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

Free Tax Services Online

Filing An Amended Tax Return For 2013Irs Form 1040ez Tax TablesFile 2011 Taxes Late Free2011 Tax TablesHow To Prepare A 1040x2012 State Taxes Online FreeAmendEfile Tax ReturnFree Taxes H&r BlockFile 2012 State TaxesCan I Efile Form 1040xHow To Amend My Tax ReturnH&r BlockState Free File1040ez Tax Form 2010Irs Tax FilingFile 2014 TaxesFederal Tax Extension FormH&r Block Tax OnlineCan You File 2011 Taxes OnlineIrs Gov 2012 Tax ReturnAmmended Tax ReturnsE-file State Taxes FreePrint Free 2010 1040ez Tax FormFile Form 1040x Free1040ez FreeHelp With 1040x First TimeAmend My TaxesHow To Fill Out A 1040ez1040x Amended Tax FormMypay Dfas Mil MypayForm 1040aTax Form 1040aEfile 1040x1040ez Form For 2010Where Can I Get A 2011 Tax FormSnaptaxExtentionHow Can I Efile My 2012 TaxesIrs Tax Form 2010

Free Tax Services Online

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

IRS Combats Identity Theft and Refund Fraud on Many Fronts

IRS YouTube Videos
ID Theft: IRS Efforts on Identity Theft

FS-2014-1, January 2014

Stopping identity theft and refund fraud is a top priority for the Internal Revenue Service (IRS). The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2014 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

The IRS assigned more than 3,000 IRS employees to work on identity theft-related issues. IRS employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS provides training to more than 35,000 employees who work with taxpayers to recognize identity theft indicators and help people victimized by identity theft.

Refund Fraud Detection and Prevention

The IRS continues to increase its efforts against refund fraud, which includes identity theft. As a result of these aggressive efforts to combat identity theft from 2011 through November 2013, the IRS has stopped 14.6 million suspicious returns, and protected over $50 billion in fraudulent refunds.

For 2014, the IRS will continue to increase both the number and efficiency of the identity theft filters that are used to identify potentially fraudulent returns due to identity theft prior to the processing of the return and release of any refund. 

In Fiscal Year 2013, the IRS initiated 1,492 identity theft related criminal investigations, an increase of 66 percent over investigations initiated in FY 2012. Indictments and sentencing doubled in FY 2013 and the average prison term was more than three years (38 months) – the longest sentenced being 26 years.   

Increasing Efforts to Help Victims

The IRS understands that identity theft is a frustrating, complex process for victims. While identity thieves steal information from sources outside the tax system, the IRS is often the first to inform a victim that identity theft has occurred. The IRS is working hard to resolve identity theft cases as quickly as possible.  We are also developing programs and information to protect the taxpayer from future misuse of their personal information impacting their tax administration and minimize the impact outside of IRS.

While the IRS has made considerable progress in this area, more work remains. Fighting identity theft is an ongoing battle as identity thieves continue to create new ways of stealing personal information and using it for their gain. Identity theft cases are among the most complex handled by the IRS. The IRS is continually reviewing processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized. Among the steps underway to help victims:

  • IP PIN expansion. The IRS Identity Protection PIN (IP PIN) is a unique six digit number that is assigned annually to victims of identity theft for use when filing their federal tax return that shows that a particular taxpayer is the rightful filer of the return. For the upcoming tax year 2013 filing season, the IRS expects to provide more than 1.2 million taxpayers with an IP PIN. For the second tax season in a row, the number of IP PINs has nearly doubled from the year before. The IP PIN will allow these individuals to avoid delays in filing returns and receiving refunds.
  • IP PIN Changes:
    • If an IP PIN is assigned to a taxpayer for their 2013 return, the IP PIN must be used on any delinquent 2011 and 2012 returns filed during the 2014 calendar year.
    • IRS is exploring the use of an online process through IRS.gov that will allow taxpayers who have an IP PIN requirement and lose their IP PIN to create an account and receive their original IP PIN online. 
  • Victim case resolution:  The IRS continues to dedicate more and more employees to resolution of victim cases. These are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years. Cases of resolving identity theft can be complicated by the thieves themselves contacting the IRS. The IRS is working hard to streamline its internal process, but much more work remains. A typical case can take 180 days to resolve, and the IRS is working to reduce that time period.
  • Service options. The IRS is providing information in several ways ranging from a special section on IRS.gov devoted to identity theft to a special phone number available for victims to obtain assistance and resource information for resolving tax issues. The IRS Identity Protection Specialized Unit is available at 1-800-908-4490.
  • More information is available on IRS.gov, including the Taxpayer Guide to Identity Theft.

IRS Criminal Investigation

In FY 2013, the IRS initiated 1,492 identity theft related criminal investigations, an increase of 66% over investigations initiated in FY 2012. Indictments and sentencing doubled in FY 2013 and the average prison term was more than three years (38 months).

In January 2013, the IRS conducted a coordinated and highly successful identity theft enforcement sweep.  The coast-to-coast effort against identity theft suspects led to 734 enforcement actions, including 298 indictments, informations, complaints and arrests.

The Law Enforcement Assistance Program, formerly known as the Identity Theft Pilot Disclosure Program, was expanded nationwide.  This program provides for the disclosure of federal tax return information associated with the accounts of known and suspected victims of identity theft with the express written consent of those victims.  There are currently more than 300 state/local law enforcement agencies from 35 states participating.  For FY 2013, more than 2,400 requests were received from state and local law enforcement agencies.

The Identity Theft Clearinghouse (ITC) continues to develop and refer identity theft refund fraud schemes to Criminal Investigation (CI) Field Offices for investigation.  For FY 2013, the ITC received over 1,400 identity theft related leads.  Those leads related to more than 391,000 tax returns claiming in excess of $1.3 billion dollars in potentially fraudulent federal income tax refunds. 

CI continues to be the lead agency or actively involved in more than 30 multi-regional task forces or working groups including state/local and federal law enforcement agencies solely focusing on identity theft.     

For more information, see the special identity theft section on IRS.gov and IRS Fact Sheet 2014-2, Tips for Taxpayers and Victims about Identity Theft and Tax Returns.

Page Last Reviewed or Updated: 07-Jan-2014

The Free Tax Services Online

Free tax services online 13. Free tax services online   Basis of Property Table of Contents Introduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds Introduction This chapter discusses how to figure your basis in property. Free tax services online It is divided into the following sections. Free tax services online Cost basis. Free tax services online Adjusted basis. Free tax services online Basis other than cost. Free tax services online Your basis is the amount of your investment in property for tax purposes. Free tax services online Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Free tax services online Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Free tax services online If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Free tax services online Only the basis allocated to the business or investment use of the property can be depreciated. Free tax services online Your original basis in property is adjusted (increased or decreased) by certain events. Free tax services online For example, if you make improvements to the property, increase your basis. Free tax services online If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Free tax services online Keep accurate records of all items that affect the basis of your property. Free tax services online For more information on keeping records, see chapter 1. Free tax services online Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 535 Business Expenses 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 551 Basis of Assets 946 How To Depreciate Property Cost Basis The basis of property you buy is usually its cost. Free tax services online The cost is the amount you pay in cash, debt obligations, other property, or services. Free tax services online Your cost also includes amounts you pay for the following items: Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if you assume liability for the seller). Free tax services online In addition, the basis of real estate and business assets may include other items. Free tax services online Loans with low or no interest. Free tax services online    If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus any amount considered to be unstated interest. Free tax services online You generally have unstated interest if your interest rate is less than the applicable federal rate. Free tax services online   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Free tax services online Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Free tax services online If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Free tax services online Lump sum purchase. Free tax services online   If you buy buildings and the land on which they stand for a lump sum, allocate the cost basis among the land and the buildings. Free tax services online Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Free tax services online Figure the basis of each asset by multiplying the lump sum by a fraction. Free tax services online The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Free tax services online    If you are not certain of the FMVs of the land and buildings, you can allocate the basis according to their assessed values for real estate tax purposes. Free tax services online Fair market value (FMV). Free tax services online   FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Free tax services online Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Free tax services online Assumption of mortgage. Free tax services online   If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Free tax services online Settlement costs. Free tax services online   Your basis includes the settlement fees and closing costs you paid for buying the property. Free tax services online (A fee for buying property is a cost that must be paid even if you buy the property for cash. Free tax services online ) Do not include fees and costs for getting a loan on the property in your basis. Free tax services online   The following are some of the settlement fees or closing costs you can include in the basis of your property. Free tax services online Abstract fees (abstract of title fees). Free tax services online Charges for installing utility services. Free tax services online Legal fees (including fees for the title search and preparation of the sales contract and deed). Free tax services online Recording fees. Free tax services online Survey fees. Free tax services online Transfer taxes. Free tax services online Owner's title insurance. Free tax services online Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Free tax services online   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Free tax services online   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Free tax services online Casualty insurance premiums. Free tax services online Rent for occupancy of the property before closing. Free tax services online Charges for utilities or other services related to occupancy of the property before closing. Free tax services online Charges connected with getting a loan, such as points (discount points, loan origination fees), mortgage insurance premiums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. Free tax services online Fees for refinancing a mortgage. Free tax services online Real estate taxes. Free tax services online   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Free tax services online You cannot deduct them as an expense. Free tax services online    If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Free tax services online Do not include that amount in the basis of your property. Free tax services online If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Free tax services online Points. Free tax services online   If you pay points to get a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Free tax services online Generally, you deduct the points over the term of the loan. Free tax services online For more information on how to deduct points, see chapter 23. Free tax services online Points on home mortgage. Free tax services online   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Free tax services online If certain requirements are met, you can deduct the points in full for the year in which they are paid. Free tax services online Reduce the basis of your home by any seller-paid points. Free tax services online Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. Free tax services online The result is the adjusted basis. Free tax services online Increases to Basis Increase the basis of any property by all items properly added to a capital account. Free tax services online Examples of items that increase basis are shown in Table 13-1. Free tax services online These include the items discussed below. Free tax services online Improvements. Free tax services online   Add to your basis in property the cost of improvements having a useful life of more than 1 year, that increase the value of the property, lengthen its life, or adapt it to a different use. Free tax services online For example, improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. Free tax services online Assessments for local improvements. Free tax services online   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Free tax services online Do not deduct them as taxes. Free tax services online However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Free tax services online Example. Free tax services online Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected property owners for the cost of the conversion. Free tax services online Add the assessment to your property's basis. Free tax services online In this example, the assessment is a depreciable asset. Free tax services online Decreases to Basis Decrease the basis of any property by all items that represent a return of capital for the period during which you held the property. Free tax services online Examples of items that decrease basis are shown in Table 13-1. Free tax services online These include the items discussed below. Free tax services online Table 13-1. Free tax services online Examples of Adjustments to Basis Increases to Basis Decreases to Basis • Capital improvements: • Exclusion from income of   Putting an addition on your home subsidies for energy conservation   Replacing an entire roof measures   Paving your driveway     Installing central air conditioning • Casualty or theft loss deductions   Rewiring your home and insurance reimbursements       • Assessments for local improvements:     Water connections     Extending utility service lines to the property • Postponed gain from the sale of a home   Sidewalks • Alternative motor vehicle credit  (Form 8910)   Roads       • Alternative fuel vehicle refueling     property credit (Form 8911)           • Residential energy credits (Form 5695)       • Casualty losses: • Depreciation and section 179 deduction   Restoring damaged property     • Nontaxable corporate distributions • Legal fees:     Cost of defending and perfecting a title • Certain canceled debt excluded from   Fees for getting a reduction of an assessment income     • Zoning costs • Easements           • Adoption tax benefits Casualty and theft losses. Free tax services online   If you have a casualty or theft loss, decrease the basis in your property by any insurance proceeds or other reimbursement and by any deductible loss not covered by insurance. Free tax services online    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Free tax services online   For more information on casualty and theft losses, see chapter 25. Free tax services online Depreciation and section 179 deduction. Free tax services online   Decrease the basis of your qualifying business property by any section 179 deduction you take and the depreciation you deducted, or could have deducted (including any special depreciation allowance), on your tax returns under the method of depreciation you selected. Free tax services online   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Free tax services online Example. Free tax services online You owned a duplex used as rental property that cost you $40,000, of which $35,000 was allocated to the building and $5,000 to the land. Free tax services online You added an improvement to the duplex that cost $10,000. Free tax services online In February last year, the duplex was damaged by fire. Free tax services online Up to that time, you had been allowed depreciation of $23,000. Free tax services online You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Free tax services online You deducted a casualty loss of $1,000 on your income tax return for last year. Free tax services online You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Free tax services online You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Free tax services online Figure the adjusted basis of the duplex as follows: Original cost of duplex $35,000 Addition to duplex 10,000 Total cost of duplex $45,000 Minus: Depreciation 23,000 Adjusted basis before casualty $22,000 Minus: Insurance proceeds $19,700     Deducted casualty loss 1,000     Salvage proceeds 1,300 22,000 Adjusted basis after casualty $-0- Add: Cost of restoring duplex 19,000 Adjusted basis after restoration $19,000 Note. Free tax services online Your basis in the land is its original cost of $5,000. Free tax services online Easements. Free tax services online   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Free tax services online It reduces the basis of the affected part of the property. Free tax services online If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Free tax services online   If the gain is on a capital asset, see chapter 16 for information about how to report it. Free tax services online If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Free tax services online Exclusion of subsidies for energy conservation measures. Free tax services online   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Free tax services online Reduce the basis of the property for which you received the subsidy by the excluded amount. Free tax services online For more information about this subsidy, see chapter 12. Free tax services online Postponed gain from sale of home. Free tax services online    If you postponed gain from the sale of your main home under rules in effect before May 7, 1997, you must reduce the basis of the home you acquired as a replacement by the amount of the postponed gain. Free tax services online For more information on the rules for the sale of a home, see chapter 15. Free tax services online Basis Other Than Cost There are many times when you cannot use cost as basis. Free tax services online In these cases, the fair market value or the adjusted basis of the property can be used. Free tax services online Fair market value (FMV) and adjusted basis were discussed earlier. Free tax services online Property Received for Services If you receive property for your services, include the FMV of the property in income. Free tax services online The amount you include in income becomes your basis. Free tax services online If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Free tax services online Restricted property. Free tax services online   If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested. Free tax services online However, this rule does not apply if you make an election to include in income the FMV of the property at the time it is transferred to you, less any amount you paid for it. Free tax services online Property is substantially vested when it is transferable or when it is not subject to a substantial risk of forfeiture (you do not have a good chance of losing it). Free tax services online For more information, see Restricted Property in Publication 525. Free tax services online Bargain purchases. Free tax services online   A bargain purchase is a purchase of an item for less than its FMV. Free tax services online If, as compensation for services, you buy goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Free tax services online Your basis in the property is its FMV (your purchase price plus the amount you include in income). Free tax services online   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Free tax services online However, your basis in the property is still its FMV. Free tax services online See Employee Discounts in Publication 15-B. Free tax services online Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Free tax services online A taxable gain or deductible loss also is known as a recognized gain or loss. Free tax services online If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Free tax services online Involuntary Conversions If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property. Free tax services online Similar or related property. Free tax services online   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the same as the converted property's basis on the date of the conversion, with the following adjustments. Free tax services online Decrease the basis by the following. Free tax services online Any loss you recognize on the involuntary conversion. Free tax services online Any money you receive that you do not spend on similar property. Free tax services online Increase the basis by the following. Free tax services online Any gain you recognize on the involuntary conversion. Free tax services online Any cost of acquiring the replacement property. Free tax services online Money or property not similar or related. Free tax services online    If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the conversion. Free tax services online Example. Free tax services online The state condemned your property. Free tax services online The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Free tax services online You realized a gain of $5,000 ($31,000 − $26,000). Free tax services online You bought replacement property similar in use to the converted property for $29,000. Free tax services online You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Free tax services online Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Free tax services online The basis of the replacement property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of replacement property $26,000 Allocating the basis. Free tax services online   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Free tax services online Basis for depreciation. Free tax services online   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Free tax services online For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Free tax services online Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Free tax services online If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Free tax services online See Nontaxable Trades in chapter 14. Free tax services online Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Free tax services online To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Free tax services online Qualifying property. Free tax services online Like-kind property. Free tax services online The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Free tax services online If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid. Free tax services online Qualifying property. Free tax services online   In a like-kind exchange, you must hold for investment or for productive use in your trade or business both the property you give up and the property you receive. Free tax services online Like-kind property. Free tax services online   There must be an exchange of like-kind property. Free tax services online Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Free tax services online The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Free tax services online Example. Free tax services online You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Free tax services online The dealer allows you $2,000 on the old truck, and you pay $4,800. Free tax services online This is a like-kind exchange. Free tax services online The basis of the new truck is $6,500 (the adjusted basis of the old one, $1,700, plus the amount you paid, $4,800). Free tax services online If you sell your old truck to a third party for $2,000 instead of trading it in and then buy a new one from the dealer, you have a taxable gain of $300 on the sale (the $2,000 sale price minus the $1,700 adjusted basis). Free tax services online The basis of the new truck is the price you pay the dealer. Free tax services online Partially nontaxable exchanges. Free tax services online   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Free tax services online The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Free tax services online Decrease the basis by the following amounts. Free tax services online Any money you receive. Free tax services online Any loss you recognize on the exchange. Free tax services online Increase the basis by the following amounts. Free tax services online Any additional costs you incur. Free tax services online Any gain you recognize on the exchange. Free tax services online If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Free tax services online Allocation of basis. Free tax services online   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Free tax services online The rest is the basis of the like-kind property. Free tax services online More information. Free tax services online   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Free tax services online Basis for depreciation. Free tax services online   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Free tax services online For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Free tax services online Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Free tax services online The same rule applies to a transfer by your former spouse that is incident to divorce. Free tax services online However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Free tax services online If the property transferred to you is a series E, series EE, or series I U. Free tax services online S. Free tax services online savings bond, the transferor must include in income the interest accrued to the date of transfer. Free tax services online Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Free tax services online For more information on these bonds, see chapter 7. Free tax services online At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Free tax services online For more information about the transfer of property from a spouse, see chapter 14. Free tax services online Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Free tax services online FMV less than donor's adjusted basis. Free tax services online   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Free tax services online Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Free tax services online Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Free tax services online See Adjusted Basis , earlier. Free tax services online Example. Free tax services online You received an acre of land as a gift. Free tax services online At the time of the gift, the land had an FMV of $8,000. Free tax services online The donor's adjusted basis was $10,000. Free tax services online After you received the property, no events occurred to increase or decrease your basis. Free tax services online If you later sell the property for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain. Free tax services online If you sell the property for $7,000, you will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss. Free tax services online If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Free tax services online Business property. Free tax services online   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Free tax services online FMV equal to or greater than donor's adjusted basis. Free tax services online   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Free tax services online Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Free tax services online   Also, for figuring gain or loss from a sale or other disposition or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Free tax services online See Adjusted Basis , earlier. Free tax services online   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Free tax services online Figure the increase by multiplying the gift tax paid by a fraction. Free tax services online The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Free tax services online   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Free tax services online The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Free tax services online Example. Free tax services online In 2013, you received a gift of property from your mother that had an FMV of $50,000. Free tax services online Her adjusted basis was $20,000. Free tax services online The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Free tax services online She paid a gift tax of $7,320 on the property. Free tax services online Your basis is $26,076, figured as follows: Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000     Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Free tax services online 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Free tax services online If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Free tax services online However, your basis cannot exceed the FMV of the gift at the time it was given to you. Free tax services online Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Free tax services online The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Free tax services online The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. Free tax services online The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Free tax services online If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Free tax services online For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Free tax services online Property inherited from a decedent who died in 2010. Free tax services online   If you inherited property from a decedent who died in 2010, special rules may apply. Free tax services online For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Free tax services online Community property. Free tax services online   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Free tax services online When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Free tax services online For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Free tax services online Example. Free tax services online You and your spouse owned community property that had a basis of $80,000. Free tax services online When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Free tax services online The FMV of the community interest was $100,000. Free tax services online The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Free tax services online The basis of the other half to your spouse's heirs is also $50,000. Free tax services online For more information about community property, see Publication 555, Community Property. Free tax services online Property Changed From Personal to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you can begin to depreciate the property at the time of the change. Free tax services online To do so, you must figure its basis for depreciation at the time of the change. Free tax services online An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Free tax services online Basis for depreciation. Free tax services online   The basis for depreciation is the lesser of the following amounts. Free tax services online The FMV of the property on the date of the change. Free tax services online Your adjusted basis on the date of the change. Free tax services online Example. Free tax services online Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Free tax services online You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Free tax services online Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Free tax services online Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Free tax services online On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Free tax services online The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it is less than your adjusted basis ($178,000). Free tax services online Sale of property. Free tax services online   If you later sell or dispose of property changed to business or rental use, the basis you use will depend on whether you are figuring gain or loss. Free tax services online Gain. Free tax services online   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Free tax services online Example. Free tax services online Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Free tax services online Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Free tax services online Loss. Free tax services online   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Free tax services online Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Free tax services online Example. Free tax services online Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Free tax services online In this case, you would start with the FMV on the date of the change to rental use ($180,000), because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. Free tax services online Reduce that amount ($180,000) by the depreciation deductions ($37,500). Free tax services online The basis for loss is $142,500 ($180,000 − $37,500). Free tax services online Stocks and Bonds The basis of stocks or bonds you buy generally is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Free tax services online If you get stocks or bonds other than by purchase, your basis is usually determined by the FMV or the previous owner's adjusted basis, as discussed earlier. Free tax services online You must adjust the basis of stocks for certain events that occur after purchase. Free tax services online For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. Free tax services online This rule applies only when the additional stock received is identical to the stock held. Free tax services online Also reduce your basis when you receive nontaxable distributions. Free tax services online They are a return of capital. Free tax services online Example. Free tax services online In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Free tax services online In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Free tax services online In 2013 XYZ declared a 2-for-1 stock split. Free tax services online You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Free tax services online Other basis. Free tax services online   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Free tax services online For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Free tax services online Identifying stocks or bonds sold. Free tax services online   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stocks or bonds. Free tax services online If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Free tax services online For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Free tax services online Mutual fund shares. Free tax services online   If you sell mutual fund shares you acquired at various times and prices and left on deposit in an account kept by a custodian or agent, you can elect to use an average basis. Free tax services online For more information, see Publication 550. Free tax services online Bond premium. Free tax services online   If you buy a taxable bond at a premium and elect to amortize the premium, reduce the basis of the bond by the amortized premium you deduct each year. Free tax services online See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Free tax services online Although you cannot deduct the premium on a tax-exempt bond, you must amortize the premium each year and reduce your basis in the bond by the amortized amount. Free tax services online Original issue discount (OID) on debt instruments. Free tax services online   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Free tax services online See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Free tax services online Tax-exempt obligations. Free tax services online    OID on tax-exempt obligations is generally not taxable. Free tax services online However, when you dispose of a tax-exempt obligation issued after September 3, 1982, and acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Free tax services online The accrued OID is added to the basis of the obligation to determine your gain or loss. Free tax services online See chapter 4 of Publication 550. Free tax services online Prev  Up  Next   Home   More Online Publications