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1040nr Ez Software

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1040nr ez software 9. 1040nr ez software   Depletion Table of Contents Introduction Topics - This chapter discusses: Who Can Claim Depletion? Mineral PropertyCost Depletion Percentage Depletion Oil and Gas Wells Mines and Geothermal Deposits Lessor's Gross Income TimberTimber units. 1040nr ez software Depletion unit. 1040nr ez software Introduction Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. 1040nr ez software The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. 1040nr ez software There are two ways of figuring depletion: cost depletion and percentage depletion. 1040nr ez software For mineral property, you generally must use the method that gives you the larger deduction. 1040nr ez software For standing timber, you must use cost depletion. 1040nr ez software Topics - This chapter discusses: Who can claim depletion Mineral property Timber Who Can Claim Depletion? If you have an economic interest in mineral property or standing timber, you can take a deduction for depletion. 1040nr ez software More than one person can have an economic interest in the same mineral deposit or timber. 1040nr ez software In the case of leased property, the depletion deduction is divided between the lessor and the lessee. 1040nr ez software You have an economic interest if both the following apply. 1040nr ez software You have acquired by investment any interest in mineral deposits or standing timber. 1040nr ez software You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment. 1040nr ez software A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. 1040nr ez software A production payment carved out of, or retained on the sale of, mineral property is not an economic interest. 1040nr ez software Individuals, corporations, estates, and trusts who claim depletion deductions may be liable for alternative minimum tax. 1040nr ez software Basis adjustment for depletion. 1040nr ez software   You must reduce the basis of your property by the depletion allowed or allowable, whichever is greater. 1040nr ez software Mineral Property Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). 1040nr ez software For this purpose, the term “property” means each separate interest you own in each mineral deposit in each separate tract or parcel of land. 1040nr ez software You can treat two or more separate interests as one property or as separate properties. 1040nr ez software See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests. 1040nr ez software There are two ways of figuring depletion on mineral property. 1040nr ez software Cost depletion. 1040nr ez software Percentage depletion. 1040nr ez software Generally, you must use the method that gives you the larger deduction. 1040nr ez software However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. 1040nr ez software See Oil and Gas Wells , later. 1040nr ez software Cost Depletion To figure cost depletion you must first determine the following. 1040nr ez software The property's basis for depletion. 1040nr ez software The total recoverable units of mineral in the property's natural deposit. 1040nr ez software The number of units of mineral sold during the tax year. 1040nr ez software Basis for depletion. 1040nr ez software   To figure the property's basis for depletion, subtract all the following from the property's adjusted basis. 1040nr ez software Amounts recoverable through: Depreciation deductions, Deferred expenses (including deferred exploration and development costs), and Deductions other than depletion. 1040nr ez software The residual value of land and improvements at the end of operations. 1040nr ez software The cost or value of land acquired for purposes other than mineral production. 1040nr ez software Adjusted basis. 1040nr ez software   The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. 1040nr ez software Your adjusted basis can never be less than zero. 1040nr ez software See Publication 551, Basis of Assets, for more information on adjusted basis. 1040nr ez software Total recoverable units. 1040nr ez software   The total recoverable units is the sum of the following. 1040nr ez software The number of units of mineral remaining at the end of the year (including units recovered but not sold). 1040nr ez software The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next). 1040nr ez software   You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. 1040nr ez software You must include ores and minerals that are developed, in sight, blocked out, or assured. 1040nr ez software You must also include probable or prospective ores or minerals that are believed to exist based on good evidence. 1040nr ez software But see Elective safe harbor for owners of oil and gas property , later. 1040nr ez software Number of units sold. 1040nr ez software   You determine the number of units sold during the tax year based on your method of accounting. 1040nr ez software Use the following table to make this determination. 1040nr ez software    IF you  use . 1040nr ez software . 1040nr ez software . 1040nr ez software THEN the units sold during the year are . 1040nr ez software . 1040nr ez software . 1040nr ez software The cash method of accounting The units sold for which you receive payment during the tax year (regardless of the year of sale). 1040nr ez software An accrual method of accounting The units sold based on your inventories and method of accounting for inventory. 1040nr ez software   The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. 1040nr ez software Figuring the cost depletion deduction. 1040nr ez software   Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps. 1040nr ez software Step Action Result 1 Divide your property's basis for depletion by total recoverable units. 1040nr ez software Rate per unit. 1040nr ez software 2 Multiply the rate per unit by units sold during the tax year. 1040nr ez software Cost depletion deduction. 1040nr ez software You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed. 1040nr ez software Elective safe harbor for owners of oil and gas property. 1040nr ez software   Instead of using the method described earlier to determine the total recoverable units, you can use an elective safe harbor. 1040nr ez software If you choose the elective safe harbor, the total recoverable units equal 105% of a property's proven reserves (both developed and undeveloped). 1040nr ez software For details, see Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www. 1040nr ez software irs. 1040nr ez software gov/pub/irs-irbs/irb04-10. 1040nr ez software pdf. 1040nr ez software   To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. 1040nr ez software The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. 1040nr ez software The election, if made, is effective for the tax year in which it is made and all later years. 1040nr ez software It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. 1040nr ez software Once revoked, it cannot be re-elected for the next 5 years. 1040nr ez software Percentage Depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. 1040nr ez software The rates to be used and other rules for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells . 1040nr ez software Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits . 1040nr ez software Gross income. 1040nr ez software   When figuring percentage depletion, subtract from your gross income from the property the following amounts. 1040nr ez software Any rents or royalties you paid or incurred for the property. 1040nr ez software The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year. 1040nr ez software A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor. 1040nr ez software   Use the following fraction to figure the part of the bonus you must subtract. 1040nr ez software No. 1040nr ez software of units sold in the tax year Recoverable units from the property × Bonus Payments For oil and gas wells and geothermal deposits, more information about the definition of gross income from the property is under Oil and Gas Wells , later. 1040nr ez software For other property, more information about the definition of gross income from the property is under Mines and Geothermal Deposits , later. 1040nr ez software Taxable income limit. 1040nr ez software   The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction. 