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Aarp Tax Filing

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Aarp Tax Filing

Aarp tax filing Index A Abandonment, Abandonment Accounting method Accrual, Accrual Method Cash, Cash Method Change in, Changes in Methods of Accounting Crop, Crop method. Aarp tax filing Farm inventory, Farm Inventory Accounting periods, Introduction Accrual method of accounting, Accrual Method Additional Medicare Tax withholding, What's New for 2013, Additional Medicare Tax. Aarp tax filing Adjusted basis for installment sale, Adjusted basis for installment sale purposes. Aarp tax filing Adjusted basis of assets, Adjusted Basis Agricultural activity codes, Schedule F, Reminders Agricultural program payments, Agricultural Program Payments Agricultural structure, defined, Agricultural structure. Aarp tax filing Alternative Depreciation System (ADS), Required use of ADS. Aarp tax filing , ADS election. Aarp tax filing Amortization Going into business, Business Start-Up Costs Reforestation expenses, Reforestation Costs Section 197 intangibles, Section 197 Intangibles Assessments By conservation district, Assessment by Conservation District Depreciable property, Assessment for Depreciable Property Assistance (see Tax help) Automobiles, depreciation, Limits for passenger automobiles. Aarp tax filing B Bankruptcy, Bankruptcy. Aarp tax filing Barter income, Barter income. Aarp tax filing Basis Adjusted, Adjusted basis. Aarp tax filing Installment sale, Adjusted basis for installment sale purposes. Aarp tax filing Involuntary conversion, Basis for depreciation. Aarp tax filing Like-kind exchange, Basis for depreciation. Aarp tax filing Partner's basis, Property Distributed From a Partnership or Corporation Replacement property, Basis of replacement property. Aarp tax filing Shareholder's basis, Property Distributed From a Partnership or Corporation Basis of assets Adjusted basis, Adjusted Basis Allocating to several assets, Allocating the Basis Changed to business use, Property changed from personal to business or rental use. Aarp tax filing Constructing assets, Constructing assets. Aarp tax filing Cost, Cost Basis Decreases, Decreases to Basis Depreciation, What Is the Basis for Depreciation? Exchanges Like-kind, Like-Kind Exchanges Nontaxable, Nontaxable Exchanges Partially nontaxable, Partially Nontaxable Exchanges Taxable, Taxable Exchanges Gifts, Property Received as a Gift Increases, Increases to Basis Real property, Real Property Received for services, Property received for services. Aarp tax filing Uniform capitalization rules, Uniform Capitalization Rules Below-market loans, Below-market loans. Aarp tax filing Books and records, Importance of Records Breeding fees, Breeding Fees Business income limit, section 179 expense deduction, Business Income Limit Business use of home, Business Use of Your Home C Canceled debt, Cancellation of Debt Capital assets, Capital Assets Capital expenses, Capital Expenses Car expenses, Truck and Car Expenses Cash method of accounting, Cash Method Casualties and thefts Adjustments to basis, Adjustments to basis. Aarp tax filing Casualty, defined, Casualty. Aarp tax filing Disaster area losses, Disaster Area Losses Leased property, Leased property. Aarp tax filing Livestock, Livestock or produce bought for resale. Aarp tax filing , Raised draft, breeding, dairy, or sporting animals. Aarp tax filing Reimbursement, Insurance and other reimbursements. Aarp tax filing Reporting gains and losses, Reporting Gains and Losses Theft, defined, Theft. Aarp tax filing Change in accounting method, Changes in Methods of Accounting Chickens, purchased, Chickens, seeds, and young plants. Aarp tax filing Christmas trees, Christmas tree cultivation. Aarp tax filing , Christmas trees. Aarp tax filing Club dues, Club dues and membership fees. Aarp tax filing Comments on publication, Comments and suggestions. Aarp tax filing Commodity Futures, Hedging (Commodity Futures) Wages, Noncash wages. Aarp tax filing Commodity Credit Corporation (CCC) Loans, Commodity Credit Corporation (CCC) Loans Market gain, Market Gain Community property, Community property. Aarp tax filing , Community property. Aarp tax filing Computer, software, Computer software. Aarp tax filing Condemnation, Casualties, Thefts, and Condemnations, Condemnation Conservation Cost-sharing exclusion, Conservation Expenses District assessments, Assessment by Conservation District Expenses, Conservation Expenses Plans, Conservation plan. Aarp tax filing Conservation Reserve Program, Conservation Reserve Program (CRP) payments. Aarp tax filing Conservation Reserve Program (CRP), Conservation Reserve Program (CRP) Constructing assets, Constructing assets. Aarp tax filing Constructive receipt of income, Constructive receipt. Aarp tax filing Contamination, Soil or other environmental contamination. Aarp tax filing Contract price, Contract price. Aarp tax filing Converted wetland, Converted Wetland and Highly Erodible Cropland Cooperatives, income from, Income From Cooperatives Cost-sharing exclusion, Cost-Sharing Exclusion (Improvements) Counter-cyclical payments, Direct payments and counter-cyclical payments. Aarp tax filing , Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Credits Employment, Employment Credits Fuel tax, Fuel tax credit and refund. Aarp tax filing , How To Claim a Credit or Refund, Claiming a Credit Social security and Medicare, Earning credits in 2013. Aarp tax filing Social security coverage, How to become insured under social security. Aarp tax filing State unemployment tax, Tax rate and credit. Aarp tax filing Crew leaders, Crew Leaders Crop Destroyed, Standing crop destroyed by casualty. Aarp tax filing Insurance proceeds, Crop Insurance and Crop Disaster Payments Method of accounting, Crop method. Aarp tax filing Shares, Rents (Including Crop Shares) Unharvested, Cost of raising unharvested crops. Aarp tax filing , Section 1231 transactions. Aarp tax filing , Gain or loss. Aarp tax filing Cropland, highly erodible, Converted Wetland and Highly Erodible Cropland D Damage Casualties and thefts, Casualties and Thefts Crop insurance, Crop Insurance and Crop Disaster Payments Tree seedlings, Tree Seedlings Debt Bad, Nonbusiness bad debt. Aarp tax filing Canceled, Cancellation of Debt, Canceled debt excluded from income. Aarp tax filing , Cancellation of debt. Aarp tax filing , Canceled debt. Aarp tax filing Nonrecourse, Amount realized on a nonrecourse debt. Aarp tax filing Qualified farm, Qualified Farm Debt Qualified principal residence, Qualified Principal Residence Debt Recourse, Amount realized on a recourse debt. Aarp tax filing Depletion, Depletion Depreciation, Claiming the Special Depreciation Allowance ADS election, ADS election. Aarp tax filing Conservation assets, Depreciable conservation assets. Aarp tax filing Deduction, Overview of Depreciation Incorrect amount deducted, How Do You Correct Depreciation Deductions? Limit for automobiles, Limits for passenger automobiles. Aarp tax filing Listed property, Additional Rules for Listed Property Raised livestock, Livestock. Aarp tax filing Recapture, When Do You Recapture MACRS Depreciation?, Depreciation Recapture, Section 1250 Property When to file, Do You Have To File Form 4562? Depreciation allowable, Basis adjustment for depreciation allowed or allowable. Aarp tax filing Depreciation allowed, Basis adjustment for depreciation allowed or allowable. Aarp tax filing Direct payments, Direct payments and counter-cyclical payments. Aarp tax filing , Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Disaster area losses, Disaster Area Losses Disaster payments, Crop Insurance and Crop Disaster Payments Disaster relief grants, Federal disaster relief grants. Aarp tax filing Disaster relief payments, Qualified disaster relief payments. Aarp tax filing Dispositions, Sale or other disposal of land during 9-year period. Aarp tax filing , Gain on sale of farmland. Aarp tax filing , Introduction Domestic production activities deduction, Domestic Production Activities Deduction Dyed diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Dyed kerosene, Dyed Diesel Fuel and Dyed Kerosene E e-file, Reminders Easement, Easements and rights-of-way. Aarp tax filing , Easements. Aarp tax filing Election ADS depreciation, Electing ADS. Aarp tax filing , ADS election. Aarp tax filing Amortization Business start-up costs, Business Start-Up Costs Reforestation costs, Reforestation Costs Crop method, Election to use crop method. Aarp tax filing Cutting of timber, Election to treat cutting as a sale or exchange. Aarp tax filing Deducting conservation expenses, When to Deduct or Capitalize Not excluding cost-sharing payments, Electing not to exclude payments. Aarp tax filing Out of installment method, Electing out of the installment method. Aarp tax filing Postponing casualty gain, Postponing Gain Postponing reporting crop insurance proceeds, Election to postpone reporting until the following year. Aarp tax filing Section 179 expense deduction, How Do You Elect the Deduction? Electronic filing, Reminders Embryo transplants, Transplanted embryo. Aarp tax filing Employer identification number, Reminders, Employer identification number (EIN). Aarp tax filing Endangered species recovery expenses, Endangered species recovery expenses. Aarp tax filing Environmental contamination, Soil or other environmental contamination. Aarp tax filing Estimated tax Farm gross income, Gross Income From Farming Gross income, Gross Income Penalties, Estimated Tax Penalty for 2013 Exchanges Basis Like-kind, Like-Kind Exchanges Nontaxable, Nontaxable Exchanges Partially nontaxable, Partially