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Did Not File 2012 Taxes

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Did Not File 2012 Taxes

Did not file 2012 taxes 8. Did not file 2012 taxes   Distributions and Rollovers Table of Contents DistributionsMinimum Required Distributions No Special 10-Year Tax Option Transfer of Interest in 403(b) ContractAfter-tax contributions. Did not file 2012 taxes Permissive service credit. Did not file 2012 taxes Tax-Free RolloversHardship exception to rollover rules. Did not file 2012 taxes Eligible retirement plans. Did not file 2012 taxes Nonqualifying distributions. Did not file 2012 taxes Second rollover. Did not file 2012 taxes Gift Tax Distributions Permissible distributions. Did not file 2012 taxes   Generally, a distribution cannot be made from a 403(b) account until the employee: Reaches age 59½, Has a severance from employment, Dies, Becomes disabled, In the case of elective deferrals, encounters financial hardship, or Has a qualified reservist distribution. Did not file 2012 taxes In most cases, the payments you receive or that are made available to you under your 403(b) account are taxable in full as ordinary income. Did not file 2012 taxes In general, the same tax rules apply to distributions from 403(b) plans that apply to distributions from other retirement plans. Did not file 2012 taxes These rules are explained in Publication 575. Did not file 2012 taxes Publication 575 also discusses the additional tax on early distributions from retirement plans. Did not file 2012 taxes Retired public safety officers. Did not file 2012 taxes   If you are an eligible retired public safety officer, distributions of up to $3,000, made directly from your 403(b) plan to pay accident, health, or long-term care insurance, are not included in your taxable income. Did not file 2012 taxes The premiums can be for you, your spouse, or your dependents. Did not file 2012 taxes   A public safety officer is a law enforcement officer, fire fighter, chaplain, or member of a rescue squad or ambulance crew. Did not file 2012 taxes   For additional information, see Publication 575. Did not file 2012 taxes Distribution for active reservist. Did not file 2012 taxes   The 10% penalty for early withdrawals will not apply to a qualified reservist distribution attributable to elective deferrals from a 403(b) plan. Did not file 2012 taxes A qualified reservist distribution is a distribution that is made: To an individual who is a reservist or national guardsman and who was ordered or called to active duty for a period in excess of 179 days or for an indefinite period; and During the period beginning on the date of the order or call to duty and ending at the close of the active duty period. Did not file 2012 taxes Minimum Required Distributions You must receive all, or at least a certain minimum, of your interest accruing after 1986 in the 403(b) plan by April 1 of the calendar year following the later of the calendar year in which you become age 70½, or the calendar year in which you retire. Did not file 2012 taxes Check with your employer, plan administrator, or provider to find out whether this rule also applies to pre-1987 accruals. Did not file 2012 taxes If not, a minimum amount of these accruals must begin to be distributed by the later of the end of the calendar year in which you reach age 75 or April 1 of the calendar year following retirement. Did not file 2012 taxes For each year thereafter, the minimum distribution must be made by the last day of the year. Did not file 2012 taxes If you do not receive the required minimum distribution, you are subject to a nondeductible 50% excise tax on the difference between the required minimum distribution and the amount actually distributed. Did not file 2012 taxes No Special 10-Year Tax Option A distribution from a 403(b) plan does not qualify as a lump-sum distribution. Did not file 2012 taxes This means you cannot use the special 10-year tax option to calculate the taxable portion of a 403(b) distribution. Did not file 2012 taxes For more information, see Publication 575. Did not file 2012 taxes Transfer of Interest in 403(b) Contract Contract exchanges. Did not file 2012 taxes   If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a contract exchange. Did not file 2012 taxes This was previously known as a 90-24 transfer. Did not file 2012 taxes A contract exchange is similar to a 90-24 transfer with one major difference. Did not file 2012 taxes Previously, you were able to accomplish the transfer without your employer’s involvement. Did not file 2012 taxes After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer’s involvement. Did not file 2012 taxes In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. Did not file 2012 taxes Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange. Did not file 2012 taxes   Transfers that do not satisfy this rule are plan distributions and are generally taxable as ordinary income. Did not file 2012 taxes Plan-to-plan transfers. Did not file 2012 taxes   You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. Did not file 2012 taxes Both the initial plan and the receiving plan must provide for transfers. Did not file 2012 taxes Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. Did not file 2012 taxes The new plan’s restrictions on distributions must be the same or stricter than those of the original plan. Did not file 2012 taxes Tax-free transfers for certain cash distributions. Did not file 2012 taxes   A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. Did not file 2012 taxes To receive tax-free treatment, you must do all of the following: Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state. Did not file 2012 taxes Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution. Did not file 2012 taxes Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions. Did not file 2012 taxes   In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information: The gross amount of cash distributed under the old contract. Did not file 2012 taxes The amount of cash reinvested in the new contract. Did not file 2012 taxes Your investment in the old contract on the date you receive your first cash distribution. Did not file 2012 taxes   Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash. Did not file 2012 taxes A copy of the statement you gave the new insurer. Did not file 2012 taxes A statement that includes: The words ELECTION UNDER REV. Did not file 2012 taxes PROC. Did not file 2012 taxes 92-44, The name of the company that issued the new contract, and The new policy number. Did not file 2012 taxes Direct trustee-to-trustee transfer. Did not file 2012 taxes   If you make a direct trustee-to-trustee transfer, from your governmental 403(b) account to a defined benefit governmental plan, it may not be includible in gross income. Did not file 2012 taxes   The transfer amount is not includible in gross income if it is made to: Purchase permissive service credits, or Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state. Did not file 2012 taxes After-tax contributions. Did not file 2012 taxes   For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a 403(b) plan and a defined benefit plan, IRA, or a defined contribution plan. Did not file 2012 taxes If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer. Did not file 2012 taxes Permissive service credit. Did not file 2012 taxes   A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that does not exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan. Did not file 2012 taxes   A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan. Did not file 2012 taxes   Check with your plan administrator as to the type and extent of service that may be purchased by this transfer. Did not file 2012 taxes Tax-Free Rollovers You can generally roll over tax free all or any part of a distribution from a 403(b) plan to a traditional IRA or a non-Roth eligible retirement plan, except for any nonqualifying distributions, described later. Did not file 2012 taxes You may also roll over any part of a distribution from a 403(b) plan by converting it through a direct rollover, described below, to a Roth IRA. Did not file 2012 taxes Conversion amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. Did not file 2012 taxes See Publication 590 for more information about conversion into a Roth IRA. Did not file 2012 taxes Note. Did not file 2012 taxes A participant is required to roll over distribution amounts received within 60 days in order for the amount to be treated as nontaxable. Did not file 2012 taxes Distribution amounts that are rolled over within the 60 days are not subject to the 10% early distribution penalty. Did not file 2012 taxes Rollovers to and from 403(b) plans. Did not file 2012 taxes   You can generally roll over tax free all or any part of a distribution from an eligible retirement plan to a 403(b) plan. Did not file 2012 taxes Beginning January 1, 2008, distributions from tax-qualified retirement plans and tax-sheltered annuities can be converted by making a direct rollover into a Roth IRA subject to the restrictions that currently apply to rollovers from a traditional IRA into a Roth IRA. Did not file 2012 taxes Converted amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. Did not file 2012 taxes See Publication 590 for more information on conversion into a Roth IRA. Did not file 2012 taxes   If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). Did not file 2012 taxes This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. Did not file 2012 taxes   For more information on rollovers and eligible retirement plans, see Publication 575. Did not file 2012 taxes If you roll over money or other property from a 403(b) plan to an eligible retirement plan, see Publication 575 for information about possible effects on later distributions from the eligible retirement plan. Did not file 2012 taxes Hardship exception to rollover rules. Did not file 2012 taxes   The IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of an individual. Did not file 2012 taxes   To obtain a hardship exception, you must apply to the IRS for a waiver of the 60-day rollover requirement. Did not file 2012 taxes You apply for the waiver by following the general instructions used in requesting a letter ruling. Did not file 2012 taxes These instructions are stated in Revenue Procedure 2013-4, 2013-1 I. Did not file 2012 taxes R. Did not file 2012 taxes B. Did not file 2012 taxes 126 available at www. Did not file 2012 taxes irs. Did not file 2012 taxes gov/irb/2013-01_IRB/ar09. Did not file 2012 taxes html, or see the latest annual update. Did not file 2012 taxes You must also pay a user fee with the application. Did not file 2012 taxes The user fee for a rollover that is less than $50,000 is $500. Did not file 2012 taxes For rollovers that are $50,000 or more, see Revenue Procedure 2013-8, 2013-1 I. Did not file 2012 taxes R. Did not file 2012 taxes B. Did not file 2012 taxes 237 available at www. Did not file 2012 taxes irs. Did not file 2012 taxes gov/irb/2013-01_IRB/ar13. Did not file 2012 taxes html, or see the latest annual update. Did not file 2012 taxes   In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution; Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. Did not file 2012 taxes   For additional information on rollovers, see Publication 590. Did not file 2012 taxes Eligible retirement plans. Did not file 2012 taxes   The following are considered eligible retirement plans. Did not file 2012 taxes Individual retirement arrangements. Did not file 2012 taxes Roth IRA. Did not file 2012 taxes 403(b) plans. Did not file 2012 taxes Government eligible 457 plans. Did not file 2012 taxes Qualified retirement plans. Did not file 2012 taxes  If the distribution is from a designated Roth account, then the only eligible retirement plan is another designated Roth account or a Roth IRA. Did not file 2012 taxes Nonqualifying distributions. Did not file 2012 taxes   You cannot roll over tax free: Minimum required distributions (generally required to begin at age 70½), Substantially equal payments over your life or life expectancy, Substantially equal payments over the joint lives or life expectancies of your beneficiary and you, Substantially equal payments for a period of 10 years or more, Hardship distributions, or Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or excess annual additions and any allocable gains. Did not file 2012 taxes Rollover of nontaxable amounts. Did not file 2012 taxes    You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another eligible retirement plan, traditional IRA, or Roth IRA. Did not file 2012 taxes The transfer must be made either through a direct rollover to an eligible plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional IRA or Roth IRA. Did not file 2012 taxes   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. Did not file 2012 taxes Direct rollovers of 403(b) plan distributions. Did not file 2012 taxes   You have the option of having your 403(b) plan make the rollover directly to a traditional IRA, Roth IRA, or new plan. Did not file 2012 taxes Before you receive a distribution, your plan will give you information on this. Did not file 2012 taxes It is generally to your advantage to choose this option because your plan will not withhold tax on the distribution if you choose it. Did not file 2012 taxes Distribution received by you. Did not file 2012 taxes   If you receive a distribution that qualifies to be rolled over, you can roll over all or any part of the distribution. Did not file 2012 taxes Generally, you will receive only 80% of the distribution because 20% must be withheld. Did not file 2012 taxes If you roll over only the 80% you receive, you must pay tax on the 20% you did not roll over. Did not file 2012 taxes You can replace the 20% that was withheld with other money within the 60-day period to make a 100% rollover. Did not file 2012 taxes Voluntary deductible contributions. Did not file 2012 taxes   For tax years 1982 through 1986, employees could make deductible contributions to a 403(b) plan under the individual retirement arrangement (IRA) rules instead of deducting contributions to a traditional IRA. Did not file 2012 taxes   If you made voluntary deductible contributions to a 403(b) plan under these traditional IRA rules, the distribution of all or part of the accumulated deductible contributions may be rolled over if it otherwise qualifies as a distribution you can roll over. Did not file 2012 taxes Accumulated deductible contributions are the deductible contributions: Plus Income allocable to the contributions, Gain allocable to the contributions, and Minus Expenses and losses allocable to the contributions, and Distributions from the contributions, income, or gain. Did not file 2012 taxes Excess employer contributions. Did not file 2012 taxes   The portion of a distribution from a 403(b) plan transferred to a traditional IRA that was previously included in income as excess employer contributions (discussed earlier) is not an eligible rollover distribution. Did not file 2012 taxes   Its transfer does not affect the rollover treatment of the eligible portion of the transferred amounts. Did not file 2012 taxes However, the ineligible portion is subject to the traditional IRA contribution limits and may create an excess IRA contribution subject to a 6% excise tax (see chapter 1 of Publication 590). Did not file 2012 taxes Qualified domestic relations order. Did not file 2012 taxes   You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(b) plan that you receive under a qualified domestic relations order (QDRO). Did not file 2012 taxes If you receive the interest in the 403(b) plan as an employee's spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee. Did not file 2012 taxes You can roll over your interest in the plan to a traditional IRA or another 403(b) plan. Did not file 2012 taxes For more information on the treatment of an interest received under a QDRO, see Publication 575. Did not file 2012 taxes Spouses of deceased employees. Did not file 2012 taxes   If you are the spouse of a deceased employee, you can roll over the qualifying distribution attributable to the employee. Did not file 2012 taxes You can make the rollover to any eligible retirement plan. Did not file 2012 taxes   After you roll money and other property over from a 403(b) plan to an eligible retirement plan, and you take a distribution from that plan, you will not be eligible to receive the capital gain treatment or the special averaging treatment for the distribution. Did not file 2012 taxes Second rollover. Did not file 2012 taxes   If you roll over a qualifying distribution to a traditional IRA, you can, if certain conditions are satisfied, later roll the distribution into another 403(b) plan. Did not file 2012 taxes For more information, see IRA as a holding account (conduit IRA) for rollovers to other eligible plans in chapter 1 of Publication 590. Did not file 2012 taxes Nonspouse beneficiary. Did not file 2012 taxes   A nonspouse beneficiary may make a direct rollover of a distribution from a 403(b) plan of a deceased participant if the rollover is a direct transfer to an inherited IRA established to receive the distribution. Did not file 2012 taxes If the rollover is a direct trustee-to-trustee transfer to an IRA established to receive the distribution: The transfer will be treated as an eligible rollover distribution. Did not file 2012 taxes The IRA will be considered an inherited account. Did not file 2012 taxes The required minimum distribution rules that apply in instances where the participant dies before the entire interest is distributed will apply to the transferred IRA. Did not file 2012 taxes    For more information on IRAs, see Publication 590. Did not file 2012 taxes Frozen deposits. Did not file 2012 taxes   The 60-day period usually allowed for completing a rollover is extended for any time that the amount distributed is a frozen deposit in a financial institution. Did not file 2012 taxes The 60-day period cannot end earlier than 10 days after the deposit ceases to be a frozen deposit. Did not file 2012 taxes   A frozen deposit is any deposit that on any day during the 60-day period cannot be withdrawn because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because one or more banks in the state are (or are about to be) bankrupt or insolvent. Did not file 2012 taxes Gift Tax If, by choosing or not choosing an election, or option, you provide an annuity for your beneficiary at or after your death, you may have made a taxable gift equal to the value of the annuity. Did not file 2012 taxes Joint and survivor annuity. Did not file 2012 taxes   If the gift is an interest in a joint and survivor annuity where only you and your spouse have the right to receive payments, the gift will generally be treated as qualifying for the unlimited marital deduction. Did not file 2012 taxes More information. Did not file 2012 taxes   For information on the gift tax, see Publication 559, Survivors, Executors, and Administrators. Did not file 2012 taxes Prev  Up  Next   Home   More Online Publications
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The Did Not File 2012 Taxes

Did not file 2012 taxes 3. Did not file 2012 taxes   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Did not file 2012 taxes Leveraged leases. Did not file 2012 taxes Leveraged leases of limited-use property. Did not file 2012 taxes Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Did not file 2012 taxes It also discusses how to treat other kinds of payments you make that are related to your use of this property. Did not file 2012 taxes These include payments you make for taxes on the property. Did not file 2012 taxes Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Did not file 2012 taxes In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Did not file 2012 taxes If you have or will receive equity in or title to the property, the rent is not deductible. Did not file 2012 taxes Unreasonable rent. Did not file 2012 taxes   You cannot take a rental deduction for unreasonable rent. Did not file 2012 taxes Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Did not file 2012 taxes Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Did not file 2012 taxes Rent is not unreasonable just because it is figured as a percentage of gross sales. Did not file 2012 taxes For examples of related persons, see Related persons in chapter 2, Publication 544. Did not file 2012 taxes Rent on your home. Did not file 2012 taxes   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Did not file 2012 taxes You must meet the requirements for business use of your home. Did not file 2012 taxes For more information, see Business use of your home in chapter 1. Did not file 2012 taxes Rent paid in advance. Did not file 2012 taxes   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Did not file 2012 taxes If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Did not file 2012 taxes You can deduct the rest of your payment only over the period to which it applies. Did not file 2012 taxes Example 1. Did not file 2012 taxes You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Did not file 2012 taxes Your rent is $12,000 per year. Did not file 2012 taxes You paid the first year's rent ($12,000) on June 30. Did not file 2012 taxes You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Did not file 2012 taxes Example 2. Did not file 2012 taxes You are a calendar year taxpayer. Did not file 2012 taxes Last January you leased property for 3 years for $6,000 a year. Did not file 2012 taxes You paid the full $18,000 (3 × $6,000) during the first year of the lease. Did not file 2012 taxes Each year you can deduct only $6,000, the part of the lease that applies to that year. Did not file 2012 taxes Canceling a lease. Did not file 2012 taxes   You generally can deduct as rent an amount you pay to cancel a business lease. Did not file 2012 taxes Lease or purchase. Did not file 2012 taxes   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Did not file 2012 taxes You must first determine whether your agreement is a lease or a conditional sales contract. Did not file 2012 taxes Payments made under