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H&r Block State Taxes

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H&r Block State Taxes

H&r block state taxes 1. H&r block state taxes   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. H&r block state taxes Amount realized on a recourse debt. H&r block state taxes Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. H&r block state taxes S. H&r block state taxes Individual Income Tax Return 1040X Amended U. H&r block state taxes S. H&r block state taxes Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. H&r block state taxes However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. H&r block state taxes See chapter 5 for information about getting publications and forms. H&r block state taxes Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. H&r block state taxes An exchange is a transfer of property for other property or services. H&r block state taxes The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. H&r block state taxes Sale or lease. H&r block state taxes    Some agreements that seem to be leases may really be conditional sales contracts. H&r block state taxes The intention of the parties to the agreement can help you distinguish between a sale and a lease. H&r block state taxes   There is no test or group of tests to prove what the parties intended when they made the agreement. H&r block state taxes You should consider each agreement based on its own facts and circumstances. H&r block state taxes For more information, see chapter 3 in Publication 535, Business Expenses. H&r block state taxes Cancellation of a lease. H&r block state taxes    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. H&r block state taxes Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. H&r block state taxes Copyright. H&r block state taxes    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. H&r block state taxes It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. H&r block state taxes Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. H&r block state taxes   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. H&r block state taxes For more information, see Section 1231 Gains and Losses in chapter 3. H&r block state taxes Easement. H&r block state taxes   The amount received for granting an easement is subtracted from the basis of the property. H&r block state taxes If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. H&r block state taxes If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. H&r block state taxes   Any amount received that is more than the basis to be reduced is a taxable gain. H&r block state taxes The transaction is reported as a sale of property. H&r block state taxes   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. H&r block state taxes However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. H&r block state taxes   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. H&r block state taxes Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. H&r block state taxes See Gain or Loss From Condemnations, later. H&r block state taxes Property transferred to satisfy debt. H&r block state taxes   A transfer of property to satisfy a debt is an exchange. H&r block state taxes Note's maturity date extended. H&r block state taxes   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. H&r block state taxes Also, it is not considered a closed and completed transaction that would result in a gain or loss. H&r block state taxes However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. H&r block state taxes Each case must be determined by its own facts. H&r block state taxes For more information, see Regulations section 1. H&r block state taxes 1001-3. H&r block state taxes Transfer on death. H&r block state taxes   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. H&r block state taxes No taxable gain or deductible loss results from the transfer. H&r block state taxes Bankruptcy. H&r block state taxes   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. H&r block state taxes Consequently, the transfer generally does not result in gain or loss. H&r block state taxes For more information, see Publication 908, Bankruptcy Tax Guide. H&r block state taxes Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. H&r block state taxes A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. H&r block state taxes A loss is the adjusted basis of the property that is more than the amount you realize. H&r block state taxes   Table 1-1. H&r block state taxes How To Figure Whether You Have a Gain or Loss IF your. H&r block state taxes . H&r block state taxes . H&r block state taxes THEN you have a. H&r block state taxes . H&r block state taxes . H&r block state taxes Adjusted basis is more than the amount realized, Loss. H&r block state taxes Amount realized is more than the adjusted basis, Gain. H&r block state taxes Basis. H&r block state taxes   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. H&r block state taxes The basis of property you buy is usually its cost. H&r block state taxes However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. H&r block state taxes See Basis Other Than Cost in Publication 551, Basis of Assets. H&r block state taxes Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. H&r block state taxes See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. H&r block state taxes Adjusted basis. H&r block state taxes   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. H&r block state taxes Increases include costs of any improvements having a useful life of more than 1 year. H&r block state taxes Decreases include depreciation and casualty losses. H&r block state taxes For more details and additional examples, see Adjusted Basis in Publication 551. H&r block state taxes Amount realized. H&r block state taxes   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. H&r block state taxes The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. H&r block state taxes Fair market value. H&r block state taxes   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. H&r block state taxes If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. H&r block state taxes If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. H&r block state taxes Example. H&r block state taxes You used a building in your business that cost you $70,000. H&r block state taxes You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. H&r block state taxes You sold the building for $100,000 plus property having an FMV of $20,000. H&r block state taxes The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. H&r block state taxes The selling expenses were $4,000. H&r block state taxes Your gain on the sale is figured as follows. H&r block state taxes Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. H&r block state taxes   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. H&r block state taxes Recognized gains must be included in gross income. H&r block state taxes Recognized losses are deductible from gross income. H&r block state taxes However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. H&r block state taxes See Nontaxable Exchanges, later. H&r block state taxes Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. H&r block state taxes Interest in property. H&r block state taxes   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. H&r block state taxes If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. H&r block state taxes Your basis in the property is disregarded. H&r block state taxes This rule does not apply if all interests in the property are disposed of at the same time. H&r block state taxes Example 1. H&r block state taxes Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. H&r block state taxes You decide to sell your life interest in the farm. H&r block state taxes The entire amount you receive is a recognized gain. H&r block state taxes Your basis in the farm is disregarded. H&r block state taxes Example 2. H&r block state taxes The facts are the same as in Example 1, except that your brother joins you in selling the farm. H&r block state taxes The entire interest in the property is sold, so your basis in the farm is not disregarded. H&r block state taxes Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. H&r block state taxes Canceling a sale of real property. H&r block state taxes   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. H&r block state taxes If the buyer returns the property in the year of sale, no gain or loss is recognized. H&r block state taxes This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. H&r block state taxes If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. H&r block state taxes When the property is returned in a later year, you acquire a new basis in the property. H&r block state taxes That basis is equal to the amount you pay to the buyer. H&r block state taxes Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. H&r block state taxes You have a gain if the amount realized is more than your adjusted basis in the property. H&r block state taxes However, you do not have a loss if the amount realized is less than the adjusted basis of the property. H&r block state taxes Bargain sales to charity. H&r block state taxes   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. H&r block state taxes If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. H&r block state taxes The adjusted basis of the part sold is figured as follows. H&r block state taxes Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. H&r block state taxes This allocation rule does not apply if a charitable contribution deduction is not allowable. H&r block state taxes   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. H&r block state taxes Example. H&r block state taxes You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. H&r block state taxes Your adjusted basis in the property is $4,000. H&r block state taxes Your gain on the sale is $1,200, figured as follows. H&r block state taxes Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. H&r block state taxes You must subtract depreciation you took or could have taken from the basis of the business or rental part. H&r block state taxes However, see the special rule below for a home used partly for business or rental. H&r block state taxes You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. H&r block state taxes Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. H&r block state taxes Any gain on the personal part of the property is a capital gain. H&r block state taxes You cannot deduct a loss on the personal part. H&r block state taxes Home used partly for business or rental. H&r block state taxes    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. H&r block state taxes See Property Used Partly for Business or Rental, in Publication 523. H&r block state taxes Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. H&r block state taxes You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. H&r block state taxes However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. H&r block state taxes Figure the loss you can deduct as follows. H&r block state taxes Use the lesser of the property's adjusted basis or fair market value at the time of the change. H&r block state taxes Add to (1) the cost of any improvements and other increases to basis since the change. H&r block state taxes Subtract from (2) depreciation and any other decreases to basis since the change. H&r block state taxes Subtract the amount you realized on the sale from the result in (3). H&r block state taxes If the amount you realized is more than the result in (3), treat this result as zero. H&r block state taxes The result in (4) is the loss you can deduct. H&r block state taxes Example. H&r block state taxes You changed your main home to rental property 5 years ago. H&r block state taxes At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. H&r block state taxes This year, you sold the property for $55,000. H&r block state taxes You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. H&r block state taxes Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. H&r block state taxes Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. H&r block state taxes   If you have a gain on the sale, you generally must recognize the full amount of the gain. H&r block state taxes You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. H&r block state taxes   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. H&r block state taxes However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. H&r block state taxes   For more information, see Business Use or Rental of Home in Publication 523. H&r block state taxes In addition, special rules apply if the home sold was acquired in a like-kind exchange. H&r block state taxes See Special Situations in Publication 523. H&r block state taxes Also see Like-Kind Exchanges, later. H&r block state taxes Abandonments The abandonment of property is a disposition of property. H&r block state taxes You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. H&r block state taxes Generally, abandonment is not treated as a sale or exchange of the property. H&r block state taxes If the amount you realize (if any) is more than your adjusted basis, then you have a gain. H&r block state taxes If your adjusted basis is more than the amount you realize (if any), then you have a loss. H&r block state taxes Loss from abandonment of business or investment property is deductible as a loss. H&r block state taxes A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. H&r block state taxes This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. H&r block state taxes If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. H&r block state taxes The abandonment loss is deducted in the tax year in which the loss is sustained. H&r block state taxes If the abandoned property is secured by debt, special rules apply. H&r block state taxes The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). H&r block state taxes For more information, including examples, see chapter 3 of Publication 4681. H&r block state taxes You cannot deduct any loss from abandonment of your home or other property held for personal use only. H&r block state taxes Cancellation of debt. H&r block state taxes   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. H&r block state taxes This income is separate from any loss realized from abandonment of the property. H&r block state taxes   You must report this income on your tax return unless one of the following applies. H&r block state taxes The cancellation is intended as a gift. H&r block state taxes The debt is qualified farm debt. H&r block state taxes The debt is qualified real property business debt. H&r block state taxes You are insolvent or bankrupt. H&r block state taxes The debt is qualified principal residence indebtedness. H&r block state taxes File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. H&r block state taxes For more information, including other exceptions and exclusion, see Publication 4681. H&r block state taxes Forms 1099-A and 1099-C. H&r block state taxes   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. H&r block state taxes However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. H&r block state taxes The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. H&r block state taxes For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. H&r block state taxes Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. H&r block state taxes The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. H&r block state taxes This is true even if you voluntarily return the property to the lender. H&r block state taxes You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. H&r block state taxes Buyer's (borrower's) gain or loss. H&r block state taxes   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. H&r block state taxes The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. H&r block state taxes See Gain or Loss From Sales and Exchanges, earlier. H&r block state taxes You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. H&r block state taxes Amount realized on a nonrecourse debt. H&r block state taxes   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. H&r block state taxes The full canceled debt is included even if the fair market value of the property is less than the canceled debt. H&r block state taxes Example 1. H&r block state taxes Chris bought a new car for $15,000. H&r block state taxes He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. H&r block state taxes Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. H&r block state taxes The credit company repossessed the car because he stopped making loan payments. H&r block state taxes The balance due after taking into account the payments Chris made was $10,000. H&r block state taxes The fair market value of the car when repossessed was $9,000. H&r block state taxes The amount Chris realized on the repossession is $10,000. H&r block state taxes That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. H&r block state taxes Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). H&r block state taxes He has a $5,000 nondeductible loss. H&r block state taxes Example 2. H&r block state taxes Abena paid $200,000 for her home. H&r block state taxes She paid $15,000 down and borrowed the remaining $185,000 from a bank. H&r block state taxes Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. H&r block state taxes The bank foreclosed on the loan because Abena stopped making payments. H&r block state taxes When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. H&r block state taxes The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. H&r block state taxes She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). H&r block state taxes She has a $5,000 realized gain. H&r block state taxes Amount realized on a recourse debt. H&r block state taxes   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. H&r block state taxes You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. H&r block state taxes The amount realized does not include the canceled debt that is your income from cancellation of debt. H&r block state taxes See Cancellation of debt, below. H&r block state taxes Seller's (lender's) gain or loss on repossession. H&r block state taxes   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. H&r block state taxes For more information, see Repossession in Publication 537. H&r block state taxes    Table 1-2. H&r block state taxes Worksheet for Foreclosures and Repossessions Part 1. H&r block state taxes Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. H&r block state taxes Complete this part only  if you were personally liable for the debt. H&r block state taxes Otherwise,  go to Part 2. H&r block state taxes   1. H&r block state taxes Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. H&r block state taxes Enter the fair market value of the transferred property   3. H&r block state taxes Ordinary income from cancellation of debt upon foreclosure or    repossession. H&r block state taxes * Subtract line 2 from line 1. H&r block state taxes   If less than zero, enter zero   Part 2. H&r block state taxes Figure your gain or loss from foreclosure or repossession. H&r block state taxes   4. H&r block state taxes If you completed Part 1, enter the smaller of line 1 or line 2. H&r block state taxes   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. H&r block state taxes Enter any proceeds you received from the foreclosure sale   6. H&r block state taxes Add lines 4 and 5   7. H&r block state taxes Enter the adjusted basis of the transferred property   8. H&r block state taxes Gain or loss from foreclosure or repossession. H&r block state taxes Subtract line 7  from line 6   * The income may not be taxable. H&r block state taxes See Cancellation of debt. H&r block state taxes Cancellation of debt. H&r block state taxes   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. H&r block state taxes This income is separate from any gain or loss realized from the foreclosure or repossession. H&r block state taxes Report the income from cancellation of a debt related to a business or rental activity as business or rental income. H&r block state taxes    You can use Table 1-2 to figure your income from cancellation of debt. H&r block state taxes   You must report this income on your tax return unless one of the following applies. H&r block state taxes The cancellation is intended as a gift. H&r block state taxes The debt is qualified farm debt. H&r block state taxes The debt is qualified real property business debt. H&r block state taxes You are insolvent or bankrupt. H&r block state taxes The debt is qualified principal residence indebtedness. H&r block state taxes File Form 982 to report the income exclusion. H&r block state taxes Example 1. H&r block state taxes Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). H&r block state taxes In this case, the amount he realizes is $9,000. H&r block state taxes This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). H&r block state taxes Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). H&r block state taxes He has a $6,000 nondeductible loss. H&r block state taxes He also is treated as receiving ordinary income from cancellation of debt. H&r block state taxes That income is $1,000 ($10,000 − $9,000). H&r block state taxes This is the part of the canceled debt not included in the amount realized. H&r block state taxes Example 2. H&r block state taxes Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). H&r block state taxes In this case, the amount she realizes is $170,000. H&r block state taxes This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). H&r block state taxes Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). H&r block state taxes She has a $5,000 nondeductible loss. H&r block state taxes She also is treated as receiving ordinary income from cancellation of debt. H&r block state taxes (The debt is not exempt from tax as discussed under Cancellation of debt, above. H&r block state taxes ) That income is $10,000 ($180,000 − $170,000). H&r block state taxes This is the part of the canceled debt not included in the amount realized. H&r block state taxes Forms 1099-A and 1099-C. H&r block state taxes   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. H&r block state taxes However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. H&r block state taxes The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. H&r block state taxes For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. H&r block state taxes Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. H&r block state taxes Involuntary conversions are also called involuntary exchanges. H&r block state taxes Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. H&r block state taxes You report the gain or deduct the loss on your tax return for the year you realize it. H&r block state taxes You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. H&r block state taxes However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. H&r block state taxes Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. H&r block state taxes Your basis for the new property is the same as your basis for the converted property. H&r block state taxes This means that the gain is deferred until a taxable sale or exchange occurs. H&r block state taxes If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. H&r block state taxes This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. H&r block state taxes If you have a gain or loss from the destruction or theft of property, see Publication 547. H&r block state taxes Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. H&r block state taxes The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. H&r block state taxes The owner receives a condemnation award (money or property) in exchange for the property taken. H&r block state taxes A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. H&r block state taxes Example. H&r block state taxes A local government authorized to acquire land for public parks informed you that it wished to acquire your property. H&r block state taxes After the local government took action to condemn your property, you went to court to keep it. H&r block state taxes But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. H&r block state taxes This is a condemnation of private property for public use. H&r block state taxes Threat of condemnation. H&r block state taxes   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. H&r block state taxes You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. H&r block state taxes   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. H&r block state taxes If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. H&r block state taxes Reports of condemnation. H&r block state taxes   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. H&r block state taxes You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. H&r block state taxes If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. H&r block state taxes Example. H&r block state taxes Your property lies along public utility lines. H&r block state taxes The utility company has the authority to condemn your property. H&r block state taxes The company informs you that it intends to acquire your property by negotiation or condemnation. H&r block state taxes A threat of condemnation exists when you receive the notice. H&r block state taxes Related property voluntarily sold. H&r block state taxes   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. H&r block state taxes A substantial economic relationship exists if together the properties were one economic unit. H&r block state taxes You also must show that the condemned property could not reasonably or adequately be replaced. H&r block state taxes You can elect to postpone reporting the gain by buying replacement property. H&r block state taxes See Postponement of Gain, later. H&r block state taxes Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. H&r block state taxes If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. H&r block state taxes You can postpone reporting gain from a condemnation if you buy replacement property. H&r block state taxes If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. H&r block state taxes See Postponement of Gain, later. H&r block state taxes If your net condemnation award is less than your adjusted basis, you have a loss. H&r block state taxes If your loss is from property you held for personal use, you cannot deduct it. H&r block state taxes You must report any deductible loss in the tax year it happened. H&r block state taxes You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. H&r block state taxes Main home condemned. H&r block state taxes   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. H&r block state taxes You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). H&r block state taxes For information on this exclusion, see Publication 523. H&r block state taxes If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. H&r block state taxes See Postponement of Gain, later. H&r block state taxes Table 1-3. H&r block state taxes Worksheet for Condemnations Part 1. H&r block state taxes Gain from severance damages. H&r block state taxes  If you did not receive severance damages, skip Part 1 and go to Part 2. H&r block state taxes   1. H&r block state taxes Enter gross severance damages received   2. H&r block state taxes Enter your expenses in getting severance damages   3. H&r block state taxes Subtract line 2 from line 1. H&r block state taxes If less than zero, enter -0-   4. H&r block state taxes Enter any special assessment on remaining property taken out of your award   5. H&r block state taxes Net severance damages. H&r block state taxes Subtract line 4 from line 3. H&r block state taxes If less than zero, enter -0-   6. H&r block state taxes Enter the adjusted basis of the remaining property   7. H&r block state taxes Gain from severance damages. H&r block state taxes Subtract line 6 from line 5. H&r block state taxes If less than zero, enter -0-   8. H&r block state taxes Refigured adjusted basis of the remaining property. H&r block state taxes Subtract line 5 from line 6. H&r block state taxes If less than zero, enter -0-   Part 2. H&r block state taxes Gain or loss from condemnation award. H&r block state taxes   9. H&r block state taxes Enter the gross condemnation award received   10. H&r block state taxes Enter your expenses in getting the condemnation award   11. H&r block state taxes If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. H&r block state taxes If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. H&r block state taxes Otherwise, enter -0-   12. H&r block state taxes Add lines 10 and 11   13. H&r block state taxes Net condemnation award. H&r block state taxes Subtract line 12 from line 9   14. H&r block state taxes Enter the adjusted basis of the condemned property   15. H&r block state taxes Gain from condemnation award. H&r block state taxes If line 14 is more than line 13, enter -0-. H&r block state taxes Otherwise, subtract line 14 from  line 13 and skip line 16   16. H&r block state taxes Loss from condemnation award. H&r block state taxes Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. H&r block state taxes )   Part 3. H&r block state taxes Postponed gain from condemnation. H&r block state taxes  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. H&r block state taxes )   17. H&r block state taxes If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. H&r block state taxes Otherwise, enter -0-   18. H&r block state taxes If line 15 is more than zero, enter the amount from line 13. H&r block state taxes Otherwise, enter -0-   19. H&r block state taxes Add lines 17 and 18. H&r block state taxes If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. H&r block state taxes Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. H&r block state taxes Subtract line 20 from line 19. H&r block state taxes If less than zero, enter -0-   22. H&r block state taxes If you completed Part 1, add lines 7 and 15. H&r block state taxes Otherwise, enter the amount from line 15. H&r block state taxes If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. H&r block state taxes Recognized gain. H&r block state taxes Enter the smaller of line 21 or line 22. H&r block state taxes   24. H&r block state taxes Postponed gain. H&r block state taxes Subtract line 23 from line 22. H&r block state taxes If less than zero, enter -0-   Condemnation award. H&r block state taxes   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. H&r block state taxes The award is also the amount you are paid for the sale of your property under threat of condemnation. H&r block state taxes Payment of your debts. H&r block state taxes   Amounts taken out of the award to pay your debts are considered paid to you. H&r block state taxes Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. H&r block state taxes Example. H&r block state taxes The state condemned your property for public use. H&r block state taxes The award was set at $200,000. H&r block state taxes The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. H&r block state taxes You are considered to have received the entire $200,000 as a condemnation award. H&r block state taxes Interest on award. H&r block state taxes   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. H&r block state taxes You must report the interest separately as ordinary income. H&r block state taxes Payments to relocate. H&r block state taxes   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. H&r block state taxes Do not include them in your income. H&r block state taxes Replacement housing payments used to buy new property are included in the property's basis as part of your cost. H&r block state taxes Net condemnation award. H&r block state taxes   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. H&r block state taxes If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. H&r block state taxes This is discussed later under Special assessment taken out of award. H&r block state taxes Severance damages. H&r block state taxes    Severance damages are not part of the award paid for the property condemned. H&r block state taxes They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. H&r block state taxes   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. H&r block state taxes Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. H&r block state taxes   The contracting parties should agree on the specific amount of severance damages in writing. H&r block state taxes If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. H&r block state taxes   You cannot make a completely new allocation of the total award after the transaction is completed. H&r block state taxes However, you can show how much of the award both parties intended for severance damages. H&r block state taxes The severance damages part of the award is determined from all the facts and circumstances. H&r block state taxes Example. H&r block state taxes You sold part of your property to the state under threat of condemnation. H&r block state taxes The contract you and the condemning authority signed showed only the total purchase price. H&r block state taxes It did not specify a fixed sum for severance damages. H&r block state taxes However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. H&r block state taxes You may treat this part as severance damages. H&r block state taxes Treatment of severance damages. H&r block state taxes   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. H&r block state taxes Use them to reduce the basis of the remaining property. H&r block state taxes If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. H&r block state taxes   If your net severance damages are more than the basis of your retained property, you have a gain. H&r block state taxes You may be able to postpone reporting the gain. H&r block state taxes See Postponement of Gain, later. H&r block state taxes    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. H&r block state taxes Net severance damages. H&r block state taxes   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. H&r block state taxes You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. H&r block state taxes The balance is your net severance damages. H&r block state taxes Expenses of obtaining a condemnation award and severance damages. H&r block state taxes   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. H&r block state taxes Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. H&r block state taxes If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. H&r block state taxes Example. H&r block state taxes You receive a condemnation award and severance damages. H&r block state taxes One-fourth of the total was designated as severance damages in your agreement with the condemning authority. H&r block state taxes You had legal expenses for the entire condemnation proceeding. H&r block state taxes You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. H&r block state taxes You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. H&r block state taxes Special assessment retained out of award. H&r block state taxes   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. H&r block state taxes An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. H&r block state taxes Examples of improvements that may cause a special assessment are widening a street and installing a sewer. H&r block state taxes   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. H&r block state taxes Example. H&r block state taxes To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. H&r block state taxes You were awarded $5,000 for this and spent $300 to get the award. H&r block state taxes Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. H&r block state taxes The city then paid you only $4,300. H&r block state taxes Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). H&r block state taxes If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). H&r block state taxes The net award would not change, even if you later paid the assessment from the amount you received. H&r block state taxes Severance damages received. H&r block state taxes   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. H&r block state taxes Any balance of the special assessment is used to reduce the condemnation award. H&r block state taxes Example. H&r block state taxes You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. H&r block state taxes You spent $300 to obtain the severance damages. H&r block state taxes A special assessment of $800 was retained out of the award. H&r block state taxes The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. H&r block state taxes Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. H&r block state taxes Part business or rental. H&r block state taxes   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. H&r block state taxes Figure your gain or loss separately because gain or loss on each part may be treated differently. H&r block state taxes   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. H&r block state taxes Example. H&r block state taxes You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. H&r block state taxes You rented half the building and lived in the other half. H&r block state taxes You paid $25,000 for the building and spent an additional $1,000 for a new roof. H&r block state taxes You claimed allowable depreciation of $4,600 on the rental half. H&r block state taxes You spent $200 in legal expenses to obtain the condemnation award. H&r block state taxes Figure your gain or loss as follows. H&r block state taxes     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. H&r block state taxes Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. H&r block state taxes Your basis for the new property is the same as your basis for the old. H&r block state taxes Money or unlike property received. H&r block state taxes   You ordinarily must report the gain if you receive money or unlike property. H&r block state taxes You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. H&r block state taxes You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. H&r block state taxes See Controlling interest in a corporation, later. H&r block state taxes   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. H&r block state taxes If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. H&r block state taxes   The basis of the replacement property is its cost, reduced by the postponed gain. H&r block state taxes Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. H&r block state taxes See Controlling interest in a corporation, later. H&r block state taxes You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. H&r block state taxes Postponing gain on severance damages. H&r block state taxes   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. H&r block state taxes See Treatment of severance damages, earlier. H&r block state taxes You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). H&r block state taxes   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. H&r block state taxes If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. H&r block state taxes   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. H&r block state taxes Postponing gain on the sale of related property. H&r block state taxes   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. H&r block state taxes You must meet the requirements explained earlier under Related property voluntarily sold. H&r block state taxes You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). H&r block state taxes Buying replacement property from a related person. H&r block state taxes   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. H&r block state taxes For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. H&r block state taxes   This rule applies to the following taxpayers. H&r block state taxes C corporations. H&r block state taxes Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. H&r block state taxes All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. H&r block state taxes   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. H&r block state taxes If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. H&r block state taxes If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. H&r block state taxes Exception. H&r block state taxes   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. H&r block state taxes Advance payment. H&r block state taxes   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). H&r block state taxes Replacement property. H&r block state taxes   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. H&r block state taxes You do not have to use the actual funds from the condemnation award to acquire the replacement property. H&r block state taxes Property you acquire by gift or inheritance does not qualify as replacement property. H&r block state taxes Similar or related in service or use. H&r block state taxes   Your replacement property must be similar or related in service or use to the property it replaces. H&r block state taxes   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. H&r block state taxes For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. H&r block state taxes Owner-user. H&r block state taxes   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. H&r block state taxes Example. H&r block state taxes Your home was condemned and you invested the proceeds from the condemnation in a grocery store. H&r block state taxes Your replacement property is not similar or related in service or use to the condemned property. H&r block state taxes To be similar or related in service or use, your replacement property must also be used by you as your home. H&r block state taxes Owner-investor. H&r block state taxes   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. H&r block state taxes You decide this by determining all the following information. H&r block state taxes Whether the properties are of similar service to you. H&r block state taxes The nature of the business risks connected with the properties. H&r block state taxes What the properties demand of you in the way of management, service, and relations to your tenants. H&r block state taxes Example. H&r block state taxes You owned land and a building you rented to a manufacturing company. H&r block state taxes The building was condemned. H&r block state taxes During the replacement period, you had a new building built on other land you already owned. H&r block state taxes You rented out the new building for use as a wholesale grocery warehouse. H&r block state taxes The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. H&r block state taxes Your management activities. H&r block state taxes The amount and kind of services you provide to your tenants. H&r block state taxes The nature of your business risks connected with the properties. H&r block state taxes Leasehold replaced with fee simple property. H&r block state taxes   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. H&r block state taxes   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. H&r block state taxes A leasehold is property held under a lease, usually for a term of years. H&r block state taxes Outdoor advertising display replaced with real property. H&r block state taxes   You can elect to treat an outdoor advertising display as real property. H&r block state taxes If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. H&r block state taxes For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. H&r block state taxes   You can make this election only if you did not claim a section 179 deduction for the display. H&r block state taxes You cannot cancel this election unless you get the consent of the IRS. H&r block state taxes   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. H&r block state taxes Substituting replacement property. H&r block state taxes   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. H&r block state taxes But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. H&r block state taxes Controlling interest in a corporation. H&r block state taxes   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. H&r block state taxes You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. H&r block state taxes Basis adjustment to corporation's property. H&r block state taxes   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. H&r block state taxes You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). H&r block state taxes   Allocate this reduction to the following classes of property in the order shown below. H&r block state taxes Property that is similar or related in service or use to the condemned property. H&r block state taxes Depreciable property not reduced in (1). H&r block state taxes All other property. H&r block state taxes If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. H&r block state taxes The reduced basis of any single property cannot be less than zero. H&r block state taxes Main home replaced. H&r block state taxes   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. H&r block state taxes The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. H&r block state taxes   You must reduce the basis of your replacement property by the postponed gain. H&r block state taxes Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. H&r block state taxes Example. H&r block state taxes City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. H&r block state taxes The city paid you a condemnation award of $400,000. H&r block state taxes Your adjusted basis in the property was $80,000. H&r block state taxes You realize a gain of $320,000 ($400,000 − $80,000). H&r block state taxes You purchased a new home for $100,000. H&r block state taxes You can exclude $250,000 of the realized gain from your gross income. H&r block state taxes The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). H&r block state taxes You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). H&r block state taxes The remaining $20,000 of realized gain is postponed. H&r block state taxes Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). H&r block state taxes Replacement period. H&r block state taxes   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. H&r block state taxes This is the replacement period. H&r block state taxes   The replacement period for a condemnation begins on the earlier of the following dates. H&r block state taxes The date on which you disposed of the condemned property. H&r block state taxes The date on which the threat of condemnation began. H&r block state taxes   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. H&r block state taxes However, see the exceptions below. H&r block state taxes Three-year replacement period for certain property. H&r block state taxes   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. H&r block state taxes However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. H&r block state taxes Five-year replacement period for certain property. H&r block state taxes   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. H&r block state taxes Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. H&r block state taxes Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. H&r block state taxes Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. H&r block state taxes Extended replacement period for taxpayers affected by other federally declared disasters. H&r block state taxes    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. H&r block state taxes For more information visit www. H&r block state taxes irs. H&r block state taxes gov/uac/Tax-Relief-in-Disaster-Situations. H&r block state taxes Weather-related sales of livestock in an area eligible for federal assistance. H&r block state taxes   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. H&r block state taxes    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. H&r block state taxes See Notice 2006-82. H&r block state taxes You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. H&r block state taxes irs. H&r block state taxes gov/irb/2006-39_IRB/ar13. H&r block state taxes html. H&r block state taxes    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. H&r block state taxes If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. H&r block state taxes You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. H&r block state taxes irs. H&r block state taxes gov/irb/2013-45_IRB/ar04. H&r block state taxes html. H&r block state taxes The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. H&r block state taxes Determining when gain is realized. H&r block state taxes   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. H&r block state taxes If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. H&r block state taxes   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. H&r block state taxes A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. H&r block state taxes   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. H&r block state taxes All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. H&r block state taxes All or part of the award is actually or constructively received. H&r block state taxes For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. H&r block state taxes Replacement property bought before the condemnation. H&r block state taxes   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. H&r block state taxes Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. H&r block state taxes Example. H&r block state taxes On April 3, 2012, city authorities notified you that your property would be condemned. H&r block state taxes On June 5, 2012, you acquired property to replace the property to be condemned. H&r block state taxes You still had the new property when the city took possession of your old property on September 4, 2013. H&r block state taxes You have made a replacement within the replacement period. H&r block state taxes Extension. H&r block state taxes   You can request an extension of the replacement period from the IRS director for your area. H&r block state taxes You should apply before the end of the replacement period. H&r block state taxes Your request should explain in detail why you need an extension. H&r block state taxes The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. H&r block state taxes An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. H&r block state taxes   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. H&r block state taxes Extensions are usually limited to a period of 1 year or less. H&r block state taxes The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. H&r block state taxes If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri
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Rehabilitation Services Administration (Education Department)

The Rehabilitation Services Administration oversees grant programs that help individuals with physical or mental disabilities obtain employment and live more independently.

Contact the Agency or Department

Website: Rehabilitation Services Administration (Education Department)

Address: Office of Special Education and Rehabilitative Services
400 Maryland Ave SW

Washington, DC 20202-7100

Phone Number: (202) 245-7468

Toll-free: (800) 827-5327 (Dept. of Ed. Programs and Directory)

TTY: (800) 437-0833 (Dept. of Ed. Programs and Directory)

The H&r Block State Taxes

H&r block state taxes Some employees may be able to deduct certain work-related expenses. The following facts from the IRS can help you determine which expenses are deductible as an employee business expense. You must be itemizing deductions on IRS Schedule A to qualify. H&r block state taxes Expenses that qualify for an itemized deduction generally include: H&r block state taxes Business travel away from home H&r block state taxes Business use of your car H&r block state taxes Business meals and entertainment H&r block state taxes Travel H&r block state taxes Use of your home H&r block state taxes Education H&r block state taxes Supplies H&r block state taxes Tools H&r block state taxes Miscellaneous expenses H&r block state taxes You must keep records to prove the business expenses you deduct. For general information on recordkeeping, see IRS Publication 552, Recordkeeping for Individuals available on this website, or by calling 1-800-TAX-FORM (800-829-3676). H&r block state taxes If your employer reimburses you under an accountable plan, you should not include the payments in your gross income, and you may not deduct any of the reimbursed amounts. H&r block state taxes An accountable plan must meet three requirements: H&r block state taxes You must have paid or incurred expenses that are deductible while performing services as an employee. H&r block state taxes H&r block state taxes You must adequately account to your employer for these expenses within a reasonable time period. H&r block state taxes H&r block state taxes You must return any excess reimbursement or allowance within a reasonable time period. H&r block state taxes If the plan under which you are reimbursed by your employer is non-accountable, the payments you receive should be included in the wages shown on your Form W-2. You must report the income and itemize your deductions to deduct these expenses. H&r block state taxes Generally, you report unreimbursed expenses on IRS Form 2106 or IRS Form 2106-EZ and attach it to Form 1040. Deductible expenses are then reported on IRS Schedule A, as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2 percent of your adjusted gross income. H&r block state taxes For more information see IRS Publication 529, Miscellaneous Deductions, which is available on this website, or by calling 1-800-TAX-FORM (800-829-3676). H&r block state taxes