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Efile 1040ez

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Efile 1040ez

Efile 1040ez Publication 584-B - Main Content Table of Contents How To Use This Workbook Comments and SuggestionsOrdering forms and publications. Efile 1040ez Tax questions. Efile 1040ez How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Efile 1040ez How To Use This Workbook You can use this workbook by following these five steps. Efile 1040ez Read Publication 547 to learn about the tax rules for casualties, disasters, and thefts. Efile 1040ez Know the definitions of adjusted basis and fair market value, discussed below. Efile 1040ez Fill out Schedules 1 through 6. Efile 1040ez Read the Instructions for Form 4684. Efile 1040ez Fill out Form 4684 using the information you entered in Schedules 1 through 6. Efile 1040ez Use the chart below to find out how to use Schedules 1 through 6 to fill out Form 4684. Efile 1040ez Take what's in each row of. Efile 1040ez . Efile 1040ez . Efile 1040ez And enter it on Form 4684. Efile 1040ez . Efile 1040ez . Efile 1040ez Column 1 Line 19 Column 2 Line 20 Column 3 Line 21 Column 4 Line 22 Column 5 Line 23 Column 6 Line 24 Column 7 Line 25 Column 8 Line 26 Column 9 Line 27 Adjusted basis. Efile 1040ez   Adjusted basis usually means original cost plus improvements, minus depreciation allowed or allowable (including any section 179 expense deduction), amortization, depletion, etc. Efile 1040ez If you did not acquire the property by purchasing it, your basis is determined as discussed in Publication 551, Basis of Assets. Efile 1040ez If you inherited the property from someone who died in 2010 and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Efile 1040ez Fair market value. Efile 1040ez   Fair market value is the price for which you could sell your property to a willing buyer, when neither of you has to sell or buy and both of you know all the relevant facts. Efile 1040ez When filling out Schedules 1 through 6, you need to know the fair market value of the property immediately before and immediately after the disaster or casualty. Efile 1040ez Deduction limits. Efile 1040ez   If your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. Efile 1040ez See the Instructions for Form 4684, Section B. Efile 1040ez If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. Efile 1040ez   The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040), must be reduced by 2% of your adjusted gross income. Efile 1040ez Employee property is property used in performing services as an employee. Efile 1040ez Comments and Suggestions We welcome your comments about this publication and your suggestions for future editions. Efile 1040ez You can write to us at the following address: Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Efile 1040ez NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Efile 1040ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Efile 1040ez You can email us at taxforms@irs. Efile 1040ez gov. Efile 1040ez Please put “Publications Comment” on the subject line. Efile 1040ez You can also send us comments from www. Efile 1040ez irs. Efile 1040ez gov/formspubs/. Efile 1040ez Select “Comment on Tax Forms and Publications” under “Information about. Efile 1040ez ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Efile 1040ez Ordering forms and publications. Efile 1040ez   Visit www. Efile 1040ez irs. Efile 1040ez gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Efile 1040ez Internal Revenue Service 1201 N. Efile 1040ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Efile 1040ez   If you have a tax question, check the information available on IRS. Efile 1040ez gov or call 1-800-829-1040. Efile 1040ez We cannot answer tax questions sent to either of the above addresses. Efile 1040ez How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Efile 1040ez By selecting the method that is best for you, you will have quick and easy access to tax help. Efile 1040ez Free help with your return. Efile 1040ez   Free help in preparing your return is available nationwide from IRS-certified volunteers. Efile 1040ez The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Efile 1040ez Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Efile 1040ez To find the nearest VITA or TCE site, visit IRS. Efile 1040ez gov or call 1-800-906-9887 or 1-800-829-1040. Efile 1040ez   As part of the TCE program, AARP offers the Tax-Aide counseling program. Efile 1040ez To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www. Efile 1040ez aarp. Efile 1040ez org/money/taxaide. Efile 1040ez   For more information on these programs, go to IRS. Efile 1040ez gov and enter keyword “VITA” in the upper right-hand corner. Efile 1040ez Internet. Efile 1040ez You can access the IRS website at IRS. Efile 1040ez gov 24 hours a day, 7 days a week to: Check the status of your 2011 refund. Efile 1040ez Go to IRS. Efile 1040ez gov and click on Where's My Refund. Efile 1040ez Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Efile 1040ez If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Efile 1040ez Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Efile 1040ez E-file your return. Efile 1040ez Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Efile 1040ez Download forms, including talking tax forms, instructions, and publications. Efile 1040ez Order IRS products online. Efile 1040ez Research your tax questions online. Efile 1040ez Search publications online by topic or keyword. Efile 1040ez Use the online Internal Revenue Code, regulations, or other official guidance. Efile 1040ez View Internal Revenue Bulletins (IRBs) published in the last few years. Efile 1040ez Figure your withholding allowances using the withholding calculator online at www. Efile 1040ez irs. Efile 1040ez gov/individuals. Efile 1040ez Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at www. Efile 1040ez irs. Efile 1040ez gov/individuals. Efile 1040ez Sign up to receive local and national tax news by email. Efile 1040ez Get information on starting and operating a small business. Efile 1040ez Phone. Efile 1040ez Many services are available by phone. Efile 1040ez   Ordering forms, instructions, and publications. Efile 1040ez Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. Efile 1040ez You should receive your order within 10 days. Efile 1040ez Asking tax questions. Efile 1040ez Call the IRS with your tax questions at 1-800-829-1040. Efile 1040ez Solving problems. Efile 1040ez You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Efile 1040ez An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Efile 1040ez Call your local Taxpayer Assistance Center for an appointment. Efile 1040ez To find the number, go to www. Efile 1040ez irs. Efile 1040ez gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Efile 1040ez TTY/TDD equipment. Efile 1040ez If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Efile 1040ez TeleTax topics. Efile 1040ez Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Efile 1040ez Refund information. Efile 1040ez You can check the status of your refund on the new IRS phone app. Efile 1040ez Download the free IRS2Go app by visiting the iTunes app store or the Android Marketplace. Efile 1040ez IRS2Go is a new way to provide you with information and tools. Efile 1040ez To check the status of your refund by phone, call 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Efile 1040ez Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Efile 1040ez If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Efile 1040ez Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Efile 1040ez If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Efile 1040ez Other refund information. Efile 1040ez To check the status of a prior-year refund or amended return refund, call 1-800-829-1040. Efile 1040ez Evaluating the quality of our telephone services. Efile 1040ez To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Efile 1040ez One method is for a second IRS representative to listen in on or record random telephone calls. Efile 1040ez Another is to ask some callers to complete a short survey at the end of the call. Efile 1040ez Walk-in. Efile 1040ez Many products and services are available on a walk-in basis. Efile 1040ez   Products. Efile 1040ez You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Efile 1040ez Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Efile 1040ez Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Efile 1040ez Services. Efile 1040ez You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Efile 1040ez An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Efile 1040ez If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Efile 1040ez No appointment is necessary—just walk in. Efile 1040ez If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Efile 1040ez A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Efile 1040ez If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. Efile 1040ez All other issues will be handled without an appointment. Efile 1040ez To find the number of your local office, go to  www. Efile 1040ez irs. Efile 1040ez gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Efile 1040ez Mail. Efile 1040ez You can send your order for forms, instructions, and publications to the address below. Efile 1040ez You should receive a response within 10 days after your request is received. Efile 1040ez  Internal Revenue Service 1201 N. Efile 1040ez Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. Efile 1040ez   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Efile 1040ez Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Efile 1040ez We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Efile 1040ez Remember, the worst thing you can do is nothing at all. Efile 1040ez   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Efile 1040ez You face (or your business is facing) an immediate threat of adverse action. Efile 1040ez You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Efile 1040ez   If you qualify for our help, we’ll do everything we can to get your problem resolved. Efile 1040ez You will be assigned to one advocate who will be with you at every turn. Efile 1040ez We have offices in every state, the District of Columbia, and Puerto Rico. Efile 1040ez Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. Efile 1040ez And our services are always free. Efile 1040ez   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Efile 1040ez Our tax toolkit at www. Efile 1040ez TaxpayerAdvocate. Efile 1040ez irs. Efile 1040ez gov can help you understand these rights. Efile 1040ez   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Efile 1040ez irs. Efile 1040ez gov/advocate. Efile 1040ez You can also call our toll-free number at 1-877-777-4778. Efile 1040ez   TAS also handles large-scale or systemic problems that affect many taxpayers. Efile 1040ez If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Efile 1040ez irs. Efile 1040ez gov/advocate. Efile 1040ez Low Income Taxpayer Clinics (LITCs). Efile 1040ez   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Efile 1040ez Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Efile 1040ez These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Efile 1040ez Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Efile 1040ez For more information and to find a clinic near you, see the LITC page at www. Efile 1040ez irs. Efile 1040ez gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Efile 1040ez This publication is also available by calling 1-800-829-3676 or at your local IRS office. Efile 1040ez Free tax services. Efile 1040ez   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Efile 1040ez Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Efile 1040ez The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Efile 1040ez The majority of the information and services listed in this publication are available to you free of charge. Efile 1040ez If there is a fee associated with a resource or service, it is listed in the publication. Efile 1040ez   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Efile 1040ez DVD for tax products. Efile 1040ez You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Efile 1040ez Prior-year forms, instructions, and publications. Efile 1040ez Tax Map: an electronic research tool and finding aid. Efile 1040ez Tax law frequently asked questions. Efile 1040ez Tax Topics from the IRS telephone response system. Efile 1040ez Internal Revenue Code—Title 26 of the U. Efile 1040ez S. Efile 1040ez Code. Efile 1040ez Links to other Internet based Tax Research Materials. Efile 1040ez Fill-in, print, and save features for most tax forms. Efile 1040ez Internal Revenue Bulletins. Efile 1040ez Toll-free and email technical support. Efile 1040ez Two releases during the year. Efile 1040ez  – The first release will ship the beginning of January 2012. Efile 1040ez  – The final release will ship the beginning of March 2012. Efile 1040ez Purchase the DVD from National Technical Information Service (NTIS) at www. Efile 1040ez irs. Efile 1040ez gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Efile 1040ez Prev  Up  Next   Home   More Online Publications
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The Efile 1040ez

Efile 1040ez Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. Efile 1040ez Employee-owners. Efile 1040ez Other rules. Efile 1040ez Other rules. Efile 1040ez Property Exchanged for StockNonqualified preferred stock. Efile 1040ez Liabilities. Efile 1040ez Election to reduce basis. Efile 1040ez Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. Efile 1040ez S. Efile 1040ez Real Property Interest Accounting MethodsSection 481(a) adjustment. Efile 1040ez Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. Efile 1040ez Business formed before 1997. Efile 1040ez   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. Efile 1040ez Business formed after 1996. Efile 1040ez   The following businesses formed after 1996 are taxed as corporations. Efile 1040ez A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. Efile 1040ez A business formed under a state law that refers to it as a joint-stock company or joint-stock association. Efile 1040ez An insurance company. Efile 1040ez Certain banks. Efile 1040ez A business wholly owned by a state or local government. Efile 1040ez A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Efile 1040ez Certain foreign businesses. Efile 1040ez Any other business that elects to be taxed as a corporation. Efile 1040ez For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. Efile 1040ez For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. Efile 1040ez S corporations. Efile 1040ez   Some corporations may meet the qualifications for electing to be S corporations. Efile 1040ez For information on S corporations, see the instructions for Form 1120S, U. Efile 1040ez S. Efile 1040ez Income Tax Return for an S Corporation. Efile 1040ez Personal service corporations. Efile 1040ez   A corporation is a personal service corporation if it meets all of the following requirements. Efile 1040ez Its principal activity during the “testing period” is performing personal services (defined later). Efile 1040ez Generally, the testing period for any tax year is the prior tax year. Efile 1040ez If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. Efile 1040ez Its employee-owners substantially perform the services in (1), above. Efile 1040ez This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. Efile 1040ez Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. Efile 1040ez Personal services. Efile 1040ez   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. Efile 1040ez Employee-owners. Efile 1040ez   A person is an employee-owner of a personal service corporation if both of the following apply. Efile 1040ez He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. Efile 1040ez He or she owns any stock in the corporation at any time during the testing period. Efile 1040ez Other rules. Efile 1040ez   For other rules that apply to personal service corporations see Accounting Periods, later. Efile 1040ez Closely held corporations. Efile 1040ez   A corporation is closely held if all of the following apply. Efile 1040ez It is not a personal service corporation. Efile 1040ez At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. Efile 1040ez “Individual” includes certain trusts and private foundations. Efile 1040ez Other rules. Efile 1040ez   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. Efile 1040ez Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. Efile 1040ez This rule applies both to individuals and to groups who transfer property to a corporation. Efile 1040ez It also applies whether the corporation is being formed or is already operating. Efile 1040ez It does not apply in the following situations. Efile 1040ez The corporation is an investment company. Efile 1040ez You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. Efile 1040ez The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. Efile 1040ez Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. Efile 1040ez For more information, see section 1. Efile 1040ez 351-3 of the Regulations. Efile 1040ez Control of a corporation. Efile 1040ez   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. Efile 1040ez Example 1. Efile 1040ez You and Bill Jones buy property for $100,000. Efile 1040ez You both organize a corporation when the property has a fair market value of $300,000. Efile 1040ez You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. Efile 1040ez No gain is recognized by you, Bill, or the corporation. Efile 1040ez Example 2. Efile 1040ez You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. Efile 1040ez This represents only 75% of each class of stock of the corporation. Efile 1040ez The other 25% was already issued to someone else. Efile 1040ez You and Bill recognize a taxable gain of $200,000 on the transaction. Efile 1040ez Services rendered. Efile 1040ez   The term property does not include services rendered or to be rendered to the issuing corporation. Efile 1040ez The value of stock received for services is income to the recipient. Efile 1040ez Example. Efile 1040ez You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Efile 1040ez Right after the exchange, you own 85% of the outstanding stock. Efile 1040ez No gain is recognized on the exchange of property. Efile 1040ez However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. Efile 1040ez Property of relatively small value. Efile 1040ez   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Efile 1040ez   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. Efile 1040ez Stock received in disproportion to property transferred. Efile 1040ez   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. Efile 1040ez If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. Efile 1040ez It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. Efile 1040ez Money or other property received. Efile 1040ez   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. Efile 1040ez You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Efile 1040ez The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. Efile 1040ez If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. Efile 1040ez See chapter 3 of Publication 544. Efile 1040ez No loss is recognized. Efile 1040ez Nonqualified preferred stock. Efile 1040ez   Nonqualified preferred stock is treated as property other than stock. Efile 1040ez Generally, it is preferred stock with any of the following features. Efile 1040ez The holder has the right to require the issuer or a related person to redeem or buy the stock. Efile 1040ez The issuer or a related person is required to redeem or buy the stock. Efile 1040ez The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. Efile 1040ez The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. Efile 1040ez For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. Efile 1040ez Liabilities. Efile 1040ez   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. Efile 1040ez There are two exceptions to this treatment. Efile 1040ez If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. Efile 1040ez However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. Efile 1040ez If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. Efile 1040ez For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. Efile 1040ez Example. Efile 1040ez You transfer property to a corporation for stock. Efile 1040ez Immediately after the transfer, you control the corporation. Efile 1040ez You also receive $10,000 in the exchange. Efile 1040ez Your adjusted basis in the transferred property is $20,000. Efile 1040ez The stock you receive has a fair market value (FMV) of $16,000. Efile 1040ez The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. Efile 1040ez Gain is realized as follows. Efile 1040ez FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. Efile 1040ez The recognized gain is limited to $10,000, the cash received. Efile 1040ez Loss on exchange. Efile 1040ez   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. Efile 1040ez For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Efile 1040ez Basis of stock or other property received. Efile 1040ez   The basis of the stock you receive is generally the adjusted basis of the property you transfer. Efile 1040ez Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. Efile 1040ez Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. Efile 1040ez Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. Efile 1040ez    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. Efile 1040ez This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. Efile 1040ez The basis of any other property you receive is its fair market value on the date of the trade. Efile 1040ez Basis of property transferred. Efile 1040ez   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. Efile 1040ez However, the increase for the gain recognized may be limited. Efile 1040ez For more information, see section 362 of the Internal Revenue Code. Efile 1040ez Election to reduce basis. Efile 1040ez   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. Efile 1040ez The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. Efile 1040ez However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. Efile 1040ez R. Efile 1040ez B. Efile 1040ez 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. Efile 1040ez    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. Efile 1040ez Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. Efile 1040ez Paid-in capital. Efile 1040ez   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. Efile 1040ez These contributions are not taxable to the corporation. Efile 1040ez Basis. Efile 1040ez   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. Efile 1040ez However, the increase for the gain recognized may be limited. Efile 1040ez For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. Efile 1040ez   The basis of property contributed to capital by a person other than a shareholder is zero. Efile 1040ez   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. Efile 1040ez If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. Efile 1040ez Depreciable property. Efile 1040ez Amortizable property. Efile 1040ez Property subject to cost depletion but not to percentage depletion. Efile 1040ez All other remaining properties. Efile 1040ez   Reduce the basis of property in each category to zero before going on to the next category. Efile 1040ez   There may be more than one piece of property in each category. Efile 1040ez Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. Efile 1040ez The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. Efile 1040ez Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. Efile 1040ez A corporation generally must make estimated tax payments as it earns or receives income during its tax year. Efile 1040ez After the end of the year, the corporation must file an income tax return. Efile 1040ez This section will help you determine when and how to pay and file corporate income taxes. Efile 1040ez For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. Efile 1040ez The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. Efile 1040ez For more information, visit www. Efile 1040ez irs. Efile 1040ez gov/newsroom/article/0,,id=108362. Efile 1040ez 00. Efile 1040ez Income Tax Return This section will help you determine when and how to report a corporation's income tax. Efile 1040ez Who must file. Efile 1040ez   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Efile 1040ez Which form to file. Efile 1040ez   A corporation generally must file Form 1120, U. Efile 1040ez S. Efile 1040ez Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. Efile 1040ez Certain organizations and entities must file special returns. Efile 1040ez For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. Efile 1040ez Electronic filing. Efile 1040ez   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. Efile 1040ez Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. Efile 1040ez However, in certain instances, these corporations can request a waiver. Efile 1040ez For more information regarding electronic filing, visit www. Efile 1040ez irs. Efile 1040ez gov/efile. Efile 1040ez When to file. Efile 1040ez   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. Efile 1040ez A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. Efile 1040ez A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. Efile 1040ez Example 1. Efile 1040ez A corporation's tax year ends December 31. Efile 1040ez It must file its income tax return by March 15th. Efile 1040ez Example 2. Efile 1040ez A corporation's tax year ends June 30. Efile 1040ez It must file its income tax return by September 15th. Efile 1040ez   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. Efile 1040ez Extension of time to file. Efile 1040ez   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. Efile 1040ez The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. Efile 1040ez   Form 7004 does not extend the time for paying the tax due on the return. Efile 1040ez Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. Efile 1040ez The interest is figured from the original due date of the return to the date of payment. Efile 1040ez   For more information, see the instructions for Form 7004. Efile 1040ez How to pay your taxes. Efile 1040ez   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. Efile 1040ez Electronic Federal Tax Payment System (EFTPS). Efile 1040ez   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). Efile 1040ez For more information on EFTPS and enrollment, visit www. Efile 1040ez eftps. Efile 1040ez gov or call 1-800-555-4477. Efile 1040ez Also see Publication 966, The Secure Way to Pay Your Federal Taxes. Efile 1040ez Note. Efile 1040ez Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. Efile 1040ez Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Efile 1040ez Do not attach an explanation when the corporation's return is filed. Efile 1040ez See the instructions for your income tax return. Efile 1040ez Late filing of return. Efile 1040ez    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. Efile 1040ez If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. Efile 1040ez The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. Efile 1040ez The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. Efile 1040ez Late payment of tax. Efile 1040ez    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Efile 1040ez The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. Efile 1040ez Trust fund recovery penalty. Efile 1040ez   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Efile 1040ez The penalty is the full amount of the unpaid trust fund tax. Efile 1040ez This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. Efile 1040ez   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. Efile 1040ez   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. Efile 1040ez A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. Efile 1040ez   Willfully means voluntarily, consciously, and intentionally. Efile 1040ez A responsible person acts willfully if the person knows the required actions are not taking place. Efile 1040ez   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. Efile 1040ez Other penalties. Efile 1040ez   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. Efile 1040ez See sections 6662, 6662A, and 6663 of the Internal Revenue Code. Efile 1040ez Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Efile 1040ez If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. Efile 1040ez This section will explain how to avoid this penalty. Efile 1040ez When to pay estimated tax. Efile 1040ez   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Efile 1040ez Example 1. Efile 1040ez Your corporation's tax year ends December 31. Efile 1040ez Installment payments are due on April 15, June 15, September 15, and December 15. Efile 1040ez Example 2. Efile 1040ez Your corporation's tax year ends June 30. Efile 1040ez Installment payments are due on October 15, December 15, March 15, and June 15. Efile 1040ez   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. Efile 1040ez How to figure each required installment. Efile 1040ez   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. Efile 1040ez You will generally use one of the following two methods to figure each required installment. Efile 1040ez You should use the method that yields the smallest installment payments. Efile 1040ez Note. Efile 1040ez In these discussions, “return” generally refers to the corporation's original return. Efile 1040ez However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Efile 1040ez Method 1. Efile 1040ez   Each required installment is 25% of the income tax the corporation will show on its return for the current year. Efile 1040ez Method 2. Efile 1040ez   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. Efile 1040ez   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). Efile 1040ez Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. Efile 1040ez   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. Efile 1040ez Other methods. Efile 1040ez   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. Efile 1040ez The annualized income installment method. Efile 1040ez The adjusted seasonal installment method. Efile 1040ez Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. Efile 1040ez Refiguring required installments. Efile 1040ez   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. Efile 1040ez An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. Efile 1040ez Underpayment penalty. Efile 1040ez   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. Efile 1040ez The penalty is figured separately for each installment due date. Efile 1040ez The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. Efile 1040ez This is true even if the corporation is due a refund when its return is filed. Efile 1040ez Form 2220. Efile 1040ez   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. Efile 1040ez   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. Efile 1040ez The amount of the underpayment. Efile 1040ez The period during which the underpayment was due and unpaid. Efile 1040ez The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. Efile 1040ez   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. Efile 1040ez However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. Efile 1040ez The annualized income installment method was used to figure any required installment. Efile 1040ez The adjusted seasonal installment method was used to figure any required installment. Efile 1040ez The corporation is a large corporation figuring its first required installment based on the prior year's tax. Efile 1040ez How to pay estimated tax. Efile 1040ez   A corporation is generally required to use EFTPS to pay its taxes. Efile 1040ez See Electronic Federal Tax Payment System (EFTPS), earlier. Efile 1040ez Also see the Instructions for Form 1120-W. Efile 1040ez Quick refund of overpayments. Efile 1040ez   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Efile 1040ez Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. Efile 1040ez A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. Efile 1040ez Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. Efile 1040ez File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. Efile 1040ez Do not file Form 4466 before the end of the corporation's tax year. Efile 1040ez An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. Efile 1040ez The IRS will act on the form within 45 days from the date you file it. Efile 1040ez U. Efile 1040ez S. Efile 1040ez Real Property Interest If a domestic corporation acquires a U. Efile 1040ez S. Efile 1040ez real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. Efile 1040ez The amount paid includes cash, the fair market value of other property, and any assumed liability. Efile 1040ez If a domestic corporation distributes a U. Efile 1040ez S. Efile 1040ez real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. Efile 1040ez A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. Efile 1040ez For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. Efile 1040ez S. Efile 1040ez Withholding Tax Return for Dispositions by Foreign Persons of U. Efile 1040ez S. Efile 1040ez Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. Efile 1040ez S. Efile 1040ez Real Property Interests. Efile 1040ez Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Efile 1040ez Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. Efile 1040ez In all cases, the method used must clearly show taxable income. Efile 1040ez Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. Efile 1040ez Accrual method. Efile 1040ez   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. Efile 1040ez A corporation engaged in farming operations also must use the accrual method. Efile 1040ez   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. Efile 1040ez However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. Efile 1040ez   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. Efile 1040ez   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. Efile 1040ez   There are exceptions to the economic performance rule for certain items, including recurring expenses. Efile 1040ez See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. Efile 1040ez Nonaccrual experience method. Efile 1040ez   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. Efile 1040ez   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. Efile 1040ez Percentage of completion method. Efile 1040ez   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. Efile 1040ez Mark-to-market accounting method. Efile 1040ez   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Efile 1040ez Under this method any security held by a dealer as inventory must be included in inventory at its FMV. Efile 1040ez Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. Efile 1040ez Any gain or loss must be taken into account in determining gross income. Efile 1040ez The gain or loss taken into account is treated as ordinary gain or loss. Efile 1040ez   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. Efile 1040ez Change in accounting method. Efile 1040ez   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). Efile 1040ez The corporation must file Form 3115, Application for Change in Accounting Method. Efile 1040ez For more information, see Form 3115 and Publication 538. Efile 1040ez Section 481(a) adjustment. Efile 1040ez   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. Efile 1040ez The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. Efile 1040ez However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. Efile 1040ez The corporation must complete the appropriate lines of Form 3115 to make the election. Efile 1040ez See the Instructions for Form 3115. Efile 1040ez Accounting Periods A corporation must figure its taxable income on the basis of a tax year. Efile 1040ez A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Efile 1040ez Generally, corporations can use either a calendar year or a fiscal year as its tax year. Efile 1040ez Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. Efile 1040ez For more information, see Publication 538. Efile 1040ez Personal service corporation. Efile 1040ez   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. Efile 1040ez See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. Efile 1040ez Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. Efile 1040ez   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. Efile 1040ez See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. Efile 1040ez Change of tax year. Efile 1040ez   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. Efile 1040ez However, under certain conditions, a corporation can change its tax year without getting the consent. Efile 1040ez For more information, see Form 1128 and Publication 538. Efile 1040ez Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Efile 1040ez Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Efile 1040ez Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. Efile 1040ez The corporation should keep copies of all filed returns. Efile 1040ez They help in preparing future and amended returns and in the calculation of earnings and profits. Efile 1040ez Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. Efile 1040ez However, the following special provisions apply only to corporations. Efile 1040ez Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. Efile 1040ez However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Efile 1040ez Any costs not deducted can be amortized. Efile 1040ez Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Efile 1040ez Organizational costs are the direct costs of creating the corporation. Efile 1040ez For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. Efile 1040ez Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. Efile 1040ez Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. Efile 1040ez Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Efile 1040ez If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. Efile 1040ez These rules also deny the deduction of losses on the sale or exchange of property between related persons. Efile 1040ez Related persons. Efile 1040ez   For purposes of this rule, the following persons are related to a corporation. Efile 1040ez Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). Efile 1040ez An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Efile 1040ez A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Efile 1040ez An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Efile 1040ez A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Efile 1040ez Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. Efile 1040ez Ownership of stock. Efile 1040ez   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. Efile 1040ez Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. Efile 1040ez An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Efile 1040ez Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. Efile 1040ez Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. Efile 1040ez To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. Efile 1040ez But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. Efile 1040ez Reallocation of income and deductions. Efile 1040ez   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. Efile 1040ez Complete liquidations. Efile 1040ez   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. Efile 1040ez More information. Efile 1040ez   For more information about the related person rules, see Publication 544. Efile 1040ez Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. Efile 1040ez If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. Efile 1040ez Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. Efile 1040ez A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. Efile 1040ez A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. Efile 1040ez For more information regarding the election, see Form 8902. Efile 1040ez Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. Efile 1040ez The deduction is allowed for the year in which the property is placed in service. Efile 1040ez A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. Efile 1040ez For more information, see section 179C of the Internal Revenue Code and the related Regulations. Efile 1040ez Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). Efile 1040ez A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. Efile 1040ez For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. Efile 1040ez Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. Efile 1040ez In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. Efile 1040ez 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. Efile 1040ez The deduction is limited to $1. Efile 1040ez 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. Efile 1040ez Other rules and limitations apply. Efile 1040ez The corporation must reduce the basis of any property by any deduction taken. Efile 1040ez The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. Efile 1040ez For more information, see section 179D of the Internal Revenue Code. Efile 1040ez Also see Notice 2006-52, 2006-26 I. Efile 1040ez R. Efile 1040ez B. Efile 1040ez 1175, clarified and amplified by Notice 2008-40, 2008-14 I. Efile 1040ez R. Efile 1040ez B. Efile 1040ez 725, and any successor. Efile 1040ez Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. Efile 1040ez These items are known as corporate preference items and they include the following. Efile 1040ez Gain on the disposition of section 1250 property. Efile 1040ez For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Efile 1040ez Percentage depletion for iron ore and coal (including lignite). Efile 1040ez For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. Efile 1040ez Amortization of pollution control facilities. Efile 1040ez For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. Efile 1040ez Mineral exploration and development costs. Efile 1040ez For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. Efile 1040ez For more information on corporate preference items, see section 291 of the Internal Revenue Code. Efile 1040ez Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. Efile 1040ez This section discusses the general rules that apply. Efile 1040ez The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. Efile 1040ez For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. Efile 1040ez Dividends from domestic corporations. Efile 1040ez   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. Efile 1040ez If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. Efile 1040ez Ownership. Efile 1040ez   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. Efile 1040ez Small business investment companies. Efile 1040ez   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. Efile 1040ez Dividends from regulated investment companies. Efile 1040ez   Regulated investment company dividends received are subject to certain limits. Efile 1040ez Capital gain dividends received from a regulated investment company do not qualify for the deduction. Efile 1040ez For more information, see section 854 of the Internal Revenue Code. Efile 1040ez No deduction allowed for certain dividends. Efile 1040ez   Corporations cannot take a deduction for dividends received from the following entities. Efile 1040ez A real estate investment trust (REIT). Efile 1040ez A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. Efile 1040ez A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Efile 1040ez Ex-dividend means the holder has no rights to the dividend. Efile 1040ez A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. Efile 1040ez Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Efile 1040ez Dividends on deposits. Efile 1040ez   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. Efile 1040ez They do not qualify for this deduction. Efile 1040ez Limit on deduction for dividends. Efile 1040ez   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). Efile 1040ez Figuring the limit. Efile 1040ez   In figuring the limit, determine taxable income without the following items. Efile 1040ez The net operating loss deduction. Efile 1040ez The domestic production activities deduction. Efile 1040ez The deduction for dividends received. Efile 1040ez Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). Efile 1040ez Any capital loss carryback to the tax year. Efile 1040ez Effect of net operating loss. Efile 1040ez   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. Efile 1040ez To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. Efile 1040ez Example 1. Efile 1040ez A corporation loses $25,000 from operations. Efile 1040ez It receives $100,000 in dividends from a 20%-owned corporation. Efile 1040ez Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. Efile 1040ez If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Efile 1040ez Therefore, the 80% of taxable income limit does not apply. Efile 1040ez The corporation can deduct the full $80,000. Efile 1040ez Example 2. Efile 1040ez Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Efile 1040ez Its taxable income is $85,000 before the deduction for dividends received. Efile 1040ez After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. Efile 1040ez Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). Efile 1040ez Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. Efile 1040ez The nontaxed part is any dividends-received deduction allowable for the dividends. Efile 1040ez Extraordinary dividend. Efile 1040ez   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. Efile 1040ez The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. Efile 1040ez Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. Efile 1040ez Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. Efile 1040ez Disqualified preferred stock. Efile 1040ez   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. Efile 1040ez   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. Efile 1040ez The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. Efile 1040ez The issue price of the stock exceeds its liquidation rights or stated redemption price. Efile 1040ez The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. Efile 1040ez   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. Efile 1040ez More information. Efile 1040ez   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. Efile 1040ez Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. Efile 1040ez A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Efile 1040ez A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. Efile 1040ez Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. Efile 1040ez Foregone interest. Efile 1040ez   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Efile 1040ez See Below-market loans, in chapter 4 of Publication 535 for more information. Efile 1040ez Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. Efile 1040ez The contribution is deductible if made to, or for the use of, a qualified organization. Efile 1040ez For more information on qualified organizations, see Publication 526, Charitable Contributions. Efile 1040ez Also see, Exempt Organizations Select Check (EO Select Check) at www. Efile 1040ez irs. Efile 1040ez gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. Efile 1040ez Note. Efile 1040ez You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. Efile 1040ez Cash method corporation. Efile 1040ez   A corporation using the cash method of accounting deducts contributions in the tax year paid. Efile 1040ez Accrual method corporation. Efile 1040ez   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Efile 1040ez Make the choice by reporting the contribution on the corporation's return for the tax year. Efile 1040ez A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. Efile 1040ez The declaration must include the date the resolution was adopted. Efile 1040ez Limitations on deduction. Efile 1040ez   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Efile 1040ez Figure taxable income for this purpose without the following. Efile 1040ez The deduction for charitable contributions. Efile 1040ez The dividends-received deduction. Efile 1040ez The deduction allowed under section 249 of the Internal Revenue Code. Efile 1040ez The domestic production activities deduction. Efile 1040ez Any net operating loss carryback to the tax year. Efile 1040ez Any capital loss carryback to the tax year. Efile 1040ez Farmers and ranchers. Efile 1040ez    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. Efile 1040ez Carryover of excess contributions. Efile 1040ez   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. Efile 1040ez You lose any excess not used within that period. Efile 1040ez For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. Efile 1040ez Any excess not used in 2015 is lost. Efile 1040ez Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). Efile 1040ez You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. Efile 1040ez Cash contributions. Efile 1040ez   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. Efile 1040ez The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. Efile 1040ez Keep the record of the contribution with the other corporate records. Efile 1040ez Do not attach the records to the corporation's return. Efile 1040ez For more information on cash contributions, see Publication 526. Efile 1040ez Gifts of $250 or more. Efile 1040ez   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. Efile 1040ez The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. Efile 1040ez The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. Efile 1040ez Keep the acknowledgement with other corporate records. Efile 1040ez Do not attach the acknowledgement to the return. Efile 1040ez Contributions of property other than cash. Efile 1040ez   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. Efile 1040ez In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. Efile 1040ez   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. Efile 1040ez For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. Efile 1040ez   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. Efile 1040ez A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. Efile 1040ez The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. Efile 1040ez   See Form 8283 for more information. Efile 1040ez Qualified conservation contributions. Efile 1040ez   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. Efile 1040ez For more information, see section 170(h) of the Internal Revenue Code. Efile 1040ez Contributions of used vehicles. Efile 1040ez   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. Efile 1040ez The deduction is limited, and other special rules apply. Efile 1040ez For more information, see Publication 526. Efile 1040ez Reduction for contributions of certain property. Efile 1040ez   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. Efile 1040ez   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. Efile 1040ez Larger deduction. Efile 1040ez   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. Efile 1040ez This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. Efile 1040ez Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. Efile 1040ez The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. Efile 1040ez Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. Efile 1040ez Contributions to organizations conducting lobbying activities. Efile 1040ez   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. Efile 1040ez More information. Efile 1040ez   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. Efile 1040ez Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. Efile 1040ez In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Efile 1040ez Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. Efile 1040ez A capital loss is carried to other years in the following order. Efile 1040ez 3 years prior to the loss year. Efile 1040ez 2 years prior to the loss year. Efile 1040ez 1 year prior to the loss year. Efile 1040ez Any loss remaining is carried forward for 5 years. Efile 1040ez When you carry a net capital loss to another tax year, treat it as a short-term loss. Efile 1040ez It does not retain its original identity as long term or short term. Efile 1040ez Example. Efile 1040ez A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. Efile 1040ez The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. Efile 1040ez The corporation treats this $6,000 as a short-term loss when carried back or forward. Efile 1040ez The corporation carries the $6,000 short-term loss back 3 years. Efile 1040ez In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. Efile 1040ez It subtracts the $6,000 short-term loss first from the net short-term gain. Efile 1040ez This results in a net capital gain for year 1 of $7,000. Efile 1040ez This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. Efile 1040ez S corporation status. Efile 1040ez   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. Efile 1040ez Rules for carryover and carryback. Efile 1040ez   When carrying a capital loss from one year to another, the following rules apply. Efile 1040ez When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. Efile 1040ez In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. Efile 1040ez If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. Efile 1040ez You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. Efile 1040ez Refunds. Efile 1040ez   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. Efile 1040ez If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. Efile 1040ez S. Efile 1040ez Corporation Income Tax Return, to apply for a refund. Efile 1040ez Form 1139. Efile 1040ez    A corporation can get a refund faster by using Form 1139. Efile 1040ez It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. Efile 1040ez Form 1120X. Efile 1040ez   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. Efile 1040ez The corporation must file the Form 1120X within 3 years of the due date, includin