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File 2007 Federal Taxes Free

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File 2007 Federal Taxes Free

File 2007 federal taxes free Publication 15-B - Main Content Table of Contents 1. File 2007 federal taxes free Fringe Benefit OverviewAre Fringe Benefits Taxable? Cafeteria Plans Simple Cafeteria Plans 2. File 2007 federal taxes free Fringe Benefit Exclusion RulesAccident and Health Benefits Achievement Awards Adoption Assistance Athletic Facilities De Minimis (Minimal) Benefits Dependent Care Assistance Educational Assistance Employee Discounts Employee Stock Options Employer-Provided Cell Phones Group-Term Life Insurance Coverage Health Savings Accounts Lodging on Your Business Premises Meals Moving Expense Reimbursements No-Additional-Cost Services Retirement Planning Services Transportation (Commuting) Benefits Tuition Reduction Working Condition Benefits 3. File 2007 federal taxes free Fringe Benefit Valuation RulesGeneral Valuation Rule Cents-Per-Mile Rule Commuting Rule Lease Value Rule Unsafe Conditions Commuting Rule 4. File 2007 federal taxes free Rules for Withholding, Depositing, and ReportingTransfer of property. File 2007 federal taxes free Amount of deposit. File 2007 federal taxes free Limitation. File 2007 federal taxes free Conformity rules. File 2007 federal taxes free Election not to withhold income tax. File 2007 federal taxes free How To Get Tax Help 1. File 2007 federal taxes free Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. File 2007 federal taxes free For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. File 2007 federal taxes free Performance of services. File 2007 federal taxes free   A person who performs services for you does not have to be your employee. File 2007 federal taxes free A person may perform services for you as an independent contractor, partner, or director. File 2007 federal taxes free Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. File 2007 federal taxes free Provider of benefit. File 2007 federal taxes free   You are the provider of a fringe benefit if it is provided for services performed for you. File 2007 federal taxes free You are considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. File 2007 federal taxes free For example, if, in exchange for goods or services, your customer provides day care services as a fringe benefit to your employees for services they provide for you as their employer, then you are the provider of this fringe benefit even though the customer is actually providing the day care. File 2007 federal taxes free Recipient of benefit. File 2007 federal taxes free   The person who performs services for you is considered the recipient of a fringe benefit provided for those services. File 2007 federal taxes free That person may be considered the recipient even if the benefit is provided to someone who did not perform services for you. File 2007 federal taxes free For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. File 2007 federal taxes free Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. File 2007 federal taxes free Section 2 discusses the exclusions that apply to certain fringe benefits. File 2007 federal taxes free Any benefit not excluded under the rules discussed in section 2 is taxable. File 2007 federal taxes free Including taxable benefits in pay. File 2007 federal taxes free   You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. File 2007 federal taxes free Any amount the law excludes from pay. File 2007 federal taxes free Any amount the recipient paid for the benefit. File 2007 federal taxes free The rules used to determine the value of a fringe benefit are discussed in section 3. File 2007 federal taxes free   If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. File 2007 federal taxes free However, you can use special rules to withhold, deposit, and report the employment taxes. File 2007 federal taxes free These rules are discussed in section 4. File 2007 federal taxes free   If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. File 2007 federal taxes free However, you may have to report the benefit on one of the following information returns. File 2007 federal taxes free If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC, Miscellaneous Income A partner Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File 2007 federal taxes free For more information, see the instructions for the forms listed above. File 2007 federal taxes free Cafeteria Plans A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. File 2007 federal taxes free If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. File 2007 federal taxes free Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. File 2007 federal taxes free However, a cafeteria plan can include a qualified 401(k) plan as a benefit. File 2007 federal taxes free Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay. File 2007 federal taxes free Qualified benefits. File 2007 federal taxes free   A cafeteria plan can include the following benefits discussed in section 2. File 2007 federal taxes free Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance). File 2007 federal taxes free Adoption assistance. File 2007 federal taxes free Dependent care assistance. File 2007 federal taxes free Group-term life insurance coverage (including costs that cannot be excluded from wages). File 2007 federal taxes free Health savings accounts (HSAs). File 2007 federal taxes free Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services. File 2007 federal taxes free Benefits not allowed. File 2007 federal taxes free   A cafeteria plan cannot include the following benefits discussed in section 2. File 2007 federal taxes free Archer MSAs. File 2007 federal taxes free See Accident and Health Benefits in section 2. File 2007 federal taxes free Athletic facilities. File 2007 federal taxes free De minimis (minimal) benefits. File 2007 federal taxes free Educational assistance. File 2007 federal taxes free Employee discounts. File 2007 federal taxes free Employer-provided cell phones. File 2007 federal taxes free Lodging on your business premises. File 2007 federal taxes free Meals. File 2007 federal taxes free Moving expense reimbursements. File 2007 federal taxes free No-additional-cost services. File 2007 federal taxes free Transportation (commuting) benefits. File 2007 federal taxes free Tuition reduction. File 2007 federal taxes free Working condition benefits. File 2007 federal taxes free It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education). File 2007 federal taxes free $2,500 limit on a health flexible spending arrangement (FSA). File 2007 federal taxes free   For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. File 2007 federal taxes free For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. File 2007 federal taxes free   A cafeteria plan offering a health FSA must be amended to specify the $2,500 limit (or any lower limit set by the employer). File 2007 federal taxes free While cafeteria plans generally must be amended on a prospective basis, an amendment that is adopted on or before December 31, 2014, may be made effective retroactively, provided that in operation the cafeteria plan meets the limit for plan years beginning after December 31, 2012. File 2007 federal taxes free A cafeteria plan that does not limit health FSA contributions to the dollar limit is not a cafeteria plan and all benefits offered under the plan are includible in the employee's gross income. File 2007 federal taxes free   For more information, see Notice 2012-40, 2012-26 I. File 2007 federal taxes free R. File 2007 federal taxes free B. File 2007 federal taxes free 1046, available at www. File 2007 federal taxes free irs. File 2007 federal taxes free gov/irb/2012-26_IRB/ar09. File 2007 federal taxes free html. File 2007 federal taxes free Employee. File 2007 federal taxes free   For these plans, treat the following individuals as employees. File 2007 federal taxes free A current common-law employee. File 2007 federal taxes free See section 2 in Publication 15 (Circular E) for more information. File 2007 federal taxes free A full-time life insurance agent who is a current statutory employee. File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free Exception for S corporation shareholders. File 2007 federal taxes free   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 2007 federal taxes free A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 2007 federal taxes free Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 2007 federal taxes free Plans that favor highly compensated employees. File 2007 federal taxes free   If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. File 2007 federal taxes free A plan you maintain under a collective bargaining agreement does not favor highly compensated employees. File 2007 federal taxes free   A highly compensated employee for this purpose is any of the following employees. File 2007 federal taxes free An officer. File 2007 federal taxes free A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock. File 2007 federal taxes free An employee who is highly compensated based on the facts and circumstances. File 2007 federal taxes free A spouse or dependent of a person described in (1), (2), or (3). File 2007 federal taxes free Plans that favor key employees. File 2007 federal taxes free   If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. File 2007 federal taxes free A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. File 2007 federal taxes free However, a plan you maintain under a collective bargaining agreement does not favor key employees. File 2007 federal taxes free   A key employee during 2014 is generally an employee who is either of the following. File 2007 federal taxes free An officer having annual pay of more than $170,000. File 2007 federal taxes free An employee who for 2014 is either of the following. File 2007 federal taxes free A 5% owner of your business. File 2007 federal taxes free A 1% owner of your business whose annual pay was more than $150,000. File 2007 federal taxes free Simple Cafeteria Plans Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. File 2007 federal taxes free Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan. File 2007 federal taxes free Eligible employer. File 2007 federal taxes free   You are an eligible employer if you employ an average of 100 or fewer employees during either of the 2 preceding years. File 2007 federal taxes free If your business was not in existence throughout the preceding year, you are eligible if you reasonably expect to employ an average of 100 or fewer employees in the current year. File 2007 federal taxes free If you establish a simple cafeteria plan in a year that you employ an average of 100 or fewer employees, you are considered an eligible employer for any subsequent year as long as you do not employ an average of 200 or more employees in a subsequent year. File 2007 federal taxes free Eligibility and participation requirements. File 2007 federal taxes free   These requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate and each employee eligible to participate in the plan may elect any benefit available under the plan. File 2007 federal taxes free You may elect to exclude from the plan employees who: Are under age 21 before the close of the plan year, Have less than 1 year of service with you as of any day during the plan year, Are covered under a collective bargaining agreement, or Are nonresident aliens working outside the United States whose income did not come from a U. File 2007 federal taxes free S. File 2007 federal taxes free source. File 2007 federal taxes free Contribution requirements. File 2007 federal taxes free   You must make a contribution to provide qualified benefits on behalf of each qualified employee in an amount equal to: A uniform percentage (not less than 2%) of the employee’s compensation for the plan year, or An amount which is at least 6% of the employee’s compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee, whichever is less. File 2007 federal taxes free If the contribution requirements are met using option (2), the rate of contribution to any salary reduction contribution of a highly compensated or key employee can not be greater than the rate of contribution to any other employee. File 2007 federal taxes free More information. File 2007 federal taxes free   For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations. File 2007 federal taxes free 2. File 2007 federal taxes free Fringe Benefit Exclusion Rules This section discusses the exclusion rules that apply to fringe benefits. File 2007 federal taxes free These rules exclude all or part of the value of certain benefits from the recipient's pay. File 2007 federal taxes free The excluded benefits are not subject to federal income tax withholding. File 2007 federal taxes free Also, in most cases, they are not subject to social security, Medicare, or federal unemployment (FUTA) tax and are not reported on Form W-2. File 2007 federal taxes free This section discusses the exclusion rules for the following fringe benefits. File 2007 federal taxes free Accident and health benefits. File 2007 federal taxes free Achievement awards. File 2007 federal taxes free Adoption assistance. File 2007 federal taxes free Athletic facilities. File 2007 federal taxes free De minimis (minimal) benefits. File 2007 federal taxes free Dependent care assistance. File 2007 federal taxes free Educational assistance. File 2007 federal taxes free Employee discounts. File 2007 federal taxes free Employee stock options. File 2007 federal taxes free Employer-provided cell phones. File 2007 federal taxes free Group-term life insurance coverage. File 2007 federal taxes free Health savings accounts (HSAs). File 2007 federal taxes free Lodging on your business premises. File 2007 federal taxes free Meals. File 2007 federal taxes free Moving expense reimbursements. File 2007 federal taxes free No-additional-cost services. File 2007 federal taxes free Retirement planning services. File 2007 federal taxes free Transportation (commuting) benefits. File 2007 federal taxes free Tuition reduction. File 2007 federal taxes free Working condition benefits. File 2007 federal taxes free See Table 2-1, later, for an overview of the employment tax treatment of these benefits. File 2007 federal taxes free Table 2-1. File 2007 federal taxes free Special Rules for Various Types of Fringe Benefits (For more information, see the full discussion in this section. File 2007 federal taxes free ) Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000) Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. File 2007 federal taxes free Exempt, except for certain payments to S corporation employees who are 2% shareholders. File 2007 federal taxes free Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). File 2007 federal taxes free Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. File 2007 federal taxes free De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). File 2007 federal taxes free Educational assistance Exempt up to $5,250 of benefits each year. File 2007 federal taxes free (See Educational Assistance , later in this section. File 2007 federal taxes free ) Employee discounts Exempt3 up to certain limits. File 2007 federal taxes free (See Employee Discounts , later in this section. File 2007 federal taxes free ) Employee stock options See Employee Stock Options , later in this section. File 2007 federal taxes free Employer-provided cell phones Exempt if provided primarily for noncompensatory business purposes. File 2007 federal taxes free Group-term life insurance coverage Exempt Exempt1,4, 7 up to cost of $50,000 of coverage. File 2007 federal taxes free (Special rules apply to former employees. File 2007 federal taxes free ) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. File 2007 federal taxes free (See Health Savings Accounts , later in this section. File 2007 federal taxes free ) Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. File 2007 federal taxes free Meals Exempt if furnished on your business premises for your convenience. File 2007 federal taxes free Exempt if de minimis. File 2007 federal taxes free Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. File 2007 federal taxes free No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($130), qualified parking ($250), or qualified bicycle commuting reimbursement6 ($20). File 2007 federal taxes free (See Transportation (Commuting) Benefits , later in this section. File 2007 federal taxes free ) Exempt if de minimis. File 2007 federal taxes free Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). File 2007 federal taxes free Working condition benefits Exempt Exempt Exempt 1 Exemption does not apply to S corporation employees who are 2% shareholders. File 2007 federal taxes free 2 Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees. File 2007 federal taxes free 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. File 2007 federal taxes free 4 Exemption does not apply to certain key employees under a plan that favors those employees. File 2007 federal taxes free 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. File 2007 federal taxes free 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. File 2007 federal taxes free 7 You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File 2007 federal taxes free Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File 2007 federal taxes free Also, show it in box 12 with code “C. File 2007 federal taxes free ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File 2007 federal taxes free Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. File 2007 federal taxes free Contributions to the cost of accident or health insurance including qualified long-term care insurance. File 2007 federal taxes free Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. File 2007 federal taxes free Contributions to Archer MSAs or health savings accounts (discussed in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans). File 2007 federal taxes free This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. File 2007 federal taxes free Payments or reimbursements of medical expenses. File 2007 federal taxes free Payments for specific injuries or illnesses (such as the loss of the use of an arm or leg). File 2007 federal taxes free The payments must be figured without regard to any period of absence from work. File 2007 federal taxes free Accident or health plan. File 2007 federal taxes free   This is an arrangement that provides benefits for your employees, their spouses, their dependents, and their children (under age 27) in the event of personal injury or sickness. File 2007 federal taxes free The plan may be insured or noninsured and does not need to be in writing. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current common-law employee. File 2007 federal taxes free A full-time life insurance agent who is a current statutory employee. File 2007 federal taxes free A retired employee. File 2007 federal taxes free A former employee you maintain coverage for based on the employment relationship. File 2007 federal taxes free A widow or widower of an individual who died while an employee. File 2007 federal taxes free A widow or widower of a retired employee. File 2007 federal taxes free For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free Special rule for certain government plans. File 2007 federal taxes free   For certain government accident and health plans, payments to a deceased plan participant's beneficiary may qualify for the exclusion from gross income if the other requirements for exclusion are met. File 2007 federal taxes free See section 105(j) for details. File 2007 federal taxes free Exception for S corporation shareholders. File 2007 federal taxes free   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 2007 federal taxes free A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 2007 federal taxes free Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 2007 federal taxes free Exclusion from wages. File 2007 federal taxes free   You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. File 2007 federal taxes free Exception for certain long-term care benefits. File 2007 federal taxes free   You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. File 2007 federal taxes free This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. File 2007 federal taxes free However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File 2007 federal taxes free S corporation shareholders. File 2007 federal taxes free   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. File 2007 federal taxes free However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File 2007 federal taxes free Exception for highly compensated employees. File 2007 federal taxes free   If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in their wages subject to federal income tax withholding. File 2007 federal taxes free However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. File 2007 federal taxes free   A self-insured plan is a plan that reimburses your employees for medical expenses not covered by an accident or health insurance policy. File 2007 federal taxes free   A highly compensated employee for this exception is any of the following individuals. File 2007 federal taxes free One of the five highest paid officers. File 2007 federal taxes free An employee who owns (directly or indirectly) more than 10% in value of the employer's stock. File 2007 federal taxes free An employee who is among the highest paid 25% of all employees (other than those who can be excluded from the plan). File 2007 federal taxes free   For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. File 2007 federal taxes free COBRA premiums. File 2007 federal taxes free   The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). File 2007 federal taxes free The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary. File 2007 federal taxes free Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. File 2007 federal taxes free The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, and other securities. File 2007 federal taxes free The award must meet the requirements for employee achievement awards discussed in chapter 2 of Publication 535, Business Expenses. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current employee. File 2007 federal taxes free A former common-law employee you maintain coverage for in consideration of or based on an agreement relating to prior service as an employee. File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free Exception for S corporation shareholders. File 2007 federal taxes free   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 2007 federal taxes free A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 2007 federal taxes free Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 2007 federal taxes free Exclusion from wages. File 2007 federal taxes free   You can generally exclude the value of achievement awards you give to an employee from the employee's wages if their cost is not more than the amount you can deduct as a business expense for the year. File 2007 federal taxes free The excludable annual amount is $1,600 ($400 for awards that are not “qualified plan awards”). File 2007 federal taxes free See chapter 2 of Publication 535 for more information about the limit on deductions for employee achievement awards. File 2007 federal taxes free    To determine for 2014 whether an achievement award is a “qualified plan award” under the deduction rules described in Publication 535, treat any employee who received more than $115,000 in pay for 2013 as a highly compensated employee. File 2007 federal taxes free   If the cost of awards given to an employee is more than your allowable deduction, include in the employee's wages the larger of the following amounts. File 2007 federal taxes free The part of the cost that is more than your allowable deduction (up to the value of the awards). File 2007 federal taxes free The amount by which the value of the awards exceeds your allowable deduction. File 2007 federal taxes free Exclude the remaining value of the awards from the employee's wages. File 2007 federal taxes free Adoption Assistance An adoption assistance program is a separate written plan of an employer that meets all of the following requirements. File 2007 federal taxes free It benefits employees who qualify under rules set up by you, which do not favor highly compensated employees or their dependents. File 2007 federal taxes free To determine whether your plan meets this test, do not consider employees excluded from your plan who are covered by a collective bargaining agreement, if there is evidence that adoption assistance was a subject of good-faith bargaining. File 2007 federal taxes free It does not pay more than 5% of its payments during the year for shareholders or owners (or their spouses or dependents). File 2007 federal taxes free A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File 2007 federal taxes free You give reasonable notice of the plan to eligible employees. File 2007 federal taxes free Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses. File 2007 federal taxes free For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 2007 federal taxes free The employee was a 5% owner at any time during the year or the preceding year. File 2007 federal taxes free The employee received more than $115,000 in pay for the preceding year. File 2007 federal taxes free You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 2007 federal taxes free You must exclude all payments or reimbursements you make under an adoption assistance program for an employee's qualified adoption expenses from the employee's wages subject to federal income tax withholding. File 2007 federal taxes free However, you cannot exclude these payments from wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. File 2007 federal taxes free For more information, see the Instructions for Form 8839, Qualified Adoption Expenses. File 2007 federal taxes free You must report all qualifying adoption expenses you paid or reimbursed under your adoption assistance program for each employee for the year in box 12 of the employee's Form W-2. File 2007 federal taxes free Use code “T” to identify this amount. File 2007 federal taxes free Exception for S corporation shareholders. File 2007 federal taxes free   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File 2007 federal taxes free A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 2007 federal taxes free Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, including using the benefit as a reduction in distributions to the 2% shareholder. File 2007 federal taxes free Athletic Facilities You can exclude the value of an employee's use of an on-premises gym or other athletic facility you operate from an employee's wages if substantially all use of the facility during the calendar year is by your employees, their spouses, and their dependent children. File 2007 federal taxes free For this purpose, an employee's dependent child is a child or stepchild who is the employee's dependent or who, if both parents are deceased, has not attained the age of 25. File 2007 federal taxes free On-premises facility. File 2007 federal taxes free   The athletic facility must be located on premises you own or lease. File 2007 federal taxes free It does not have to be located on your business premises. File 2007 federal taxes free However, the exclusion does not apply to an athletic facility for residential use, such as athletic facilities that are part of a resort. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current employee. File 2007 federal taxes free A former employee who retired or left on disability. File 2007 federal taxes free A widow or widower of an individual who died while an employee. File 2007 federal taxes free A widow or widower of a former employee who retired or left on disability. File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free A partner who performs services for a partnership. File 2007 federal taxes free De Minimis (Minimal) Benefits You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. File 2007 federal taxes free A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. File 2007 federal taxes free Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. File 2007 federal taxes free Examples of de minimis benefits include the following. File 2007 federal taxes free Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes. File 2007 federal taxes free See Employer-Provided Cell Phones , later in this section, for details. File 2007 federal taxes free Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes. File 2007 federal taxes free Holiday gifts, other than cash, with a low fair market value. File 2007 federal taxes free Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000. File 2007 federal taxes free Meals. File 2007 federal taxes free See Meals , later in this section, for details. File 2007 federal taxes free Occasional parties or picnics for employees and their guests. File 2007 federal taxes free Occasional tickets for theater or sporting events. File 2007 federal taxes free Transportation fare. File 2007 federal taxes free See Transportation (Commuting) Benefits , later in this section, for details. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat any recipient of a de minimis benefit as an employee. File 2007 federal taxes free Dependent Care Assistance This exclusion applies to household and dependent care services you directly or indirectly pay for or provide to an employee under a dependent care assistance program that covers only your employees. File 2007 federal taxes free The services must be for a qualifying person's care and must be provided to allow the employee to work. File 2007 federal taxes free These requirements are basically the same as the tests the employee would have to meet to claim the dependent care credit if the employee paid for the services. File 2007 federal taxes free For more information, see Qualifying Person Test and Work-Related Expense Test in Publication 503, Child and Dependent Care Expenses. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current employee. File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free Yourself (if you are a sole proprietor). File 2007 federal taxes free A partner who performs services for a partnership. File 2007 federal taxes free Exclusion from wages. File 2007 federal taxes free   You can exclude the value of benefits you provide to an employee under a dependent care assistance program from the employee's wages if you reasonably believe that the employee can exclude the benefits from gross income. File 2007 federal taxes free   An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year. File 2007 federal taxes free This limit is reduced to $2,500 for married employees filing separate returns. File 2007 federal taxes free   However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. File 2007 federal taxes free Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. File 2007 federal taxes free For more information on the earned income limit, see Publication 503. File 2007 federal taxes free Exception for highly compensated employees. File 2007 federal taxes free   You cannot exclude dependent care assistance from the wages of a highly compensated employee unless the benefits provided under the program do not favor highly compensated employees and the program meets the requirements described in section 129(d) of the Internal Revenue Code. File 2007 federal taxes free   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 2007 federal taxes free The employee was a 5% owner at any time during the year or the preceding year. File 2007 federal taxes free The employee received more than $115,000 in pay for the preceding year. File 2007 federal taxes free You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 2007 federal taxes free Form W-2. File 2007 federal taxes free   Report the value of all dependent care assistance you provide to an employee under a dependent care assistance program in box 10 of the employee's Form W-2. File 2007 federal taxes free Include any amounts you cannot exclude from the employee's wages in boxes 1, 3, and 5. File 2007 federal taxes free Report both the nontaxable portion of assistance (up to $5,000) and any assistance above the amount that is non-taxable to the employee. File 2007 federal taxes free Example. File 2007 federal taxes free   Company A provides a dependent care assistance flexible spending arrangement to its employees through a cafeteria plan. File 2007 federal taxes free In addition, it provides occasional on-site dependent care to its employees at no cost. File 2007 federal taxes free Emily, an employee of company A, had $4,500 deducted from her pay for the dependent care flexible spending arrangement. File 2007 federal taxes free In addition, Emily used the on-site dependent care several times. File 2007 federal taxes free The fair market value of the on-site care was $700. File 2007 federal taxes free Emily's Form W-2 should report $5,200 of dependent care assistance in box 10 ($4,500 flexible spending arrangement plus $700 on-site dependent care). File 2007 federal taxes free Boxes 1, 3, and 5 should include $200 (the amount in excess of the nontaxable assistance), and applicable taxes should be withheld on that amount. File 2007 federal taxes free Educational Assistance This exclusion applies to educational assistance you provide to employees under an educational assistance program. File 2007 federal taxes free The exclusion also applies to graduate level courses. File 2007 federal taxes free Educational assistance means amounts you pay or incur for your employees' education expenses. File 2007 federal taxes free These expenses generally include the cost of books, equipment, fees, supplies, and tuition. File 2007 federal taxes free However, these expenses do not include the cost of a course or other education involving sports, games, or hobbies, unless the education: Has a reasonable relationship to your business, or Is required as part of a degree program. File 2007 federal taxes free Education expenses do not include the cost of tools or supplies (other than textbooks) your employee is allowed to keep at the end of the course. File 2007 federal taxes free Nor do they include the cost of lodging, meals, or transportation. File 2007 federal taxes free Educational assistance program. File 2007 federal taxes free   An educational assistance program is a separate written plan that provides educational assistance only to your employees. File 2007 federal taxes free The program qualifies only if all of the following tests are met. File 2007 federal taxes free The program benefits employees who qualify under rules set up by you that do not favor highly compensated employees. File 2007 federal taxes free To determine whether your program meets this test, do not consider employees excluded from your program who are covered by a collective bargaining agreement if there is evidence that educational assistance was a subject of good-faith bargaining. File 2007 federal taxes free The program does not provide more than 5% of its benefits during the year for shareholders or owners. File 2007 federal taxes free A shareholder or owner is someone who owns (on any day of the year) more than 5% of the stock or of the capital or profits interest of your business. File 2007 federal taxes free The program does not allow employees to choose to receive cash or other benefits that must be included in gross income instead of educational assistance. File 2007 federal taxes free You give reasonable notice of the program to eligible employees. File 2007 federal taxes free Your program can cover former employees if their employment is the reason for the coverage. File 2007 federal taxes free   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 2007 federal taxes free The employee was a 5% owner at any time during the year or the preceding year. File 2007 federal taxes free The employee received more than $115,000 in pay for the preceding year. File 2007 federal taxes free You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current employee. File 2007 federal taxes free A former employee who retired, left on disability, or was laid off. File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free Yourself (if you are a sole proprietor). File 2007 federal taxes free A partner who performs services for a partnership. File 2007 federal taxes free Exclusion from wages. File 2007 federal taxes free   You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee's wages each year. File 2007 federal taxes free Assistance over $5,250. File 2007 federal taxes free   If you do not have an educational assistance plan, or you provide an employee with assistance exceeding $5,250, you must include the value of these benefits as wages, unless the benefits are working condition benefits. File 2007 federal taxes free Working condition benefits may be excluded from wages. File 2007 federal taxes free Property or a service provided is a working condition benefit to the extent that if the employee paid for it, the amount paid would have been deductible as a business or depreciation expense. File 2007 federal taxes free See Working Condition Benefits , later, in this section. File 2007 federal taxes free Employee Discounts This exclusion applies to a price reduction you give an employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services. File 2007 federal taxes free However, it does not apply to discounts on real property or discounts on personal property of a kind commonly held for investment (such as stocks or bonds). File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current employee. File 2007 federal taxes free A former employee who retired or left on disability. File 2007 federal taxes free A widow or widower of an individual who died while an employee. File 2007 federal taxes free A widow or widower of an employee who retired or left on disability. File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. File 2007 federal taxes free A partner who performs services for a partnership. File 2007 federal taxes free Exclusion from wages. File 2007 federal taxes free   You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits. File 2007 federal taxes free For a discount on services, 20% of the price you charge nonemployee customers for the service. File 2007 federal taxes free For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property. File 2007 federal taxes free   Determine your gross profit percentage in the line of business based on all property you offer to customers (including employee customers) and your experience during the tax year immediately before the tax year in which the discount is available. File 2007 federal taxes free To figure your gross profit percentage, subtract the total cost of the property from the total sales price of the property and divide the result by the total sales price of the property. File 2007 federal taxes free Exception for highly compensated employees. File 2007 federal taxes free   You cannot exclude from the wages of a highly compensated employee any part of the value of a discount that is not available on the same terms to one of the following groups. File 2007 federal taxes free All of your employees. File 2007 federal taxes free A group of employees defined under a reasonable classification you set up that does not favor highly compensated employees. File 2007 federal taxes free   For this exclusion, a highly compensated employee for 2014 is an employee who meets either of the following tests. File 2007 federal taxes free The employee was a 5% owner at any time during the year or the preceding year. File 2007 federal taxes free The employee received more than $115,000 in pay for the preceding year. File 2007 federal taxes free You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 2007 federal taxes free Employee Stock Options There are three kinds of stock options—incentive stock options, employee stock purchase plan options, and nonstatutory (nonqualified) stock options. File 2007 federal taxes free Wages for social security, Medicare, and federal unemployment (FUTA) taxes do not include remuneration resulting from the exercise, after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or from any disposition of stock acquired by exercising such an option. File 2007 federal taxes free The IRS will not apply these taxes to an exercise before October 23, 2004, of an incentive stock option or an employee stock purchase plan option or to a disposition of stock acquired by such exercise. File 2007 federal taxes free Additionally, federal income tax withholding is not required on the income resulting from a disqualifying disposition of stock acquired by the exercise after October 22, 2004, of an incentive stock option or under an employee stock purchase plan option, or on income equal to the discount portion of stock acquired by the exercise, after October 22, 2004, of an employee stock purchase plan option resulting from any disposition of the stock. File 2007 federal taxes free The IRS will not apply federal income tax withholding upon the disposition of stock acquired by the exercise, before October 23, 2004, of an incentive stock option or an employee stock purchase plan option. File 2007 federal taxes free However, the employer must report as income in box 1 of Form W-2, (a) the discount portion of stock acquired by the exercise of an employee stock purchase plan option upon disposition of the stock, and (b) the spread (between the exercise price and the fair market value of the stock at the time of exercise) upon a disqualifying disposition of stock acquired by the exercise of an incentive stock option or an employee stock purchase plan option. File 2007 federal taxes free An employer must report the excess of the fair market value of stock received upon exercise of a nonstatutory stock option over the amount paid for the stock option on Form W-2 in boxes 1, 3 (up to the social security wage base), 5, and in box 12 using the code “V. File 2007 federal taxes free ” See Regulations section 1. File 2007 federal taxes free 83-7. File 2007 federal taxes free An employee who transfers his or her interest in nonstatutory stock options to the employee's former spouse incident to a divorce is not required to include an amount in gross income upon the transfer. File 2007 federal taxes free The former spouse, rather than the employee, is required to include an amount in gross income when the former spouse exercises the stock options. File 2007 federal taxes free See Revenue Ruling 2002-22 and Revenue Ruling 2004-60 for details. File 2007 federal taxes free You can find Revenue Ruling 2002-22 on page 849 of Internal Revenue Bulletin 2002-19 at www. File 2007 federal taxes free irs. File 2007 federal taxes free gov/pub/irs-irbs/irb02-19. File 2007 federal taxes free pdf. File 2007 federal taxes free See Revenue Ruling 2004-60, 2004-24 I. File 2007 federal taxes free R. File 2007 federal taxes free B. File 2007 federal taxes free 1051, available at www. File 2007 federal taxes free irs. File 2007 federal taxes free gov/irb/2004-24_IRB/ar13. File 2007 federal taxes free html. File 2007 federal taxes free For more information about employee stock options, see sections 421, 422, and 423 of the Internal Revenue Code and their related regulations. File 2007 federal taxes free Employer-Provided Cell Phones The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. File 2007 federal taxes free Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit. File 2007 federal taxes free For the rules relating to these types of benefits, see De Minimis (Minimal) Benefits , earlier in this section, and Working Condition Benefits , later in this section. File 2007 federal taxes free Noncompensatory business purposes. File 2007 federal taxes free   You provide a cell phone primarily for noncompensatory business purposes if there are substantial business reasons for providing the cell phone. File 2007 federal taxes free Examples of substantial business reasons include the employer's: Need to contact the employee at all times for work-related emergencies, Requirement that the employee be available to speak with clients at times when the employee is away from the office, and Need to speak with clients located in other time zones at times outside the employee's normal workday. File 2007 federal taxes free Cell phones provided to promote goodwill, boost morale, or attract prospective employees. File 2007 federal taxes free   You cannot exclude from an employee's wages the value of a cell phone provided to promote goodwill of an employee, to attract a prospective employee, or as a means of providing additional compensation to an employee. File 2007 federal taxes free Additional information. File 2007 federal taxes free   For additional information on the tax treatment of employer-provided cell phones, see Notice 2011-72, 2011-38 I. File 2007 federal taxes free R. File 2007 federal taxes free B. File 2007 federal taxes free 407, available at  www. File 2007 federal taxes free irs. File 2007 federal taxes free gov/irb/2011-38_IRB/ar07. File 2007 federal taxes free html. File 2007 federal taxes free Group-Term Life Insurance Coverage This exclusion applies to life insurance coverage that meets all the following conditions. File 2007 federal taxes free It provides a general death benefit that is not included in income. File 2007 federal taxes free You provide it to a group of employees. File 2007 federal taxes free See The 10-employee rule , later. File 2007 federal taxes free It provides an amount of insurance to each employee based on a formula that prevents individual selection. File 2007 federal taxes free This formula must use factors such as the employee's age, years of service, pay, or position. File 2007 federal taxes free You provide it under a policy you directly or indirectly carry. File 2007 federal taxes free Even if you do not pay any of the policy's cost, you are considered to carry it if you arrange for payment of its cost by your employees and charge at least one employee less than, and at least one other employee more than, the cost of his or her insurance. File 2007 federal taxes free Determine the cost of the insurance, for this purpose, as explained under Coverage over the limit , later. File 2007 federal taxes free Group-term life insurance does not include the following insurance. File 2007 federal taxes free Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits. File 2007 federal taxes free Life insurance on the life of your employee's spouse or dependent. File 2007 federal taxes free However, you may be able to exclude the cost of this insurance from the employee's wages as a de minimis benefit. File 2007 federal taxes free See De Minimis (Minimal) Benefits , earlier in this section. File 2007 federal taxes free Insurance provided under a policy that provides a permanent benefit (an economic value that extends beyond 1 policy year, such as paid-up or cash surrender value), unless certain requirements are met. File 2007 federal taxes free See Regulations section 1. File 2007 federal taxes free 79-1 for details. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat the following individuals as employees. File 2007 federal taxes free A current common-law employee. File 2007 federal taxes free A full-time life insurance agent who is a current statutory employee. File 2007 federal taxes free An individual who was formerly your employee under (1) or (2). File 2007 federal taxes free A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction and control. File 2007 federal taxes free Exception for S corporation shareholders. File 2007 federal taxes free   Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. File 2007 federal taxes free A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 2007 federal taxes free Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 2007 federal taxes free The 10-employee rule. File 2007 federal taxes free   Generally, life insurance is not group-term life insurance unless you provide it to at least 10 full-time employees at some time during the year. File 2007 federal taxes free   For this rule, count employees who choose not to receive the insurance unless, to receive it, they must contribute to the cost of benefits other than the group-term life insurance. File 2007 federal taxes free For example, count an employee who could receive insurance by paying part of the cost, even if that employee chooses not to receive it. File 2007 federal taxes free However, do not count an employee who must pay part or all of the cost of permanent benefits to get insurance, unless that employee chooses to receive it. File 2007 federal taxes free A permanent benefit is an economic value extending beyond one policy year (for example, a paid-up or cash-surrender value) that is provided under a life insurance policy. File 2007 federal taxes free Exceptions. File 2007 federal taxes free   Even if you do not meet the 10-employee rule, two exceptions allow you to treat insurance as group-term life insurance. File 2007 federal taxes free   Under the first exception, you do not have to meet the 10-employee rule if all the following conditions are met. File 2007 federal taxes free If evidence that the employee is insurable is required, it is limited to a medical questionnaire (completed by the employee) that does not require a physical. File 2007 federal taxes free You provide the insurance to all your full-time employees or, if the insurer requires the evidence mentioned in (1), to all full-time employees who provide evidence the insurer accepts. File 2007 federal taxes free You figure the coverage based on either a uniform percentage of pay or the insurer's coverage brackets that meet certain requirements. File 2007 federal taxes free See Regulations section 1. File 2007 federal taxes free 79-1 for details. File 2007 federal taxes free   Under the second exception, you do not have to meet the 10-employee rule if all the following conditions are met. File 2007 federal taxes free You provide the insurance under a common plan covering your employees and the employees of at least one other employer who is not related to you. File 2007 federal taxes free The insurance is restricted to, but mandatory for, all your employees who belong to, or are represented by, an organization (such as a union) that carries on substantial activities besides obtaining insurance. File 2007 federal taxes free Evidence of whether an employee is insurable does not affect an employee's eligibility for insurance or the amount of insurance that employee gets. File 2007 federal taxes free   To apply either exception, do not consider employees who were denied insurance for any of the following reasons. File 2007 federal taxes free They were 65 or older. File 2007 federal taxes free They customarily work 20 hours or less a week or 5 months or less in a calendar year. File 2007 federal taxes free They have not been employed for the waiting period given in the policy. File 2007 federal taxes free This waiting period cannot be more than 6 months. File 2007 federal taxes free Exclusion from wages. File 2007 federal taxes free   You can generally exclude the cost of up to $50,000 of group-term life insurance from the wages of an insured employee. File 2007 federal taxes free You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. File 2007 federal taxes free In addition, you do not have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee. File 2007 federal taxes free Coverage over the limit. File 2007 federal taxes free   You must include in your employee's wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. File 2007 federal taxes free Report it as wages in boxes 1, 3, and 5 of the employee's Form W-2. File 2007 federal taxes free Also, show it in box 12 with code “C. File 2007 federal taxes free ” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax. File 2007 federal taxes free   Figure the monthly cost of the insurance to include in the employee's wages by multiplying the number of thousands of dollars of all insurance coverage over $50,000 (figured to the nearest $100) by the cost shown in Table 2-2. File 2007 federal taxes free For all coverage provided within the calendar year, use the employee's age on the last day of the employee's tax year. File 2007 federal taxes free You must prorate the cost from the table if less than a full month of coverage is involved. File 2007 federal taxes free Table 2-2. File 2007 federal taxes free Cost Per $1,000 of Protection For 1 Month Age Cost Under 25 $ . File 2007 federal taxes free 05 25 through 29 . File 2007 federal taxes free 06 30 through 34 . File 2007 federal taxes free 08 35 through 39 . File 2007 federal taxes free 09 40 through 44 . File 2007 federal taxes free 10 45 through 49 . File 2007 federal taxes free 15 50 through 54 . File 2007 federal taxes free 23 55 through 59 . File 2007 federal taxes free 43 60 through 64 . File 2007 federal taxes free 66 65 through 69 1. File 2007 federal taxes free 27 70 and older 2. File 2007 federal taxes free 06 You figure the total cost to include in the employee's wages by multiplying the monthly cost by the number of full months' coverage at that cost. File 2007 federal taxes free Example. File 2007 federal taxes free Tom's employer provides him with group-term life insurance coverage of $200,000. File 2007 federal taxes free Tom is 45 years old, is not a key employee, and pays $100 per year toward the cost of the insurance. File 2007 federal taxes free Tom's employer must include $170 in his wages. File 2007 federal taxes free The $200,000 of insurance coverage is reduced by $50,000. File 2007 federal taxes free The yearly cost of $150,000 of coverage is $270 ($. File 2007 federal taxes free 15 x 150 x 12), and is reduced by the $100 Tom pays for the insurance. File 2007 federal taxes free The employer includes $170 in boxes 1, 3, and 5 of Tom's Form W-2. File 2007 federal taxes free The employer also enters $170 in box 12 with code “C. File 2007 federal taxes free ” Coverage for dependents. File 2007 federal taxes free   Group-term life insurance coverage paid by the employer for the spouse or dependents of an employee may be excludable from income as a de minimis fringe benefit if the face amount is not more than $2,000. File 2007 federal taxes free If the face amount is greater than $2,000, the entire cost of the dependent coverage must be included in income unless the amount over $2,000 is purchased with employee contributions on an after-tax basis. File 2007 federal taxes free The cost of the insurance is determined by using Table 2-2. File 2007 federal taxes free Former employees. File 2007 federal taxes free   When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes on that period of coverage is paid by the former employee with his or her tax return and is not collected by the employer. File 2007 federal taxes free You are not required to collect those taxes. File 2007 federal taxes free Use the table above to determine the amount of social security and Medicare taxes owed by the former employee for coverage provided after separation from service. File 2007 federal taxes free Report those uncollected amounts separately in box 12 of Form W-2 using codes “M” and “N. File 2007 federal taxes free ” See the General Instructions for Forms W-2 and W-3 and the Instructions for Form 941. File 2007 federal taxes free Exception for key employees. File 2007 federal taxes free   Generally, if your group-term life insurance plan favors key employees as to participation or benefits, you must include the entire cost of the insurance in your key employees' wages. File 2007 federal taxes free This exception generally does not apply to church plans. File 2007 federal taxes free When figuring social security and Medicare taxes, you must also include the entire cost in the employees' wages. File 2007 federal taxes free Include the cost in boxes 1, 3, and 5 of Form W-2. File 2007 federal taxes free However, you do not have to withhold federal income tax or pay FUTA tax on the cost of any group-term life insurance you provide to an employee. File 2007 federal taxes free   For this purpose, the cost of the insurance is the greater of the following amounts. File 2007 federal taxes free The premiums you pay for the employee's insurance. File 2007 federal taxes free See Regulations section 1. File 2007 federal taxes free 79-4T(Q&A 6) for more information. File 2007 federal taxes free The cost you figure using Table 2-2. File 2007 federal taxes free   For this exclusion, a key employee during 2014 is an employee or former employee who is one of the following individuals. File 2007 federal taxes free See section 416(i) of the Internal Revenue Code for more information. File 2007 federal taxes free An officer having annual pay of more than $170,000. File 2007 federal taxes free An individual who for 2014 was either of the following. File 2007 federal taxes free A 5% owner of your business. File 2007 federal taxes free A 1% owner of your business whose annual pay was more than $150,000. File 2007 federal taxes free   A former employee who was a key employee upon retirement or separation from service is also a key employee. File 2007 federal taxes free   Your plan does not favor key employees as to participation if at least one of the following is true. File 2007 federal taxes free It benefits at least 70% of your employees. File 2007 federal taxes free At least 85% of the participating employees are not key employees. File 2007 federal taxes free It benefits employees who qualify under a set of rules you set up that do not favor key employees. File 2007 federal taxes free   Your plan meets this participation test if it is part of a cafeteria plan (discussed in section 1) and it meets the participation test for those plans. File 2007 federal taxes free   When applying this test, do not consider employees who: Have not completed 3 years of service, Are part-time or seasonal, Are nonresident aliens who receive no U. File 2007 federal taxes free S. File 2007 federal taxes free source earned income from you, or Are not included in the plan but are in a unit of employees covered by a collective bargaining agreement, if the benefits provided under the plan were the subject of good-faith bargaining between you and employee representatives. File 2007 federal taxes free   Your plan does not favor key employees as to benefits if all benefits available to participating key employees are also available to all other participating employees. File 2007 federal taxes free Your plan does not favor key employees just because the amount of insurance you provide to your employees is uniformly related to their pay. File 2007 federal taxes free S corporation shareholders. File 2007 federal taxes free   Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the cost of all group-term life insurance coverage you provide the 2% shareholder in his or her wages. File 2007 federal taxes free When figuring social security and Medicare taxes, you must also include the cost of this coverage in the 2% shareholder's wages. File 2007 federal taxes free Include the cost in boxes 1, 3, and 5 of Form W-2. File 2007 federal taxes free However, you do not have to withhold federal income tax or pay federal unemployment tax on the cost of any group-term life insurance coverage you provide to the 2% shareholder. File 2007 federal taxes free Health Savings Accounts A Health Savings Account (HSA) is an account owned by a qualified individual who is generally your employee or former employee. File 2007 federal taxes free Any contributions that you make to an HSA become the employee's property and cannot be withdrawn by you. File 2007 federal taxes free Contributions to the account are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. File 2007 federal taxes free The medical expenses must not be reimbursable by insurance or other sources and their payment from HSA funds (distribution) will not give rise to a medical expense deduction on the individual's federal income tax return. File 2007 federal taxes free For more information about HSAs, visit the Department of Treasury's website at www. File 2007 federal taxes free treasury. File 2007 federal taxes free gov and enter “HSA” in the search box. File 2007 federal taxes free Eligibility. File 2007 federal taxes free   A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance except for permitted insurance listed under section 223(c)(3) or insurance for accidents, disability, dental care, vision care, or long-term care. File 2007 federal taxes free For calendar year 2014, a qualifying HDHP must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,350 for self-only coverage and $12,700 for family coverage. File 2007 federal taxes free   There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. File 2007 federal taxes free Exceptions. File 2007 federal taxes free   An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. File 2007 federal taxes free Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) generally disqualifies the individual (and employer) from making contributions to his or her HSA. File 2007 federal taxes free However, an individual may qualify to participate in an HSA if he or she is participating in only a limited-purpose FSA or HRA or a post-deductible FSA. File 2007 federal taxes free For more information, see Other employee health plans in Publication 969. File 2007 federal taxes free Employer contributions. File 2007 federal taxes free   Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. File 2007 federal taxes free For 2014, you can contribute up to $3,300 for self-only coverage or $6,550 for family coverage to a qualified individual's HSA. File 2007 federal taxes free   The contribution amounts listed above are increased by $1,000 for a qualified individual who is age 55 or older at any time during the year. File 2007 federal taxes free For two qualified individuals who are married to each other and who each are age 55 or older at any time during the year, each spouse's contribution limit is increased by $1,000 provided each spouse has a separate HSA. File 2007 federal taxes free No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part B. File 2007 federal taxes free Nondiscrimination rules. File 2007 federal taxes free    Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. File 2007 federal taxes free Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. File 2007 federal taxes free   For guidance on employer comparable contributions to HSAs under section 4980G in instances where an employee has not established an HSA by December 31 and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses, see Regulations section 54. File 2007 federal taxes free 4980G-4. File 2007 federal taxes free Exception. File 2007 federal taxes free   The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee. File 2007 federal taxes free A highly compensated employee for 2014 is an employee who meets either of the following tests. File 2007 federal taxes free The employee was a 5% owner at any time during the year or the preceding year. File 2007 federal taxes free The employee received more than $115,000 in pay for the preceding year. File 2007 federal taxes free You can choose to ignore test (2) if the employee was not also in the top 20% of employees when ranked by pay for the preceding year. File 2007 federal taxes free Partnerships and S corporations. File 2007 federal taxes free   Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. File 2007 federal taxes free Employer contributions to the HSA of a bona fide partner or 2% shareholder are treated as distributions or guaranteed payments as determined by the facts and circumstances. File 2007 federal taxes free Cafeteria plans. File 2007 federal taxes free   You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. File 2007 federal taxes free However, cafeteria plan nondiscrimination rules still apply. File 2007 federal taxes free For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. File 2007 federal taxes free Contributions that favor lower-paid employees are not prohibited. File 2007 federal taxes free Reporting requirements. File 2007 federal taxes free   You must report your contributions to an employee's HSA in box 12 of Form W-2 using code “W. File 2007 federal taxes free ” The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. File 2007 federal taxes free Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. File 2007 federal taxes free It is furnished on your business premises. File 2007 federal taxes free It is furnished for your convenience. File 2007 federal taxes free The employee must accept it as a condition of employment. File 2007 federal taxes free Different tests may apply to lodging furnished by educational institutions. File 2007 federal taxes free See section 119(d) of the Internal Revenue Code for details. File 2007 federal taxes free The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. File 2007 federal taxes free On your business premises. File 2007 federal taxes free   For this exclusion, your business premises is generally your employee's place of work. File 2007 federal taxes free For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. File 2007 federal taxes free For your convenience. File 2007 federal taxes free   Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. File 2007 federal taxes free You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. File 2007 federal taxes free This is true even if a law or an employment contract provides that the lodging is furnished as pay. File 2007 federal taxes free However, a written statement that the lodging is furnished for your convenience is not sufficient. File 2007 federal taxes free Condition of employment. File 2007 federal taxes free   Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. File 2007 federal taxes free Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging. File 2007 federal taxes free   It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. File 2007 federal taxes free Example. File 2007 federal taxes free A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. File 2007 federal taxes free If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. File 2007 federal taxes free S corporation shareholders. File 2007 federal taxes free   For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. File 2007 federal taxes free A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. File 2007 federal taxes free Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. File 2007 federal taxes free Meals This section discusses the exclusion rules that apply to de minimis meals and meals on your business premises. File 2007 federal taxes free De Minimis Meals You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. File 2007 federal taxes free The exclusion applies, for example, to the following items. File 2007 federal taxes free Coffee, doughnuts, or soft drinks. File 2007 federal taxes free Occasional meals or meal money provided to enable an employee to work overtime. File 2007 federal taxes free However, the exclusion does not apply to meal money figured on the basis of hours worked. File 2007 federal taxes free Occasional parties or picnics for employees and their guests. File 2007 federal taxes free This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. File 2007 federal taxes free For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later. File 2007 federal taxes free If food or beverages you furnish to employees qualify as a de minimis benefit, you can deduct their full cost. File 2007 federal taxes free The 50% limit on deductions for the cost of meals does not apply. File 2007 federal taxes free The deduction limit on meals is discussed in chapter 2 of Publication 535. File 2007 federal taxes free Employee. File 2007 federal taxes free   For this exclusion, treat any recipient of a de minimis meal as
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Publication 17, Your Federal Income Tax

This publication covers the general rules for filing a federal income tax return. It supplements the information contained in your tax form instruction booklet. It explains the tax law to make sure you pay only the tax you owe and no more.


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Page Last Reviewed or Updated: 28-Jan-2014

The File 2007 Federal Taxes Free

File 2007 federal taxes free Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. File 2007 federal taxes free Proc. File 2007 federal taxes free 2009-37 Table of Contents SECTION 1. File 2007 federal taxes free PURPOSE SECTION 2. File 2007 federal taxes free BACKGROUND SECTION 3. File 2007 federal taxes free SCOPE SECTION 4. File 2007 federal taxes free ELECTION PROCEDURES SECTION 5. File 2007 federal taxes free REQUIRED INFORMATION STATEMENT SECTION 6. File 2007 federal taxes free EFFECTIVE DATE SECTION 7. File 2007 federal taxes free TRANSITION RULE SECTION 8. File 2007 federal taxes free PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. File 2007 federal taxes free PURPOSE . File 2007 federal taxes free 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. File 2007 federal taxes free . File 2007 federal taxes free 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. File 2007 federal taxes free This revenue procedure describes the time and manner of providing this additional information. File 2007 federal taxes free . File 2007 federal taxes free 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. File 2007 federal taxes free Taxpayers should be aware that these regulations may be retroactive. File 2007 federal taxes free See § 7805(b)(2). File 2007 federal taxes free This revenue procedure may be modified to provide procedures consistent with additional guidance. File 2007 federal taxes free SECTION 2. File 2007 federal taxes free BACKGROUND . File 2007 federal taxes free 01 Section 108(i), Generally. File 2007 federal taxes free Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. File 2007 federal taxes free L. File 2007 federal taxes free No. File 2007 federal taxes free 111-5, 123 Stat. File 2007 federal taxes free 338. File 2007 federal taxes free In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. File 2007 federal taxes free Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). File 2007 federal taxes free The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. File 2007 federal taxes free 1273-1(d) of the Income Tax Regulations. File 2007 federal taxes free The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. File 2007 federal taxes free For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). File 2007 federal taxes free A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). File 2007 federal taxes free See § 108(i)(5)(D). File 2007 federal taxes free The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. File 2007 federal taxes free Section 108(i)(5)(D)(ii). File 2007 federal taxes free For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. File 2007 federal taxes free . File 2007 federal taxes free 02 Applicable Debt Instrument. File 2007 federal taxes free Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. File 2007 federal taxes free The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). File 2007 federal taxes free Section 108(i)(3)(B). File 2007 federal taxes free For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. File 2007 federal taxes free 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. File 2007 federal taxes free 1502-13(g)(5). File 2007 federal taxes free . File 2007 federal taxes free 03 Reacquisition. File 2007 federal taxes free Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). File 2007 federal taxes free The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. File 2007 federal taxes free See § 108(i)(4)(B). File 2007 federal taxes free The term “acquisition” also includes an indirect acquisition within the meaning of § 1. File 2007 federal taxes free 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). File 2007 federal taxes free For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. File 2007 federal taxes free . File 2007 federal taxes free 04 General Requirements for the Section 108(i) Election. File 2007 federal taxes free Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. File 2007 federal taxes free (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. File 2007 federal taxes free ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. File 2007 federal taxes free Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. File 2007 federal taxes free . File 2007 federal taxes free 05 Section 108(i) Elections Made by Pass-through Entities. File 2007 federal taxes free In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. File 2007 federal taxes free Section 108(i)(5)(B)(iii). File 2007 federal taxes free . File 2007 federal taxes free 06 Additional Information on Subsequent Years’ Returns. File 2007 federal taxes free Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. File 2007 federal taxes free . File 2007 federal taxes free 07 Exclusivity. File 2007 federal taxes free Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). File 2007 federal taxes free . File 2007 federal taxes free 08 Allocation of Deferred COD Income on Partnership Indebtedness. File 2007 federal taxes free Section 4. File 2007 federal taxes free 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. File 2007 federal taxes free If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. File 2007 federal taxes free 704-1(b)(2)(iii). File 2007 federal taxes free Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). File 2007 federal taxes free The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). File 2007 federal taxes free The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). File 2007 federal taxes free . File 2007 federal taxes free 09 Partner’s Deferred § 752 Amount. File 2007 federal taxes free A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). File 2007 federal taxes free A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). File 2007 federal taxes free To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. File 2007 federal taxes free 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). File 2007 federal taxes free See Rev. File 2007 federal taxes free Rul. File 2007 federal taxes free 92-97, 1992-2 C. File 2007 federal taxes free B. File 2007 federal taxes free 124, and Rev. File 2007 federal taxes free Rul. File 2007 federal taxes free 94-4, 1994-1 C. File 2007 federal taxes free B. File 2007 federal taxes free 195. File 2007 federal taxes free A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). File 2007 federal taxes free . File 2007 federal taxes free 10 Allocation of Deferred COD Income on S Corporation Indebtedness. File 2007 federal taxes free For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. File 2007 federal taxes free . File 2007 federal taxes free 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. File 2007 federal taxes free (1) In general. File 2007 federal taxes free The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). File 2007 federal taxes free These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. File 2007 federal taxes free OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). File 2007 federal taxes free COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. File 2007 federal taxes free See § 1. File 2007 federal taxes free 56(g)-1(c)(1). File 2007 federal taxes free (2) Exceptions for certain special status corporations. File 2007 federal taxes free The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. File 2007 federal taxes free OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. File 2007 federal taxes free . File 2007 federal taxes free 12 Extension of Time to Make Election. File 2007 federal taxes free Under § 301. File 2007 federal taxes free 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. File 2007 federal taxes free An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. File 2007 federal taxes free Section 301. File 2007 federal taxes free 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. File 2007 federal taxes free SECTION 3. File 2007 federal taxes free SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). File 2007 federal taxes free SECTION 4. File 2007 federal taxes free ELECTION PROCEDURES . File 2007 federal taxes free 01 In General. File 2007 federal taxes free (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. File 2007 federal taxes free 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. File 2007 federal taxes free 07, 4. File 2007 federal taxes free 08, 4. File 2007 federal taxes free 09, or 4. File 2007 federal taxes free 10 of this revenue procedure. File 2007 federal taxes free (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. File 2007 federal taxes free 01(1)(a) of this revenue procedure for making the § 108(i) election. File 2007 federal taxes free The rules that apply to an automatic extension under § 301. File 2007 federal taxes free 9100-2(a) apply to this automatic extension. File 2007 federal taxes free . File 2007 federal taxes free 02 Section 108(i) Elections Made by Members of Consolidated Groups. File 2007 federal taxes free The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. File 2007 federal taxes free See § 1. File 2007 federal taxes free 1502-77(a). File 2007 federal taxes free . File 2007 federal taxes free 03 Aggregation Rule. File 2007 federal taxes free A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. File 2007 federal taxes free A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. File 2007 federal taxes free 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. File 2007 federal taxes free . File 2007 federal taxes free 04 Partial Elections. File 2007 federal taxes free (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. File 2007 federal taxes free Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. File 2007 federal taxes free The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. File 2007 federal taxes free (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). File 2007 federal taxes free Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. File 2007 federal taxes free (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. File 2007 federal taxes free Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). File 2007 federal taxes free A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. File 2007 federal taxes free The provisions of this section 4. File 2007 federal taxes free 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. File 