1040nr ez software   Taxable income from the property means gross income from the property minus all allowable deductions (except any deduction for depletion or domestic production activities) attributable to mining processes, including mining transportation. 1040nr ez software These deductible items include, but are not limited to, the following. 1040nr ez software Operating expenses. 1040nr ez software Certain selling expenses. 1040nr ez software Administrative and financial overhead. 1040nr ez software Depreciation. 1040nr ez software Intangible drilling and development costs. 1040nr ez software Exploration and development expenditures. 1040nr ez software Deductible taxes (see chapter 5), but not taxes that you capitalize or take as a credit. 1040nr ez software Losses sustained. 1040nr ez software   The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit. 1040nr ez software Do not deduct any net operating loss deduction from the gross income from the property. 1040nr ez software Corporations do not deduct charitable contributions from the gross income from the property. 1040nr ez software If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. 1040nr ez software See section 1. 1040nr ez software 613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property. 1040nr ez software Oil and Gas Wells You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies. 1040nr ez software You are either an independent producer or a royalty owner. 1040nr ez software The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine. 1040nr ez software If you are an independent producer or royalty owner, see Independent Producers and Royalty Owners , next. 1040nr ez software For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells , later. 1040nr ez software Independent Producers and Royalty Owners If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. 1040nr ez software However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained next, cannot claim percentage depletion. 1040nr ez software For information on figuring the deduction, see Figuring percentage depletion , later. 1040nr ez software Refiners who cannot claim percentage depletion. 1040nr ez software   You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. 1040nr ez software The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. 1040nr ez software Related person. 1040nr ez software   You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you. 1040nr ez software For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. 1040nr ez software A partnership and a trust are related persons if one person holds a significant ownership interest in each of them. 1040nr ez software For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following. 1040nr ez software The value of the outstanding stock of a corporation. 1040nr ez software The interest in the profits or capital of a partnership. 1040nr ez software The beneficial interests in an estate or trust. 1040nr ez software Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. 1040nr ez software Retailers who cannot claim percentage depletion. 1040nr ez software   You cannot claim percentage depletion if both the following apply. 1040nr ez software You sell oil or natural gas or their by-products directly or through a related person in any of the following situations. 1040nr ez software Through a retail outlet operated by you or a related person. 1040nr ez software To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products. 1040nr ez software To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person. 1040nr ez software The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year. 1040nr ez software   For the purpose of determining if this rule applies, do not count the following. 1040nr ez software Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users. 1040nr ez software Bulk sales of aviation fuels to the Department of Defense. 1040nr ez software Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year. 1040nr ez software Related person. 1040nr ez software   To determine if you and another person are related persons, see Related person under Refiners who cannot claim percentage depletion, earlier. 1040nr ez software Sales through a related person. 1040nr ez software   You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person. 1040nr ez software   You are not considered to be selling through a related person who is a retailer if all the following apply. 1040nr ez software You do not have a significant ownership interest in the retailer. 1040nr ez software You sell your production to persons who are not related to either you or the retailer. 1040nr ez software The retailer does not buy oil or natural gas from your customers or persons related to your customers. 1040nr ez software There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer. 1040nr ez software Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale. 1040nr ez software Transferees who cannot claim percentage depletion. 1040nr ez software   You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. 1040nr ez software For a definition of the term “transfer,” see section 1. 1040nr ez software 613A-7(n) of the regulations. 1040nr ez software For a definition of the term “interest in proven oil or gas property,” see section 1. 1040nr ez software 613A-7(p) of the regulations. 1040nr ez software Figuring percentage depletion. 1040nr ez software   Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. 1040nr ez software If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. 1040nr ez software If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production. 1040nr ez software   In addition, there is a limit on the percentage depletion deduction. 1040nr ez software See Taxable income limit , later. 1040nr ez software Average daily production. 1040nr ez software   Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. 1040nr ez software Partial interest. 1040nr ez software   If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property. 1040nr ez software   You have a partial interest in the production from a property if you have a net profits interest in the property. 1040nr ez software To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. 1040nr ez software To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. 1040nr ez software Then multiply the total production from the property by your percentage participation to figure your share of the production. 1040nr ez software Example. 1040nr ez software Javier Robles owns oil property in which Pablo Olmos owns a 20% net profits interest. 1040nr ez software During the year, the property produced 10,000 barrels of oil, which Javier sold for $200,000. 1040nr ez software Javier had expenses of $90,000 attributable to the property. 1040nr ez software The property generated a net profit of $110,000 ($200,000 − $90,000). 1040nr ez software Pablo received income of $22,000 ($110,000 × . 1040nr ez software 20) for his net profits interest. 1040nr ez software Pablo determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). 1040nr ez software Pablo determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). 1040nr ez software Depletable oil or natural gas quantity. 1040nr ez software   Generally, your depletable oil quantity is 1,000 barrels. 1040nr ez software Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. 1040nr ez software If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity. 1040nr ez software Example. 1040nr ez software You have both oil and natural gas production. 1040nr ez software To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. 1040nr ez software Your depletable natural gas quantity is 2. 1040nr ez software 16 million cubic feet of gas (360 × 6000). 1040nr ez software You must reduce your depletable oil quantity to 640 barrels (1000 − 360). 1040nr ez software If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity. 1040nr ez software Also, see Notice 2012-50, available at www. 1040nr ez software irs. 1040nr ez software gov/irb/2012–31_IRB/index. 1040nr ez software html. 1040nr ez software Business entities and family members. 1040nr ez software   You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year. 1040nr ez software Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest). 1040nr ez software You and your spouse and minor children. 1040nr ez software A related person is anyone mentioned in the related persons discussion under Nondeductible loss in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children. 1040nr ez software Controlled group of corporations. 