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

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Office of the Attorney General

Website: Office of the Attorney General

Address: Office of the Attorney General
Consumer Protection Unit
1031 W. 4th Ave., Suite 200
Anchorage, AK 99501-5903

Phone Number: 907-269-5200

Toll-free: 1-888-576-2529

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Commerce, Community and Economic Development

Website: Department of Commerce, Community and Economic Development

Address: Department of Commerce, Community and Economic Development
Division of Banking and Securities
PO Box 110807
Juneau, AK 99811-0807

Phone Number: 907-465-2521

Toll-free: 1-888-925-2521

TTY: 907-465-5437

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Commerce, Community and Economic Development

Website: Department of Commerce, Community and Economic Development

Address: Department of Commerce, Community and Economic Development
Division of Insurance
Robert B. Atwood Building
550 W. 7th Ave., Suite 1560
Anchorage, AK 99501-3567

Phone Number: 907-269-7900

Toll-free: 1-800-467-8725

TTY: 907-465-5437

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Commerce, Community and Economic Development

Website: Department of Commerce, Community and Economic Development

Address: Department of Commerce, Community and Economic Development
Division of Banking and Securities
PO Box 110807
Juneau, AK 99811-0807

Phone Number: 907-465-2521

Toll-free: 1-888-925-2521 (AK)

TTY: 907-465-5437

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Regulatory Commission

Website: Regulatory Commission

Address: Regulatory Commission
Consumer Protection and Information Section
701 W. 8th Ave., Suite 300
Anchorage, AK 99501-3469

Phone Number: 907-276-6222

Toll-free: 1-800-390-2782

TTY: 907-276-4533

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The File Past Taxes For Free

File past taxes for free 4. File past taxes for free   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. File past taxes for free However, the information shown on the filled-in forms is not from any actual person or scenario. File past taxes for free Example 1—Mortgage loan modification. File past taxes for free    In 2007, Nancy Oak bought a main home for $435,000. File past taxes for free Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. File past taxes for free The loan was secured by the home. File past taxes for free The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. File past taxes for free In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. File past taxes for free    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. File past taxes for free The FMV of Nancy's home at the time of the refinancing was $500,000. File past taxes for free Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. File past taxes for free After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. File past taxes for free   In 2013, Nancy was unable to make her mortgage loan payments. File past taxes for free On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. File past taxes for free Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. File past taxes for free   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. File past taxes for free Identifiable event code "F" appears in box 6. File past taxes for free This box shows the reason the creditor has filed Form 1099-C. File past taxes for free To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. File past taxes for free Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. File past taxes for free   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. File past taxes for free Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. File past taxes for free Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. File past taxes for free Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). File past taxes for free   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. File past taxes for free Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). File past taxes for free Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. File past taxes for free You can see Nancy's Form 1099-C and a portion of her Form 1040 below. File past taxes for free Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 1040, U. File past taxes for free S. File past taxes for free Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. File past taxes for free    In 2005, John and Mary Elm bought a main home for $335,000. File past taxes for free John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. File past taxes for free The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. File past taxes for free   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. File past taxes for free Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. File past taxes for free   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. File past taxes for free Identifiable event code "D" appears in box 6. File past taxes for free This box shows the reason the creditor has filed Form 1099-C. File past taxes for free In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. File past taxes for free In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. File past taxes for free Their sample Form 1099-C is shown on this page. File past taxes for free   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). File past taxes for free However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. File past taxes for free   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). File past taxes for free Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. File past taxes for free Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. File past taxes for free As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. File past taxes for free Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. File past taxes for free Thus, John and Mary leave line 10b of Form 982 blank. File past taxes for free   John and Mary must also determine whether they have a gain or loss from the foreclosure. File past taxes for free John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. File past taxes for free Because this loss relates to their home, it is a nondeductible loss. File past taxes for free   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. File past taxes for free John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 1099-C, Cancellation of Debt Table 1-1. File past taxes for free Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. File past taxes for free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). File past taxes for free Otherwise, go to Part 2. File past taxes for free 1. File past taxes for free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. File past taxes for free 00 2. File past taxes for free Enter the fair market value of the transferred property $290,000. File past taxes for free 00 3. File past taxes for free Ordinary income from the cancellation of debt upon foreclosure or repossession. File past taxes for free * Subtract line 2 from line 1. File past taxes for free If less than zero, enter zero. File past taxes for free Next, go to Part 2 $ 25,000. File past taxes for free 00 Part 2. File past taxes for free Gain or loss from foreclosure or repossession. File past taxes for free   4. File past taxes for free Enter the smaller of line 1 or line 2. File past taxes for free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. File past taxes for free 00 5. File past taxes for free Enter any proceeds you received from the foreclosure sale   6. File past taxes for free Add line 4 and line 5 $290,000. File past taxes for free 00 7. File past taxes for free Enter the adjusted basis of the transferred property $335,000. File past taxes for free 00 8. File past taxes for free Gain or loss from foreclosure or repossession. File past taxes for free Subtract line 7 from line 6 ($ 45,000. File past taxes for free 00) * The income may not be taxable. File past taxes for free See chapter 1 for more details. File past taxes for free Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. File past taxes for free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. File past taxes for free Credit card debt $ 5,500 2. File past taxes for free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. File past taxes for free Car and other vehicle loans $ 4. File past taxes for free Medical bills owed $ 5. File past taxes for free Student loans $ 6. File past taxes for free Accrued or past-due mortgage interest $ 7. File past taxes for free Accrued or past-due real estate taxes $ 8. File past taxes for free Accrued or past-due utilities (water, gas, electric) $ 9. File past taxes for free Accrued or past-due child care costs $ 10. File past taxes for free Federal or state income taxes remaining due (for prior tax years) $ 11. File past taxes for free Judgments $ 12. File past taxes for free Business debts (including those owed as a sole proprietor or partner) $ 13. File past taxes for free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. File past taxes for free Other liabilities (debts) not included above $ 15. File past taxes for free Total liabilities immediately before the cancellation. File past taxes for free Add lines 1 through 14. File past taxes for free $ 320,500 Part II. File past taxes for free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. File past taxes for free Cash and bank account balances $ 6,000 17. File past taxes for free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. File past taxes for free Cars and other vehicles $ 19. File past taxes for free Computers $ 20. File past taxes for free Household goods and furnishings (for example, appliances, electronics, furniture, etc. File past taxes for free ) $ 21. File past taxes for free Tools $ 22. File past taxes for free Jewelry $ 23. File past taxes for free Clothing $ 24. File past taxes for free Books $ 25. File past taxes for free Stocks and bonds $ 26. File past taxes for free Investments in coins, stamps, paintings, or other collectibles $ 27. File past taxes for free Firearms, sports, photographic, and other hobby equipment $ 28. File past taxes for free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. File past taxes for free Interest in a pension plan $ 30. File past taxes for free Interest in education accounts $ 31. File past taxes for free Cash value of life insurance $ 32. File past taxes for free Security deposits with landlords, utilities, and others $ 33. File past taxes for free Interests in partnerships $ 34. File past taxes for free Value of investment in a business $ 35. File past taxes for free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. File past taxes for free Other assets not included above $ 37. File past taxes for free FMV of total assets immediately before the cancellation. File past taxes for free Add lines 16 through 36. File past taxes for free $ 309,000 Part III. File past taxes for free Insolvency 38. File past taxes for free Amount of Insolvency. File past taxes for free Subtract line 37 from line 15. File past taxes for free If zero or less, you are not insolvent. File past taxes for free $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. File past taxes for free    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. File past taxes for free Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. File past taxes for free Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. File past taxes for free   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. File past taxes for free The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. File past taxes for free On December 26, 2013, the lender canceled the remaining debt. File past taxes for free Kathy and Frank have no tax attributes other than basis of personal-use property. File past taxes for free   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). File past taxes for free Identifiable event code "D" appears in box 6. File past taxes for free This box shows the reason the creditor has filed Form 1099-C. File past taxes for free Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. File past taxes for free Kathy and Frank are filing a joint return for 2013. File past taxes for free   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. File past taxes for free Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). File past taxes for free Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. File past taxes for free Because this loss relates to their home, it is a nondeductible loss. File past taxes for free   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. File past taxes for free Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. File past taxes for free Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. File past taxes for free The household furnishings originally cost $30,000. File past taxes for free The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. File past taxes for free Kathy and Frank had no adjustments to the cost basis of the car. File past taxes for free Kathy and Frank had no other assets or liabilities at the time of the cancellation. File past taxes for free Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). File past taxes for free   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. File past taxes for free Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). File past taxes for free Kathy and Frank had no other assets or liabilities at that time. File past taxes for free Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. File past taxes for free   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. File past taxes for free The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. File past taxes for free The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. File past taxes for free Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. File past taxes for free Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). File past taxes for free This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. File past taxes for free   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. File past taxes for free Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. File past taxes for free Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. File past taxes for free Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). File past taxes for free   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. File past taxes for free Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. File past taxes for free Thus, Kathy and Frank leave line 10b of Form 982 blank. File past taxes for free However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. File past taxes for free As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. File past taxes for free Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). File past taxes for free Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. File past taxes for free Kathy and Frank reduce the basis in the car by $14,956. File past taxes for free 52 ($43,000 x $16,000/$46,000). File past taxes for free And they reduce the basis in the household furnishings by $28,043. File past taxes for free 48 ($43,000 x $30,000/$46,000). File past taxes for free   Following are Kathy and Frank's sample forms and worksheets. File past taxes for free Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 1099-C, Cancellation of Debt Table 1-1. File past taxes for free Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. File past taxes for free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). File past taxes for free Otherwise, go to Part 2. File past taxes for free 1. File past taxes for free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. File past taxes for free 00 2. File past taxes for free Enter the fair market value of the transferred property $1,750,000. File past taxes for free 00 3. File past taxes for free Ordinary income from the cancellation of debt upon foreclosure or repossession. File past taxes for free * Subtract line 2 from line 1. File past taxes for free If less than zero, enter zero. File past taxes for free Next, go to Part 2 $0. File past taxes for free 00 Part 2. File past taxes for free Gain or loss from foreclosure or repossession. File past taxes for free   4. File past taxes for free Enter the smaller of line 1 or line 2. File past taxes for free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. File past taxes for free $1,750,000. File past taxes for free 00 5. File past taxes for free Enter any proceeds you received from the foreclosure sale   6. File past taxes for free Add line 4 and line 5 $1,750,000. File past taxes for free 00 7. File past taxes for free Enter the adjusted basis of the transferred property $3,000,000. File past taxes for free 00 8. File past taxes for free Gain or loss from foreclosure or repossession. File past taxes for free Subtract line 7 from line 6 ($1,250,000. File past taxes for free 00) * The income may not be taxable. File past taxes for free See chapter 1 for more details. File past taxes for free    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. File past taxes for free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. File past taxes for free Credit card debt $ 18,000 2. File past taxes for free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. File past taxes for free Car and other vehicle loans $ 4. File past taxes for free Medical bills owed $ 5. File past taxes for free Student loans $ 6. File past taxes for free Accrued or past-due mortgage interest $ 7. File past taxes for free Accrued or past-due real estate taxes $ 8. File past taxes for free Accrued or past-due utilities (water, gas, electric) $ 9. File past taxes for free Accrued or past-due child care costs $ 10. File past taxes for free Federal or state income taxes remaining due (for prior tax years) $ 11. File past taxes for free Judgments $ 12. File past taxes for free Business debts (including those owed as a sole proprietor or partner) $ 13. File past taxes for free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. File past taxes for free Other liabilities (debts) not included above $ 15. File past taxes for free Total liabilities immediately before the cancellation. File past taxes for free Add lines 1 through 14. File past taxes for free $ 768,000 Part II. File past taxes for free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. File past taxes for free Cash and bank account balances $ 15,000 17. File past taxes for free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. File past taxes for free Cars and other vehicles $ 10,000 19. File past taxes for free Computers $ 20. File past taxes for free Household goods and furnishings (for example, appliances, electronics, furniture, etc. File past taxes for free ) $ 17,000 21. File past taxes for free Tools $ 22. File past taxes for free Jewelry $ 23. File past taxes for free Clothing $ 24. File past taxes for free Books $ 25. File past taxes for free Stocks and bonds $ 26. File past taxes for free Investments in coins, stamps, paintings, or other collectibles $ 27. File past taxes for free Firearms, sports, photographic, and other hobby equipment $ 28. File past taxes for free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. File past taxes for free Interest in a pension plan $ 30. File past taxes for free Interest in education accounts $ 31. File past taxes for free Cash value of life insurance $ 32. File past taxes for free Security deposits with landlords, utilities, and others $ 33. File past taxes for free Interests in partnerships $ 34. File past taxes for free Value of investment in a business $ 35. File past taxes for free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. File past taxes for free Other assets not included above $ 37. File past taxes for free FMV of total assets immediately before the cancellation. File past taxes for free Add lines 16 through 36. File past taxes for free $ 42,000 Part III. File past taxes for free Insolvency 38. File past taxes for free Amount of Insolvency. File past taxes for free Subtract line 37 from line 15. File past taxes for free If zero or less, you are not insolvent. File past taxes for free $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. File past taxes for free Please click the link to view the image. File past taxes for free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications