File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Filing Taxes As Unemployed

Free State Tax E-fileDo Students Need To File Taxes1040 Tax Form WorksheetTax ReturnAmended 2012 Tax FormH & R Block ComIncome Tax For SeniorsFile 2009 Tax Return TurbotaxIrsfreetaxH&r Block My BlockTurbotax Free EditionHow To File State Return For FreeTax Return 1040nrTax Return 2012Free File State Taxes Online2012 Amended Tax ReturnFree H & R BlockFile Taxes Electronically 2011File My State Tax Return FreeCan I File 2011 Tax Return OnlineFile An Extension OnlineH&r Block Online FilingTax Return For Students1040ez Form And Instructions1040ez Form 2012Federal 1040ez OnlineTax Software 20122011 E-fileCan I File My Back Taxes Online FreeState Tax FreeUs Irs E File FreeFile 1040nr Ez OnlineAmending My 2010 Tax ReturnState TaxsIrs File 2012 TaxesWww Irs Gov EfileFile Online Tax Extension For Free1040ez Tax Return Forms 2013Irs 1040ez Instructions2012 Tax Forms 1040ez

Filing Taxes As Unemployed

Filing taxes as unemployed 5. Filing taxes as unemployed   Ministers and Church Employees Table of Contents Alternative Limit for Church Employees Changes to Includible Compensation for Most Recent Year of ServiceChanges to Includible Compensation Changes to Years of Service Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b) plan participants. Filing taxes as unemployed This means that if you are a self-employed minister or a church employee, your MAC generally is the lesser of: Your limit on annual additions, or Your limit on elective deferrals. Filing taxes as unemployed For most ministers and church employees, the limit on annual additions is figured without any changes. Filing taxes as unemployed This means that if you are a minister or church employee, your limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or Your includible compensation for your most recent year of service. Filing taxes as unemployed Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service. Filing taxes as unemployed This chapter will explain the alternative limit and the changes. Filing taxes as unemployed Who is a church employee?   A church employee is anyone who is an employee of a church or a convention or association of churches, including an employee of a tax-exempt organization controlled by or associated with a church or a convention or association of churches. Filing taxes as unemployed Alternative Limit for Church Employees If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions, even if your annual additions computed under the general rule is less. Filing taxes as unemployed Total contributions over your lifetime under this choice cannot be more than $40,000. Filing taxes as unemployed Changes to Includible Compensation for Most Recent Year of Service There are two types of changes in determining includible compensation for the most recent year of service. Filing taxes as unemployed They are: Changes in how the includible compensation of foreign missionaries and self-employed ministers is figured, and A change to the years that are counted when figuring the most recent year of service for church employees and self-employed ministers. Filing taxes as unemployed Changes to Includible Compensation Includible compensation is figured differently for foreign missionaries and self-employed ministers. Filing taxes as unemployed Foreign missionary. Filing taxes as unemployed   If you are a foreign missionary, your includible compensation includes foreign earned income that may otherwise be excludable from your gross income under section 911. Filing taxes as unemployed   If you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000. Filing taxes as unemployed   You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister of a church and you meet both of the following requirements. Filing taxes as unemployed You are an employee of a church or convention or association of churches. Filing taxes as unemployed You are performing services for the church outside the United States. Filing taxes as unemployed Self-employed minister. Filing taxes as unemployed   If you are a self-employed minister, you are treated as an employee of a tax-exempt organization that is a qualified employer. Filing taxes as unemployed Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deductible portion of your self-employment tax. Filing taxes as unemployed Changes to Years of Service Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual additions. Filing taxes as unemployed Church employees. Filing taxes as unemployed   If you are a church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. Filing taxes as unemployed Self-employed minister. Filing taxes as unemployed   If you are a self-employed minister, your years of service include full and part years during which you were self-employed. Filing taxes as unemployed Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding your CP11A Notice

We made changes to your return because we believe there's a miscalculation involving your Earned Income Credit. You owe money on your taxes as a result of these changes.

Tax publications you may find useful

How to get help

Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully ― it will explain why you owe money on your taxes.
  • Pay the amount owed by the date on the notice's payment coupon.
  • Make payment arrangements if you can't pay the full amount you owe.
  • Contact us within 60 days of the date of your notice if you disagree with the change we made.
  • Correct the copy of your tax return that you kept for your records.

You may want to...


Answers to Common Questions

How can I find out what caused my tax return to change?
Please contact us at the number listed on your notice for specific information concerning your tax return.

What should I do if I disagree with the changes you made?
If you disagree, contact us at the toll free number listed on the top right corner of your notice.

If you contact us in writing within 60 days of the date of this notice, we'll reverse the change we made to your account. However, if you're unable to provide us additional information that justifies the reversal and we believe the reversal is in error, we'll forward your case for audit. This step gives you formal appeal rights, including the right to appeal our decision in court before you have to pay the additional tax. After we forward your case, the audit staff will contact you within five to six weeks to fully explain the audit process and your rights. If you don’t contact us within the 60-day period, you'll lose your right to appeal our decision before payment of tax.

If you don't contact us within 60 days, the change won’t be reversed and you must pay the additional tax. You may then file a claim for refund. You must submit the claim within three years of the date you filed the tax return, or within two years of the date of your last payment for this tax.

What happens if I can’t pay the full amount I owe?
You can arrange to make a payment plan with us if you can’t pay the full amount you owe.

Am I charged interest on the money I owe?
Not if you pay the full amount you owe by the date on the payment coupon. However interest accrues on the unpaid balance after that date.

Will I receive a penalty if I can't pay the full amount?
Yes, you will receive a late payment penalty. You can contact us at the number given on your notice at 1-800-829-0922 if you're unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.

What's the difference between the "Child Tax Credit" and the "Additional Child Tax Credit?" Can I qualify for both?
The Child Tax Credit is for people who have a qualifying child and meet the eligibility requirements. The maximum amount you can claim is $1000 for each qualifying child. The Additional Child Tax Credit is for eligible individuals who receive less than the full amount of Child Tax Credit. You may qualify for both the Child Tax Credit and the Additional Child Tax Credit. For more information, see:

How do I claim an Additional Child Tax Credit?
You can claim the credit by completing a Form 1040 Schedule 8812, Child Tax Credit and attaching it to your income tax return.

My child is turning 18 this year. Can I still get the Additional Child Tax Credit?
No. Your child must be under age 17 at the end of 2009 to qualify for both the Child Tax Credit and the Additional Child Tax Credit.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Use the EITC Assistant on our website to help you complete your Schedule EIC, Earned Income Credit and claim your Earned Income Credit.

If you have any dependent children, remember to check out if you are eligible to claim the Child Tax Credit and the Additional Child Tax Credit the next time you file your income tax return. Instructions for claiming the Child Tax Credit are found in the Form 1040 Instruction booklet. Use Form 1040 Schedule 8812, Child Tax Credit to claim the Additional Child Tax Credit, if you are eligible.

Page Last Reviewed or Updated: 28-Mar-2014

The Filing Taxes As Unemployed

Filing taxes as unemployed 2. Filing taxes as unemployed   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. Filing taxes as unemployed Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. Filing taxes as unemployed Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). Filing taxes as unemployed You must do this to figure your net capital gain or loss. Filing taxes as unemployed For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. Filing taxes as unemployed See Capital Gains Tax Rates in chapter 4. Filing taxes as unemployed Your deduction for a net capital loss may be limited. Filing taxes as unemployed See Treatment of Capital Losses in chapter 4. Filing taxes as unemployed Capital gain or loss. Filing taxes as unemployed   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. Filing taxes as unemployed You also may have a capital gain if your section 1231 transactions result in a net gain. Filing taxes as unemployed Section 1231 transactions. Filing taxes as unemployed   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. Filing taxes as unemployed They also include certain involuntary conversions of business or investment property, including capital assets. Filing taxes as unemployed See Section 1231 Gains and Losses in chapter 3 for more information. Filing taxes as unemployed Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Filing taxes as unemployed Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. Filing taxes as unemployed For exceptions, see Noncapital Assets, later. Filing taxes as unemployed The following items are examples of capital assets. Filing taxes as unemployed Stocks and bonds. Filing taxes as unemployed A home owned and occupied by you and your family. Filing taxes as unemployed Timber grown on your home property or investment property, even if you make casual sales of the timber. Filing taxes as unemployed Household furnishings. Filing taxes as unemployed A car used for pleasure or commuting. Filing taxes as unemployed Coin or stamp collections. Filing taxes as unemployed Gems and jewelry. Filing taxes as unemployed Gold, silver, and other metals. Filing taxes as unemployed Personal-use property. Filing taxes as unemployed   Generally, property held for personal use is a capital asset. Filing taxes as unemployed Gain from a sale or exchange of that property is a capital gain. Filing taxes as unemployed Loss from the sale or exchange of that property is not deductible. Filing taxes as unemployed You can deduct a loss relating to personal-use property only if it results from a casualty or theft. Filing taxes as unemployed Investment property. Filing taxes as unemployed   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. Filing taxes as unemployed This treatment does not apply to property used to produce rental income. Filing taxes as unemployed See Business assets, later, under Noncapital Assets. Filing taxes as unemployed Release of restriction on land. Filing taxes as unemployed   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. Filing taxes as unemployed Noncapital Assets A noncapital asset is property that is not a capital asset. Filing taxes as unemployed The following kinds of property are not capital assets. Filing taxes as unemployed Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. Filing taxes as unemployed Inventories are discussed in Publication 538, Accounting Periods and Methods. Filing taxes as unemployed But, see the Tip below. Filing taxes as unemployed Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. Filing taxes as unemployed Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). Filing taxes as unemployed Sales of this type of property are discussed in chapter 3. Filing taxes as unemployed Real property used in your trade or business or as rental property, even if the property is fully depreciated. Filing taxes as unemployed A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. Filing taxes as unemployed But, see the Tip below. Filing taxes as unemployed U. Filing taxes as unemployed S. Filing taxes as unemployed Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. Filing taxes as unemployed Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. Filing taxes as unemployed It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. Filing taxes as unemployed The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. Filing taxes as unemployed Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. Filing taxes as unemployed Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Filing taxes as unemployed You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. Filing taxes as unemployed See chapter 4 of Publication 550 for details. Filing taxes as unemployed Property held mainly for sale to customers. Filing taxes as unemployed   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. Filing taxes as unemployed Inventories are discussed in Publication 538. Filing taxes as unemployed Business assets. Filing taxes as unemployed   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. Filing taxes as unemployed The sale or disposition of business property is discussed in chapter 3. Filing taxes as unemployed Letters and memoranda. Filing taxes as unemployed   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. Filing taxes as unemployed Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. Filing taxes as unemployed For this purpose, letters and memoranda addressed to you are considered prepared for you. Filing taxes as unemployed If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. Filing taxes as unemployed Commodities derivative financial instrument. Filing taxes as unemployed   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). Filing taxes as unemployed Commodities derivative dealer. Filing taxes as unemployed   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. Filing taxes as unemployed Hedging transaction. Filing taxes as unemployed   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. Filing taxes as unemployed Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. Filing taxes as unemployed Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. Filing taxes as unemployed Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. Filing taxes as unemployed If these rules apply, gains may be treated as ordinary income and losses may not be deductible. Filing taxes as unemployed See Transfers to Spouse in chapter 1 for rules that apply to spouses. Filing taxes as unemployed Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. Filing taxes as unemployed It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. Filing taxes as unemployed Depreciable property transaction. Filing taxes as unemployed   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. Filing taxes as unemployed A person and the person's controlled entity or entities. Filing taxes as unemployed A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. Filing taxes as unemployed An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). Filing taxes as unemployed An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). Filing taxes as unemployed Controlled entity. Filing taxes as unemployed   A person's controlled entity is either of the following. Filing taxes as unemployed A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. Filing taxes as unemployed An entity whose relationship with that person is one of the following. Filing taxes as unemployed A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. Filing taxes as unemployed 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 50%” is substituted for “at least 80%” in that definition. Filing taxes as unemployed Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. Filing taxes as unemployed Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Filing taxes as unemployed Controlled partnership transaction. Filing taxes as unemployed   A gain recognized in a controlled partnership transaction may be ordinary income. Filing taxes as unemployed The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. Filing taxes as unemployed   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. Filing taxes as unemployed A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. Filing taxes as unemployed Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. Filing taxes as unemployed Determining ownership. Filing taxes as unemployed   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. Filing taxes as unemployed Stock or a partnership interest 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. Filing taxes as unemployed (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. Filing taxes as unemployed ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. Filing taxes as unemployed Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. Filing taxes as unemployed For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. Filing taxes as unemployed But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. Filing taxes as unemployed Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. Filing taxes as unemployed This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. Filing taxes as unemployed For the list of related persons, see Related persons next. Filing taxes as unemployed If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. Filing taxes as unemployed The gain on each item is taxable. Filing taxes as unemployed The loss on any item is nondeductible. Filing taxes as unemployed Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. Filing taxes as unemployed Related persons. Filing taxes as unemployed   The following is a list of related persons. Filing taxes as unemployed Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Filing taxes as unemployed ), and lineal descendants (children, grandchildren, etc. Filing taxes as unemployed ). Filing taxes as unemployed An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. Filing taxes as unemployed Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. Filing taxes as unemployed A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. Filing taxes as unemployed A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Filing taxes as unemployed Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Filing taxes as unemployed A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. Filing taxes as unemployed A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. Filing taxes as unemployed Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Filing taxes as unemployed Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Filing taxes as unemployed An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. Filing taxes as unemployed Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. Filing taxes as unemployed A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. Filing taxes as unemployed Partnership interests. Filing taxes as unemployed   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. Filing taxes as unemployed Controlled groups. Filing taxes as unemployed   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. Filing taxes as unemployed   For more information, see section 267(f) of the Internal Revenue Code. Filing taxes as unemployed Ownership of stock or partnership interests. Filing taxes as unemployed   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. Filing taxes as unemployed Stock or a partnership interest 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. Filing taxes as unemployed (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. Filing taxes as unemployed ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. Filing taxes as unemployed Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. Filing taxes as unemployed An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Filing taxes as unemployed For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. Filing taxes as unemployed But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. Filing taxes as unemployed Indirect transactions. Filing taxes as unemployed   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. Filing taxes as unemployed This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. Filing taxes as unemployed Property received from a related person. Filing taxes as unemployed   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. Filing taxes as unemployed This rule applies only to the original transferee. Filing taxes as unemployed Example 1. Filing taxes as unemployed Your brother sold stock to you for $7,600. Filing taxes as unemployed His cost basis was $10,000. Filing taxes as unemployed His loss of $2,400 was not deductible. Filing taxes as unemployed You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). Filing taxes as unemployed Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. Filing taxes as unemployed Example 2. Filing taxes as unemployed Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. Filing taxes as unemployed Your recognized loss is only $700 ($7,600 − $6,900). Filing taxes as unemployed You cannot deduct the loss not allowed to your brother. Filing taxes as unemployed Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. Filing taxes as unemployed Sale of a Business The sale of a business usually is not a sale of one asset. Filing taxes as unemployed Instead, all the assets of the business are sold. Filing taxes as unemployed Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. Filing taxes as unemployed A business usually has many assets. Filing taxes as unemployed When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. Filing taxes as unemployed The gain or loss on each asset is figured separately. Filing taxes as unemployed The sale of capital assets results in capital gain or loss. Filing taxes as unemployed The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). Filing taxes as unemployed The sale of inventory results in ordinary income or loss. Filing taxes as unemployed Partnership interests. Filing taxes as unemployed   An interest in a partnership or joint venture is treated as a capital asset when sold. Filing taxes as unemployed The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. Filing taxes as unemployed For more information, see Disposition of Partner's Interest in Publication 541. Filing taxes as unemployed Corporation interests. Filing taxes as unemployed   Your interest in a corporation is represented by stock certificates. Filing taxes as unemployed When you sell these certificates, you usually realize capital gain or loss. Filing taxes as unemployed For information on the sale of stock, see chapter 4 in Publication 550. Filing taxes as unemployed Corporate liquidations. Filing taxes as unemployed   Corporate liquidations of property generally are treated as a sale or exchange. Filing taxes as unemployed Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. Filing taxes as unemployed Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. Filing taxes as unemployed   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. Filing taxes as unemployed For more information, see section 332 of the Internal Revenue Code and the related regulations. Filing taxes as unemployed Allocation of consideration paid for a business. Filing taxes as unemployed   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. Filing taxes as unemployed Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. Filing taxes as unemployed This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. Filing taxes as unemployed It also determines the buyer's basis in the business assets. Filing taxes as unemployed Consideration. Filing taxes as unemployed   The buyer's consideration is the cost of the assets acquired. Filing taxes as unemployed The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. Filing taxes as unemployed Residual method. Filing taxes as unemployed   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. Filing taxes as unemployed This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. Filing taxes as unemployed Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. Filing taxes as unemployed   A group of assets constitutes a trade or business if either of the following applies. Filing taxes as unemployed Goodwill or going concern value could, under any circumstances, attach to them. Filing taxes as unemployed The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. Filing taxes as unemployed   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). Filing taxes as unemployed The consideration remaining after this reduction must be allocated among the various business assets in a certain order. Filing taxes as unemployed See Classes of assets next for the complete order. Filing taxes as unemployed Classes of assets. Filing taxes as unemployed   The following definitions are the classifications for deemed or actual asset acquisitions. Filing taxes as unemployed Allocate the consideration among the assets in the following order. Filing taxes as unemployed The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. Filing taxes as unemployed The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. Filing taxes as unemployed Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). Filing taxes as unemployed Class II assets are certificates of deposit, U. Filing taxes as unemployed S. Filing taxes as unemployed Government securities, foreign currency, and actively traded personal property, including stock and securities. Filing taxes as unemployed Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. Filing taxes as unemployed However, see section 1. Filing taxes as unemployed 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. Filing taxes as unemployed Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. Filing taxes as unemployed Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. Filing taxes as unemployed    Note. Filing taxes as unemployed Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. Filing taxes as unemployed Class VI assets are section 197 intangibles (other than goodwill and going concern value). Filing taxes as unemployed Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). Filing taxes as unemployed   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. Filing taxes as unemployed For example, if an asset is described in both Class II and Class IV, choose Class II. Filing taxes as unemployed Example. Filing taxes as unemployed The total paid in the sale of the assets of Company SKB is $21,000. Filing taxes as unemployed No cash or deposit accounts or similar accounts were sold. Filing taxes as unemployed The company's U. Filing taxes as unemployed S. Filing taxes as unemployed Government securities sold had a fair market value of $3,200. Filing taxes as unemployed The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. Filing taxes as unemployed Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. Filing taxes as unemployed S. Filing taxes as unemployed Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. Filing taxes as unemployed Agreement. Filing taxes as unemployed   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. Filing taxes as unemployed This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Filing taxes as unemployed Reporting requirement. Filing taxes as unemployed   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Filing taxes as unemployed Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. Filing taxes as unemployed Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Filing taxes as unemployed See the Instructions for Form 8594. Filing taxes as unemployed Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. Filing taxes as unemployed It includes such items as patents, copyrights, and the goodwill value of a business. Filing taxes as unemployed Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. Filing taxes as unemployed The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. Filing taxes as unemployed See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. Filing taxes as unemployed Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. Filing taxes as unemployed The following discussions explain special rules that apply to certain dispositions of intangible property. Filing taxes as unemployed Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. Filing taxes as unemployed They include the following assets. Filing taxes as unemployed Goodwill. Filing taxes as unemployed Going concern value. Filing taxes as unemployed Workforce in place. Filing taxes as unemployed Business books and records, operating systems, and other information bases. Filing taxes as unemployed Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. Filing taxes as unemployed Customer-based intangibles. Filing taxes as unemployed Supplier-based intangibles. Filing taxes as unemployed Licenses, permits, and other rights granted by a governmental unit. Filing taxes as unemployed Covenants not to compete entered into in connection with the acquisition of a business. Filing taxes as unemployed Franchises, trademarks, and trade names. Filing taxes as unemployed See chapter 8 of Publication 535 for a description of each intangible. Filing taxes as unemployed Dispositions. Filing taxes as unemployed   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. Filing taxes as unemployed Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. Filing taxes as unemployed If you retain more than one section 197 intangible, increase each intangible's adjusted basis. Filing taxes as unemployed Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. Filing taxes as unemployed   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. Filing taxes as unemployed For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. Filing taxes as unemployed Covenant not to compete. Filing taxes as unemployed   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. Filing taxes as unemployed Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. Filing taxes as unemployed Anti-churning rules. Filing taxes as unemployed   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. Filing taxes as unemployed However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. Filing taxes as unemployed Recognize gain on the transfer of the property. Filing taxes as unemployed Pay income tax on the gain at the highest tax rate. Filing taxes as unemployed   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. Filing taxes as unemployed But each partner or shareholder must pay the tax on his or her share of gain. Filing taxes as unemployed   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. Filing taxes as unemployed You must file the tax return by the due date (including extensions). Filing taxes as unemployed You must also notify the transferee of the election in writing by the due date of the return. Filing taxes as unemployed   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Filing taxes as unemployed Attach the statement to the amended return and write “Filed pursuant to section 301. Filing taxes as unemployed 9100-2” at the top of the statement. Filing taxes as unemployed File the amended return at the same address the original return was filed. Filing taxes as unemployed For more information about making the election, see Regulations section 1. Filing taxes as unemployed 197-2(h)(9). Filing taxes as unemployed For information about reporting the tax on your income tax return, see the Instructions for Form 4797. Filing taxes as unemployed Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. Filing taxes as unemployed This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. Filing taxes as unemployed For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. Filing taxes as unemployed This treatment applies to your transfer of a patent if you meet all the following conditions. Filing taxes as unemployed You are the holder of the patent. Filing taxes as unemployed You transfer the patent other than by gift, inheritance, or devise. Filing taxes as unemployed You transfer all substantial rights to the patent or an undivided interest in all such rights. Filing taxes as unemployed You do not transfer the patent to a related person. Filing taxes as unemployed Holder. Filing taxes as unemployed   You are the holder of a patent if you are either of the following. Filing taxes as unemployed The individual whose effort created the patent property and who qualifies as the original and first inventor. Filing taxes as unemployed The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. Filing taxes as unemployed All substantial rights. Filing taxes as unemployed   All substantial rights to patent property are all rights that have value when they are transferred. Filing taxes as unemployed A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. Filing taxes as unemployed   All substantial rights to a patent are not transferred if any of the following apply to the transfer. Filing taxes as unemployed The rights are limited geographically within a country. Filing taxes as unemployed The rights are limited to a period less than the remaining life of the patent. Filing taxes as unemployed The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. Filing taxes as unemployed The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. Filing taxes as unemployed Related persons. Filing taxes as unemployed   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. Filing taxes as unemployed Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. Filing taxes as unemployed Substitute “25% or more” ownership for “more than 50%. Filing taxes as unemployed ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. Filing taxes as unemployed For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. Filing taxes as unemployed The brother-sister exception does not apply because the trust relationship is independent of family status. Filing taxes as unemployed Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. Filing taxes as unemployed A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. Filing taxes as unemployed Significant power, right, or continuing interest. Filing taxes as unemployed   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. Filing taxes as unemployed   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. Filing taxes as unemployed A right to disapprove any assignment of the interest, or any part of it. Filing taxes as unemployed A right to end the agreement at will. Filing taxes as unemployed A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. Filing taxes as unemployed A right to make the recipient sell or advertise only your products or services. Filing taxes as unemployed A right to make the recipient buy most supplies and equipment from you. Filing taxes as unemployed A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. Filing taxes as unemployed Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. Filing taxes as unemployed However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. Filing taxes as unemployed See section 1237 of the Internal Revenue Code. Filing taxes as unemployed Timber Standing timber held as investment property is a capital asset. Filing taxes as unemployed Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. Filing taxes as unemployed If you held the timber primarily for sale to customers, it is not a capital asset. Filing taxes as unemployed Gain or loss on its sale is ordinary business income or loss. Filing taxes as unemployed It is reported in the gross receipts or sales and cost of goods sold items of your return. Filing taxes as unemployed Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. Filing taxes as unemployed These sales constitute a very minor part of their farm businesses. Filing taxes as unemployed In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. Filing taxes as unemployed , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. Filing taxes as unemployed Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. Filing taxes as unemployed Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. Filing taxes as unemployed This is true whether the timber is cut under contract or whether you cut it yourself. Filing taxes as unemployed Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. Filing taxes as unemployed See chapter 3. Filing taxes as unemployed Gain or loss is reported on Form 4797. Filing taxes as unemployed Christmas trees. Filing taxes as unemployed   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. Filing taxes as unemployed They qualify for both rules discussed below. Filing taxes as unemployed Election to treat cutting as a sale or exchange. Filing taxes as unemployed   Under the general rule, the cutting of timber results in no gain or loss. Filing taxes as unemployed It is not until a sale or exchange occurs that gain or loss is realized. Filing taxes as unemployed But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. Filing taxes as unemployed Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. Filing taxes as unemployed Any later sale results in ordinary business income or loss. Filing taxes as unemployed See Example, later. Filing taxes as unemployed   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. Filing taxes as unemployed Making the election. Filing taxes as unemployed   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. Filing taxes as unemployed You do not have to make the election in the first year you cut timber. Filing taxes as unemployed You can make it in any year to which the election would apply. Filing taxes as unemployed If the timber is partnership property, the election is made on the partnership return. Filing taxes as unemployed This election cannot be made on an amended return. Filing taxes as unemployed   Once you have made the election, it remains in effect for all later years unless you cancel it. Filing taxes as unemployed   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. Filing taxes as unemployed The prior election (and revocation) is disregarded for purposes of making a subsequent election. Filing taxes as unemployed See Form T (Timber), Forest Activities Schedule, for more information. Filing taxes as unemployed Gain or loss. Filing taxes as unemployed   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. Filing taxes as unemployed   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. Filing taxes as unemployed Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. Filing taxes as unemployed   Timber depletion is discussed in chapter 9 of Publication 535. Filing taxes as unemployed Example. Filing taxes as unemployed In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. Filing taxes as unemployed It had an adjusted basis for depletion of $40 per MBF. Filing taxes as unemployed You are a calendar year taxpayer. Filing taxes as unemployed On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. Filing taxes as unemployed It was cut in April for sale. Filing taxes as unemployed On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. Filing taxes as unemployed You report the difference between the fair market value and your adjusted basis for depletion as a gain. Filing taxes as unemployed This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. Filing taxes as unemployed You figure your gain as follows. Filing taxes as unemployed FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. Filing taxes as unemployed Outright sales of timber. Filing taxes as unemployed   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). Filing taxes as unemployed However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). Filing taxes as unemployed Cutting contract. Filing taxes as unemployed   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. Filing taxes as unemployed You are the owner of the timber. Filing taxes as unemployed You held the timber longer than 1 year before its disposal. Filing taxes as unemployed You kept an economic interest in the timber. Filing taxes as unemployed   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. Filing taxes as unemployed   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. Filing taxes as unemployed Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. Filing taxes as unemployed Date of disposal. Filing taxes as unemployed   The date of disposal is the date the timber is cut. Filing taxes as unemployed However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. Filing taxes as unemployed   This election applies only to figure the holding period of the timber. Filing taxes as unemployed It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). Filing taxes as unemployed   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. Filing taxes as unemployed The statement must identify the advance payments subject to the election and the contract under which they were made. Filing taxes as unemployed   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). Filing taxes as unemployed Attach the statement to the amended return and write “Filed pursuant to section 301. Filing taxes as unemployed 9100-2” at the top of the statement. Filing taxes as unemployed File the amended return at the same address the original return was filed. Filing taxes as unemployed Owner. Filing taxes as unemployed   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. Filing taxes as unemployed You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. Filing taxes as unemployed Tree stumps. Filing taxes as unemployed   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. Filing taxes as unemployed Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. Filing taxes as unemployed However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. Filing taxes as unemployed Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. Filing taxes as unemployed   See Form T (Timber) and its separate instructions for more information about dispositions of timber. Filing taxes as unemployed Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. Filing taxes as unemployed , are capital assets except when they are held for sale by a dealer. Filing taxes as unemployed Any gain or loss from their sale or exchange generally is a capital gain or loss. Filing taxes as unemployed If you are a dealer, the amount received from the sale is ordinary business income. Filing taxes as unemployed Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. Filing taxes as unemployed You owned the coal or iron ore longer than 1 year before its disposal. Filing taxes as unemployed You kept an economic interest in the coal or iron ore. Filing taxes as unemployed For this rule, the date the coal or iron ore is mined is considered the date of its disposal. Filing taxes as unemployed Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). Filing taxes as unemployed This amount is included on Form 4797 along with your other section 1231 gains and losses. Filing taxes as unemployed You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. Filing taxes as unemployed If you own only an option to buy the coal in place, you do not qualify as an owner. Filing taxes as unemployed In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. Filing taxes as unemployed The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. Filing taxes as unemployed Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. Filing taxes as unemployed If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. Filing taxes as unemployed Special rule. Filing taxes as unemployed   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. Filing taxes as unemployed A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). Filing taxes as unemployed An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. Filing taxes as unemployed Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. Filing taxes as unemployed This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. Filing taxes as unemployed An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). Filing taxes as unemployed A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. Filing taxes as unemployed Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. Filing taxes as unemployed For more information, see chapter 4 of Publication 550. Filing taxes as unemployed Prev  Up  Next   Home   More Online Publications