a conditional sales contract are not deductible as rent expense. Did not file 2012 taxes Conditional sales contract. Did not file 2012 taxes   Whether an agreement is a conditional sales contract depends on the intent of the parties. Did not file 2012 taxes Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Did not file 2012 taxes No single test, or special combination of tests, always applies. Did not file 2012 taxes However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Did not file 2012 taxes The agreement applies part of each payment toward an equity interest you will receive. Did not file 2012 taxes You get title to the property after you make a stated amount of required payments. Did not file 2012 taxes The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Did not file 2012 taxes You pay much more than the current fair rental value of the property. Did not file 2012 taxes You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Did not file 2012 taxes Determine this value when you make the agreement. Did not file 2012 taxes You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Did not file 2012 taxes The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Did not file 2012 taxes Leveraged leases. Did not file 2012 taxes   Leveraged lease transactions may not be considered leases. Did not file 2012 taxes Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Did not file 2012 taxes Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Did not file 2012 taxes   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Did not file 2012 taxes Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Did not file 2012 taxes Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Did not file 2012 taxes Internal Revenue Bulletin 2001-19 is available at www. Did not file 2012 taxes irs. Did not file 2012 taxes gov/pub/irs-irbs/irb01-19. Did not file 2012 taxes pdf. Did not file 2012 taxes   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Did not file 2012 taxes The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Did not file 2012 taxes The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Did not file 2012 taxes The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Did not file 2012 taxes The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Did not file 2012 taxes The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Did not file 2012 taxes   The IRS may charge you a user fee for issuing a tax ruling. Did not file 2012 taxes For more information, see Revenue Procedure 2014-1 available at  www. Did not file 2012 taxes irs. Did not file 2012 taxes gov/irb/2014-1_IRB/ar05. Did not file 2012 taxes html. Did not file 2012 taxes Leveraged leases of limited-use property. Did not file 2012 taxes   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Did not file 2012 taxes Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Did not file 2012 taxes See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Did not file 2012 taxes Leases over $250,000. Did not file 2012 taxes   Special rules are provided for certain leases of tangible property. Did not file 2012 taxes The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Did not file 2012 taxes Rents increase during the lease. Did not file 2012 taxes Rents decrease during the lease. Did not file 2012 taxes Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Did not file 2012 taxes Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Did not file 2012 taxes These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Did not file 2012 taxes   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Did not file 2012 taxes In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Did not file 2012 taxes For details, see section 467 of the Internal Revenue Code. Did not file 2012 taxes Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Did not file 2012 taxes When you can deduct these taxes as additional rent depends on your accounting method. Did not file 2012 taxes Cash method. Did not file 2012 taxes   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Did not file 2012 taxes Accrual method. Did not file 2012 taxes   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Did not file 2012 taxes That you have a liability for taxes on the leased property. Did not file 2012 taxes How much the liability is. Did not file 2012 taxes That economic performance occurred. Did not file 2012 taxes   The liability and amount of taxes are determined by state or local law and the lease agreement. Did not file 2012 taxes Economic performance occurs as you use the property. Did not file 2012 taxes Example 1. Did not file 2012 taxes Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Did not file 2012 taxes Oak leases land for use in its business. Did not file 2012 taxes Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Did not file 2012 taxes However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Did not file 2012 taxes Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Did not file 2012 taxes If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Did not file 2012 taxes Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Did not file 2012 taxes This is when Oak's liability under the lease becomes fixed. Did not file 2012 taxes Example 2. Did not file 2012 taxes The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Did not file 2012 taxes As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Did not file 2012 taxes This is the year in which Oak's liability under the lease becomes fixed. Did not file 2012 taxes Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Did not file 2012 taxes Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Did not file 2012 taxes If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Did not file 2012 taxes For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Did not file 2012 taxes The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Did not file 2012 taxes Option to renew. Did not file 2012 taxes   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Did not file 2012 taxes However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Did not file 2012 taxes Allocate the lease cost to the original term and any option term based on the facts and circumstances. Did not file 2012 taxes In some cases, it may be appropriate to make the allocation using a present value computation. Did not file 2012 taxes For more information, see Regulations section 1. Did not file 2012 taxes 178-1(b)(5). Did not file 2012 taxes Example 1. Did not file 2012 taxes You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Did not file 2012 taxes Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Did not file 2012 taxes Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Did not file 2012 taxes That is the remaining life of your present lease plus the periods for renewal. Did not file 2012 taxes Example 2. Did not file 2012 taxes The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Did not file 2012 taxes You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Did not file 2012 taxes The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Did not file 2012 taxes Cost of a modification agreement. Did not file 2012 taxes   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Did not file 2012 taxes You must capitalize these payments and amortize them over the remaining period of the lease. Did not file 2012 taxes You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Did not file 2012 taxes Example. Did not file 2012 taxes You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Did not file 2012 taxes However, before you occupy it, you decide that you really need less space. Did not file 2012 taxes The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Did not file 2012 taxes In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Did not file 2012 taxes   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Did not file 2012 taxes Your amortization deduction each year will be $150 ($3,000 ÷ 20). Did not file 2012 taxes You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Did not file 2012 taxes Commissions, bonuses, and fees. Did not file 2012 taxes   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Did not file 2012 taxes You must amortize these costs over the term of the lease. Did not file 2012 taxes Loss on merchandise and fixtures. Did not file 2012 taxes   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Did not file 2012 taxes You must capitalize the loss and amortize it over the remaining term of the lease. Did not file 2012 taxes Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Did not file 2012 taxes Depreciate the property over its appropriate recovery period. Did not file 2012 taxes You cannot amortize the cost over the remaining term of the lease. Did not file 2012 taxes If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Did not file 2012 taxes For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Did not file 2012 taxes Assignment of a lease. Did not file 2012 taxes   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Did not file 2012 taxes If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Did not file 2012 taxes The rest is for your investment in the permanent improvements. Did not file 2012 taxes   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Did not file 2012 taxes You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Did not file 2012 taxes Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Did not file 2012 taxes Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Did not file 2012 taxes You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Did not file 2012 taxes Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Did not file 2012 taxes Uniform capitalization rules. Did not file 2012 taxes   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Did not file 2012 taxes Produce real property or tangible personal property. Did not file 2012 taxes For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Did not file 2012 taxes Acquire property for resale. Did not file 2012 taxes However, these rules do not apply to the following property. Did not file 2012 taxes Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Did not file 2012 taxes Property you produce if you meet either of the following conditions. Did not file 2012 taxes Your indirect costs of producing the property are $200,000 or less. Did not file 2012 taxes You use the cash method of accounting and do not account for inventories. Did not file 2012 taxes Example 1. Did not file 2012 taxes You rent construction equipment to build a storage facility. Did not file 2012 taxes If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Did not file 2012 taxes You recover your cost by claiming a deduction for depreciation on the building. Did not file 2012 taxes Example 2. Did not file 2012 taxes You rent space in a facility to conduct your business of manufacturing tools. Did not file 2012 taxes If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Did not file 2012 taxes More information. Did not file 2012 taxes   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Did not file 2012 taxes Prev  Up  Next   Home   More Online Publications