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2011 Tax Forms And Instructions 1040

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2011 Tax Forms And Instructions 1040

2011 tax forms and instructions 1040 Publication 526 - Main Content Table of Contents Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Expenses of Whaling Captains Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions to Donor-Advised Funds Partial Interest in Property Contributions of PropertyContributions Subject to Special Rules Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value Penalty When To DeductChecks. 2011 tax forms and instructions 1040 Text message. 2011 tax forms and instructions 1040 Credit card. 2011 tax forms and instructions 1040 Pay-by-phone account. 2011 tax forms and instructions 1040 Stock certificate. 2011 tax forms and instructions 1040 Promissory note. 2011 tax forms and instructions 1040 Option. 2011 tax forms and instructions 1040 Borrowed funds. 2011 tax forms and instructions 1040 Conditional gift. 2011 tax forms and instructions 1040 Limits on Deductions50% Limit 30% Limit Special 30% Limit for Capital Gain Property 20% Limit Special 50% Limit for Qualified Conservation Contributions How To Figure Your Deduction When Limits Apply Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To ReportReporting expenses for student living with you. 2011 tax forms and instructions 1040 Total deduction over $500. 2011 tax forms and instructions 1040 Deduction over $5,000 for one item. 2011 tax forms and instructions 1040 Vehicle donations. 2011 tax forms and instructions 1040 Clothing and household items not in good used condition. 2011 tax forms and instructions 1040 Easement on building in historic district. 2011 tax forms and instructions 1040 Deduction over $500,000. 2011 tax forms and instructions 1040 How To Get Tax HelpLow Income Taxpayer Clinics Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. 2011 tax forms and instructions 1040 Most organizations, other than churches and governments, must apply to the IRS to become a qualified organization. 2011 tax forms and instructions 1040 How to check whether an organization can receive deductible charitable contributions. 2011 tax forms and instructions 1040   You can ask any organization whether it is a qualified organization, and most will be able to tell you. 2011 tax forms and instructions 1040 Or go to IRS. 2011 tax forms and instructions 1040 gov. 2011 tax forms and instructions 1040 Click on “Tools” and then on “Exempt Organizations Select Check” (www. 2011 tax forms and instructions 1040 irs. 2011 tax forms and instructions 1040 gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). 2011 tax forms and instructions 1040 This online tool will enable you to search for qualified organizations. 2011 tax forms and instructions 1040 You can also call the IRS to find out if an organization is qualified. 2011 tax forms and instructions 1040 Call 1-877-829-5500. 2011 tax forms and instructions 1040 People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. 2011 tax forms and instructions 1040 Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. 2011 tax forms and instructions 1040 gsa. 2011 tax forms and instructions 1040 gov/fedrelay. 2011 tax forms and instructions 1040 Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. 2011 tax forms and instructions 1040 A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). 2011 tax forms and instructions 1040 It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. 2011 tax forms and instructions 1040 Certain organizations that foster national or international amateur sports competition also qualify. 2011 tax forms and instructions 1040 War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). 2011 tax forms and instructions 1040 Domestic fraternal societies, orders, and associations operating under the lodge system. 2011 tax forms and instructions 1040 (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. 2011 tax forms and instructions 1040 ) Certain nonprofit cemetery companies or corporations. 2011 tax forms and instructions 1040 (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. 2011 tax forms and instructions 1040 ) The United States or any state, the District of Columbia, a U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 possession (including Puerto Rico), a political subdivision of a state or U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. 2011 tax forms and instructions 1040 (Your contribution to this type of organization is deductible only if it is to be used solely for public purposes. 2011 tax forms and instructions 1040 ) Example 1. 2011 tax forms and instructions 1040 You contribute cash to your city's police department to be used as a reward for information about a crime. 2011 tax forms and instructions 1040 The city police department is a qualified organization, and your contribution is for a public purpose. 2011 tax forms and instructions 1040 You can deduct your contribution. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 You make a voluntary contribution to the social security trust fund, not earmarked for a specific account. 2011 tax forms and instructions 1040 Because the trust fund is part of the U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Government, you contributed to a qualified organization. 2011 tax forms and instructions 1040 You can deduct your contribution. 2011 tax forms and instructions 1040 Examples. 2011 tax forms and instructions 1040   The following list gives some examples of qualified organizations. 2011 tax forms and instructions 1040 Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. 2011 tax forms and instructions 1040 Most nonprofit charitable organizations such as the American Red Cross and the United Way. 2011 tax forms and instructions 1040 Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. 2011 tax forms and instructions 1040 This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. 2011 tax forms and instructions 1040 However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . 2011 tax forms and instructions 1040 Nonprofit hospitals and medical research organizations. 2011 tax forms and instructions 1040 Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. 2011 tax forms and instructions 1040 Nonprofit volunteer fire companies. 2011 tax forms and instructions 1040 Nonprofit organizations that develop and maintain public parks and recreation facilities. 2011 tax forms and instructions 1040 Civil defense organizations. 2011 tax forms and instructions 1040 Canadian charities. 2011 tax forms and instructions 1040   You may be able to deduct contributions to certain Canadian charitable organizations covered under an income tax treaty with Canada. 2011 tax forms and instructions 1040 To deduct your contribution to a Canadian charity, you generally must have income from sources in Canada. 2011 tax forms and instructions 1040 See Publication 597, Information on the United States-Canada Income Tax Treaty, for information on how to figure your deduction. 2011 tax forms and instructions 1040 Mexican charities. 2011 tax forms and instructions 1040   Under the U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 -Mexico income tax treaty, a contribution to a Mexican charitable organization may be deductible, but only if and to the extent the contribution would have been treated as a charitable contribution to a public charity created or organized under U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 law. 2011 tax forms and instructions 1040 To deduct your contribution to a Mexican charity, you must have income from sources in Mexico. 2011 tax forms and instructions 1040 The limits described in Limits on Deductions , later, apply and are figured using your income from Mexican sources. 2011 tax forms and instructions 1040 Israeli charities. 2011 tax forms and instructions 1040   Under the U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 -Israel income tax treaty, a contribution to an Israeli charitable organization is deductible if and to the extent the contribution would have been treated as a charitable contribution if the organization had been created or organized under U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 law. 2011 tax forms and instructions 1040 To deduct your contribution to an Israeli charity, you must have income from sources in Israel. 2011 tax forms and instructions 1040 The limits described in Limits on Deductions , later, apply. 2011 tax forms and instructions 1040 The deduction is also limited to 25% of your adjusted gross income from Israeli sources. 2011 tax forms and instructions 1040 Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. 2011 tax forms and instructions 1040 A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. 2011 tax forms and instructions 1040 The contributions must be made to a qualified organization and not set aside for use by a specific person. 2011 tax forms and instructions 1040 If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. 2011 tax forms and instructions 1040 See Contributions of Property , later. 2011 tax forms and instructions 1040 Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. 2011 tax forms and instructions 1040 In addition, the total of your charitable contributions deduction and certain other itemized deductions may be limited. 2011 tax forms and instructions 1040 See Limits on Deductions , later. 2011 tax forms and instructions 1040 Table 1 in this publication gives examples of contributions you can and cannot deduct. 2011 tax forms and instructions 1040 Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. 2011 tax forms and instructions 1040 Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. 2011 tax forms and instructions 1040 If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. 2011 tax forms and instructions 1040 For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 You pay $65 for a ticket to a dinner-dance at a church. 2011 tax forms and instructions 1040 Your entire $65 payment goes to the church. 2011 tax forms and instructions 1040 The ticket to the dinner-dance has a fair market value of $25. 2011 tax forms and instructions 1040 When you buy your ticket, you know its value is less than your payment. 2011 tax forms and instructions 1040 To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). 2011 tax forms and instructions 1040 You can deduct $40 as a charitable contribution to the church. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. 2011 tax forms and instructions 1040 The amount you pay is no more than the fair rental value. 2011 tax forms and instructions 1040 You have not made a deductible charitable contribution. 2011 tax forms and instructions 1040 Athletic events. 2011 tax forms and instructions 1040   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. 2011 tax forms and instructions 1040   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. 2011 tax forms and instructions 1040 Subtract the price of the tickets from your payment. 2011 tax forms and instructions 1040 You can deduct 80% of the remaining amount as a charitable contribution. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 You pay $300 a year for membership in a university's athletic scholarship program. 2011 tax forms and instructions 1040 The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. 2011 tax forms and instructions 1040 You can deduct $240 (80% of $300) as a charitable contribution. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. 2011 tax forms and instructions 1040 You must subtract the usual price of a ticket ($120) from your $300 payment. 2011 tax forms and instructions 1040 The result is $180. 2011 tax forms and instructions 1040 Your deductible charitable contribution is $144 (80% of $180). 2011 tax forms and instructions 1040 Charity benefit events. 2011 tax forms and instructions 1040   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. 2011 tax forms and instructions 1040   If there is an established charge for the event, that charge is the value of your benefit. 2011 tax forms and instructions 1040 If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. 2011 tax forms and instructions 1040 Whether you use the tickets or other privileges has no effect on the amount you can deduct. 2011 tax forms and instructions 1040 However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. 2011 tax forms and instructions 1040    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. 2011 tax forms and instructions 1040 If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You pay $40 to see a special showing of a movie for the benefit of a qualified organization. 2011 tax forms and instructions 1040 Printed on the ticket is “Contribution–$40. 2011 tax forms and instructions 1040 ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). 2011 tax forms and instructions 1040 Membership fees or dues. 2011 tax forms and instructions 1040   You may be able to deduct membership fees or dues you pay to a qualified organization. 2011 tax forms and instructions 1040 However, you can deduct only the amount that is more than the value of the benefits you receive. 2011 tax forms and instructions 1040   You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. 2011 tax forms and instructions 1040 They are not qualified organizations. 2011 tax forms and instructions 1040 Certain membership benefits can be disregarded. 2011 tax forms and instructions 1040   Both you and the organization can disregard the following membership benefits if you get them in return for an annual payment of $75 or less. 2011 tax forms and instructions 1040 Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. 2011 tax forms and instructions 1040 Admission, while you are a member, to events open only to members of the organization if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. 2011 tax forms and instructions 1040 20. 2011 tax forms and instructions 1040 Token items. 2011 tax forms and instructions 1040   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. 2011 tax forms and instructions 1040 You receive only a small item or other benefit of token value. 2011 tax forms and instructions 1040 The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. 2011 tax forms and instructions 1040 The organization determines whether the value of an item or benefit is substantial by using Revenue Procedures 90-12 and 92-49 and the inflation adjustment in Revenue Procedure 2012–41. 2011 tax forms and instructions 1040 Written statement. 2011 tax forms and instructions 1040   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. 2011 tax forms and instructions 1040 The statement must say you can deduct only the amount of your payment that is more than the value of the goods or services you received. 2011 tax forms and instructions 1040 It must also give you a good faith estimate of the value of those goods or services. 2011 tax forms and instructions 1040   The organization can give you the statement either when it solicits or when it receives the payment from you. 2011 tax forms and instructions 1040 Exception. 2011 tax forms and instructions 1040   An organization will not have to give you this statement if one of the following is true. 2011 tax forms and instructions 1040 The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. 2011 tax forms and instructions 1040 You receive only items whose value is not substantial as described under Token items , earlier. 2011 tax forms and instructions 1040 You receive only membership benefits that can be disregarded, as described under Membership fees or dues , earlier. 2011 tax forms and instructions 1040 Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. 2011 tax forms and instructions 1040 You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization (defined later) as part of a program of the organization to provide educational opportunities for the student, Is not your relative (defined later) or dependent (also defined later), and Is a full-time student in the twelfth or any lower grade at a school in the United States. 2011 tax forms and instructions 1040 You can deduct up to $50 a month for each full calendar month the student lives with you. 2011 tax forms and instructions 1040 Any month when conditions (1) through (3) above are met for 15 or more days counts as a full month. 2011 tax forms and instructions 1040 Qualified organization. 2011 tax forms and instructions 1040   For these purposes, a qualified organization can be any of the organizations described earlier under Types of Qualified Organizations , except those in (4) and (5). 2011 tax forms and instructions 1040 For example, if you are providing a home for a student as part of a state or local government program, you cannot deduct your expenses as charitable contributions. 2011 tax forms and instructions 1040 But see Foster parents under Out-of-Pocket Expenses in Giving Services, later, if you provide the home as a foster parent. 2011 tax forms and instructions 1040 Relative. 2011 tax forms and instructions 1040   The term “relative” means any of the following persons. 2011 tax forms and instructions 1040 Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). 2011 tax forms and instructions 1040 A legally adopted child is considered your child. 2011 tax forms and instructions 1040 Your brother, sister, half brother, half sister, stepbrother, or stepsister. 2011 tax forms and instructions 1040 Your father, mother, grandparent, or other direct ancestor. 2011 tax forms and instructions 1040 Your stepfather or stepmother. 2011 tax forms and instructions 1040 A son or daughter of your brother or sister. 2011 tax forms and instructions 1040 A brother or sister of your father or mother. 2011 tax forms and instructions 1040 Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. 2011 tax forms and instructions 1040 Dependent. 2011 tax forms and instructions 1040   For this purpose, the term “dependent” means: A person you can claim as a dependent, or A person you could have claimed as a dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. 2011 tax forms and instructions 1040    Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 residents and cannot be claimed as dependents. 2011 tax forms and instructions 1040 Qualifying expenses. 2011 tax forms and instructions 1040   You may be able to deduct the cost of books, tuition, food, clothing, transportation, medical and dental care, entertainment, and other amounts you actually spend for the well-being of the student. 2011 tax forms and instructions 1040 Expenses that do not qualify. 2011 tax forms and instructions 1040   You cannot deduct depreciation on your home, the fair market value of lodging, and similar items not considered amounts actually spent by you. 2011 tax forms and instructions 1040 Nor can you deduct general household expenses, such as taxes, insurance, and repairs. 2011 tax forms and instructions 1040 Reimbursed expenses. 2011 tax forms and instructions 1040   In most cases, you cannot claim a charitable contribution deduction if you are compensated or reimbursed for any part of the costs of having a student live with you. 2011 tax forms and instructions 1040 However, you may be able to claim a charitable contribution deduction for the unreimbursed portion of your expenses if you are reimbursed only for an extraordinary or one-time item, such as a hospital bill or vacation trip, you paid in advance at the request of the student's parents or the sponsoring organization. 2011 tax forms and instructions 1040 Mutual exchange program. 2011 tax forms and instructions 1040   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. 2011 tax forms and instructions 1040 Reporting expenses. 2011 tax forms and instructions 1040   For a list of what you must file with your return if you deduct expenses for a student living with you, see Reporting expenses for student living with you under How To Report, later. 2011 tax forms and instructions 1040 Out-of-Pocket Expenses in Giving Services Table 2. 2011 tax forms and instructions 1040 Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. 2011 tax forms and instructions 1040 All of the rules explained in this publication also apply. 2011 tax forms and instructions 1040 See, in particular, Out-of-Pocket Expenses in Giving Services . 2011 tax forms and instructions 1040 Question Answer I volunteer 6 hours a week in the office of a qualified organization. 2011 tax forms and instructions 1040 The receptionist is paid $10 an hour for the same work. 2011 tax forms and instructions 1040 Can I deduct $60 a week for my time? No, you cannot deduct the value of your time or services. 2011 tax forms and instructions 1040  The office is 30 miles from my home. 2011 tax forms and instructions 1040 Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. 2011 tax forms and instructions 1040 If you do not want to figure your actual costs, you can deduct 14 cents for each mile. 2011 tax forms and instructions 1040 I volunteer as a Red Cross nurse's aide at a hospital. 2011 tax forms and instructions 1040 Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. 2011 tax forms and instructions 1040 I pay a babysitter to watch my children while I volunteer for a qualified organization. 2011 tax forms and instructions 1040 Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. 2011 tax forms and instructions 1040 (If you have childcare expenses so you can work for pay, see Publication 503, Child and Dependent Care Expenses. 2011 tax forms and instructions 1040 ) Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. 2011 tax forms and instructions 1040 The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. 2011 tax forms and instructions 1040 Table 2 contains questions and answers that apply to some individuals who volunteer their services. 2011 tax forms and instructions 1040 Underprivileged youths selected by charity. 2011 tax forms and instructions 1040   You can deduct reasonable unreimbursed out-of-pocket expenses you pay to allow underprivileged youths to attend athletic events, movies, or dinners. 2011 tax forms and instructions 1040 The youths must be selected by a charitable organization whose goal is to reduce juvenile delinquency. 2011 tax forms and instructions 1040 Your own similar expenses in accompanying the youths are not deductible. 2011 tax forms and instructions 1040 Conventions. 2011 tax forms and instructions 1040   If a qualified organization selects you to attend a convention as its representative, you can deduct your unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight for the convention. 2011 tax forms and instructions 1040 However, see Travel , later. 2011 tax forms and instructions 1040   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. 2011 tax forms and instructions 1040 You also cannot deduct travel, meals and lodging, and other expenses for your spouse or children. 2011 tax forms and instructions 1040   You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. 2011 tax forms and instructions 1040 You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. 2011 tax forms and instructions 1040 Uniforms. 2011 tax forms and instructions 1040   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. 2011 tax forms and instructions 1040 Foster parents. 2011 tax forms and instructions 1040   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. 2011 tax forms and instructions 1040 A qualified organization must select the individuals you take into your home for foster care. 2011 tax forms and instructions 1040   You can deduct expenses that meet both of the following requirements. 2011 tax forms and instructions 1040 They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. 2011 tax forms and instructions 1040 They are incurred primarily to benefit the qualified organization. 2011 tax forms and instructions 1040   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. 2011 tax forms and instructions 1040 For details, see Publication 501, Exemptions, Standard Deduction, and Filing Information. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. 2011 tax forms and instructions 1040 Your unreimbursed expenses are not deductible as charitable contributions. 2011 tax forms and instructions 1040 Church deacon. 2011 tax forms and instructions 1040   You can deduct as a charitable contribution any unreimbursed expenses you have while in a permanent diaconate program established by your church. 2011 tax forms and instructions 1040 These expenses include the cost of vestments, books, and transportation required in order to serve in the program as either a deacon candidate or an ordained deacon. 2011 tax forms and instructions 1040 Car expenses. 2011 tax forms and instructions 1040   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of your car in giving services to a charitable organization. 2011 tax forms and instructions 1040 You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. 2011 tax forms and instructions 1040   If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. 2011 tax forms and instructions 1040   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. 2011 tax forms and instructions 1040   You must keep reliable written records of your car expenses. 2011 tax forms and instructions 1040 For more information, see Car expenses under Records To Keep, later. 2011 tax forms and instructions 1040 Travel. 2011 tax forms and instructions 1040   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. 2011 tax forms and instructions 1040 This applies whether you pay the expenses directly or indirectly. 2011 tax forms and instructions 1040 You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. 2011 tax forms and instructions 1040   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. 2011 tax forms and instructions 1040 Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. 2011 tax forms and instructions 1040 However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. 2011 tax forms and instructions 1040 You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. 2011 tax forms and instructions 1040 You participate in the activities of the group and enjoy your time with them. 2011 tax forms and instructions 1040 You oversee the breaking of camp and you transport the group home. 2011 tax forms and instructions 1040 You can deduct your travel expenses. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. 2011 tax forms and instructions 1040 The project is sponsored by a charitable organization. 2011 tax forms and instructions 1040 In most circumstances, you cannot deduct your expenses. 2011 tax forms and instructions 1040 Example 3. 2011 tax forms and instructions 1040 You work for several hours each morning on an archeological dig sponsored by a charitable organization. 2011 tax forms and instructions 1040 The rest of the day is free for recreation and sightseeing. 2011 tax forms and instructions 1040 You cannot take a charitable contribution deduction even though you work very hard during those few hours. 2011 tax forms and instructions 1040 Example 4. 2011 tax forms and instructions 1040 You spend the entire day attending a charitable organization's regional meeting as a chosen representative. 2011 tax forms and instructions 1040 In the evening you go to the theater. 2011 tax forms and instructions 1040 You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. 2011 tax forms and instructions 1040 Daily allowance (per diem). 2011 tax forms and instructions 1040   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. 2011 tax forms and instructions 1040 You may be able to deduct any necessary travel expenses that are more than the allowance. 2011 tax forms and instructions 1040 Deductible travel expenses. 2011 tax forms and instructions 1040   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. 2011 tax forms and instructions 1040 Because these travel expenses are not business-related, they are not subject to the same limits as business related expenses. 2011 tax forms and instructions 1040 For information on business travel expenses, see Travel in Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2011 tax forms and instructions 1040 Expenses of Whaling Captains You may be able to deduct as a charitable contribution any reasonable and necessary whaling expenses you pay during the year to carry out sanctioned whaling activities. 2011 tax forms and instructions 1040 The deduction is limited to $10,000 a year. 2011 tax forms and instructions 1040 To claim the deduction, you must be recognized by the Alaska Eskimo Whaling Commission as a whaling captain charged with the responsibility of maintaining and carrying out sanctioned whaling activities. 2011 tax forms and instructions 1040 Sanctioned whaling activities are subsistence bowhead whale hunting activities conducted under the management plan of the Alaska Eskimo Whaling Commission. 2011 tax forms and instructions 1040 Whaling expenses include expenses for: Acquiring and maintaining whaling boats, weapons, and gear used in sanctioned whaling activities, Supplying food for the crew and other provisions for carrying out these activities, and Storing and distributing the catch from these activities. 2011 tax forms and instructions 1040 You must keep records showing the time, place, date, amount, and nature of the expenses. 2011 tax forms and instructions 1040 For details, see Revenue Procedure 2006-50, which is on page 944 of Internal Revenue Bulletin 2006-47 at www. 2011 tax forms and instructions 1040 irs. 2011 tax forms and instructions 1040 gov/pub/irs-irbs/irb06-47. 2011 tax forms and instructions 1040 pdf. 2011 tax forms and instructions 1040 Contributions You Cannot Deduct There are some contributions you cannot deduct and others you can deduct only in part. 2011 tax forms and instructions 1040 You cannot deduct as a charitable contribution: A contribution to a specific individual, A contribution to a nonqualified organization, The part of a contribution from which you receive or expect to receive a benefit, The value of your time or services, Your personal expenses, A qualified charitable distribution from an individual retirement arrangement (IRA), Appraisal fees, Certain contributions to donor-advised funds, or Certain contributions of partial interests in property. 2011 tax forms and instructions 1040 Detailed discussions of these items follow. 2011 tax forms and instructions 1040 Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. 2011 tax forms and instructions 1040 Contributions to fraternal societies made for the purpose of paying medical or burial expenses of members. 2011 tax forms and instructions 1040 Contributions to individuals who are needy or worthy. 2011 tax forms and instructions 1040 You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. 2011 tax forms and instructions 1040 But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. 2011 tax forms and instructions 1040 However, you cannot deduct contributions earmarked for relief of a particular individual or family. 2011 tax forms and instructions 1040 Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. 2011 tax forms and instructions 1040 Expenses you paid for another person who provided services to a qualified organization. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 Your son does missionary work. 2011 tax forms and instructions 1040 You pay his expenses. 2011 tax forms and instructions 1040 You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. 2011 tax forms and instructions 1040 Payments to a hospital that are for a specific patient's care or for services for a specific patient. 2011 tax forms and instructions 1040 You cannot deduct these payments even if the hospital is operated by a city, state, or other qualified organization. 2011 tax forms and instructions 1040 Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. 2011 tax forms and instructions 1040 Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. 2011 tax forms and instructions 1040 Chambers of commerce and other business leagues or organizations. 2011 tax forms and instructions 1040 Civic leagues and associations. 2011 tax forms and instructions 1040 Communist organizations. 2011 tax forms and instructions 1040 Country clubs and other social clubs. 2011 tax forms and instructions 1040 Foreign organizations other than certain Canadian, Israeli, or Mexican charitable organizations. 2011 tax forms and instructions 1040 (See Canadian charities , Mexican charities , and Israeli charities under Organizations That Qualify To Receive Deductible Contributions, earlier. 2011 tax forms and instructions 1040 ) Also, you cannot deduct a contribution you made to any qualifying organization if the contribution is earmarked to go to a foreign organization. 2011 tax forms and instructions 1040 However, certain contributions to a qualified organization for use in a program conducted by a foreign charity may be deductible as long as they are not earmarked to go to the foreign charity. 2011 tax forms and instructions 1040 For the contribution to be deductible, the qualified organization must approve the program as furthering its own exempt purposes and must keep control over the use of the contributed funds. 2011 tax forms and instructions 1040 The contribution is also deductible if the foreign charity is only an administrative arm of the qualified organization. 2011 tax forms and instructions 1040 Homeowners' associations. 2011 tax forms and instructions 1040 Labor unions. 2011 tax forms and instructions 1040 But you may be able to deduct union dues as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit, on Schedule A (Form 1040). 2011 tax forms and instructions 1040 See Publication 529, Miscellaneous Deductions. 2011 tax forms and instructions 1040 Political organizations and candidates. 2011 tax forms and instructions 1040 Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. 2011 tax forms and instructions 1040 See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. 2011 tax forms and instructions 1040 These contributions include the following. 2011 tax forms and instructions 1040 Contributions for lobbying. 2011 tax forms and instructions 1040 This includes amounts you earmark for use in, or in connection with, influencing specific legislation. 2011 tax forms and instructions 1040 Contributions to a retirement home for room, board, maintenance, or admittance. 2011 tax forms and instructions 1040 Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. 2011 tax forms and instructions 1040 Costs of raffles, bingo, lottery, etc. 2011 tax forms and instructions 1040 You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. 2011 tax forms and instructions 1040 For information on how to report gambling winnings and losses, see Deductions Not Subject to the 2% Limit in Publication 529. 2011 tax forms and instructions 1040 Dues to fraternal orders and similar groups. 2011 tax forms and instructions 1040 However, see Membership fees or dues under Contributions From Which You Benefit, earlier. 2011 tax forms and instructions 1040 Tuition, or amounts you pay instead of tuition. 2011 tax forms and instructions 1040 You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. 2011 tax forms and instructions 1040 You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. 2011 tax forms and instructions 1040 ” Contributions connected with split-dollar insurance arrangements. 2011 tax forms and instructions 1040 You cannot deduct any part of a contribution to a charitable organization if, in connection with the contribution, the organization directly or indirectly pays, has paid, or is expected to pay any premium on any life insurance, annuity, or endowment contract for which you, any member of your family, or any other person chosen by you (other than a qualified charitable organization) is a beneficiary. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You donate money to a charitable organization. 2011 tax forms and instructions 1040 The charity uses the money to purchase a cash value life insurance policy. 2011 tax forms and instructions 1040 The beneficiaries under the insurance policy include members of your family. 2011 tax forms and instructions 1040 Even though the charity may eventually get some benefit out of the insurance policy, you cannot deduct any part of the donation. 2011 tax forms and instructions 1040 Qualified Charitable Distributions A qualified charitable distribution (QCD) is a distribution made directly by the trustee of your individual retirement arrangement (IRA), other than a SEP or SIMPLE IRA, to certain qualified organizations. 2011 tax forms and instructions 1040 You must have been at least age 70½ when the distribution was made. 2011 tax forms and instructions 1040 Your total QCDs for the year cannot be more than $100,000. 2011 tax forms and instructions 1040 If all the requirements are met, a QCD is nontaxable, but you cannot claim a charitable contribution deduction for a QCD. 2011 tax forms and instructions 1040 See Publication 590, Individual Retirement Arrangements (IRAs), for more information about QCDs. 2011 tax forms and instructions 1040 Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. 2011 tax forms and instructions 1040 Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. 2011 tax forms and instructions 1040 The cost of meals you eat while you perform services for a qualified organization, unless it is necessary for you to be away from home overnight while performing the services. 2011 tax forms and instructions 1040 Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final. 2011 tax forms and instructions 1040 However, you may be able to claim a tax credit for these expenses. 2011 tax forms and instructions 1040 Also, you may be able to exclude from your gross income amounts paid or reimbursed by your employer for your adoption expenses. 2011 tax forms and instructions 1040 See Form 8839, Qualified Adoption Expenses, and its instructions, for more information. 2011 tax forms and instructions 1040 You also may be able to claim an exemption for the child. 2011 tax forms and instructions 1040 See Exemptions for Dependents in Publication 501 for more information. 2011 tax forms and instructions 1040 Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property. 2011 tax forms and instructions 1040 But you can claim them, subject to the 2%-of-adjusted-gross-income limit, as a miscellaneous itemized deduction on Schedule A (Form 1040). 2011 tax forms and instructions 1040 See Deductions Subject to the 2% Limit in Publication 529 for more information. 2011 tax forms and instructions 1040 Contributions to Donor-Advised Funds You cannot deduct a contribution to a donor-advised fund if: The qualified organization that sponsors the fund is a war veterans' organization, a fraternal society, or a nonprofit cemetery company, or You do not have an acknowledgment from that sponsoring organization that it has exclusive legal control over the assets contributed. 2011 tax forms and instructions 1040 There are also other circumstances in which you cannot deduct your contribution to a donor-advised fund. 2011 tax forms and instructions 1040 Generally, a donor-advised fund is a fund or account in which a donor can, because of being a donor, advise the fund how to distribute or invest amounts held in the fund. 2011 tax forms and instructions 1040 For details, see Internal Revenue Code section 170(f)(18). 2011 tax forms and instructions 1040 Partial Interest in Property Generally, you cannot deduct a contribution of less than your entire interest in property. 2011 tax forms and instructions 1040 For details, see Partial Interest in Property under Contributions of Property, later. 2011 tax forms and instructions 1040 Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. 2011 tax forms and instructions 1040 However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. 2011 tax forms and instructions 1040 See Giving Property That Has Increased in Value , later. 2011 tax forms and instructions 1040 For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. 2011 tax forms and instructions 1040 Contributions Subject to Special Rules Special rules apply if you contribute: Clothing or household items, A car, boat, or airplane, Taxidermy property, Property subject to a debt, A partial interest in property, A fractional interest in tangible personal property, A qualified conservation contribution, A future interest in tangible personal property, Inventory from your business, or A patent or other intellectual property. 2011 tax forms and instructions 1040 These special rules are described next. 2011 tax forms and instructions 1040 Clothing and Household Items You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. 2011 tax forms and instructions 1040 Exception. 2011 tax forms and instructions 1040   You can take a deduction for a contribution of an item of clothing or a household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. 2011 tax forms and instructions 1040 Household items. 2011 tax forms and instructions 1040   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. 2011 tax forms and instructions 1040   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. 2011 tax forms and instructions 1040 Fair market value. 2011 tax forms and instructions 1040   To determine the fair market value of these items, use the rules under Determining Fair Market Value , later. 2011 tax forms and instructions 1040 Cars, Boats, and Airplanes The following rules apply to any donation of a qualified vehicle. 2011 tax forms and instructions 1040 A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. 2011 tax forms and instructions 1040 Deduction more than $500. 2011 tax forms and instructions 1040   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. 2011 tax forms and instructions 1040 If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 tax forms and instructions 1040 Form 1098-C. 2011 tax forms and instructions 1040   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. 2011 tax forms and instructions 1040 The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. 2011 tax forms and instructions 1040   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453, U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Individual Income Tax Transmittal for an IRS e-file Return, and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. 2011 tax forms and instructions 1040   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. 2011 tax forms and instructions 1040    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. 2011 tax forms and instructions 1040 But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. 2011 tax forms and instructions 1040 Filing deadline approaching and still no Form 1098-C. 2011 tax forms and instructions 1040   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. 2011 tax forms and instructions 1040 Request an automatic 6-month extension of time to file your return. 2011 tax forms and instructions 1040 You can get this extension by filing Form 4868, Application for Automatic Extension of Time To File U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Individual Income Tax Return. 2011 tax forms and instructions 1040 For more information, see the instructions for Form 4868. 2011 tax forms and instructions 1040 File the return on time without claiming the deduction for the qualified vehicle. 2011 tax forms and instructions 1040 After receiving the Form 1098-C, file an amended return, Form 1040X, Amended U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Individual Income Tax Return, claiming the deduction. 2011 tax forms and instructions 1040 Attach Copy B of Form 1098-C (or other statement) to the amended return. 2011 tax forms and instructions 1040 Exceptions. 2011 tax forms and instructions 1040   There are two exceptions to the rules just described for deductions of more than $500. 2011 tax forms and instructions 1040 Exception 1—vehicle used or improved by organization. 2011 tax forms and instructions 1040   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. 2011 tax forms and instructions 1040 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 tax forms and instructions 1040 The Form 1098-C (or other statement) will show whether this exception applies. 2011 tax forms and instructions 1040    Exception 2—vehicle given or sold to needy individual. 2011 tax forms and instructions 1040   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. 2011 tax forms and instructions 1040 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 tax forms and instructions 1040 The Form 1098-C (or other statement) will show whether this exception applies. 2011 tax forms and instructions 1040   This exception does not apply if the organization sells the vehicle at auction. 2011 tax forms and instructions 1040 In that case, you cannot deduct the vehicle's fair market value. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 Anita donates a used car to a qualified organization. 2011 tax forms and instructions 1040 She bought it 3 years ago for $9,000. 2011 tax forms and instructions 1040 A used car guide shows the fair market value for this type of car is $6,000. 2011 tax forms and instructions 1040 However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. 2011 tax forms and instructions 1040 Neither exception 1 nor exception 2 applies. 2011 tax forms and instructions 1040 If Anita itemizes her deductions, she can deduct $2,900 for her donation. 2011 tax forms and instructions 1040 She must attach Form 1098-C and Form 8283 to her return. 2011 tax forms and instructions 1040 Deduction $500 or less. 2011 tax forms and instructions 1040   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. 2011 tax forms and instructions 1040 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 2011 tax forms and instructions 1040   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. 2011 tax forms and instructions 1040 The statement must contain the information and meet the tests for an acknowledgment described under Contributions of $250 or More under Records To Keep, later. 2011 tax forms and instructions 1040 Fair market value. 2011 tax forms and instructions 1040   To determine a vehicle's fair market value, use the rules described under Determining Fair Market Value , later. 2011 tax forms and instructions 1040 Donations of inventory. 2011 tax forms and instructions 1040   The vehicle donation rules just described do not apply to donations of inventory. 2011 tax forms and instructions 1040 For example, these rules do not apply if you are a car dealer who donates a car you had been holding for sale to customers. 2011 tax forms and instructions 1040 See Inventory , later. 2011 tax forms and instructions 1040 Taxidermy Property If you donate taxidermy property to a qualified organization, your deduction is limited to your basis in the property or its fair market value, whichever is less. 2011 tax forms and instructions 1040 This applies if you prepared, stuffed, or mounted the property or paid or incurred the cost of preparing, stuffing, or mounting the property. 2011 tax forms and instructions 1040 Your basis for this purpose includes only the cost of preparing, stuffing, and mounting the property. 2011 tax forms and instructions 1040 Your basis does not include transportation or travel costs. 2011 tax forms and instructions 1040 It also does not include the direct or indirect costs for hunting or killing an animal, such as equipment costs. 2011 tax forms and instructions 1040 In addition, it does not include the value of your time. 2011 tax forms and instructions 1040 Taxidermy property means any work of art that: Is the reproduction or preservation of an animal, in whole or in part, Is prepared, stuffed, or mounted to recreate one or more characteristics of the animal, and Contains a part of the body of the dead animal. 2011 tax forms and instructions 1040 Property Subject to a Debt If you contribute property subject to a debt (such as a mortgage), you must reduce the fair market value of the property by: Any allowable deduction for interest you paid (or will pay) that is attributable to any period after the contribution, and If the property is a bond, the lesser of: Any allowable deduction for interest you paid (or will pay) to buy or carry the bond that is attributable to any period before the contribution, or The interest, including bond discount, receivable on the bond that is attributable to any period before the contribution, and that is not includible in your income due to your accounting method. 2011 tax forms and instructions 1040 This prevents you from deducting the same amount as both investment interest and a charitable contribution. 2011 tax forms and instructions 1040 If the recipient (or another person) assumes the debt, you must also reduce the fair market value of the property by the amount of the outstanding debt assumed. 2011 tax forms and instructions 1040 The amount of the debt is also treated as an amount realized on the sale or exchange of property for purposes of figuring your taxable gain (if any). 2011 tax forms and instructions 1040 For more information, see Bargain Sales under Giving Property That Has Increased in Value, later. 2011 tax forms and instructions 1040 Partial Interest in Property Generally, you cannot deduct a charitable contribution of less than your entire interest in property. 2011 tax forms and instructions 1040 Right to use property. 2011 tax forms and instructions 1040   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 You own a 10-story office building and donate rent-free use of the top floor to a charitable organization. 2011 tax forms and instructions 1040 Because you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 Mandy White owns a vacation home at the beach that she sometimes rents to others. 2011 tax forms and instructions 1040 For a fund-raising auction at her church, she donated the right to use the vacation home for 1 week. 2011 tax forms and instructions 1040 At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. 2011 tax forms and instructions 1040 Mandy cannot claim a deduction because of the partial interest rule. 2011 tax forms and instructions 1040 Lauren cannot claim a deduction either, because she received a benefit equal to the amount of her payment. 2011 tax forms and instructions 1040 See Contributions From Which You Benefit , earlier. 2011 tax forms and instructions 1040 Exceptions. 2011 tax forms and instructions 1040   You can deduct a charitable contribution of a partial interest in property only if that interest represents one of the following items. 2011 tax forms and instructions 1040 A remainder interest in your personal home or farm. 2011 tax forms and instructions 1040 A remainder interest is one that passes to a beneficiary after the end of an earlier interest in the property. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You keep the right to live in your home during your lifetime and give your church a remainder interest that begins upon your death. 2011 tax forms and instructions 1040 You can deduct the value of the remainder interest. 2011 tax forms and instructions 1040 An undivided part of your entire interest. 2011 tax forms and instructions 1040 This must consist of a part of every substantial interest or right you own in the property and must last as long as your interest in the property lasts. 2011 tax forms and instructions 1040 But see Fractional Interest in Tangible Personal Property , later. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You contribute voting stock to a qualified organization but keep the right to vote the stock. 2011 tax forms and instructions 1040 The right to vote is a substantial right in the stock. 2011 tax forms and instructions 1040 You have not contributed an undivided part of your entire interest and cannot deduct your contribution. 2011 tax forms and instructions 1040 A partial interest that would be deductible if transferred to certain types of trusts. 2011 tax forms and instructions 1040 A qualified conservation contribution (defined later). 2011 tax forms and instructions 1040 For information about how to figure the value of a contribution of a partial interest in property, see Partial Interest in Property Not in Trust in Publication 561. 