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Income Tax Forms 2011

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Income Tax Forms 2011

Income tax forms 2011 Index A Abandonment of home, Abandonment. Income tax forms 2011 Absence, temporary, Temporary absence. Income tax forms 2011 Abstract fees, Settlement fees or closing costs. Income tax forms 2011 Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. Income tax forms 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Income tax forms 2011 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Income tax forms 2011 Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. Income tax forms 2011 Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. Income tax forms 2011 Architect's fees, Construction. Income tax forms 2011 Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Income tax forms 2011 Assistance (see Tax help) B Back interest, Settlement fees or closing costs. Income tax forms 2011 Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. Income tax forms 2011 Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Income tax forms 2011 C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. Income tax forms 2011 Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. Income tax forms 2011 Commissions, Selling expenses. Income tax forms 2011 , Settlement fees or closing costs. Income tax forms 2011 Community property Basis determination, Community property. Income tax forms 2011 Condemnation Gain exclusion, Home destroyed or condemned. Income tax forms 2011 Ownership and use test when previous home condemned, Previous home destroyed or condemned. Income tax forms 2011 Condominiums As main home, Main Home Basis determination, Condominium. Income tax forms 2011 Construction costs, Construction. Income tax forms 2011 Built by you, Built by you. Income tax forms 2011 Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. Income tax forms 2011 Ownership and use tests, Cooperative apartment. Income tax forms 2011 Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. Income tax forms 2011 D Date of sale, Date of sale. Income tax forms 2011 Death Sale due to, Specific event safe harbors. Income tax forms 2011 Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. Income tax forms 2011 Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. Income tax forms 2011 Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. Income tax forms 2011 Ownership and use test when previous home destroyed, Previous home destroyed or condemned. Income tax forms 2011 Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. Income tax forms 2011 Disasters, Specific event safe harbors. Income tax forms 2011 Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. Income tax forms 2011 Home transferred to spouse, Transfer to spouse. Income tax forms 2011 Ownership and use tests, Home transferred from spouse. Income tax forms 2011 Sale due to, Specific event safe harbors. Income tax forms 2011 Transfers after July 18, 1984, Transfers after July 18, 1984. Income tax forms 2011 Transfers before July 19, 1984, Transfers before July 19, 1984. Income tax forms 2011 Use of home after divorce, Use of home after divorce. Income tax forms 2011 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Income tax forms 2011 E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. Income tax forms 2011 Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. Income tax forms 2011 Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. Income tax forms 2011 F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. Income tax forms 2011 Fire insurance premiums, Settlement fees or closing costs. Income tax forms 2011 Foreclosure, Foreclosure or repossession. Income tax forms 2011 Foreign Service, Foreign Service member. Income tax forms 2011 Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Income tax forms 2011 Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. Income tax forms 2011 Form 1040, Schedule A Real estate taxes, Real estate taxes. Income tax forms 2011 Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. Income tax forms 2011 , Form 1099-S. Income tax forms 2011 , Form 1099-S. Income tax forms 2011 Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. Income tax forms 2011 Form 8828 Recapture tax, How to figure and report the recapture. Income tax forms 2011 Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). Income tax forms 2011 NIIT, Net Investment Income Tax (NIIT). Income tax forms 2011 Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. Income tax forms 2011 Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. Income tax forms 2011 Loss on sale, Loss on sale. Income tax forms 2011 Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Income tax forms 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. Income tax forms 2011 H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. Income tax forms 2011 Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. Income tax forms 2011 Charges for, Settlement fees or closing costs. Income tax forms 2011 Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). Income tax forms 2011 Inheritance Home received as, Home acquired from a decedent who died before or after 2010. Income tax forms 2011 Installment sales, Installment sale. Income tax forms 2011 Involuntary conversion, Specific event safe harbors. Income tax forms 2011 ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). Income tax forms 2011 J Joint owners not married, Joint owners not married. Income tax forms 2011 Joint returns, Jointly owned home. Income tax forms 2011 Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. Income tax forms 2011 Sale of vacant land, Vacant land. Income tax forms 2011 Legal fees, Selling expenses. Income tax forms 2011 , Settlement fees or closing costs. Income tax forms 2011 , Construction. Income tax forms 2011 Legal separation Sale due to, Specific event safe harbors. Income tax forms 2011 Like-kind exchange, Sale of home acquired in a like-kind exchange. Income tax forms 2011 Living expenses, Reasonable basic living expenses. Income tax forms 2011 Loan assumption fees, Settlement fees or closing costs. Income tax forms 2011 Loan placement fees, Selling expenses. Income tax forms 2011 Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. Income tax forms 2011 Property used partly as, Property used partly as your main home. Income tax forms 2011 , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. Income tax forms 2011 Mortgage fees, Settlement fees or closing costs. Income tax forms 2011 Mortgage insurance premiums, Settlement fees or closing costs. Income tax forms 2011 Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. Income tax forms 2011 Moving expense, Settlement fees or closing costs. Income tax forms 2011 Multiple births Sale due to, Specific event safe harbors. Income tax forms 2011 N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. Income tax forms 2011 O Option to buy home, Option to buy. Income tax forms 2011 Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. Income tax forms 2011 P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. Income tax forms 2011 Points, Selling expenses. Income tax forms 2011 Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. Income tax forms 2011 Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. Income tax forms 2011 , Real estate taxes. Income tax forms 2011 Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. Income tax forms 2011 Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. Income tax forms 2011 Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. Income tax forms 2011 Relatives Sale of home to, Exception for sales to related persons. Income tax forms 2011 Remainder interest Sale of, Sale of remainder interest. Income tax forms 2011 Remodeling, Improvements. Income tax forms 2011 , Exception. Income tax forms 2011 (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Income tax forms 2011 Before closing, by buyer, Settlement fees or closing costs. Income tax forms 2011 Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. Income tax forms 2011 , Improvements. Income tax forms 2011 , Repairs. Income tax forms 2011 (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. Income tax forms 2011 Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. Income tax forms 2011 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Income tax forms 2011 Unforeseeable events, Specific event safe harbors. Income tax forms 2011 Sales commissions, Selling expenses. Income tax forms 2011 , Settlement fees or closing costs. Income tax forms 2011 Sales to related persons, Exception for sales to related persons. Income tax forms 2011 Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. Income tax forms 2011 Seller-financed mortgages, Seller-financed mortgage. Income tax forms 2011 Seller-paid points, Seller-paid points. Income tax forms 2011 Selling expenses, Selling expenses. Income tax forms 2011 Selling price, Selling Price Separate returns, Separate returns. Income tax forms 2011 Settlement fees, Settlement fees or closing costs. Income tax forms 2011 Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. Income tax forms 2011 Surviving spouse Basis determination, Surviving spouse. Income tax forms 2011 Ownership and use tests, Sale of main home by surviving spouse. Income tax forms 2011 T Tax help, How To Get Tax Help Temporary absence, Temporary absence. Income tax forms 2011 Temporary housing, Temporary housing. Income tax forms 2011 Title insurance, Settlement fees or closing costs. Income tax forms 2011 Title search fees, Settlement fees or closing costs. Income tax forms 2011 Trading homes, Trading (exchanging) homes. Income tax forms 2011 , Home received as trade. Income tax forms 2011 Transfer taxes, Settlement fees or closing costs. Income tax forms 2011 , Transfer taxes. Income tax forms 2011 Transfer to spouse, Transfer to spouse. Income tax forms 2011 After July 18, 1984, Transfers after July 18, 1984. Income tax forms 2011 Before July 19, 1984, Transfers before July 19, 1984. Income tax forms 2011 TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. Income tax forms 2011 Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. Income tax forms 2011 Utilities Charges for installing, Settlement fees or closing costs. Income tax forms 2011 Charges related to occupancy of house before closing, Settlement fees or closing costs. Income tax forms 2011 Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. Income tax forms 2011 V Vacant land Sale of, Vacant land. Income tax forms 2011 W Worksheets, Worksheets. Income tax forms 2011 Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. Income tax forms 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Income tax forms 2011 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Income tax forms 2011 Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Income tax forms 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Income tax forms 2011 Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. Income tax forms 2011 Reduced Maximum Exclusion Prev  Up     Home   More Online Publications
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The Income Tax Forms 2011

Income tax forms 2011 9. Income tax forms 2011   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. Income tax forms 2011 Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Income tax forms 2011 Amount to report as ordinary income. Income tax forms 2011 Applicable percentage. Income tax forms 2011 Amount to report as ordinary income. Income tax forms 2011 Applicable percentage. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Income tax forms 2011 Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Income tax forms 2011 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. Income tax forms 2011 Table 9-1. Income tax forms 2011 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. Income tax forms 2011 Held 24 mos. Income tax forms 2011  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. Income tax forms 2011 Held 12 mos. Income tax forms 2011   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). Income tax forms 2011 Do not take that gain into account as section 1231 gain. Income tax forms 2011 Section 1231 transactions. Income tax forms 2011   Gain or loss on the following transactions is subject to section 1231 treatment. Income tax forms 2011 Sale or exchange of cattle and horses. Income tax forms 2011 The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Income tax forms 2011 Sale or exchange of other livestock. Income tax forms 2011 This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Income tax forms 2011 Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Income tax forms 2011 Other livestock does not include poultry. Income tax forms 2011 Sale or exchange of depreciable personal property. Income tax forms 2011 This property must be used in your business and held longer than 1 year. Income tax forms 2011 Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Income tax forms 2011 Examples of depreciable personal property include farm machinery and trucks. Income tax forms 2011 It also includes amortizable section 197 intangibles. Income tax forms 2011 Sale or exchange of real estate. Income tax forms 2011 This property must be used in your business and held longer than 1 year. Income tax forms 2011 Examples are your farm or ranch (including barns and sheds). Income tax forms 2011 Sale or exchange of unharvested crops. Income tax forms 2011 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. Income tax forms 2011 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). Income tax forms 2011 Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Income tax forms 2011 Distributive share of partnership gains and losses. Income tax forms 2011 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). Income tax forms 2011 Cutting or disposal of timber. Income tax forms 2011 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 . Income tax forms 2011 Condemnation. Income tax forms 2011 The condemned property (defined in chapter 11) must have been held longer than 1 year. Income tax forms 2011 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. Income tax forms 2011 It cannot be property held for personal use. Income tax forms 2011 Casualty or theft. Income tax forms 2011 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). Income tax forms 2011 You must have held the property longer than 1 year. Income tax forms 2011 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. Income tax forms 2011 Section 1231 does not apply to personal casualty gains and losses. Income tax forms 2011 See chapter 11 for information on how to treat those gains and losses. Income tax forms 2011 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. Income tax forms 2011 See Table 9-1. Income tax forms 2011 Property for sale to customers. Income tax forms 2011   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Income tax forms 2011 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. Income tax forms 2011 Treatment as ordinary or capital. Income tax forms 2011   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Income tax forms 2011 If you have a net section 1231 loss, it is an ordinary loss. Income tax forms 2011 If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Income tax forms 2011 The rest, if any, is long-term capital gain. Income tax forms 2011 Nonrecaptured section 1231 losses. Income tax forms 2011   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. Income tax forms 2011 These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Income tax forms 2011 Example. Income tax forms 2011 In 2013, Ben has a $2,000 net section 1231 gain. Income tax forms 2011 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. Income tax forms 2011 From 2008 through 2012 he had the following section 1231 gains and losses. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 For more information, see chapter 3 of Publication 544. Income tax forms 2011 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. Income tax forms 2011 Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Income tax forms 2011 See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Income tax forms 2011 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. Income tax forms 2011 Personal property (either tangible or intangible). Income tax forms 2011 Other tangible property (except buildings and their structural components) used as any of the following. Income tax forms 2011 See Buildings and structural components below. Income tax forms 2011 An integral part of manufacturing, production, or extraction, or of furnishing certain services. Income tax forms 2011 A research facility in any of the activities in (a). Income tax forms 2011 A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Income tax forms 2011 That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Income tax forms 2011 Amortization of certified pollution control facilities. Income tax forms 2011 The section 179 expense deduction. Income tax forms 2011 Deduction for clean-fuel vehicles and certain refueling property. Income tax forms 2011 Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Income tax forms 2011 Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Income tax forms 2011 Single purpose agricultural (livestock) or horticultural structures. Income tax forms 2011 Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Income tax forms 2011 Buildings and structural components. Income tax forms 2011   Section 1245 property does not include buildings and structural components. Income tax forms 2011 The term building includes a house, barn, warehouse, or garage. Income tax forms 2011 The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Income tax forms 2011   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Income tax forms 2011 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. Income tax forms 2011   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. Income tax forms 2011 Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Income tax forms 2011 Facility for bulk storage of fungible commodities. Income tax forms 2011   This is a facility used mainly for the bulk storage of fungible commodities. Income tax forms 2011 Bulk storage means storage of a commodity in a large mass before it is used. Income tax forms 2011 For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Income tax forms 2011 To be fungible, a commodity must be such that one part may be used in place of another. Income tax forms 2011 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. Income tax forms 2011 The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Income tax forms 2011 The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Income tax forms 2011 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. Income tax forms 2011 For details, see chapter 3 of Publication 544. Income tax forms 2011 Use Part III of Form 4797 to figure the ordinary income part of the gain. Income tax forms 2011 Depreciation claimed on other property or claimed by other taxpayers. Income tax forms 2011   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Income tax forms 2011 Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Income tax forms 2011 For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Income tax forms 2011 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). Income tax forms 2011 Example. Income tax forms 2011 Jeff Free paid $120,000 for a tractor in 2012. Income tax forms 2011 On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Income tax forms 2011 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. Income tax forms 2011 Jeff can also depreciate the additional $30,000 for the chopper. Income tax forms 2011 Depreciation and amortization. Income tax forms 2011   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Income tax forms 2011 See Depreciation Recapture in chapter 3 of Publication 544 for more details. Income tax forms 2011 Ordinary depreciation deductions. Income tax forms 2011 Section 179 deduction (see chapter 7). Income tax forms 2011 Any special depreciation allowance. Income tax forms 2011 Amortization deductions for all the following costs. Income tax forms 2011 Acquiring a lease. Income tax forms 2011 Lessee improvements. Income tax forms 2011 Pollution control facilities. Income tax forms 2011 Reforestation expenses. Income tax forms 2011 Section 197 intangibles. Income tax forms 2011 Qualified disaster expenses. Income tax forms 2011 Franchises, trademarks, and trade names acquired before August 11, 1993. Income tax forms 2011 Example. Income tax forms 2011 You file your returns on a calendar year basis. Income tax forms 2011 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. Income tax forms 2011 You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Income tax forms 2011 You did not claim the section 179 expense deduction for the truck. Income tax forms 2011 You sold it in May 2013 for $7,000. Income tax forms 2011 The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Income tax forms 2011 Figure the gain treated as ordinary income as follows. Income tax forms 2011 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. Income tax forms 2011   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Income tax forms 2011 Disposition of plants and animals. Income tax forms 2011   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Income tax forms 2011 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. Income tax forms 2011 For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Income tax forms 2011 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. Income tax forms 2011 You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Income tax forms 2011 Example. Income tax forms 2011 Janet Maple sold her apple orchard in 2013 for $80,000. Income tax forms 2011 Her adjusted basis at the time of sale was $60,000. Income tax forms 2011 She bought the orchard in 2006, but the trees did not produce a crop until 2009. Income tax forms 2011 Her pre-productive expenses were $6,000. Income tax forms 2011 She elected not to use the uniform capitalization rules. Income tax forms 2011 Janet must treat $6,000 of the gain as ordinary income. Income tax forms 2011 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. Income tax forms 2011 It includes buildings and structural components that are not section 1245 property (discussed earlier). Income tax forms 2011 It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Income tax forms 2011 A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Income tax forms 2011 Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Income tax forms 2011 To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Income tax forms 2011 You will not have additional depreciation if any of the following apply to the property disposed of. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 These properties are depreciated using the straight line method. Income tax forms 2011 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. Income tax forms 2011 This applies even if no payments are received in that year. Income tax forms 2011 If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Income tax forms 2011 For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Income tax forms 2011 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. Income tax forms 2011 To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Income tax forms 2011 Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Income tax forms 2011 For more information on installment sales, see chapter 10. Income tax forms 2011 Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Income tax forms 2011 By gift. Income tax forms 2011 At death. Income tax forms 2011 In like-kind exchanges. Income tax forms 2011 In involuntary conversions. Income tax forms 2011 Publication 544 also explains how to handle a single transaction involving multiple properties. Income tax forms 2011 Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Income tax forms 2011 Deductions for soil and water conservation expenditures (section 1252 property). Income tax forms 2011 Exclusions from income for certain cost sharing payments (section 1255 property). Income tax forms 2011 Section 1252 property. Income tax forms 2011   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. Income tax forms 2011 Exceptions. Income tax forms 2011   Do not treat gain on the following transactions as gain on section 1252 property. Income tax forms 2011 Disposition of farmland by gift. Income tax forms 2011 Transfer of farm property at death (except for income in respect of a decedent). Income tax forms 2011 For more information, see Regulations section 1. Income tax forms 2011 1252-2. Income tax forms 2011 Amount to report as ordinary income. Income tax forms 2011   You report as ordinary income the lesser of the following amounts. Income tax forms 2011 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). Income tax forms 2011 The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Income tax forms 2011 Applicable percentage. Income tax forms 2011   The applicable percentage is based on the length of time you held the land. Income tax forms 2011 If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Income tax forms 2011 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. Income tax forms 2011 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. Income tax forms 2011 Example. Income tax forms 2011 You acquired farmland on January 19, 2005. Income tax forms 2011 On October 3, 2013, you sold the land at a $30,000 gain. Income tax forms 2011 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. Income tax forms 2011 The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Income tax forms 2011 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. Income tax forms 2011 Section 1255 property. Income tax forms 2011   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. Income tax forms 2011 If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Income tax forms 2011 Amount to report as ordinary income. Income tax forms 2011   You report as ordinary income the lesser of the following amounts. Income tax forms 2011 The applicable percentage of the total excluded cost-sharing payments. Income tax forms 2011 The gain on the disposition of the property. Income tax forms 2011 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. Income tax forms 2011 However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Income tax forms 2011 Applicable percentage. Income tax forms 2011   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. Income tax forms 2011 If the property is held less than 10 years after you receive the payments, the percentage is 100%. Income tax forms 2011 After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Income tax forms 2011 Form 4797, Part III. Income tax forms 2011   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. Income tax forms 2011 Prev  Up  Next   Home   More Online Publications