Nontaxable Exchanges Taxable, Taxable Exchanges Like-kind, Like-Kind Exchanges Nontaxable, Like-Kind Exchanges Excise taxes Credit, Claiming a Credit Diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Farming purposes, Fuels Used in Farming Home use of fuels, Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines Off-highway uses, Fuels Used in Off-Highway Business Use Refund, Claiming a Refund F Fair market value defined, Fair market value (FMV). Aarp tax filing , Fair market value (FMV). Aarp tax filing Family member Business expenses, Special rule for related persons. Aarp tax filing Installment sale, Sale to a related person. Aarp tax filing Like-kind exchange, Like-kind exchanges between related persons. Aarp tax filing Loss on sale or exchange of property, Losses from sales or exchanges between related persons. Aarp tax filing Personal-use property, Personal-use property. Aarp tax filing Social security coverage, Family Employees Farm Business expenses, Farm Business Expenses Business, defined, Business of Farming Defined, Farm defined. Aarp tax filing , Farm. Aarp tax filing Income averaging, Income Averaging for Farmers Rental, Farm rental. Aarp tax filing Sale of, Sale of a Farm Farmer, Farmer. Aarp tax filing Federal unemployment tax (FUTA), Federal Unemployment (FUTA) Tax Fertilizer, Fertilizer and Lime, Fertilizer and Lime Foreclosure, Foreclosure or Repossession Forestation costs, Forestation and reforestation costs. Aarp tax filing Form 1099-A, Form 1099-A. Aarp tax filing , Forms 1099-A and 1099-C. Aarp tax filing 1099-C, Cancellation of Debt, Form 1099-C. Aarp tax filing , Forms 1099-A and 1099-C. Aarp tax filing 1099-G, Market Gain, Payment to More Than One Person 1099-MISC, Reminders, Nonemployee compensation. Aarp tax filing 1099-PATR, Form 1099-PATR. Aarp tax filing 1128, Introduction 2210-F, Estimated Tax Penalty for 2013 3115, Changes in Methods of Accounting 4136, Claiming a Credit 4562, Do You Have To File Form 4562? 4797, Form 4797. Aarp tax filing , Recapture. Aarp tax filing , Reporting the exchange. Aarp tax filing 4835, Rents (Including Crop Shares) 5213, Using the presumption later. Aarp tax filing 6252, Form 6252. Aarp tax filing 8822, Reminders 8824, Reporting the exchange. Aarp tax filing 8849, Claiming a Refund 8886, Reminders 940, Form 940. Aarp tax filing 943, Form 943. Aarp tax filing 982, Form 982 I-9, Form I-9. Aarp tax filing SS-4, Reminders, Employer identification number (EIN). Aarp tax filing SS-5, Obtaining a social security number. Aarp tax filing T (Timber), Form T (Timber). Aarp tax filing W-2, Form W-2. Aarp tax filing W-4, Reminders, New hire reporting. Aarp tax filing , Form W-4. Aarp tax filing W-4V, Commodity Credit Corporation (CCC) Loans, Crop Insurance and Crop Disaster Payments W-7, Obtaining an individual taxpayer identification number. Aarp tax filing Free tax services, How To Get Tax Help, Free help with your tax return. Aarp tax filing Fuel tax credit or refund, Fuel tax credit and refund. Aarp tax filing , How To Claim a Credit or Refund G Gains and losses Basis of assets, Cost Basis Capital assets, defined, Capital Assets Casualty, How To Figure a Loss, Figuring a Gain Installment sales, Installment Sales Livestock, Livestock Long- or short-term, Long and Short Term Ordinary or capital, Ordinary or Capital Gain or Loss Sale of farm, Sale of a Farm Section 1231, Section 1231 Gains and Losses Theft, How To Figure a Loss, Figuring a Gain Timber, Timber General asset accounts, How Do You Use General Asset Accounts? Gifts, Crop shares you give to others (gift). Aarp tax filing , Cost related to gifts. Aarp tax filing , Property Received as a Gift, Gift. Aarp tax filing Going into business, Business Start-Up Costs Grants, disaster relief, Federal disaster relief grants. Aarp tax filing Gross profit percentage, Gross profit percentage. Aarp tax filing Gross profit, defined, Gross profit. Aarp tax filing Guarantee, Debt not payable on demand. Aarp tax filing H Health insurance deduction, Self-employed health insurance deduction. Aarp tax filing Hedging, Hedging (Commodity Futures) Help (see Tax help) Highway use tax, Highway use tax. Aarp tax filing Holding period, Holding period. Aarp tax filing Horticultural structure, Horticultural structure. Aarp tax filing I Illegal irrigation subsidy, Illegal federal irrigation subsidy. Aarp tax filing Important dates, Important Dates for 2014 Improvements, Cost-Sharing Exclusion (Improvements) Income Accounting for, Accounting Methods Accrual method of accounting, Income Canceled debt excluded, Cancellation of Debt From farming, Farm Income, Gross income from farming. Aarp tax filing , Gross Income From Farming Gross, Gross Income Not-for-profit farming, Not-for-Profit Farming Pasture, Pasture income and rental. Aarp tax filing Schedule F, Farm Income Withholding of tax, Federal Income Tax Withholding Income averaging (see Farm: Income averaging) Incorrect amount of depreciation deducted, How Do You Correct Depreciation Deductions? Individual taxpayer identification number (ITIN), Obtaining an individual taxpayer identification number. Aarp tax filing Inherited property, Inherited Property Insolvency, Insolvency. Aarp tax filing Installment sales, Form 6252. Aarp tax filing Electing out, Electing out of the installment method. Aarp tax filing Farm, sale of, Installment Sale of a Farm Figuring income, Figuring Installment Sale Income Reporting income, Form 6252. Aarp tax filing Unstated interest, Unstated interest. Aarp tax filing Insurance, Insurance, Self-employed health insurance deduction. Aarp tax filing Intangible property, Section 197 Intangibles Interest Expense, Interest Income, Interest income. Aarp tax filing Unstated, Unstated interest. Aarp tax filing Inventory Items included, Farm Inventory Methods of valuation, Inventory valuation methods. Aarp tax filing Involuntary conversions, Involuntary Conversions, Property acquired in a like-kind exchange or involuntary conversion. Aarp tax filing , Introduction Irrigation Illegal subsidy, Illegal federal irrigation subsidy. Aarp tax filing Project, Irrigation Project L Labor hired, Labor Hired Landlord participation, Landlord Participation in Farming Lease or purchase, Lease or Purchase Life tenant (see Term interests) Like-kind exchanges, Like-Kind Exchanges, Like-Kind Exchanges Lime, Fertilizer and Lime Limits At-risk, At-Risk Limits Business use of home, Deduction limit. Aarp tax filing Capital losses, Treatment of Capital Losses Conservation expenses, Assessment for Depreciable Property, 25% Limit on Deduction Depreciation Business-use, What Is the Business-Use Requirement? Excluded farm debt, Exclusion limit. Aarp tax filing Farm losses, Losses From Operating a Farm Loss of personal-use property, Deduction Limits on Losses of Personal-Use Property Not-for-profit farming, Not-for-Profit Farming Passive activity, Passive Activity Limits Percentage depletion, Taxable income limit. Aarp tax filing Prepaid farm supplies, Deduction limit. Aarp tax filing Reforestation costs, Reforestation Costs Section 179 expense deduction Automobile, Limits for passenger automobiles. Aarp tax filing Business income, Business Income Limit Dollar, Dollar Limits Time to keep records, How Long To Keep Records Listed property Defined, What Is Listed Property? Passenger automobile, Passenger automobiles. Aarp tax filing Rules, Additional Rules for Listed Property Livestock, Section 1231 transactions. Aarp tax filing Casualty and theft losses, Livestock or produce bought for resale. Aarp tax filing Crop shares, Crop shares you use to feed livestock. Aarp tax filing Depreciation, Livestock. Aarp tax filing Diseased, Diseased livestock. Aarp tax filing Feed assistance, Feed Assistance and Payments Immature, Immature livestock. Aarp tax filing Losses, Loss of livestock. Aarp tax filing , Livestock Purchased, Purchased livestock. Aarp tax filing Raised, Raised livestock. Aarp tax filing Sale of, Sales of Farm Products, Livestock Unit-livestock-price, inventory valuation, Unit-livestock-price method. Aarp tax filing Used in a farm business, Livestock used in farm business. Aarp tax filing Weather-related sales, Sales Caused by Weather-Related Conditions, Weather-related sales of livestock. Aarp tax filing Loans, Commodity Credit Corporation (CCC) Loans, Loan expenses. Aarp tax filing Losses At-risk limits, At-Risk Limits Casualty, Casualties, Thefts, and Condemnations Disaster areas, Disaster Area Losses Farming, Farming Losses Growing crops, Loss of growing plants, produce, and crops. Aarp tax filing Hobby farming, Not-for-Profit Farming Livestock, Livestock, Diseased livestock. Aarp tax filing Nondeductible, Other Nondeductible Items Theft, Casualties, Thefts, and Condemnations Lost income payments, Lost income payments. Aarp tax filing Lost property, Mislaid or lost property. Aarp tax filing M MACRS property Involuntary conversion, Property acquired in a like-kind exchange or involuntary conversion. Aarp tax filing Like-kind exchange, Property acquired in a like-kind exchange or involuntary conversion. Aarp tax filing Nontaxable transfer, Property acquired in a nontaxable transfer. Aarp tax filing Market gain, reporting, Market Gain Marketing quota penalties, Marketing Quota Penalties Material participation, Landlord Participation in Farming Meals, Meals. Aarp tax filing Membership fees, Club dues and membership fees. Aarp tax filing Methods of accounting, Accounting Methods Modified ACRS (MACRS) ADS election, ADS election. Aarp tax filing Conventions, Which Convention Applies? Depreciation methods, Which Depreciation Method Applies? Exchange, Property acquired in a like-kind exchange or involuntary