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2012 Form 1040ez

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2012 Form 1040ez

2012 form 1040ez Publication 584SP - Introductory Material Table of Contents Qué Hay de Nuevo Introduction Qué Hay de Nuevo Acontecimientos futuros. 2012 form 1040ez  El IRS ha diseñado una página en el Internet, www. 2012 form 1040ez irs. 2012 form 1040ez gov/pub584sp, que incluye información sobre la Publicación 584(SP). 2012 form 1040ez Toda información sobre desarrollos futuros que afecten la Publicación 584(SP) (como legislación aprobada después de que la publicación haya sido publicada) será anunciada en esta página. 2012 form 1040ez Introduction Este registro se ha creado para ayudarlo a determinar la cantidad de una pérdida ocasionada por un desastre, hecho fortuito o robo que esté relacionada con propiedad de uso personal. 2012 form 1040ez Contiene anexos para ayudarlo a calcular el valor de la pérdida de su residencia principal, de toda propiedad contenida dentro de la misma y de sus vehículos motorizados. 2012 form 1040ez Sin embargo, estos anexos sólo son para su información. 2012 form 1040ez Tiene que completar el Formulario 4684, Casualties and Thefts (Hechos Fortuitos y Robos), en inglés, para declarar su pérdida. 2012 form 1040ez Prev  Up  Next   Home   More Online Publications
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If you need an attorney to advise or represent you, ask friends and family for recommendations. You can also contact the Lawyer Referral Service of your state, county, or city bar association listed in your local phone directory.

Websites such as abalawinfo.org (American Bar Association), uslaw.com, thelaw.com, freeadvice.com, and nolo.com can help you with answers to general legal questions.

Tips For Choosing An Attorney

Many lawyers who primarily serve individuals and families are general practitioners with experience in frequently needed legal services such as divorce and family matters; wills and probate; bankruptcy and debt problems; real estate; criminal and/or personal injury. Some have a narrower focus. Be sure the lawyer you are considering has experience in the area for which you are seeking help.

Once you've identified some candidates:

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The initial consultation is an opportunity for you and the lawyer to get to know each other. After listening to the description of your case, the lawyer should be able to outline your rights and liabilities, as well as alternative courses of action. The initial consultation is the lawyer's opportunity to explain what he or she can do for you and how much it will cost. You should not hesitate to ask about the attorney's experience in handling matters such as yours. Also, do not hesitate to ask about the lawyer's fees and the likely results. If you are considering going beyond the initial consultation and hiring the lawyer, request a written fee agreement before proceeding.

What If You Can't Afford A Lawyer?

If you cannot afford a lawyer, you may qualify for free legal help from a Legal Aid or Legal Services Corporation (LSC) office. These offices generally offer legal assistance about such things as landlord-tenant relations, credit, utilities, family matters (e.g., divorce and adoption), foreclosure, home equity fraud, social security, welfare, unemployment, and workers' compensation. If the Legal Aid office in your area does not handle your type of case, it may refer you to other local, state or national organizations that can provide help. Additional resources may be found at lawhelp.org or freeadvice.com.

To find the Legal Aid office nearest to you, check a local telephone directory or contact:
National Legal Aid and Defender Association
1625 K Street, NW, 8th Floor
Washington, DC 20006
Phone: 202-452-0620
E-mail: info@nlada.org

To find the LSC office nearest you, check a local telephone directory or contact:
LSC Public Affairs
3333 K St., NW, 3rd Floor
Washington, DC 20007
Phone: 202-295-1500

Free assistance could also be available from a law school program where students, supervised by attorneys, handle a variety of legal matters. Some of these programs are open to all. Others limit their service to specific groups, such as senior citizens or low-income persons. Contact a law school in your area to find out if such a program is available.