2011 tax forms and instructions 1040 Fractional Interest in Tangible Personal Property You cannot deduct a charitable contribution of a fractional interest in tangible personal property unless all interests in the property are held immediately before the contribution by: You, or You and the qualifying organization receiving the contribution. 2011 tax forms and instructions 1040 If you make an additional contribution later, the fair market value of that contribution will be determined by using the smaller of: The fair market value of the property at the time of the initial contribution, or The fair market value of the property at the time of the additional contribution. 2011 tax forms and instructions 1040 Tangible personal property is defined later under Future Interest in Tangible Personal Property . 2011 tax forms and instructions 1040 A fractional interest in property is an undivided portion of your entire interest in the property. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 An undivided one-quarter interest in a painting that entitles an art museum to possession of the painting for 3 months of each year is a fractional interest in the property. 2011 tax forms and instructions 1040 Recapture of deduction. 2011 tax forms and instructions 1040   You must recapture your charitable contribution deduction by including it in your income if both of the following statements are true. 2011 tax forms and instructions 1040 You contributed a fractional interest in tangible personal property after August 17, 2006. 2011 tax forms and instructions 1040 You do not contribute the rest of your interests in the property to the original recipient or, if it no longer exists, another qualified organization on or before the earlier of: The date that is 10 years after the date of the initial contribution, or The date of your death. 2011 tax forms and instructions 1040   Recapture is also required if the qualified organization has not taken substantial physical possession of the property and used it in a way related to the organization's purpose during the period beginning on the date of the initial contribution and ending on the earlier of: The date that is 10 years after the date of the initial contribution, or The date of your death. 2011 tax forms and instructions 1040 Additional tax. 2011 tax forms and instructions 1040   If you must recapture your deduction, you must also pay interest and an additional tax equal to 10% of the amount recaptured. 2011 tax forms and instructions 1040 Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. 2011 tax forms and instructions 1040 Qualified organization. 2011 tax forms and instructions 1040   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charity, or An organization controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. 2011 tax forms and instructions 1040 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. 2011 tax forms and instructions 1040   A publicly supported charity is an organization of the type described in (1) under Types of Qualified Organizations , earlier, that normally receives a substantial part of its support, other than income from its exempt activities, from direct or indirect contributions from the general public or from governmental units. 2011 tax forms and instructions 1040 Qualified real property interest. 2011 tax forms and instructions 1040   This is any of the following interests in real property. 2011 tax forms and instructions 1040 Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). 2011 tax forms and instructions 1040 A remainder interest. 2011 tax forms and instructions 1040 A restriction (granted in perpetuity) on the use that may be made of the real property. 2011 tax forms and instructions 1040 Conservation purposes. 2011 tax forms and instructions 1040   Your contribution must be made only for one of the following conservation purposes. 2011 tax forms and instructions 1040 Preserving land areas for outdoor recreation by, or for the education of, the general public. 2011 tax forms and instructions 1040 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. 2011 tax forms and instructions 1040 Preserving open space, including farmland and forest land, if it yields a significant public benefit. 2011 tax forms and instructions 1040 The open space must be preserved either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. 2011 tax forms and instructions 1040 Preserving a historically important land area or a certified historic structure. 2011 tax forms and instructions 1040 Building in registered historic district. 2011 tax forms and instructions 1040   If a building in a registered historic district is a certified historic structure, a contribution of a qualified real property interest that is an easement or other restriction on the exterior of the building is deductible only if it meets all of the following conditions. 2011 tax forms and instructions 1040 The restriction must preserve the entire exterior of the building (including its front, sides, rear, and height) and must prohibit any change to the exterior of the building that is inconsistent with its historical character. 2011 tax forms and instructions 1040 You and the organization receiving the contribution must enter into a written agreement certifying, under penalty of perjury, that the organization: Is a qualified organization with a purpose of environmental protection, land conservation, open space preservation, or historic preservation, and Has the resources to manage and enforce the restriction and a commitment to do so. 2011 tax forms and instructions 1040 You must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. 2011 tax forms and instructions 1040   If you claimed the rehabilitation credit for the building for any of the 5 years before the year of the contribution, your charitable deduction is reduced. 2011 tax forms and instructions 1040 For more information, see Form 3468, Investment Credit, and Internal Revenue Code section 170(f)(14). 2011 tax forms and instructions 1040   If you claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. 2011 tax forms and instructions 1040 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. 2011 tax forms and instructions 1040 You may be able to deduct the filing fee as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit, on Schedule A (Form 1040). 2011 tax forms and instructions 1040 See Deductions Subject to the 2% Limit in Publication 529 for more information. 2011 tax forms and instructions 1040 More information. 2011 tax forms and instructions 1040   For information about determining the fair market value of qualified conservation contributions, see Publication 561. 2011 tax forms and instructions 1040 For information about the limits that apply to deductions for this type of contribution, see Limits on Deductions , later. 2011 tax forms and instructions 1040 For more information about qualified conservation contributions, see Regulations section 1. 2011 tax forms and instructions 1040 170A-14. 2011 tax forms and instructions 1040 Future Interest in Tangible Personal Property You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. 2011 tax forms and instructions 1040 But see Fractional Interest in Tangible Personal Property , earlier, and Tangible personal property put to unrelated use , later. 2011 tax forms and instructions 1040 Related persons include your spouse, children, grandchildren, brothers, sisters, and parents. 2011 tax forms and instructions 1040 Related organizations may include a partnership or corporation in which you have an interest, or an estate or trust with which you have a connection. 2011 tax forms and instructions 1040 Tangible personal property. 2011 tax forms and instructions 1040   This is any property, other than land or buildings, that can be seen or touched. 2011 tax forms and instructions 1040 It includes furniture, books, jewelry, paintings, and cars. 2011 tax forms and instructions 1040 Future interest. 2011 tax forms and instructions 1040   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You own an antique car that you contribute to a museum. 2011 tax forms and instructions 1040 You give up ownership, but retain the right to keep the car in your garage with your personal collection. 2011 tax forms and instructions 1040 Because you keep an interest in the property, you cannot deduct the contribution. 2011 tax forms and instructions 1040 If you turn the car over to the museum in a later year, giving up all rights to its use, possession, and enjoyment, you can take a deduction for the contribution in that later year. 2011 tax forms and instructions 1040 Inventory If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it or its basis. 2011 tax forms and instructions 1040 The basis of contributed inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. 2011 tax forms and instructions 1040 You must remove the amount of your charitable contribution deduction from your opening inventory. 2011 tax forms and instructions 1040 It is not part of the cost of goods sold. 2011 tax forms and instructions 1040 If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. 2011 tax forms and instructions 1040 Treat the inventory's cost as you would ordinarily treat it under your method of accounting. 2011 tax forms and instructions 1040 For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. 2011 tax forms and instructions 1040 A special rule applies to certain donations of food inventory. 2011 tax forms and instructions 1040 See Food Inventory, later. 2011 tax forms and instructions 1040 Patents and Other Intellectual Property If you donate intellectual property to a qualified organization, your deduction is limited to the basis of the property or the fair market value of the property, whichever is smaller. 2011 tax forms and instructions 1040 Intellectual property means any of the following: Patents. 2011 tax forms and instructions 1040 Copyrights (other than a copyright described in Internal Revenue Code sections 1221(a)(3) or 1231(b)(1)(C)). 2011 tax forms and instructions 1040 Trademarks. 2011 tax forms and instructions 1040 Trade names. 2011 tax forms and instructions 1040 Trade secrets. 2011 tax forms and instructions 1040 Know-how. 2011 tax forms and instructions 1040 Software (other than software described in Internal Revenue Code section 197(e)(3)(A)(i)). 2011 tax forms and instructions 1040 Other similar property or applications or registrations of such property. 2011 tax forms and instructions 1040 Additional deduction based on income. 2011 tax forms and instructions 1040   You may be able to claim additional charitable contribution deductions in the year of the contribution and years following, based on the income, if any, from the donated property. 2011 tax forms and instructions 1040   The following table shows the percentage of income from the property that you can deduct for each of your tax years ending on or after the date of the contribution. 2011 tax forms and instructions 1040 In the table, “tax year 1,” for example, means your first tax year ending on or after the date of the contribution. 2011 tax forms and instructions 1040 However, you can take the additional deduction only to the extent the total of the amounts figured using this table is more than the amount of the deduction claimed for the original donation of the property. 2011 tax forms and instructions 1040   After the legal life of the intellectual property ends, or after the 10th anniversary of the donation, whichever is earlier, no additional deduction is allowed. 2011 tax forms and instructions 1040 The additional deductions cannot be taken for intellectual property donated to certain private foundations. 2011 tax forms and instructions 1040 Tax year Deductible percentage 1 100% 2 100% 3 90% 4 80% 5 70% 6 60% 7 50% 8 40% 9 30% 10 20% 11 10% 12 10% Reporting requirements. 2011 tax forms and instructions 1040   You must inform the organization at the time of the donation that you intend to treat the donation as a contribution subject to the provisions just discussed. 2011 tax forms and instructions 1040   The organization is required to file an information return showing the income from the property, with a copy to you. 2011 tax forms and instructions 1040 This is done on Form 8899, Notice of Income From Donated Intellectual Property. 2011 tax forms and instructions 1040 Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. 2011 tax forms and instructions 1040 Publication 561 contains a more complete discussion. 2011 tax forms and instructions 1040 Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. 2011 tax forms and instructions 1040 Used clothing. 2011 tax forms and instructions 1040   The fair market value of used clothing and other personal items is usually far less than the price you paid for them. 2011 tax forms and instructions 1040 There are no fixed formulas or methods for finding the value of items of clothing. 2011 tax forms and instructions 1040   You should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. 2011 tax forms and instructions 1040      Also see Clothing and Household Items , earlier. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040    Kristin donated a coat to a thrift store operated by her church. 2011 tax forms and instructions 1040 She paid $300 for the coat 3 years ago. 2011 tax forms and instructions 1040 Similar coats in the thrift store sell for $50. 2011 tax forms and instructions 1040 The fair market value of the coat is $50. 2011 tax forms and instructions 1040 Kristin's donation is limited to $50. 2011 tax forms and instructions 1040 Household items. 2011 tax forms and instructions 1040   The fair market value of used household items, such as furniture, appliances, and linens, is usually much lower than the price paid when new. 2011 tax forms and instructions 1040 These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. 2011 tax forms and instructions 1040 For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) are not acceptable in determining value. 2011 tax forms and instructions 1040   You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. 2011 tax forms and instructions 1040 Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items are also useful. 2011 tax forms and instructions 1040 Do not include any of this evidence with your tax return. 2011 tax forms and instructions 1040   If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art in Publication 561. 2011 tax forms and instructions 1040   Also see Clothing and Household Items , earlier. 2011 tax forms and instructions 1040 Cars, boats, and airplanes. 2011 tax forms and instructions 1040   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. 2011 tax forms and instructions 1040 Boats. 2011 tax forms and instructions 1040   Except for small, inexpensive boats, the valuation of boats should be based on an appraisal by a marine surveyor or appraiser because the physical condition is critical to the value. 2011 tax forms and instructions 1040 Cars. 2011 tax forms and instructions 1040   Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. 2011 tax forms and instructions 1040 The guides may be published monthly or seasonally, and for different regions of the country. 2011 tax forms and instructions 1040 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 2011 tax forms and instructions 1040 The prices are not “official” and these publications are not considered an appraisal of any specific donated property. 2011 tax forms and instructions 1040 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 2011 tax forms and instructions 1040   These publications are sometimes available from public libraries, or from the loan officer at a bank, credit union, or finance company. 2011 tax forms and instructions 1040 You can also find used car pricing information on the Internet. 2011 tax forms and instructions 1040   To find the fair market value of a donated car, use the price listed in a used car guide for a private party sale, not the dealer retail value. 2011 tax forms and instructions 1040 However, the fair market value may be less if the car has engine trouble, body damage, high mileage, or any type of excessive wear. 2011 tax forms and instructions 1040 The fair market value of a donated car is the same as the price listed in a used car guide for a private party sale only if the guide lists a sales price for a car that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated car. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You donate a used car in poor condition to a local high school for use by students studying car repair. 2011 tax forms and instructions 1040 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 2011 tax forms and instructions 1040 However, the guide shows the price for a private party sale of the car is only $750. 2011 tax forms and instructions 1040 The fair market value of the car is considered to be $750. 2011 tax forms and instructions 1040 Large quantities. 2011 tax forms and instructions 1040   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You purchase 500 bibles for $1,000. 2011 tax forms and instructions 1040 The person who sells them to you says the retail value of these bibles is $3,000. 2011 tax forms and instructions 1040 If you contribute the bibles to a qualified organization, you can claim a deduction only for the price at which similar numbers of the same bible are currently being sold. 2011 tax forms and instructions 1040 Your charitable contribution is $1,000, unless you can show that similar numbers of that bible wer
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Understanding your CP259C Notice