conversion. Aarp tax filing Figuring the deduction, How Is the Depreciation Deduction Figured? Involuntary conversion, Property acquired in a like-kind exchange or involuntary conversion. Aarp tax filing Nontaxable transfer, Property acquired in a nontaxable transfer. Aarp tax filing Percentage tables, Rules for using the tables. Aarp tax filing Property classes, Which Property Class Applies Under GDS? Recovery periods, Which Recovery Period Applies? N New hire reporting, New hire reporting. Aarp tax filing Noncapital asset, Noncapital Assets Nontaxable exchanges, Like-Kind Exchanges Nontaxable transfer of MACRS property, Property acquired in a nontaxable transfer. Aarp tax filing Not-for-profit farming, Not-for-Profit Farming O Organizational costs, Business start-up and organizational costs. Aarp tax filing P Partners, limited, Limited partner. Aarp tax filing Partners, retired, Retired partner. Aarp tax filing Partners, Spouse, Business Owned and Operated by Spouses. Aarp tax filing Partnership, Partnership income or loss. Aarp tax filing Passenger automobile, Passenger automobiles. Aarp tax filing Pasture income, Pasture income and rental. Aarp tax filing Patronage dividends, Patronage Dividends Payments considered received, Payments Received or Considered Received Payments received, Payments Received or Considered Received Penalties Estimated tax, Estimated Tax Penalty for 2013 Returns, Estimated Tax Penalty for 2013 Trust fund recovery, Trust fund recovery penalty. Aarp tax filing Per-unit retain certificates, Per-Unit Retain Certificates Personal expenses, Personal, Living, and Family Expenses Placed in service, Placed in Service, What Is the Placed-in-Service Date? Postponing casualty gain, Postponing Gain Prepaid expense Advance premiums, Advance premiums. Aarp tax filing Extends useful life, Prepayment. Aarp tax filing Farm supplies, Prepaid Farm Supplies Livestock feed, Prepaid Livestock Feed Prizes, Prizes. Aarp tax filing Produce, Sales of Farm Products Property Changed to business use, Property changed from personal to business or rental use. Aarp tax filing Received for services, Property received for services. Aarp tax filing Repairs and improvements, How Do You Treat Repairs and Improvements? Section 1231, Section 1231 transactions. Aarp tax filing Section 1245, Section 1245 Property Section 1250, Section 1250 Property Section 1252, Section 1252 property. Aarp tax filing Section 1255, Section 1255 property. Aarp tax filing Tangible personal, Tangible personal property. Aarp tax filing Publications (see Tax help) Q Qualified disaster relief payments, Qualified disaster relief payments. Aarp tax filing Qualified farm debt, Qualified Farm Debt Qualified joint venture, Qualified joint venture. Aarp tax filing Qualified principal residence debt, Qualified Principal Residence Debt R Recapture Amortization, Depreciation and amortization. Aarp tax filing Basis reductions, Recapture of basis reductions. Aarp tax filing Certain depreciation, Recapture of certain depreciation. Aarp tax filing Cost-sharing payments, Recapture. Aarp tax filing Depreciation, When Do You Recapture MACRS Depreciation?, Depreciation Recapture, Depreciation recapture. Aarp tax filing Section 1245 property, Section 1245 Property Section 1250 property, Section 1250 Property Section 179 expense deduction, When Must You Recapture the Deduction? Section 179 GO Zone property, Recapture for qualified section 179 GO Zone property. Aarp tax filing Special depreciation allowance, When Must You Recapture an Allowance Recordkeeping, Importance of Records, Meals. Aarp tax filing Records on depreciable property, Depreciation Recapture Reforestation costs, Forestation and reforestation costs. Aarp tax filing , Reforestation Costs Refund Deduction taken, Refund or reimbursement. Aarp tax filing Fuel tax, Fuel tax credit and refund. Aarp tax filing , Including the Credit or Refund in Income Reimbursements Casualties and thefts, Casualty and theft losses. Aarp tax filing , Casualties and Thefts, Insurance and other reimbursements. Aarp tax filing Deduction taken, Refund or reimbursement. Aarp tax filing Expenses, Reimbursed expenses. Aarp tax filing Feed assistance, Feed Assistance and Payments Real estate taxes, Real estate taxes. Aarp tax filing Reforestation expenses, Qualifying costs. Aarp tax filing To employees, Reimbursements to employees. Aarp tax filing Related persons, Special rule for related persons. Aarp tax filing , Losses from sales or exchanges between related persons. Aarp tax filing , Special rules for related persons. Aarp tax filing , Like-kind exchanges between related persons. Aarp tax filing , Sale to a related person. Aarp tax filing , Buying replacement property from a related person. Aarp tax filing , Related persons. Aarp tax filing Rental income, Rents (Including Crop Shares) Rented property, improvements, Improvements to rented property. Aarp tax filing Repairs, Repairs and Maintenance Repairs and improvements, How Do You Treat Repairs and Improvements? Repayment of income, Repayment of income. Aarp tax filing Replacement Period, Replacement Period Property, Replacement Property Reportable transactions. Aarp tax filing , Reminders Repossessions, Foreclosure or Repossession Right-of-way income, Easements and rights-of-way. Aarp tax filing S Sale of home, Sale of your home. Aarp tax filing Section 179 expense deduction, Section 179 Expense Deduction How to elect, How Do You Elect the Deduction? Listed property, Additional Rules for Listed Property Qualifying property, What Property Qualifies? Recapture, When Must You Recapture the Deduction? Self-employed health insurance, Self-employed health insurance deduction. Aarp tax filing Self-employed health insurance deduction, Self-employed health insurance deduction. Aarp tax filing Self-employment tax Community property, Community property. Aarp tax filing Deduction, Deduction for employer-equivalent portion of self-employment tax. Aarp tax filing How to pay, How To Pay Self-Employment Tax Landlord participation, Landlord Participation in Farming Material participation, Material participation for landlords. Aarp tax filing Maximum net earnings, What's New for 2013 Methods for figuring net earnings, Methods for Figuring Net Earnings Optional method, Farm Optional Method Regular method, Regular Method Rental income, Landlord Participation in Farming Reporting, Reporting Self-Employment Tax Self-employment tax rate, Self-employment tax rate. Aarp tax filing Share farming, Share farmer. Aarp tax filing Tax rates, What's New for 2013 Who must pay, Who Must Pay Self-Employment Tax? Selling expenses, Selling expenses. Aarp tax filing Selling price Defined, Selling price. Aarp tax filing Reduced, Selling price reduced. Aarp tax filing Settlement costs (fees), Settlement costs. Aarp tax filing Social security and Medicare Credits of coverage, Earning credits in 2013. Aarp tax filing Withholding of tax, Social Security and Medicare Taxes Social security number, Obtaining a social security number. Aarp tax filing Software, computer, Computer software. Aarp tax filing Soil Conservation, Conservation Expenses Contamination, Soil or other environmental contamination. Aarp tax filing Special depreciation allowance How to elect not to claim, How Can You Elect Not To Claim the Allowance? Recapture, When Must You Recapture an Allowance Standard mileage rate, Standard mileage rate. Aarp tax filing Start-up costs for businesses, Business start-up and organizational costs. Aarp tax filing Suggestions for publication, Comments and suggestions. Aarp tax filing T Tangible personal property, Tangible personal property. Aarp tax filing Tax help, How To Get Tax Help Tax preparation fees, Tax preparation fees. Aarp tax filing Tax shelter At-risk limits, At-Risk Limits Defined, Tax shelter. Aarp tax filing Tax-free exchanges, Like-Kind Exchanges Taxes Excise, Excise Taxes Federal use, Highway use tax. Aarp tax filing General, Taxes Self-employment, Self-Employment Tax State and federal, State and federal income taxes. Aarp tax filing State and local general sales, State and local general sales taxes. Aarp tax filing Withholding, Federal income tax withholding. Aarp tax filing , Social Security and Medicare Taxes, Federal Income Tax Withholding Telephone expense, Telephone expense. Aarp tax filing Tenant house expenses, Tenant House Expenses Term interests, Certain term interests in property. Aarp tax filing Theft losses, Casualties, Thefts, and Condemnations Timber, Timber. Aarp tax filing , Timber Depletion, Timber Tobacco quota buyout payments, Tobacco Quota Buyout Program Payments Tobacco settlement payments, National Tobacco Growers' Settlement Trust Fund Payments Trade-in, Sale and Purchase Travel expenses, Travel Expenses Truck expenses, Truck and Car Expenses Trust fund recovery penalty, Trust fund recovery penalty. Aarp tax filing TTY/TDD information, How To Get Tax Help U Uniform capitalization rules Basis of assets, Uniform Capitalization Rules Inventory, Uniform capitalization rules. Aarp tax filing Unstated interest, Unstated interest. Aarp tax filing W Wages and salaries, Wages and salaries. Aarp tax filing Water conservation, Conservation Expenses Water well, Water well. Aarp tax filing , Water wells. Aarp tax filing Weather-related sales, livestock, Sales Caused by Weather-Related Conditions, Weather-related sales of livestock. Aarp tax filing Withholding Income tax, Federal Income Tax Withholding Social security and Medicare tax, Social Security and Medicare Taxes Prev  Up     Home   More Online Publications
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Help for Victims of Hurricane Sandy

