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Amend Federal Tax Return 2012

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Amend Federal Tax Return 2012

Amend federal tax return 2012 37. Amend federal tax return 2012   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Amend federal tax return 2012  The maximum adoption credit is $12,970 for 2013. Amend federal tax return 2012 See Adoption Credit . Amend federal tax return 2012 Plug-in electric vehicle credit. Amend federal tax return 2012  This credit has expired. Amend federal tax return 2012 Credit for prior year minimum tax. Amend federal tax return 2012  The refundable portion of the credit for prior year minimum tax has expired. Amend federal tax return 2012 Excess withholding of social security and railroad retirement tax. Amend federal tax return 2012  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Amend federal tax return 2012 2% of wages up to $113,700. Amend federal tax return 2012 If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Amend federal tax return 2012 See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Amend federal tax return 2012 Introduction This chapter discusses the following nonrefundable credits. Amend federal tax return 2012 Adoption credit. Amend federal tax return 2012 Alternative motor vehicle credit. Amend federal tax return 2012 Alternative fuel vehicle refueling property credit. Amend federal tax return 2012 Credit to holders of tax credit bonds. Amend federal tax return 2012 Foreign tax credit. Amend federal tax return 2012 Mortgage interest credit. Amend federal tax return 2012 Nonrefundable credit for prior year minimum tax. Amend federal tax return 2012 Plug-in electric drive motor vehicle credit. Amend federal tax return 2012 Residential energy credits. Amend federal tax return 2012 Retirement savings contributions credit. Amend federal tax return 2012 This chapter also discusses the following refundable credits. Amend federal tax return 2012 Credit for tax on undistributed capital gain. Amend federal tax return 2012 Health coverage tax credit. Amend federal tax return 2012 Credit for excess social security tax or railroad retirement tax withheld. Amend federal tax return 2012 Several other credits are discussed in other chapters in this publication. Amend federal tax return 2012 Child and dependent care credit (chapter 32). Amend federal tax return 2012 Credit for the elderly or the disabled (chapter 33). Amend federal tax return 2012 Child tax credit (chapter 34). Amend federal tax return 2012 Education credits (chapter 35). Amend federal tax return 2012 Earned income credit (chapter 36). Amend federal tax return 2012 Nonrefundable credits. Amend federal tax return 2012   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Amend federal tax return 2012 These credits may reduce your tax to zero. Amend federal tax return 2012 If these credits are more than your tax, the excess is not refunded to you. Amend federal tax return 2012 Refundable credits. Amend federal tax return 2012   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Amend federal tax return 2012 These credits are added to the federal income tax withheld and any estimated tax payments you made. Amend federal tax return 2012 If this total is more than your total tax, the excess will be refunded to you. Amend federal tax return 2012 Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. Amend federal tax return 2012 However, if the total of these credits is more than your tax, the excess is not refunded to you. Amend federal tax return 2012 Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Amend federal tax return 2012 The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Amend federal tax return 2012 If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Amend federal tax return 2012 If your modified AGI is $234,580 or more, you cannot take the credit. Amend federal tax return 2012 Qualified adoption expenses. Amend federal tax return 2012   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Amend federal tax return 2012 These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. Amend federal tax return 2012 Nonqualified expenses. Amend federal tax return 2012   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. Amend federal tax return 2012 Eligible child. Amend federal tax return 2012   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Amend federal tax return 2012 Child with special needs. Amend federal tax return 2012   An eligible child is a child with special needs if all three of the following apply. Amend federal tax return 2012 The child was a citizen or resident of the United States (including U. Amend federal tax return 2012 S. Amend federal tax return 2012 possessions) at the time the adoption process began. Amend federal tax return 2012 A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Amend federal tax return 2012 The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Amend federal tax return 2012 Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Amend federal tax return 2012 When to take the credit. Amend federal tax return 2012   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Amend federal tax return 2012 If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Amend federal tax return 2012 See the Instructions for Form 8839 for more specific information on when to take the credit. Amend federal tax return 2012 Foreign child. Amend federal tax return 2012   If the child is not a U. Amend federal tax return 2012 S. Amend federal tax return 2012 citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Amend federal tax return 2012 You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Amend federal tax return 2012 Include the credit in your total for Form 1040, line 53. Amend federal tax return 2012 Check box c and enter “8839” on the line next to that box. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information, see the Instructions for Form 8839. Amend federal tax return 2012 Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Amend federal tax return 2012 Amount of credit. Amend federal tax return 2012   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Amend federal tax return 2012 In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Amend federal tax return 2012   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Amend federal tax return 2012 Include the credit in your total for Form 1040, line 53. Amend federal tax return 2012 Check box c and enter “8910” on the line next to that box. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see the Instructions for Form 8910. Amend federal tax return 2012 Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. Amend federal tax return 2012 Qualified alternative fuel vehicle refueling property. Amend federal tax return 2012   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Amend federal tax return 2012 To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. Amend federal tax return 2012 To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Amend federal tax return 2012   The following are alternative fuels. Amend federal tax return 2012 Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. Amend federal tax return 2012 Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. Amend federal tax return 2012 Electricity. Amend federal tax return 2012 Amount of the credit. Amend federal tax return 2012   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Amend federal tax return 2012 For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Amend federal tax return 2012 Include the credit in your total for Form 1040, line 53. Amend federal tax return 2012 Check box c and enter “8911” on the line next to that box. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see the Form 8911 instructions. Amend federal tax return 2012 Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. Amend federal tax return 2012 You may be able to take a credit if you are a holder of one of the following bonds. Amend federal tax return 2012 Clean renewable energy bonds (issued before 2010). Amend federal tax return 2012 New clean renewable energy bonds. Amend federal tax return 2012 Qualified energy conservation bonds. Amend federal tax return 2012 Qualified school construction bonds. Amend federal tax return 2012 Qualified zone academy bonds. Amend federal tax return 2012 Build America bonds. Amend federal tax return 2012 In some instances, an issuer may elect to receive a credit for interest paid on the bond. Amend federal tax return 2012 If the issuer makes this election, you cannot also claim a credit. Amend federal tax return 2012 Interest income. Amend federal tax return 2012   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   Complete Form 8912 and attach it to your Form 1040. Amend federal tax return 2012 Include the credit in your total for Form 1040, line 53. Amend federal tax return 2012 Check box c and enter “8912” on the line next to that box. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information, see the Instructions for Form 8912. Amend federal tax return 2012 Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Amend federal tax return 2012 S. Amend federal tax return 2012 possession as a credit against your U. Amend federal tax return 2012 S. Amend federal tax return 2012 income tax. Amend federal tax return 2012 Or, you can deduct them as an itemized deduction (see chapter 22). Amend federal tax return 2012 You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Amend federal tax return 2012 S. Amend federal tax return 2012 tax under any of the following. Amend federal tax return 2012 Foreign earned income exclusion. Amend federal tax return 2012 Foreign housing exclusion. Amend federal tax return 2012 Income from Puerto Rico exempt from U. Amend federal tax return 2012 S. Amend federal tax return 2012 tax. Amend federal tax return 2012 Possession exclusion. Amend federal tax return 2012 Limit on the credit. Amend federal tax return 2012   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Amend federal tax return 2012 S. Amend federal tax return 2012 tax liability (Form 1040, line 44), multiplied by a fraction. Amend federal tax return 2012 The numerator of the fraction is your taxable income from sources outside the United States. Amend federal tax return 2012 The denominator is your total taxable income from U. Amend federal tax return 2012 S. Amend federal tax return 2012 and foreign sources. Amend federal tax return 2012 See Publication 514 for more information. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   Complete Form 1116 and attach it to your Form 1040. Amend federal tax return 2012 Enter the credit on Form 1040, line 47. Amend federal tax return 2012 Exception. Amend federal tax return 2012   You do not have to complete Form 1116 to take the credit if all of the following apply. Amend federal tax return 2012 All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). Amend federal tax return 2012 If you had dividend income from shares of stock, you held those shares for at least 16 days. Amend federal tax return 2012 You are not filing Form 4563 or excluding income from sources within Puerto Rico. Amend federal tax return 2012 The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Amend federal tax return 2012 All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit and these requirements, see the Instructions for Form 1116. Amend federal tax return 2012 Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Amend federal tax return 2012 If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Amend federal tax return 2012 Who qualifies. Amend federal tax return 2012   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Amend federal tax return 2012 Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Amend federal tax return 2012 Amount of credit. Amend federal tax return 2012   Figure your credit on Form 8396. Amend federal tax return 2012 If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Amend federal tax return 2012   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Amend federal tax return 2012 To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Amend federal tax return 2012      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Amend federal tax return 2012   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Amend federal tax return 2012 If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. Amend federal tax return 2012 See Publication 530 for more information. Amend federal tax return 2012 Carryforward. Amend federal tax return 2012   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. Amend federal tax return 2012 If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Amend federal tax return 2012   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Amend federal tax return 2012 Be sure to include any credit carryforward from 2010, 2011, and 2012. Amend federal tax return 2012   Include the credit in your total for Form 1040, line 53. Amend federal tax return 2012 Check box c and enter “8396” on the line next to that box. Amend federal tax return 2012 Reduced home mortgage interest deduction. Amend federal tax return 2012   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Amend federal tax return 2012 You must do this even if part of that amount is to be carried forward to 2014. Amend federal tax return 2012 For more information about the home mortgage interest deduction, see chapter 23. Amend federal tax return 2012 Recapture of federal mortgage subsidy. Amend federal tax return 2012   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. Amend federal tax return 2012 The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. Amend federal tax return 2012 See the Instructions for Form 8828 and chapter 15 for more information. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see the Form 8396 instructions. Amend federal tax return 2012 Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. Amend federal tax return 2012 If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. Amend federal tax return 2012 This is called the alternative minimum tax. Amend federal tax return 2012 The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Amend federal tax return 2012 If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. Amend federal tax return 2012 You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Amend federal tax return 2012 Include the credit in your total for Form 1040, line 53, and check box b. Amend federal tax return 2012 You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see the Instructions for Form 8801. Amend federal tax return 2012 Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. Amend federal tax return 2012 Qualified plug-in electric drive motor vehicle. Amend federal tax return 2012   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Amend federal tax return 2012 Qualified two- or three-wheeled plug-in electric vehicle. Amend federal tax return 2012   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. Amend federal tax return 2012 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Amend federal tax return 2012 Certification and other requirements. Amend federal tax return 2012   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. Amend federal tax return 2012 However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. Amend federal tax return 2012   The following requirements must also be met to qualify for the credit. Amend federal tax return 2012 You are the owner of the vehicle. Amend federal tax return 2012 If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Amend federal tax return 2012 You placed the vehicle in service during 2013. Amend federal tax return 2012 The vehicle is manufactured primarily for use on public streets, roads, and highways. Amend federal tax return 2012 The original use of the vehicle began with you. Amend federal tax return 2012 You acquired the vehicle for your use or to lease to others, and not for resale. Amend federal tax return 2012 In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Amend federal tax return 2012 You use the vehicle primarily in the United States. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Amend federal tax return 2012 Include the credit in your total for Form 1040, line 53. Amend federal tax return 2012 Check box c and enter “8936” on the line next to that box. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see the Form 8936 instructions. Amend federal tax return 2012 Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. Amend federal tax return 2012 Nonbusiness energy property credit. Amend federal tax return 2012 Residential energy efficient property credit. Amend federal tax return 2012 If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. Amend federal tax return 2012 Nonbusiness energy property credit. Amend federal tax return 2012   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. Amend federal tax return 2012   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. Amend federal tax return 2012    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. Amend federal tax return 2012   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. Amend federal tax return 2012 Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Amend federal tax return 2012 Exterior window (including skylights). Amend federal tax return 2012 Exterior doors. Amend federal tax return 2012 Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Amend federal tax return 2012   Residential energy property is any of the following. Amend federal tax return 2012 Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. Amend federal tax return 2012 Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Amend federal tax return 2012 Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Amend federal tax return 2012 Residential energy efficient property credit. Amend federal tax return 2012   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. Amend federal tax return 2012 The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. Amend federal tax return 2012 Basis reduction. Amend federal tax return 2012   You must reduce the basis of your home by the amount of any credit allowed. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   Complete Form 5695 and attach it to your Form 1040. Amend federal tax return 2012 Enter the credit on Form 1040, line 52. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on these credits, see the Form 5695 instructions. Amend federal tax return 2012 Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. Amend federal tax return 2012 However, you cannot take the credit if either of the following applies. Amend federal tax return 2012 The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Amend federal tax return 2012 The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Amend federal tax return 2012 Student. Amend federal tax return 2012   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. Amend federal tax return 2012 School. Amend federal tax return 2012   A school includes a technical, trade, or mechanical school. Amend federal tax return 2012 It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   Figure the credit on Form 8880. Amend federal tax return 2012 Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see the Form 8880 instructions. Amend federal tax return 2012 Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Amend federal tax return 2012 If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. Amend federal tax return 2012 Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. Amend federal tax return 2012 If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. Amend federal tax return 2012 The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   To take the credit, attach Copy B of Form 2439 to your Form 1040. Amend federal tax return 2012 Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Amend federal tax return 2012 More information. Amend federal tax return 2012   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Amend federal tax return 2012 Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. Amend federal tax return 2012 You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. Amend federal tax return 2012 You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. Amend federal tax return 2012 S. Amend federal tax return 2012 Treasury–HCTC. Amend federal tax return 2012 ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. Amend federal tax return 2012 You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Amend federal tax return 2012 You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Amend federal tax return 2012 S. Amend federal tax return 2012 military health system (TRICARE). Amend federal tax return 2012 You were not imprisoned under federal, state, or local authority. Amend federal tax return 2012 Your employer did not pay 50% or more of the cost of coverage. Amend federal tax return 2012 You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Amend federal tax return 2012 But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Amend federal tax return 2012 If you meet all of these conditions, you may be able to take a credit of up to 72. Amend federal tax return 2012 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Amend federal tax return 2012 You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Amend federal tax return 2012 The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. Amend federal tax return 2012 You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Amend federal tax return 2012 If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. Amend federal tax return 2012 TAA recipient. Amend federal tax return 2012   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). Amend federal tax return 2012 Example. Amend federal tax return 2012 You received a trade adjustment allowance for January 2013. Amend federal tax return 2012 You were an eligible TAA recipient on the first day of January and February. Amend federal tax return 2012 Alternative TAA recipient. Amend federal tax return 2012   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. Amend federal tax return 2012 Example. Amend federal tax return 2012 You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Amend federal tax return 2012 The program was established by the Department of Labor. Amend federal tax return 2012 You were an eligible alternative TAA recipient on the first day of October and November. Amend federal tax return 2012 RTAA recipient. Amend federal tax return 2012   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. Amend federal tax return 2012 PBGC pension recipient. Amend federal tax return 2012   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Amend federal tax return 2012 You were age 55 or older on the first day of the month. Amend federal tax return 2012 You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Amend federal tax return 2012 If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. Amend federal tax return 2012 How to take the credit. Amend federal tax return 2012   To take the credit, complete Form 8885 and attach it to your Form 1040. Amend federal tax return 2012 Include your credit in the total for Form 1040, line 71, and check box c. Amend federal tax return 2012   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Amend federal tax return 2012 For details, see Publication 502 or Form 8885. Amend federal tax return 2012 More information. Amend federal tax return 2012   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. Amend federal tax return 2012 Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Amend federal tax return 2012 If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Amend federal tax return 2012 If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Amend federal tax return 2012 If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Amend federal tax return 2012 2% rate. Amend federal tax return 2012 You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Amend federal tax return 2012 For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Amend federal tax return 2012 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Amend federal tax return 2012 45%) or the Additional Medicare Tax rate (. Amend federal tax return 2012 9%). Amend federal tax return 2012 The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Amend federal tax return 2012 Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Amend federal tax return 2012 40 RRTA tier 2 $84,300 $3,709. Amend federal tax return 2012 20 All wages are subject to Medicare tax withholding. Amend federal tax return 2012   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Amend federal tax return 2012 Be sure to attach a copy of all of your W-2 forms. Amend federal tax return 2012 Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Amend federal tax return 2012 Employer's error. Amend federal tax return 2012   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. Amend federal tax return 2012 The employer should adjust the tax for you. Amend federal tax return 2012 If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Amend federal tax return 2012 Joint return. Amend federal tax return 2012   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Amend federal tax return 2012 Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Amend federal tax return 2012 How to figure the credit if you did not work for a railroad. Amend federal tax return 2012   If you did not work for a railroad during 2013, figure the credit as follows: 1. Amend federal tax return 2012 Add all social security tax withheld (but not more than $7,049. Amend federal tax return 2012 40 for each employer). Amend federal tax return 2012 Enter the total here   2. Amend federal tax return 2012 Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Amend federal tax return 2012 Add lines 1 and 2. Amend federal tax return 2012 If $7,049. Amend federal tax return 2012 40 or less, stop here. Amend federal tax return 2012 You cannot take  the credit   4. Amend federal tax return 2012 Social security tax limit 7,049. Amend federal tax return 2012 40 5. Amend federal tax return 2012 Credit. Amend federal tax return 2012 Subtract line 4 from line 3. Amend federal tax return 2012 Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Amend federal tax return 2012 You are married and file a joint return with your spouse who had no gross income in 2013. Amend federal tax return 2012 During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Amend federal tax return 2012 Social security tax of $3,720 was withheld. Amend federal tax return 2012 You also worked for another employer in 2013 and earned $55,000 in wages. Amend federal tax return 2012 $3,410 of social security tax was withheld from these wages. Amend federal tax return 2012 Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Amend federal tax return 2012 60 for the excess social security tax withheld. Amend federal tax return 2012 1. Amend federal tax return 2012 Add all social security tax withheld (but not more than $7,049. Amend federal tax return 2012 40 for each employer). Amend federal tax return 2012 Enter the total here $7,130. Amend federal tax return 2012 00 2. Amend federal tax return 2012 Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. Amend federal tax return 2012 Add lines 1 and 2. Amend federal tax return 2012 If $7,049. Amend federal tax return 2012 40 or less, stop here. Amend federal tax return 2012 You cannot take the credit 7,130. Amend federal tax return 2012 00 4. Amend federal tax return 2012 Social security tax limit 7,049. Amend federal tax return 2012 40 5. Amend federal tax return 2012 Credit. Amend federal tax return 2012 Subtract line 4 from line 3. Amend federal tax return 2012 Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Amend federal tax return 2012 60 How to figure the credit if you worked for a railroad. Amend federal tax return 2012   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Amend federal tax return 2012 Add all social security and tier 1 RRTA tax withheld at the 6. Amend federal tax return 2012 2% rate (but not more than $7,049. Amend federal tax return 2012 40 for each employer). Amend federal tax return 2012 Enter the total here   2. Amend federal tax return 2012 Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Amend federal tax return 2012 Add lines 1 and 2. Amend federal tax return 2012 If $7,049. Amend federal tax return 2012 40 or less, stop here. Amend federal tax return 2012 You cannot take  the credit   4. Amend federal tax return 2012 Social security and tier 1 RRTA  tax limit 7,049. Amend federal tax return 2012 40 5. Amend federal tax return 2012 Credit. Amend federal tax return 2012 Subtract line 4 from line 3. Amend federal tax return 2012 Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Amend federal tax return 2012   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the credit, see Publication 505. Amend federal tax return 2012 Prev  Up  Next   Home   More Online Publications
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The Amend Federal Tax Return 2012

Amend federal tax return 2012 6. Amend federal tax return 2012   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. Amend federal tax return 2012 Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Amend federal tax return 2012 Also use basis to figure depreciation, amortization, depletion, and casualty losses. Amend federal tax return 2012 If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Amend federal tax return 2012 Only the basis allocated to the business or investment use of the property can be depreciated. Amend federal tax return 2012 Your original basis in property is adjusted (increased or decreased) by certain events. Amend federal tax return 2012 For example, if you make improvements to the property, increase your basis. Amend federal tax return 2012 If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Amend federal tax return 2012 Keep accurate records of all items that affect the basis of your assets. Amend federal tax return 2012 For information on keeping records, see chapter 1. Amend federal tax return 2012 Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. Amend federal tax return 2012 Cost Basis The basis of property you buy is usually its cost. Amend federal tax return 2012 Cost is the amount you pay in cash, debt obligations, other property, or services. Amend federal tax return 2012 Your cost includes amounts you pay for sales tax, freight, installation, and testing. Amend federal tax return 2012 The basis of real estate and business assets will include other items, discussed later. Amend federal tax return 2012 Basis generally does not include interest payments. Amend federal tax return 2012 However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Amend federal tax return 2012 You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Amend federal tax return 2012 Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Amend federal tax return 2012 Loans with low or no interest. Amend federal tax return 2012   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. Amend federal tax return 2012 You generally have unstated interest if your interest rate is less than the applicable federal rate. Amend federal tax return 2012 See the discussion of unstated interest in Publication 537, Installment Sales. Amend federal tax return 2012 Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Amend federal tax return 2012 If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Amend federal tax return 2012 Some of these expenses are discussed next. Amend federal tax return 2012 Lump sum purchase. Amend federal tax return 2012   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. Amend federal tax return 2012 Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Amend federal tax return 2012 Figure the basis of each asset by multiplying the lump sum by a fraction. Amend federal tax return 2012 The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Amend federal tax return 2012 Fair market value (FMV). Amend federal tax return 2012   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Amend federal tax return 2012 Sales of similar property on or about the same date may help in figuring the FMV of the property. Amend federal tax return 2012 If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. Amend federal tax return 2012 Real estate taxes. Amend federal tax return 2012   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Amend federal tax return 2012   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Amend federal tax return 2012 Whether or not you reimburse the seller, do not include that amount in the basis of your property. Amend federal tax return 2012 Settlement costs. Amend federal tax return 2012   Your basis includes the settlement fees and closing costs for buying the property. Amend federal tax return 2012 See Publication 551 for a detailed list of items you can and cannot include in basis. Amend federal tax return 2012   Do not include fees and costs for getting a loan on the property. Amend federal tax return 2012 Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Amend federal tax return 2012 Points. Amend federal tax return 2012   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. Amend federal tax return 2012 You may be able to deduct the points currently or over the term of the loan. Amend federal tax return 2012 For more information about deducting points, see Points in chapter 4 of Publication 535. Amend federal tax return 2012 Assumption of a mortgage. Amend federal tax return 2012   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. Amend federal tax return 2012 Example. Amend federal tax return 2012 If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Amend federal tax return 2012 Constructing assets. Amend federal tax return 2012   If you build property or have assets built for you, your expenses for this construction are part of your basis. Amend federal tax return 2012 Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Amend federal tax return 2012   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Amend federal tax return 2012 You must capitalize them (include them in the asset's basis). Amend federal tax return 2012 Employee wages paid for the construction work, reduced by any employment credits allowed. Amend federal tax return 2012 Depreciation on equipment you own while it is used in the construction. Amend federal tax return 2012 Operating and maintenance costs for equipment used in the construction. Amend federal tax return 2012 The cost of business supplies and materials used in the construction. Amend federal tax return 2012    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Amend federal tax return 2012 Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. Amend federal tax return 2012 To determine the basis of these assets or separate items, there must be an allocation of basis. Amend federal tax return 2012 Group of assets acquired. Amend federal tax return 2012   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Amend federal tax return 2012 Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Amend federal tax return 2012 You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Amend federal tax return 2012 If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Amend federal tax return 2012 Farming business acquired. Amend federal tax return 2012   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. Amend federal tax return 2012 Generally, reduce the purchase price by any cash received. Amend federal tax return 2012 Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. Amend federal tax return 2012 See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Amend federal tax return 2012 Transplanted embryo. Amend federal tax return 2012   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. Amend federal tax return 2012 Allocate the rest of the purchase price to the basis of the calf. Amend federal tax return 2012 Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Amend federal tax return 2012 Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. Amend federal tax return 2012 You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Amend federal tax return 2012 Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. Amend federal tax return 2012 However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. Amend federal tax return 2012 You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Amend federal tax return 2012 You are not subject to the uniform capitalization rules if the property is produced for personal use. Amend federal tax return 2012 In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Amend federal tax return 2012 Plants. Amend federal tax return 2012   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. Amend federal tax return 2012 Animals. Amend federal tax return 2012   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Amend federal tax return 2012 The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Amend federal tax return 2012 Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Amend federal tax return 2012 For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Amend federal tax return 2012 For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Amend federal tax return 2012 Exceptions. Amend federal tax return 2012   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. Amend federal tax return 2012   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Amend federal tax return 2012 See Accrual Method Required under Accounting Methods in chapter 2. Amend federal tax return 2012   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Amend federal tax return 2012 If you make this election, special rules apply. Amend federal tax return 2012 This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Amend federal tax return 2012 This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. Amend federal tax return 2012    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. Amend federal tax return 2012 See chapter 7, for additional information on depreciation. Amend federal tax return 2012 Example. Amend federal tax return 2012 You grow trees that have a preproductive period of more than 2 years. Amend federal tax return 2012 The trees produce an annual crop. Amend federal tax return 2012 You are an individual and the uniform capitalization rules apply to your farming business. Amend federal tax return 2012 You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Amend federal tax return 2012 You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Amend federal tax return 2012 Preproductive period of more than 2 years. Amend federal tax return 2012   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Amend federal tax return 2012 Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Amend federal tax return 2012 Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Amend federal tax return 2012 More information. Amend federal tax return 2012   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Amend federal tax return 2012 263A-4. Amend federal tax return 2012 Table 6-1. Amend federal tax return 2012 Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. Amend federal tax return 2012 Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. Amend federal tax return 2012 The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. Amend federal tax return 2012 Increases to Basis Increase the basis of any property by all items properly added to a capital account. Amend federal tax return 2012 These include the cost of any improvements having a useful life of more than 1 year. Amend federal tax return 2012 The following costs increase the basis of property. Amend federal tax return 2012 The cost of extending utility service lines to property. Amend federal tax return 2012 Legal fees, such as the cost of defending and perfecting title. Amend federal tax return 2012 Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Amend federal tax return 2012 Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Amend federal tax return 2012 Do not deduct these expenses as taxes. Amend federal tax return 2012 However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Amend federal tax return 2012 If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Amend federal tax return 2012 See chapter 7. Amend federal tax return 2012 Deducting vs. Amend federal tax return 2012 capitalizing costs. Amend federal tax return 2012   Do not add to your basis costs you can deduct as current expenses. Amend federal tax return 2012 For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Amend federal tax return 2012 However, you can elect either to deduct or to capitalize certain other costs. Amend federal tax return 2012 See chapter 7 in Publication 535. Amend federal tax return 2012 Decreases to Basis The following are some items that reduce the basis of property. Amend federal tax return 2012 Section 179 deduction. Amend federal tax return 2012 Deductions previously allowed or allowable for amortization, depreciation, and depletion. Amend federal tax return 2012 Alternative motor vehicle credit. Amend federal tax return 2012 See Form 8910. Amend federal tax return 2012 Alternative fuel vehicle refueling property credit. Amend federal tax return 2012 See Form 8911. Amend federal tax return 2012 Residential energy efficient property credits. Amend federal tax return 2012 See Form 5695. Amend federal tax return 2012 Investment credit (part or all) taken. Amend federal tax return 2012 Casualty and theft losses and insurance reimbursements. Amend federal tax return 2012 Payments you receive for granting an easement. Amend federal tax return 2012 Exclusion from income of subsidies for energy conservation measures. Amend federal tax return 2012 Certain canceled debt excluded from income. Amend federal tax return 2012 Rebates from a manufacturer or seller. Amend federal tax return 2012 Patronage dividends received from a cooperative association as a result of a purchase of property. Amend federal tax return 2012 See Patronage Dividends in chapter 3. Amend federal tax return 2012 Gas-guzzler tax. Amend federal tax return 2012 See Form 6197. Amend federal tax return 2012 Some of these items are discussed next. Amend federal tax return 2012 For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Amend federal tax return 2012 Depreciation and section 179 deduction. Amend federal tax return 2012   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. Amend federal tax return 2012 For more information on these deductions, see chapter 7. Amend federal tax return 2012 Section 179 deduction. Amend federal tax return 2012   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Amend federal tax return 2012 Depreciation. Amend federal tax return 2012   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. Amend federal tax return 2012 If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Amend federal tax return 2012 If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Amend federal tax return 2012   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. Amend federal tax return 2012   See chapter 7 for information on figuring the depreciation you should have claimed. Amend federal tax return 2012   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. Amend federal tax return 2012 Casualty and theft losses. Amend federal tax return 2012   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Amend federal tax return 2012 Also, decrease it by any deductible loss not covered by insurance. Amend federal tax return 2012 See chapter 11 for information about figuring your casualty or theft loss. Amend federal tax return 2012   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. Amend federal tax return 2012 To make this determination, compare the repaired property to the property before the casualty. Amend federal tax return 2012 Easements. Amend federal tax return 2012   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Amend federal tax return 2012 It reduces the basis of the affected part of the property. Amend federal tax return 2012 If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Amend federal tax return 2012 See Easements and rights-of-way in chapter 3. Amend federal tax return 2012 Exclusion from income of subsidies for energy conservation measures. Amend federal tax return 2012   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Amend federal tax return 2012 Reduce the basis of the property by the excluded amount. Amend federal tax return 2012 Canceled debt excluded from income. Amend federal tax return 2012   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Amend federal tax return 2012 A debt includes any indebtedness for which you are liable or which attaches to property you hold. Amend federal tax return 2012   You can exclude your canceled debt from income if the debt is any of the following. Amend federal tax return 2012 Debt canceled in a bankruptcy case or when you are insolvent. Amend federal tax return 2012 Qualified farm debt. Amend federal tax return 2012 Qualified real property business debt (provided you are not a C corporation). Amend federal tax return 2012 Qualified principal residence indebtedness. Amend federal tax return 2012 Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Amend federal tax return 2012 If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Amend federal tax return 2012 If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Amend federal tax return 2012   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Amend federal tax return 2012 For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Amend federal tax return 2012 For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Amend federal tax return 2012 For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Amend federal tax return 2012 Basis Other Than Cost There are times when you cannot use cost as basis. Amend federal tax return 2012 In these situations, the fair market value or the adjusted basis of property may be used. Amend federal tax return 2012 Examples are discussed next. Amend federal tax return 2012 Property changed from personal to business or rental use. Amend federal tax return 2012   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Amend federal tax return 2012 An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. Amend federal tax return 2012   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Amend federal tax return 2012   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Amend federal tax return 2012 The basis for figuring a gain is your adjusted basis in the property when you sell the property. Amend federal tax return 2012 Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Amend federal tax return 2012 Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Amend federal tax return 2012 Property received for services. Amend federal tax return 2012   If you receive property for services, include the property's FMV in income. Amend federal tax return 2012 The amount you include in income becomes your basis. Amend federal tax return 2012 If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Amend federal tax return 2012 Example. Amend federal tax return 2012 George Smith is an accountant and also operates a farming business. Amend federal tax return 2012 George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Amend federal tax return 2012 The accounting work and the cow are each worth $1,500. Amend federal tax return 2012 George must include $1,500 in income for his accounting services. Amend federal tax return 2012 George's basis in the cow is $1,500. Amend federal tax return 2012 Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Amend federal tax return 2012 A taxable gain or deductible loss also is known as a recognized gain or loss. Amend federal tax return 2012 A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Amend federal tax return 2012 If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Amend federal tax return 2012 Example. Amend federal tax return 2012 You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Amend federal tax return 2012 You must report a taxable gain of $4,000 for the land. Amend federal tax return 2012 The tractor has a basis of $6,000. Amend federal tax return 2012 Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. Amend federal tax return 2012 Similar or related property. Amend federal tax return 2012   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. Amend federal tax return 2012 However, make the following adjustments. Amend federal tax return 2012 Decrease the basis by the following amounts. Amend federal tax return 2012 Any loss you recognize on the involuntary conversion. Amend federal tax return 2012 Any money you receive that you do not spend on similar property. Amend federal tax return 2012 Increase the basis by the following amounts. Amend federal tax return 2012 Any gain you recognize on the involuntary conversion. Amend federal tax return 2012 Any cost of acquiring the replacement property. Amend federal tax return 2012 Money or property not similar or related. Amend federal tax return 2012   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. Amend federal tax return 2012 Allocating the basis. Amend federal tax return 2012   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Amend federal tax return 2012 Basis for depreciation. Amend federal tax return 2012   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Amend federal tax return 2012 For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Amend federal tax return 2012 For more information about involuntary conversions, see chapter 11. Amend federal tax return 2012 Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Amend federal tax return 2012 A nontaxable gain or loss also is known as an unrecognized gain or loss. Amend federal tax return 2012 If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Amend federal tax return 2012 Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Amend federal tax return 2012 For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Amend federal tax return 2012 There must also be an exchange of like-kind property. Amend federal tax return 2012 For more information, see Like-Kind Exchanges in  chapter 8. Amend federal tax return 2012 The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Amend federal tax return 2012 Example 1. Amend federal tax return 2012 You traded a truck you used in your farming business for a new smaller truck to use in farming. Amend federal tax return 2012 The adjusted basis of the old truck was $10,000. Amend federal tax return 2012 The FMV of the new truck is $30,000. Amend federal tax return 2012 Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. Amend federal tax return 2012 Example 2. Amend federal tax return 2012 You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Amend federal tax return 2012 You use both the field cultivator and the planter in your farming business. Amend federal tax return 2012 The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Amend federal tax return 2012   Exchange expenses generally are the closing costs that you pay. Amend federal tax return 2012 They include such items as brokerage commissions, attorney fees, and deed preparation fees. Amend federal tax return 2012 Add them to the basis of the like-kind property you receive. Amend federal tax return 2012 Property plus cash. Amend federal tax return 2012   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. Amend federal tax return 2012 Example. Amend federal tax return 2012 You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Amend federal tax return 2012 Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Amend federal tax return 2012 Special rules for related persons. Amend federal tax return 2012   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Amend federal tax return 2012 Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. Amend federal tax return 2012 Each person reports it on the tax return filed for the year in which the later disposition occurred. Amend federal tax return 2012 If this rule applies, the basis of the property received in the original exchange will be its FMV. Amend federal tax return 2012 For more information, see chapter 8. Amend federal tax return 2012 Exchange of business property. Amend federal tax return 2012   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Amend federal tax return 2012 For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Amend federal tax return 2012 Basis for depreciation. Amend federal tax return 2012   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Amend federal tax return 2012 For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Amend federal tax return 2012 Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Amend federal tax return 2012 The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. Amend federal tax return 2012 Decrease the basis by the following amounts. Amend federal tax return 2012 Any money you receive. Amend federal tax return 2012 Any loss you recognize on the exchange. Amend federal tax return 2012 Increase the basis by the following amounts. Amend federal tax return 2012 Any additional costs you incur. Amend federal tax return 2012 Any gain you recognize on the exchange. Amend federal tax return 2012 If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Amend federal tax return 2012 Example 1. Amend federal tax return 2012 You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Amend federal tax return 2012 You realize a gain of $40,000. Amend federal tax return 2012 This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). Amend federal tax return 2012 Include your gain in income (recognize gain) only to the extent of the cash received. Amend federal tax return 2012 Your basis in the land you received is figured as follows. Amend federal tax return 2012 Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. Amend federal tax return 2012 You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Amend federal tax return 2012 You realize a gain of $7,250. Amend federal tax return 2012 This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). Amend federal tax return 2012 You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Amend federal tax return 2012 Your basis in the truck you received is figured as follows. Amend federal tax return 2012 Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. Amend federal tax return 2012   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Amend federal tax return 2012 The rest is the basis of the like-kind property. Amend federal tax return 2012 Example. Amend federal tax return 2012 You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Amend federal tax return 2012 You also received $1,000 cash and a truck that had an FMV of $3,000. Amend federal tax return 2012 The truck is unlike property. Amend federal tax return 2012 You realized a gain of $1,500. Amend federal tax return 2012 This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). Amend federal tax return 2012 You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Amend federal tax return 2012 Your basis in the properties you received is figured as follows. Amend federal tax return 2012 Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). Amend federal tax return 2012 This is the truck's FMV. Amend federal tax return 2012 The rest ($12,500) is the basis of the tractor. Amend federal tax return 2012 Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Amend federal tax return 2012 Example. Amend federal tax return 2012 You used a tractor on your farm for 3 years. Amend federal tax return 2012 Its adjusted basis is $22,000 and its FMV is $40,000. Amend federal tax return 2012 You are interested in a new tractor, which sells for $60,000. Amend federal tax return 2012 Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Amend federal tax return 2012 Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Amend federal tax return 2012 However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. Amend federal tax return 2012 Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). Amend federal tax return 2012 Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Amend federal tax return 2012 Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. Amend federal tax return 2012 You also must know its FMV at the time it was given to you and any gift tax paid on it. Amend federal tax return 2012 FMV equal to or greater than donor's adjusted basis. Amend federal tax return 2012   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. Amend federal tax return 2012 Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Amend federal tax return 2012   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Amend federal tax return 2012 See Adjusted Basis , earlier. Amend federal tax return 2012   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Amend federal tax return 2012 Figure the increase by multiplying the gift tax paid by the following fraction. Amend federal tax return 2012 Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Amend federal tax return 2012 The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Amend federal tax return 2012 Example. Amend federal tax return 2012 In 2013, you received a gift of property from your mother that had an FMV of $50,000. Amend federal tax return 2012 Her adjusted basis was $20,000. Amend federal tax return 2012 The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Amend federal tax return 2012 She paid a gift tax of $7,320. Amend federal tax return 2012 Your basis, $26,076, is figured as follows. Amend federal tax return 2012 Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Amend federal tax return 2012 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Amend federal tax return 2012 If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Amend federal tax return 2012 However, your basis cannot exceed the FMV of the gift when it was given to you. Amend federal tax return 2012 FMV less than donor's adjusted basis. Amend federal tax return 2012   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Amend federal tax return 2012 Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Amend federal tax return 2012 Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Amend federal tax return 2012 (See Adjusted Basis , earlier. Amend federal tax return 2012 )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. Amend federal tax return 2012 Example. Amend federal tax return 2012 You received farmland as a gift from your parents when they retired from farming. Amend federal tax return 2012 At the time of the gift, the land had an FMV of $80,000. Amend federal tax return 2012 Your parents' adjusted basis was $100,000. Amend federal tax return 2012 After you received the land, no events occurred that would increase or decrease your basis. Amend federal tax return 2012 If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. Amend federal tax return 2012 If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. Amend federal tax return 2012 If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Amend federal tax return 2012 For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. Amend federal tax return 2012 If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Amend federal tax return 2012 Business property. Amend federal tax return 2012   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Amend federal tax return 2012 Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Amend federal tax return 2012 The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Amend federal tax return 2012 However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. Amend federal tax return 2012 The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Amend federal tax return 2012 For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Amend federal tax return 2012 Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Amend federal tax return 2012 If a federal estate return is filed, you can use its appraised value. Amend federal tax return 2012 The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Amend federal tax return 2012 For information on the alternate valuation, see the Instructions for Form 706. Amend federal tax return 2012 The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. Amend federal tax return 2012 If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Amend federal tax return 2012 Special-use valuation method. Amend federal tax return 2012   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. Amend federal tax return 2012 If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Amend federal tax return 2012 If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. Amend federal tax return 2012 The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Amend federal tax return 2012   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Amend federal tax return 2012 Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. Amend federal tax return 2012 Figure all FMVs without regard to the special-use valuation. Amend federal tax return 2012   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. Amend federal tax return 2012 This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. Amend federal tax return 2012 The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Amend federal tax return 2012   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Amend federal tax return 2012 To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. Amend federal tax return 2012 If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Amend federal tax return 2012 The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Amend federal tax return 2012   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. Amend federal tax return 2012   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Amend federal tax return 2012 Property inherited from a decedent who died in 2010. Amend federal tax return 2012   If you inherited property from a decedent who died in 2010, different rules may apply. Amend federal tax return 2012 See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Amend federal tax return 2012 Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. Amend federal tax return 2012 Partner's basis. Amend federal tax return 2012   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. Amend federal tax return 2012 However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Amend federal tax return 2012 For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Amend federal tax return 2012 Shareholder's basis. Amend federal tax return 2012   The basis of property distributed by a corporation to a shareholder is its fair market value. Amend federal tax return 2012 For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. 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