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How Soon Can I File My 2012 Taxes In 2013

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How Soon Can I File My 2012 Taxes In 2013

How soon can i file my 2012 taxes in 2013 9. How soon can i file my 2012 taxes in 2013   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. How soon can i file my 2012 taxes in 2013 Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. How soon can i file my 2012 taxes in 2013 Amount to report as ordinary income. How soon can i file my 2012 taxes in 2013 Applicable percentage. How soon can i file my 2012 taxes in 2013 Amount to report as ordinary income. How soon can i file my 2012 taxes in 2013 Applicable percentage. How soon can i file my 2012 taxes in 2013 Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. How soon can i file my 2012 taxes in 2013 When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. How soon can i file my 2012 taxes in 2013 Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. How soon can i file my 2012 taxes in 2013 Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. How soon can i file my 2012 taxes in 2013 Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. How soon can i file my 2012 taxes in 2013 Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. How soon can i file my 2012 taxes in 2013 Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). How soon can i file my 2012 taxes in 2013 Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. How soon can i file my 2012 taxes in 2013 Table 9-1. How soon can i file my 2012 taxes in 2013 Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. How soon can i file my 2012 taxes in 2013 Held 24 mos. How soon can i file my 2012 taxes in 2013  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. How soon can i file my 2012 taxes in 2013 Held 12 mos. How soon can i file my 2012 taxes in 2013   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). How soon can i file my 2012 taxes in 2013 Do not take that gain into account as section 1231 gain. How soon can i file my 2012 taxes in 2013 Section 1231 transactions. How soon can i file my 2012 taxes in 2013   Gain or loss on the following transactions is subject to section 1231 treatment. How soon can i file my 2012 taxes in 2013 Sale or exchange of cattle and horses. How soon can i file my 2012 taxes in 2013 The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. How soon can i file my 2012 taxes in 2013 Sale or exchange of other livestock. How soon can i file my 2012 taxes in 2013 This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. How soon can i file my 2012 taxes in 2013 Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. How soon can i file my 2012 taxes in 2013 Other livestock does not include poultry. How soon can i file my 2012 taxes in 2013 Sale or exchange of depreciable personal property. How soon can i file my 2012 taxes in 2013 This property must be used in your business and held longer than 1 year. How soon can i file my 2012 taxes in 2013 Generally, property held for the production of rents or royalties is considered to be used in a trade or business. How soon can i file my 2012 taxes in 2013 Examples of depreciable personal property include farm machinery and trucks. How soon can i file my 2012 taxes in 2013 It also includes amortizable section 197 intangibles. How soon can i file my 2012 taxes in 2013 Sale or exchange of real estate. How soon can i file my 2012 taxes in 2013 This property must be used in your business and held longer than 1 year. How soon can i file my 2012 taxes in 2013 Examples are your farm or ranch (including barns and sheds). How soon can i file my 2012 taxes in 2013 Sale or exchange of unharvested crops. How soon can i file my 2012 taxes in 2013 The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. How soon can i file my 2012 taxes in 2013 You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). How soon can i file my 2012 taxes in 2013 Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. How soon can i file my 2012 taxes in 2013 Distributive share of partnership gains and losses. How soon can i file my 2012 taxes in 2013 Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). How soon can i file my 2012 taxes in 2013 Cutting or disposal of timber. How soon can i file my 2012 taxes in 2013 Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . How soon can i file my 2012 taxes in 2013 Condemnation. How soon can i file my 2012 taxes in 2013 The condemned property (defined in chapter 11) must have been held longer than 1 year. How soon can i file my 2012 taxes in 2013 It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. How soon can i file my 2012 taxes in 2013 It cannot be property held for personal use. How soon can i file my 2012 taxes in 2013 Casualty or theft. How soon can i file my 2012 taxes in 2013 The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). How soon can i file my 2012 taxes in 2013 You must have held the property longer than 1 year. How soon can i file my 2012 taxes in 2013 However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. How soon can i file my 2012 taxes in 2013 Section 1231 does not apply to personal casualty gains and losses. How soon can i file my 2012 taxes in 2013 See chapter 11 for information on how to treat those gains and losses. How soon can i file my 2012 taxes in 2013 If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. How soon can i file my 2012 taxes in 2013 See Table 9-1. How soon can i file my 2012 taxes in 2013 Property for sale to customers. How soon can i file my 2012 taxes in 2013   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. How soon can i file my 2012 taxes in 2013 If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. How soon can i file my 2012 taxes in 2013 Treatment as ordinary or capital. How soon can i file my 2012 taxes in 2013   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. How soon can i file my 2012 taxes in 2013 If you have a net section 1231 loss, it is an ordinary loss. How soon can i file my 2012 taxes in 2013 If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. How soon can i file my 2012 taxes in 2013 The rest, if any, is long-term capital gain. How soon can i file my 2012 taxes in 2013 Nonrecaptured section 1231 losses. How soon can i file my 2012 taxes in 2013   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. How soon can i file my 2012 taxes in 2013 These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 In 2013, Ben has a $2,000 net section 1231 gain. How soon can i file my 2012 taxes in 2013 To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. How soon can i file my 2012 taxes in 2013 From 2008 through 2012 he had the following section 1231 gains and losses. How soon can i file my 2012 taxes in 2013 Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. How soon can i file my 2012 taxes in 2013 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. How soon can i file my 2012 taxes in 2013 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. How soon can i file my 2012 taxes in 2013 To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. How soon can i file my 2012 taxes in 2013 For more information, see chapter 3 of Publication 544. How soon can i file my 2012 taxes in 2013 Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. How soon can i file my 2012 taxes in 2013 Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. How soon can i file my 2012 taxes in 2013 See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. How soon can i file my 2012 taxes in 2013 Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. How soon can i file my 2012 taxes in 2013 Personal property (either tangible or intangible). How soon can i file my 2012 taxes in 2013 Other tangible property (except buildings and their structural components) used as any of the following. How soon can i file my 2012 taxes in 2013 See Buildings and structural components below. How soon can i file my 2012 taxes in 2013 An integral part of manufacturing, production, or extraction, or of furnishing certain services. How soon can i file my 2012 taxes in 2013 A research facility in any of the activities in (a). How soon can i file my 2012 taxes in 2013 A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). How soon can i file my 2012 taxes in 2013 That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. How soon can i file my 2012 taxes in 2013 Amortization of certified pollution control facilities. How soon can i file my 2012 taxes in 2013 The section 179 expense deduction. How soon can i file my 2012 taxes in 2013 Deduction for clean-fuel vehicles and certain refueling property. How soon can i file my 2012 taxes in 2013 Expenditures to remove architectural and transportation barriers to the handicapped and elderly. How soon can i file my 2012 taxes in 2013 Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. How soon can i file my 2012 taxes in 2013 Single purpose agricultural (livestock) or horticultural structures. How soon can i file my 2012 taxes in 2013 Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. How soon can i file my 2012 taxes in 2013 Buildings and structural components. How soon can i file my 2012 taxes in 2013   Section 1245 property does not include buildings and structural components. How soon can i file my 2012 taxes in 2013 The term building includes a house, barn, warehouse, or garage. How soon can i file my 2012 taxes in 2013 The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. How soon can i file my 2012 taxes in 2013   Do not treat a structure that is essentially machinery or equipment as a building or structural component. How soon can i file my 2012 taxes in 2013 Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. How soon can i file my 2012 taxes in 2013   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. How soon can i file my 2012 taxes in 2013 Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. How soon can i file my 2012 taxes in 2013 Facility for bulk storage of fungible commodities. How soon can i file my 2012 taxes in 2013   This is a facility used mainly for the bulk storage of fungible commodities. How soon can i file my 2012 taxes in 2013 Bulk storage means storage of a commodity in a large mass before it is used. How soon can i file my 2012 taxes in 2013 For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. How soon can i file my 2012 taxes in 2013 To be fungible, a commodity must be such that one part may be used in place of another. How soon can i file my 2012 taxes in 2013 Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. How soon can i file my 2012 taxes in 2013 The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. How soon can i file my 2012 taxes in 2013 The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). How soon can i file my 2012 taxes in 2013 For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. How soon can i file my 2012 taxes in 2013 For details, see chapter 3 of Publication 544. How soon can i file my 2012 taxes in 2013 Use Part III of Form 4797 to figure the ordinary income part of the gain. How soon can i file my 2012 taxes in 2013 Depreciation claimed on other property or claimed by other taxpayers. How soon can i file my 2012 taxes in 2013   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. How soon can i file my 2012 taxes in 2013 Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. How soon can i file my 2012 taxes in 2013 For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. How soon can i file my 2012 taxes in 2013 Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 Jeff Free paid $120,000 for a tractor in 2012. How soon can i file my 2012 taxes in 2013 On February 23, 2013, he traded it for a chopper and paid an additional $30,000. How soon can i file my 2012 taxes in 2013 To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. How soon can i file my 2012 taxes in 2013 Jeff can also depreciate the additional $30,000 for the chopper. How soon can i file my 2012 taxes in 2013 Depreciation and amortization. How soon can i file my 2012 taxes in 2013   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. How soon can i file my 2012 taxes in 2013 See Depreciation Recapture in chapter 3 of Publication 544 for more details. How soon can i file my 2012 taxes in 2013 Ordinary depreciation deductions. How soon can i file my 2012 taxes in 2013 Section 179 deduction (see chapter 7). How soon can i file my 2012 taxes in 2013 Any special depreciation allowance. How soon can i file my 2012 taxes in 2013 Amortization deductions for all the following costs. How soon can i file my 2012 taxes in 2013 Acquiring a lease. How soon can i file my 2012 taxes in 2013 Lessee improvements. How soon can i file my 2012 taxes in 2013 Pollution control facilities. How soon can i file my 2012 taxes in 2013 Reforestation expenses. How soon can i file my 2012 taxes in 2013 Section 197 intangibles. How soon can i file my 2012 taxes in 2013 Qualified disaster expenses. How soon can i file my 2012 taxes in 2013 Franchises, trademarks, and trade names acquired before August 11, 1993. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You file your returns on a calendar year basis. How soon can i file my 2012 taxes in 2013 In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. How soon can i file my 2012 taxes in 2013 You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. How soon can i file my 2012 taxes in 2013 You did not claim the section 179 expense deduction for the truck. How soon can i file my 2012 taxes in 2013 You sold it in May 2013 for $7,000. How soon can i file my 2012 taxes in 2013 The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). How soon can i file my 2012 taxes in 2013 Figure the gain treated as ordinary income as follows. How soon can i file my 2012 taxes in 2013 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. How soon can i file my 2012 taxes in 2013   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. How soon can i file my 2012 taxes in 2013 If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. How soon can i file my 2012 taxes in 2013 If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. How soon can i file my 2012 taxes in 2013 This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. How soon can i file my 2012 taxes in 2013 Disposition of plants and animals. How soon can i file my 2012 taxes in 2013   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. How soon can i file my 2012 taxes in 2013 If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. How soon can i file my 2012 taxes in 2013 For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. How soon can i file my 2012 taxes in 2013 For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. How soon can i file my 2012 taxes in 2013 You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 Janet Maple sold her apple orchard in 2013 for $80,000. How soon can i file my 2012 taxes in 2013 Her adjusted basis at the time of sale was $60,000. How soon can i file my 2012 taxes in 2013 She bought the orchard in 2006, but the trees did not produce a crop until 2009. How soon can i file my 2012 taxes in 2013 Her pre-productive expenses were $6,000. How soon can i file my 2012 taxes in 2013 She elected not to use the uniform capitalization rules. How soon can i file my 2012 taxes in 2013 Janet must treat $6,000 of the gain as ordinary income. How soon can i file my 2012 taxes in 2013 Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. How soon can i file my 2012 taxes in 2013 It includes buildings and structural components that are not section 1245 property (discussed earlier). How soon can i file my 2012 taxes in 2013 It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. How soon can i file my 2012 taxes in 2013 A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. How soon can i file my 2012 taxes in 2013 Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. How soon can i file my 2012 taxes in 2013 To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. How soon can i file my 2012 taxes in 2013 You will not have additional depreciation if any of the following apply to the property disposed of. How soon can i file my 2012 taxes in 2013 You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. How soon can i file my 2012 taxes in 2013 You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. How soon can i file my 2012 taxes in 2013 The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. How soon can i file my 2012 taxes in 2013 These properties are depreciated using the straight line method. How soon can i file my 2012 taxes in 2013 Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. How soon can i file my 2012 taxes in 2013 This applies even if no payments are received in that year. How soon can i file my 2012 taxes in 2013 If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. How soon can i file my 2012 taxes in 2013 For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. How soon can i file my 2012 taxes in 2013 If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. How soon can i file my 2012 taxes in 2013 To do this, allocate the selling price and the payments you receive in the year of sale to each asset. How soon can i file my 2012 taxes in 2013 Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. How soon can i file my 2012 taxes in 2013 For more information on installment sales, see chapter 10. How soon can i file my 2012 taxes in 2013 Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. How soon can i file my 2012 taxes in 2013 By gift. How soon can i file my 2012 taxes in 2013 At death. How soon can i file my 2012 taxes in 2013 In like-kind exchanges. How soon can i file my 2012 taxes in 2013 In involuntary conversions. How soon can i file my 2012 taxes in 2013 Publication 544 also explains how to handle a single transaction involving multiple properties. How soon can i file my 2012 taxes in 2013 Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. How soon can i file my 2012 taxes in 2013 Deductions for soil and water conservation expenditures (section 1252 property). How soon can i file my 2012 taxes in 2013 Exclusions from income for certain cost sharing payments (section 1255 property). How soon can i file my 2012 taxes in 2013 Section 1252 property. How soon can i file my 2012 taxes in 2013   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. How soon can i file my 2012 taxes in 2013 Exceptions. How soon can i file my 2012 taxes in 2013   Do not treat gain on the following transactions as gain on section 1252 property. How soon can i file my 2012 taxes in 2013 Disposition of farmland by gift. How soon can i file my 2012 taxes in 2013 Transfer of farm property at death (except for income in respect of a decedent). How soon can i file my 2012 taxes in 2013 For more information, see Regulations section 1. How soon can i file my 2012 taxes in 2013 1252-2. How soon can i file my 2012 taxes in 2013 Amount to report as ordinary income. How soon can i file my 2012 taxes in 2013   You report as ordinary income the lesser of the following amounts. How soon can i file my 2012 taxes in 2013 Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). How soon can i file my 2012 taxes in 2013 The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. How soon can i file my 2012 taxes in 2013 Applicable percentage. How soon can i file my 2012 taxes in 2013   The applicable percentage is based on the length of time you held the land. How soon can i file my 2012 taxes in 2013 If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. How soon can i file my 2012 taxes in 2013 If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. How soon can i file my 2012 taxes in 2013 If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You acquired farmland on January 19, 2005. How soon can i file my 2012 taxes in 2013 On October 3, 2013, you sold the land at a $30,000 gain. How soon can i file my 2012 taxes in 2013 Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. How soon can i file my 2012 taxes in 2013 The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. How soon can i file my 2012 taxes in 2013 You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. How soon can i file my 2012 taxes in 2013 Section 1255 property. How soon can i file my 2012 taxes in 2013   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. How soon can i file my 2012 taxes in 2013 If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. How soon can i file my 2012 taxes in 2013 Amount to report as ordinary income. How soon can i file my 2012 taxes in 2013   You report as ordinary income the lesser of the following amounts. How soon can i file my 2012 taxes in 2013 The applicable percentage of the total excluded cost-sharing payments. How soon can i file my 2012 taxes in 2013 The gain on the disposition of the property. How soon can i file my 2012 taxes in 2013 You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. How soon can i file my 2012 taxes in 2013 However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. How soon can i file my 2012 taxes in 2013 Applicable percentage. How soon can i file my 2012 taxes in 2013   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. How soon can i file my 2012 taxes in 2013 If the property is held less than 10 years after you receive the payments, the percentage is 100%. How soon can i file my 2012 taxes in 2013 After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. How soon can i file my 2012 taxes in 2013 Form 4797, Part III. How soon can i file my 2012 taxes in 2013   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. How soon can i file my 2012 taxes in 2013 Prev  Up  Next   Home   More Online Publications
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Abusive Return Preparer - Criminal Investigation (CI)

Overview - Abusive Return Preparer
Criminal Investigation Return Preparer Program (RPP) establishes procedures to foster compliance by identifying, investigating and prosecuting abusive return preparers

Definition - Abusive Return Preparer
A Return Preparer is defined as any person (including a partnership or corporation) who prepares for compensation all or a substantial portion of a tax return or claim for refund under the income tax provisions of the Internal Revenue Code

Return Preparation and Electronic Filing - Abusive Return Preparer
The advent of electronic filing of income tax returns by electronic return transmitters has provided a new mechanism for unscrupulous preparers to commit fraud

Tactics Used by Dishonest Abusive Return Preparers
Dishonest tax preparers use a variety of methods to formulate fraudulent and illegal deductions reducing taxable income

Helpful Hints when choosing a Return Preparer to ensure you don't hire an Abusive Return Preparer
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Statistical Data - Abusive Return Preparers
Enforcement statistics on investigations initiated, prosecutions recommended, indictments, sentencings and months to serve in prison.

Examples of Abusive Return Preparer Investigations
Examples have been written from public record documents filed in the district courts where the case was prosecuted.

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You should report fraudulent or abusive returns, including those with questionable Forms W2

 


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The How Soon Can I File My 2012 Taxes In 2013

How soon can i file my 2012 taxes in 2013 Publication 537 - Main Content Table of Contents What Is an Installment Sale?Special rule. How soon can i file my 2012 taxes in 2013 General RulesFiguring Installment Sale Income Reporting Installment Sale Income Other RulesElecting Out of the Installment Method Payments Received or Considered Received Escrow Account Depreciation Recapture Income Sale to a Related Person Like-Kind Exchange Contingent Payment Sale Single Sale of Several Assets Sale of a Business Unstated Interest and Original Issue Discount (OID) Disposition of an Installment Obligation Repossession Interest on Deferred Tax Reporting an Installment SaleRelated person. How soon can i file my 2012 taxes in 2013 Several assets. How soon can i file my 2012 taxes in 2013 Special situations. How soon can i file my 2012 taxes in 2013 Schedule D (Form 1040). How soon can i file my 2012 taxes in 2013 Form 4797. How soon can i file my 2012 taxes in 2013 How To Get Tax Help What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. How soon can i file my 2012 taxes in 2013 The rules for installment sales do not apply if you elect not to use the installment method (see Electing Out of the Installment Method under Other Rules, later) or the transaction is one for which the installment method may not apply. How soon can i file my 2012 taxes in 2013 The installment sales method cannot be used for the following. How soon can i file my 2012 taxes in 2013 Sale of inventory. How soon can i file my 2012 taxes in 2013   The regular sale of inventory of personal property does not qualify as an installment sale even if you receive a payment after the year of sale. How soon can i file my 2012 taxes in 2013 See Sale of a Business under Other Rules, later. How soon can i file my 2012 taxes in 2013 Dealer sales. How soon can i file my 2012 taxes in 2013   Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. How soon can i file my 2012 taxes in 2013 This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. How soon can i file my 2012 taxes in 2013 However, the rule does not apply to an installment sale of property used or produced in farming. How soon can i file my 2012 taxes in 2013 Special rule. How soon can i file my 2012 taxes in 2013   Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. How soon can i file my 2012 taxes in 2013 For more information, see section 453(l). How soon can i file my 2012 taxes in 2013 Stock or securities. How soon can i file my 2012 taxes in 2013   You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. How soon can i file my 2012 taxes in 2013 You must report the entire gain on the sale in the year in which the trade date falls. How soon can i file my 2012 taxes in 2013 Installment obligation. How soon can i file my 2012 taxes in 2013   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. How soon can i file my 2012 taxes in 2013 General Rules If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. How soon can i file my 2012 taxes in 2013 See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale. How soon can i file my 2012 taxes in 2013 Sale at a loss. How soon can i file my 2012 taxes in 2013   If your sale results in a loss, you cannot use the installment method. How soon can i file my 2012 taxes in 2013 If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale. How soon can i file my 2012 taxes in 2013 Unstated interest. How soon can i file my 2012 taxes in 2013   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. How soon can i file my 2012 taxes in 2013 See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. How soon can i file my 2012 taxes in 2013 Figuring Installment Sale Income You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income. How soon can i file my 2012 taxes in 2013 Each payment on an installment sale usually consists of the following three parts. How soon can i file my 2012 taxes in 2013 Interest income. How soon can i file my 2012 taxes in 2013 Return of your adjusted basis in the property. How soon can i file my 2012 taxes in 2013 Gain on the sale. How soon can i file my 2012 taxes in 2013 In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. How soon can i file my 2012 taxes in 2013 You do not include in income the part that is the return of your basis in the property. How soon can i file my 2012 taxes in 2013 Basis is the amount of your investment in the property for installment sale purposes. How soon can i file my 2012 taxes in 2013 Interest Income You must report interest as ordinary income. How soon can i file my 2012 taxes in 2013 Interest is generally not included in a down payment. How soon can i file my 2012 taxes in 2013 However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. How soon can i file my 2012 taxes in 2013 Interest provided in the agreement is called stated interest. How soon can i file my 2012 taxes in 2013 If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. How soon can i file my 2012 taxes in 2013 See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. How soon can i file my 2012 taxes in 2013 Adjusted Basis and Installment Sale Income (Gain on Sale) After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. How soon can i file my 2012 taxes in 2013 A tax-free return of your adjusted basis in the property, and Your gain (referred to as installment sale income on Form 6252). How soon can i file my 2012 taxes in 2013 Figuring adjusted basis for installment sale purposes. How soon can i file my 2012 taxes in 2013   You can use Worksheet A to figure your adjusted basis in the property for installment sale purposes. How soon can i file my 2012 taxes in 2013 When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. How soon can i file my 2012 taxes in 2013 Worksheet A. How soon can i file my 2012 taxes in 2013 Figuring Adjusted Basis and Gross Profit Percentage 1. How soon can i file my 2012 taxes in 2013 Enter the selling price for the property   2. How soon can i file my 2012 taxes in 2013 Enter your adjusted basis for the property     3. How soon can i file my 2012 taxes in 2013 Enter your selling expenses     4. How soon can i file my 2012 taxes in 2013 Enter any depreciation recapture     5. How soon can i file my 2012 taxes in 2013 Add lines 2, 3, and 4. How soon can i file my 2012 taxes in 2013  This is your adjusted basis for installment sale purposes   6. How soon can i file my 2012 taxes in 2013 Subtract line 5 from line 1. How soon can i file my 2012 taxes in 2013 If zero or less, enter -0-. How soon can i file my 2012 taxes in 2013  This is your gross profit     If the amount entered on line 6 is zero, stop here. How soon can i file my 2012 taxes in 2013 You cannot use the installment method. How soon can i file my 2012 taxes in 2013   7. How soon can i file my 2012 taxes in 2013 Enter the contract price for the property   8. How soon can i file my 2012 taxes in 2013 Divide line 6 by line 7. How soon can i file my 2012 taxes in 2013 This is your gross profit percentage   Selling price. How soon can i file my 2012 taxes in 2013   The selling price is the total cost of the property to the buyer and includes any of the following. How soon can i file my 2012 taxes in 2013 Any money you are to receive. How soon can i file my 2012 taxes in 2013 The fair market value (FMV) of any property you are to receive (FMV is discussed in Property Used As a Payment under Other Rules, later). How soon can i file my 2012 taxes in 2013 Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). How soon can i file my 2012 taxes in 2013 Any of your selling expenses the buyer pays. How soon can i file my 2012 taxes in 2013   Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. How soon can i file my 2012 taxes in 2013 Adjusted basis for installment sale purposes. How soon can i file my 2012 taxes in 2013   Your adjusted basis is the total of the following three items. How soon can i file my 2012 taxes in 2013 Adjusted basis. How soon can i file my 2012 taxes in 2013 Selling expenses. How soon can i file my 2012 taxes in 2013 Depreciation recapture. How soon can i file my 2012 taxes in 2013 Adjusted basis. How soon can i file my 2012 taxes in 2013   Basis is your investment in the property for installment sale purposes. How soon can i file my 2012 taxes in 2013 The way you figure basis depends on how you acquire the property. How soon can i file my 2012 taxes in 2013 The basis of property you buy is generally its cost. How soon can i file my 2012 taxes in 2013 The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. How soon can i file my 2012 taxes in 2013   While you own property, various events may change your original basis. How soon can i file my 2012 taxes in 2013 Some events, such as adding rooms or making permanent improvements, increase basis. How soon can i file my 2012 taxes in 2013 Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. How soon can i file my 2012 taxes in 2013 The result is adjusted basis. How soon can i file my 2012 taxes in 2013   For more information on how to figure basis and adjusted basis, see Publication 551. How soon can i file my 2012 taxes in 2013 For more information regarding your basis in property you inherited from someone who died in 2010 and whose executor filed Form 8939, Allocation of Increase In Basis for Property Acquired From a Decedent, see Publication 4895. How soon can i file my 2012 taxes in 2013 Selling expenses. How soon can i file my 2012 taxes in 2013   Selling expenses relate to the sale of the property. How soon can i file my 2012 taxes in 2013 They include commissions, attorney fees, and any other expenses paid on the sale. How soon can i file my 2012 taxes in 2013 Selling expenses are added to the basis of the sold property. How soon can i file my 2012 taxes in 2013 Depreciation recapture. How soon can i file my 2012 taxes in 2013   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. How soon can i file my 2012 taxes in 2013 See Depreciation Recapture Income under Other Rules, later. How soon can i file my 2012 taxes in 2013 Gross profit. How soon can i file my 2012 taxes in 2013   Gross profit is the total gain you report on the installment method. How soon can i file my 2012 taxes in 2013   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. How soon can i file my 2012 taxes in 2013 If the property you sold was your home, subtract from the gross profit any gain you can exclude. How soon can i file my 2012 taxes in 2013 See Sale of Your Home , later, under Reporting Installment Sale Income. How soon can i file my 2012 taxes in 2013 Contract price. How soon can i file my 2012 taxes in 2013   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. How soon can i file my 2012 taxes in 2013 Gross profit percentage. How soon can i file my 2012 taxes in 2013   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. How soon can i file my 2012 taxes in 2013 This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. How soon can i file my 2012 taxes in 2013   The gross profit percentage generally remains the same for each payment you receive. How soon can i file my 2012 taxes in 2013 However, see the Example under Selling Price Reduced, later, for a situation where the gross profit percentage changes. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You sell property at a contract price of $6,000 and your gross profit is $1,500. How soon can i file my 2012 taxes in 2013 Your gross profit percentage is 25% ($1,500 ÷ $6,000). How soon can i file my 2012 taxes in 2013 After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. How soon can i file my 2012 taxes in 2013 The remainder (balance) of each payment is the tax-free return of your adjusted basis. How soon can i file my 2012 taxes in 2013 Amount to report as installment sale income. How soon can i file my 2012 taxes in 2013   Multiply the payments you receive each year (less interest) by the gross profit percentage. How soon can i file my 2012 taxes in 2013 The result is your installment sale income for the tax year. How soon can i file my 2012 taxes in 2013 In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. How soon can i file my 2012 taxes in 2013 A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. How soon can i file my 2012 taxes in 2013 For a detailed discussion, see Payments Received or Considered Received under Other Rules, later. How soon can i file my 2012 taxes in 2013 Selling Price Reduced If the selling price is reduced at a later date, the gross profit on the sale also will change. How soon can i file my 2012 taxes in 2013 You then must refigure the gross profit percentage for the remaining payments. How soon can i file my 2012 taxes in 2013 Refigure your gross profit using Worksheet B. How soon can i file my 2012 taxes in 2013 You will spread any remaining gain over future installments. How soon can i file my 2012 taxes in 2013 Worksheet B. How soon can i file my 2012 taxes in 2013 New Gross Profit Percentage — Selling Price Reduced 1. How soon can i file my 2012 taxes in 2013 Enter the reduced selling  price for the property   2. How soon can i file my 2012 taxes in 2013 Enter your adjusted  basis for the  property     3. How soon can i file my 2012 taxes in 2013 Enter your selling  expenses     4. How soon can i file my 2012 taxes in 2013 Enter any depreciation  recapture     5. How soon can i file my 2012 taxes in 2013 Add lines 2, 3, and 4. How soon can i file my 2012 taxes in 2013   6. How soon can i file my 2012 taxes in 2013 Subtract line 5 from line 1. How soon can i file my 2012 taxes in 2013  This is your adjusted  gross profit   7. How soon can i file my 2012 taxes in 2013 Enter any installment sale  income reported in  prior year(s)   8. How soon can i file my 2012 taxes in 2013 Subtract line 7 from line 6   9. How soon can i file my 2012 taxes in 2013 Future installments   10. How soon can i file my 2012 taxes in 2013 Divide line 8 by line 9. How soon can i file my 2012 taxes in 2013  This is your new gross profit percentage*   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 In 2011, you sold land with a basis of $40,000 for $100,000. How soon can i file my 2012 taxes in 2013 Your gross profit was $60,000. How soon can i file my 2012 taxes in 2013 You received a $20,000 down payment and the buyer's note for $80,000. How soon can i file my 2012 taxes in 2013 The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2012. How soon can i file my 2012 taxes in 2013 Your gross profit percentage is 60%. How soon can i file my 2012 taxes in 2013 You reported a gain of $12,000 on each payment received in 2011 and 2012. How soon can i file my 2012 taxes in 2013 In 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $15,000 for each year. How soon can i file my 2012 taxes in 2013 The new gross profit percentage, 46. How soon can i file my 2012 taxes in 2013 67%, is figured on Example—Worksheet B. How soon can i file my 2012 taxes in 2013 You will report a gain of $7,000 (46. How soon can i file my 2012 taxes in 2013 67% of $15,000) on each of the $15,000 installments due in 2013, 2014, and 2015. How soon can i file my 2012 taxes in 2013 Example — Worksheet B. How soon can i file my 2012 taxes in 2013 New Gross Profit Percentage — Selling Price Reduced 1. How soon can i file my 2012 taxes in 2013 Enter the reduced selling  price for the property 85,000 2. How soon can i file my 2012 taxes in 2013 Enter your adjusted  basis for the  property 40,000   3. How soon can i file my 2012 taxes in 2013 Enter your selling  expenses -0-   4. How soon can i file my 2012 taxes in 2013 Enter any depreciation  recapture -0-   5. How soon can i file my 2012 taxes in 2013 Add lines 2, 3, and 4. How soon can i file my 2012 taxes in 2013 40,000 6. How soon can i file my 2012 taxes in 2013 Subtract line 5 from line 1. How soon can i file my 2012 taxes in 2013  This is your adjusted  gross profit 45,000 7. How soon can i file my 2012 taxes in 2013 Enter any installment sale  income reported in  prior year(s) 24,000 8. How soon can i file my 2012 taxes in 2013 Subtract line 7 from line 6 21,000 9. How soon can i file my 2012 taxes in 2013 Future installments 45,000 10. How soon can i file my 2012 taxes in 2013 Divide line 8 by line 9. How soon can i file my 2012 taxes in 2013  This is your new gross profit percentage* 46. How soon can i file my 2012 taxes in 2013 67% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. How soon can i file my 2012 taxes in 2013 Reporting Installment Sale Income Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. How soon can i file my 2012 taxes in 2013 You also will have to report the installment sale income on Schedule D (Form 1040), Capital Gains and Losses, or Form 4797, or both. How soon can i file my 2012 taxes in 2013 See Schedule D (Form 1040) and Form 4797 , later. How soon can i file my 2012 taxes in 2013 If the property was your main home, you may be able to exclude part or all of the gain. How soon can i file my 2012 taxes in 2013 See Sale of Your Home , later. How soon can i file my 2012 taxes in 2013 Form 6252 Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. How soon can i file my 2012 taxes in 2013 Attach it to your tax return for each year. How soon can i file my 2012 taxes in 2013 Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income. How soon can i file my 2012 taxes in 2013 Which parts to complete. How soon can i file my 2012 taxes in 2013   Which part to complete depends on whether you are filing the form for the year of sale or a later year. How soon can i file my 2012 taxes in 2013 Year of sale. How soon can i file my 2012 taxes in 2013   Complete lines 1 through 4, Part I, and Part II. How soon can i file my 2012 taxes in 2013 If you sold property to a related party during the year, also complete Part III. How soon can i file my 2012 taxes in 2013 Later years. How soon can i file my 2012 taxes in 2013   Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale. How soon can i file my 2012 taxes in 2013   If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. How soon can i file my 2012 taxes in 2013 (After December 31, 1986, the installment method is not available for the sale of marketable securities. How soon can i file my 2012 taxes in 2013 ) Complete lines 1 through 4 and Part II for any year in which you receive a payment from the sale. How soon can i file my 2012 taxes in 2013 Complete Part III unless you received the final payment during the tax year. How soon can i file my 2012 taxes in 2013   If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of sale and for 2 years after the year of sale, even if you did not receive a payment. How soon can i file my 2012 taxes in 2013 Complete lines 1 through 4 and Part II for any year during this 2-year period in which you receive a payment from the sale. How soon can i file my 2012 taxes in 2013 Complete Part III for the 2 years after the year of sale unless you received the final payment during the tax year. How soon can i file my 2012 taxes in 2013 Schedule D (Form 1040) Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). How soon can i file my 2012 taxes in 2013 If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. How soon can i file my 2012 taxes in 2013 Your gain is long-term if you owned the property for more than 1 year when you sold it. How soon can i file my 2012 taxes in 2013 Form 4797 An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. How soon can i file my 2012 taxes in 2013 All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. How soon can i file my 2012 taxes in 2013 For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. How soon can i file my 2012 taxes in 2013 If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252. How soon can i file my 2012 taxes in 2013 ” Sale of Your Home If you sell your home, you may be able to exclude all or part of the gain on the sale. How soon can i file my 2012 taxes in 2013 See Publication 523 for information about excluding the gain. How soon can i file my 2012 taxes in 2013 If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage. How soon can i file my 2012 taxes in 2013 Seller-financed mortgage. How soon can i file my 2012 taxes in 2013   If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures. How soon can i file my 2012 taxes in 2013   When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. How soon can i file my 2012 taxes in 2013   When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040), Itemized Deductions. How soon can i file my 2012 taxes in 2013   If either person fails to include the other person's SSN, a $50 penalty will be assessed. How soon can i file my 2012 taxes in 2013 Other Rules The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. How soon can i file my 2012 taxes in 2013 The following topics are discussed. How soon can i file my 2012 taxes in 2013 Electing out of the installment method. How soon can i file my 2012 taxes in 2013 Payments received or considered received. How soon can i file my 2012 taxes in 2013 Escrow account. How soon can i file my 2012 taxes in 2013 Depreciation recapture income. How soon can i file my 2012 taxes in 2013 Sale to a related person. How soon can i file my 2012 taxes in 2013 Like-kind exchange. How soon can i file my 2012 taxes in 2013 Contingent payment sale. How soon can i file my 2012 taxes in 2013 Single sale of several assets. How soon can i file my 2012 taxes in 2013 Sale of a business. How soon can i file my 2012 taxes in 2013 Unstated interest and original issue discount. How soon can i file my 2012 taxes in 2013 Disposition of an installment obligation. How soon can i file my 2012 taxes in 2013 Repossession. How soon can i file my 2012 taxes in 2013 Interest on deferred tax. How soon can i file my 2012 taxes in 2013 Electing Out of the Installment Method If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. How soon can i file my 2012 taxes in 2013 To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. How soon can i file my 2012 taxes in 2013 Notes, mortgages, and land contracts are examples of obligations that are included at FMV. How soon can i file my 2012 taxes in 2013 You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. How soon can i file my 2012 taxes in 2013 If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received). How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You sold a parcel of land for $50,000. How soon can i file my 2012 taxes in 2013 You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. How soon can i file my 2012 taxes in 2013 The buyer gave you a note for $40,000. How soon can i file my 2012 taxes in 2013 The note had an FMV of $40,000. How soon can i file my 2012 taxes in 2013 You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. How soon can i file my 2012 taxes in 2013 The land cost $25,000, and you owned it for more than one year. How soon can i file my 2012 taxes in 2013 You decide to elect out of the installment method and report the entire gain in the year of sale. How soon can i file my 2012 taxes in 2013 Gain realized:     Selling price $50,000 Minus: Property's adj. How soon can i file my 2012 taxes in 2013 basis $25,000     Commission 3,000 28,000 Gain realized $22,000 Gain recognized in year of sale:   Cash $10,000 Market value of note 40,000 Total realized in year of sale $50,000 Minus: Property's adj. How soon can i file my 2012 taxes in 2013 basis $25,000     Commission 3,000 28,000 Gain recognized $22,000 The recognized gain of $22,000 is long-term capital gain. How soon can i file my 2012 taxes in 2013 You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. How soon can i file my 2012 taxes in 2013 The interest on the note is ordinary income and is reported as interest income each year. How soon can i file my 2012 taxes in 2013 How to elect out. How soon can i file my 2012 taxes in 2013   To make this election, do not report your sale on Form 6252. How soon can i file my 2012 taxes in 2013 Instead, report it on Form 8949, Sales and Other Dispositions of Capital Assets, Form 4797, or both. How soon can i file my 2012 taxes in 2013 When to elect out. How soon can i file my 2012 taxes in 2013   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. How soon can i file my 2012 taxes in 2013 Automatic six-month extension. How soon can i file my 2012 taxes in 2013   If you timely file your tax return without making the election, you still can make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). How soon can i file my 2012 taxes in 2013 Write “Filed pursuant to section 301. How soon can i file my 2012 taxes in 2013 9100-2” at the top of the amended return and file it where the original return was filed. How soon can i file my 2012 taxes in 2013 Revoking the election. How soon can i file my 2012 taxes in 2013   Once made, the election can be revoked only with IRS approval. How soon can i file my 2012 taxes in 2013 A revocation is retroactive. How soon can i file my 2012 taxes in 2013 You will not be allowed to revoke the election if either of the following applies. How soon can i file my 2012 taxes in 2013 One of the purposes is to avoid federal income tax. How soon can i file my 2012 taxes in 2013 The tax year in which any payment was received has closed. How soon can i file my 2012 taxes in 2013 Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. How soon can i file my 2012 taxes in 2013 In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. How soon can i file my 2012 taxes in 2013 These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. How soon can i file my 2012 taxes in 2013 However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases. How soon can i file my 2012 taxes in 2013 Buyer Pays Seller's Expenses If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. How soon can i file my 2012 taxes in 2013 Include these expenses in the selling and contract prices when figuring the gross profit percentage. How soon can i file my 2012 taxes in 2013 Buyer Assumes Mortgage If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. How soon can i file my 2012 taxes in 2013 Mortgage not more than basis. How soon can i file my 2012 taxes in 2013   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. How soon can i file my 2012 taxes in 2013 It is considered a recovery of your basis. How soon can i file my 2012 taxes in 2013 The contract price is the selling price minus the mortgage. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You sell property with an adjusted basis of $19,000. How soon can i file my 2012 taxes in 2013 You have selling expenses of $1,000. How soon can i file my 2012 taxes in 2013 The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years). How soon can i file my 2012 taxes in 2013 The selling price is $25,000 ($15,000 + $10,000). How soon can i file my 2012 taxes in 2013 Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). How soon can i file my 2012 taxes in 2013 The contract price is $10,000 ($25,000 − $15,000 mortgage). How soon can i file my 2012 taxes in 2013 Your gross profit percentage is 50% ($5,000 ÷ $10,000). How soon can i file my 2012 taxes in 2013 You report half of each $2,000 payment received as gain from the sale. How soon can i file my 2012 taxes in 2013 You also report all interest you receive as ordinary income. How soon can i file my 2012 taxes in 2013 Mortgage more than basis. How soon can i file my 2012 taxes in 2013   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. How soon can i file my 2012 taxes in 2013 The part of the mortgage greater than your basis is treated as a payment received in the year of sale. How soon can i file my 2012 taxes in 2013   To figure the contract price, subtract the mortgage from the selling price. How soon can i file my 2012 taxes in 2013 This is the total amount (other than interest) you will receive directly from the buyer. How soon can i file my 2012 taxes in 2013 Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). How soon can i file my 2012 taxes in 2013 The contract price is then the same as your gross profit from the sale. How soon can i file my 2012 taxes in 2013    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 The selling price for your property is $9,000. How soon can i file my 2012 taxes in 2013 The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. How soon can i file my 2012 taxes in 2013 Your adjusted basis in the property is $4,400. How soon can i file my 2012 taxes in 2013 You have selling expenses of $600, for a total installment sale basis of $5,000. How soon can i file my 2012 taxes in 2013 The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). How soon can i file my 2012 taxes in 2013 This amount is included in the contract price and treated as a payment received in the year of sale. How soon can i file my 2012 taxes in 2013 The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000       Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000 Your gross profit percentage is 100%. How soon can i file my 2012 taxes in 2013 Report 100% of each payment (less interest) as gain from the sale. How soon can i file my 2012 taxes in 2013 Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. How soon can i file my 2012 taxes in 2013 Mortgage Canceled If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. How soon can i file my 2012 taxes in 2013 You are considered to receive a payment equal to the outstanding canceled debt. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 Mary Jones loaned you $45,000 in 2009 in exchange for a note and a mortgage in a tract of land you owned. How soon can i file my 2012 taxes in 2013 On April 4, 2013, she bought the land for $70,000. How soon can i file my 2012 taxes in 2013 At that time, $30,000 of her loan to you was outstanding. How soon can i file my 2012 taxes in 2013 She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2013, and $20,000 on August 1, 2014. How soon can i file my 2012 taxes in 2013 She did not assume an existing mortgage. How soon can i file my 2012 taxes in 2013 She canceled the $30,000 debt you owed her. How soon can i file my 2012 taxes in 2013 You are considered to have received a $30,000 payment at the time of the sale. How soon can i file my 2012 taxes in 2013 Buyer Assumes Other Debts If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. How soon can i file my 2012 taxes in 2013 If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. How soon can i file my 2012 taxes in 2013 Compare the debt to your installment sale basis in the property being sold. How soon can i file my 2012 taxes in 2013 If the debt is less than your installment sale basis, none of it is treated as a payment. How soon can i file my 2012 taxes in 2013 If it is more, only the difference is treated as a payment. How soon can i file my 2012 taxes in 2013 If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. How soon can i file my 2012 taxes in 2013 These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage . How soon can i file my 2012 taxes in 2013 However, they apply only to the following types of debt the buyer assumes. How soon can i file my 2012 taxes in 2013 Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. How soon can i file my 2012 taxes in 2013 Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. How soon can i file my 2012 taxes in 2013 If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. How soon can i file my 2012 taxes in 2013 The value of the assumed debt is then considered a payment to you in the year of sale. How soon can i file my 2012 taxes in 2013 Property Used As a Payment If you receive property other than money from the buyer, it is still considered a payment in the year received. How soon can i file my 2012 taxes in 2013 However, see Like-Kind Exchange , later. How soon can i file my 2012 taxes in 2013 Generally, the amount of the payment is the property's FMV on the date you receive it. How soon can i file my 2012 taxes in 2013 Exception. How soon can i file my 2012 taxes in 2013   If the property the buyer gives you is payable on demand or readily tradable, the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. How soon can i file my 2012 taxes in 2013 See Unstated Interest and Original Issue Discount (OID) , later. How soon can i file my 2012 taxes in 2013 Debt not payable on demand. How soon can i file my 2012 taxes in 2013   Any evidence of debt you receive from the buyer not payable on demand is not considered a payment. How soon can i file my 2012 taxes in 2013 This is true even if the debt is guaranteed by a third party, including a government agency. How soon can i file my 2012 taxes in 2013 Fair market value (FMV). How soon can i file my 2012 taxes in 2013   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. How soon can i file my 2012 taxes in 2013 Third-party note. How soon can i file my 2012 taxes in 2013   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. How soon can i file my 2012 taxes in 2013 Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. How soon can i file my 2012 taxes in 2013 The excess of the note's face value over its FMV is interest. How soon can i file my 2012 taxes in 2013 Exclude this interest in determining the selling price of the property. How soon can i file my 2012 taxes in 2013 However, see Exception under Property Used As a Payment, earlier. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You sold real estate in an installment sale. How soon can i file my 2012 taxes in 2013 As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. How soon can i file my 2012 taxes in 2013 The FMV of the third-party note at the time of the sale was $30,000. How soon can i file my 2012 taxes in 2013 This amount, not $50,000, is a payment to you in the year of sale. How soon can i file my 2012 taxes in 2013 The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. How soon can i file my 2012 taxes in 2013 The remaining 40% is interest taxed as ordinary income. How soon can i file my 2012 taxes in 2013 Bond. How soon can i file my 2012 taxes in 2013   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. How soon can i file my 2012 taxes in 2013 For more information on the amount you should treat as a payment, see Exception under Property Used As a Payment, earlier. How soon can i file my 2012 taxes in 2013    If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. How soon can i file my 2012 taxes in 2013 However, see Exception under Property Used As a Payment, earlier. How soon can i file my 2012 taxes in 2013 Buyer's note. How soon can i file my 2012 taxes in 2013   The buyer's note (unless payable on demand) is not considered payment on the sale. How soon can i file my 2012 taxes in 2013 However, its full face value is included when figuring the selling price and the contract price. How soon can i file my 2012 taxes in 2013 Payments you receive on the note are used to figure your gain in the year received. How soon can i file my 2012 taxes in 2013 Installment Obligation Used as Security (Pledge Rule) If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. How soon can i file my 2012 taxes in 2013 This is known as the pledge rule, and it applies if the selling price of the property is over $150,000. How soon can i file my 2012 taxes in 2013 It does not apply to the following dispositions. How soon can i file my 2012 taxes in 2013 Sales of property used or produced in farming. How soon can i file my 2012 taxes in 2013 Sales of personal-use property. How soon can i file my 2012 taxes in 2013 Qualifying sales of time-shares and residential lots. How soon can i file my 2012 taxes in 2013 The net debt proceeds are the gross debt minus the direct expenses of getting the debt. How soon can i file my 2012 taxes in 2013 The amount treated as a payment is considered received on the later of the following dates. How soon can i file my 2012 taxes in 2013 The date the debt becomes secured. How soon can i file my 2012 taxes in 2013 The date you receive the debt proceeds. How soon can i file my 2012 taxes in 2013 A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. How soon can i file my 2012 taxes in 2013 For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation. How soon can i file my 2012 taxes in 2013 Limit. How soon can i file my 2012 taxes in 2013   The net debt proceeds treated as a payment on the pledged installment obligation cannot be more than the excess of item (1) over item (2), below. How soon can i file my 2012 taxes in 2013 The total contract price on the installment sale. How soon can i file my 2012 taxes in 2013 Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment. How soon can i file my 2012 taxes in 2013 Installment payments. How soon can i file my 2012 taxes in 2013   The pledge rule accelerates the reporting of the installment obligation payments. How soon can i file my 2012 taxes in 2013 Do not report payments received on the obligation after it has been pledged until the payments received exceed the amount reported under the pledge rule. How soon can i file my 2012 taxes in 2013 Exception. How soon can i file my 2012 taxes in 2013   The pledge rule does not apply to pledges made after December 17, 1987, to refinance a debt under the following circumstances. How soon can i file my 2012 taxes in 2013 The debt was outstanding on December 17, 1987. How soon can i file my 2012 taxes in 2013 The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred. How soon can i file my 2012 taxes in 2013   A refinancing as a result of the creditor's calling of the debt is treated as a continuation of the original debt so long as a person other than the creditor or a person related to the creditor provides the refinancing. How soon can i file my 2012 taxes in 2013   This exception applies only to refinancing that does not exceed the principal of the original debt immediately before the refinancing. How soon can i file my 2012 taxes in 2013 Any excess is treated as a payment on the installment obligation. How soon can i file my 2012 taxes in 2013 Escrow Account In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. How soon can i file my 2012 taxes in 2013 These sales cannot be reported on the installment method. How soon can i file my 2012 taxes in 2013 The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. How soon can i file my 2012 taxes in 2013 When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You sell property for $100,000. How soon can i file my 2012 taxes in 2013 The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. How soon can i file my 2012 taxes in 2013 You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. How soon can i file my 2012 taxes in 2013 You report the entire gain in the year of sale. How soon can i file my 2012 taxes in 2013 Escrow established in a later year. How soon can i file my 2012 taxes in 2013   If you make an installment sale and in a later year an irrevocable escrow account is established to pay the remaining installments plus interest, the amount placed in the escrow account represents payment of the balance of the installment obligation. How soon can i file my 2012 taxes in 2013 Substantial restriction. How soon can i file my 2012 taxes in 2013   If an escrow arrangement imposes a substantial restriction on your right to receive the sale proceeds, the sale can be reported on the installment method, provided it otherwise qualifies. How soon can i file my 2012 taxes in 2013 For an escrow arrangement to impose a substantial restriction, it must serve a bona fide purpose of the buyer, that is, a real and definite restriction placed on the seller or a specific economic benefit conferred on the buyer. How soon can i file my 2012 taxes in 2013 Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. How soon can i file my 2012 taxes in 2013 Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. How soon can i file my 2012 taxes in 2013 Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. How soon can i file my 2012 taxes in 2013 The recapture income is also included in Part I of Form 6252. How soon can i file my 2012 taxes in 2013 However, the gain equal to the recapture income is reported in full in the year of the sale. How soon can i file my 2012 taxes in 2013 Only the gain greater than the recapture income is reported on the installment method. How soon can i file my 2012 taxes in 2013 For more information on depreciation recapture, see chapter 3 in Publication 544. How soon can i file my 2012 taxes in 2013 The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. How soon can i file my 2012 taxes in 2013 Determining gross profit is discussed under General Rules , earlier. How soon can i file my 2012 taxes in 2013 Sale to a Related Person If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. How soon can i file my 2012 taxes in 2013 If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. How soon can i file my 2012 taxes in 2013 These rules are explained under Sale of Depreciable Property and under Sale and Later Disposition , later. How soon can i file my 2012 taxes in 2013 Sale of Depreciable Property If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. How soon can i file my 2012 taxes in 2013 Instead, all payments to be received are considered received in the year of sale. How soon can i file my 2012 taxes in 2013 However, see Exception , below. How soon can i file my 2012 taxes in 2013 Depreciable property for this rule is any property the purchaser can depreciate. How soon can i file my 2012 taxes in 2013 Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount. How soon can i file my 2012 taxes in 2013 In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. How soon can i file my 2012 taxes in 2013 The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income. How soon can i file my 2012 taxes in 2013 Exception. How soon can i file my 2012 taxes in 2013   You can use the installment method to report a sale of depreciable property to a related person if no significant tax deferral benefit will be derived from the sale. How soon can i file my 2012 taxes in 2013 You must show to the satisfaction of the IRS that avoidance of federal income tax was not one of the principal purposes of the sale. How soon can i file my 2012 taxes in 2013 Related person. How soon can i file my 2012 taxes in 2013   Related persons include the following. How soon can i file my 2012 taxes in 2013 A person and all controlled entities with respect to that person. How soon can i file my 2012 taxes in 2013 A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless that beneficiary's interest in the trust is a remote contingent interest. How soon can i file my 2012 taxes in 2013 Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of that estate. How soon can i file my 2012 taxes in 2013 Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests. How soon can i file my 2012 taxes in 2013   For information about which entities are controlled entities, see section 1239(c). How soon can i file my 2012 taxes in 2013 Sale and Later Disposition Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances. How soon can i file my 2012 taxes in 2013 The related person makes the second disposition before making all payments on the first disposition. How soon can i file my 2012 taxes in 2013 The related person disposes of the property within 2 years of the first disposition. How soon can i file my 2012 taxes in 2013 This rule does not apply if the property involved is marketable securities. How soon can i file my 2012 taxes in 2013 Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition. How soon can i file my 2012 taxes in 2013 See Exception , later. How soon can i file my 2012 taxes in 2013 Related person. How soon can i file my 2012 taxes in 2013   Related persons include the following. How soon can i file my 2012 taxes in 2013 Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants. How soon can i file my 2012 taxes in 2013 A partnership or estate and a partner or beneficiary. How soon can i file my 2012 taxes in 2013 A trust (other than a section 401(a) employees trust) and a beneficiary. How soon can i file my 2012 taxes in 2013 A trust and an owner of the trust. How soon can i file my 2012 taxes in 2013 Two corporations that are members of the same controlled group as defined in section 267(f). How soon can i file my 2012 taxes in 2013 The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. How soon can i file my 2012 taxes in 2013 A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization. How soon can i file my 2012 taxes in 2013 An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. How soon can i file my 2012 taxes in 2013 A fiduciary of a trust and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. How soon can i file my 2012 taxes in 2013 The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. How soon can i file my 2012 taxes in 2013 Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. How soon can i file my 2012 taxes in 2013 An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation. How soon can i file my 2012 taxes in 2013 A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. How soon can i file my 2012 taxes in 2013 An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest. How soon can i file my 2012 taxes in 2013 Example 1. How soon can i file my 2012 taxes in 2013 In 2012, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. How soon can i file my 2012 taxes in 2013 His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. How soon can i file my 2012 taxes in 2013 His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). How soon can i file my 2012 taxes in 2013 He received $100,000 in 2012 and included $50,000 in income for that year ($100,000 × 0. How soon can i file my 2012 taxes in 2013 50). How soon can i file my 2012 taxes in 2013 Bob made no improvements to the property and sold it to Alfalfa Inc. How soon can i file my 2012 taxes in 2013 , in 2013 for $600,000 after making the payment for that year. How soon can i file my 2012 taxes in 2013 The amount realized from the second disposition is $600,000. How soon can i file my 2012 taxes in 2013 Harvey figures his installment sale income for 2013 as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $500,000 Subtract: Sum of payments from Bob in 2012 and 2013 - 200,000 Amount treated as received because of second disposition $300,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $400,000 Multiply by gross profit % × . How soon can i file my 2012 taxes in 2013 50 Installment sale income for 2013 $200,000 Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2014, 2015, and 2016 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2012 and $400,000 in 2013). How soon can i file my 2012 taxes in 2013 Example 2. How soon can i file my 2012 taxes in 2013 Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. How soon can i file my 2012 taxes in 2013 The gain for 2013 is figured as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $400,000 Subtract: Sum of payments from Bob in 2012 and 2013 − 200,000 Amount treated as received because of second disposition $200,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $300,000 Multiply by gross profit % × . How soon can i file my 2012 taxes in 2013 50 Installment sale income for 2013 $150,000     Harvey receives a $100,000 payment in 2014 and another in 2015. How soon can i file my 2012 taxes in 2013 They are not taxed because he treated the $200,000 from the disposition in 2013 as a payment received and paid tax on the installment sale income. How soon can i file my 2012 taxes in 2013 In 2016, he receives the final $100,000 payment. How soon can i file my 2012 taxes in 2013 He figures the installment sale income he must recognize in 2016 as follows: Total payments from the first disposition received by the end of 2016 $500,000 Minus the sum of:     Payment from 2012 $100,000   Payment from 2013 100,000   Amount treated as received in 2013 200,000   Total on which gain was previously recognized  − 400,000 Payment on which gain is recognized for 2016  $100,000 Multiply by gross profit % × . How soon can i file my 2012 taxes in 2013 50 Installment sale income for 2016 $ 50,000 Exception. How soon can i file my 2012 taxes in 2013   This rule does not apply to a second disposition, and any later transfer, if you can show to the satisfaction of the IRS that neither the first disposition (to the related person) nor the second disposition had as one of its principal purposes the avoidance of federal income tax. How soon can i file my 2012 taxes in 2013 Generally, an involuntary second disposition will qualify under the nontax avoidance exception, such as when a creditor of the related person forecloses on the property or the related person declares bankruptcy. How soon can i file my 2012 taxes in 2013   The nontax avoidance exception also applies to a second disposition that is also an installment sale if the terms of payment under the installment resale are substantially equal to or longer than those for the first installment sale. How soon can i file my 2012 taxes in 2013 However, the exception does not apply if the resale terms permit significant deferral of recognition of gain from the first sale. How soon can i file my 2012 taxes in 2013   In addition, any sale or exchange of stock to the issuing corporation is not treated as a first disposition. How soon can i file my 2012 taxes in 2013 An involuntary conversion is not treated as a second disposition if the first disposition occurred before the threat of conversion. How soon can i file my 2012 taxes in 2013 A transfer after the death of the person making the first disposition or the related person's death, whichever is earlier, is not treated as a second disposition. How soon can i file my 2012 taxes in 2013 Like-Kind Exchange If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. How soon can i file my 2012 taxes in 2013 These trades are known as like-kind exchanges. How soon can i file my 2012 taxes in 2013 The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up. How soon can i file my 2012 taxes in 2013 You do not have to report any part of your gain if you receive only like-kind property. How soon can i file my 2012 taxes in 2013 However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received. How soon can i file my 2012 taxes in 2013 For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544. How soon can i file my 2012 taxes in 2013 Installment payments. How soon can i file my 2012 taxes in 2013   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine the installment sale income each year. How soon can i file my 2012 taxes in 2013 The contract price is reduced by the FMV of the like-kind property received in the trade. How soon can i file my 2012 taxes in 2013 The gross profit is reduced by any gain on the trade that can be postponed. How soon can i file my 2012 taxes in 2013 Like-kind property received in the trade is not considered payment on the installment obligation. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 In 2013, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. How soon can i file my 2012 taxes in 2013 He also receives an installment note for $800,000 in the trade. How soon can i file my 2012 taxes in 2013 Under the terms of the note, he is to receive $100,000 (plus interest) in 2014 and the balance of $700,000 (plus interest) in 2015. How soon can i file my 2012 taxes in 2013 George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). How soon can i file my 2012 taxes in 2013 His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). How soon can i file my 2012 taxes in 2013 The contract price is $800,000 ($1,000,000 − $200,000). How soon can i file my 2012 taxes in 2013 The gross profit percentage is 75% ($600,000 ÷ $800,000). How soon can i file my 2012 taxes in 2013 He reports no gain in 2013 because the like-kind property he receives is not treated as a payment for figuring gain. How soon can i file my 2012 taxes in 2013 He reports $75,000 gain for 2014 (75% of $100,000 payment received) and $525,000 gain for 2015 (75% of $700,000 payment received). How soon can i file my 2012 taxes in 2013 Deferred exchanges. How soon can i file my 2012 taxes in 2013   A deferred exchange is one in which you transfer property you use in business or hold for investment and receive like-kind property later that you will use in business or hold for investment. How soon can i file my 2012 taxes in 2013 Under this type of exchange, the person receiving your property may be required to place funds in an escrow account or trust. How soon can i file my 2012 taxes in 2013 If certain rules are met, these funds will not be considered a payment until you have the right to receive the funds or, if earlier, the end of the exchange period. How soon can i file my 2012 taxes in 2013 See Regulations section 1. How soon can i file my 2012 taxes in 2013 1031(k)-1(j)(2) for these rules. How soon can i file my 2012 taxes in 2013 Contingent Payment Sale A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. How soon can i file my 2012 taxes in 2013 This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years. How soon can i file my 2012 taxes in 2013 If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price. How soon can i file my 2012 taxes in 2013 For rules on using the installment method for a contingent payment sale, see Regulations section 15a. How soon can i file my 2012 taxes in 2013 453-1(c). How soon can i file my 2012 taxes in 2013 Single Sale of Several Assets If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. How soon can i file my 2012 taxes in 2013 You also have to allocate part of the selling price to each asset. How soon can i file my 2012 taxes in 2013 If you sell assets that constitute a trade or business, see Sale of a Business , later. How soon can i file my 2012 taxes in 2013 Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. How soon can i file my 2012 taxes in 2013 If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. How soon can i file my 2012 taxes in 2013 This becomes the net FMV. How soon can i file my 2012 taxes in 2013 A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. How soon can i file my 2012 taxes in 2013 However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. How soon can i file my 2012 taxes in 2013 It must be reported separately. How soon can i file my 2012 taxes in 2013 The remaining assets sold at a gain are reported together. How soon can i file my 2012 taxes in 2013 Example. How soon can i file my 2012 taxes in 2013 You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. How soon can i file my 2012 taxes in 2013 The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year. How soon can i file my 2012 taxes in 2013 Your installment sale basis for each parcel was $15,000. How soon can i file my 2012 taxes in 2013 Your net gain was $85,000 ($130,000 − $45,000). How soon can i file my 2012 taxes in 2013 You report the gain on the installment method. How soon can i file my 2012 taxes in 2013 The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. How soon can i file my 2012 taxes in 2013 The FMV of parcels A, B, and C were $60,000, $60,000, and $10,000, respectively. How soon can i file my 2012 taxes in 2013 The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. How soon can i file my 2012 taxes in 2013 You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels. How soon can i file my 2012 taxes in 2013 Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. How soon can i file my 2012 taxes in 2013 You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. How soon can i file my 2012 taxes in 2013 The allocation is figured as follows:   Parcels   A and B Parcel C FMV $120,000 $10,000 Minus: Mortgage assumed 30,000 -0- Net FMV $ 90,000 $10,000 Proportionate net FMV:     Percentage of total 90% 10% Payments in year of sale:     $20,000 × 90% $18,000   $20,000 × 10%   $2,000 Excess of parcel B mortgage over installment sale basis 15,000 -0- Allocation of payments  received (or considered  received) in year of sale $ 33,000 $ 2,000 You cannot report the sale of parcel C on the installment method because the sale results in a loss. How soon can i file my 2012 taxes in 2013 You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. How soon can i file my 2012 taxes in 2013 However, if parcel C was held for personal use, the loss is not deductible. How soon can i file my 2012 taxes in 2013 You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C). How soon can i file my 2012 taxes in 2013 Sale of a Business The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset. How soon can i file my 2012 taxes in 2013 Allocation of Selling Price To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets. How soon can i file my 2012 taxes in 2013 Assets sold at a loss. How soon can i file my 2012 taxes in 2013 Real and personal property eligible for the installment method. How soon can i file my 2012 taxes in 2013 Real and personal property ineligible for the installment method, including: Inventory, Dealer property, and Stocks and securities. How soon can i file my 2012 taxes in 2013 Inventory. How soon can i file my 2012 taxes in 2013   The sale of inventories of personal property cannot be reported on the installment method. How soon can i file my 2012 taxes in 2013 All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. How soon can i file my 2012 taxes in 2013   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. How soon can i file my 2012 taxes in 2013 If you do not, each payment must be allocated between the inventory and the other assets sold. How soon can i file my 2012 taxes in 2013   Report the amount you receive (or will receive) on the sale of inventory items as ordinary business income. How soon can i file my 2012 taxes in 2013 Use your basis in the inventory to figure the cost of goods sold. How soon can i file my 2012 taxes in 2013 Deduct the part of the selling expenses allocated to inventory as an ordinary business expense. How soon can i file my 2012 taxes in 2013 Residual method. How soon can i file my 2012 taxes in 2013   Except for assets exchanged under the like-kind exchange rules, both the buyer and seller of a business must use the residual method to allocate the sale price to each business asset sold. How soon can i file my 2012 taxes in 2013 This method determines gain or loss from the transfer of each asset and the buyer's basis in the assets. How soon can i file my 2012 taxes in 2013   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. How soon can i file my 2012 taxes in 2013 This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b). How soon can i file my 2012 taxes in 2013   A group of assets constitutes a trade or business if goodwill or going concern value could, under any circumstances, attach to the assets or if the use of the assets would constitute an active trade or business under section 355. How soon can i file my 2012 taxes in 2013   The residual method provides for the consideration to be reduced first by cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). How soon can i file my 2012 taxes in 2013 The consideration remaining after this reduction must be allocated among the various business assets in a certain order. How soon can i file my 2012 taxes in 2013   For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order. How soon can i file my 2012 taxes in 2013 Certificates of deposit, U. How soon can i file my 2012 taxes in 2013 S. How soon can i file my 2012 taxes in 2013 Government securities, foreign currency, and actively traded personal property, including stock and securities. How soon can i file my 2012 taxes in 2013 Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. How soon can i file my 2012 taxes in 2013 However, see Regulations section 1. How soon can i file my 2012 taxes in 2013 338-6(b)(2)(iii) for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. How soon can i file my 2012 taxes in 2013 Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. How soon can i file my 2012 taxes in 2013 All other assets except section 197 intangibles. How soon can i file my 2012 taxes in 2013 Section 197 intangibles except goodwill and going concern value. How soon can i file my 2012 taxes in 2013 Goodwill and going concern value (whether or not they qualify as section 197 intangibles). How soon can i file my 2012 taxes in 2013   If an asset described in (1) through (6) is includible in more than one category, include it in the lower number category. How soon can i file my 2012 taxes in 2013 For example, if an asset is described in both (4) and (6), include it in (4). How soon can i file my 2012 taxes in 2013 Agreement. How soon can i file my 2012 taxes in 2013   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. How soon can i file my 2012 taxes in 2013 This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. How soon can i file my 2012 taxes in 2013 Reporting requirement. How soon can i file my 2012 taxes in 2013   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. How soon can i file my 2012 taxes in 2013 Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. How soon can i file my 2012 taxes in 2013 The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. How soon can i file my 2012 taxes in 2013 Sale of Partnership Interest A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. How soon can i file my 2012 taxes in 2013 The sale of a partnership interest is treated as the sale of a single capital asset. How soon can i file my 2012 taxes in 2013 The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. How soon can i file my 2012 taxes in 2013 (The term “unrealized receivables” includes depreciation recapture income, discussed earlier. How soon can i file my 2012 taxes in 2013 ) The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. How soon can i file my 2012 taxes in 2013 The gain allocated to the other assets can be reported under the installment method. How soon can i file my 2012 taxes in 2013 For more information on the treatment of unrealized receivables and inventory, see Publication 541. How soon can i file my 2012 taxes in 2013 Example — Sale of a Business On June 4, 2013, you sold the machine shop you had operated since 2005. How soon can i file my 2012 taxes in 2013 You received a $100,000 down payment and the buyer's note for $120,000. How soon can i file my 2012 taxes in 2013 The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2014. How soon can i file my 2012 taxes in 2013 The total selling price is $220,000. How soon can i file my 2012 taxes in 2013 Your selling expenses are $11,000. How soon can i file my 2012 taxes in 2013 The selling expenses are divided among all the assets sold, including inventory. How soon can i file my 2012 taxes in 2013 Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price). How soon can i file my 2012 taxes in 2013 The FMV, adjusted basis, and depreciation claimed on each asset sold are as follows:     Depre- ciation Adj. How soon can i file my 2012 taxes in 2013 Asset FMV Claimed Basis Inventory $ 10,000 -0- $ 8,000 Land 42,000 -0- 15,000 Building 48,000 $9,000 36,000 Machine A 71,000 27,200 63,800 Machine B 24,000 12,960 22,040 Truck 6,500 18,624 5,376   $201,500 $67,784 $150,216         Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). How soon can i file my 2012 taxes in 2013 The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill. How soon can i file my 2012 taxes in 2013 The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart. How soon can i file my 2012 taxes in 2013   Sale  Price Sale   Exp. How soon can i file my 2012 taxes in 2013 Adj. How soon can i file my 2012 taxes in 2013   Basis Gain Inventory $ 10,000 $ 500 $ 8,000 $ 1,500 Land 42,000 2,100 15,000 24,900 Building 48,000 2,400 36,000 9,600 Mch. How soon can i file my 2012 taxes in 2013 A 71,000 3,550 63,800 3,650 Mch. How soon can i file my 2012 taxes in 2013 B 24,000 1,200 22,040 760 Truck 6,500 325 5,376 799 Goodwill 18,500 925 -0- 17,575   $220,000 $11,000 $150,216 $58,784 The building was acquired in 2005, the year the business began, and it is section 1250 property. How soon can i file my 2012 taxes in 2013 There is no depreciation recapture income because the building was depreciated using the straight line method. How soon can i file my 2012 taxes in 2013 All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. How soon can i file my 2012 taxes in 2013 Figure depreciation recapture in Part III of Form 4797. How soon can i file my 2012 taxes in 2013 The total depreciation recapture income reported in Part II of Form 4797 is $5,209. How soon can i file my 2012 taxes in 2013 This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). How soon can i file my 2012 taxes in 2013 These gains are reported in full in the year of sale and are not included in the installment sale computation. How soon can i file my 2012 taxes in 2013 Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. How soon can i file my 2012 taxes in 2013 The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale. How soon can i file my 2012 taxes in 2013 The selling price equals the contract price for the installment sale ($108,500). How soon can i file my 2012 taxes in 2013 The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart. How soon can i file my 2012 taxes in 2013   Selling  Price Install- ment  Sale  Basis Gross  Profit Land $ 42,000 $17,100 $24,900 Building 48,000 38,400 9,600 Goodwill 18,500 925 17,575 Total $108,500 $56,425 $52,075         The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). How soon can i file my 2012 taxes in 2013 The gross profit percentage for each asset is figured as follows: Percentage Land— $24,900 ÷ $108,500 22. How soon can i file my 2012 taxes in 2013 95 Building— $9,600 ÷ $108,500 8. How soon can i file my 2012 taxes in 2013 85 Goodwill— $17,575 ÷ $108,500 16. How soon can i file my 2012 taxes in 2013 20 Total 48. How soon can i file my 2012 taxes in 2013 00 The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. How soon can i file my 2012 taxes in 2013 The selling price for the installment sale is $108,500. How soon can i file my 2012 taxes in 2013 This is 49. How soon can i file my 2012 taxes in 2013 3% of the total selling price of $220,000 ($108,500 ÷ $220,000). How soon can i file my 2012 taxes in 2013 The selling price of assets not reported on the installment method is $111,500. How soon can i file my 2012 taxes in 2013 This is 50. How soon can i file my 2012 taxes in 2013 7% ($111,500 ÷ $220,000) of the total selling price. How soon can i file my 2012 taxes in 2013 Multiply principal payments by 49. How soon can i file my 2012 taxes in 2013 3% to determine the part of the payment for the installment sale. How soon can i file my 2012 taxes in 2013 The balance, 50. How soon can i file my 2012 taxes in 2013 7%, is for the part reported in the year of the sale. How soon can i file my 2012 taxes in 2013 The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. How soon can i file my 2012 taxes in 2013 When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. How soon can i file my 2012 taxes in 2013 Only the part for the installment sale (49. How soon can i file my 2012 taxes in 2013 3%) is used in the installment sale computation. How soon can i file my 2012 taxes in 2013 The only payment received in 2013 is the down payment of $100,000. How soon can i file my 2012 taxes in 2013 The part of the payment for the installment sale is $49,300 ($100,000 × 49. How soon can i file my 2012 taxes in 2013 3%). How soon can i file my 2012 taxes in 2013 This amount is used in the installment sale computation. How soon can i file my 2012 taxes in 2013 Installment income for 2013. How soon can i file my 2012 taxes in 2013   Your installment income for each asset is the gross profit percentage for that asset times $49,300, the installment income received in 2013. How soon can i file my 2012 taxes in 2013 Income Land—22. How soon can i file my 2012 taxes in 2013 95% of $49,300 $11,314 Building—8. How soon can i file my 2012 taxes in 2013 85% of $49,300 4,363 Goodwill—16. How soon can i file my 2012 taxes in 2013 2% of $49,300 7,987 Total installment income for 2013 $23,664 Installment income after 2013. How soon can i file my 2012 taxes in 2013   You figure installment income for years after 2013 by applying the same gross profit percentages to 49. How soon can i file my 2012 taxes in 2013 3% of the total payments you receive on the buyer's note during the year. How soon can i file my 2012 taxes in 2013 Unstated Interest and Original Issue Discount (OID) An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. How soon can i file my 2012 taxes in 2013 Interest provided in the contract is called stated interest. How soon can i file my 2012 taxes in 2013 If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. How soon can i file my 2012 taxes in 2013 If section 483 applies to the contract, this interest is called unstated interest. How soon can i file my 2012 taxes in 2013 If section 1274 applies to the contract, this interest is called original issue discount (OID). How soon can i file my 2012 taxes in 2013 An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later). How soon can i file my 2012 taxes in 2013 Treatment of unstated interest and OID. How soon can i file my 2012 taxes in 2013   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. How soon can i file my 2012 taxes in 2013 As a result, the buyer cannot deduct the unstated interest. How soon can i file my 2012 taxes in 2013 The seller must report the unstated interest as income. How soon can i file my 2012 taxes in 2013   Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. How soon can i file my 2012 taxes in 2013   If the debt is subject to the section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan, or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. How soon can i file my 2012 taxes in 2013 Rules for the seller. How soon can i file my 2012 taxes in 2013   If either section 1274 or section 483 applies to the installment sale contract, you must treat part of the installment sale price as interest, even though interest is not called for in the sales agreement. How soon can i file my 2012 taxes in 2013 If either section applies, you must reduce the stated selling price of the property and increase your interest income by this unstated interest. How soon can i file my 2012 taxes in 2013   Include the unstated interest in income based on your regular method of accounting. How soon can i file my 2012 taxes in 2013 Include OID in income over the term of the contract. How soon can i file my 2012 taxes in 2013   The OID includible in income each year is based on the constant yield method described in section 1272. How soon can i file my 2012 taxes in 2013 (In some cases, the OID on an installment sale contract also may include all or part of the stated interest, especially if the stated interest is not paid at least annually. How soon can i file my 2012 taxes in 2013 )   If you do not use the installment method to report the sale, report the entire gain under your method of accounting in the year of sale. How soon can i file my 2012 taxes in 2013 Reduce the selling price by any stated principal treated as interest to determine the gain. How soon can i file my 2012 taxes in 2013   Report unstated interest or OID on your tax return, in addition to stated interest. How soon can i file my 2012 taxes in 2013 Rules for the buyer. How soon can i file my 2012 taxes in 2013   Any part of the stated selling price of an installment sale contract treated by the buyer as interest reduces the buyer's basis in the property and increases the buyer's interest expense. How soon can i file my 2012 taxes in 2013 These rules do not apply to personal-use property (for example, property not used in a trade or business). How soon can i file my 2012 taxes in 2013 Adequate stated interest. How soon can i file my 2012 taxes in 2013   An installment sale contract generally provides for adequate stated interest if the contract's stated principal amount is at least equal to the sum of the present values of all principal and interest payments called for under the contract. How soon can i file my 2012 taxes in 2013 The present value of a payment is determined based on the test rate of interest, defined next. How soon can i file my 2012 taxes in 2013 (If section 483 applies to the contract, payments due within six months after the sale are taken into account at face value. How soon can i file my 2012 taxes in 2013 ) In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the test rate of interest. How soon can i file my 2012 taxes in 2013 Test rate of interest. How soon can i file my 2012 taxes in 2013   The test rate of interest for a contract is the 3-month rate. How soon can i file my 2012 taxes in 2013 The 3-month rate is the lower of the following applicable federal rates (AFRs). How soon can i file my 2012 taxes in 2013 The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the first month in which there is a binding written contract that substantially provides the terms under which the sale or exchange is ultimately completed. How soon can i file my 2012 taxes in 2013 The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the month in which the sale or exchange occurs. How soon can i file my 2012 taxes in 2013 Applicable federal rate (AFR). How soon can i file my 2012 taxes in 2013   The AFR depends on the month the binding