We sent you this notice because our records indicate you are presumed to be a private foundation and you didn't file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).
 


What you need to do

  • Disregard this notice if you have filed the return within the last four weeks using the same name and EIN listed on the notice.
  • Otherwise, file your required Form 990-PF immediately according to the instructions on the notice.
    • If you don't think you need to file, complete the Response form enclosed with your notice and mail it to us using the envelope provided.
    • If you filed more than four weeks ago or used a different name or EIN, complete the Response form enclosed with your notice and mail it to us in the envelope provided along with a signed and dated copy of the return.

You may want to...


Answers to Common Questions

Which organizations must file a Form 990-PF?
Form 990-FP must be filed by:

  • Exempt private foundations (section 6033(a), (b), and (c))
  • Taxable private foundations (section 6033(d))
  • Organizations that agree to private foundation status and whose applications for exempt status are pending on the due date for filing
  • Organizations that made an election under section 41(e)(6)
  • Foundations that are making a section 507 termination
  • Section 4947(a)(1) nonexempt charitable trusts treated as private foundations (section 6033(d))

When is Form 990-PF due?
Form 990-PF is due by the 15th day of the 5th month following the close of the foundation's accounting period. Thus, for a calendar year taxpayer, Form 990-PF is due on May 15 of the following year. If any due date falls on a Saturday, Sunday, or legal holiday, the foundation can file the return on the next business day.

More information can be found at Tax Information for Private Foundations.

Can I get help over the phone?
If you have questions and/or need help completing this form, please call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.

Where can I go for more information about tax-exempt organizations?
For more information on tax-exempt organizations see Tax Information for Charities & Other Non-Profits.


Tips for next year

Review the tax-exempt organization resources at Form 990 Resources and Tools for Exempt Organizations.


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP259C, Page 1

Notice CP259C, Page 2

Notice CP259C, Page 3

Notice CP259C, Page 4

Page Last Reviewed or Updated: 28-Mar-2014

The 2011 Tax Forms And Instructions 1040

2011 tax forms and instructions 1040 Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. 2011 tax forms and instructions 1040 Employee-owners. 2011 tax forms and instructions 1040 Other rules. 2011 tax forms and instructions 1040 Other rules. 2011 tax forms and instructions 1040 Property Exchanged for StockNonqualified preferred stock. 2011 tax forms and instructions 1040 Liabilities. 2011 tax forms and instructions 1040 Election to reduce basis. 2011 tax forms and instructions 1040 Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Real Property Interest Accounting MethodsSection 481(a) adjustment. 2011 tax forms and instructions 1040 Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. 2011 tax forms and instructions 1040 Business formed before 1997. 2011 tax forms and instructions 1040   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. 2011 tax forms and instructions 1040 Business formed after 1996. 2011 tax forms and instructions 1040   The following businesses formed after 1996 are taxed as corporations. 2011 tax forms and instructions 1040 A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. 2011 tax forms and instructions 1040 A business formed under a state law that refers to it as a joint-stock company or joint-stock association. 2011 tax forms and instructions 1040 An insurance company. 2011 tax forms and instructions 1040 Certain banks. 2011 tax forms and instructions 1040 A business wholly owned by a state or local government. 2011 tax forms and instructions 1040 A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). 2011 tax forms and instructions 1040 Certain foreign businesses. 2011 tax forms and instructions 1040 Any other business that elects to be taxed as a corporation. 2011 tax forms and instructions 1040 For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. 2011 tax forms and instructions 1040 For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. 2011 tax forms and instructions 1040 S corporations. 2011 tax forms and instructions 1040   Some corporations may meet the qualifications for electing to be S corporations. 2011 tax forms and instructions 1040 For information on S corporations, see the instructions for Form 1120S, U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Income Tax Return for an S Corporation. 2011 tax forms and instructions 1040 Personal service corporations. 2011 tax forms and instructions 1040   A corporation is a personal service corporation if it meets all of the following requirements. 2011 tax forms and instructions 1040 Its principal activity during the “testing period” is performing personal services (defined later). 2011 tax forms and instructions 1040 Generally, the testing period for any tax year is the prior tax year. 2011 tax forms and instructions 1040 If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. 2011 tax forms and instructions 1040 Its employee-owners substantially perform the services in (1), above. 2011 tax forms and instructions 1040 This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. 2011 tax forms and instructions 1040 Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. 2011 tax forms and instructions 1040 Personal services. 2011 tax forms and instructions 1040   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. 2011 tax forms and instructions 1040 Employee-owners. 2011 tax forms and instructions 1040   A person is an employee-owner of a personal service corporation if both of the following apply. 2011 tax forms and instructions 1040 He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. 2011 tax forms and instructions 1040 He or she owns any stock in the corporation at any time during the testing period. 2011 tax forms and instructions 1040 Other rules. 2011 tax forms and instructions 1040   For other rules that apply to personal service corporations see Accounting Periods, later. 2011 tax forms and instructions 1040 Closely held corporations. 2011 tax forms and instructions 1040   A corporation is closely held if all of the following apply. 2011 tax forms and instructions 1040 It is not a personal service corporation. 2011 tax forms and instructions 1040 At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. 2011 tax forms and instructions 1040 “Individual” includes certain trusts and private foundations. 2011 tax forms and instructions 1040 Other rules. 2011 tax forms and instructions 1040   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. 2011 tax forms and instructions 1040 Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. 2011 tax forms and instructions 1040 This rule applies both to individuals and to groups who transfer property to a corporation. 2011 tax forms and instructions 1040 It also applies whether the corporation is being formed or is already operating. 2011 tax forms and instructions 1040 It does not apply in the following situations. 2011 tax forms and instructions 1040 The corporation is an investment company. 2011 tax forms and instructions 1040 You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. 2011 tax forms and instructions 1040 The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. 2011 tax forms and instructions 1040 Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. 2011 tax forms and instructions 1040 For more information, see section 1. 2011 tax forms and instructions 1040 351-3 of the Regulations. 2011 tax forms and instructions 1040 Control of a corporation. 2011 tax forms and instructions 1040   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 You and Bill Jones buy property for $100,000. 2011 tax forms and instructions 1040 You both organize a corporation when the property has a fair market value of $300,000. 2011 tax forms and instructions 1040 You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. 2011 tax forms and instructions 1040 No gain is recognized by you, Bill, or the corporation. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. 2011 tax forms and instructions 1040 This represents only 75% of each class of stock of the corporation. 2011 tax forms and instructions 1040 The other 25% was already issued to someone else. 2011 tax forms and instructions 1040 You and Bill recognize a taxable gain of $200,000 on the transaction. 2011 tax forms and instructions 1040 Services rendered. 2011 tax forms and instructions 1040   The term property does not include services rendered or to be rendered to the issuing corporation. 2011 tax forms and instructions 1040 The value of stock received for services is income to the recipient. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. 2011 tax forms and instructions 1040 Right after the exchange, you own 85% of the outstanding stock. 2011 tax forms and instructions 1040 No gain is recognized on the exchange of property. 2011 tax forms and instructions 1040 However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. 2011 tax forms and instructions 1040 Property of relatively small value. 2011 tax forms and instructions 1040   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. 2011 tax forms and instructions 1040   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. 2011 tax forms and instructions 1040 Stock received in disproportion to property transferred. 2011 tax forms and instructions 1040   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. 2011 tax forms and instructions 1040 If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. 2011 tax forms and instructions 1040 It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. 2011 tax forms and instructions 1040 Money or other property received. 2011 tax forms and instructions 1040   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. 2011 tax forms and instructions 1040 You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. 2011 tax forms and instructions 1040 The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. 2011 tax forms and instructions 1040 If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. 2011 tax forms and instructions 1040 See chapter 3 of Publication 544. 2011 tax forms and instructions 1040 No loss is recognized. 2011 tax forms and instructions 1040 Nonqualified preferred stock. 2011 tax forms and instructions 1040   Nonqualified preferred stock is treated as property other than stock. 2011 tax forms and instructions 1040 Generally, it is preferred stock with any of the following features. 2011 tax forms and instructions 1040 The holder has the right to require the issuer or a related person to redeem or buy the stock. 2011 tax forms and instructions 1040 The issuer or a related person is required to redeem or buy the stock. 2011 tax forms and instructions 1040 The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. 2011 tax forms and instructions 1040 The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. 2011 tax forms and instructions 1040 For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. 2011 tax forms and instructions 1040 Liabilities. 2011 tax forms and instructions 1040   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. 2011 tax forms and instructions 1040 There are two exceptions to this treatment. 2011 tax forms and instructions 1040 If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. 2011 tax forms and instructions 1040 However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. 2011 tax forms and instructions 1040 If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. 2011 tax forms and instructions 1040 For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 You transfer property to a corporation for stock. 2011 tax forms and instructions 1040 Immediately after the transfer, you control the corporation. 2011 tax forms and instructions 1040 You also receive $10,000 in the exchange. 2011 tax forms and instructions 1040 Your adjusted basis in the transferred property is $20,000. 2011 tax forms and instructions 1040 The stock you receive has a fair market value (FMV) of $16,000. 2011 tax forms and instructions 1040 The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. 2011 tax forms and instructions 1040 Gain is realized as follows. 2011 tax forms and instructions 1040 FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. 2011 tax forms and instructions 1040 The recognized gain is limited to $10,000, the cash received. 2011 tax forms and instructions 1040 Loss on exchange. 2011 tax forms and instructions 1040   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. 2011 tax forms and instructions 1040 For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 2011 tax forms and instructions 1040 Basis of stock or other property received. 2011 tax forms and instructions 1040   The basis of the stock you receive is generally the adjusted basis of the property you transfer. 2011 tax forms and instructions 1040 Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. 2011 tax forms and instructions 1040 Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. 2011 tax forms and instructions 1040 Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. 2011 tax forms and instructions 1040    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. 2011 tax forms and instructions 1040 This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. 2011 tax forms and instructions 1040 The basis of any other property you receive is its fair market value on the date of the trade. 2011 tax forms and instructions 1040 Basis of property transferred. 2011 tax forms and instructions 1040   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. 2011 tax forms and instructions 1040 However, the increase for the gain recognized may be limited. 2011 tax forms and instructions 1040 For more information, see section 362 of the Internal Revenue Code. 2011 tax forms and instructions 1040 Election to reduce basis. 2011 tax forms and instructions 1040   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. 2011 tax forms and instructions 1040 The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. 2011 tax forms and instructions 1040 However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. 2011 tax forms and instructions 1040 R. 2011 tax forms and instructions 1040 B. 2011 tax forms and instructions 1040 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. 2011 tax forms and instructions 1040    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. 2011 tax forms and instructions 1040 Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. 2011 tax forms and instructions 1040 Paid-in capital. 2011 tax forms and instructions 1040   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. 2011 tax forms and instructions 1040 These contributions are not taxable to the corporation. 2011 tax forms and instructions 1040 Basis. 2011 tax forms and instructions 1040   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. 2011 tax forms and instructions 1040 However, the increase for the gain recognized may be limited. 2011 tax forms and instructions 1040 For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. 2011 tax forms and instructions 1040   The basis of property contributed to capital by a person other than a shareholder is zero. 2011 tax forms and instructions 1040   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. 2011 tax forms and instructions 1040 If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. 2011 tax forms and instructions 1040 Depreciable property. 2011 tax forms and instructions 1040 Amortizable property. 2011 tax forms and instructions 1040 Property subject to cost depletion but not to percentage depletion. 2011 tax forms and instructions 1040 All other remaining properties. 2011 tax forms and instructions 1040   Reduce the basis of property in each category to zero before going on to the next category. 2011 tax forms and instructions 1040   There may be more than one piece of property in each category. 2011 tax forms and instructions 1040 Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. 2011 tax forms and instructions 1040 The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. 2011 tax forms and instructions 1040 Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. 2011 tax forms and instructions 1040 A corporation generally must make estimated tax payments as it earns or receives income during its tax year. 2011 tax forms and instructions 1040 After the end of the year, the corporation must file an income tax return. 2011 tax forms and instructions 1040 This section will help you determine when and how to pay and file corporate income taxes. 2011 tax forms and instructions 1040 For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. 2011 tax forms and instructions 1040 The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. 2011 tax forms and instructions 1040 For more information, visit www. 2011 tax forms and instructions 1040 irs. 2011 tax forms and instructions 1040 gov/newsroom/article/0,,id=108362. 2011 tax forms and instructions 1040 00. 2011 tax forms and instructions 1040 Income Tax Return This section will help you determine when and how to report a corporation's income tax. 2011 tax forms and instructions 1040 Who must file. 2011 tax forms and instructions 1040   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. 2011 tax forms and instructions 1040 Which form to file. 2011 tax forms and instructions 1040   A corporation generally must file Form 1120, U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. 2011 tax forms and instructions 1040 Certain organizations and entities must file special returns. 2011 tax forms and instructions 1040 For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. 2011 tax forms and instructions 1040 Electronic filing. 2011 tax forms and instructions 1040   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. 2011 tax forms and instructions 1040 Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. 2011 tax forms and instructions 1040 However, in certain instances, these corporations can request a waiver. 2011 tax forms and instructions 1040 For more information regarding electronic filing, visit www. 2011 tax forms and instructions 1040 irs. 2011 tax forms and instructions 1040 gov/efile. 2011 tax forms and instructions 1040 When to file. 2011 tax forms and instructions 1040   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. 2011 tax forms and instructions 1040 A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. 2011 tax forms and instructions 1040 A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 A corporation's tax year ends December 31. 2011 tax forms and instructions 1040 It must file its income tax return by March 15th. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 A corporation's tax year ends June 30. 2011 tax forms and instructions 1040 It must file its income tax return by September 15th. 2011 tax forms and instructions 1040   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. 2011 tax forms and instructions 1040 Extension of time to file. 2011 tax forms and instructions 1040   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. 2011 tax forms and instructions 1040 The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. 2011 tax forms and instructions 1040   Form 7004 does not extend the time for paying the tax due on the return. 2011 tax forms and instructions 1040 Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. 2011 tax forms and instructions 1040 The interest is figured from the original due date of the return to the date of payment. 2011 tax forms and instructions 1040   For more information, see the instructions for Form 7004. 2011 tax forms and instructions 1040 How to pay your taxes. 2011 tax forms and instructions 1040   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. 2011 tax forms and instructions 1040 Electronic Federal Tax Payment System (EFTPS). 2011 tax forms and instructions 1040   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). 2011 tax forms and instructions 1040 For more information on EFTPS and enrollment, visit www. 2011 tax forms and instructions 1040 eftps. 2011 tax forms and instructions 1040 gov or call 1-800-555-4477. 2011 tax forms and instructions 1040 Also see Publication 966, The Secure Way to Pay Your Federal Taxes. 2011 tax forms and instructions 1040 Note. 2011 tax forms and instructions 1040 Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. 