IRS YouTube Videos
Help for Disaster Victims: English | Spanish | ASL
How to Request a Copy of Your Tax Return: English | Spanish | ASL

Podcast
Disaster Assistance: English | Spanish

The IRS is providing help to the victims of Hurricane Sandy. Special tax relief and assistance is available to taxpayers in the Presidential Disaster Areas. 

So far, the IRS filing and payment relief applies to the following localities identified by FEMA for Individual Assistance due to Hurricane Sandy:

  • In Connecticut: Fairfield, Middlesex, New Haven, and New London Counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County;

  • In Maryland: Somerset County
  • In New Jersey: Atlantic, Bergen, Burlington, Camden, Cape May, Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Salem, Somerset, Sussex, Union and Warren;
  • In New York: Bronx, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Sullivan, Suffolk, Ulster and Westchester;
  • In Rhode Island: Newport and Washington counties.

The IRS also announced additional tax relief to certain affected individuals and businesses, further extending tax deadlines of that relief until April 1 for the following localities:

  • In New Jersey: Monmouth and Ocean counties.
  • In New York: Nassau, Queens, Richmond and Suffolk counties.

We are monitoring the situation closely to resolve potential tax administration issues as they are identified. The IRS often updates its information on disaster relief efforts related to Hurricane Sandy. For the latest news, check this page frequently.

News Releases

  • IR-2013-16, IRS Extends Tax Relief to Some New Jersey and New York Victims of Hurricane Sandy; Return Filing and Tax Payment Deadline Extended to April 1, 2013
  • IR-2012-96, IRS Gives Additional Time to Small, Automatically Revoked Tax-Exempt Organizations Affected by Hurricane Sandy
  • IR-2012-94, IRS Extends Hurricane Sandy Diesel Fuel Penalty Waiver to Dec. 7 for New Jersey and Parts of New York
  • IR-2012-93, Retirement Plans Can Make Loans, Hardship Distributions to Sandy Victims
  • IR-2012-91, IRS Warns Consumers of Possible Scams Relating to Hurricane Sandy Relief
  • IR-2012-91SP, IRS Advierte a Consumidores de Posibles Estafas Relacionadas a las Ayudas por el Huracán Sandy
  • IR-2012-88, Treasury, IRS Announce Special Relief to Encourage Leave-Donation Programs for Victims of Hurricane Sandy
  • IR-2012-88SP, Tesoro y IRS Anuncian Alivio Especial para Estimular Programas Que Permitan la Donación de Días de Paga a Víctimas del Huracán Sandy
  • IR-2012-87, IRS Expedites Charity Applications, Urges Use of Existing Charities
  • IR-2012-87SP, El IRS Acelera Las Solicitudes de Organizaciones Benéficas, Recomienda el Uso de Caridades Existentes
  • IR-2012-86, Treasury and IRS Expand Availability of Housing for Hurricane Sandy Victims
  • IR-2012-85, IRS Waives Diesel Fuel Penalty Due to Hurricane Sandy
  • IR-2012-84, IRS Announces Qualified Disaster Treatment of Payments to Victims of Hurricane Sandy
  • IR-2012-84SP, El IRS Anuncia el Trato de Pagos Por un Desastre Calificado para las Víctimas del Huracán Sandy
  • IR-2012-83, IRS Provides Tax Relief to Victims of Hurricane Sandy; Return Filing and Tax Payment Deadline Extended to Feb. 1, 2013
  • IR-2012-83SP, IRS Ofrece Alivio a Víctimas del Huracán Sandy; Extiende Plazo de Presentación de Declaraciones de Impuestos y Pagos al 1 de Febrero de 2013
  • IR-2012-82, IRS Gives Additional Time to Taxpayers and Preparers Affected by Hurricane Sandy; File and Pay by Nov. 7

Legal Guidance

  • Notice 2013-21, Postponement of Deadline for Making an Election to Deduct for the Preceding Taxable Year Losses Attributable to Hurricane Sandy
  • Notice 2012-71, Postponement of Deadline for Transitional Relief under Notice 2011-43 for Certain Small Organizations Affected by Hurricane Sandy
  • Notice 2012-69, Treatment of Certain Amounts Paid to Section 170(c) Organizations under Certain Employer Leave-Based Donation Programs to Aid Victims of Hurricane Sandy
  • Notice 2012-68, Low-Income Housing Credit Disaster Relief for Hurricane Sandy

Other Resources

For additional information provided by the federal government on disaster recovery, visit DisasterAssistance.gov and the Hurricane Sandy Recovery page on USA.gov. The latest Federal Emergency Management Agency disaster declarations are also available.

Related Item: Hurricane Sandy News Releases and Legal Guidance

 

Page Last Reviewed or Updated: 05-Nov-2013

The Aarp Tax Filing

Aarp tax filing Publication 537 - Main Content Table of Contents What Is an Installment Sale?Special rule. Aarp tax filing General RulesFiguring Installment Sale Income Reporting Installment Sale Income Other RulesElecting Out of the Installment Method Payments Received or Considered Received Escrow Account Depreciation Recapture Income Sale to a Related Person Like-Kind Exchange Contingent Payment Sale Single Sale of Several Assets Sale of a Business Unstated Interest and Original Issue Discount (OID) Disposition of an Installment Obligation Repossession Interest on Deferred Tax Reporting an Installment SaleRelated person. Aarp tax filing Several assets. Aarp tax filing Special situations. Aarp tax filing Schedule D (Form 1040). Aarp tax filing Form 4797. Aarp tax filing How To Get Tax Help What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Aarp tax filing The rules for installment sales do not apply if you elect not to use the installment method (see Electing Out of the Installment Method under Other Rules, later) or the transaction is one for which the installment method may not apply. Aarp tax filing The installment sales method cannot be used for the following. Aarp tax filing Sale of inventory. Aarp tax filing   The regular sale of inventory of personal property does not qualify as an installment sale even if you receive a payment after the year of sale. Aarp tax filing See Sale of a Business under Other Rules, later. Aarp tax filing Dealer sales. Aarp tax filing   Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. Aarp tax filing This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. Aarp tax filing However, the rule does not apply to an installment sale of property used or produced in farming. Aarp tax filing Special rule. Aarp tax filing   Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. Aarp tax filing For more information, see section 453(l). Aarp tax filing Stock or securities. Aarp tax filing   You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. Aarp tax filing You must report the entire gain on the sale in the year in which the trade date falls. Aarp tax filing Installment obligation. Aarp tax filing   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. Aarp tax filing General Rules If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. Aarp tax filing See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale. Aarp tax filing Sale at a loss. Aarp tax filing   If your sale results in a loss, you cannot use the installment method. Aarp tax filing If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale. Aarp tax filing Unstated interest. Aarp tax filing   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. Aarp tax filing See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. Aarp tax filing Figuring Installment Sale Income You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income. Aarp tax filing Each payment on an installment sale usually consists of the following three parts. Aarp tax filing Interest income. Aarp tax filing Return of your adjusted basis in the property. Aarp tax filing Gain on the sale. Aarp tax filing In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. Aarp tax filing You do not include in income the part that is the return of your basis in the property. Aarp tax filing Basis is the amount of your investment in the property for installment sale purposes. Aarp tax filing Interest Income You must report interest as ordinary income. Aarp tax filing Interest is generally not included in a down payment. Aarp tax filing However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Aarp tax filing Interest provided in the agreement is called stated interest. Aarp tax filing If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. Aarp tax filing See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. Aarp tax filing Adjusted Basis and Installment Sale Income (Gain on Sale) After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. Aarp tax filing A tax-free return of your adjusted basis in the property, and Your gain (referred to as installment sale income on Form 6252). Aarp tax filing Figuring adjusted basis for installment sale purposes. Aarp tax filing   You can use Worksheet A to figure your adjusted basis in the property for installment sale purposes. Aarp tax filing When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. Aarp tax filing Worksheet A. Aarp tax filing Figuring Adjusted Basis and Gross Profit Percentage 1. Aarp tax filing Enter the selling price for the property   2. Aarp tax filing Enter your adjusted basis for the property     3. Aarp tax filing Enter your selling expenses     4. Aarp tax filing Enter any depreciation recapture     5. Aarp tax filing Add lines 2, 3, and 4. Aarp tax filing  This is your adjusted basis for installment sale purposes   6. Aarp tax filing Subtract line 5 from line 1. Aarp tax filing If zero or less, enter -0-. Aarp tax filing  This is your gross profit     If the amount entered on line 6 is zero, stop here. Aarp tax filing You cannot use the installment method. Aarp tax filing   7. Aarp tax filing Enter the contract price for the property   8. Aarp tax filing Divide line 6 by line 7. Aarp tax filing This is your gross profit percentage   Selling price. Aarp tax filing   The selling price is the total cost of the property to the buyer and includes any of the following. Aarp tax filing Any money you are to receive. Aarp tax filing The fair market value (FMV) of any property you are to receive (FMV is discussed in Property Used As a Payment under Other Rules, later). Aarp tax filing Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). Aarp tax filing Any of your selling expenses the buyer pays. Aarp tax filing   Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. Aarp tax filing Adjusted basis for installment sale purposes. Aarp tax filing   Your adjusted basis is the total of the following three items. Aarp tax filing Adjusted basis. Aarp tax filing Selling expenses. Aarp tax filing Depreciation recapture. Aarp tax filing Adjusted basis. Aarp tax filing   Basis is your investment in the property for installment sale purposes. Aarp tax filing The way you figure basis depends on how you acquire the property. Aarp tax filing The basis of property you buy is generally its cost. Aarp tax filing The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. Aarp tax filing   While you own property, various events may change your original basis. Aarp tax filing Some events, such as adding rooms or making permanent improvements, increase basis. Aarp tax filing Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. Aarp tax filing The result is adjusted basis. Aarp tax filing   For more information on how to figure basis and adjusted basis, see Publication 551. Aarp tax filing For more information regarding your basis in property you inherited from someone who died in 2010 and whose executor filed Form 8939, Allocation of Increase In Basis for Property Acquired From a Decedent, see Publication 4895. Aarp tax filing Selling expenses. Aarp tax filing   Selling expenses relate to the sale of the property. Aarp tax filing They include commissions, attorney fees, and any other expenses paid on the sale. Aarp tax filing Selling expenses are added to the basis of the sold property. Aarp tax filing Depreciation recapture. Aarp tax filing   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. Aarp tax filing See Depreciation Recapture Income under Other Rules, later. Aarp tax filing Gross profit. Aarp tax filing   Gross profit is the total gain you report on the installment method. Aarp tax filing   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. Aarp tax filing If the property you sold was your home, subtract from the gross profit any gain you can exclude. Aarp tax filing See Sale of Your Home , later, under Reporting Installment Sale Income. Aarp tax filing Contract price. Aarp tax filing   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. Aarp tax filing Gross profit percentage. Aarp tax filing   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. Aarp tax filing This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. Aarp tax filing   The gross profit percentage generally remains the same for each payment you receive. Aarp tax filing However, see the Example under Selling Price Reduced, later, for a situation where the gross profit percentage changes. Aarp tax filing Example. Aarp tax filing You sell property at a contract price of $6,000 and your gross profit is $1,500. Aarp tax filing Your gross profit percentage is 25% ($1,500 ÷ $6,000). Aarp tax filing After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. Aarp tax filing The remainder (balance) of each payment is the tax-free return of your adjusted basis. Aarp tax filing Amount to report as installment sale income. Aarp tax filing   Multiply the payments you receive each year (less interest) by the gross profit percentage. Aarp tax filing The result is your installment sale income for the tax year. Aarp tax filing In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. Aarp tax filing A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. Aarp tax filing For a detailed discussion, see Payments Received or Considered Received under Other Rules, later. Aarp tax filing Selling Price Reduced If the selling price is reduced at a later date, the gross profit on the sale also will change. Aarp tax filing You then must refigure the gross profit percentage for the remaining payments. Aarp tax filing Refigure your gross profit using Worksheet B. Aarp tax filing You will spread any remaining gain over future installments. Aarp tax filing Worksheet B. Aarp tax filing New Gross Profit Percentage — Selling Price Reduced 1. Aarp tax filing Enter the reduced selling  price for the property   2. Aarp tax filing Enter your adjusted  basis for the  property     3. Aarp tax filing Enter your selling  expenses     4. Aarp tax filing Enter any depreciation  recapture     5. Aarp tax filing Add lines 2, 3, and 4. Aarp tax filing   6. Aarp tax filing Subtract line 5 from line 1. Aarp tax filing  This is your adjusted  gross profit   7. Aarp tax filing Enter any installment sale  income reported in  prior year(s)   8. Aarp tax filing Subtract line 7 from line 6   9. Aarp tax filing Future installments   10. Aarp tax filing Divide line 8 by line 9. Aarp tax filing  This is your new gross profit percentage*   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Aarp tax filing Example. Aarp tax filing In 2011, you sold land with a basis of $40,000 for $100,000. Aarp tax filing Your gross profit was $60,000. Aarp tax filing You received a $20,000 down payment and the buyer's note for $80,000. Aarp tax filing The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2012. Aarp tax filing Your gross profit percentage is 60%. Aarp tax filing You reported a gain of $12,000 on each payment received in 2011 and 2012. Aarp tax filing In 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $15,000 for each year. Aarp tax filing The new gross profit percentage, 46. Aarp tax filing 67%, is figured on Example—Worksheet B. Aarp tax filing You will report a gain of $7,000 (46. Aarp tax filing 67% of $15,000) on each of the $15,000 installments due in 2013, 2014, and 2015. Aarp tax filing Example — Worksheet B. Aarp tax filing New Gross Profit Percentage — Selling Price Reduced 1. Aarp tax filing Enter the reduced selling  price for the property 85,000 2. Aarp tax filing Enter your adjusted  basis for the  property 40,000   3. Aarp tax filing Enter your selling  expenses -0-   4. Aarp tax filing Enter any depreciation  recapture -0-   5. Aarp tax filing Add lines 2, 3, and 4. Aarp tax filing 40,000 6. Aarp tax filing Subtract line 5 from line 1. Aarp tax filing  This is your adjusted  gross profit 45,000 7. Aarp tax filing Enter any installment sale  income reported in  prior year(s) 24,000 8. Aarp tax filing Subtract line 7 from line 6 21,000 9. Aarp tax filing Future installments 45,000 10. Aarp tax filing Divide line 8 by line 9. Aarp tax filing  This is your new gross profit percentage* 46. Aarp tax filing 67% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Aarp tax filing Reporting Installment Sale Income Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. Aarp tax filing You also will have to report the installment sale income on Schedule D (Form 1040), Capital Gains and Losses, or Form 4797, or both. Aarp tax filing See Schedule D (Form 1040) and Form 4797 , later. Aarp tax filing If the property was your main home, you may be able to exclude part or all of the gain. Aarp tax filing See Sale of Your Home , later. Aarp tax filing Form 6252 Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. Aarp tax filing Attach it to your tax return for each year. Aarp tax filing Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income. Aarp tax filing Which parts to complete. Aarp tax filing   Which part to complete depends on whether you are filing the form for the year of sale or a later year. Aarp tax filing Year of sale. Aarp tax filing   Complete lines 1 through 4, Part I, and Part II. Aarp tax filing If you sold property to a related party during the year, also complete Part III. Aarp tax filing Later years. Aarp tax filing   Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale. Aarp tax filing   If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. Aarp tax filing (After December 31, 1986, the installment method is not available for the sale of marketable securities. Aarp tax filing ) Complete lines 1 through 4 and Part II for any year in which you receive a payment from the sale. Aarp tax filing Complete Part III unless you received the final payment during the tax year. Aarp tax filing   If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of sale and for 2 years after the year of sale, even if you did not receive a payment. Aarp tax filing Complete lines 1 through 4 and Part II for any year during this 2-year period in which you receive a payment from the sale. Aarp tax filing Complete Part III for the 2 years after the year of sale