The 2012 Form 1040ez

2012 form 1040ez 9. 2012 form 1040ez   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. 2012 form 1040ez Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. 2012 form 1040ez Amount to report as ordinary income. 2012 form 1040ez Applicable percentage. 2012 form 1040ez Amount to report as ordinary income. 2012 form 1040ez Applicable percentage. 2012 form 1040ez Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. 2012 form 1040ez When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. 2012 form 1040ez Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. 2012 form 1040ez Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. 2012 form 1040ez Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. 2012 form 1040ez Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. 2012 form 1040ez Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). 2012 form 1040ez Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. 2012 form 1040ez Table 9-1. 2012 form 1040ez Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. 2012 form 1040ez Held 24 mos. 2012 form 1040ez  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. 2012 form 1040ez Held 12 mos. 2012 form 1040ez   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). 2012 form 1040ez Do not take that gain into account as section 1231 gain. 2012 form 1040ez Section 1231 transactions. 2012 form 1040ez   Gain or loss on the following transactions is subject to section 1231 treatment. 2012 form 1040ez Sale or exchange of cattle and horses. 2012 form 1040ez The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. 2012 form 1040ez Sale or exchange of other livestock. 2012 form 1040ez This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. 2012 form 1040ez Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. 2012 form 1040ez Other livestock does not include poultry. 2012 form 1040ez Sale or exchange of depreciable personal property. 2012 form 1040ez This property must be used in your business and held longer than 1 year. 2012 form 1040ez Generally, property held for the production of rents or royalties is considered to be used in a trade or business. 2012 form 1040ez Examples of depreciable personal property include farm machinery and trucks. 2012 form 1040ez It also includes amortizable section 197 intangibles. 2012 form 1040ez Sale or exchange of real estate. 2012 form 1040ez This property must be used in your business and held longer than 1 year. 2012 form 1040ez Examples are your farm or ranch (including barns and sheds). 2012 form 1040ez Sale or exchange of unharvested crops. 2012 form 1040ez The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. 2012 form 1040ez You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). 2012 form 1040ez Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. 2012 form 1040ez Distributive share of partnership gains and losses. 2012 form 1040ez Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). 2012 form 1040ez Cutting or disposal of timber. 2012 form 1040ez Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . 2012 form 1040ez Condemnation. 2012 form 1040ez The condemned property (defined in chapter 11) must have been held longer than 1 year. 2012 form 1040ez It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. 2012 form 1040ez It cannot be property held for personal use. 2012 form 1040ez Casualty or theft. 2012 form 1040ez The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). 2012 form 1040ez You must have held the property longer than 1 year. 2012 form 1040ez However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. 2012 form 1040ez Section 1231 does not apply to personal casualty gains and losses. 2012 form 1040ez See chapter 11 for information on how to treat those gains and losses. 2012 form 1040ez If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. 2012 form 1040ez See Table 9-1. 2012 form 1040ez Property for sale to customers. 2012 form 1040ez   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. 2012 form 1040ez If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. 2012 form 1040ez Treatment as ordinary or capital. 2012 form 1040ez   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. 2012 form 1040ez If you have a net section 1231 loss, it is an ordinary loss. 2012 form 1040ez If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. 2012 form 1040ez The rest, if any, is long-term capital gain. 2012 form 1040ez Nonrecaptured section 1231 losses. 2012 form 1040ez   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. 2012 form 1040ez These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. 2012 form 1040ez Example. 2012 form 1040ez In 2013, Ben has a $2,000 net section 1231 gain. 2012 form 1040ez To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. 2012 form 1040ez From 2008 through 2012 he had the following section 1231 gains and losses. 2012 form 1040ez Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. 2012 form 1040ez 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. 2012 form 1040ez Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. 2012 form 1040ez To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. 2012 form 1040ez For more information, see chapter 3 of Publication 544. 2012 form 1040ez Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. 2012 form 1040ez Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. 2012 form 1040ez See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. 2012 form 1040ez Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. 2012 form 1040ez Personal property (either tangible or intangible). 2012 form 1040ez Other tangible property (except buildings and their structural components) used as any of the following. 2012 form 1040ez See Buildings and structural components below. 2012 form 1040ez An integral part of manufacturing, production, or extraction, or of furnishing certain services. 2012 form 1040ez A research facility in any of the activities in (a). 2012 form 1040ez A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). 2012 form 1040ez That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. 2012 form 1040ez Amortization of certified pollution control facilities. 2012 form 1040ez The section 179 expense deduction. 2012 form 1040ez Deduction for clean-fuel vehicles and certain refueling property. 2012 form 1040ez Expenditures to remove architectural and transportation barriers to the handicapped and elderly. 2012 form 1040ez Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. 2012 form 1040ez Single purpose agricultural (livestock) or horticultural structures. 2012 form 1040ez Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. 2012 form 1040ez Buildings and structural components. 2012 form 1040ez   Section 1245 property does not include buildings and structural components. 2012 form 1040ez The term building includes a house, barn, warehouse, or garage. 2012 form 1040ez The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. 2012 form 1040ez   Do not treat a structure that is essentially machinery or equipment as a building or structural component. 2012 form 1040ez Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. 2012 form 1040ez   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. 2012 form 1040ez Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. 2012 form 1040ez Facility for bulk storage of fungible commodities. 2012 form 1040ez   This is a facility used mainly for the bulk storage of fungible commodities. 2012 form 1040ez Bulk storage means storage of a commodity in a large mass before it is used. 2012 form 1040ez For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. 2012 form 1040ez To be fungible, a commodity must be such that one part may be used in place of another. 2012 form 1040ez Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. 2012 form 1040ez The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. 2012 form 1040ez The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). 2012 form 1040ez For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. 2012 form 1040ez For details, see chapter 3 of Publication 544. 2012 form 1040ez Use Part III of Form 4797 to figure the ordinary income part of the gain. 2012 form 1040ez Depreciation claimed on other property or claimed by other taxpayers. 2012 form 1040ez   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. 2012 form 1040ez Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. 2012 form 1040ez For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. 2012 form 1040ez Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). 2012 form 1040ez Example. 2012 form 1040ez Jeff Free paid $120,000 for a tractor in 2012. 2012 form 1040ez On February 23, 2013, he traded it for a chopper and paid an additional $30,000. 2012 form 1040ez To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. 2012 form 1040ez Jeff can also depreciate the additional $30,000 for the chopper. 2012 form 1040ez Depreciation and amortization. 2012 form 1040ez   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. 2012 form 1040ez See Depreciation Recapture in chapter 3 of Publication 544 for more details. 2012 form 1040ez Ordinary depreciation deductions. 2012 form 1040ez Section 179 deduction (see chapter 7). 2012 form 1040ez Any special depreciation allowance. 2012 form 1040ez Amortization deductions for all the following costs. 2012 form 1040ez Acquiring a lease. 2012 form 1040ez Lessee improvements. 2012 form 1040ez Pollution control facilities. 2012 form 1040ez Reforestation expenses. 2012 form 1040ez Section 197 intangibles. 2012 form 1040ez Qualified disaster expenses. 2012 form 1040ez Franchises, trademarks, and trade names acquired before August 11, 1993. 2012 form 1040ez Example. 2012 form 1040ez You file your returns on a calendar year basis. 2012 form 1040ez In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. 2012 form 1040ez You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. 2012 form 1040ez You did not claim the section 179 expense deduction for the truck. 2012 form 1040ez You sold it in May 2013 for $7,000. 2012 form 1040ez The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). 2012 form 1040ez Figure the gain treated as ordinary income as follows. 2012 form 1040ez 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. 2012 form 1040ez   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. 2012 form 1040ez If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. 2012 form 1040ez If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. 2012 form 1040ez This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. 2012 form 1040ez Disposition of plants and animals. 2012 form 1040ez   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. 2012 form 1040ez If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. 2012 form 1040ez For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. 2012 form 1040ez For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. 2012 form 1040ez You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. 2012 form 1040ez Example. 2012 form 1040ez Janet Maple sold her apple orchard in 2013 for $80,000. 2012 form 1040ez Her adjusted basis at the time of sale was $60,000. 2012 form 1040ez She bought the orchard in 2006, but the trees did not produce a crop until 2009. 2012 form 1040ez Her pre-productive expenses were $6,000. 2012 form 1040ez She elected not to use the uniform capitalization rules. 2012 form 1040ez Janet must treat $6,000 of the gain as ordinary income. 2012 form 1040ez Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. 2012 form 1040ez It includes buildings and structural components that are not section 1245 property (discussed earlier). 2012 form 1040ez It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. 2012 form 1040ez A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. 2012 form 1040ez Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. 2012 form 1040ez To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. 2012 form 1040ez You will not have additional depreciation if any of the following apply to the property disposed of. 2012 form 1040ez You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. 2012 form 1040ez You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. 2012 form 1040ez The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. 2012 form 1040ez These properties are depreciated using the straight line method. 2012 form 1040ez Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. 2012 form 1040ez This applies even if no payments are received in that year. 2012 form 1040ez If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. 2012 form 1040ez For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. 2012 form 1040ez If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. 2012 form 1040ez To do this, allocate the selling price and the payments you receive in the year of sale to each asset. 2012 form 1040ez Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. 2012 form 1040ez For more information on installment sales, see chapter 10. 2012 form 1040ez Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. 2012 form 1040ez By gift. 2012 form 1040ez At death. 2012 form 1040ez In like-kind exchanges. 2012 form 1040ez In involuntary conversions. 2012 form 1040ez Publication 544 also explains how to handle a single transaction involving multiple properties. 2012 form 1040ez Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. 2012 form 1040ez Deductions for soil and water conservation expenditures (section 1252 property). 2012 form 1040ez Exclusions from income for certain cost sharing payments (section 1255 property). 2012 form 1040ez Section 1252 property. 2012 form 1040ez   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. 2012 form 1040ez Exceptions. 2012 form 1040ez   Do not treat gain on the following transactions as gain on section 1252 property. 2012 form 1040ez Disposition of farmland by gift. 2012 form 1040ez Transfer of farm property at death (except for income in respect of a decedent). 2012 form 1040ez For more information, see Regulations section 1. 2012 form 1040ez 1252-2. 2012 form 1040ez Amount to report as ordinary income. 2012 form 1040ez   You report as ordinary income the lesser of the following amounts. 2012 form 1040ez Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). 2012 form 1040ez The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. 2012 form 1040ez Applicable percentage. 2012 form 1040ez   The applicable percentage is based on the length of time you held the land. 2012 form 1040ez If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. 2012 form 1040ez If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. 2012 form 1040ez If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. 2012 form 1040ez Example. 2012 form 1040ez You acquired farmland on January 19, 2005. 2012 form 1040ez On October 3, 2013, you sold the land at a $30,000 gain. 2012 form 1040ez Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. 2012 form 1040ez The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. 2012 form 1040ez You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. 2012 form 1040ez Section 1255 property. 2012 form 1040ez   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. 2012 form 1040ez If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. 2012 form 1040ez Amount to report as ordinary income. 2012 form 1040ez   You report as ordinary income the lesser of the following amounts. 2012 form 1040ez The applicable percentage of the total excluded cost-sharing payments. 2012 form 1040ez The gain on the disposition of the property. 2012 form 1040ez You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. 2012 form 1040ez However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. 2012 form 1040ez Applicable percentage. 2012 form 1040ez   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. 2012 form 1040ez If the property is held less than 10 years after you receive the payments, the percentage is 100%. 2012 form 1040ez After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. 2012 form 1040ez Form 4797, Part III. 2012 form 1040ez   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. 2012 form 1040ez Prev  Up  Next   Home   More Online Publications