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Amended Tax Form

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Amended Tax Form

Amended tax form Index A Activities not for profit, Hobby Expenses Adjustments to gross income Armed forces reservists' travel expenses, Armed Forces reservists traveling more than 100 miles from home. Amended tax form Performing artists, Performing Artists State or local government officials paid on fee basis, Officials Paid on a Fee Basis Unlawful discrimination claims, Unlawful discrimination claims. Amended tax form Administrative fees IRA trustees, Trustee's Administrative Fees for IRA Adoption expenses, Adoption Expenses Amortizable bond premium, Amortizable Premium on Taxable Bonds, More information. Amended tax form Appraisal fees, Appraisal Fees Armed forces Military uniforms, Military uniforms. Amended tax form Reservists, travel expenses, Armed Forces reservists traveling more than 100 miles from home. Amended tax form Assistance (see Tax help) B Bad debts, Business Bad Debt Bank accounts Check-writing fees, Check-Writing Fees on Personal Account Losses on deposits, Loss on Deposits Bonds Amortizable premium, Amortizable Premium on Taxable Bonds Breach of contract Damages, Damages for Breach of Employment Contract Bribes, List of Nondeductible Expenses Burial expenses, List of Nondeductible Expenses Business expenses (see Employee business expenses) Business gifts, Gift expenses. Amended tax form C Campaign contributions, Lobbying and political activities. Amended tax form , Political Contributions Campaign expenses, Campaign Expenses Capital expenditures, Capital Expenses Casualty losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Cell phones, Depreciation on Computers Chambers of Commerce dues, Lobbying and political activities. Amended tax form Check-writing fees, Check-Writing Fees on Personal Account Claim of right repayments, Repayments Under Claim of Right Clerical help, deductibility of, Clerical Help and Office Rent Clothes Protective, Protective clothing. Amended tax form Work, Work Clothes and Uniforms Club dues, Club Dues Commissions, Commissions Commuting expenses, Commuting Expenses Computers Depreciation, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Convenience fees, Credit or Debit Card Convenience Fees Criminal prosecutions Travel expenses for federal staff, Federal crime investigation and prosecution. Amended tax form D Damages Breach of employment contract, Damages for Breach of Employment Contract Deposits Losses on, Loss on Deposits Depreciation Computers, Depreciation on Computers, Depreciation on Home Computer, Excess Deductions of an Estate Disabilities, persons with Work-related expenses, Impairment-Related Work Expenses Dividends Fees to collect, Fees To Collect Interest and Dividends Service charges on reinvestment plans, Service Charges on Dividend Reinvestment Plans Dues, Dues to Chambers of Commerce and Professional Societies (see also Expenses) (see also Fees) Chambers of Commerce, Dues to Chambers of Commerce and Professional Societies Club, Club Dues Lobbying, Dues used for lobbying. Amended tax form Professional societies, Dues to Chambers of Commerce and Professional Societies Union, Union Dues and Expenses E Education, Educator Expenses, Education Expenses During Unemployment Education expenses, Work-Related Education, More information. Amended tax form Employee business expenses Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Amended tax form Performing artists, Performing Artists Unreimbursed, Unreimbursed Employee Expenses Employment Agency fees, Employment and outplacement agency fees. Amended tax form Breach of contract, Damages for Breach of Employment Contract Entertainers and musicians (see Performing artists) Entertainment expenses, Meals and entertainment. Amended tax form Estates Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Expenses, Dues to Chambers of Commerce and Professional Societies, Education Expenses During Unemployment (see also Dues) (see also Fees) Adoption, Adoption Expenses Campaign, Campaign Expenses Capital, Capital Expenses Commuting, Commuting Expenses Education Work-related, Work-Related Education Educator, Educator Expenses Qualified, Qualified expenses. Amended tax form Educator Expenses, Eligible educator. Amended tax form Employee business (see Employee business expenses) Entertainment, Meals and entertainment. Amended tax form Funeral and burial, List of Nondeductible Expenses Gifts, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging, Gift expenses. Amended tax form Health spa, Health Spa Expenses Hobby, Hobby Expenses Home office, Home Office Impairment-related, Impairment-Related Work Expenses Investment, Investment Fees and Expenses, Investment-Related Seminars Job search, Job Search Expenses Legal (see Legal expenses) Local lodging, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Meals, Meals and entertainment. Amended tax form , Lunches With Co-workers Meals and entertainment, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Nondeductible, Nondeductible Expenses Over limit, educator, Educator expenses over limit. Amended tax form Personal, Nondeductible Expenses Production of income, Other Expenses Professional promotion, Professional Reputation Tax-exempt income, Tax-Exempt Income Expenses Travel and transportation, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Travel as education, Travel as education. Amended tax form F Federal estate tax, Federal Estate Tax on Income in Respect of a Decedent Fees, Dues to Chambers of Commerce and Professional Societies (see also Dues) (see also Expenses) Appraisal, Appraisal Fees Check-writing, Check-Writing Fees on Personal Account Employment and outplacement agency, Employment and outplacement agency fees. Amended tax form Investment, Fees To Collect Interest and Dividends, Investment Fees and Expenses IRA trustee, Trustee's Administrative Fees for IRA Legal (see Legal expenses) License, Licenses and Regulatory Fees Professional accreditation, Professional Accreditation Fees Fines, Fines or Penalties Form 2106 Employee business expenses, Form 2106 and Form 2106-EZ. Amended tax form Form 2106-EZ Employee business expenses, Form 2106 and Form 2106-EZ. Amended tax form Form 4562 Depreciation and amortization, Reporting your depreciation deduction. Amended tax form , Depreciation. Amended tax form , Computer used in a home office. Amended tax form Free tax services, Free help with your tax return. Amended tax form Funeral expenses, List of Nondeductible Expenses G Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Government employees Federal criminal investigation and prosecution travel expenses, Federal crime investigation and prosecution. Amended tax form State or local government officials paid on fee basis, Officials Paid on a Fee Basis H Health spa, Health Spa Expenses Help (see Tax help) Hobbies, Hobby Expenses Home Security system, Home Security System Telephone service, Residential Telephone Service Home office Computers, Computer used in a home office. Amended tax form Expenses, Home Office Principal place of business, Principal place of business. Amended tax form Travel and transportation expenses, Home office. Amended tax form I Impairment-related work expenses, Impairment-Related Work Expenses Income aid payment, Repayment of Income Aid Payment Income in respect of decedent Estate tax, Federal Estate Tax on Income in Respect of a Decedent Individual retirement arrangements (IRAs) Trustees' fees, Trustee's Administrative Fees for IRA Insurance Business liability, Business Liability Insurance Life insurance, Life Insurance Premiums Malpractice, Unreimbursed Employee Expenses Personal disability, List of Nondeductible Expenses Interest income Fees to collect, Fees To Collect Interest and Dividends Investments Annuity, unrecovered investment in, Unrecovered Investment in Annuity Deposits, losses on, Loss on Deposits Fees and expenses, Investment Fees and Expenses Seminars, Investment-Related Seminars Itemized deductions Deductions not subject to 2% limit, Deductions Not Subject to the 2% Limit Deductions subject to 2% limit, Introduction, Deductions Subject to the 2% Limit How to report, How To Report J Job search, Job Search Expenses, Travel and transportation expenses. Amended tax form K Kickbacks, List of Nondeductible Expenses L Legal expenses Job-related, Legal Fees Personal, Personal Legal Expenses Political campaigns, Legal fees. Amended tax form Production of income, Legal Expenses Unlawful discrimination claims, Legal Expenses Licenses Fees, Licenses and Regulatory Fees Life insurance, Life Insurance Premiums Lobbying, Lobbying and political activities. Amended tax form , Lobbying Expenses, Exceptions. Amended tax form Local transportation, Local transportation expenses. Amended tax form Losses Casualties and thefts, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Deposits, Loss on Deposits Gambling, Gambling Losses Up to the Amount of Gambling Winnings IRA, Loss on IRA Mislaid cash or property, Lost or Mislaid Cash or Property Partnership, Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 Roth IRA, Loss on IRA M Mail carriers, rural, Rural Mail Carriers' Vehicle Expenses Malpractice insurance, Unreimbursed Employee Expenses Meal and lodging expenses, Meals and entertainment. Amended tax form Lunches with coworkers, Lunches With Co-workers Working late, Meals While Working Late Medical examinations, Unreimbursed Employee Expenses Mileage rate, What's New Missing children, photographs of, Reminders Mutual funds Indirect deductions, Indirect Deductions of Pass-Through Entities N Nondeductible expenses, Nondeductible Expenses, Wristwatches Not-for-profit activities, Hobby Expenses O Occupational taxes, Occupational Taxes Office Home (see Home office) Rent, Clerical Help and Office Rent Outplacement agency fees, Employment and outplacement agency fees. Amended tax form P Partnerships Indirect deductions, Indirect Deductions of Pass-Through Entities Pass-through entities, Indirect Deductions of Pass-Through Entities Passport expense, Unreimbursed Employee Expenses Penalties, Fines or Penalties Performing artists, Performing Artists Work clothes, Work Clothes and Uniforms Personal expenses, Nondeductible Expenses, Wristwatches Political contributions, Lobbying and political activities. Amended tax form , Political Contributions Campaign expenses, Campaign Expenses Ponzi-type investment schemes, Losses From Ponzi-type Investment Schemes Postal workers, Rural Mail Carriers' Vehicle Expenses Production of income expenses, Other Expenses, Loss on IRA Professional accreditation fees, Professional Accreditation Fees Professional journals, Unreimbursed Employee Expenses Professional reputation and marketing, Professional Reputation Professional societies dues, Lobbying and political activities. Amended tax form Prosecution travel expenses, Federal crime investigation and prosecution. Amended tax form Protective clothing, Protective clothing. Amended tax form Publications (see Tax help) R Recordkeeping requirements Computer used for home and business, Depreciation on Computers Deductions, to verify, Introduction Gambling winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Home office, Home Office Relief fund contributions, Relief Fund Contributions Rent Office, Clerical Help and Office Rent Safe deposit box, Safe Deposit Box Rent Repayments Claim of right, Repayments Under Claim of Right Income, Repayments of Income Income aid payments, Unreimbursed Employee Expenses Social Security benefits, Repayments of Social Security Benefits Reporting requirements Armed Forces reservists, Armed Forces reservists. Amended tax form Computer used in a home office, Computer used in a home office. Amended tax form Depreciation, Depreciation. Amended tax form Form 2106 and Form 2106-EZ, Form 2106 and Form 2106-EZ. Amended tax form Impairment-related work expenses, Impairment-related work expenses. Amended tax form Itemized deductions, How To Report Tax preparation fees, Tax preparation fees. Amended tax form Research expenses, Research Expenses of a College Professor Résumé, Résumé. Amended tax form Rural mail carriers, Rural Mail Carriers' Vehicle Expenses S S corporations Indirect deductions, Indirect Deductions of Pass-Through Entities Safe deposit box, Safe Deposit Box Rent Security systems, home, Home Security System Seminars, investment-related, Investment-Related Seminars Service charges on dividend reinvestment plans, Service Charges on Dividend Reinvestment Plans Social Security repayments, Repayments of Social Security Benefits State or local governments Officials paid on fee basis, Officials Paid on a Fee Basis Stockholders' meeting expenses, Stockholders' Meetings T Tax help, How To Get Tax Help Tax-exempt income expenses, Tax-Exempt Income Expenses Taxes Estate tax, Federal Estate Tax on Income in Respect of a Decedent Occupational, Occupational Taxes Telephones Cell phone, Depreciation on Computers Residential service, Residential Telephone Service Theft losses, Casualty and Theft Losses, Casualty and Theft Losses of Income-Producing Property Tools, Tools Used in Your Work Travel and transportation expenses, Local lodging. Amended tax form , Additional information. Amended tax form Another individual, paid by taxpayer, Travel Expenses for Another Individual Armed forces reservists, Armed Forces reservists traveling more than 100 miles from home. Amended tax form Commuting, Commuting Expenses Criminal investigations and prosecutions, Federal crime investigation and prosecution. Amended tax form Education, Travel as education. Amended tax form Indefinite work assignments, Indefinite work assignment. Amended tax form Job search, Travel and transportation expenses. Amended tax form Local transportation, Local transportation expenses. Amended tax form Research, Research Expenses of a College Professor Temporary work assignments, Temporary work assignment. Amended tax form Trustees IRA administrative fees, Trustee's Administrative Fees for IRA TTY/TDD information, How To Get Tax Help U Unemployment and education expenses, Education Expenses During Unemployment Unemployment benefit fund contributions, Voluntary Unemployment Benefit Fund Contributions Uniforms, military, Military uniforms. Amended tax form Union dues, Union Dues and Expenses Unreimbursed employee expenses, Unreimbursed Employee Expenses, Military uniforms. Amended tax form W Wagering winnings and losses, Gambling Losses Up to the Amount of Gambling Winnings Work Clothes and uniforms, Work Clothes and Uniforms Impairment-related expenses, Impairment-Related Work Expenses Supplies, Unreimbursed Employee Expenses Tools, Unreimbursed Employee Expenses, Tools Used in Your Work Travel and transportation expenses, Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging Wristwatches, List of Nondeductible Expenses, Wristwatches Prev  Up     Home   More Online Publications
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The Amended Tax Form

Amended tax form 8. Amended tax form   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Amended tax form Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Amended tax form It is similar to the straight line method of depreciation. Amended tax form The various amortizable costs covered in this chapter are included in the list below. Amended tax form However, this chapter does not discuss amortization of bond premium. Amended tax form For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Amended tax form Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Amended tax form How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Amended tax form To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Amended tax form For example, in 2012, you began to amortize a lease. Amended tax form In 2013, you began to amortize a second lease. Amended tax form Report amortization from the new lease on line 42 of your 2013 Form 4562. Amended tax form Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Amended tax form If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Amended tax form Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Amended tax form Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Amended tax form Generally, you recover costs for particular assets through depreciation deductions. Amended tax form However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Amended tax form For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Amended tax form For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Amended tax form The costs that are not deducted currently can be amortized ratably over a 180-month period. Amended tax form The amortization period starts with the month you begin operating your active trade or business. Amended tax form You are not required to attach a statement to make this election. Amended tax form You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Amended tax form Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Amended tax form See Regulations sections 1. Amended tax form 195-1, 1. Amended tax form 248-1, and 1. Amended tax form 709-1. Amended tax form For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Amended tax form Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Amended tax form If the election is made, you must attach any statement required by Regulations sections 1. Amended tax form 195-1(b), 1. Amended tax form 248-1(c), and 1. Amended tax form 709-1(c), as in effect before September 9, 2008. Amended tax form Note. Amended tax form You can apply the provisions of Regulations sections 1. Amended tax form 195-1, 1. Amended tax form 248-1, and 1. Amended tax form 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Amended tax form Otherwise, the provisions under Regulations sections 1. Amended tax form 195-1(b), 1. Amended tax form 248-1(c), and 1. Amended tax form 709-1(c), as in effect before September 9, 2008, will apply. Amended tax form For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Amended tax form See How To Make the Election , later. Amended tax form The cost must qualify as one of the following. Amended tax form A business start-up cost. Amended tax form An organizational cost for a corporation. Amended tax form An organizational cost for a partnership. Amended tax form Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Amended tax form Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Amended tax form Qualifying costs. Amended tax form   A start-up cost is amortizable if it meets both of the following tests. Amended tax form It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Amended tax form It is a cost you pay or incur before the day your active trade or business begins. Amended tax form   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Amended tax form Advertisements for the opening of the business. Amended tax form Salaries and wages for employees who are being trained and their instructors. Amended tax form Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Amended tax form Salaries and fees for executives and consultants, or for similar professional services. Amended tax form Nonqualifying costs. Amended tax form   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Amended tax form See Research and Experimental Costs , later. Amended tax form Purchasing an active trade or business. Amended tax form   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Amended tax form These are costs that help you decide whether to purchase a business. Amended tax form Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Amended tax form Example. Amended tax form On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Amended tax form They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Amended tax form In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Amended tax form The letter stated that a binding commitment would result only after a purchase agreement was signed. Amended tax form The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Amended tax form On October 22nd, you signed a purchase agreement with XYZ, Inc. Amended tax form All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Amended tax form Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Amended tax form Disposition of business. Amended tax form   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Amended tax form However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Amended tax form Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Amended tax form Qualifying costs. Amended tax form   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Amended tax form   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Amended tax form   Examples of organizational costs include: The cost of temporary directors. Amended tax form The cost of organizational meetings. Amended tax form State incorporation fees. Amended tax form The cost of legal services. Amended tax form Nonqualifying costs. Amended tax form   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Amended tax form Costs associated with the transfer of assets to the corporation. Amended tax form Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Amended tax form Qualifying costs. Amended tax form   A partnership can amortize an organizational cost only if it meets all the following tests. Amended tax form It is for the creation of the partnership and not for starting or operating the partnership trade or business. Amended tax form It is chargeable to a capital account (see chapter 1). Amended tax form It could be amortized over the life of the partnership if the partnership had a fixed life. Amended tax form It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Amended tax form However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Amended tax form It is for a type of item normally expected to benefit the partnership throughout its entire life. Amended tax form   Organizational costs include the following fees. Amended tax form Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Amended tax form Accounting fees for services incident to the organization of the partnership. Amended tax form Filing fees. Amended tax form Nonqualifying costs. Amended tax form   The following costs cannot be amortized. Amended tax form The cost of acquiring assets for the partnership or transferring assets to the partnership. Amended tax form The cost of admitting or removing partners, other than at the time the partnership is first organized. Amended tax form The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Amended tax form The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Amended tax form These “syndication fees” are capital expenses that cannot be depreciated or amortized. Amended tax form Liquidation of partnership. Amended tax form   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Amended tax form However, these costs can be deducted only to the extent they qualify as a loss from a business. Amended tax form How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Amended tax form You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Amended tax form Once you choose an amortization period, you cannot change it. Amended tax form To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Amended tax form The result is the amount you can deduct for each month. Amended tax form Cash method partnership. Amended tax form   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Amended tax form However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Amended tax form How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Amended tax form You may also be required to attach an accompanying statement (described later) to your return. Amended tax form For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Amended tax form Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Amended tax form 195-1, 1. Amended tax form 248-1, and 1. Amended tax form 709-1, you must also attach an accompanying statement to elect to amortize the costs. Amended tax form If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Amended tax form See Starting a Business , earlier, for more information. Amended tax form Generally, you must file the return by the due date (including any extensions). Amended tax form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Amended tax form For more information, see the instructions for Part VI of Form 4562. Amended tax form You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Amended tax form Note. Amended tax form The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Amended tax form If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Amended tax form A shareholder or partner cannot make this election. Amended tax form You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Amended tax form Only the corporation or partnership can amortize these costs. Amended tax form However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Amended tax form These costs qualify as business start-up costs if you acquire the partnership interest. Amended tax form Start-up costs election statement. Amended tax form   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Amended tax form A description of the business to which the start-up costs relate. Amended tax form A description of each start-up cost incurred. Amended tax form The month your active business began (or was acquired). Amended tax form The number of months in your amortization period (which is generally 180 months). Amended tax form Filing the statement early. Amended tax form   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Amended tax form If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Amended tax form Revised statement. Amended tax form   You can file a revised statement to include any start-up costs not included in your original statement. Amended tax form However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Amended tax form You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Amended tax form Organizational costs election statement. Amended tax form   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Amended tax form A description of each cost. Amended tax form The amount of each cost. Amended tax form The date each cost was incurred. Amended tax form The month your corporation or partnership began active business (or acquired the business). Amended tax form The number of months in your amortization period (which is generally 180 months). Amended tax form Partnerships. Amended tax form   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Amended tax form   You do not need to separately list any partnership organizational cost that is less than $10. Amended tax form Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Amended tax form   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Amended tax form Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Amended tax form The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Amended tax form However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Amended tax form For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Amended tax form How to amortize. Amended tax form   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Amended tax form Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Amended tax form You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Amended tax form You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Amended tax form See Anti-Churning Rules, later. Amended tax form Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Amended tax form The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Amended tax form You cannot deduct amortization for the month you dispose of the intangible. Amended tax form If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Amended tax form You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Amended tax form Tax-exempt use property subject to a lease. Amended tax form   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Amended tax form Cost attributable to other property. Amended tax form   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Amended tax form For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Amended tax form Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Amended tax form Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Amended tax form You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Amended tax form Goodwill. Amended tax form   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Amended tax form Going concern value. Amended tax form   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Amended tax form It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Amended tax form It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Amended tax form Workforce in place, etc. Amended tax form   This includes the composition of a workforce (for example, its experience, education, or training). Amended tax form It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Amended tax form   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Amended tax form Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Amended tax form Business books and records, etc. Amended tax form   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Amended tax form It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Amended tax form Patents, copyrights, etc. Amended tax form   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Amended tax form Customer-based intangible. Amended tax form   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Amended tax form For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Amended tax form A customer base. Amended tax form A circulation base. Amended tax form An undeveloped market or market growth. Amended tax form Insurance in force. Amended tax form A mortgage servicing contract. Amended tax form An investment management contract. Amended tax form Any other relationship with customers involving the future provision of goods or services. Amended tax form   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Amended tax form Supplier-based intangible. Amended tax form   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Amended tax form The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Amended tax form Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Amended tax form Also, see Assets That Are Not Section 197 Intangibles below. Amended tax form Government-granted license, permit, etc. Amended tax form   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Amended tax form For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Amended tax form Covenant not to compete. Amended tax form   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Amended tax form An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Amended tax form   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Amended tax form Franchise, trademark, or trade name. Amended tax form   A franchise, trademark, or trade name is a section 197 intangible. Amended tax form You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Amended tax form For information on currently deductible contingent payments, see chapter 11. Amended tax form Professional sports franchise. Amended tax form   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Amended tax form Contract for the use of, or a term interest in, a section 197 intangible. Amended tax form   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Amended tax form It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Amended tax form Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Amended tax form Any interest in a corporation, partnership, trust, or estate. Amended tax form Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Amended tax form Any interest in land. Amended tax form Most computer software. Amended tax form (See Computer software , later. Amended tax form ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Amended tax form An interest in a film, sound recording, video tape, book, or similar property. Amended tax form A right to receive tangible property or services under a contract or from a governmental agency. Amended tax form An interest in a patent or copyright. Amended tax form Certain rights that have a fixed duration or amount. Amended tax form (See Rights of fixed duration or amount , later. Amended tax form ) An interest under either of the following. Amended tax form An existing lease or sublease of tangible property. Amended tax form A debt that was in existence when the interest was acquired. Amended tax form A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Amended tax form Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Amended tax form Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Amended tax form You generally must use the straight line method over its useful life. Amended tax form For certain intangibles, the depreciation period is specified in the law and regulations. Amended tax form For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Amended tax form For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Amended tax form Computer software. Amended tax form   Section 197 intangibles do not include the following types of computer software. Amended tax form Software that meets all the following requirements. Amended tax form It is, or has been, readily available for purchase by the general public. Amended tax form It is subject to a nonexclusive license. Amended tax form It has not been substantially modified. Amended tax form This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Amended tax form Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Amended tax form Computer software defined. Amended tax form   Computer software includes all programs designed to cause a computer to perform a desired function. Amended tax form It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Amended tax form Rights of fixed duration or amount. Amended tax form   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Amended tax form However, this does not apply to the following intangibles. Amended tax form Goodwill. Amended tax form Going concern value. Amended tax form A covenant not to compete. Amended tax form A franchise, trademark, or trade name. Amended tax form A customer-related information base, customer-based intangible, or similar item. Amended tax form Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Amended tax form You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Amended tax form If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Amended tax form Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Amended tax form Amortize these costs using the rules of Revenue Procedure 2004-36. Amended tax form For more information, see Revenue Procedure 2004-36, 2004-24 I. Amended tax form R. Amended tax form B. Amended tax form 1063, available at  www. Amended tax form irs. Amended tax form gov/irb/2004-24_IRB/ar16. Amended tax form html. Amended tax form A change in the treatment of creative property costs is a change in method of accounting. Amended tax form Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Amended tax form These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Amended tax form Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Amended tax form You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Amended tax form You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Amended tax form You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Amended tax form This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Amended tax form See Related person , later, for more information. Amended tax form Exceptions. Amended tax form   The anti-churning rules do not apply in the following situations. Amended tax form You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Amended tax form The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Amended tax form This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Amended tax form The gain-recognition exception, discussed later, applies. Amended tax form Related person. Amended tax form   For purposes of the anti-churning rules, the following are related persons. Amended tax form An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Amended tax form ), and lineal descendants (children, grandchildren, etc. Amended tax form ). Amended tax form A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Amended tax form Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Amended tax form (For an exception, see section 1. Amended tax form 197-2(h)(6)(iv) of the regulations. Amended tax form ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Amended tax form The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Amended tax form The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Amended tax form The executor and beneficiary of an estate. Amended tax form A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Amended tax form A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Amended tax form Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Amended tax form Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Amended tax form A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Amended tax form Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Amended tax form When to determine relationship. Amended tax form   Persons are treated as related if the relationship existed at the following time. Amended tax form In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Amended tax form In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Amended tax form Ownership of stock. Amended tax form   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Amended tax form Rule 1. Amended tax form   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Amended tax form Rule 2. Amended tax form   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Amended tax form Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Amended tax form Rule 3. Amended tax form   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Amended tax form Rule 4. Amended tax form   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Amended tax form Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Amended tax form Gain-recognition exception. Amended tax form   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Amended tax form That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Amended tax form That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Amended tax form See chapter 2 in Publication 544 for information on making this choice. Amended tax form   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Amended tax form Notification. Amended tax form   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Amended tax form Anti-abuse rule. Amended tax form   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Amended tax form To avoid the requirement that the intangible be acquired after August 10, 1993. Amended tax form To avoid any of the anti-churning rules. Amended tax form More information. Amended tax form   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Amended tax form 197-2(h). Amended tax form Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Amended tax form See Amended Return , next. Amended tax form If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Amended tax form See Changing Your Accounting Method , later. Amended tax form Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Amended tax form A mathematical error made in any year. Amended tax form A posting error made in any year. Amended tax form An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Amended tax form When to file. Amended tax form   If an amended return is allowed, you must file it by the later of the following dates. Amended tax form 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Amended tax form (A return filed early is considered filed on the due date. Amended tax form ) 2 years from the time you paid your tax for that year. Amended tax form Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Amended tax form File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Amended tax form The following are examples of a change in method of accounting for amortization. Amended tax form A change in the amortization method, period of recovery, or convention of an amortizable asset. Amended tax form A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Amended tax form A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Amended tax form Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Amended tax form An adjustment in the useful life of an amortizable asset. Amended tax form Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Amended tax form Any change in the placed-in-service date of an amortizable asset. Amended tax form See Regulations section 1. Amended tax form 446-1(e)(2)(ii)(a) for more information and examples. Amended tax form Automatic approval. Amended tax form   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Amended tax form For a list of automatic accounting method changes, see the Instructions for Form 3115. Amended tax form Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Amended tax form For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Amended tax form See Revenue Procedure 2006-12, 2006-3 I. Amended tax form R. Amended tax form B. Amended tax form 310, available at  www. Amended tax form irs. Amended tax form gov/irb/2006-03_IRB/ar14. Amended tax form html. Amended tax form  See Revenue Procedure 2006-37, 2006-38 I. Amended tax form R. Amended tax form B. Amended tax form 499, available at  www. Amended tax form irs. Amended tax form gov/irb/2006-38_IRB/ar10. Amended tax form html. Amended tax form  See Revenue Procedure 2008-52, 2008-36 I. Amended tax form R. Amended tax form B. Amended tax form 587, available at www. Amended tax form irs. Amended tax form gov/irb/2008-36_IRB/ar09. Amended tax form html. Amended tax form  See Revenue Procedure 2009-39, 2009-38 I. Amended tax form R. Amended tax form B. Amended tax form 371, available at  www. Amended tax form irs. Amended tax form gov/irb/2009-38_IRB/ar08. Amended tax form html. Amended tax form  See Revenue Procedure 2011-14, 2011-4 I. Amended tax form R. Amended tax form B. Amended tax form 330, available at  www. Amended tax form irs. Amended tax form gov/irb/2011-04_IRB/ar08. Amended tax form html. Amended tax form  See Revenue Procedure 2011-22, 2011-18 I. Amended tax form R. Amended tax form B. Amended tax form 737, available at  www. Amended tax form irs. Amended tax form gov/irb/2011-18_IRB/ar08. Amended tax form html. Amended tax form Also, see Revenue Procedure 2012-39, 2012-41 I. Amended tax form R. Amended tax form B. Amended tax form 470 available at www. Amended tax form irs. Amended tax form gov/irb/2012-41_IRB/index. Amended tax form html. Amended tax form Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Amended tax form If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Amended tax form If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Amended tax form Any remaining gain, or any loss, is a section 1231 gain or loss. Amended tax form If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Amended tax form For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Amended tax form Nondeductible loss. Amended tax form   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Amended tax form Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Amended tax form Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Amended tax form The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Amended tax form The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Amended tax form Covenant not to compete. Amended tax form   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Amended tax form Nonrecognition transfers. Amended tax form   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Amended tax form You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Amended tax form Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Amended tax form   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Amended tax form Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Amended tax form Example. Amended tax form You own a section 197 intangible you have amortized for 4 full years. Amended tax form It has a remaining unamortized basis of $30,000. Amended tax form You exchange the asset plus $10,000 for a like-kind section 197 intangible. Amended tax form The nonrecognition provisions of like-kind exchanges apply. Amended tax form You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Amended tax form You amortize the other $10,000 of adjusted basis over a new 15-year period. Amended tax form For more information, see Regulations section 1. Amended tax form 197-2(g). Amended tax form Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Amended tax form See Reforestation Costs in chapter 7. Amended tax form You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Amended tax form There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Amended tax form The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Amended tax form A partner, shareholder, or beneficiary cannot make that election. Amended tax form A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Amended tax form , of a partnership or S corporation. Amended tax form The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Amended tax form Qualifying costs. Amended tax form   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Amended tax form Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Amended tax form They include costs for the following items. Amended tax form Site preparation. Amended tax form Seeds or seedlings. Amended tax form Labor. Amended tax form Tools. Amended tax form Depreciation on equipment used in planting and seeding. Amended tax form Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Amended tax form Qualified timber property. Amended tax form   Qualified timber property is property that contains trees in significant commercial quantities. Amended tax form It can be a woodlot or other site that you own or lease. Amended tax form The property qualifies only if it meets all of the following requirements. Amended tax form It is located in the United States. Amended tax form It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Amended tax form It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Amended tax form Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Amended tax form Amortization period. Amended tax form   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Amended tax form You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Amended tax form Life tenant and remainderman. Amended tax form   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Amended tax form Any remainder interest in the property is ignored for amortization purposes. Amended tax form Recapture. Amended tax form   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Amended tax form See chapter 3 of Publication 544 for more information. Amended tax form How to make the election. Amended tax form   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Amended tax form A description of the costs and the dates you incurred them. Amended tax form A description of the type of timber being grown and the purpose for which it is grown. Amended tax form Attach a separate statement for each property for which you amortize reforestation costs. Amended tax form   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Amended tax form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Amended tax form Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Amended tax form 9100-2” on Form 4562. Amended tax form File the amended return at the same address you filed the original return. Amended tax form Revoking the election. Amended tax form   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Amended tax form Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Amended tax form Please provide your daytime telephone number (optional), in case we need to contact you. Amended tax form You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Amended tax form    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Amended tax form NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Amended tax form These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Amended tax form For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Amended tax form If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Amended tax form Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Amended tax form However, see Atmospheric pollution control facilities for an exception. Amended tax form The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Amended tax form Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Amended tax form You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Amended tax form See chapter 3 of Publication 946. Amended tax form A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Amended tax form The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Amended tax form The facility must be certified by state and federal certifying authorities. Amended tax form The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Amended tax form Also, it must not significantly change the nature of the manufacturing or production process or facility. Amended tax form The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Amended tax form The federal certifying authority will describe the nature of the potential cost recovery. Amended tax form You must then reduce the amortizable basis of the facility by this potential recovery. Amended tax form New identifiable treatment facility. Amended tax form   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Amended tax form It does not include a building and its structural components unless the building is exclusively a treatment facility. Amended tax form Atmospheric pollution control facilities. Amended tax form   Certain atmospheric pollution control facilities can be amortized over 84 months. Amended tax form To qualify, the following must apply. Amended tax form The facility must be acquired and placed in service after April 11, 2005. Amended tax form If acquired, the original use must begin with you after April 11, 2005. Amended tax form The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Amended tax form If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Amended tax form Basis reduction for corporations. Amended tax form   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Amended tax form More information. Amended tax form   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Amended tax form Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Amended tax form If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Amended tax form The amortization period begins the month you first receive an economic benefit from the costs. Amended tax form For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Amended tax form Optional write-off method. Amended tax form   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Amended tax form For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Amended tax form Costs you can amortize. Amended tax form   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Amended tax form You paid or incurred the costs in your trade or business. Amended tax form You are not deducting the costs currently. Amended tax form How to make the election. Amended tax form   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Amended tax form Generally, you must file the return by the due date (including extensions). Amended tax form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Amended tax form Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Amended tax form 9100-2” on Form 4562. Amended tax form File the amended return at the same address you filed the original return. Amended tax form   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Amended tax form Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Amended tax form If you make this election, there is no AMT adjustment. Amended tax form The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Amended tax form How to make the election. Amended tax form   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Amended tax form   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Amended tax form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Amended tax form Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Amended tax form 9100-2” on Form 4562. Amended tax form File the amended return at the same address you filed the original return. Amended tax form Revoking the election. Amended tax form   You must obtain consent from the IRS to revoke your election. Amended tax form Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Amended tax form The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Amended tax form If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Amended tax form Prev  Up  Next   Home   More Online Publications