1040nr ez software   Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. 1040nr ez software They share the depletable quantity. 1040nr ez software A controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that, for this purpose, the stock ownership requirement in that definition is “more than 50%” rather than “at least 80%. 1040nr ez software ” Gross income from the property. 1040nr ez software   For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. 1040nr ez software If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation. 1040nr ez software   If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP. 1040nr ez software   Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. 1040nr ez software Average daily production exceeds depletable quantities. 1040nr ez software   If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows. 1040nr ez software Figure your average daily production of oil or natural gas for the year. 1040nr ez software Figure your depletable oil or natural gas quantity for the year. 1040nr ez software Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%. 1040nr ez software Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). 1040nr ez software This is your depletion allowance for that property for the year. 1040nr ez software Taxable income limit. 1040nr ez software   If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following. 1040nr ez software 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. 1040nr ez software For a definition of taxable income from the property, see Taxable income limit , earlier, under Mineral Property. 1040nr ez software 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback. 1040nr ez software You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. 1040nr ez software Add it to your depletion allowance (before applying any limits) for the following year. 1040nr ez software Partnerships and S Corporations Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately. 1040nr ez software (However, see Electing large partnerships must figure depletion allowance , later. 1040nr ez software ) Each partner or shareholder must decide whether to use cost or percentage depletion. 1040nr ez software If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources. 1040nr ez software Partner's or shareholder's adjusted basis. 1040nr ez software   The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. 1040nr ez software The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property. 1040nr ez software   Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. 1040nr ez software However, in some cases, it is figured according to the partner's interest in partnership income. 1040nr ez software   The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests. 1040nr ez software Recordkeeping. 1040nr ez software Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. 1040nr ez software The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. 1040nr ez software The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property. 1040nr ez software Reporting the deduction. 1040nr ez software   Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). 1040nr ez software Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). 1040nr ez software The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. 1040nr ez software The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms. 1040nr ez software Form 6198, At-Risk Limitations. 1040nr ez software Form 8582, Passive Activity Loss Limitations. 1040nr ez software Electing large partnerships must figure depletion allowance. 1040nr ez software   An electing large partnership, rather than each partner, generally must figure the depletion allowance. 1040nr ez software The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. 1040nr ez software Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance. 1040nr ez software   An electing large partnership is one that meets both the following requirements. 1040nr ez software The partnership had 100 or more partners in the preceding year. 1040nr ez software The partnership chooses to be an electing large partnership. 1040nr ez software Disqualified persons. 1040nr ez software   An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. 1040nr ez software Disqualified persons must figure it themselves, as explained earlier. 1040nr ez software   All the following are disqualified persons. 1040nr ez software Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). 1040nr ez software Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). 1040nr ez software Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. 1040nr ez software Average daily production is discussed earlier. 1040nr ez software Natural Gas Wells You can use percentage depletion for a well that produces natural gas that is either Sold under a fixed contract, or Produced from geopressured brine. 1040nr ez software Natural gas sold under a fixed contract. 1040nr ez software   Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. 1040nr ez software This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. 1040nr ez software The contract must have been in effect from February 1, 1975, until the date of sale of the gas. 1040nr ez software Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. 1040nr ez software Natural gas from geopressured brine. 1040nr ez software   Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. 1040nr ez software This is natural gas that is both the following. 1040nr ez software Produced from a well you began to drill after September 1978 and before 1984. 1040nr ez software Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine. 1040nr ez software Mines and Geothermal Deposits Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion. 1040nr ez software Mines and other natural deposits. 1040nr ez software   For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit. 1040nr ez software   The following is a list of the percentage depletion rates for the more common minerals. 1040nr ez software DEPOSITS RATE Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica 22% Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States 15% Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well 14% Coal, lignite, and sodium chloride 10% Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates 7½% Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone) 5%   You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. 1040nr ez software Corporate deduction for iron ore and coal. 1040nr ez software   The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of: The percentage depletion deduction for the tax year (figured without this reduction), minus The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year). 1040nr ez software Gross income from the property. 1040nr ez software   For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. 1040nr ez software Mining includes all the following. 1040nr ez software Extracting ores or minerals from the ground. 1040nr ez software Applying certain treatment processes described later. 1040nr ez software Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied. 1040nr ez software Excise tax. 1040nr ez software   Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. 1040nr ez software Extraction. 1040nr ez software   Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. 1040nr ez software This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. 1040nr ez software Treatment processes. 1040nr ez software   The processes included as mining depend on the ore or mineral mined. 1040nr ez software To qualify as mining, the treatment processes must be applied by the mine owner or operator. 1040nr ez software For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. 1040nr ez software Transportation of more than 50 miles. 1040nr ez software   If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining. 1040nr ez software    If you wish to include transportation of more than 50 miles in the computation of gross income from mining, request an advance ruling from the IRS. 1040nr ez software Include in the request the facts about the physical and other requirements that prevented the construction and operation of the plant within 50 miles of the point of extraction. 1040nr ez software For more information about requesting an advance ruling, see Revenue Procedure 2013-1, available at www. 1040nr ez software irs. 1040nr ez software gov/irb/2013-01_IRB/ar11. 1040nr ez software html. 1040nr ez software Disposal of coal or iron ore. 1040nr ez software   You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply. 1040nr ez software You disposed of it after holding it for more than 1 year. 1040nr ez software You disposed of it under a contract under which you retain an economic interest in the coal or iron ore. 1040nr ez software Treat any gain on the disposition as a capital gain. 1040nr ez software Disposal to related person. 1040nr ez software   This rule does not apply if you dispose of the coal or iron ore to one of the following persons. 1040nr ez software A related person (as listed in chapter 2 of Publication 544). 1040nr ez software A person owned or controlled by the same interests that own or control you. 1040nr ez software Geothermal deposits. 1040nr ez software   Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. 1040nr ez software A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. 1040nr ez software For percentage depletion purposes, a geothermal deposit is not considered a gas well. 1040nr ez software   Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. 1040nr ez software See Gross income from the property , earlier, under Oil and Gas Wells. 1040nr ez software Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property. 1040nr ez software Lessor's Gross Income In the case of leased property, the depletion deduction is divided between the lessor and the lessee. 1040nr ez software A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. 1040nr ez software Bonuses and advanced royalties. 1040nr ez software   Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. 1040nr ez software If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion, as explained in the next two paragraphs. 1040nr ez software Figuring cost depletion. 1040nr ez software   To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. 1040nr ez software To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion , treating the number of units for which the advanced royalty is received as the number of units sold. 1040nr ez software Figuring percentage depletion. 1040nr ez software   In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits . 1040nr ez software Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. 1040nr ez software However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. 1040nr ez software Ending the lease. 1040nr ez software   If you receive a bonus on a lease that ends or is abandoned before you derive any income from mineral extraction, include in income the depletion deduction you took. 1040nr ez software Do this for the year the lease ends or is abandoned. 1040nr ez software Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted. 1040nr ez software   For advanced royalties, include in income the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before the lease ended. 1040nr ez software Include this amount in income for the year the lease ends. 1040nr ez software Increase your adjusted basis in the property by the amount you include in income. 1040nr ez software Delay rentals. 1040nr ez software   These are payments for deferring development of the property. 1040nr ez software Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. 1040nr ez software These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production. 1040nr ez software Timber You can figure timber depletion only by the cost method. 1040nr ez software Percentage depletion does not apply to timber. 1040nr ez software Base your depletion on your cost or other basis in the timber. 1040nr ez software Your cost does not include the cost of land or any amounts recoverable through depreciation. 1040nr ez software Depletion takes place when you cut standing timber. 1040nr ez software You can figure your depletion deduction when the quantity of cut timber is first accurately measured in the process of exploitation. 1040nr ez software Figuring cost depletion. 1040nr ez software   To figure your cost depletion allowance, you multiply the number of timber units cut by your depletion unit. 1040nr ez software Timber units. 1040nr ez software   When you acquire timber property, you must make an estimate of the quantity of marketable timber that exists on the property. 1040nr ez software You measure the timber using board feet, log scale, cords, or other units. 1040nr ez software If you later determine that you have more or less units of timber, you must adjust the original estimate. 1040nr ez software   The term “timber property” means your economic interest in standing timber in each tract or block representing a separate timber account. 1040nr ez software Depletion unit. 1040nr ez software   You figure your depletion unit each year by taking the following steps. 1040nr ez software Determine your cost or adjusted basis of the timber on hand at the beginning of the year. 1040nr ez software Adjusted basis is defined under Cost Depletion in the discussion on Mineral Property. 1040nr ez software Add to the amount determined in (1) the cost of any timber units acquired during the year and any additions to capital. 1040nr ez software Figure the number of timber units to take into account by adding the number of timber units acquired during the year to the number of timber units on hand in the account at the beginning of the year and then adding (or subtracting) any correction to the estimate of the number of timber units remaining in the account. 1040nr ez software Divide the result of (2) by the result of (3). 1040nr ez software This is your depletion unit. 1040nr ez software Example. 1040nr ez software You bought a timber tract for $160,000 and the land was worth as much as the timber. 1040nr ez software Your basis for the timber is $80,000. 1040nr ez software Based on an estimated one million board feet (1,000 MBF) of standing timber, you figure your depletion unit to be $80 per MBF ($80,000 ÷ 1,000). 1040nr ez software If you cut 500 MBF of timber, your depletion allowance would be $40,000 (500 MBF × $80). 1040nr ez software When to claim depletion. 1040nr ez software   Claim your depletion allowance as a deduction in the year of sale or other disposition of the products cut from the timber, unless you choose to treat the cutting of timber as a sale or exchange (explained below). 1040nr ez software Include allowable depletion for timber products not sold during the tax year the timber is cut as a cost item in the closing inventory of timber products for the year. 1040nr ez software The inventory is your basis for determining gain or loss in the tax year you sell the timber products. 1040nr ez software Example. 1040nr ez software The facts are the same as in the previous example except that you sold only half of the timber products in the cutting year. 1040nr ez software You would deduct $20,000 of the $40,000 depletion that year. 1040nr ez software You would add the remaining $20,000 depletion to your closing inventory of timber products. 1040nr ez software Electing to treat the cutting of timber as a sale or exchange. 1040nr ez software   You can elect, under certain circumstances, to treat the cutting of timber held for more than 1 year as a sale or exchange. 1040nr ez software You must make the election on your income tax return for the tax year to which it applies. 1040nr ez software If you make this election, subtract the adjusted basis for depletion from the fair market value of the timber on the first day of the tax year in which you cut it to figure the gain or loss on the cutting. 1040nr ez software You generally report the gain as long-term capital gain. 1040nr ez software The fair market value then becomes your basis for figuring your ordinary gain or loss on the sale or other disposition of the products cut from the timber. 1040nr ez software For more information, see Timber in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. 1040nr ez software   You may revoke an election to treat the cutting of timber as a sale or exchange without IRS's consent. 1040nr ez software The prior election (and revocation) is disregarded for purposes of making a subsequent election. 1040nr ez software See Form T (Timber), Forest Activities Schedule, for more information. 1040nr ez software Form T. 1040nr ez software   Complete and attach Form T (Timber) to your income tax return if you claim a deduction for timber depletion, choose to treat the cutting of timber as a sale or exchange, or make an outright sale of timber. 1040nr ez software Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Migration Data

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There is a delay in the release of  the 2010–2011 state and county level migration data. During the review process, we identified some discrepancies in the data. The data are being corrected and will be released as soon as possible. We apologize for any inconvenience this delay causes to users of the information.


U.S. Population Migration Data

Migration data for the United States are based on year-to-year address changes reported on individual income tax returns filed with the IRS. They present migration patterns by State or by county for the entire United States and are available for inflows—the number of new residents who moved to a State or county and where they migrated from, and outflows—the number of residents leaving a State or county and where they went. The data are available for Filing Years 1991 through 2010 and include:

  • Number of returns filed, which approximates the number of households that migrated
  • Number of personal exemptions claimed, which approximates the number of individuals
  • Total adjusted gross income, starting with Filing Year 1995.

Important: The data used to produce migration data products come from individual income tax returns filed prior to late September of each calendar year and represent between 95 and 98 percent of total annual filings. However, since returns filed after September are not included, totals shown in migration data tables will not match analogous totals reported in other IRS statistical data products. For more information, see U.S. Population Migration Data: Strengths and Limitations

Migration Data Users Guides


Migration Data 2005–2010

Migration Data 1990–2004

Migration data for years 1990 to 2004 are available as single Zip files containing all State Excel files. Both migration inflow and outflow files are included for each state. The files are compressed using the WinZip utility and must be downloaded and extracted before viewing or loading into any application. A free WinZip utility is available, if needed.

County-to-County Migration Data

1990 to 1991  1991 to 1992  1992 to 1993  1993 to 1994  1994 to 1995  1995 to 1996  1996 to 1997  1997 to 1998  1998 to 1999  1999 to 2000  2000 to 2001  2001 to 2002  2002 to 2003  2003 to 2004

State-to-State Migration Data

1990 to 1991  1991 to 1992  1992 to 1993  1993 to 1994  1994 to 1995  1995 to 1996  1996 to 1997  1997 to 1998  1998 to 1999  1999 to 2000  2000 to 2001  2001 to 2002  2002 to 2003  2003 to 2004

Follow these steps to extract files for the entire year (all States) or for an individual State.

To extract an entire year (all States) using WinZip:

  1. Double click the Zip file to open the WinZip utility.
  2. Double click the folder.
  3. Click and drag either the Inflow and/or Outflow folder to your desktop.

OR

  1. Double click the Zip file to open the WinZip utility (NOTE: SecureZIP users should follow the following steps).
  2. Click the ‘Extract’ button. Ensure that the radio button, ‘All Files in Archive Selected’, is selected.
  3. Select a destination folder.
  4. Click the ‘Extract’ button.

To extract an individual State using WinZip:

  1. Double click the Zip file to open the WinZip utility.
  2. Double click the folder.
  3. Double click either the Inflow or Outflow folder.
  4. Click and drag the desired Excel file(s) to your desktop.

OR

  1. Double click the Zip file to open the WinZip utility (NOTE: SecureZIP users should follow the following steps).
  2. Highlight the desired Excel file(s).
  3. Click the ‘Extract’ button. Ensure that radio button, ‘Selected Files/Folder’, is selected.
  4. Select a destination folder.
  5. Click the ‘Extract’ button.


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Page Last Reviewed or Updated: 18-Dec-2013

The 1040nr Ez Software

1040nr ez software 7. 1040nr ez software   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. 1040nr ez software Costs not included. 1040nr ez software Intangible Drilling Costs Exploration CostsPartnerships and S corporations. 1040nr ez software Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. 1040nr ez software Film and Television Production Costs What's New Film and television productions costs. 1040nr ez software  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. 1040nr ez software See Film and Television Production Costs , later. 1040nr ez software Introduction This chapter discusses costs you can elect to deduct or capitalize. 1040nr ez software You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. 1040nr ez software If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. 1040nr ez software When you capitalize a cost, you add it to the basis of property to which it relates. 1040nr ez software A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. 1040nr ez software Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. 1040nr ez software You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. 1040nr ez software For more information on the alternative minimum tax, see the instructions for the following forms. 1040nr ez software Form 6251, Alternative Minimum Tax—Individuals. 1040nr ez software Form 4626, Alternative Minimum Tax—Corporations. 1040nr ez software Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. 1040nr ez software Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. 1040nr ez software Certain carrying charges must be capitalized under the uniform capitalization rules. 1040nr ez software (For information on capitalization of interest, see chapter 4 . 1040nr ez software ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. 1040nr ez software You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. 1040nr ez software For unimproved and unproductive real property, your election is good for only 1 year. 1040nr ez software You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. 1040nr ez software For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. 1040nr ez software For personal property, your election is effective until the date you install or first use it, whichever is later. 1040nr ez software How to make the election. 1040nr ez software   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. 1040nr ez software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez software Attach the statement to the amended return and write “Filed pursuant to section 301. 1040nr ez software 9100-2” on the statement. 1040nr ez software File the amended return at the same address you filed the original return. 1040nr ez software Research and Experimental Costs The costs of research and experimentation are generally capital expenses. 1040nr ez software However, you can elect to deduct these costs as a current business expense. 1040nr ez software Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. 1040nr ez software If you meet certain requirements, you may elect to defer and amortize research and experimental costs. 1040nr ez software For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. 1040nr ez software Research and experimental costs defined. 1040nr ez software   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. 1040nr ez software Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. 1040nr ez software Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. 1040nr ez software      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. 1040nr ez software However, costs paid or incurred to obtain another's patent are not research and experimental costs. 1040nr ez software Product. 1040nr ez software   The term “product” includes any of the following items. 1040nr ez software Formula. 1040nr ez software Invention. 1040nr ez software Patent. 1040nr ez software Pilot model. 1040nr ez software Process. 1040nr ez software Technique. 1040nr ez software Property similar to the items listed above. 1040nr ez software It also includes products used by you in your trade or business or held for sale, lease, or license. 1040nr ez software Costs not included. 1040nr ez software   Research and experimental costs do not include expenses for any of the following activities. 1040nr ez software Advertising or promotions. 1040nr ez software Consumer surveys. 1040nr ez software Efficiency surveys. 1040nr ez software Management studies. 1040nr ez software Quality control testing. 1040nr ez software Research in connection with literary, historical, or similar projects. 1040nr ez software The acquisition of another's patent, model, production, or process. 1040nr ez software When and how to elect. 1040nr ez software   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. 1040nr ez software If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. 1040nr ez software Deducting or Amortizing Research and Experimentation Costs IF you . 1040nr ez software . 1040nr ez software . 1040nr ez software THEN . 1040nr ez software . 1040nr ez software . 1040nr ez software Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. 1040nr ez software Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. 1040nr ez software See Research and Experimental Costs in chapter 8. 1040nr ez software Research credit. 1040nr ez software   If you pay or incur qualified research expenses, you may be able to take the research credit. 1040nr ez software For more information see Form 6765, Credit for Increasing Research Activities and its instructions. 1040nr ez software Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. 1040nr ez software You can usually recover them through depreciation or depletion. 1040nr ez software However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. 1040nr ez software These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. 1040nr ez software You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. 1040nr ez software You can elect to deduct only the costs of items with no salvage value. 1040nr ez software These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. 1040nr ez software Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. 1040nr ez software However, see Amounts paid to contractor that must be capitalized , later. 1040nr ez software You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. 1040nr ez software It does not matter whether there is any intent to produce hydrocarbons. 1040nr ez software If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. 1040nr ez software Amounts paid to contractor that must be capitalized. 1040nr ez software   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. 1040nr ez software How to make the election. 1040nr ez software   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. 1040nr ez software No formal statement is required. 1040nr ez software If you file Schedule C (Form 1040), enter these costs under “Other expenses. 1040nr ez software ”   For oil and gas wells, your election is binding for the year it is made and for all later years. 1040nr ez software For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. 1040nr ez software You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. 1040nr ez software Energy credit for costs of geothermal wells. 1040nr ez software   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. 1040nr ez software See the Instructions for Form 3468 for more information. 1040nr ez software Nonproductive well. 1040nr ez software   If you capitalize your IDCs, you have another option if the well is nonproductive. 1040nr ez software You can deduct the IDCs of the nonproductive well as an ordinary loss. 1040nr ez software You must indicate and clearly state your election on your tax return for the year the well is completed. 1040nr ez software Once made, the election for oil and gas wells is binding for all later years. 1040nr ez software You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. 1040nr ez software Costs incurred outside the United States. 1040nr ez software   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. 1040nr ez software However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. 1040nr ez software If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. 1040nr ez software These rules do not apply to a nonproductive well. 1040nr ez software Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. 1040nr ez software You recover these costs through depletion as the mineral is removed from the ground. 1040nr ez software However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). 1040nr ez software How to make the election. 1040nr ez software   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. 1040nr ez software Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. 1040nr ez software The election applies to the tax year you make this election and all later tax years. 1040nr ez software Partnerships and S corporations. 1040nr ez software   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. 1040nr ez software Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. 1040nr ez software Reduced corporate deductions for exploration costs. 1040nr ez software   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. 1040nr ez software It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. 1040nr ez software A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. 1040nr ez software For more information on this method of amortization, see Internal Revenue Code section 59(e). 1040nr ez software   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. 1040nr ez software However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. 1040nr ez software See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. 1040nr ez software   These rules also apply to the deduction of development costs by corporations. 1040nr ez software See Development Costs , later. 1040nr ez software Recapture of exploration expenses. 1040nr ez software   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. 1040nr ez software Use either of the following methods. 1040nr ez software Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. 1040nr ez software Your election must be clearly indicated on the return. 1040nr ez software Increase your adjusted basis in the mine by the amount included in income. 1040nr ez software Generally, you must elect this recapture method by the due date (including extensions) of your return. 1040nr ez software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez software Make the election on your amended return and write “Filed pursuant to section 301. 1040nr ez software 9100-2” on the form where you are including the income. 1040nr ez software File the amended return at the same address you filed the original return. 1040nr ez software Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. 1040nr ez software   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. 1040nr ez software Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. 1040nr ez software   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. 1040nr ez software Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. 1040nr ez software If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. 1040nr ez software Foreign exploration costs. 1040nr ez software   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. 1040nr ez software You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. 1040nr ez software (Cost depletion is discussed in chapter 9 . 1040nr ez software ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. 1040nr ez software These rules also apply to foreign development costs. 1040nr ez software Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. 1040nr ez software These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. 1040nr ez software Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. 1040nr ez software Development costs do not include the costs for the acquisition or improvement of depreciable property. 1040nr ez software Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. 1040nr ez software This election applies each tax year to expenses paid or incurred in that year. 1040nr ez software Once made, the election is binding for the year and cannot be revoked for any reason. 1040nr ez software How to make the election. 1040nr ez software   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. 1040nr ez software Generally, you must make the election by the due date of the return (including extensions). 1040nr ez software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 1040nr ez software 9100-2. 1040nr ez software ” File the amended return at the same address you filed the original return. 1040nr ez software Foreign development costs. 1040nr ez software   The rules discussed earlier for foreign exploration costs apply to foreign development costs. 1040nr ez software Reduced corporate deductions for development costs. 1040nr ez software   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. 1040nr ez software Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. 1040nr ez software For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. 1040nr ez software Circulation costs are deductible even if they normally would be capitalized. 1040nr ez software This rule does not apply to the following costs that must be capitalized. 1040nr ez software The purchase of land or depreciable property. 1040nr ez software The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. 1040nr ez software Other treatment of circulation costs. 1040nr ez software   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. 1040nr ez software Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). 1040nr ez software Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. 1040nr ez software How to make the election. 1040nr ez software   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. 1040nr ez software Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. 1040nr ez software Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. 1040nr ez software However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. 1040nr ez software The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 1040nr ez software Any remaining costs must be amortized. 1040nr ez software For information about amortizing start-up and organizational costs, see chapter 8 . 