2011 tax forms and instructions 1040 Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. 2011 tax forms and instructions 1040 Do not attach an explanation when the corporation's return is filed. 2011 tax forms and instructions 1040 See the instructions for your income tax return. 2011 tax forms and instructions 1040 Late filing of return. 2011 tax forms and instructions 1040    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. 2011 tax forms and instructions 1040 If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. 2011 tax forms and instructions 1040 The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. 2011 tax forms and instructions 1040 The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. 2011 tax forms and instructions 1040 Late payment of tax. 2011 tax forms and instructions 1040    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. 2011 tax forms and instructions 1040 The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. 2011 tax forms and instructions 1040 Trust fund recovery penalty. 2011 tax forms and instructions 1040   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. 2011 tax forms and instructions 1040 The penalty is the full amount of the unpaid trust fund tax. 2011 tax forms and instructions 1040 This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. 2011 tax forms and instructions 1040   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. 2011 tax forms and instructions 1040   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. 2011 tax forms and instructions 1040 A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. 2011 tax forms and instructions 1040   Willfully means voluntarily, consciously, and intentionally. 2011 tax forms and instructions 1040 A responsible person acts willfully if the person knows the required actions are not taking place. 2011 tax forms and instructions 1040   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. 2011 tax forms and instructions 1040 Other penalties. 2011 tax forms and instructions 1040   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. 2011 tax forms and instructions 1040 See sections 6662, 6662A, and 6663 of the Internal Revenue Code. 2011 tax forms and instructions 1040 Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. 2011 tax forms and instructions 1040 If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. 2011 tax forms and instructions 1040 This section will explain how to avoid this penalty. 2011 tax forms and instructions 1040 When to pay estimated tax. 2011 tax forms and instructions 1040   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 Your corporation's tax year ends December 31. 2011 tax forms and instructions 1040 Installment payments are due on April 15, June 15, September 15, and December 15. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 Your corporation's tax year ends June 30. 2011 tax forms and instructions 1040 Installment payments are due on October 15, December 15, March 15, and June 15. 2011 tax forms and instructions 1040   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. 2011 tax forms and instructions 1040 How to figure each required installment. 2011 tax forms and instructions 1040   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. 2011 tax forms and instructions 1040 You will generally use one of the following two methods to figure each required installment. 2011 tax forms and instructions 1040 You should use the method that yields the smallest installment payments. 2011 tax forms and instructions 1040 Note. 2011 tax forms and instructions 1040 In these discussions, “return” generally refers to the corporation's original return. 2011 tax forms and instructions 1040 However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. 2011 tax forms and instructions 1040 Method 1. 2011 tax forms and instructions 1040   Each required installment is 25% of the income tax the corporation will show on its return for the current year. 2011 tax forms and instructions 1040 Method 2. 2011 tax forms and instructions 1040   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. 2011 tax forms and instructions 1040   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). 2011 tax forms and instructions 1040 Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. 2011 tax forms and instructions 1040   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. 2011 tax forms and instructions 1040 Other methods. 2011 tax forms and instructions 1040   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. 2011 tax forms and instructions 1040 The annualized income installment method. 2011 tax forms and instructions 1040 The adjusted seasonal installment method. 2011 tax forms and instructions 1040 Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. 2011 tax forms and instructions 1040 Refiguring required installments. 2011 tax forms and instructions 1040   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. 2011 tax forms and instructions 1040 An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. 2011 tax forms and instructions 1040 Underpayment penalty. 2011 tax forms and instructions 1040   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. 2011 tax forms and instructions 1040 The penalty is figured separately for each installment due date. 2011 tax forms and instructions 1040 The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. 2011 tax forms and instructions 1040 This is true even if the corporation is due a refund when its return is filed. 2011 tax forms and instructions 1040 Form 2220. 2011 tax forms and instructions 1040   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. 2011 tax forms and instructions 1040   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. 2011 tax forms and instructions 1040 The amount of the underpayment. 2011 tax forms and instructions 1040 The period during which the underpayment was due and unpaid. 2011 tax forms and instructions 1040 The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. 2011 tax forms and instructions 1040   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. 2011 tax forms and instructions 1040 However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. 2011 tax forms and instructions 1040 The annualized income installment method was used to figure any required installment. 2011 tax forms and instructions 1040 The adjusted seasonal installment method was used to figure any required installment. 2011 tax forms and instructions 1040 The corporation is a large corporation figuring its first required installment based on the prior year's tax. 2011 tax forms and instructions 1040 How to pay estimated tax. 2011 tax forms and instructions 1040   A corporation is generally required to use EFTPS to pay its taxes. 2011 tax forms and instructions 1040 See Electronic Federal Tax Payment System (EFTPS), earlier. 2011 tax forms and instructions 1040 Also see the Instructions for Form 1120-W. 2011 tax forms and instructions 1040 Quick refund of overpayments. 2011 tax forms and instructions 1040   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. 2011 tax forms and instructions 1040 Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. 2011 tax forms and instructions 1040 A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. 2011 tax forms and instructions 1040 Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. 2011 tax forms and instructions 1040 File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. 2011 tax forms and instructions 1040 Do not file Form 4466 before the end of the corporation's tax year. 2011 tax forms and instructions 1040 An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. 2011 tax forms and instructions 1040 The IRS will act on the form within 45 days from the date you file it. 2011 tax forms and instructions 1040 U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Real Property Interest If a domestic corporation acquires a U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. 2011 tax forms and instructions 1040 The amount paid includes cash, the fair market value of other property, and any assumed liability. 2011 tax forms and instructions 1040 If a domestic corporation distributes a U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. 2011 tax forms and instructions 1040 A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. 2011 tax forms and instructions 1040 For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Withholding Tax Return for Dispositions by Foreign Persons of U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Real Property Interests. 2011 tax forms and instructions 1040 Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. 2011 tax forms and instructions 1040 Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. 2011 tax forms and instructions 1040 In all cases, the method used must clearly show taxable income. 2011 tax forms and instructions 1040 Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. 2011 tax forms and instructions 1040 Accrual method. 2011 tax forms and instructions 1040   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. 2011 tax forms and instructions 1040 A corporation engaged in farming operations also must use the accrual method. 2011 tax forms and instructions 1040   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. 2011 tax forms and instructions 1040 However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. 2011 tax forms and instructions 1040   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. 2011 tax forms and instructions 1040   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. 2011 tax forms and instructions 1040   There are exceptions to the economic performance rule for certain items, including recurring expenses. 2011 tax forms and instructions 1040 See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. 2011 tax forms and instructions 1040 Nonaccrual experience method. 2011 tax forms and instructions 1040   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. 2011 tax forms and instructions 1040   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. 2011 tax forms and instructions 1040 Percentage of completion method. 2011 tax forms and instructions 1040   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. 2011 tax forms and instructions 1040 Mark-to-market accounting method. 2011 tax forms and instructions 1040   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. 2011 tax forms and instructions 1040 Under this method any security held by a dealer as inventory must be included in inventory at its FMV. 2011 tax forms and instructions 1040 Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. 2011 tax forms and instructions 1040 Any gain or loss must be taken into account in determining gross income. 2011 tax forms and instructions 1040 The gain or loss taken into account is treated as ordinary gain or loss. 2011 tax forms and instructions 1040   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. 2011 tax forms and instructions 1040 Change in accounting method. 2011 tax forms and instructions 1040   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). 2011 tax forms and instructions 1040 The corporation must file Form 3115, Application for Change in Accounting Method. 2011 tax forms and instructions 1040 For more information, see Form 3115 and Publication 538. 2011 tax forms and instructions 1040 Section 481(a) adjustment. 2011 tax forms and instructions 1040   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. 2011 tax forms and instructions 1040 The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. 2011 tax forms and instructions 1040 However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. 2011 tax forms and instructions 1040 The corporation must complete the appropriate lines of Form 3115 to make the election. 2011 tax forms and instructions 1040 See the Instructions for Form 3115. 2011 tax forms and instructions 1040 Accounting Periods A corporation must figure its taxable income on the basis of a tax year. 2011 tax forms and instructions 1040 A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. 2011 tax forms and instructions 1040 Generally, corporations can use either a calendar year or a fiscal year as its tax year. 2011 tax forms and instructions 1040 Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. 2011 tax forms and instructions 1040 For more information, see Publication 538. 2011 tax forms and instructions 1040 Personal service corporation. 2011 tax forms and instructions 1040   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. 2011 tax forms and instructions 1040 See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. 2011 tax forms and instructions 1040 Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. 2011 tax forms and instructions 1040   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. 2011 tax forms and instructions 1040 See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. 2011 tax forms and instructions 1040 Change of tax year. 2011 tax forms and instructions 1040   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. 2011 tax forms and instructions 1040 However, under certain conditions, a corporation can change its tax year without getting the consent. 2011 tax forms and instructions 1040 For more information, see Form 1128 and Publication 538. 2011 tax forms and instructions 1040 Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. 2011 tax forms and instructions 1040 Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. 2011 tax forms and instructions 1040 Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. 2011 tax forms and instructions 1040 The corporation should keep copies of all filed returns. 2011 tax forms and instructions 1040 They help in preparing future and amended returns and in the calculation of earnings and profits. 2011 tax forms and instructions 1040 Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. 2011 tax forms and instructions 1040 However, the following special provisions apply only to corporations. 2011 tax forms and instructions 1040 Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. 2011 tax forms and instructions 1040 However, a corporation can elect to deduct a limited amount of start-up or organizational costs. 2011 tax forms and instructions 1040 Any costs not deducted can be amortized. 2011 tax forms and instructions 1040 Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. 2011 tax forms and instructions 1040 Organizational costs are the direct costs of creating the corporation. 2011 tax forms and instructions 1040 For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. 2011 tax forms and instructions 1040 Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. 2011 tax forms and instructions 1040 Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. 2011 tax forms and instructions 1040 Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. 2011 tax forms and instructions 1040 If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. 2011 tax forms and instructions 1040 These rules also deny the deduction of losses on the sale or exchange of property between related persons. 2011 tax forms and instructions 1040 Related persons. 2011 tax forms and instructions 1040   For purposes of this rule, the following persons are related to a corporation. 2011 tax forms and instructions 1040 Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). 2011 tax forms and instructions 1040 An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. 2011 tax forms and instructions 1040 A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. 2011 tax forms and instructions 1040 An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 tax forms and instructions 1040 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 or profits interest in the partnership. 2011 tax forms and instructions 1040 Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. 2011 tax forms and instructions 1040 Ownership of stock. 2011 tax forms and instructions 1040   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. 2011 tax forms and instructions 1040 Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. 2011 tax forms and instructions 1040 An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. 2011 tax forms and instructions 1040 Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. 2011 tax forms and instructions 1040 Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. 2011 tax forms and instructions 1040 To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. 2011 tax forms and instructions 1040 But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. 2011 tax forms and instructions 1040 Reallocation of income and deductions. 2011 tax forms and instructions 1040   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. 2011 tax forms and instructions 1040 Complete liquidations. 2011 tax forms and instructions 1040   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. 2011 tax forms and instructions 1040 More information. 2011 tax forms and instructions 1040   For more information about the related person rules, see Publication 544. 2011 tax forms and instructions 1040 Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. 2011 tax forms and instructions 1040 If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. 2011 tax forms and instructions 1040 Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. 2011 tax forms and instructions 1040 A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. 2011 tax forms and instructions 1040 A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. 2011 tax forms and instructions 1040 For more information regarding the election, see Form 8902. 2011 tax forms and instructions 1040 Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. 2011 tax forms and instructions 1040 The deduction is allowed for the year in which the property is placed in service. 2011 tax forms and instructions 1040 A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. 2011 tax forms and instructions 1040 For more information, see section 179C of the Internal Revenue Code and the related Regulations. 2011 tax forms and instructions 1040 Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). 2011 tax forms and instructions 1040 A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. 2011 tax forms and instructions 1040 For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. 2011 tax forms and instructions 1040 Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. 2011 tax forms and instructions 1040 In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. 2011 tax forms and instructions 1040 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. 2011 tax forms and instructions 1040 The deduction is limited to $1. 2011 tax forms and instructions 1040 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. 2011 tax forms and instructions 1040 Other rules and limitations apply. 2011 tax forms and instructions 1040 The corporation must reduce the basis of any property by any deduction taken. 2011 tax forms and instructions 1040 The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. 2011 tax forms and instructions 1040 For more information, see section 179D of the Internal Revenue Code. 2011 tax forms and instructions 1040 Also see Notice 2006-52, 2006-26 I. 2011 tax forms and instructions 1040 R. 2011 tax forms and instructions 1040 B. 2011 tax forms and instructions 1040 1175, clarified and amplified by Notice 2008-40, 2008-14 I. 2011 tax forms and instructions 1040 R. 2011 tax forms and instructions 1040 B. 2011 tax forms and instructions 1040 725, and any successor. 2011 tax forms and instructions 1040 Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. 2011 tax forms and instructions 1040 These items are known as corporate preference items and they include the following. 2011 tax forms and instructions 1040 Gain on the disposition of section 1250 property. 2011 tax forms and instructions 1040 For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. 2011 tax forms and instructions 1040 Percentage depletion for iron ore and coal (including lignite). 2011 tax forms and instructions 1040 For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. 2011 tax forms and instructions 1040 Amortization of pollution control facilities. 2011 tax forms and instructions 1040 For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. 2011 tax forms and instructions 1040 Mineral exploration and development costs. 2011 tax forms and instructions 1040 For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. 2011 tax forms and instructions 1040 For more information on corporate preference items, see section 291 of the Internal Revenue Code. 2011 tax forms and instructions 1040 Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. 2011 tax forms and instructions 1040 This section discusses the general rules that apply. 2011 tax forms and instructions 1040 The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. 2011 tax forms and instructions 1040 For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. 2011 tax forms and instructions 1040 Dividends from domestic corporations. 2011 tax forms and instructions 1040   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. 2011 tax forms and instructions 1040 If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. 2011 tax forms and instructions 1040 Ownership. 2011 tax forms and instructions 1040   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. 2011 tax forms and instructions 1040 Small business investment companies. 2011 tax forms and instructions 1040   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. 2011 tax forms and instructions 1040 Dividends from regulated investment companies. 2011 tax forms and instructions 1040   Regulated investment company dividends received are subject to certain limits. 2011 tax forms and instructions 1040 Capital gain dividends received from a regulated investment company do not qualify for the deduction. 2011 tax forms and instructions 1040 For more information, see section 854 of the Internal Revenue Code. 2011 tax forms and instructions 1040 No deduction allowed for certain dividends. 2011 tax forms and instructions 1040   Corporations cannot take a deduction for dividends received from the following entities. 2011 tax forms and instructions 1040 A real estate investment trust (REIT). 2011 tax forms and instructions 1040 A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. 2011 tax forms and instructions 1040 A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. 2011 tax forms and instructions 1040 Ex-dividend means the holder has no rights to the dividend. 2011 tax forms and instructions 1040 A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. 2011 tax forms and instructions 1040 Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. 2011 tax forms and instructions 1040 Dividends on deposits. 2011 tax forms and instructions 1040   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. 2011 tax forms and instructions 1040 They do not qualify for this deduction. 2011 tax forms and instructions 1040 Limit on deduction for dividends. 2011 tax forms and instructions 1040   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). 2011 tax forms and instructions 1040 Figuring the limit. 2011 tax forms and instructions 1040   In figuring the limit, determine taxable income without the following items. 2011 tax forms and instructions 1040 The net operating loss deduction. 2011 tax forms and instructions 1040 The domestic production activities deduction. 2011 tax forms and instructions 1040 The deduction for dividends received. 2011 tax forms and instructions 1040 Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). 2011 tax forms and instructions 1040 Any capital loss carryback to the tax year. 2011 tax forms and instructions 1040 Effect of net operating loss. 2011 tax forms and instructions 1040   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. 2011 tax forms and instructions 1040 To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. 2011 tax forms and instructions 1040 Example 1. 2011 tax forms and instructions 1040 A corporation loses $25,000 from operations. 2011 tax forms and instructions 1040 It receives $100,000 in dividends from a 20%-owned corporation. 2011 tax forms and instructions 1040 Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. 2011 tax forms and instructions 1040 If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). 2011 tax forms and instructions 1040 Therefore, the 80% of taxable income limit does not apply. 2011 tax forms and instructions 1040 The corporation can deduct the full $80,000. 2011 tax forms and instructions 1040 Example 2. 2011 tax forms and instructions 1040 Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. 2011 tax forms and instructions 1040 Its taxable income is $85,000 before the deduction for dividends received. 2011 tax forms and instructions 1040 After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. 2011 tax forms and instructions 1040 Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). 2011 tax forms and instructions 1040 Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. 2011 tax forms and instructions 1040 The nontaxed part is any dividends-received deduction allowable for the dividends. 2011 tax forms and instructions 1040 Extraordinary dividend. 2011 tax forms and instructions 1040   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. 2011 tax forms and instructions 1040 The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. 2011 tax forms and instructions 1040 Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. 2011 tax forms and instructions 1040 Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. 2011 tax forms and instructions 1040 Disqualified preferred stock. 2011 tax forms and instructions 1040   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. 2011 tax forms and instructions 1040   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. 2011 tax forms and instructions 1040 The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. 2011 tax forms and instructions 1040 The issue price of the stock exceeds its liquidation rights or stated redemption price. 2011 tax forms and instructions 1040 The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. 2011 tax forms and instructions 1040   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. 2011 tax forms and instructions 1040 More information. 2011 tax forms and instructions 1040   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. 2011 tax forms and instructions 1040 Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. 2011 tax forms and instructions 1040 A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. 2011 tax forms and instructions 1040 A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. 2011 tax forms and instructions 1040 Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. 2011 tax forms and instructions 1040 Foregone interest. 2011 tax forms and instructions 1040   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. 2011 tax forms and instructions 1040 See Below-market loans, in chapter 4 of Publication 535 for more information. 2011 tax forms and instructions 1040 Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. 2011 tax forms and instructions 1040 The contribution is deductible if made to, or for the use of, a qualified organization. 2011 tax forms and instructions 1040 For more information on qualified organizations, see Publication 526, Charitable Contributions. 2011 tax forms and instructions 1040 Also see, Exempt Organizations Select Check (EO Select Check) at www. 2011 tax forms and instructions 1040 irs. 2011 tax forms and instructions 1040 gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. 2011 tax forms and instructions 1040 Note. 2011 tax forms and instructions 1040 You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. 2011 tax forms and instructions 1040 Cash method corporation. 2011 tax forms and instructions 1040   A corporation using the cash method of accounting deducts contributions in the tax year paid. 2011 tax forms and instructions 1040 Accrual method corporation. 2011 tax forms and instructions 1040   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. 2011 tax forms and instructions 1040 Make the choice by reporting the contribution on the corporation's return for the tax year. 2011 tax forms and instructions 1040 A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. 2011 tax forms and instructions 1040 The declaration must include the date the resolution was adopted. 2011 tax forms and instructions 1040 Limitations on deduction. 2011 tax forms and instructions 1040   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. 2011 tax forms and instructions 1040 Figure taxable income for this purpose without the following. 2011 tax forms and instructions 1040 The deduction for charitable contributions. 2011 tax forms and instructions 1040 The dividends-received deduction. 2011 tax forms and instructions 1040 The deduction allowed under section 249 of the Internal Revenue Code. 2011 tax forms and instructions 1040 The domestic production activities deduction. 2011 tax forms and instructions 1040 Any net operating loss carryback to the tax year. 2011 tax forms and instructions 1040 Any capital loss carryback to the tax year. 2011 tax forms and instructions 1040 Farmers and ranchers. 2011 tax forms and instructions 1040    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. 2011 tax forms and instructions 1040 Carryover of excess contributions. 2011 tax forms and instructions 1040   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. 2011 tax forms and instructions 1040 You lose any excess not used within that period. 2011 tax forms and instructions 1040 For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. 2011 tax forms and instructions 1040 Any excess not used in 2015 is lost. 2011 tax forms and instructions 1040 Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). 2011 tax forms and instructions 1040 You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. 2011 tax forms and instructions 1040 Cash contributions. 2011 tax forms and instructions 1040   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. 2011 tax forms and instructions 1040 The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. 2011 tax forms and instructions 1040 Keep the record of the contribution with the other corporate records. 2011 tax forms and instructions 1040 Do not attach the records to the corporation's return. 2011 tax forms and instructions 1040 For more information on cash contributions, see Publication 526. 2011 tax forms and instructions 1040 Gifts of $250 or more. 2011 tax forms and instructions 1040   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. 2011 tax forms and instructions 1040 The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. 2011 tax forms and instructions 1040 The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. 2011 tax forms and instructions 1040 Keep the acknowledgement with other corporate records. 2011 tax forms and instructions 1040 Do not attach the acknowledgement to the return. 2011 tax forms and instructions 1040 Contributions of property other than cash. 2011 tax forms and instructions 1040   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. 2011 tax forms and instructions 1040 In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. 2011 tax forms and instructions 1040   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. 2011 tax forms and instructions 1040 For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. 2011 tax forms and instructions 1040   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. 2011 tax forms and instructions 1040 A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. 2011 tax forms and instructions 1040 The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. 2011 tax forms and instructions 1040   See Form 8283 for more information. 2011 tax forms and instructions 1040 Qualified conservation contributions. 2011 tax forms and instructions 1040   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. 2011 tax forms and instructions 1040 For more information, see section 170(h) of the Internal Revenue Code. 2011 tax forms and instructions 1040 Contributions of used vehicles. 2011 tax forms and instructions 1040   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. 2011 tax forms and instructions 1040 The deduction is limited, and other special rules apply. 2011 tax forms and instructions 1040 For more information, see Publication 526. 2011 tax forms and instructions 1040 Reduction for contributions of certain property. 2011 tax forms and instructions 1040   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. 2011 tax forms and instructions 1040   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. 2011 tax forms and instructions 1040 Larger deduction. 2011 tax forms and instructions 1040   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. 2011 tax forms and instructions 1040 This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. 2011 tax forms and instructions 1040 Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. 2011 tax forms and instructions 1040 The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. 2011 tax forms and instructions 1040 Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. 2011 tax forms and instructions 1040 Contributions to organizations conducting lobbying activities. 2011 tax forms and instructions 1040   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. 2011 tax forms and instructions 1040 More information. 2011 tax forms and instructions 1040   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. 2011 tax forms and instructions 1040 Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. 2011 tax forms and instructions 1040 In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. 2011 tax forms and instructions 1040 Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. 2011 tax forms and instructions 1040 A capital loss is carried to other years in the following order. 2011 tax forms and instructions 1040 3 years prior to the loss year. 2011 tax forms and instructions 1040 2 years prior to the loss year. 2011 tax forms and instructions 1040 1 year prior to the loss year. 2011 tax forms and instructions 1040 Any loss remaining is carried forward for 5 years. 2011 tax forms and instructions 1040 When you carry a net capital loss to another tax year, treat it as a short-term loss. 2011 tax forms and instructions 1040 It does not retain its original identity as long term or short term. 2011 tax forms and instructions 1040 Example. 2011 tax forms and instructions 1040 A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. 2011 tax forms and instructions 1040 The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. 2011 tax forms and instructions 1040 The corporation treats this $6,000 as a short-term loss when carried back or forward. 2011 tax forms and instructions 1040 The corporation carries the $6,000 short-term loss back 3 years. 2011 tax forms and instructions 1040 In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. 2011 tax forms and instructions 1040 It subtracts the $6,000 short-term loss first from the net short-term gain. 2011 tax forms and instructions 1040 This results in a net capital gain for year 1 of $7,000. 2011 tax forms and instructions 1040 This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. 2011 tax forms and instructions 1040 S corporation status. 2011 tax forms and instructions 1040   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. 2011 tax forms and instructions 1040 Rules for carryover and carryback. 2011 tax forms and instructions 1040   When carrying a capital loss from one year to another, the following rules apply. 2011 tax forms and instructions 1040 When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. 2011 tax forms and instructions 1040 In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. 2011 tax forms and instructions 1040 If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. 2011 tax forms and instructions 1040 You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. 2011 tax forms and instructions 1040 Refunds. 2011 tax forms and instructions 1040   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. 2011 tax forms and instructions 1040 If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. 2011 tax forms and instructions 1040 S. 2011 tax forms and instructions 1040 Corporation Income Tax Return, to apply for a refund. 2011 tax forms and instructions 1040 Form 1139. 2011 tax forms and instructions 1040    A corporation can get a refund faster by using Form 1139. 2011 tax forms and instructions 1040 It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. 2011 tax forms and instructions 1040 Form 1120X. 2011 tax forms and instructions 1040   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. 2011 tax forms and instructions 1040 The corporation must file the Form 1120X within 3 years of the due date, includin