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Form 1040x

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Form 1040x

Form 1040x Publication 915 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Form 1040x Tax questions. Form 1040x Useful Items - You may want to see: Reminders Future developments. Form 1040x  The IRS has created a page on IRS. Form 1040x gov for information about Publication 915, at www. Form 1040x irs. Form 1040x gov/pub915. Form 1040x Information about any future developments affecting Publication 915 (such as legislation enacted after we release it) will be posted on that page. Form 1040x Photographs of missing children. Form 1040x  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form 1040x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form 1040x You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Form 1040x Introduction This publication explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Form 1040x It is prepared through the joint efforts of the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the U. Form 1040x S. Form 1040x Railroad Retirement Board (RRB). Form 1040x Social security benefits include monthly retirement, survivor, and disability benefits. Form 1040x They do not include supplemental security income (SSI) payments, which are not taxable. Form 1040x Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. Form 1040x They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits. Form 1040x If you received these benefits during 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board, showing the amount. Form 1040x (If you are a nonresident alien, you should have received Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board. Form 1040x ) Note. Form 1040x When the term “benefits” is used in this publication, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Form 1040x What is covered in this publication. Form 1040x   This publication covers the following topics: Whether any of your benefits are taxable, How much is taxable, How to report taxable benefits, How to treat lump-sum benefit payments, and Deductions related to your benefits, including a deduction or credit you can claim if your repayments are more than your gross benefits. Form 1040x The Appendix at the end of this publication explains items shown on your Form SSA-1099, SSA-1042S, RRB-1099, or RRB-1042S. Form 1040x What is not covered in this publication. Form 1040x   This publication does not cover the tax rules for the following railroad retirement benefits: Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits, Tier 2 benefits, Vested dual benefits, and Supplemental annuity benefits. Form 1040x For information on these taxable pension benefits, see Publication 575, Pension and Annuity Income. Form 1040x   This publication also does not cover the tax rules for foreign social security benefits. Form 1040x These benefits are taxable as annuities, unless they are exempt from U. Form 1040x S. Form 1040x tax or treated as a U. Form 1040x S. Form 1040x social security benefit under a tax treaty. Form 1040x Comments and suggestions. Form 1040x   We welcome your comments about this publication and your suggestions for future editions. Form 1040x   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Form 1040x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Form 1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form 1040x   You can send your comments from www. Form 1040x irs. Form 1040x gov/formspubs/. Form 1040x Click on “More Information” and then on “Comment on Tax Forms and Publications”. Form 1040x   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Form 1040x Ordering forms and publications. Form 1040x   Visit www. Form 1040x irs. Form 1040x gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Form 1040x Internal Revenue Service 1201 N. Form 1040x Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Form 1040x   If you have a tax question, check the information available on IRS. Form 1040x gov or call 1-800-829-1040. Form 1040x We cannot answer tax questions sent to either of the above addresses. Form 1040x Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) Forms (and Instructions) 1040-ES Estimated Tax for Individuals SSA-1099 Social Security Benefit Statement RRB-1099 Payments by the Railroad Retirement Board W-4V Voluntary Withholding Request See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Form 1040x Prev  Up  Next   Home   More Online Publications
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The Form 1040x

Form 1040x 5. Form 1040x   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. Form 1040x Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. Form 1040x When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. Form 1040x Otherwise, these are capital expenses that must be added to the basis of the land. Form 1040x (See chapter 6 for information on determining basis. Form 1040x ) Conservation expenses for land in a foreign country do not qualify for this special treatment. Form 1040x The deduction for conservation expenses cannot be more than 25% of your gross income from farming. Form 1040x See 25% Limit on Deduction , later. Form 1040x Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. Form 1040x These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. Form 1040x You must include in income most government payments for approved conservation practices. Form 1040x However, you can exclude some payments you receive under certain cost-sharing conservation programs. Form 1040x For more information, see Agricultural Program Payments in chapter 3. Form 1040x To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. Form 1040x Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. Form 1040x You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. Form 1040x You are not farming if you are engaged only in forestry or the growing of timber. Form 1040x Farm defined. Form 1040x   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Form 1040x It also includes plantations, ranches, ranges, and orchards. Form 1040x A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. Form 1040x It does not include an area where they are merely caught or harvested. Form 1040x A plant nursery is a farm for purposes of deducting soil and water conservation expenses. Form 1040x Farm rental. Form 1040x   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. Form 1040x If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. Form 1040x   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. Form 1040x Example. Form 1040x You own a farm in Iowa and live in California. Form 1040x You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. Form 1040x You cannot deduct your soil conservation expenses for this farm. Form 1040x You must capitalize the expenses and add them to the basis of the land. Form 1040x     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. Form 1040x Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. Form 1040x If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. Form 1040x Keep a copy of the plan with your books and records to support your deductions. Form 1040x Conservation plan. Form 1040x   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. Form 1040x There are three types of approved plans. Form 1040x NRCS individual site plans. Form 1040x These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. Form 1040x NRCS county plans. Form 1040x These plans include a listing of farm conservation practices approved for the county where the farmland is located. Form 1040x You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. Form 1040x Comparable state agency plans. Form 1040x These plans are approved by state agencies and can be approved individual site plans or county plans. Form 1040x   A list of NRCS conservation programs is available at www. Form 1040x nrcs. Form 1040x usda. Form 1040x gov/programs. Form 1040x Individual site plans can be obtained from NRCS offices and the comparable state agencies. Form 1040x Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. Form 1040x These expenses include, but are not limited to, the following. Form 1040x The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. Form 1040x The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. Form 1040x The eradication of brush. Form 1040x The planting of windbreaks. Form 1040x You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. Form 1040x These expenses are added to the basis of the land. Form 1040x If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. Form 1040x See chapter 3 for information about payments eligible for the cost-sharing exclusion. Form 1040x New farm or farmland. Form 1040x   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. Form 1040x You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. Form 1040x The new farming activity does not have to be the same as the old farming activity. Form 1040x For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. Form 1040x Land not used for farming. Form 1040x   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. Form 1040x For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. Form 1040x You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. Form 1040x Depreciable conservation assets. Form 1040x   You generally cannot deduct your expenses for depreciable conservation assets. Form 1040x However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. Form 1040x See Assessment for Depreciable Property , later. Form 1040x   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. Form 1040x These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. Form 1040x You recover your capital investment through annual allowances for depreciation. Form 1040x   You can deduct soil and water conservation expenses for nondepreciable earthen items. Form 1040x Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. Form 1040x Water well. Form 1040x   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Form 1040x It is a capital expense. Form 1040x You recover your cost through depreciation. Form 1040x You also must capitalize your cost for drilling a test hole. Form 1040x If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. Form 1040x You can recover the total cost through depreciation deductions. Form 1040x   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. Form 1040x Abandonment means that all economic benefits from the well are terminated. Form 1040x For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Form 1040x Endangered species recovery expenses. Form 1040x   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. Form 1040x Otherwise, these are capital expenses that must be added to the basis of the land. Form 1040x   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. Form 1040x See Internal Revenue Code section 175 for more information. Form 1040x Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. Form 1040x You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. Form 1040x Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. Form 1040x This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. Form 1040x The depreciable property must be used in the district's soil and water conservation activities. Form 1040x However, the following limits apply to these assessments. Form 1040x The total assessment limit. Form 1040x The yearly assessment limit. Form 1040x After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. Form 1040x The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. Form 1040x See Table 5-1 for a brief summary of these limits. Form 1040x Table 5-1. Form 1040x Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. Form 1040x Your deductible share of the cost to the district for the property. Form 1040x Your gross income from farming. Form 1040x No one taxpayer can deduct more than 10% of the total assessment. Form 1040x Any amount over 10% is a capital expense and is added to the basis of your land. Form 1040x If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Form 1040x If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. Form 1040x You can deduct the remainder in equal amounts over the next 9 tax years. Form 1040x Limit for all conservation expenses, including assessments for depreciable property. Form 1040x Amounts greater than 25% can be carried to the following year and added to that year's expenses. Form 1040x The total is then subject to the 25% of gross income from farming limit in that year. Form 1040x To ensure your deduction is within the deduction limits, keep records to show the following. Form 1040x The total assessment against all members of the district for the depreciable property. Form 1040x Your deductible share of the cost to the district for the depreciable property. Form 1040x Your gross income from farming. Form 1040x Total assessment limit. Form 1040x   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. Form 1040x This applies whether you pay the assessment in one payment or in installments. Form 1040x If your assessment is more than 10% of the total amount assessed, both the following rules apply. Form 1040x The amount over 10% is a capital expense and is added to the basis of your land. Form 1040x If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Form 1040x Yearly assessment limit. Form 1040x   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. Form 1040x If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. Form 1040x If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. Form 1040x You can deduct the remainder in equal amounts over the next 9 tax years. Form 1040x Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. Form 1040x Example 1. Form 1040x This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. Form 1040x Of the assessment, $1,500 is for digging drainage ditches. Form 1040x You can deduct this part as a soil or conservation expense as if you had paid it directly. Form 1040x The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. Form 1040x The total amount assessed by the district against all its members for the depreciable equipment is $7,000. Form 1040x The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. Form 1040x The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. Form 1040x To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. Form 1040x Add $500 to the result for a total of $570. Form 1040x Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). Form 1040x You can deduct the balance at the rate of $70 a year over the next 9 years. Form 1040x You add $70 to the $1,500 portion of the assessment for drainage ditches. Form 1040x You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. Form 1040x Example 2. Form 1040x Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. Form 1040x The total amount assessed by the district against all its members for depreciable equipment is $5,500. Form 1040x The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. Form 1040x The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). Form 1040x Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. Form 1040x You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. Form 1040x Sale or other disposal of land during 9-year period. Form 1040x   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. Form 1040x Death of farmer during 9-year period. Form 1040x   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. Form 1040x 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. Form 1040x Gross income from farming. Form 1040x   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. Form 1040x Gains from sales of draft, breeding, or dairy livestock are included. Form 1040x Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. Form 1040x Carryover of deduction. Form 1040x   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. Form 1040x However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. Form 1040x Example. Form 1040x In 2012, you have gross income of $32,000 from two farms. Form 1040x During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. Form 1040x However, your deduction is limited to 25% of $32,000, or $8,000. Form 1040x The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. Form 1040x The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. Form 1040x Any expenses over the limit in that year are carried to 2014 and later years. Form 1040x Net operating loss. Form 1040x   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. Form 1040x If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. Form 1040x When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. Form 1040x If you do not choose to deduct the expenses, you must capitalize them. Form 1040x Change of method. Form 1040x   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. Form 1040x To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. Form 1040x You or your authorized representative must sign the request. Form 1040x   The request must include the following information. Form 1040x Your name and address. Form 1040x The first tax year the method or change of method is to apply. Form 1040x Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. Form 1040x If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. Form 1040x The total expenses you paid or incurred in the first tax year the method or change of method is to apply. Form 1040x A statement that you will account separately in your books for the expenses to which this method or change of method relates. Form 1040x Send your request to the following  address. Form 1040x  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. Form 1040x Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). Form 1040x However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. Form 1040x Gain on sale of farmland. Form 1040x   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. Form 1040x If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. Form 1040x See Section 1252 property under Other Gains in chapter 9. Form 1040x Prev  Up  Next   Home   More Online Publications