1040nr ez software Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. 1040nr ez software Organizational costs include the costs of creating a corporation. 1040nr ez software For more information on start-up and organizational costs, see chapter 8 . 1040nr ez software How to make the election. 1040nr ez software   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. 1040nr ez software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 1040nr ez software 9100-2. 1040nr ez software ” File the amended return at the same address you filed the original return. 1040nr ez software The election applies when computing taxable income for the current tax year and all subsequent years. 1040nr ez software Reforestation Costs Reforestation costs are generally capital expenditures. 1040nr ez software However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. 1040nr ez software The remaining costs can be amortized over an 84-month period. 1040nr ez software For information about amortizing reforestation costs, see chapter 8 . 1040nr ez software Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. 1040nr ez software Qualified timber property is property that contains trees in significant commercial quantities. 1040nr ez software See chapter 8 for more information on qualifying reforestation costs and qualified timber property. 1040nr ez software If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. 1040nr ez software Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. 1040nr ez software How to make the election. 1040nr ez software   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. 1040nr ez software If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. 1040nr ez software If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. 1040nr ez software The unique stand identification numbers. 1040nr ez software The total number of acres reforested during the tax year. 1040nr ez software The nature of the reforestation treatments. 1040nr ez software The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. 1040nr ez software   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 1040nr ez software 9100-2. 1040nr ez software ” File the amended return at the same address you filed the original return. 1040nr ez software The election applies when computing taxable income for the current tax year and all subsequent years. 1040nr ez software   For additional information on reforestation costs, see chapter 8 . 1040nr ez software Recapture. 1040nr ez software   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. 1040nr ez software For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. 1040nr ez software Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. 1040nr ez software However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. 1040nr ez software Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. 1040nr ez software However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. 1040nr ez software You must own or lease the facility or vehicle for use in connection with your trade or business. 1040nr ez software A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. 1040nr ez software A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). 1040nr ez software You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. 1040nr ez software Deduction limit. 1040nr ez software   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. 1040nr ez software However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. 1040nr ez software Partners and partnerships. 1040nr ez software   The $15,000 limit applies to a partnership and also to each partner in the partnership. 1040nr ez software A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. 1040nr ez software If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. 1040nr ez software   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). 1040nr ez software If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. 1040nr ez software Example. 1040nr ez software Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. 1040nr ez software Emilio had $12,000 of similar expenses in his sole proprietorship. 1040nr ez software He elected to deduct $7,000 of them. 1040nr ez software Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. 1040nr ez software Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. 1040nr ez software Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. 1040nr ez software Qualification standards. 1040nr ez software   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. 1040nr ez software You can view the Americans with Disabilities Act at www. 1040nr ez software ada. 1040nr ez software gov/pubs/ada. 1040nr ez software htm. 1040nr ez software   The following is a list of some architectural barrier removal costs that can be deducted. 1040nr ez software Ground and floor surfaces. 1040nr ez software Walks. 1040nr ez software Parking lots. 1040nr ez software Ramps. 1040nr ez software Entrances. 1040nr ez software Doors and doorways. 1040nr ez software Stairs. 1040nr ez software Floors. 1040nr ez software Toilet rooms. 1040nr ez software Water fountains. 1040nr ez software Public telephones. 1040nr ez software Elevators. 1040nr ez software Controls. 1040nr ez software Signage. 1040nr ez software Alarms. 1040nr ez software Protruding objects. 1040nr ez software Symbols of accessibility. 1040nr ez software You can find the ADA guidelines and requirements for architectural barrier removal at www. 1040nr ez software usdoj. 1040nr ez software gov/crt/ada/reg3a. 1040nr ez software html. 1040nr ez software   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. 1040nr ez software You can find the guidelines and requirements for transportation barrier removal at www. 1040nr ez software fta. 1040nr ez software dot. 1040nr ez software gov. 1040nr ez software   Also, you can access the ADA website at www. 1040nr ez software ada. 1040nr ez software gov for additional information. 1040nr ez software Other barrier removals. 1040nr ez software   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. 1040nr ez software The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. 1040nr ez software The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). 1040nr ez software The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. 1040nr ez software How to make the election. 1040nr ez software   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. 1040nr ez software Identify the deduction as a separate item. 1040nr ez software The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. 1040nr ez software If you make this election, you must maintain adequate records to support your deduction. 1040nr ez software   For your election to be valid, you generally must file your return by its due date, including extensions. 1040nr ez software However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez software Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 1040nr ez software 9100-2. 1040nr ez software ” File the amended return at the same address you filed the original return. 1040nr ez software Your election is irrevocable after the due date, including extensions, of your return. 1040nr ez software Disabled access credit. 1040nr ez software   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. 1040nr ez software If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. 1040nr ez software   For more information, see Form 8826, Disabled Access Credit. 1040nr ez software Film and Television Production Costs Film and television production costs are generally capital expenses. 1040nr ez software However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. 1040nr ez software For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. 1040nr ez software Prev  Up  Next   Home   More Online Publications