unless you received the final payment during the tax year. Aarp tax filing Schedule D (Form 1040) Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). Aarp tax filing If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. Aarp tax filing Your gain is long-term if you owned the property for more than 1 year when you sold it. Aarp tax filing Form 4797 An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. Aarp tax filing All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. Aarp tax filing For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. Aarp tax filing If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252. Aarp tax filing ” Sale of Your Home If you sell your home, you may be able to exclude all or part of the gain on the sale. Aarp tax filing See Publication 523 for information about excluding the gain. Aarp tax filing If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage. Aarp tax filing Seller-financed mortgage. Aarp tax filing   If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures. Aarp tax filing   When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Aarp tax filing   When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040), Itemized Deductions. Aarp tax filing   If either person fails to include the other person's SSN, a $50 penalty will be assessed. Aarp tax filing Other Rules The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. Aarp tax filing The following topics are discussed. Aarp tax filing Electing out of the installment method. Aarp tax filing Payments received or considered received. Aarp tax filing Escrow account. Aarp tax filing Depreciation recapture income. Aarp tax filing Sale to a related person. Aarp tax filing Like-kind exchange. Aarp tax filing Contingent payment sale. Aarp tax filing Single sale of several assets. Aarp tax filing Sale of a business. Aarp tax filing Unstated interest and original issue discount. Aarp tax filing Disposition of an installment obligation. Aarp tax filing Repossession. Aarp tax filing Interest on deferred tax. Aarp tax filing Electing Out of the Installment Method If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. Aarp tax filing To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. Aarp tax filing Notes, mortgages, and land contracts are examples of obligations that are included at FMV. Aarp tax filing You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. Aarp tax filing If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received). Aarp tax filing Example. Aarp tax filing You sold a parcel of land for $50,000. Aarp tax filing You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. Aarp tax filing The buyer gave you a note for $40,000. Aarp tax filing The note had an FMV of $40,000. Aarp tax filing You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. Aarp tax filing The land cost $25,000, and you owned it for more than one year. Aarp tax filing You decide to elect out of the installment method and report the entire gain in the year of sale. Aarp tax filing Gain realized:     Selling price $50,000 Minus: Property's adj. Aarp tax filing basis $25,000     Commission 3,000 28,000 Gain realized $22,000 Gain recognized in year of sale:   Cash $10,000 Market value of note 40,000 Total realized in year of sale $50,000 Minus: Property's adj. Aarp tax filing basis $25,000     Commission 3,000 28,000 Gain recognized $22,000 The recognized gain of $22,000 is long-term capital gain. Aarp tax filing You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. Aarp tax filing The interest on the note is ordinary income and is reported as interest income each year. Aarp tax filing How to elect out. Aarp tax filing   To make this election, do not report your sale on Form 6252. Aarp tax filing Instead, report it on Form 8949, Sales and Other Dispositions of Capital Assets, Form 4797, or both. Aarp tax filing When to elect out. Aarp tax filing   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. Aarp tax filing Automatic six-month extension. Aarp tax filing   If you timely file your tax return without making the election, you still can make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Aarp tax filing Write “Filed pursuant to section 301. Aarp tax filing 9100-2” at the top of the amended return and file it where the original return was filed. Aarp tax filing Revoking the election. Aarp tax filing   Once made, the election can be revoked only with IRS approval. Aarp tax filing A revocation is retroactive. Aarp tax filing You will not be allowed to revoke the election if either of the following applies. Aarp tax filing One of the purposes is to avoid federal income tax. Aarp tax filing The tax year in which any payment was received has closed. Aarp tax filing Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. Aarp tax filing In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. Aarp tax filing These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. Aarp tax filing However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases. Aarp tax filing Buyer Pays Seller's Expenses If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. Aarp tax filing Include these expenses in the selling and contract prices when figuring the gross profit percentage. Aarp tax filing Buyer Assumes Mortgage If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. Aarp tax filing Mortgage not more than basis. Aarp tax filing   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. Aarp tax filing It is considered a recovery of your basis. Aarp tax filing The contract price is the selling price minus the mortgage. Aarp tax filing Example. Aarp tax filing You sell property with an adjusted basis of $19,000. Aarp tax filing You have selling expenses of $1,000. Aarp tax filing The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years). Aarp tax filing The selling price is $25,000 ($15,000 + $10,000). Aarp tax filing Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). Aarp tax filing The contract price is $10,000 ($25,000 − $15,000 mortgage). Aarp tax filing Your gross profit percentage is 50% ($5,000 ÷ $10,000). Aarp tax filing You report half of each $2,000 payment received as gain from the sale. Aarp tax filing You also report all interest you receive as ordinary income. Aarp tax filing Mortgage more than basis. Aarp tax filing   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. Aarp tax filing The part of the mortgage greater than your basis is treated as a payment received in the year of sale. Aarp tax filing   To figure the contract price, subtract the mortgage from the selling price. Aarp tax filing This is the total amount (other than interest) you will receive directly from the buyer. Aarp tax filing Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). Aarp tax filing The contract price is then the same as your gross profit from the sale. Aarp tax filing    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. Aarp tax filing Example. Aarp tax filing The selling price for your property is $9,000. Aarp tax filing The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Aarp tax filing Your adjusted basis in the property is $4,400. Aarp tax filing You have selling expenses of $600, for a total installment sale basis of $5,000. Aarp tax filing The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). Aarp tax filing This amount is included in the contract price and treated as a payment received in the year of sale. Aarp tax filing The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000       Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000 Your gross profit percentage is 100%. Aarp tax filing Report 100% of each payment (less interest) as gain from the sale. Aarp tax filing Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. Aarp tax filing Mortgage Canceled If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. Aarp tax filing You are considered to receive a payment equal to the outstanding canceled debt. Aarp tax filing Example. Aarp tax filing Mary Jones loaned you $45,000 in 2009 in exchange for a note and a mortgage in a tract of land you owned. Aarp tax filing On April 4, 2013, she bought the land for $70,000. Aarp tax filing At that time, $30,000 of her loan to you was outstanding. Aarp tax filing She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2013, and $20,000 on August 1, 2014. Aarp tax filing She did not assume an existing mortgage. Aarp tax filing She canceled the $30,000 debt you owed her. Aarp tax filing You are considered to have received a $30,000 payment at the time of the sale. Aarp tax filing Buyer Assumes Other Debts If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. Aarp tax filing If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Aarp tax filing Compare the debt to your installment sale basis in the property being sold. Aarp tax filing If the debt is less than your installment sale basis, none of it is treated as a payment. Aarp tax filing If it is more, only the difference is treated as a payment. Aarp tax filing If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. Aarp tax filing These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage . Aarp tax filing However, they apply only to the following types of debt the buyer assumes. Aarp tax filing Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. Aarp tax filing Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. Aarp tax filing If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. Aarp tax filing The value of the assumed debt is then considered a payment to you in the year of sale. Aarp tax filing Property Used As a Payment If you receive property other than money from the buyer, it is still considered a payment in the year received. Aarp tax filing However, see Like-Kind Exchange , later. Aarp tax filing Generally, the amount of the payment is the property's FMV on the date you receive it. Aarp tax filing Exception. Aarp tax filing   If the property the buyer gives you is payable on demand or readily tradable, the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. Aarp tax filing See Unstated Interest and Original Issue Discount (OID) , later. Aarp tax filing Debt not payable on demand. Aarp tax filing   Any evidence of debt you receive from the buyer not payable on demand is not considered a payment. Aarp tax filing This is true even if the debt is guaranteed by a third party, including a government agency. Aarp tax filing Fair market value (FMV). Aarp tax filing   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. Aarp tax filing Third-party note. Aarp tax filing   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. Aarp tax filing Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. Aarp tax filing The excess of the note's face value over its FMV is interest. Aarp tax filing Exclude this interest in determining the selling price of the property. Aarp tax filing However, see Exception under Property Used As a Payment, earlier. Aarp tax filing Example. Aarp tax filing You sold real estate in an installment sale. Aarp tax filing As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. Aarp tax filing The FMV of the third-party note at the time of the sale was $30,000. Aarp tax filing This amount, not $50,000, is a payment to you in the year of sale. Aarp tax filing The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. Aarp tax filing The remaining 40% is interest taxed as ordinary income. Aarp tax filing Bond. Aarp tax filing   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. Aarp tax filing For more information on the amount you should treat as a payment, see Exception under Property Used As a Payment, earlier. Aarp tax filing    If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. Aarp tax filing However, see Exception under Property Used As a Payment, earlier. Aarp tax filing Buyer's note. Aarp tax filing   The buyer's note (unless payable on demand) is not considered payment on the sale. Aarp tax filing However, its full face value is included when figuring the selling price and the contract price. Aarp tax filing Payments you receive on the note are used to figure your gain in the year received. Aarp tax filing Installment Obligation Used as Security (Pledge Rule) If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. Aarp tax filing This is known as the pledge rule, and it applies if the selling price of the property is over $150,000. Aarp tax filing It does not apply to the following dispositions. Aarp tax filing Sales of property used or produced in farming. Aarp tax filing Sales of personal-use property. Aarp tax filing Qualifying sales of time-shares and residential lots. Aarp tax filing The net debt proceeds are the gross debt minus the direct expenses of getting the debt. Aarp tax filing The amount treated as a payment is considered received on the later of the following dates. Aarp tax filing The date the debt becomes secured. Aarp tax filing The date you receive the debt proceeds. Aarp tax filing A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. Aarp tax filing For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation. Aarp tax filing Limit. Aarp tax filing   The net debt proceeds treated as a payment on the pledged installment obligation cannot be more than the excess of item (1) over item (2), below. Aarp tax filing The total contract price on the installment sale. Aarp tax filing Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment. Aarp tax filing Installment payments. Aarp tax filing   The pledge rule accelerates the reporting of the installment obligation payments. Aarp tax filing Do not report payments received on the obligation after it has been pledged until the payments received exceed the amount reported under the pledge rule. Aarp tax filing Exception. Aarp tax filing   The pledge rule does not apply to pledges made after December 17, 1987, to refinance a debt under the following circumstances. Aarp tax filing The debt was outstanding on December 17, 1987. Aarp tax filing The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred. Aarp tax filing   A refinancing as a result of the creditor's calling of the debt is treated as a continuation of the original debt so long as a person other than the creditor or a person related to the creditor provides the refinancing. Aarp tax filing   This exception applies only to refinancing that does not exceed the principal of the original debt immediately before the refinancing. Aarp tax filing Any excess is treated as a payment on the installment obligation. Aarp tax filing Escrow Account In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. Aarp tax filing These sales cannot be reported on the installment method. Aarp tax filing The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. Aarp tax filing When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement. Aarp tax filing Example. Aarp tax filing You sell property for $100,000. Aarp tax filing The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. Aarp tax filing You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. Aarp tax filing You report the entire gain in the year of sale. Aarp tax filing Escrow established in a later year. Aarp tax filing   If you make an installment sale and in a later year an irrevocable escrow account is established to pay the remaining installments plus interest, the amount placed in the escrow account represents payment of the balance of the installment obligation. Aarp tax filing Substantial restriction. Aarp tax filing   If an escrow arrangement imposes a substantial restriction on your right to receive the sale proceeds, the sale can be reported on the installment method, provided it otherwise qualifies. Aarp tax filing For an escrow arrangement to impose a substantial restriction, it must serve a bona fide purpose of the buyer, that is, a real and definite restriction placed on the seller or a specific economic benefit conferred on the buyer. Aarp tax filing Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. Aarp tax filing Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Aarp tax filing Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. Aarp tax filing The recapture income is also included in Part I of Form 6252. Aarp tax filing However, the gain equal to the recapture income is reported in full in the year of the sale. Aarp tax filing Only the gain greater than the recapture income is reported on the installment method. Aarp tax filing For more information on depreciation recapture, see chapter 3 in Publication 544. Aarp tax filing The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. Aarp tax filing Determining gross profit is discussed under General Rules , earlier. Aarp tax filing Sale to a Related Person If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. Aarp tax filing If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. Aarp tax filing These rules are explained under Sale of Depreciable Property and under Sale and Later Disposition , later. Aarp tax filing Sale of Depreciable Property If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. Aarp tax filing Instead, all payments to be received are considered received in the year of sale. Aarp tax filing However, see Exception , below. Aarp tax filing Depreciable property for this rule is any property the purchaser can depreciate. Aarp tax filing Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount. Aarp tax filing In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. Aarp tax filing The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income. Aarp tax filing Exception. Aarp tax filing   You can use the installment method to report a sale of depreciable property to a related person if no significant tax deferral benefit will be derived from the sale. Aarp tax filing You must show to the satisfaction of the IRS that avoidance of federal income tax was not one of the principal purposes of the sale. Aarp tax filing Related person. Aarp tax filing   Related persons include the following. Aarp tax filing A person and all controlled entities with respect to that person. Aarp tax filing A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless that beneficiary's interest in the trust is a remote contingent interest. Aarp tax filing Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of that estate. Aarp tax filing Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests. Aarp tax filing   For information about which entities are controlled entities, see section 1239(c). Aarp tax filing Sale and Later Disposition Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances. Aarp tax filing The related person makes the second disposition before making all payments on the first disposition. Aarp tax filing The related person disposes of the property within 2 years of the first disposition. Aarp tax filing This rule does not apply if the property involved is marketable securities. Aarp tax filing Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition. Aarp tax filing See Exception , later. Aarp tax filing Related person. Aarp tax filing   Related persons include the following. Aarp tax filing Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants. Aarp tax filing A partnership or estate and a partner or beneficiary. Aarp tax filing A trust (other than a section 401(a) employees trust) and a beneficiary. Aarp tax filing A trust and an owner of the trust. Aarp tax filing Two corporations that are members of the same controlled group as defined in section 267(f). Aarp tax filing The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Aarp tax filing A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization. Aarp tax filing An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Aarp tax filing A fiduciary of a trust and a corporation 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. Aarp tax filing The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Aarp tax filing Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Aarp tax filing An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation. Aarp tax filing A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Aarp tax filing An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest. Aarp tax filing Example 1. Aarp tax filing In 2012, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. Aarp tax filing His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. Aarp tax filing His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). Aarp tax filing He received $100,000 in 2012 and included $50,000 in income for that year ($100,000 × 0. Aarp tax filing 50). Aarp tax filing Bob made no improvements to the property and sold it to Alfalfa Inc. Aarp tax filing , in 2013 for $600,000 after making the payment for that year. Aarp tax filing The amount realized from the second disposition is $600,000. Aarp tax filing Harvey figures his installment sale income for 2013 as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $500,000 Subtract: Sum of payments from Bob in 2012 and 2013 - 200,000 Amount treated as received because of second disposition $300,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $400,000 Multiply by gross profit % × . Aarp tax filing 50 Installment sale income for 2013 $200,000 Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2014, 2015, and 2016 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2012 and $400,000 in 2013). Aarp tax filing Example 2. Aarp tax filing Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. Aarp tax filing The gain for 2013 is figured as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $400,000 Subtract: Sum of payments from Bob in 2012 and 2013 − 200,000 Amount treated as received because of second disposition $200,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $300,000 Multiply by gross profit % × . Aarp tax filing 50 Installment sale income for 2013 $150,000     Harvey receives a $100,000 payment in 2014 and another in 2015. Aarp tax filing They are not taxed because he treated the $200,000 from the disposition in 2013 as a payment received and paid tax on the installment sale income. Aarp tax filing In 2016, he receives the final $100,000 payment. Aarp tax filing He figures the installment sale income he must recognize in 2016 as follows: Total payments from the first disposition received by the end of 2016 $500,000 Minus the sum of:     Payment from 2012 $100,000   Payment from 2013 100,000   Amount treated as received in 2013 200,000   Total on which gain was previously recognized  − 400,000 Payment on which gain is recognized for 2016  $100,000 Multiply by gross profit % × . Aarp tax filing 50 Installment sale income for 2016 $ 50,000 Exception. Aarp tax filing   This rule does not apply to a second disposition, and any later transfer, if you can show to the satisfaction of the IRS that neither the first disposition (to the related person) nor the second disposition had as one of its principal purposes the avoidance of federal income tax. Aarp tax filing Generally, an involuntary second disposition will qualify under the nontax avoidance exception, such as when a creditor of the related person forecloses on the property or the related person declares bankruptcy. Aarp tax filing   The nontax avoidance exception also applies to a second disposition that is also an installment sale if the terms of payment under the installment resale are substantially equal to or longer than those for the first installment sale. Aarp tax filing However, the exception does not apply if the resale terms permit significant deferral of recognition of gain from the first sale. Aarp tax filing   In addition, any sale or exchange of stock to the issuing corporation is not treated as a first disposition. Aarp tax filing An involuntary conversion is not treated as a second disposition if the first disposition occurred before the threat of conversion. Aarp tax filing A transfer after the death of the person making the first disposition or the related person's death, whichever is earlier, is not treated as a second disposition. Aarp tax filing Like-Kind Exchange If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. Aarp tax filing These trades are known as like-kind exchanges. Aarp tax filing The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up. Aarp tax filing You do not have to report any part of your gain if you receive only like-kind property. Aarp tax filing However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received. Aarp tax filing For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544. Aarp tax filing Installment payments. Aarp tax filing   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine the installment sale income each year. Aarp tax filing The contract price is reduced by the FMV of the like-kind property received in the trade. Aarp tax filing The gross profit is reduced by any gain on the trade that can be postponed. Aarp tax filing Like-kind property received in the trade is not considered payment on the installment obligation. Aarp tax filing Example. Aarp tax filing In 2013, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. Aarp tax filing He also receives an installment note for $800,000 in the trade. Aarp tax filing Under the terms of the note, he is to receive $100,000 (plus interest) in 2014 and the balance of $700,000 (plus interest) in 2015. Aarp tax filing George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). Aarp tax filing His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). Aarp tax filing The contract price is $800,000 ($1,000,000 − $200,000). Aarp tax filing The gross profit percentage is 75% ($600,000 ÷ $800,000). Aarp tax filing He reports no gain in 2013 because the like-kind property he receives is not treated as a payment for figuring gain. Aarp tax filing He reports $75,000 gain for 2014 (75% of $100,000 payment received) and $525,000 gain for 2015 (75% of $700,000 payment received). Aarp tax filing Deferred exchanges. Aarp tax filing   A deferred exchange is one in which you transfer property you use in business or hold for investment and receive like-kind property later that you will use in business or hold for investment. Aarp tax filing Under this type of exchange, the person receiving your property may be required to place funds in an escrow account or trust. Aarp tax filing If certain rules are met, these funds will not be considered a payment until you have the right to receive the funds or, if earlier, the end of the exchange period. Aarp tax filing See Regulations section 1. Aarp tax filing 1031(k)-1(j)(2) for these rules. Aarp tax filing Contingent Payment Sale A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. Aarp tax filing This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years. Aarp tax filing If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price. Aarp tax filing For rules on using the installment method for a contingent payment sale, see Regulations section 15a. Aarp tax filing 453-1(c). Aarp tax filing Single Sale of Several Assets If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. Aarp tax filing You also have to allocate part of the selling price to each asset. Aarp tax filing If you sell assets that constitute a trade or business, see Sale of a Business , later. Aarp tax filing Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. Aarp tax filing If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. Aarp tax filing This becomes the net FMV. Aarp tax filing A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. Aarp tax filing However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. Aarp tax filing It must be reported separately. Aarp tax filing The remaining assets sold at a gain are reported together. Aarp tax filing Example. Aarp tax filing You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. Aarp tax filing The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year. Aarp tax filing Your installment sale basis for each parcel was $15,000. Aarp tax filing Your net gain was $85,000 ($130,000 − $45,000). Aarp tax filing You report the gain on the installment method. Aarp tax filing The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. Aarp tax filing The FMV of parcels A, B, and C were $60,000, $60,000, and $10,000, respectively. Aarp tax filing The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. Aarp tax filing You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels. Aarp tax filing Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. Aarp tax filing You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. Aarp tax filing The allocation is figured as follows:   Parcels   A and B Parcel C FMV $120,000 $10,000 Minus: Mortgage assumed 30,000 -0- Net FMV $ 90,000 $10,000 Proportionate net FMV:     Percentage of total 90% 10% Payments in year of sale:     $20,000 × 90% $18,000   $20,000 × 10%   $2,000 Excess of parcel B mortgage over installment sale basis 15,000 -0- Allocation of payments  received (or considered  received) in year of sale $ 33,000 $ 2,000 You cannot report the sale of parcel C on the installment method because the sale results in a loss. Aarp tax filing You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. Aarp tax filing However, if parcel C was held for personal use, the loss is not deductible. Aarp tax filing You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C). Aarp tax filing Sale of a Business The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset. Aarp tax filing Allocation of Selling Price To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets. Aarp tax filing Assets sold at a loss. Aarp tax filing Real and personal property eligible for the installment method. Aarp tax filing Real and personal property ineligible for the installment method, including: Inventory, Dealer property, and Stocks and securities. Aarp tax filing Inventory. Aarp tax filing   The sale of inventories of personal property cannot be reported on the installment method. Aarp tax filing All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. Aarp tax filing   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. Aarp tax filing If you do not, each payment must be allocated between the inventory and the other assets sold. Aarp tax filing   Report the amount you receive (or will receive) on the sale of inventory items as ordinary business income. Aarp tax filing Use your basis in the inventory to figure the cost of goods sold. Aarp tax filing Deduct the part of the selling expenses allocated to inventory as an ordinary business expense. Aarp tax filing Residual method. Aarp tax filing   Except for assets exchanged under the like-kind exchange rules, both the buyer and seller of a business must use the residual method to allocate the sale price to each business asset sold. Aarp tax filing This method determines gain or loss from the transfer of each asset and the buyer's basis in the assets. Aarp tax filing   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. Aarp tax filing This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b). Aarp tax filing   A group of assets constitutes a trade or business if goodwill or going concern value could, under any circumstances, attach to the assets or if the use of the assets would constitute an active trade or business under section 355. Aarp tax filing   The residual method provides for the consideration to be reduced first by cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). Aarp tax filing The consideration remaining after this reduction must be allocated among the various business assets in a certain order. Aarp tax filing   For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order. Aarp tax filing Certificates of deposit, U. Aarp tax filing S. Aarp tax filing Government securities, foreign currency, and actively traded personal property, including stock and securities. Aarp tax filing Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. Aarp tax filing However, see Regulations section 1. Aarp tax filing 338-6(b)(2)(iii) for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. Aarp tax filing Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. Aarp tax filing All other assets except section 197 intangibles. Aarp tax filing Section 197 intangibles except goodwill and going concern value. Aarp tax filing Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Aarp tax filing   If an asset described in (1) through (6) is includible in more than one category, include it in the lower number category. Aarp tax filing For example, if an asset is described in both (4) and (6), include it in (4). Aarp tax filing Agreement. Aarp tax filing   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. Aarp tax filing This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Aarp tax filing Reporting requirement. Aarp tax filing   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Aarp tax filing Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. Aarp tax filing The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Aarp tax filing Sale of Partnership Interest A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. Aarp tax filing The sale of a partnership interest is treated as the sale of a single capital asset. Aarp tax filing The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. Aarp tax filing (The term “unrealized receivables” includes depreciation recapture income, discussed earlier. Aarp tax filing ) The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. Aarp tax filing The gain allocated to the other assets can be reported under the installment method. Aarp tax filing For more information on the treatment of unrealized receivables and inventory, see Publication 541. Aarp tax filing Example — Sale of a Business On June 4, 2013, you sold the machine shop you had operated since 2005. Aarp tax filing You received a $100,000 down payment and the buyer's note for $120,000. Aarp tax filing The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2014. Aarp tax filing The total selling price is $220,000. Aarp tax filing Your selling expenses are $11,000. Aarp tax filing The selling expenses are divided among all the assets sold, including inventory. Aarp tax filing Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price). Aarp tax filing The FMV, adjusted basis, and depreciation claimed on each asset sold are as follows:     Depre- ciation Adj. Aarp tax filing Asset FMV Claimed Basis Inventory $ 10,000 -0- $ 8,000 Land 42,000 -0- 15,000 Building 48,000 $9,000 36,000 Machine A 71,000 27,200 63,800 Machine B 24,000 12,960 22,040 Truck 6,500 18,624 5,376   $201,500 $67,784 $150,216         Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). Aarp tax filing The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill. Aarp tax filing The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart. Aarp tax filing   Sale  Price Sale   Exp. Aarp tax filing Adj. Aarp tax filing   Basis Gain Inventory $ 10,000 $ 500 $ 8,000 $ 1,500 Land 42,000 2,100 15,000 24,900 Building 48,000 2,400 36,000 9,600 Mch. Aarp tax filing A 71,000 3,550 63,800 3,650 Mch. Aarp tax filing B 24,000 1,200 22,040 760 Truck 6,500 325 5,376 799 Goodwill 18,500 925 -0- 17,575   $220,000 $11,000 $150,216 $58,784 The building was acquired in 2005, the year the business began, and it is section 1250 property. Aarp tax filing There is no depreciation recapture income because the building was depreciated using the straight line method. Aarp tax filing All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. Aarp tax filing Figure depreciation recapture in Part III of Form 4797. Aarp tax filing The total depreciation recapture income reported in Part II of Form 4797 is $5,209. Aarp tax filing This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). Aarp tax filing These gains are reported in full in the year of sale and are not included in the installment sale computation. Aarp tax filing Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. Aarp tax filing The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale. Aarp tax filing The selling price equals the contract price for the installment sale ($108,500). Aarp tax filing The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart. Aarp tax filing   Selling  Price Install- ment  Sale  Basis Gross  Profit Land $ 42,000 $17,100 $24,900 Building 48,000 38,400 9,600 Goodwill 18,500 925 17,575 Total $108,500 $56,425 $52,075         The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). Aarp tax filing The gross profit percentage for each asset is figured as follows: Percentage Land— $24,900 ÷ $108,500 22. Aarp tax filing 95 Building— $9,600 ÷ $108,500 8. Aarp tax filing 85 Goodwill— $17,575 ÷ $108,500 16. Aarp tax filing 20 Total 48. Aarp tax filing 00 The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. Aarp tax filing The selling price for the installment sale is $108,500. Aarp tax filing This is 49. Aarp tax filing 3% of the total selling price of $220,000 ($108,500 ÷ $220,000). Aarp tax filing The selling price of assets not reported on the installment method is $111,500. Aarp tax filing This is 50. Aarp tax filing 7% ($111,500 ÷ $220,000) of the total selling price. Aarp tax filing Multiply principal payments by 49. Aarp tax filing 3% to determine the part of the payment for the installment sale. Aarp tax filing The balance, 50. Aarp tax filing 7%, is for the part reported in the year of the sale. Aarp tax filing The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. Aarp tax filing When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. Aarp tax filing Only the part for the installment sale (49. Aarp tax filing 3%) is used in the installment sale computation. Aarp tax filing The only payment received in 2013 is the down payment of $100,000. Aarp tax filing The part of the payment for the installment sale is $49,300 ($100,000 × 49. Aarp tax filing 3%). Aarp tax filing This amount is used in the installment sale computation. Aarp tax filing Installment income for 2013. Aarp tax filing   Your installment income for each asset is the gross profit percentage for that asset times $49,300, the installment income received in 2013. Aarp tax filing Income Land—22. Aarp tax filing 95% of $49,300 $11,314 Building—8. Aarp tax filing 85% of $49,300 4,363 Goodwill—16. Aarp tax filing 2% of $49,300 7,987 Total installment income for 2013 $23,664 Installment income after 2013. Aarp tax filing   You figure installment income for years after 2013 by applying the same gross profit percentages to 49. Aarp tax filing 3% of the total payments you receive on the buyer's note during the year. Aarp tax filing Unstated Interest and Original Issue Discount (OID) An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. Aarp tax filing Interest provided in the contract is called stated interest. Aarp tax filing If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. Aarp tax filing If section 483 applies to the contract, this interest is called unstated interest. Aarp tax filing If section 1274 applies to the contract, this interest is called original issue discount (OID). Aarp tax filing An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later). Aarp tax filing Treatment of unstated interest and OID. Aarp tax filing   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. Aarp tax filing As a result, the buyer cannot deduct the unstated interest. Aarp tax filing The seller must report the unstated interest as income. Aarp tax filing   Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. Aarp tax filing   If the debt is subject to the section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan, or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. Aarp tax filing Rules for the seller. Aarp tax filing   If either section 1274 or section 483 applies to the installment sale contract, you must treat part of the installment sale price as interest, even though interest is not called for in the sales agreement. Aarp tax filing If either section applies, you must reduce the stated selling price of the property and increase your interest income by this unstated interest. Aarp tax filing   Include the unstated interest in income based on your regular method of accounting. Aarp tax filing Include OID in income over the term of the contract. Aarp tax filing   The OID includible in income each year is based on the constant yield method described in section 1272. Aarp tax filing (In some cases, the OID on an installment sale contract also may include all or part of the stated interest, especially if the stated interest is not paid at least annually. Aarp tax filing )   If you do not use the installment method to report the sale, report the entire gain under your method of accounting in the year of sale. Aarp tax filing Reduce the selling price by any stated principal treated as interest to determine the gain. Aarp tax filing   Report unstated interest or OID on your tax return, in addition to stated interest. Aarp tax filing Rules for the buyer. Aarp tax filing   Any part of the stated selling price of an installment sale contract treated by the buyer as interest reduces the buyer's basis in the property and increases the buyer's interest expense. Aarp tax filing These rules do not apply to personal-use property (for example, property not used in a trade or business). Aarp tax filing Adequate stated interest. Aarp tax filing   An installment sale contract generally provides for adequate stated interest if the contract's stated principal amount is at least equal to the sum of the present values of all principal and interest payments called for under the contract. Aarp tax filing The present value of a payment is determined based on the test rate of interest, defined next. Aarp tax filing (If section 483 applies to the contract, payments due within six months after the sale are taken into account at face value. Aarp tax filing ) In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the test rate of interest. Aarp tax filing Test rate of interest. Aarp tax filing   The test rate of interest for a contract is the 3-month rate. Aarp tax filing The 3-month rate is the lower of the following applicable federal rates (AFRs). Aarp tax filing The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the first month in which there is a binding written contract that substantially provides the terms under which the sale or exchange is ultimately completed. Aarp tax filing The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the month in which the sale or exchange occurs. Aarp tax filing Applicable federal rate (AFR). Aarp tax filing   The AFR depends on the month the binding