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Irs Amended Tax Form 1040x

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Irs Amended Tax Form 1040x

Irs amended tax form 1040x 21. Irs amended tax form 1040x   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Irs amended tax form 1040x How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. Irs amended tax form 1040x  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. Irs amended tax form 1040x 5% if either you or your spouse is age 65 or older). Irs amended tax form 1040x Standard mileage rate. Irs amended tax form 1040x  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. Irs amended tax form 1040x See Transportation under What Medical Expenses Are Includible. Irs amended tax form 1040x Introduction This chapter will help you determine the following. Irs amended tax form 1040x What medical expenses are. Irs amended tax form 1040x What expenses you can include this year. Irs amended tax form 1040x How much of the expenses you can deduct. Irs amended tax form 1040x Whose medical expenses you can include. Irs amended tax form 1040x What medical expenses are includible. Irs amended tax form 1040x How to treat reimbursements. Irs amended tax form 1040x How to report the deduction on your tax return. Irs amended tax form 1040x How to report impairment-related work expenses. Irs amended tax form 1040x How to report health insurance costs if you are self-employed. Irs amended tax form 1040x Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Irs amended tax form 1040x These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Irs amended tax form 1040x They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Irs amended tax form 1040x Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Irs amended tax form 1040x They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Irs amended tax form 1040x Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Irs amended tax form 1040x Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Irs amended tax form 1040x What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Irs amended tax form 1040x If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Irs amended tax form 1040x If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Irs amended tax form 1040x If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Irs amended tax form 1040x Separate returns. Irs amended tax form 1040x   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Irs amended tax form 1040x Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Irs amended tax form 1040x Community property states. Irs amended tax form 1040x   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Irs amended tax form 1040x Each of you should include half the expenses. Irs amended tax form 1040x If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Irs amended tax form 1040x If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. Irs amended tax form 1040x How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Irs amended tax form 1040x 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). Irs amended tax form 1040x Example. Irs amended tax form 1040x You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. Irs amended tax form 1040x You paid medical expenses of $2,500. Irs amended tax form 1040x You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Irs amended tax form 1040x Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Irs amended tax form 1040x There are different rules for decedents and for individuals who are the subject of multiple support agreements. Irs amended tax form 1040x See Support claimed under a multiple support agreement , later. Irs amended tax form 1040x Yourself You can include medical expenses you paid for yourself. Irs amended tax form 1040x Spouse You can include medical expenses you paid for your spouse. Irs amended tax form 1040x To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Irs amended tax form 1040x Example 1. Irs amended tax form 1040x Mary received medical treatment before she married Bill. Irs amended tax form 1040x Bill paid for the treatment after they married. Irs amended tax form 1040x Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Irs amended tax form 1040x If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Irs amended tax form 1040x Mary would include the amounts she paid during the year in her separate return. Irs amended tax form 1040x If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Irs amended tax form 1040x Example 2. Irs amended tax form 1040x This year, John paid medical expenses for his wife Louise, who died last year. Irs amended tax form 1040x John married Belle this year and they file a joint return. Irs amended tax form 1040x Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Irs amended tax form 1040x Dependent You can include medical expenses you paid for your dependent. Irs amended tax form 1040x For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Irs amended tax form 1040x A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Irs amended tax form 1040x The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Irs amended tax form 1040x S. Irs amended tax form 1040x citizen or national, or a resident of the United States, Canada, or Mexico. Irs amended tax form 1040x If your qualifying child was adopted, see Exception for adopted child , next. Irs amended tax form 1040x You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Irs amended tax form 1040x Exception for adopted child. Irs amended tax form 1040x   If you are a U. Irs amended tax form 1040x S. Irs amended tax form 1040x citizen or U. Irs amended tax form 1040x S. Irs amended tax form 1040x national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Irs amended tax form 1040x S. Irs amended tax form 1040x citizen or national or a resident of the United States, Canada, or Mexico. Irs amended tax form 1040x Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. Irs amended tax form 1040x Adopted child. Irs amended tax form 1040x   A legally adopted child is treated as your own child. Irs amended tax form 1040x This includes a child lawfully placed with you for legal adoption. Irs amended tax form 1040x   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Irs amended tax form 1040x   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Irs amended tax form 1040x   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Irs amended tax form 1040x    You may be able to take an adoption credit for other expenses related to an adoption. Irs amended tax form 1040x See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Irs amended tax form 1040x Child of divorced or separated parents. Irs amended tax form 1040x   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Irs amended tax form 1040x Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Irs amended tax form 1040x This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Irs amended tax form 1040x Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. Irs amended tax form 1040x But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. Irs amended tax form 1040x Support claimed under a multiple support agreement. Irs amended tax form 1040x   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Irs amended tax form 1040x A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Irs amended tax form 1040x   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Irs amended tax form 1040x However, you can include the entire unreimbursed amount you paid for medical expenses. Irs amended tax form 1040x Example. Irs amended tax form 1040x You and your three brothers each provide one-fourth of your mother's total support. Irs amended tax form 1040x Under a multiple support agreement, you treat your mother as your dependent. Irs amended tax form 1040x You paid all of her medical expenses. Irs amended tax form 1040x Your brothers reimbursed you for three-fourths of these expenses. Irs amended tax form 1040x In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Irs amended tax form 1040x Your brothers cannot include any part of the expenses. Irs amended tax form 1040x However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Irs amended tax form 1040x Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Irs amended tax form 1040x This includes expenses for the decedent's spouse and dependents as well as for the decedent. Irs amended tax form 1040x The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Irs amended tax form 1040x The expenses must be paid within the 1-year period beginning with the day after the date of death. Irs amended tax form 1040x If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Irs amended tax form 1040x Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Irs amended tax form 1040x Amended returns and claims for refund are discussed in chapter 1. Irs amended tax form 1040x What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Irs amended tax form 1040x The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Irs amended tax form 1040x What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). Irs amended tax form 1040x This table does not include all possible medical expenses. Irs amended tax form 1040x To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Irs amended tax form 1040x Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Irs amended tax form 1040x Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Irs amended tax form 1040x See Qualified Long-Term Care Insurance Contracts in Publication 502. Irs amended tax form 1040x If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Irs amended tax form 1040x The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Irs amended tax form 1040x Note. Irs amended tax form 1040x When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Irs amended tax form 1040x Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. Irs amended tax form 1040x Employer-sponsored health insurance plan. Irs amended tax form 1040x   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. Irs amended tax form 1040x Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. Irs amended tax form 1040x Example. Irs amended tax form 1040x You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Irs amended tax form 1040x Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Irs amended tax form 1040x Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Irs amended tax form 1040x Long-term care services. Irs amended tax form 1040x   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Irs amended tax form 1040x This amount will be reported as wages in box 1 of your Form W-2. Irs amended tax form 1040x Health reimbursement arrangement (HRA). Irs amended tax form 1040x   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Irs amended tax form 1040x This is because an HRA is funded solely by the employer. Irs amended tax form 1040x Retired public safety officers. Irs amended tax form 1040x   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. Irs amended tax form 1040x This applies only to distributions that would otherwise be included in income. Irs amended tax form 1040x Medicare A. Irs amended tax form 1040x   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Irs amended tax form 1040x The payroll tax paid for Medicare A is not a medical expense. Irs amended tax form 1040x   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Irs amended tax form 1040x In this situation you can include the premiums you paid for Medicare A as a medical expense. Irs amended tax form 1040x Medicare B. Irs amended tax form 1040x   Medicare B is supplemental medical insurance. Irs amended tax form 1040x Premiums you pay for Medicare B are a medical expense. Irs amended tax form 1040x Check the information you received from the Social Security Administration to find out your premium. Irs amended tax form 1040x Medicare D. Irs amended tax form 1040x    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Irs amended tax form 1040x You can include as a medical expense premiums you pay for Medicare D. Irs amended tax form 1040x Prepaid insurance premiums. Irs amended tax form 1040x   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Irs amended tax form 1040x Unused sick leave used to pay premiums. Irs amended tax form 1040x   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Irs amended tax form 1040x You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Irs amended tax form 1040x You can include this cost of continuing participation in the health plan as a medical expense. Irs amended tax form 1040x   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Irs amended tax form 1040x You cannot include this cost of continuing participation in that health plan as a medical expense. Irs amended tax form 1040x Table 21-1. Irs amended tax form 1040x Medical and Dental Expenses Checklist. Irs amended tax form 1040x See Publication 502 for more information about these and other expenses. Irs amended tax form 1040x You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Irs amended tax form 1040x ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. Irs amended tax form 1040x ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Irs amended tax form 1040x Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Irs amended tax form 1040x , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. Irs amended tax form 1040x Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. Irs amended tax form 1040x See Nursing home , later. Irs amended tax form 1040x You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Irs amended tax form 1040x You can include the cost of such lodging while away from home if all of the following requirements are met. Irs amended tax form 1040x The lodging is primarily for and essential to medical care. Irs amended tax form 1040x The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Irs amended tax form 1040x The lodging is not lavish or extravagant under the circumstances. Irs amended tax form 1040x There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Irs amended tax form 1040x The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Irs amended tax form 1040x You can include lodging for a person traveling with the person receiving the medical care. Irs amended tax form 1040x For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Irs amended tax form 1040x Meals are not included. Irs amended tax form 1040x Nursing home. Irs amended tax form 1040x   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Irs amended tax form 1040x This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Irs amended tax form 1040x   Do not include the cost of meals and lodging if the reason for being in the home is personal. Irs amended tax form 1040x You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Irs amended tax form 1040x Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Irs amended tax form 1040x You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Irs amended tax form 1040x Car expenses. Irs amended tax form 1040x   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. Irs amended tax form 1040x You cannot include depreciation, insurance, general repair, or maintenance expenses. Irs amended tax form 1040x   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. Irs amended tax form 1040x    You can also include parking fees and tolls. Irs amended tax form 1040x You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Irs amended tax form 1040x Example. Irs amended tax form 1040x In 2013, Bill Jones drove 2,800 miles for medical reasons. Irs amended tax form 1040x He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Irs amended tax form 1040x He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Irs amended tax form 1040x He figures the actual expenses first. Irs amended tax form 1040x He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Irs amended tax form 1040x He then figures the standard mileage amount. Irs amended tax form 1040x He multiplies 2,800 miles by 24 cents a mile for a total of $672. Irs amended tax form 1040x He then adds the $100 tolls and parking for a total of $772. Irs amended tax form 1040x Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Irs amended tax form 1040x Transportation expenses you cannot include. Irs amended tax form 1040x   You cannot include in medical expenses the cost of transportation in the following situations. Irs amended tax form 1040x Going to and from work, even if your condition requires an unusual means of transportation. Irs amended tax form 1040x Travel for purely personal reasons to another city for an operation or other medical care. Irs amended tax form 1040x Travel that is merely for the general improvement of one's health. Irs amended tax form 1040x The costs of operating a specially equipped car for other than medical reasons. Irs amended tax form 1040x Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Irs amended tax form 1040x (See chapter 32 and Publication 503, Child and Dependent Care Expenses. Irs amended tax form 1040x ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Irs amended tax form 1040x How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. Irs amended tax form 1040x Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Irs amended tax form 1040x This includes payments from Medicare. Irs amended tax form 1040x Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Irs amended tax form 1040x Example. Irs amended tax form 1040x You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Irs amended tax form 1040x The insurance you receive for the hospital and doctors' bills is more than their charges. Irs amended tax form 1040x In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Irs amended tax form 1040x Health reimbursement arrangement (HRA). Irs amended tax form 1040x   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. Irs amended tax form 1040x An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. Irs amended tax form 1040x Other reimbursements. Irs amended tax form 1040x   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. Irs amended tax form 1040x ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. Irs amended tax form 1040x   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. Irs amended tax form 1040x See How Do You Figure and Report the Deduction on Your Tax Return , later. Irs amended tax form 1040x   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. Irs amended tax form 1040x You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. Irs amended tax form 1040x Excess reimbursement. Irs amended tax form 1040x   If you are reimbursed more than your medical expenses, you may have to include the excess in income. Irs amended tax form 1040x You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. Irs amended tax form 1040x Premiums paid by you. Irs amended tax form 1040x   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. Irs amended tax form 1040x Generally, you do not include the excess reimbursement in your gross income. Irs amended tax form 1040x Premiums paid by you and your employer. Irs amended tax form 1040x   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. Irs amended tax form 1040x   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. Irs amended tax form 1040x Reimbursement in a later year. Irs amended tax form 1040x   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. Irs amended tax form 1040x   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. Irs amended tax form 1040x For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. Irs amended tax form 1040x Figure 21-A. Irs amended tax form 1040x Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. Irs amended tax form 1040x Figure 21-A. Irs amended tax form 1040x Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. Irs amended tax form 1040x   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. Irs amended tax form 1040x 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. Irs amended tax form 1040x However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. Irs amended tax form 1040x Example. Irs amended tax form 1040x For 2013, you were unmarried and under age 65 and you had medical expenses of $500. Irs amended tax form 1040x You cannot deduct the $500 because it is less than 10% of your AGI. Irs amended tax form 1040x If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. Irs amended tax form 1040x Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. Irs amended tax form 1040x If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. Irs amended tax form 1040x See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. Irs amended tax form 1040x Future medical expenses. Irs amended tax form 1040x   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. Irs amended tax form 1040x If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. Irs amended tax form 1040x How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. Irs amended tax form 1040x What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). Irs amended tax form 1040x You cannot claim medical expenses on Form 1040A or Form 1040EZ. Irs amended tax form 1040x If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. Irs amended tax form 1040x Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). Irs amended tax form 1040x This should be your expenses that were not reimbursed by insurance or any other sources. Irs amended tax form 1040x Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Irs amended tax form 1040x 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. Irs amended tax form 1040x Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. Irs amended tax form 1040x If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. Irs amended tax form 1040x You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Irs amended tax form 1040x Impairment-related expenses defined. Irs amended tax form 1040x   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Irs amended tax form 1040x Where to report. Irs amended tax form 1040x   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Irs amended tax form 1040x   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Irs amended tax form 1040x Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. Irs amended tax form 1040x Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). Irs amended tax form 1040x Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. Irs amended tax form 1040x Example. Irs amended tax form 1040x You are blind. Irs amended tax form 1040x You must use a reader to do your work. Irs amended tax form 1040x You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Irs amended tax form 1040x The reader's services are only for your work. Irs amended tax form 1040x You can deduct your expenses for the reader as business expenses. Irs amended tax form 1040x Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. Irs amended tax form 1040x For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. Irs amended tax form 1040x The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. Irs amended tax form 1040x You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. Irs amended tax form 1040x You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. Irs amended tax form 1040x If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. Irs amended tax form 1040x But if any of the following applies, do not use that worksheet. Irs amended tax form 1040x You had more than one source of income subject to self-employment tax. Irs amended tax form 1040x You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Irs amended tax form 1040x You are using amounts paid for qualified long-term care insurance to figure the deduction. Irs amended tax form 1040x If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. Irs amended tax form 1040x Note. Irs amended tax form 1040x When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Irs amended tax form 1040x If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. Irs amended tax form 1040x Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. Irs amended tax form 1040x Where to report. Irs amended tax form 1040x    You take this deduction on Form 1040. Irs amended tax form 1040x If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. Irs amended tax form 1040x 5% if either you or your spouse was age 65 or older). Irs amended tax form 1040x See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. Irs amended tax form 1040x Prev  Up  Next   Home   More Online Publications
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The Irs Amended Tax Form 1040x

Irs amended tax form 1040x Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. Irs amended tax form 1040x Employee-owners. Irs amended tax form 1040x Other rules. Irs amended tax form 1040x Other rules. Irs amended tax form 1040x Property Exchanged for StockNonqualified preferred stock. Irs amended tax form 1040x Liabilities. Irs amended tax form 1040x Election to reduce basis. Irs amended tax form 1040x Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. Irs amended tax form 1040x S. Irs amended tax form 1040x Real Property Interest Accounting MethodsSection 481(a) adjustment. Irs amended tax form 1040x Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. Irs amended tax form 1040x Business formed before 1997. Irs amended tax form 1040x   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. Irs amended tax form 1040x Business formed after 1996. Irs amended tax form 1040x   The following businesses formed after 1996 are taxed as corporations. Irs amended tax form 1040x A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. Irs amended tax form 1040x A business formed under a state law that refers to it as a joint-stock company or joint-stock association. Irs amended tax form 1040x An insurance company. Irs amended tax form 1040x Certain banks. Irs amended tax form 1040x A business wholly owned by a state or local government. Irs amended tax form 1040x A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Irs amended tax form 1040x Certain foreign businesses. Irs amended tax form 1040x Any other business that elects to be taxed as a corporation. Irs amended tax form 1040x For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. Irs amended tax form 1040x For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. Irs amended tax form 1040x S corporations. Irs amended tax form 1040x   Some corporations may meet the qualifications for electing to be S corporations. Irs amended tax form 1040x For information on S corporations, see the instructions for Form 1120S, U. Irs amended tax form 1040x S. Irs amended tax form 1040x Income Tax Return for an S Corporation. Irs amended tax form 1040x Personal service corporations. Irs amended tax form 1040x   A corporation is a personal service corporation if it meets all of the following requirements. Irs amended tax form 1040x Its principal activity during the “testing period” is performing personal services (defined later). Irs amended tax form 1040x Generally, the testing period for any tax year is the prior tax year. Irs amended tax form 1040x If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. Irs amended tax form 1040x Its employee-owners substantially perform the services in (1), above. Irs amended tax form 1040x This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. Irs amended tax form 1040x Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. Irs amended tax form 1040x Personal services. Irs amended tax form 1040x   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. Irs amended tax form 1040x Employee-owners. Irs amended tax form 1040x   A person is an employee-owner of a personal service corporation if both of the following apply. Irs amended tax form 1040x He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. Irs amended tax form 1040x He or she owns any stock in the corporation at any time during the testing period. Irs amended tax form 1040x Other rules. Irs amended tax form 1040x   For other rules that apply to personal service corporations see Accounting Periods, later. Irs amended tax form 1040x Closely held corporations. Irs amended tax form 1040x   A corporation is closely held if all of the following apply. Irs amended tax form 1040x It is not a personal service corporation. Irs amended tax form 1040x At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. Irs amended tax form 1040x “Individual” includes certain trusts and private foundations. Irs amended tax form 1040x Other rules. Irs amended tax form 1040x   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. Irs amended tax form 1040x Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. Irs amended tax form 1040x This rule applies both to individuals and to groups who transfer property to a corporation. Irs amended tax form 1040x It also applies whether the corporation is being formed or is already operating. Irs amended tax form 1040x It does not apply in the following situations. Irs amended tax form 1040x The corporation is an investment company. Irs amended tax form 1040x You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. Irs amended tax form 1040x The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. Irs amended tax form 1040x Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. Irs amended tax form 1040x For more information, see section 1. Irs amended tax form 1040x 351-3 of the Regulations. Irs amended tax form 1040x Control of a corporation. Irs amended tax form 1040x   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. Irs amended tax form 1040x Example 1. Irs amended tax form 1040x You and Bill Jones buy property for $100,000. Irs amended tax form 1040x You both organize a corporation when the property has a fair market value of $300,000. Irs amended tax form 1040x You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. Irs amended tax form 1040x No gain is recognized by you, Bill, or the corporation. Irs amended tax form 1040x Example 2. Irs amended tax form 1040x You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. Irs amended tax form 1040x This represents only 75% of each class of stock of the corporation. Irs amended tax form 1040x The other 25% was already issued to someone else. Irs amended tax form 1040x You and Bill recognize a taxable gain of $200,000 on the transaction. Irs amended tax form 1040x Services rendered. Irs amended tax form 1040x   The term property does not include services rendered or to be rendered to the issuing corporation. Irs amended tax form 1040x The value of stock received for services is income to the recipient. Irs amended tax form 1040x Example. Irs amended tax form 1040x You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Irs amended tax form 1040x Right after the exchange, you own 85% of the outstanding stock. Irs amended tax form 1040x No gain is recognized on the exchange of property. Irs amended tax form 1040x However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. Irs amended tax form 1040x Property of relatively small value. Irs amended tax form 1040x   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Irs amended tax form 1040x   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. Irs amended tax form 1040x Stock received in disproportion to property transferred. Irs amended tax form 1040x   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. Irs amended tax form 1040x If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. Irs amended tax form 1040x It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. Irs amended tax form 1040x Money or other property received. Irs amended tax form 1040x   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. Irs amended tax form 1040x You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Irs amended tax form 1040x The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. Irs amended tax form 1040x If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. Irs amended tax form 1040x See chapter 3 of Publication 544. Irs amended tax form 1040x No loss is recognized. Irs amended tax form 1040x Nonqualified preferred stock. Irs amended tax form 1040x   Nonqualified preferred stock is treated as property other than stock. Irs amended tax form 1040x Generally, it is preferred stock with any of the following features. Irs amended tax form 1040x The holder has the right to require the issuer or a related person to redeem or buy the stock. Irs amended tax form 1040x The issuer or a related person is required to redeem or buy the stock. Irs amended tax form 1040x The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. Irs amended tax form 1040x The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. Irs amended tax form 1040x For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. Irs amended tax form 1040x Liabilities. Irs amended tax form 1040x   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. Irs amended tax form 1040x There are two exceptions to this treatment. Irs amended tax form 1040x If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. Irs amended tax form 1040x However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. Irs amended tax form 1040x If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. Irs amended tax form 1040x For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. Irs amended tax form 1040x Example. Irs amended tax form 1040x You transfer property to a corporation for stock. Irs amended tax form 1040x Immediately after the transfer, you control the corporation. Irs amended tax form 1040x You also receive $10,000 in the exchange. Irs amended tax form 1040x Your adjusted basis in the transferred property is $20,000. Irs amended tax form 1040x The stock you receive has a fair market value (FMV) of $16,000. Irs amended tax form 1040x The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. Irs amended tax form 1040x Gain is realized as follows. Irs amended tax form 1040x FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. Irs amended tax form 1040x The recognized gain is limited to $10,000, the cash received. Irs amended tax form 1040x Loss on exchange. Irs amended tax form 1040x   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. Irs amended tax form 1040x For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Irs amended tax form 1040x Basis of stock or other property received. Irs amended tax form 1040x   The basis of the stock you receive is generally the adjusted basis of the property you transfer. Irs amended tax form 1040x Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. Irs amended tax form 1040x Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. Irs amended tax form 1040x Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. Irs amended tax form 1040x    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. Irs amended tax form 1040x This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. Irs amended tax form 1040x The basis of any other property you receive is its fair market value on the date of the trade. Irs amended tax form 1040x Basis of property transferred. Irs amended tax form 1040x   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. Irs amended tax form 1040x However, the increase for the gain recognized may be limited. Irs amended tax form 1040x For more information, see section 362 of the Internal Revenue Code. Irs amended tax form 1040x Election to reduce basis. Irs amended tax form 1040x   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. Irs amended tax form 1040x The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. Irs amended tax form 1040x However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. Irs amended tax form 1040x R. Irs amended tax form 1040x B. Irs amended tax form 1040x 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. Irs amended tax form 1040x    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. Irs amended tax form 1040x Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. Irs amended tax form 1040x Paid-in capital. Irs amended tax form 1040x   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. Irs amended tax form 1040x These contributions are not taxable to the corporation. Irs amended tax form 1040x Basis. Irs amended tax form 1040x   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. Irs amended tax form 1040x However, the increase for the gain recognized may be limited. Irs amended tax form 1040x For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. Irs amended tax form 1040x   The basis of property contributed to capital by a person other than a shareholder is zero. Irs amended tax form 1040x   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. Irs amended tax form 1040x If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. Irs amended tax form 1040x Depreciable property. Irs amended tax form 1040x Amortizable property. Irs amended tax form 1040x Property subject to cost depletion but not to percentage depletion. Irs amended tax form 1040x All other remaining properties. Irs amended tax form 1040x   Reduce the basis of property in each category to zero before going on to the next category. Irs amended tax form 1040x   There may be more than one piece of property in each category. Irs amended tax form 1040x Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. Irs amended tax form 1040x The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. Irs amended tax form 1040x Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. Irs amended tax form 1040x A corporation generally must make estimated tax payments as it earns or receives income during its tax year. Irs amended tax form 1040x After the end of the year, the corporation must file an income tax return. Irs amended tax form 1040x This section will help you determine when and how to pay and file corporate income taxes. Irs amended tax form 1040x For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. Irs amended tax form 1040x The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. Irs amended tax form 1040x For more information, visit www. Irs amended tax form 1040x irs. Irs amended tax form 1040x gov/newsroom/article/0,,id=108362. Irs amended tax form 1040x 00. Irs amended tax form 1040x Income Tax Return This section will help you determine when and how to report a corporation's income tax. Irs amended tax form 1040x Who must file. Irs amended tax form 1040x   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Irs amended tax form 1040x Which form to file. Irs amended tax form 1040x   A corporation generally must file Form 1120, U. Irs amended tax form 1040x S. Irs amended tax form 1040x Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. Irs amended tax form 1040x Certain organizations and entities must file special returns. Irs amended tax form 1040x For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. Irs amended tax form 1040x Electronic filing. Irs amended tax form 1040x   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. Irs amended tax form 1040x Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. Irs amended tax form 1040x However, in certain instances, these corporations can request a waiver. Irs amended tax form 1040x For more information regarding electronic filing, visit www. Irs amended tax form 1040x irs. Irs amended tax form 1040x gov/efile. Irs amended tax form 1040x When to file. Irs amended tax form 1040x   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. Irs amended tax form 1040x A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. Irs amended tax form 1040x A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. Irs amended tax form 1040x Example 1. Irs amended tax form 1040x A corporation's tax year ends December 31. Irs amended tax form 1040x It must file its income tax return by March 15th. Irs amended tax form 1040x Example 2. Irs amended tax form 1040x A corporation's tax year ends June 30. Irs amended tax form 1040x It must file its income tax return by September 15th. Irs amended tax form 1040x   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. Irs amended tax form 1040x Extension of time to file. Irs amended tax form 1040x   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. Irs amended tax form 1040x The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. Irs amended tax form 1040x   Form 7004 does not extend the time for paying the tax due on the return. Irs amended tax form 1040x Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. Irs amended tax form 1040x The interest is figured from the original due date of the return to the date of payment. Irs amended tax form 1040x   For more information, see the instructions for Form 7004. Irs amended tax form 1040x How to pay your taxes. Irs amended tax form 1040x   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. Irs amended tax form 1040x Electronic Federal Tax Payment System (EFTPS). Irs amended tax form 1040x   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). Irs amended tax form 1040x For more information on EFTPS and enrollment, visit www. Irs amended tax form 1040x eftps. Irs amended tax form 1040x gov or call 1-800-555-4477. Irs amended tax form 1040x Also see Publication 966, The Secure Way to Pay Your Federal Taxes. Irs amended tax form 1040x Note. Irs amended tax form 1040x Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. Irs amended tax form 1040x Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Irs amended tax form 1040x Do not attach an explanation when the corporation's return is filed. Irs amended tax form 1040x See the instructions for your income tax return. Irs amended tax form 1040x Late filing of return. Irs amended tax form 1040x    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. Irs amended tax form 1040x If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. Irs amended tax form 1040x The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. Irs amended tax form 1040x The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. Irs amended tax form 1040x Late payment of tax. Irs amended tax form 1040x    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Irs amended tax form 1040x The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. Irs amended tax form 1040x Trust fund recovery penalty. Irs amended tax form 1040x   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Irs amended tax form 1040x The penalty is the full amount of the unpaid trust fund tax. Irs amended tax form 1040x This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. Irs amended tax form 1040x   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. Irs amended tax form 1040x   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. Irs amended tax form 1040x A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. Irs amended tax form 1040x   Willfully means voluntarily, consciously, and intentionally. Irs amended tax form 1040x A responsible person acts willfully if the person knows the required actions are not taking place. Irs amended tax form 1040x   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. Irs amended tax form 1040x Other penalties. Irs amended tax form 1040x   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. Irs amended tax form 1040x See sections 6662, 6662A, and 6663 of the Internal Revenue Code. Irs amended tax form 1040x Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Irs amended tax form 1040x If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. Irs amended tax form 1040x This section will explain how to avoid this penalty. Irs amended tax form 1040x When to pay estimated tax. Irs amended tax form 1040x   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Irs amended tax form 1040x Example 1. Irs amended tax form 1040x Your corporation's tax year ends December 31. Irs amended tax form 1040x Installment payments are due on April 15, June 15, September 15, and December 15. Irs amended tax form 1040x Example 2. Irs amended tax form 1040x Your corporation's tax year ends June 30. Irs amended tax form 1040x Installment payments are due on October 15, December 15, March 15, and June 15. Irs amended tax form 1040x   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. Irs amended tax form 1040x How to figure each required installment. Irs amended tax form 1040x   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. Irs amended tax form 1040x You will generally use one of the following two methods to figure each required installment. Irs amended tax form 1040x You should use the method that yields the smallest installment payments. Irs amended tax form 1040x Note. Irs amended tax form 1040x In these discussions, “return” generally refers to the corporation's original return. Irs amended tax form 1040x However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Irs amended tax form 1040x Method 1. Irs amended tax form 1040x   Each required installment is 25% of the income tax the corporation will show on its return for the current year. Irs amended tax form 1040x Method 2. Irs amended tax form 1040x   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. Irs amended tax form 1040x   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). Irs amended tax form 1040x Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. Irs amended tax form 1040x   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. Irs amended tax form 1040x Other methods. Irs amended tax form 1040x   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. Irs amended tax form 1040x The annualized income installment method. Irs amended tax form 1040x The adjusted seasonal installment method. Irs amended tax form 1040x Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. Irs amended tax form 1040x Refiguring required installments. Irs amended tax form 1040x   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. Irs amended tax form 1040x An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. Irs amended tax form 1040x Underpayment penalty. Irs amended tax form 1040x   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. Irs amended tax form 1040x The penalty is figured separately for each installment due date. Irs amended tax form 1040x The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. Irs amended tax form 1040x This is true even if the corporation is due a refund when its return is filed. Irs amended tax form 1040x Form 2220. Irs amended tax form 1040x   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. Irs amended tax form 1040x   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. Irs amended tax form 1040x The amount of the underpayment. Irs amended tax form 1040x The period during which the underpayment was due and unpaid. Irs amended tax form 1040x The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. Irs amended tax form 1040x   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. Irs amended tax form 1040x However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. Irs amended tax form 1040x The annualized income installment method was used to figure any required installment. Irs amended tax form 1040x The adjusted seasonal installment method was used to figure any required installment. Irs amended tax form 1040x The corporation is a large corporation figuring its first required installment based on the prior year's tax. Irs amended tax form 1040x How to pay estimated tax. Irs amended tax form 1040x   A corporation is generally required to use EFTPS to pay its taxes. Irs amended tax form 1040x See Electronic Federal Tax Payment System (EFTPS), earlier. Irs amended tax form 1040x Also see the Instructions for Form 1120-W. Irs amended tax form 1040x Quick refund of overpayments. Irs amended tax form 1040x   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Irs amended tax form 1040x Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. Irs amended tax form 1040x A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. Irs amended tax form 1040x Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. Irs amended tax form 1040x File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. Irs amended tax form 1040x Do not file Form 4466 before the end of the corporation's tax year. Irs amended tax form 1040x An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. Irs amended tax form 1040x The IRS will act on the form within 45 days from the date you file it. Irs amended tax form 1040x U. Irs amended tax form 1040x S. Irs amended tax form 1040x Real Property Interest If a domestic corporation acquires a U. Irs amended tax form 1040x S. Irs amended tax form 1040x real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. Irs amended tax form 1040x The amount paid includes cash, the fair market value of other property, and any assumed liability. Irs amended tax form 1040x If a domestic corporation distributes a U. Irs amended tax form 1040x S. Irs amended tax form 1040x real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. Irs amended tax form 1040x A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. Irs amended tax form 1040x For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. Irs amended tax form 1040x S. Irs amended tax form 1040x Withholding Tax Return for Dispositions by Foreign Persons of U. Irs amended tax form 1040x S. Irs amended tax form 1040x Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. Irs amended tax form 1040x S. Irs amended tax form 1040x Real Property Interests. Irs amended tax form 1040x Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Irs amended tax form 1040x Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. Irs amended tax form 1040x In all cases, the method used must clearly show taxable income. Irs amended tax form 1040x Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. Irs amended tax form 1040x Accrual method. Irs amended tax form 1040x   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. Irs amended tax form 1040x A corporation engaged in farming operations also must use the accrual method. Irs amended tax form 1040x   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. Irs amended tax form 1040x However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. Irs amended tax form 1040x   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. Irs amended tax form 1040x   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. Irs amended tax form 1040x   There are exceptions to the economic performance rule for certain items, including recurring expenses. Irs amended tax form 1040x See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. Irs amended tax form 1040x Nonaccrual experience method. Irs amended tax form 1040x   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. Irs amended tax form 1040x   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. Irs amended tax form 1040x Percentage of completion method. Irs amended tax form 1040x   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. Irs amended tax form 1040x Mark-to-market accounting method. Irs amended tax form 1040x   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Irs amended tax form 1040x Under this method any security held by a dealer as inventory must be included in inventory at its FMV. Irs amended tax form 1040x Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. Irs amended tax form 1040x Any gain or loss must be taken into account in determining gross income. Irs amended tax form 1040x The gain or loss taken into account is treated as ordinary gain or loss. Irs amended tax form 1040x   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. Irs amended tax form 1040x Change in accounting method. Irs amended tax form 1040x   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). Irs amended tax form 1040x The corporation must file Form 3115, Application for Change in Accounting Method. Irs amended tax form 1040x For more information, see Form 3115 and Publication 538. Irs amended tax form 1040x Section 481(a) adjustment. Irs amended tax form 1040x   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. Irs amended tax form 1040x The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. Irs amended tax form 1040x However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. Irs amended tax form 1040x The corporation must complete the appropriate lines of Form 3115 to make the election. Irs amended tax form 1040x See the Instructions for Form 3115. Irs amended tax form 1040x Accounting Periods A corporation must figure its taxable income on the basis of a tax year. Irs amended tax form 1040x A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Irs amended tax form 1040x Generally, corporations can use either a calendar year or a fiscal year as its tax year. Irs amended tax form 1040x Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. Irs amended tax form 1040x For more information, see Publication 538. Irs amended tax form 1040x Personal service corporation. Irs amended tax form 1040x   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. Irs amended tax form 1040x See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. Irs amended tax form 1040x Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. Irs amended tax form 1040x   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. Irs amended tax form 1040x See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. Irs amended tax form 1040x Change of tax year. Irs amended tax form 1040x   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. Irs amended tax form 1040x However, under certain conditions, a corporation can change its tax year without getting the consent. Irs amended tax form 1040x For more information, see Form 1128 and Publication 538. Irs amended tax form 1040x Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Irs amended tax form 1040x Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Irs amended tax form 1040x Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. Irs amended tax form 1040x The corporation should keep copies of all filed returns. Irs amended tax form 1040x They help in preparing future and amended returns and in the calculation of earnings and profits. Irs amended tax form 1040x Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. Irs amended tax form 1040x However, the following special provisions apply only to corporations. Irs amended tax form 1040x Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. Irs amended tax form 1040x However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Irs amended tax form 1040x Any costs not deducted can be amortized. Irs amended tax form 1040x Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Irs amended tax form 1040x Organizational costs are the direct costs of creating the corporation. Irs amended tax form 1040x For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. Irs amended tax form 1040x Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. Irs amended tax form 1040x Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. Irs amended tax form 1040x Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Irs amended tax form 1040x If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. Irs amended tax form 1040x These rules also deny the deduction of losses on the sale or exchange of property between related persons. Irs amended tax form 1040x Related persons. Irs amended tax form 1040x   For purposes of this rule, the following persons are related to a corporation. Irs amended tax form 1040x Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). Irs amended tax form 1040x An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Irs amended tax form 1040x A trust fiduciary, 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. Irs amended tax form 1040x An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Irs amended tax form 1040x 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. Irs amended tax form 1040x Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. Irs amended tax form 1040x Ownership of stock. Irs amended tax form 1040x   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. Irs amended tax form 1040x Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. Irs amended tax form 1040x An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Irs amended tax form 1040x Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. Irs amended tax form 1040x Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. Irs amended tax form 1040x To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. Irs amended tax form 1040x But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. Irs amended tax form 1040x Reallocation of income and deductions. Irs amended tax form 1040x   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. Irs amended tax form 1040x Complete liquidations. Irs amended tax form 1040x   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. Irs amended tax form 1040x More information. Irs amended tax form 1040x   For more information about the related person rules, see Publication 544. Irs amended tax form 1040x Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. Irs amended tax form 1040x If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. Irs amended tax form 1040x Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. Irs amended tax form 1040x A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. Irs amended tax form 1040x A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. Irs amended tax form 1040x For more information regarding the election, see Form 8902. Irs amended tax form 1040x Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. Irs amended tax form 1040x The deduction is allowed for the year in which the property is placed in service. Irs amended tax form 1040x A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. Irs amended tax form 1040x For more information, see section 179C of the Internal Revenue Code and the related Regulations. Irs amended tax form 1040x Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). Irs amended tax form 1040x A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. Irs amended tax form 1040x For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. Irs amended tax form 1040x Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. Irs amended tax form 1040x In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. Irs amended tax form 1040x 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. Irs amended tax form 1040x The deduction is limited to $1. Irs amended tax form 1040x 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. Irs amended tax form 1040x Other rules and limitations apply. Irs amended tax form 1040x The corporation must reduce the basis of any property by any deduction taken. Irs amended tax form 1040x The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. Irs amended tax form 1040x For more information, see section 179D of the Internal Revenue Code. Irs amended tax form 1040x Also see Notice 2006-52, 2006-26 I. Irs amended tax form 1040x R. Irs amended tax form 1040x B. Irs amended tax form 1040x 1175, clarified and amplified by Notice 2008-40, 2008-14 I. Irs amended tax form 1040x R. Irs amended tax form 1040x B. Irs amended tax form 1040x 725, and any successor. Irs amended tax form 1040x Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. Irs amended tax form 1040x These items are known as corporate preference items and they include the following. Irs amended tax form 1040x Gain on the disposition of section 1250 property. Irs amended tax form 1040x For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Irs amended tax form 1040x Percentage depletion for iron ore and coal (including lignite). Irs amended tax form 1040x For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. Irs amended tax form 1040x Amortization of pollution control facilities. Irs amended tax form 1040x For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. Irs amended tax form 1040x Mineral exploration and development costs. Irs amended tax form 1040x For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. Irs amended tax form 1040x For more information on corporate preference items, see section 291 of the Internal Revenue Code. Irs amended tax form 1040x Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. Irs amended tax form 1040x This section discusses the general rules that apply. Irs amended tax form 1040x The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. Irs amended tax form 1040x For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. Irs amended tax form 1040x Dividends from domestic corporations. Irs amended tax form 1040x   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. Irs amended tax form 1040x If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. Irs amended tax form 1040x Ownership. Irs amended tax form 1040x   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. Irs amended tax form 1040x Small business investment companies. Irs amended tax form 1040x   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. Irs amended tax form 1040x Dividends from regulated investment companies. Irs amended tax form 1040x   Regulated investment company dividends received are subject to certain limits. Irs amended tax form 1040x Capital gain dividends received from a regulated investment company do not qualify for the deduction. Irs amended tax form 1040x For more information, see section 854 of the Internal Revenue Code. Irs amended tax form 1040x No deduction allowed for certain dividends. Irs amended tax form 1040x   Corporations cannot take a deduction for dividends received from the following entities. Irs amended tax form 1040x A real estate investment trust (REIT). Irs amended tax form 1040x A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. Irs amended tax form 1040x A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Irs amended tax form 1040x Ex-dividend means the holder has no rights to the dividend. Irs amended tax form 1040x A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. Irs amended tax form 1040x Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Irs amended tax form 1040x Dividends on deposits. Irs amended tax form 1040x   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. Irs amended tax form 1040x They do not qualify for this deduction. Irs amended tax form 1040x Limit on deduction for dividends. Irs amended tax form 1040x   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). Irs amended tax form 1040x Figuring the limit. Irs amended tax form 1040x   In figuring the limit, determine taxable income without the following items. Irs amended tax form 1040x The net operating loss deduction. Irs amended tax form 1040x The domestic production activities deduction. Irs amended tax form 1040x The deduction for dividends received. Irs amended tax form 1040x Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). Irs amended tax form 1040x Any capital loss carryback to the tax year. Irs amended tax form 1040x Effect of net operating loss. Irs amended tax form 1040x   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. Irs amended tax form 1040x To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. Irs amended tax form 1040x Example 1. Irs amended tax form 1040x A corporation loses $25,000 from operations. Irs amended tax form 1040x It receives $100,000 in dividends from a 20%-owned corporation. Irs amended tax form 1040x Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. Irs amended tax form 1040x If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Irs amended tax form 1040x Therefore, the 80% of taxable income limit does not apply. Irs amended tax form 1040x The corporation can deduct the full $80,000. Irs amended tax form 1040x Example 2. Irs amended tax form 1040x Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Irs amended tax form 1040x Its taxable income is $85,000 before the deduction for dividends received. Irs amended tax form 1040x After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. Irs amended tax form 1040x Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). Irs amended tax form 1040x Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. Irs amended tax form 1040x The nontaxed part is any dividends-received deduction allowable for the dividends. Irs amended tax form 1040x Extraordinary dividend. Irs amended tax form 1040x   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. Irs amended tax form 1040x The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. Irs amended tax form 1040x Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. Irs amended tax form 1040x Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. Irs amended tax form 1040x Disqualified preferred stock. Irs amended tax form 1040x   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. Irs amended tax form 1040x   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. Irs amended tax form 1040x The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. Irs amended tax form 1040x The issue price of the stock exceeds its liquidation rights or stated redemption price. Irs amended tax form 1040x The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. Irs amended tax form 1040x   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. Irs amended tax form 1040x More information. Irs amended tax form 1040x   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. Irs amended tax form 1040x Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. Irs amended tax form 1040x A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Irs amended tax form 1040x A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. Irs amended tax form 1040x Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. Irs amended tax form 1040x Foregone interest. Irs amended tax form 1040x   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Irs amended tax form 1040x See Below-market loans, in chapter 4 of Publication 535 for more information. Irs amended tax form 1040x Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. Irs amended tax form 1040x The contribution is deductible if made to, or for the use of, a qualified organization. Irs amended tax form 1040x For more information on qualified organizations, see Publication 526, Charitable Contributions. Irs amended tax form 1040x Also see, Exempt Organizations Select Check (EO Select Check) at www. Irs amended tax form 1040x irs. Irs amended tax form 1040x gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. Irs amended tax form 1040x Note. Irs amended tax form 1040x You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. Irs amended tax form 1040x Cash method corporation. Irs amended tax form 1040x   A corporation using the cash method of accounting deducts contributions in the tax year paid. Irs amended tax form 1040x Accrual method corporation. Irs amended tax form 1040x   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Irs amended tax form 1040x Make the choice by reporting the contribution on the corporation's return for the tax year. Irs amended tax form 1040x A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. Irs amended tax form 1040x The declaration must include the date the resolution was adopted. Irs amended tax form 1040x Limitations on deduction. Irs amended tax form 1040x   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Irs amended tax form 1040x Figure taxable income for this purpose without the following. Irs amended tax form 1040x The deduction for charitable contributions. Irs amended tax form 1040x The dividends-received deduction. Irs amended tax form 1040x The deduction allowed under section 249 of the Internal Revenue Code. Irs amended tax form 1040x The domestic production activities deduction. Irs amended tax form 1040x Any net operating loss carryback to the tax year. Irs amended tax form 1040x Any capital loss carryback to the tax year. Irs amended tax form 1040x Farmers and ranchers. Irs amended tax form 1040x    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. Irs amended tax form 1040x Carryover of excess contributions. Irs amended tax form 1040x   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. Irs amended tax form 1040x You lose any excess not used within that period. Irs amended tax form 1040x For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. Irs amended tax form 1040x Any excess not used in 2015 is lost. Irs amended tax form 1040x Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). Irs amended tax form 1040x You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. Irs amended tax form 1040x Cash contributions. Irs amended tax form 1040x   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. Irs amended tax form 1040x The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. Irs amended tax form 1040x Keep the record of the contribution with the other corporate records. Irs amended tax form 1040x Do not attach the records to the corporation's return. Irs amended tax form 1040x For more information on cash contributions, see Publication 526. Irs amended tax form 1040x Gifts of $250 or more. Irs amended tax form 1040x   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. Irs amended tax form 1040x The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. Irs amended tax form 1040x The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. Irs amended tax form 1040x Keep the acknowledgement with other corporate records. Irs amended tax form 1040x Do not attach the acknowledgement to the return. Irs amended tax form 1040x Contributions of property other than cash. Irs amended tax form 1040x   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. Irs amended tax form 1040x In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. Irs amended tax form 1040x   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. Irs amended tax form 1040x For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. Irs amended tax form 1040x   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. Irs amended tax form 1040x A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. Irs amended tax form 1040x The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. Irs amended tax form 1040x   See Form 8283 for more information. Irs amended tax form 1040x Qualified conservation contributions. Irs amended tax form 1040x   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. Irs amended tax form 1040x For more information, see section 170(h) of the Internal Revenue Code. Irs amended tax form 1040x Contributions of used vehicles. Irs amended tax form 1040x   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. Irs amended tax form 1040x The deduction is limited, and other special rules apply. Irs amended tax form 1040x For more information, see Publication 526. Irs amended tax form 1040x Reduction for contributions of certain property. Irs amended tax form 1040x   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. Irs amended tax form 1040x   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. Irs amended tax form 1040x Larger deduction. Irs amended tax form 1040x   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. Irs amended tax form 1040x This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. Irs amended tax form 1040x Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. Irs amended tax form 1040x The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. Irs amended tax form 1040x Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. Irs amended tax form 1040x Contributions to organizations conducting lobbying activities. Irs amended tax form 1040x   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. Irs amended tax form 1040x More information. Irs amended tax form 1040x   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. Irs amended tax form 1040x Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. Irs amended tax form 1040x In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Irs amended tax form 1040x Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. Irs amended tax form 1040x A capital loss is carried to other years in the following order. Irs amended tax form 1040x 3 years prior to the loss year. Irs amended tax form 1040x 2 years prior to the loss year. Irs amended tax form 1040x 1 year prior to the loss year. Irs amended tax form 1040x Any loss remaining is carried forward for 5 years. Irs amended tax form 1040x When you carry a net capital loss to another tax year, treat it as a short-term loss. Irs amended tax form 1040x It does not retain its original identity as long term or short term. Irs amended tax form 1040x Example. Irs amended tax form 1040x A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. Irs amended tax form 1040x The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. Irs amended tax form 1040x The corporation treats this $6,000 as a short-term loss when carried back or forward. Irs amended tax form 1040x The corporation carries the $6,000 short-term loss back 3 years. Irs amended tax form 1040x In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. Irs amended tax form 1040x It subtracts the $6,000 short-term loss first from the net short-term gain. Irs amended tax form 1040x This results in a net capital gain for year 1 of $7,000. Irs amended tax form 1040x This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. Irs amended tax form 1040x S corporation status. Irs amended tax form 1040x   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. Irs amended tax form 1040x Rules for carryover and carryback. Irs amended tax form 1040x   When carrying a capital loss from one year to another, the following rules apply. Irs amended tax form 1040x When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. Irs amended tax form 1040x In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. Irs amended tax form 1040x If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. Irs amended tax form 1040x You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. Irs amended tax form 1040x Refunds. Irs amended tax form 1040x   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. Irs amended tax form 1040x If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. Irs amended tax form 1040x S. Irs amended tax form 1040x Corporation Income Tax Return, to apply for a refund. Irs amended tax form 1040x Form 1139. Irs amended tax form 1040x    A corporation can get a refund faster by using Form 1139. Irs amended tax form 1040x It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. Irs amended tax form 1040x Form 1120X. Irs amended tax form 1040x   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. Irs amended tax form 1040x The corporation must file the Form 1120X within 3 years of the due date, includin