2007 federal taxes free . File 2007 federal taxes free 05 Contents of Election Statement. File 2007 federal taxes free A statement meets the requirements of this section 4. File 2007 federal taxes free 05 if the statement— (1) Label. File 2007 federal taxes free States “Section 108(i) Election” across the top. File 2007 federal taxes free (2) Required information. File 2007 federal taxes free Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. File 2007 federal taxes free 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. File 2007 federal taxes free . File 2007 federal taxes free 06 Supplemental information. File 2007 federal taxes free The statement described in section 4. File 2007 federal taxes free 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. File 2007 federal taxes free 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. File 2007 federal taxes free 05(2)(d) of this revenue procedure. File 2007 federal taxes free This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. File 2007 federal taxes free If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. File 2007 federal taxes free If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. File 2007 federal taxes free In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. File 2007 federal taxes free 08, 2. File 2007 federal taxes free 10 and, if applicable, 4. File 2007 federal taxes free 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. File 2007 federal taxes free . File 2007 federal taxes free 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. File 2007 federal taxes free The rules of this section 4. File 2007 federal taxes free 07 apply to partnerships other than partnerships described in section 4. File 2007 federal taxes free 10 of this revenue procedure. File 2007 federal taxes free (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). File 2007 federal taxes free For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. File 2007 federal taxes free , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. File 2007 federal taxes free Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). File 2007 federal taxes free (2) Election information statement provided to partners. File 2007 federal taxes free The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. File 2007 federal taxes free 07(2). File 2007 federal taxes free The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. File 2007 federal taxes free A statement meets the requirements of this section 4. File 2007 federal taxes free 07(2) if the statement— (a) Label. File 2007 federal taxes free States “Section 108(i) Election Information Statement for Partners” across the top. File 2007 federal taxes free (b) Required information. File 2007 federal taxes free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. File 2007 federal taxes free 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. File 2007 federal taxes free 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. File 2007 federal taxes free 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. File 2007 federal taxes free (c) If a partner fails to provide the written statement required by section 4. File 2007 federal taxes free 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. File 2007 federal taxes free 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. File 2007 federal taxes free (3) Partner reporting requirements. File 2007 federal taxes free The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. File 2007 federal taxes free 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. File 2007 federal taxes free Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. File 2007 federal taxes free A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. File 2007 federal taxes free If a partner provides its written statement under this section 4. File 2007 federal taxes free 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. File 2007 federal taxes free 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. File 2007 federal taxes free . File 2007 federal taxes free 08 Additional Requirements for an S Corporation Making a § 108(i) Election. File 2007 federal taxes free (1) Information filing on Schedule K-1 (Form 1120S). File 2007 federal taxes free For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. File 2007 federal taxes free , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. File 2007 federal taxes free S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. File 2007 federal taxes free (2) Election information statement provided to shareholders. File 2007 federal taxes free The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. File 2007 federal taxes free 08(2). File 2007 federal taxes free The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. File 2007 federal taxes free A statement meets the requirements of this section 4. File 2007 federal taxes free 08(2) if the statement— (a) Label. File 2007 federal taxes free States “Section 108(i) Election Information Statement for Shareholders” across the top. File 2007 federal taxes free (b) Required information. File 2007 federal taxes free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. File 2007 federal taxes free 06 of this revenue procedure. File 2007 federal taxes free . File 2007 federal taxes free 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. File 2007 federal taxes free The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. File 2007 federal taxes free 964-1(c)(3). File 2007 federal taxes free Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. File 2007 federal taxes free 05 of this revenue procedure and, if applicable, section 4. File 2007 federal taxes free 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. File 2007 federal taxes free . File 2007 federal taxes free 10 Section 108(i) Elections Made By Certain Foreign Partnerships. File 2007 federal taxes free The rules of this section 4. File 2007 federal taxes free 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). File 2007 federal taxes free See § 1. File 2007 federal taxes free 6031(a)-1(b). File 2007 federal taxes free (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. File 2007 federal taxes free 05 of this revenue procedure and, if applicable, section 4. File 2007 federal taxes free 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. File 2007 federal taxes free 6031(a)-1(b)(5) it files with the Service. File 2007 federal taxes free In addition, a nonfiling foreign partnership must include in the information required in section 4. File 2007 federal taxes free 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. File 2007 federal taxes free S. File 2007 federal taxes free persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). File 2007 federal taxes free (2) The nonfiling foreign partnership must make the election, in accordance with § 1. File 2007 federal taxes free 6031(a)-1(b)(5), by the date provided in section 4. File 2007 federal taxes free 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. File 2007 federal taxes free (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. File 2007 federal taxes free 07(1) of this revenue procedure. File 2007 federal taxes free Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). File 2007 federal taxes free The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. File 2007 federal taxes free 07(2) of this revenue procedure by the date provided in section 4. File 2007 federal taxes free 01(1)(a) of this revenue procedure. File 2007 federal taxes free The partnership should not attach any statement described in section 4. File 2007 federal taxes free 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. File 2007 federal taxes free However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. File 2007 federal taxes free (4) The partnership and each affected partner must satisfy the requirements of section 4. File 2007 federal taxes free 07(3) of this revenue procedure. File 2007 federal taxes free . File 2007 federal taxes free 11 Protective § 108(i) Election. File 2007 federal taxes free (1) In general. File 2007 federal taxes free A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. File 2007 federal taxes free If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). File 2007 federal taxes free Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. File 2007 federal taxes free A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. File 2007 federal taxes free 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. File 2007 federal taxes free 01(1)(a) of this revenue procedure. File 2007 federal taxes free The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. File 2007 federal taxes free A statement meets the requirements of this section 4. File 2007 federal taxes free 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. File 2007 federal taxes free 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. File 2007 federal taxes free 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. File 2007 federal taxes free 06 of this revenue procedure. File 2007 federal taxes free (2) Statements provided to shareholders and partners. File 2007 federal taxes free (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. File 2007 federal taxes free 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. File 2007 federal taxes free 11(1)(d) of this revenue procedure. File 2007 federal taxes free (b) The partnership or S corporation should not attach the statements described in this section 4. File 2007 federal taxes free 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. File 2007 federal taxes free . File 2007 federal taxes free 12 Election-Year Reporting by Tiered Pass-Through Entities. File 2007 federal taxes free (1) A partnership required to file a U. File 2007 federal taxes free S. File 2007 federal taxes free partnership return other than under § 1. File 2007 federal taxes free 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. File 2007 federal taxes free 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. File 2007 federal taxes free 07(1)(a) through (d) of this revenue procedure). File 2007 federal taxes free (2) If a partnership described in section 4. File 2007 federal taxes free 12(1) of this revenue procedure receives a statement described in sections 4. File 2007 federal taxes free 07(2) or 4. File 2007 federal taxes free 10(3) of this revenue procedure or this section 4. File 2007 federal taxes free 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. File 2007 federal taxes free 07(2)(b)(x) of this revenue procedure. File 2007 federal taxes free If an S corporation receives a statement described in sections 4. File 2007 federal taxes free 07(2) or 4. File 2007 federal taxes free 10(3) of this revenue procedure or this section 4. File 2007 federal taxes free 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. File 2007 federal taxes free 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. File 2007 federal taxes free The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. File 2007 federal taxes free The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. File 2007 federal taxes free (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. File 2007 federal taxes free 704-1(b)(2)(iii). File 2007 federal taxes free The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. File 2007 federal taxes free No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. File 2007 federal taxes free The partnership allocates amounts described in section 4. File 2007 federal taxes free 06 of this revenue procedure under this section 4. File 2007 federal taxes free 12(3) as if the additional COD income was realized. File 2007 federal taxes free (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. File 2007 federal taxes free No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. File 2007 federal taxes free (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. File 2007 federal taxes free (6) This paragraph 4. File 2007 federal taxes free 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. File 2007 federal taxes free S. File 2007 federal taxes free Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. File 2007 federal taxes free 07(1) of this revenue procedure, or a statement described in sections 4. File 2007 federal taxes free 07(2) or 4. File 2007 federal taxes free 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). File 2007 federal taxes free (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. File 2007 federal taxes free 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. File 2007 federal taxes free 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. File 2007 federal taxes free (b) A Category 2 filer must include its share of the information described in section 4. File 2007 federal taxes free 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. File 2007 federal taxes free Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. File 2007 federal taxes free (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. File 2007 federal taxes free 12(6)(a)(ii) and 4. File 2007 federal taxes free 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. File 2007 federal taxes free However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. File 2007 federal taxes free (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. File 2007 federal taxes free 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. File 2007 federal taxes free 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. File 2007 federal taxes free 12(1) and (2) of this revenue procedure. File 2007 federal taxes free Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. File 2007 federal taxes free 12(6) of this revenue procedure. File 2007 federal taxes free (8) The provisions of section 4. File 2007 federal taxes free 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. File 2007 federal taxes free 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. File 2007 federal taxes free 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. File 2007 federal taxes free 11(1)(d) of this revenue procedure. File 2007 federal taxes free SECTION 5. File 2007 federal taxes free REQUIRED INFORMATION STATEMENT . File 2007 federal taxes free 01 Annual Information Statements. File 2007 federal taxes free Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. File 2007 federal taxes free 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. File 2007 federal taxes free 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. File 2007 federal taxes free . File 2007 federal taxes free 02 Contents of Statement. File 2007 federal taxes free A statement meets the requirements of this section 5. File 2007 federal taxes free 02 if the statement— (1) Label. File 2007 federal taxes free States “Section 108(i) Information Statement” across the top; (2) Required information. File 2007 federal taxes free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. File 2007 federal taxes free (3) Election attached. File 2007 federal taxes free Includes a copy of the election statement described in section 4. File 2007 federal taxes free 05 of this revenue procedure. File 2007 federal taxes free . File 2007 federal taxes free 03 Additional Annual Reporting Requirements for Certain Partnerships. File 2007 federal taxes free The rules of this section 5. File 2007 federal taxes free 03 apply to partnerships other than partnerships described in section 5. File 2007 federal taxes free 05 of this revenue procedure. File 2007 federal taxes free (1) In general. File 2007 federal taxes free A partnership that makes an election under § 108(i) (except for a protective election under section 4. File 2007 federal taxes free 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. File 2007 federal taxes free 01 of this revenue procedure. File 2007 federal taxes free In addition, for each taxable year in which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. File 2007 federal taxes free 07(1) of this revenue procedure. File 2007 federal taxes free (2) Annual information statements provided to partners. File 2007 federal taxes free The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure, a statement meeting the requirements of this section 5. File 2007 federal taxes free 03(2). File 2007 federal taxes free The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. File 2007 federal taxes free A statement meets the requirements of this section 5. File 2007 federal taxes free 03(2) if the statement— (a) Label. File 2007 federal taxes free States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. File 2007 federal taxes free (b) Required information. File 2007 federal taxes free Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. File 2007 federal taxes free If a partner fails to provide the written statement required by section 4. File 2007 federal taxes free 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. File 2007 federal taxes free 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. File 2007 federal taxes free . File 2007 federal taxes free 04 Additional Annual Reporting Requirements for an S Corporation. File 2007 federal taxes free (1) In general. File 2007 federal taxes free An S corporation that makes an election under § 108(i) (except for a protective election under section 4. File 2007 federal taxes free 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. File 2007 federal taxes free 01 of this revenue procedure. File 2007 federal taxes free In addition, for each taxable year in which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. File 2007 federal taxes free 08(1) of this revenue procedure. File 2007 federal taxes free (2) Annual information statements provided to shareholders. File 2007 federal taxes free The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure a statement meeting the requirements of this section 5. File 2007 federal taxes free 04(2). File 2007 federal taxes free The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. File 2007 federal taxes free A statement meets the requirements of this section 5. File 2007 federal taxes free 04(2) if the statement— (a) Label. File 2007 federal taxes free States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. File 2007 federal taxes free Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. File 2007 federal taxes free . File 2007 federal taxes free 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. File 2007 federal taxes free (1) The rules of this section 5. File 2007 federal taxes free 05 apply to nonfiling foreign partnerships. File 2007 federal taxes free (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. File 2007 federal taxes free 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. File 2007 federal taxes free 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. File 2007 federal taxes free 01 of this revenue procedure. File 2007 federal taxes free (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. File 2007 federal taxes free 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. File 2007 federal taxes free (4) For each taxable year in which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. File 2007 federal taxes free 07(1) of this revenue procedure. File 2007 federal taxes free Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). File 2007 federal taxes free The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. File 2007 federal taxes free 6031(b)-1T(b). File 2007 federal taxes free The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. File 2007 federal taxes free 05(2) of this revenue procedure. File 2007 federal taxes free (5) For each taxable year for which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. File 2007 federal taxes free 03(2) of this revenue procedure. File 2007 federal taxes free The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. File 2007 federal taxes free . File 2007 federal taxes free 06 Information Statements Made on Behalf of Certain Foreign Corporations. File 2007 federal taxes free Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. File 2007 federal taxes free 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. File 2007 federal taxes free 01 of this revenue procedure. File 2007 federal taxes free . File 2007 federal taxes free 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. File 2007 federal taxes free (1) A partnership required to file a U. File 2007 federal taxes free S. File 2007 federal taxes free partnership return other than under § 1. File 2007 federal taxes free 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. File 2007 federal taxes free 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. File 2007 federal taxes free 07(1)(a) through (d) of this revenue procedure). File 2007 federal taxes free (2) If a partnership described in section 5. File 2007 federal taxes free 07(1) of this revenue procedure receives a statement described in sections 5. File 2007 federal taxes free 03(2) or 5. File 2007 federal taxes free 05(5) of this revenue procedure or this section 5. File 2007 federal taxes free 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. File 2007 federal taxes free If an S corporation receives a statement described in sections 5. File 2007 federal taxes free 03(2) or 5. File 2007 federal taxes free 05(5) of this revenue procedure or this section 5. File 2007 federal taxes free 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. File 2007 federal taxes free 03(2)(b)(i) through (viii) of this revenue procedure. File 2007 federal taxes free The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. File 2007 federal taxes free The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. File 2007 federal taxes free (3) This paragraph 5. File 2007 federal taxes free 07(3) provides the rules for persons described in section 4. File 2007 federal taxes free 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. File 2007 federal taxes free 03(1) of this revenue procedure, or a statement described in sections 5. File 2007 federal taxes free 03(2) or 5. File 2007 federal taxes free 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). File 2007 federal taxes free (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. File 2007 federal taxes free 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. File 2007 federal taxes free 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. File 2007 federal taxes free (b) A Category 2 filer must include its share of the information described in section 4. File 2007 federal taxes free 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. File 2007 federal taxes free Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. File 2007 federal taxes free (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. File 2007 federal taxes free 07(3)(a)(ii) and 5. File 2007 federal taxes free 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. File 2007 federal taxes free However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. File 2007 federal taxes free (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. File 2007 federal taxes free 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. File 2007 federal taxes free 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. File 2007 federal taxes free 07(1) and (2) of this revenue procedure. File 2007 federal taxes free Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. File 2007 federal taxes free 12(6) of this revenue procedure. File 2007 federal taxes free SECTION 6. File 2007 federal taxes free EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. File 2007 federal taxes free SECTION 7. File 2007 federal taxes free TRANSITION RULE . File 2007 federal taxes free 01 Noncomplying Election. File 2007 federal taxes free Except as otherwise provided in this section 7. File 2007 federal taxes free 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. File 2007 federal taxes free However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. File 2007 federal taxes free . File 2007 federal taxes free 02 Modification of Election. File 2007 federal taxes free A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). File 2007 federal taxes free To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. File 2007 federal taxes free . File 2007 federal taxes free 03 Notations. File 2007 federal taxes free A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. File 2007 federal taxes free A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. File 2007 federal taxes free See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. File 2007 federal taxes free SECTION 8. File 2007 federal taxes free PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. File 2007 federal taxes free S. File 2007 federal taxes free C. File 2007 federal taxes free 3507) under control number 1545-2147. File 2007 federal taxes free An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. File 2007 federal taxes free The collection of information in this revenue procedure is in sections 4, 5 and 7. File 2007 federal taxes free This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. File 2007 federal taxes free This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. File 2007 federal taxes free The collection of information is required to obtain a benefit. File 2007 federal taxes free The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. File 2007 federal taxes free The estimated total annual reporting burden is 300,000 hours. File 2007 federal taxes free The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. File 2007 federal taxes free The estimated number of respondents is 50,000. File 2007 federal taxes free Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. File 2007 federal taxes free Generally, tax returns and return information are confidential, as required by § 6103. File 2007 federal taxes free DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. File 2007 federal taxes free Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). File 2007 federal taxes free For further information regarding this revenue procedure, contact Megan A. File 2007 federal taxes free Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. File 2007 federal taxes free Blanchard at (202) 622-3950 for questions involving OID, Ronald M. File 2007 federal taxes free Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). 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