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2011 1040 Form Download

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2011 1040 Form Download

2011 1040 form download 2. 2011 1040 form download   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. 2011 1040 form download Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. 2011 1040 form download Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). 2011 1040 form download You must do this to figure your net capital gain or loss. 2011 1040 form download For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. 2011 1040 form download See Capital Gains Tax Rates in chapter 4. 2011 1040 form download Your deduction for a net capital loss may be limited. 2011 1040 form download See Treatment of Capital Losses in chapter 4. 2011 1040 form download Capital gain or loss. 2011 1040 form download   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. 2011 1040 form download You also may have a capital gain if your section 1231 transactions result in a net gain. 2011 1040 form download Section 1231 transactions. 2011 1040 form download   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. 2011 1040 form download They also include certain involuntary conversions of business or investment property, including capital assets. 2011 1040 form download See Section 1231 Gains and Losses in chapter 3 for more information. 2011 1040 form download Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. 2011 1040 form download Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. 2011 1040 form download For exceptions, see Noncapital Assets, later. 2011 1040 form download The following items are examples of capital assets. 2011 1040 form download Stocks and bonds. 2011 1040 form download A home owned and occupied by you and your family. 2011 1040 form download Timber grown on your home property or investment property, even if you make casual sales of the timber. 2011 1040 form download Household furnishings. 2011 1040 form download A car used for pleasure or commuting. 2011 1040 form download Coin or stamp collections. 2011 1040 form download Gems and jewelry. 2011 1040 form download Gold, silver, and other metals. 2011 1040 form download Personal-use property. 2011 1040 form download   Generally, property held for personal use is a capital asset. 2011 1040 form download Gain from a sale or exchange of that property is a capital gain. 2011 1040 form download Loss from the sale or exchange of that property is not deductible. 2011 1040 form download You can deduct a loss relating to personal-use property only if it results from a casualty or theft. 2011 1040 form download Investment property. 2011 1040 form download   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. 2011 1040 form download This treatment does not apply to property used to produce rental income. 2011 1040 form download See Business assets, later, under Noncapital Assets. 2011 1040 form download Release of restriction on land. 2011 1040 form download   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. 2011 1040 form download Noncapital Assets A noncapital asset is property that is not a capital asset. 2011 1040 form download The following kinds of property are not capital assets. 2011 1040 form download Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. 2011 1040 form download Inventories are discussed in Publication 538, Accounting Periods and Methods. 2011 1040 form download But, see the Tip below. 2011 1040 form download Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. 2011 1040 form download Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). 2011 1040 form download Sales of this type of property are discussed in chapter 3. 2011 1040 form download Real property used in your trade or business or as rental property, even if the property is fully depreciated. 2011 1040 form download A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. 2011 1040 form download But, see the Tip below. 2011 1040 form download U. 2011 1040 form download S. 2011 1040 form download Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. 2011 1040 form download Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. 2011 1040 form download It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. 2011 1040 form download The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. 2011 1040 form download Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. 2011 1040 form download Supplies of a type you regularly use or consume in the ordinary course of your trade or business. 2011 1040 form download You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. 2011 1040 form download See chapter 4 of Publication 550 for details. 2011 1040 form download Property held mainly for sale to customers. 2011 1040 form download   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. 2011 1040 form download Inventories are discussed in Publication 538. 2011 1040 form download Business assets. 2011 1040 form download   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. 2011 1040 form download The sale or disposition of business property is discussed in chapter 3. 2011 1040 form download Letters and memoranda. 2011 1040 form download   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. 2011 1040 form download Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. 2011 1040 form download For this purpose, letters and memoranda addressed to you are considered prepared for you. 2011 1040 form download If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. 2011 1040 form download Commodities derivative financial instrument. 2011 1040 form download   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). 2011 1040 form download Commodities derivative dealer. 2011 1040 form download   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. 2011 1040 form download Hedging transaction. 2011 1040 form download   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. 2011 1040 form download Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. 2011 1040 form download Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. 2011 1040 form download Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. 2011 1040 form download If these rules apply, gains may be treated as ordinary income and losses may not be deductible. 2011 1040 form download See Transfers to Spouse in chapter 1 for rules that apply to spouses. 2011 1040 form download Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. 2011 1040 form download It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. 2011 1040 form download Depreciable property transaction. 2011 1040 form download   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. 2011 1040 form download A person and the person's controlled entity or entities. 2011 1040 form download A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. 2011 1040 form download An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). 2011 1040 form download An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). 2011 1040 form download Controlled entity. 2011 1040 form download   A person's controlled entity is either of the following. 2011 1040 form download A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. 2011 1040 form download An entity whose relationship with that person is one of the following. 2011 1040 form download A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. 2011 1040 form download Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. 2011 1040 form download Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 1040 form download Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 1040 form download Controlled partnership transaction. 2011 1040 form download   A gain recognized in a controlled partnership transaction may be ordinary income. 2011 1040 form download The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. 2011 1040 form download   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. 2011 1040 form download A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. 2011 1040 form download Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. 2011 1040 form download Determining ownership. 2011 1040 form download   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. 2011 1040 form download Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2011 1040 form download (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. 2011 1040 form download ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. 2011 1040 form download Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. 2011 1040 form download For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. 2011 1040 form download But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. 2011 1040 form download Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. 2011 1040 form download This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. 2011 1040 form download For the list of related persons, see Related persons next. 2011 1040 form download If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. 2011 1040 form download The gain on each item is taxable. 2011 1040 form download The loss on any item is nondeductible. 2011 1040 form download Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. 2011 1040 form download Related persons. 2011 1040 form download   The following is a list of related persons. 2011 1040 form download Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 2011 1040 form download ), and lineal descendants (children, grandchildren, etc. 2011 1040 form download ). 2011 1040 form download An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. 2011 1040 form download Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. 2011 1040 form download A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. 2011 1040 form download A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 2011 1040 form download Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 2011 1040 form download A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. 2011 1040 form download A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. 2011 1040 form download Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 1040 form download Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 1040 form download An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. 2011 1040 form download Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. 2011 1040 form download A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. 2011 1040 form download Partnership interests. 2011 1040 form download   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. 2011 1040 form download Controlled groups. 2011 1040 form download   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. 2011 1040 form download   For more information, see section 267(f) of the Internal Revenue Code. 2011 1040 form download Ownership of stock or partnership interests. 2011 1040 form download   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. 2011 1040 form download Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2011 1040 form download (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. 2011 1040 form download ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. 2011 1040 form download Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. 2011 1040 form download An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 2011 1040 form download For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. 2011 1040 form download But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. 2011 1040 form download Indirect transactions. 2011 1040 form download   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. 2011 1040 form download This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. 2011 1040 form download Property received from a related person. 2011 1040 form download   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. 2011 1040 form download This rule applies only to the original transferee. 2011 1040 form download Example 1. 2011 1040 form download Your brother sold stock to you for $7,600. 2011 1040 form download His cost basis was $10,000. 2011 1040 form download His loss of $2,400 was not deductible. 2011 1040 form download You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). 2011 1040 form download Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. 2011 1040 form download Example 2. 2011 1040 form download Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. 2011 1040 form download Your recognized loss is only $700 ($7,600 − $6,900). 2011 1040 form download You cannot deduct the loss not allowed to your brother. 2011 1040 form download Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. 2011 1040 form download Sale of a Business The sale of a business usually is not a sale of one asset. 2011 1040 form download Instead, all the assets of the business are sold. 2011 1040 form download Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. 2011 1040 form download A business usually has many assets. 2011 1040 form download When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. 2011 1040 form download The gain or loss on each asset is figured separately. 2011 1040 form download The sale of capital assets results in capital gain or loss. 2011 1040 form download The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). 2011 1040 form download The sale of inventory results in ordinary income or loss. 2011 1040 form download Partnership interests. 2011 1040 form download   An interest in a partnership or joint venture is treated as a capital asset when sold. 2011 1040 form download The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. 2011 1040 form download For more information, see Disposition of Partner's Interest in Publication 541. 2011 1040 form download Corporation interests. 2011 1040 form download   Your interest in a corporation is represented by stock certificates. 2011 1040 form download When you sell these certificates, you usually realize capital gain or loss. 2011 1040 form download For information on the sale of stock, see chapter 4 in Publication 550. 2011 1040 form download Corporate liquidations. 2011 1040 form download   Corporate liquidations of property generally are treated as a sale or exchange. 2011 1040 form download Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. 2011 1040 form download Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. 2011 1040 form download   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. 2011 1040 form download For more information, see section 332 of the Internal Revenue Code and the related regulations. 2011 1040 form download Allocation of consideration paid for a business. 2011 1040 form download   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. 2011 1040 form download Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. 2011 1040 form download This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. 2011 1040 form download It also determines the buyer's basis in the business assets. 2011 1040 form download Consideration. 2011 1040 form download   The buyer's consideration is the cost of the assets acquired. 2011 1040 form download The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. 2011 1040 form download Residual method. 2011 1040 form download   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. 2011 1040 form download This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. 2011 1040 form download Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. 2011 1040 form download   A group of assets constitutes a trade or business if either of the following applies. 2011 1040 form download Goodwill or going concern value could, under any circumstances, attach to them. 2011 1040 form download The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. 2011 1040 form download   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). 2011 1040 form download The consideration remaining after this reduction must be allocated among the various business assets in a certain order. 2011 1040 form download See Classes of assets next for the complete order. 2011 1040 form download Classes of assets. 2011 1040 form download   The following definitions are the classifications for deemed or actual asset acquisitions. 2011 1040 form download Allocate the consideration among the assets in the following order. 2011 1040 form download The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. 2011 1040 form download The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. 2011 1040 form download Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). 2011 1040 form download Class II assets are certificates of deposit, U. 2011 1040 form download S. 2011 1040 form download Government securities, foreign currency, and actively traded personal property, including stock and securities. 2011 1040 form download Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. 2011 1040 form download However, see section 1. 2011 1040 form download 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. 2011 1040 form download Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. 2011 1040 form download Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. 2011 1040 form download    Note. 2011 1040 form download Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. 2011 1040 form download Class VI assets are section 197 intangibles (other than goodwill and going concern value). 2011 1040 form download Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). 2011 1040 form download   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. 2011 1040 form download For example, if an asset is described in both Class II and Class IV, choose Class II. 2011 1040 form download Example. 2011 1040 form download The total paid in the sale of the assets of Company SKB is $21,000. 2011 1040 form download No cash or deposit accounts or similar accounts were sold. 2011 1040 form download The company's U. 2011 1040 form download S. 2011 1040 form download Government securities sold had a fair market value of $3,200. 2011 1040 form download The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. 2011 1040 form download Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. 2011 1040 form download S. 2011 1040 form download Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. 2011 1040 form download Agreement. 2011 1040 form download   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. 2011 1040 form download This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. 2011 1040 form download Reporting requirement. 2011 1040 form download   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. 2011 1040 form download Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. 2011 1040 form download Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. 2011 1040 form download See the Instructions for Form 8594. 2011 1040 form download Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. 2011 1040 form download It includes such items as patents, copyrights, and the goodwill value of a business. 2011 1040 form download Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. 2011 1040 form download The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. 2011 1040 form download See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. 2011 1040 form download Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. 2011 1040 form download The following discussions explain special rules that apply to certain dispositions of intangible property. 2011 1040 form download Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. 2011 1040 form download They include the following assets. 2011 1040 form download Goodwill. 2011 1040 form download Going concern value. 2011 1040 form download Workforce in place. 2011 1040 form download Business books and records, operating systems, and other information bases. 2011 1040 form download Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. 2011 1040 form download Customer-based intangibles. 2011 1040 form download Supplier-based intangibles. 2011 1040 form download Licenses, permits, and other rights granted by a governmental unit. 2011 1040 form download Covenants not to compete entered into in connection with the acquisition of a business. 2011 1040 form download Franchises, trademarks, and trade names. 2011 1040 form download See chapter 8 of Publication 535 for a description of each intangible. 2011 1040 form download Dispositions. 2011 1040 form download   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. 2011 1040 form download Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. 2011 1040 form download If you retain more than one section 197 intangible, increase each intangible's adjusted basis. 2011 1040 form download Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. 2011 1040 form download   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. 2011 1040 form download For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. 2011 1040 form download Covenant not to compete. 2011 1040 form download   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. 2011 1040 form download Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. 2011 1040 form download Anti-churning rules. 2011 1040 form download   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. 2011 1040 form download However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. 2011 1040 form download Recognize gain on the transfer of the property. 2011 1040 form download Pay income tax on the gain at the highest tax rate. 2011 1040 form download   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. 2011 1040 form download But each partner or shareholder must pay the tax on his or her share of gain. 2011 1040 form download   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. 2011 1040 form download You must file the tax return by the due date (including extensions). 2011 1040 form download You must also notify the transferee of the election in writing by the due date of the return. 2011 1040 form download   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). 2011 1040 form download Attach the statement to the amended return and write “Filed pursuant to section 301. 2011 1040 form download 9100-2” at the top of the statement. 2011 1040 form download File the amended return at the same address the original return was filed. 2011 1040 form download For more information about making the election, see Regulations section 1. 2011 1040 form download 197-2(h)(9). 2011 1040 form download For information about reporting the tax on your income tax return, see the Instructions for Form 4797. 2011 1040 form download Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. 2011 1040 form download This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. 2011 1040 form download For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. 2011 1040 form download This treatment applies to your transfer of a patent if you meet all the following conditions. 2011 1040 form download You are the holder of the patent. 2011 1040 form download You transfer the patent other than by gift, inheritance, or devise. 2011 1040 form download You transfer all substantial rights to the patent or an undivided interest in all such rights. 2011 1040 form download You do not transfer the patent to a related person. 2011 1040 form download Holder. 2011 1040 form download   You are the holder of a patent if you are either of the following. 2011 1040 form download The individual whose effort created the patent property and who qualifies as the original and first inventor. 2011 1040 form download The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. 2011 1040 form download All substantial rights. 2011 1040 form download   All substantial rights to patent property are all rights that have value when they are transferred. 2011 1040 form download A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. 2011 1040 form download   All substantial rights to a patent are not transferred if any of the following apply to the transfer. 2011 1040 form download The rights are limited geographically within a country. 2011 1040 form download The rights are limited to a period less than the remaining life of the patent. 2011 1040 form download The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. 2011 1040 form download The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. 2011 1040 form download Related persons. 2011 1040 form download   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. 2011 1040 form download Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. 2011 1040 form download Substitute “25% or more” ownership for “more than 50%. 2011 1040 form download ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. 2011 1040 form download For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. 2011 1040 form download The brother-sister exception does not apply because the trust relationship is independent of family status. 2011 1040 form download Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. 2011 1040 form download A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. 2011 1040 form download Significant power, right, or continuing interest. 2011 1040 form download   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. 2011 1040 form download   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. 2011 1040 form download A right to disapprove any assignment of the interest, or any part of it. 2011 1040 form download A right to end the agreement at will. 2011 1040 form download A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. 2011 1040 form download A right to make the recipient sell or advertise only your products or services. 2011 1040 form download A right to make the recipient buy most supplies and equipment from you. 2011 1040 form download A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. 2011 1040 form download Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. 2011 1040 form download However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. 2011 1040 form download See section 1237 of the Internal Revenue Code. 2011 1040 form download Timber Standing timber held as investment property is a capital asset. 2011 1040 form download Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. 2011 1040 form download If you held the timber primarily for sale to customers, it is not a capital asset. 2011 1040 form download Gain or loss on its sale is ordinary business income or loss. 2011 1040 form download It is reported in the gross receipts or sales and cost of goods sold items of your return. 2011 1040 form download Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. 2011 1040 form download These sales constitute a very minor part of their farm businesses. 2011 1040 form download In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. 2011 1040 form download , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. 2011 1040 form download Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. 2011 1040 form download Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. 2011 1040 form download This is true whether the timber is cut under contract or whether you cut it yourself. 2011 1040 form download Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. 2011 1040 form download See chapter 3. 2011 1040 form download Gain or loss is reported on Form 4797. 2011 1040 form download Christmas trees. 2011 1040 form download   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. 2011 1040 form download They qualify for both rules discussed below. 2011 1040 form download Election to treat cutting as a sale or exchange. 2011 1040 form download   Under the general rule, the cutting of timber results in no gain or loss. 2011 1040 form download It is not until a sale or exchange occurs that gain or loss is realized. 2011 1040 form download But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. 2011 1040 form download Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. 2011 1040 form download Any later sale results in ordinary business income or loss. 2011 1040 form download See Example, later. 2011 1040 form download   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. 2011 1040 form download Making the election. 2011 1040 form download   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. 2011 1040 form download You do not have to make the election in the first year you cut timber. 2011 1040 form download You can make it in any year to which the election would apply. 2011 1040 form download If the timber is partnership property, the election is made on the partnership return. 2011 1040 form download This election cannot be made on an amended return. 2011 1040 form download   Once you have made the election, it remains in effect for all later years unless you cancel it. 2011 1040 form download   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. 2011 1040 form download The prior election (and revocation) is disregarded for purposes of making a subsequent election. 2011 1040 form download See Form T (Timber), Forest Activities Schedule, for more information. 2011 1040 form download Gain or loss. 2011 1040 form download   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. 2011 1040 form download   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. 2011 1040 form download Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. 2011 1040 form download   Timber depletion is discussed in chapter 9 of Publication 535. 2011 1040 form download Example. 2011 1040 form download In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. 2011 1040 form download It had an adjusted basis for depletion of $40 per MBF. 2011 1040 form download You are a calendar year taxpayer. 2011 1040 form download On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. 2011 1040 form download It was cut in April for sale. 2011 1040 form download On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. 2011 1040 form download You report the difference between the fair market value and your adjusted basis for depletion as a gain. 2011 1040 form download This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. 2011 1040 form download You figure your gain as follows. 2011 1040 form download FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. 2011 1040 form download Outright sales of timber. 2011 1040 form download   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). 2011 1040 form download However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). 2011 1040 form download Cutting contract. 2011 1040 form download   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. 2011 1040 form download You are the owner of the timber. 2011 1040 form download You held the timber longer than 1 year before its disposal. 2011 1040 form download You kept an economic interest in the timber. 2011 1040 form download   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. 2011 1040 form download   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. 2011 1040 form download Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. 2011 1040 form download Date of disposal. 2011 1040 form download   The date of disposal is the date the timber is cut. 2011 1040 form download However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. 2011 1040 form download   This election applies only to figure the holding period of the timber. 2011 1040 form download It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). 2011 1040 form download   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. 2011 1040 form download The statement must identify the advance payments subject to the election and the contract under which they were made. 2011 1040 form download   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). 2011 1040 form download Attach the statement to the amended return and write “Filed pursuant to section 301. 2011 1040 form download 9100-2” at the top of the statement. 2011 1040 form download File the amended return at the same address the original return was filed. 2011 1040 form download Owner. 2011 1040 form download   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. 2011 1040 form download You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. 2011 1040 form download Tree stumps. 2011 1040 form download   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. 2011 1040 form download Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. 2011 1040 form download However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. 2011 1040 form download Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. 2011 1040 form download   See Form T (Timber) and its separate instructions for more information about dispositions of timber. 2011 1040 form download Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. 2011 1040 form download , are capital assets except when they are held for sale by a dealer. 2011 1040 form download Any gain or loss from their sale or exchange generally is a capital gain or loss. 2011 1040 form download If you are a dealer, the amount received from the sale is ordinary business income. 2011 1040 form download Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. 2011 1040 form download You owned the coal or iron ore longer than 1 year before its disposal. 2011 1040 form download You kept an economic interest in the coal or iron ore. 2011 1040 form download For this rule, the date the coal or iron ore is mined is considered the date of its disposal. 2011 1040 form download Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). 2011 1040 form download This amount is included on Form 4797 along with your other section 1231 gains and losses. 2011 1040 form download You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. 2011 1040 form download If you own only an option to buy the coal in place, you do not qualify as an owner. 2011 1040 form download In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. 2011 1040 form download The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. 2011 1040 form download Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. 2011 1040 form download If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. 2011 1040 form download Special rule. 2011 1040 form download   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. 2011 1040 form download A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). 2011 1040 form download An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. 2011 1040 form download Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. 2011 1040 form download This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. 2011 1040 form download An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). 2011 1040 form download A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. 2011 1040 form download Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. 2011 1040 form download For more information, see chapter 4 of Publication 550. 2011 1040 form download Prev  Up  Next   Home   More Online Publications
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Federal Payment Levy Program

In July 2000, the IRS, in conjunction with the Department of the Treasury, Financial Management Service (FMS), started the Federal Payment Levy Program (FPLP) which is authorized by Internal Revenue Code Section 6331 (h), as prescribed by the Taxpayer Relief Act of 1997 Section 1024. Through this program, we can collect your overdue taxes through a continuous levy on certain federal payments disbursed by FMS. The following is a list of federal payments that can be levied through the FPLP:

  • federal employee retirement annuities,
  • federal payments made to you as a contractor/vendor doing business with the government (including Defense contracts),
  • federal employee travel advances or reimbursements,
  • certain Social Security benefits paid to you,
  • some federal salaries, 
  • Medicare provider and supplier payments.
  • Railroad Retirement Board benefits paid to you.

In the future, the program will expand to include additional federal employee salaries and other types of federal payments.

Federal payments to a delinquent taxpayer will not be included in the program in certain circumstances. These circumstances include, when you are in bankruptcy, have applied for relief as an innocent or injured spouse, made alternative arrangements to pay, or the IRS has determined you are in a hardship situation.

As part of this program, a file of delinquent accounts is transmitted to FMS to be matched against pending federal payments you are due. When a match is found, we send you a Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing, CP 90 or CP 297, if another Final Notice has not already been issued. See Tax Information for Appeals for additional information about your right to a hearing.

If we don't hear from you within 30 days from the date of the Final Notice, we will transmit the levy electronically to FMS. This applies to all federal payments that can be levied except for certain Social Security benefits. See Publication 594, The IRS Collection Process, and Publication 1, Your Rights as a Taxpayer , for additional information.

A levy may be transmitted to FMS without issuing a Final Notice if you previously requested a Collection Due Process (CDP) hearing on employment taxes. The Small Business and Work Opportunity Tax Act of 2007 amended I.R.C. Section 6330(f) and permits such a levy. If you requested a CDP hearing on previous employment taxes NO MORE THAN 2 years prior to the employment taxes being levied, we will send you a Notice of Levy and Notice of Your Right to a Hearing, CP 297A.

A levy may be transmitted to FMS without issuing a Final Notice if you or your predecessor is a Federal contractor.The Small Business Jobs Act of 2010 amended IRC Section 6330(f) and permits the IRS to issue such a levy.  We will send you a post levy notice, Notice of Levy and Notice of Your Right to a Hearing, CP 90C or CP 297C.

From that point on, FMS may reduce any federal payments subject to the levy by 15 percent, or the exact amount of tax owed if it is less than 15 percent of the payment.  Some contract/vendor payments, however, will be reduced by 100 percent, or the exact amount of tax owed. The levy is continuous until your overdue taxes are paid in full, or other arrangements are made to satisfy the debt. Each time your federal payment is levied, FMS will send you a letter of explanation, including information on which federal payment was levied, and advise you to contact us for resolution.

Contact us toll-free at 1-800-829-7650 or 1-800-829-3903 to resolve the issue by paying the tax bill, entering into an installment agreement, or proposing an Offer in Compromise. Please do not contact the FMS, OPM, SSA, or any other federal agency. See Topic 202, What to Do if You Can't Pay Your Tax, and Topic 204, Offers In Compromise, for additional information.

 

Page Last Reviewed or Updated: 07-Jan-2014

The 2011 1040 Form Download

2011 1040 form download Index A Assistance (see Tax help) C Capital construction fund, Capital Construction Fund Comments, Comments and suggestions. 2011 1040 form download F Free tax services, How To Get Tax Help H Help (see Tax help) M More information (see Tax help) P Publications (see Tax help) S Suggestions, Comments and suggestions. 2011 1040 form download T Tax help, How To Get Tax Help Taxpayer Advocate, Contacting your Taxpayer Advocate. 2011 1040 form download TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications