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Irs Form 1040

2011 Irs Form 1040File Extension For Taxes 2012Tax Questions For StudentsLate Filing 2011 TaxesFree 1040xMilitary Turbo TaxFile 2006 Tax Return FreeAmend 2013 Tax ReturnMypay Com2011 E FilePa 1040ezFile 2012 Taxes Late Online FreeForm 1040 XWhere To File 2009 Tax ReturnTax Software 1040nrFile Free State Taxes Only1040 Form 2011H & R BlockFree Turbo Tax For MilitaryHow To Amend My 2011 Tax ReturnIrs 1040ez InstructionsH&r Block For MilitaryWhere Can I File 2011 TaxesH&r Block E FileFiling An Amended Tax Return 2013H&r Block At Home FreeFree Tax Filing Hr Block2011 Tax Forms 1040 EzHow To File 2012 State Taxes2010 Taxes Cheap 1099g Form W2012 1040 Tax FormAmended Tax FormHow To Amend A Prior Year Tax ReturnFree State Tax Preparation OnlineMilitary Tax Return1041xAmended Utah State Tax ReturnE File 2012 TaxesForm1040ez1040ez Instruction Booklet

Irs Form 1040

Irs form 1040 Index A Accelerated death benefits, Accelerated Death Benefits Accounting periods Change in, standard deduction not allowed, Persons not eligible for the standard deduction. Irs form 1040 Accrued leave payment Disability retirement and, Accrued leave payment. Irs form 1040 Adjusted gross income (AGI), Adjustments to Income Adjustments to income, Adjustments to Income Age Standard deduction for age 65 or older, Higher standard deduction for age (65 or older). Irs form 1040 Age 65, Qualified Individual American Association of Retired Persons (AARP), Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Irs form 1040 Annuities, Pensions and Annuities Assistance (see Tax help) B Base amount, social security benefits, Base Amount Benefits Accident or health, Other compensation. Irs form 1040 Long-term care, Long-Term Care Insurance Contracts No-fault insurance, Other compensation. Irs form 1040 Sickness and injury, Sickness and Injury Benefits Social security, Are Any of Your Benefits Taxable? Veterans', Veterans' benefits. Irs form 1040 Bequests, Gifts and inheritances. Irs form 1040 Blind persons Standard deduction for, Higher standard deduction for blindness. Irs form 1040 C Child and dependent care credit, Child and Dependent Care Credit Children Standard deduction for, Standard Deduction for Dependents Chronically ill persons, Chronically ill individual. Irs form 1040 Chronically ill, defined, Terminally or chronically ill defined. Irs form 1040 Compensation For services, Compensation for Services Loss or disfigurement, Other compensation. Irs form 1040 Contributions Foreign employment, Foreign employment contributions. Irs form 1040 Pension or annuity, Cost. Irs form 1040 Cost, pension or annuity, Cost. Irs form 1040 Credit Child and dependent care, Child and Dependent Care Credit Earned income, Earned Income Credit (EIC) The elderly or the disabled, Credit for the Elderly or the Disabled Credit for the elderly or the disabled, Credit for the Elderly or the Disabled D Death benefit, accelerated, Accelerated Death Benefits Decedents, Dependents. Irs form 1040 Standard deduction, Decedent's final return. Irs form 1040 Deductions Generally, Deductions Insurance premiums, Medical Insurance Premiums Itemized, Itemized Deductions Meals and lodging, Meals and Lodging Medical and dental, Medical and Dental Expenses Standard, Standard Deduction Dependents, Dependents. Irs form 1040 Standard deduction for, Standard Deduction for Dependents Disabilities, individuals with Ownership and use test, Exception to use test for individuals with a disability. Irs form 1040 Disability Person with, Persons with disabilities. Irs form 1040 Physician's statement, Physician's statement. Irs form 1040 Total and permanent, Permanent and total disability. Irs form 1040 Disability income, Disability Pensions, Other compensation. Irs form 1040 , Disability income. Irs form 1040 Distributions, retirement plan, Retirement Plan Distributions Drugs (see Medicines) Dual-status taxpayers Standard deduction, Persons not eligible for the standard deduction. Irs form 1040 E Early distributions, tax, Tax on Early Distributions Earned income credit, Earned Income Credit (EIC) Elderly or disabled credit, Credit for the Elderly or the Disabled Elderly persons Standard deduction for age 65 or older, Higher standard deduction for age (65 or older). Irs form 1040 Employment tax withholding, Reminders Employment taxes, Employment taxes. Irs form 1040 Endowment proceeds, Endowment Contract Proceeds Estimated tax, Tax Withholding and Estimated Tax, Estimated Tax, Who Must Make Estimated Tax Payments Excess accumulation, tax on, Tax on Excess Accumulation Exclusion, gain on sale of home, Maximum Amount of Exclusion F Federal Employees Compensation Act (FECA) payments, Federal Employees' Compensation Act (FECA). Irs form 1040 Filing requirements Decedents, Dependents. Irs form 1040 General requirements, General Requirements Surviving spouse, Surviving spouse. Irs form 1040 Final return for decedent Standard deduction, Decedent's final return. Irs form 1040 First-time homebuyer credit Recapture, Repaying the first-time homebuyer credit because you sold your home. Irs form 1040 Form, Credit for the Elderly or the Disabled, Physician's statement. Irs form 1040 1099-R, Form 1099-R. Irs form 1040 , Form 1099-R. Irs form 1040 5329, Form 5329. Irs form 1040 8853, Accelerated Death Benefits Schedule R, Credit for the Elderly or the Disabled, Physician's statement. Irs form 1040 W-4P, Withholding. Irs form 1040 Free tax services, Free help with your tax return. Irs form 1040 G Gain on sale of home (see Sale of home) General rule, pension or annuity, Pensions and Annuities Gifts, Gifts and inheritances. Irs form 1040 H Help (see Tax help) Home care (see Nursing services) Home improvements, Home Improvements Home, sale of, Sale of Home Hospital services, Hospital Services Household help, Household Help I Income Adjustments, Adjustments to Income Disability, Disability Pensions, Disability income. Irs form 1040 Gross, defined, Gross income. Irs form 1040 Nontaxable, Taxable and Nontaxable Income Sale of home, Sale of Home Self-employment, Self-employed persons. Irs form 1040 Taxable, Taxable and Nontaxable Income Individual retirement arrangement (IRA) Adjustments to income, Individual Retirement Arrangement (IRA) Contributions and Deductions Contributions, Contributions. Irs form 1040 Deductible contribution, Deductible contribution. Irs form 1040 Distributions, Individual Retirement Arrangements (IRAs) Inheritances, Gifts and inheritances. Irs form 1040 Injury benefits, Sickness and Injury Benefits, Cost paid by you. Irs form 1040 Insurance Accident and health, Other compensation. Irs form 1040 , Medical Insurance Premiums Benefits, long-term care, Long-Term Care Insurance Contracts Benefits, no-fault insurance, Other compensation. Irs form 1040 Life insurance proceeds, Life Insurance Proceeds Proceeds paid after death, Life Insurance Proceeds Proceeds paid before death, Accelerated Death Benefits Insurance premiums for retired public safety officers, Insurance Premiums for Retired Public Safety Officers Itemized deductions, Itemized Deductions Married filing separately One spouse has itemized, Persons not eligible for the standard deduction. Irs form 1040 L Life insurance proceeds, Life Insurance Proceeds Long-term care, Long-Term Care Chronically ill individuals, Chronically ill individual. Irs form 1040 Maintenance and personal care services, Maintenance and personal care services. Irs form 1040 Qualified insurance contracts, Qualified long-term care insurance contracts. Irs form 1040 Qualified services, Qualified long-term care services. Irs form 1040 Long-term care insurance, Long-Term Care Insurance Contracts Loss or disfigurement compensation, Other compensation. Irs form 1040 Lump-sum distributions, Lump-sum distributions. Irs form 1040 Lump-sum election, social security, Lump-Sum Election M Maintenance and personal care services, Maintenance and personal care services. Irs form 1040 Married filing separately Itemized deductions One spouse has itemized so other must as well, Persons not eligible for the standard deduction. Irs form 1040 Married taxpayers Age 65 or older spouse Standard deduction, Spouse 65 or older or blind. Irs form 1040 Blind spouse Standard deduction, Spouse 65 or older or blind. Irs form 1040 Meals and lodging expenses, Meals and Lodging Medical expenses, Medical and Dental Expenses Medicare, Medicare Part A. Irs form 1040 , Medicare Part B. Irs form 1040 , Medicare Part D. Irs form 1040 Benefits, Medicare. Irs form 1040 Medicines, Medicines Imported, Imported medicines and drugs. Irs form 1040 Military retirement pay, Military Retirement Pay Minimum distributions, Tax on Excess Accumulation Minimum wage, Substantial gainful activity. Irs form 1040 Missing children, Reminders Mortgage assistance payments, Mortgage assistance payments. Irs form 1040 N Nonperiodic distributions, Nonperiodic Distributions Nonqualified use, Period of nonqualified use. Irs form 1040 Nonresident aliens Standard deduction, Persons not eligible for the standard deduction. Irs form 1040 Nontaxable income, Payments from a state fund for victims of crime. Irs form 1040 Accident or health insurance benefits, Other compensation. Irs form 1040 Bequests, Gifts and inheritances. Irs form 1040 Generally, Taxable and Nontaxable Income Gifts, Gifts and inheritances. Irs form 1040 Inheritances, Gifts and inheritances. Irs form 1040 Mortgage assistance payments, Mortgage assistance payments. Irs form 1040 No-fault insurance benefits, Other compensation. Irs form 1040 Nutrition program for elderly, Nutrition Program for the Elderly. Irs form 1040 Public assistance payments, Welfare benefits. Irs form 1040 Sickness and injury benefits, Sickness and Injury Benefits Veterans' benefits, Veterans' benefits. Irs form 1040 Winter energy use, Payments to reduce cost of winter energy use. Irs form 1040 Workers' compensation, Workers' Compensation Nursing home, Nursing home. Irs form 1040 Nursing services, Nursing Services Chronically ill individuals, Chronically ill individual. Irs form 1040 Nutrition program for elderly, Nutrition Program for the Elderly. Irs form 1040 O Old-age, survivors, and disability insurance benefits (OASDI), Old-age, survivors, and disability insurance benefits (OASDI). Irs form 1040 Other items, Other Items Overall limitation, Overall limitation. Irs form 1040 P Payments, estimated tax, Estimated Tax Pensions, Pensions and Annuities Pensions, disability, Disability Pensions Photographs, missing children, Reminders Physician's statement, disability, Physician's statement. Irs form 1040 Prepaid insurance premiums, Prepaid insurance premiums. Irs form 1040 Preparer, paid, Reminders Preparing your return, Return preparation assistance. Irs form 1040 Profit-sharing plan, Retirement and profit-sharing plans. Irs form 1040 Public assistance payments, Welfare benefits. Irs form 1040 Publications (see Tax help) Q Qualified retirement plan, Tax on Early Distributions R Railroad retirement benefits, Railroad Retirement Benefits, Social Security and Equivalent Railroad Retirement Benefits Repayments Social security benefits, Repayment of Benefits Reporting pension income, How to report. Irs form 1040 Residence, sale of, Sale of Home Retirement plans, distributions, Retirement Plan Distributions Returns Decedent, Dependents. Irs form 1040 Executors and administrators, Dependents. Irs form 1040 Filing requirements, 2013 Filing Requirements Surviving spouse, Surviving spouse. Irs form 1040 Reverse mortgages, Reverse Mortgages S Salaries (see Compensation) Sale of Home First-time homebuyer credit, Repaying the first-time homebuyer credit because you sold your home. Irs form 1040 Surviving spouse, Reminders Sale of home, Sale of Home Self-employed, Self-employed persons. Irs form 1040 Short tax year Change in annual accounting period, Persons not eligible for the standard deduction. Irs form 1040 Sickness and injury benefits, Sickness and Injury Benefits Simplified method, Pensions and Annuities Social security benefits, Social Security and Equivalent Railroad Retirement Benefits Standard deduction, Standard Deduction Age 65 or older, Higher standard deduction for age (65 or older). Irs form 1040 Blind persons, Higher standard deduction for blindness. Irs form 1040 Dependents, Standard Deduction for Dependents Final return of decedent, Decedent's final return. Irs form 1040 Married filing separately One spouse has itemized, Persons not eligible for the standard deduction. Irs form 1040 Starting date, annuity, Cost. Irs form 1040 State fund for victims of crime, Payments from a state fund for victims of crime. Irs form 1040 Substantial gainful activity, Substantial gainful activity. Irs form 1040 Surrender of Iife insurance, Surrender of policy for cash. Irs form 1040 Surviving Spouse, Reminders Surviving spouse, Surviving spouse. Irs form 1040 Surviving spouse, insurance, Surviving spouse. Irs form 1040 Survivors of retirees, Survivors of retirees. Irs form 1040 T Tax Early distributions, Tax on Early Distributions Estimated, Tax Withholding and Estimated Tax, Estimated Tax Excess accumulation, Tax on Excess Accumulation Tax counseling for the elderly (TCE), Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Irs form 1040 Tax help, How To Get Tax Help Tax option, 10-year, Lump-sum distributions. Irs form 1040 Tax return preparers, Reminders Taxable income, Taxable and Nontaxable Income Taxation of benefits, Are Any of Your Benefits Taxable? Terminally ill, defined, Terminally or chronically ill defined. Irs form 1040 Total and permanent disability, defined, Permanent and total disability. Irs form 1040 Transportation expenses, Transportation TTY/TDD information, How To Get Tax Help U U. Irs form 1040 S. Irs form 1040 citizen or resident, U. Irs form 1040 S. Irs form 1040 citizen or resident alien. Irs form 1040 Unemployment compensation, Unemployment compensation. Irs form 1040 V Veterans' benefits, Veterans' benefits. Irs form 1040 Viatical settlement, Accelerated Death Benefits Victims of crime, Payments from a state fund for victims of crime. Irs form 1040 Volunteer income tax assistance (VITA), Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Irs form 1040 Volunteer work, Volunteer work. Irs form 1040 W Wages (see Compensation) Winter energy use payments, Payments to reduce cost of winter energy use. Irs form 1040 Withholding Employment tax, Reminders Pensions and annuities, Withholding. Irs form 1040 Workers' compensation, Workers' Compensation Worksheets, social security, Which worksheet to use. Irs form 1040 Prev  Up     Home   More Online Publications
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The Irs Form 1040

Irs form 1040 4. Irs form 1040   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Irs form 1040 Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Irs form 1040 Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Irs form 1040 Debt paid off. Irs form 1040 Payment of cash. Irs form 1040 Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Irs form 1040 S. Irs form 1040 Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Irs form 1040 Exception 2. Irs form 1040 Section 1256 contracts and straddles. Irs form 1040 Market discount bonds. Irs form 1040 File Form 1099-B or Form 1099-S with the IRS. Irs form 1040 Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Irs form 1040 Investment property. Irs form 1040   This is property that produces investment income. Irs form 1040 Examples include stocks, bonds, and Treasury bills and notes. Irs form 1040 Property used in a trade or business is not investment property. Irs form 1040 Form 1099-B. Irs form 1040   If you sold property such as stocks, bonds, mutual funds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Irs form 1040 You should receive the statement by February 15 of the next year. Irs form 1040 It will show the gross proceeds from the sale. Irs form 1040 The IRS will also get a copy of Form 1099-B from the broker. Irs form 1040   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Irs form 1040 If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Irs form 1040 This will help you complete Form 8949. Irs form 1040 Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Irs form 1040    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Irs form 1040 Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Irs form 1040 Nominees. Irs form 1040   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Irs form 1040   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Irs form 1040 Other property transactions. Irs form 1040   Certain transfers of property are discussed in other IRS publications. Irs form 1040 These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Irs form 1040 Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Irs form 1040 Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Irs form 1040 What Is a Sale or Trade? This section explains what is a sale or trade. Irs form 1040 It also explains certain transactions and events that are treated as sales or trades. Irs form 1040 A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Irs form 1040 A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Irs form 1040 Sale and purchase. Irs form 1040   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Irs form 1040 The sale and purchase are two separate transactions. Irs form 1040 But see Like-Kind Exchanges under Nontaxable Trades, later. Irs form 1040 Redemption of stock. Irs form 1040   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Irs form 1040 Dividend versus sale or trade. Irs form 1040   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Irs form 1040 Both direct and indirect ownership of stock will be considered. Irs form 1040 The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Irs form 1040 Redemption or retirement of bonds. Irs form 1040   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Irs form 1040 See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Irs form 1040   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Irs form 1040 For details, see Regulations section 1. Irs form 1040 1001-3. Irs form 1040 Surrender of stock. Irs form 1040   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Irs form 1040 The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Irs form 1040 Trade of investment property for an annuity. Irs form 1040   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Irs form 1040 If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Irs form 1040 Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Irs form 1040 Transfer by inheritance. Irs form 1040   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Irs form 1040 No taxable gain or deductible loss results from the transfer. Irs form 1040 Termination of certain rights and obligations. Irs form 1040   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Irs form 1040 Any gain or loss is treated as a capital gain or loss. Irs form 1040   This rule does not apply to the retirement of a debt instrument. Irs form 1040 See Redemption or retirement of bonds , earlier. Irs form 1040 Worthless Securities Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Irs form 1040 This affects whether your capital loss is long term or short term. Irs form 1040 See Holding Period , later. Irs form 1040 Worthless securities also include securities that you abandon after March 12, 2008. Irs form 1040 To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Irs form 1040 All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Irs form 1040 If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Irs form 1040 Do not deduct them in the year the stock became worthless. Irs form 1040 How to report loss. Irs form 1040   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Irs form 1040    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Irs form 1040 See Form 8949 and the Instructions for Form 8949. Irs form 1040 Filing a claim for refund. Irs form 1040   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Irs form 1040 You must use Form 1040X, Amended U. Irs form 1040 S. Irs form 1040 Individual Income Tax Return, to amend your return for the year the security became worthless. Irs form 1040 You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Irs form 1040 (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Irs form 1040 ) For more information about filing a claim, see Publication 556. Irs form 1040 Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Irs form 1040 You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Irs form 1040 This gives you a new holding period for the position that begins on the date of the constructive sale. Irs form 1040 Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Irs form 1040 Constructive sale. Irs form 1040   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Irs form 1040   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Irs form 1040 For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Irs form 1040 Exception for nonmarketable securities. Irs form 1040   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Irs form 1040 Exception for certain closed transactions. Irs form 1040   Do not treat a transaction as a constructive sale if all of the following are true. Irs form 1040 You closed the transaction on or before the 30th day after the end of your tax year. Irs form 1040 You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Irs form 1040 Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Irs form 1040   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Irs form 1040   This exception also applies to successive short sales of an entire appreciated financial position. Irs form 1040 For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Irs form 1040 This bulletin is available at www. Irs form 1040 irs. Irs form 1040 gov/pub/irs-irbs/irb03-03. Irs form 1040 pdf. Irs form 1040 Appreciated financial position. Irs form 1040   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Irs form 1040 Exceptions. Irs form 1040   An appreciated financial position does not include the following. Irs form 1040 Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Irs form 1040 Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Irs form 1040 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Irs form 1040 Any hedge with respect to a position described in (2). Irs form 1040 Certain trust instruments treated as stock. Irs form 1040   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Irs form 1040 Sale of appreciated financial position. Irs form 1040   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Irs form 1040 However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Irs form 1040 Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Irs form 1040 Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Irs form 1040 Exceptions. Irs form 1040   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Irs form 1040 For more details, including definitions of these terms, see section 1256. Irs form 1040 Regulated futures contract. Irs form 1040   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Irs form 1040 A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Irs form 1040 Foreign currency contract. Irs form 1040   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Irs form 1040   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Irs form 1040   Special rules apply to certain foreign currency transactions. Irs form 1040 These transactions may result in ordinary gain or loss treatment. Irs form 1040 For details, see Internal Revenue Code section 988 and Regulations sections 1. Irs form 1040 988-1(a)(7) and 1. Irs form 1040 988-3. Irs form 1040 Nonequity option. Irs form 1040   This is any listed option (defined later) that is not an equity option. Irs form 1040 Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Irs form 1040 A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Irs form 1040 Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Irs form 1040 Cash-settled options. Irs form 1040   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Irs form 1040   This rule does not apply to options established before the SEC determines that the stock index is broad based. Irs form 1040 Listed option. Irs form 1040   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Irs form 1040 A listed option, however, does not include an option that is a right to acquire stock from the issuer. Irs form 1040 Dealer equity option. Irs form 1040   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Irs form 1040   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Irs form 1040 Equity option. Irs form 1040   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Irs form 1040  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Irs form 1040 Dealer securities futures contract. Irs form 1040   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Irs form 1040 A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Irs form 1040 Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Irs form 1040 That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Irs form 1040 Hedging exception. Irs form 1040   The marked-to-market rules do not apply to hedging transactions. Irs form 1040 See Hedging Transactions , later. Irs form 1040 60/40 rule. Irs form 1040   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Irs form 1040 This is true regardless of how long you actually held the property. Irs form 1040 Example. Irs form 1040 On June 22, 2012, you bought a regulated futures contract for $50,000. Irs form 1040 On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Irs form 1040 You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Irs form 1040 On February 1, 2013, you sold the contract for $56,000. Irs form 1040 Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Irs form 1040 Limited partners or entrepreneurs. Irs form 1040   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Irs form 1040 Instead, these gains or losses are treated as short term. Irs form 1040 Terminations and transfers. Irs form 1040   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Irs form 1040 In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Irs form 1040 Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Irs form 1040 Loss carryback election. Irs form 1040   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Irs form 1040 See How To Report , later, for information about reporting this election on your return. Irs form 1040   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Irs form 1040 In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Irs form 1040   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Irs form 1040 In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Irs form 1040   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Irs form 1040 (See Capital Losses under Reporting Capital Gains and Losses, later. Irs form 1040 ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Irs form 1040 In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Irs form 1040 Net section 1256 contracts loss. Irs form 1040   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Irs form 1040 Net section 1256 contracts gain. Irs form 1040   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Irs form 1040  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Irs form 1040 Traders in section 1256 contracts. Irs form 1040   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Irs form 1040 However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Irs form 1040 Treatment of underlying property. Irs form 1040   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Irs form 1040 How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Irs form 1040 Form 6781. Irs form 1040   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Irs form 1040 This includes the amount shown in box 10 of Form 1099-B. Irs form 1040 Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Irs form 1040 Include a copy of Form 6781 with your income tax return. Irs form 1040   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Irs form 1040 Follow the Form 6781 instructions for completing Part I. Irs form 1040 Loss carryback election. Irs form 1040   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Irs form 1040 Follow the instructions for completing Form 6781 for the loss year to make this election. Irs form 1040 Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Irs form 1040 A transaction is a hedging transaction if both of the following conditions are met. Irs form 1040 You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Irs form 1040 You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Irs form 1040 This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Irs form 1040 A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Irs form 1040 A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Irs form 1040 However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Irs form 1040 Hedging loss limit. Irs form 1040   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Irs form 1040 A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Irs form 1040   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Irs form 1040 Ignore any hedging transaction items in determining this taxable income. Irs form 1040 If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Irs form 1040   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Irs form 1040   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Irs form 1040 The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Irs form 1040 Sale of property used in a hedge. Irs form 1040   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Irs form 1040 Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Irs form 1040 See the Instructions for Schedule SE (Form 1040). Irs form 1040 In addition, the rules relating to contributions to self-employment retirement plans apply. Irs form 1040 For information on retirement plan contributions, see Publication 560 and Publication 590. Irs form 1040 Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Irs form 1040 You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Irs form 1040 Investment property you buy normally has an original basis equal to its cost. Irs form 1040 If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Irs form 1040 Cost Basis The basis of property you buy is usually its cost. Irs form 1040 The cost is the amount you pay in cash, debt obligations, or other property or services. Irs form 1040 Unstated interest. Irs form 1040   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Irs form 1040 You generally have unstated interest if your interest rate is less than the applicable federal rate. Irs form 1040 For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Irs form 1040 Basis Other Than Cost There are times when you must use a basis other than cost. Irs form 1040 In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Irs form 1040 Fair market value. Irs form 1040   This is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Irs form 1040 Sales of similar property, around the same date, may be helpful in figuring fair market value. Irs form 1040 Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Irs form 1040 The amount you include in income then becomes your basis in the property. Irs form 1040 If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Irs form 1040 Restricted property. Irs form 1040   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Irs form 1040 Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Irs form 1040 See Restricted Property in Publication 525 for more information. Irs form 1040 Bargain purchases. Irs form 1040   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Irs form 1040 Your basis in the property is the price you pay plus the amount you include in income. Irs form 1040 Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Irs form 1040 Example. Irs form 1040 You trade A Company stock for B Company stock having a fair market value of $1,200. Irs form 1040 If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Irs form 1040 If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Irs form 1040 The basis of your B Company stock is $1,200. Irs form 1040 If you later sell the B Company stock for $1,300, you will have a gain of $100. Irs form 1040 Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Irs form 1040 See Nontaxable Trades , later. Irs form 1040 The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Irs form 1040 Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Irs form 1040 Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Irs form 1040 Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Irs form 1040 See Transfers Between Spouses , later. Irs form 1040 Recordkeeping. Irs form 1040 The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Irs form 1040 Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Irs form 1040 Fair market value less than donor's adjusted basis. Irs form 1040   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Irs form 1040 Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Irs form 1040 No gain or loss. Irs form 1040   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Irs form 1040 Example. Irs form 1040 You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Irs form 1040 The fair market value at the time of the gift is $9,000. Irs form 1040 You later sell the property for $9,500. Irs form 1040 You have neither gain nor loss. Irs form 1040 Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Irs form 1040 Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Irs form 1040 Fair market value equal to or more than donor's adjusted basis. Irs form 1040   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Irs form 1040 Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Irs form 1040 Gift received before 1977. Irs form 1040   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Irs form 1040 However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Irs form 1040 Example 1. Irs form 1040 You were given XYZ Company stock in 1976. Irs form 1040 At the time of the gift, the stock had a fair market value of $21,000. Irs form 1040 The donor's adjusted basis was $20,000. Irs form 1040 The donor paid a gift tax of $500 on the gift. Irs form 1040 Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Irs form 1040 Example 2. Irs form 1040 The facts are the same as in Example 1 except that the gift tax paid was $1,500. Irs form 1040 Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Irs form 1040 Gift received after 1976. Irs form 1040   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Irs form 1040 You figure this part by multiplying the gift tax paid on the gift by a fraction. Irs form 1040 The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Irs form 1040   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Irs form 1040 The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Irs form 1040 Example. Irs form 1040 In 2013, you received a gift of property from your mother. Irs form 1040 At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Irs form 1040 The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Irs form 1040 You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Irs form 1040 701 ($61,000 ÷ $87,000) . Irs form 1040 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Irs form 1040   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Irs form 1040 Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Irs form 1040 For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Irs form 1040 Gift tax information. Irs form 1040   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Irs form 1040 For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Irs form 1040 Property Received as Inheritance Before or after 2010. Irs form 1040   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Irs form 1040 If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Irs form 1040 For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Irs form 1040 Appreciated property you gave the decedent. Irs form 1040   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Irs form 1040 This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Irs form 1040 Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Irs form 1040 More information. Irs form 1040   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Irs form 1040 Inherited in 2010 and executor elected to file Form 8939. Irs form 1040   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Irs form 1040 Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Irs form 1040 The result of these adjustments to the basis is the adjusted basis. Irs form 1040 Adjustments to the basis of stocks and bonds are explained in the following discussion. Irs form 1040 For information about other adjustments to basis, see Publication 551. Irs form 1040 Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Irs form 1040 If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Irs form 1040 The basis of stock must be adjusted for certain events that occur after purchase. Irs form 1040 For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Irs form 1040 You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Irs form 1040 These distributions, up to the amount of your basis, are a nontaxable return of capital. Irs form 1040 The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Irs form 1040 To find out more, go to www. Irs form 1040 irs. Irs form 1040 gov/Filing/Filing-Options. Irs form 1040 Identifying stock or bonds sold. Irs form 1040   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Irs form 1040 Adequate identification. Irs form 1040   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Irs form 1040 Broker holds stock. Irs form 1040   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Irs form 1040  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Irs form 1040 Single stock certificate. Irs form 1040   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Irs form 1040   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Irs form 1040 Bonds. Irs form 1040   These methods of identification also apply to bonds sold or transferred. Irs form 1040 Identification not possible. Irs form 1040   If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Irs form 1040 Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Irs form 1040 Example. Irs form 1040 You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Irs form 1040 In January 1999 you bought another 200 shares for $11 a share. Irs form 1040 In July 1999 you gave your son 50 shares. Irs form 1040 In December 2001 you bought 100 shares for $9 a share. Irs form 1040 In April 2013 you sold 130 shares. Irs form 1040 You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Irs form 1040 The shares of stock you gave your son had a basis of $500 (50 × $10). Irs form 1040 You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Irs form 1040    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Irs form 1040 Example. Irs form 1040 You bought 100 shares of Fund A for $10 a share. Irs form 1040 You paid a $50 commission to the broker for the purchase. Irs form 1040 Your cost basis for each share is $10. Irs form 1040 50 ($1,050 ÷ 100). Irs form 1040 Commissions and load charges. Irs form 1040   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Irs form 1040 You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Irs form 1040 A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Irs form 1040   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Irs form 1040 You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Irs form 1040 You dispose of the shares within 90 days of the purchase date. Irs form 1040 You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Irs form 1040   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Irs form 1040 The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Irs form 1040 Choosing average basis for mutual fund shares. Irs form 1040   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Irs form 1040 The methods you can use to figure average basis are explained later. Irs form 1040 Undistributed capital gains. Irs form 1040   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Irs form 1040 See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Irs form 1040 Reinvestment right. Irs form 1040   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Irs form 1040      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Irs form 1040 This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Irs form 1040 Table 4-1. Irs form 1040 This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Irs form 1040 Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Irs form 1040 This worksheet will help you figure the adjusted basis when you sell or redeem shares. Irs form 1040 Table 4-1. Irs form 1040 Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Irs form 1040 2 Cost plus or minus adjustments. Irs form 1040 Automatic investment service. Irs form 1040   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Irs form 1040 Dividend reinvestment plans. Irs form 1040   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Irs form 1040 You must include the amount of the discount in your income. Irs form 1040 Public utilities. Irs form 1040   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Irs form 1040 Stock dividends. Irs form 1040   Stock dividends are distributions made by a corporation of its own stock. Irs form 1040 Generally, stock dividends are not taxable to you. Irs form 1040 However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Irs form 1040 If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Irs form 1040 New and old stock identical. Irs form 1040   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Irs form 1040 The result is your basis for each share of stock. Irs form 1040 Example 1. Irs form 1040 You owned one share of common stock that you bought for $45. Irs form 1040 The corporation distributed two new shares of common stock for each share held. Irs form 1040 You then had three shares of common stock. Irs form 1040 Your basis in each share is $15 ($45 ÷ 3). Irs form 1040 Example 2. Irs form 1040 You owned two shares of common stock. Irs form 1040 You bought one for $30 and the other for $45. Irs form 1040 The corporation distributed two new shares of common stock for each share held. Irs form 1040 You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Irs form 1040 New and old stock not identical. Irs form 1040   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Irs form 1040 Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Irs form 1040 Example. Irs form 1040 You bought a share of common stock for $100. Irs form 1040 Later, the corporation distributed a share of preferred stock for each share of common stock held. Irs form 1040 At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Irs form 1040 You figure the basis of the old and new stock by dividing your $100 basis between them. Irs form 1040 The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Irs form 1040 Stock bought at various times. Irs form 1040   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Irs form 1040 Taxable stock dividends. Irs form 1040   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Irs form 1040 The basis of your old stock does not change. Irs form 1040 Stock splits. Irs form 1040   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Irs form 1040 Stock rights. Irs form 1040   A stock right is a right to acquire a corporation's stock. Irs form 1040 It may be exercised, it may be sold if it has a market value, or it may expire. Irs form 1040 Stock rights are rarely taxable when you receive them. Irs form 1040 See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Irs form 1040 Taxable stock rights. Irs form 1040   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Irs form 1040 The basis of the old stock does not change. Irs form 1040 Nontaxable stock rights. Irs form 1040   If you receive nontaxable stock rights and allow them to expire, they have no basis. Irs form 1040   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Irs form 1040 Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Irs form 1040   If the fair market value of the stock rights was less than 15%, their basis is zero. Irs form 1040 However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Irs form 1040 To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Irs form 1040 Basis of new stock. Irs form 1040   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Irs form 1040 Example. Irs form 1040 You own 100 shares of ABC Company stock, which cost you $22 per share. Irs form 1040 The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Irs form 1040 At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Irs form 1040 Each stock right had a market value of $3. Irs form 1040 The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Irs form 1040 You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Irs form 1040 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Irs form 1040 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Irs form 1040 18 ($21. Irs form 1040 78 ÷ 10) per right. Irs form 1040 If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Irs form 1040 18), or $28. Irs form 1040 18 per share. Irs form 1040 The remaining basis of the old stock is $21. Irs form 1040 78 per share. Irs form 1040 Investment property received in liquidation. Irs form 1040   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Irs form 1040 S corporation stock. Irs form 1040   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Irs form 1040 All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Irs form 1040 The nonseparately stated income of the S corporation. Irs form 1040 The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Irs form 1040   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Irs form 1040 Distributions by the S corporation that were not included in your income. Irs form 1040 All loss and deduction items of the S corporation that are separately stated and passed through to you. Irs form 1040 Any nonseparately stated loss of the S corporation. Irs form 1040 Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Irs form 1040 The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Irs form 1040 However, your basis in the stock cannot be reduced below zero. Irs form 1040 Specialized small business investment company stock or partnership interest. Irs form 1040   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Irs form 1040 See Rollover of Gain From Publicly Traded Securities , later. Irs form 1040 Qualified small business stock. Irs form 1040   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Irs form 1040 See Gains on Qualified Small Business Stock , later. Irs form 1040 Short sales. Irs form 1040   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Irs form 1040   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Irs form 1040 Premiums on bonds. Irs form 1040   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Irs form 1040 If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Irs form 1040   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Irs form 1040 You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Irs form 1040   See Bond Premium Amortization in chapter 3 for more information. Irs form 1040 Market discount on bonds. Irs form 1040   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Irs form 1040 See Market Discount Bonds in chapter 1 for more information. Irs form 1040 Bonds purchased at par value. Irs form 1040   A bond purchased at par value (face amount) has no premium or discount. Irs form 1040 When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Irs form 1040 Example. Irs form 1040 You purchased a bond several years ago for its par value of $10,000. Irs form 1040 You sold the bond this year for $10,100. Irs form 1040 You have a gain of $100. Irs form 1040 However, if you had sold the bond for $9,900, you would have a loss of $100. Irs form 1040 Acquisition discount on short-term obligations. Irs form 1040   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Irs form 1040 See Discount on Short-Term Obligations in chapter 1 for more information. Irs form 1040 Original issue discount (OID) on debt instruments. Irs form 1040   Increase the basis of a debt instrument by the OID you include in your income. Irs form 1040 See Original Issue Discount (OID) in chapter 1. Irs form 1040 Discounted tax-exempt obligations. Irs form 1040   OID on tax-exempt obligations is generally not taxable. Irs form 1040 However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Irs form 1040 The accrued OID is added to the basis of the obligation to determine your gain or loss. Irs form 1040   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Irs form 1040   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Irs form 1040 See Discount on Short-Term Obligations in chapter 1. Irs form 1040 Stripped tax-exempt obligation. Irs form 1040   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Irs form 1040 For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Irs form 1040 You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Irs form 1040   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Irs form 1040 Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Irs form 1040 In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Irs form 1040 How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Irs form 1040 Gain. Irs form 1040   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Irs form 1040 Loss. Irs form 1040   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Irs form 1040 Amount realized. Irs form 1040   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Irs form 1040 Amount realized includes the money you receive plus the fair market value of any property or services you receive. Irs form 1040   If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Irs form 1040 For more information, see Publication 537. Irs form 1040   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Irs form 1040 See Regulations section 1. Irs form 1040 1001-1(g). Irs form 1040 However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Irs form 1040 Fair market value. Irs form 1040   Fair market value is the price at which property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Irs form 1040 Example. Irs form 1040 You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Irs form 1040 Your gain is $3,000 ($10,000 – $7,000). Irs form 1040 If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Irs form 1040 Debt paid off. Irs form 1040   A debt against the property, or against you, that is paid off as a part of the transaction or that is assumed by the buyer must be included in the amount realized. Irs form 1040 This is true even if neither you nor the buyer is personally liable for the debt. Irs form 1040 For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Irs form 1040 Example. Irs form 1040 You sell stock that you had pledged as security for a bank loan of $8,000. Irs form 1040 Your basis in the stock is $6,000. Irs form 1040 The buyer pays off your bank loan and pays you $20,000 in cash. Irs form 1040 The amount realized is $28,000 ($20,000 + $8,000). Irs form 1040 Your gain is $22,000 ($28,000 – $6,000). Irs form 1040 Payment of cash. Irs form 1040   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Irs form 1040 Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Irs form 1040 If the result is a positive number, it is a gain. Irs form 1040 If the result is a negative number, it is a loss. Irs form 1040 No gain or loss. Irs form 1040   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Irs form 1040 In this case, you may have neither a gain nor a loss. Irs form 1040 See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Irs form 1040 Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Irs form 1040 If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu