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Military H And R Block

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Military H And R Block

Military h and r block 12. Military h and r block   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Military h and r block Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Military h and r block Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Military h and r block Method 2. Military h and r block RoyaltiesDepletion. Military h and r block Coal and iron ore. Military h and r block Sale of property interest. Military h and r block Part of future production sold. Military h and r block Unemployment BenefitsTypes of unemployment compensation. Military h and r block Governmental program. Military h and r block Repayment of unemployment compensation. Military h and r block Tax withholding. Military h and r block Repayment of benefits. Military h and r block Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Military h and r block Deduction for costs involved in unlawful discrimination suits. Military h and r block Energy conservation measure. Military h and r block Dwelling unit. Military h and r block Current income required to be distributed. Military h and r block Current income not required to be distributed. Military h and r block How to report. Military h and r block Losses. Military h and r block Grantor trust. Military h and r block Nonemployee compensation. Military h and r block Corporate director. Military h and r block Personal representatives. Military h and r block Manager of trade or business for bankruptcy estate. Military h and r block Notary public. Military h and r block Election precinct official. Military h and r block Difficulty-of-care payments. Military h and r block Maintaining space in home. Military h and r block Reporting taxable payments. Military h and r block Lotteries and raffles. Military h and r block Form W-2G. Military h and r block Reporting winnings and recordkeeping. Military h and r block Inherited pension or IRA. Military h and r block Employee awards or bonuses. Military h and r block Pulitzer, Nobel, and similar prizes. Military h and r block Payment for services. Military h and r block VA payments. Military h and r block Prizes. Military h and r block Strike and lockout benefits. Military h and r block Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Military h and r block Some items, however, are only partly excluded from income. Military h and r block This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Military h and r block Income that is taxable must be reported on your tax return and is subject to tax. Military h and r block Income that is nontaxable may have to be shown on your tax return but is not taxable. Military h and r block This chapter begins with discussions of the following income items. Military h and r block Bartering. Military h and r block Canceled debts. Military h and r block Sales parties at which you are the host or hostess. Military h and r block Life insurance proceeds. Military h and r block Partnership income. Military h and r block S Corporation income. Military h and r block Recoveries (including state income tax refunds). Military h and r block Rents from personal property. Military h and r block Repayments. Military h and r block Royalties. Military h and r block Unemployment benefits. Military h and r block Welfare and other public assistance benefits. Military h and r block These discussions are followed by brief discussions of other income items. Military h and r block Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Military h and r block You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Military h and r block If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Military h and r block Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Military h and r block However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Military h and r block Example 1. Military h and r block You are a self-employed attorney who performs legal services for a client, a small corporation. Military h and r block The corporation gives you shares of its stock as payment for your services. Military h and r block You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Military h and r block Example 2. Military h and r block You are self-employed and a member of a barter club. Military h and r block The club uses “credit units” as a means of exchange. Military h and r block It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Military h and r block The club subtracts credit units from your account when you receive goods or services from other members. Military h and r block You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Military h and r block Example 3. Military h and r block You own a small apartment building. Military h and r block In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Military h and r block You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Military h and r block Form 1099-B from barter exchange. Military h and r block   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Military h and r block It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Military h and r block The IRS also will receive a copy of Form 1099-B. Military h and r block Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Military h and r block You have no income from the canceled debt if it is intended as a gift to you. Military h and r block A debt includes any indebtedness for which you are liable or which attaches to property you hold. Military h and r block If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Military h and r block If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Military h and r block Form 1099-C. Military h and r block   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Military h and r block The amount of the canceled debt is shown in box 2. Military h and r block Interest included in canceled debt. Military h and r block   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Military h and r block Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Military h and r block See Deductible debt under Exceptions, later. Military h and r block   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Military h and r block If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Military h and r block Discounted mortgage loan. Military h and r block   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Military h and r block You must include the canceled amount in your income. Military h and r block Mortgage relief upon sale or other disposition. Military h and r block   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Military h and r block To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Military h and r block Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Military h and r block    You may be able to exclude part of the mortgage relief on your principal residence. Military h and r block See Excluded debt, later. Military h and r block   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Military h and r block You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Military h and r block Report any gain on nonbusiness property as a capital gain. Military h and r block   See Publication 4681 for more information. Military h and r block Stockholder debt. Military h and r block   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Military h and r block For more information, see Publication 542, Corporations. Military h and r block   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Military h and r block This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Military h and r block Repayment of canceled debt. Military h and r block   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Military h and r block You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Military h and r block The statute of limitations generally does not end until 3 years after the due date of your original return. Military h and r block Exceptions There are several exceptions to the inclusion of canceled debt in income. Military h and r block These are explained next. Military h and r block Student loans. Military h and r block   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Military h and r block   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Military h and r block To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Military h and r block   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Military h and r block Education loan repayment assistance. Military h and r block   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Military h and r block    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Military h and r block If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Military h and r block See Form 1040X and its instructions for details on filing. Military h and r block Deductible debt. Military h and r block   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Military h and r block This exception applies only if you use the cash method of accounting. Military h and r block For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Military h and r block Price reduced after purchase. Military h and r block   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Military h and r block The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Military h and r block Excluded debt. Military h and r block   Do not include a canceled debt in your gross income in the following situations. Military h and r block The debt is canceled in a bankruptcy case under title 11 of the U. Military h and r block S. Military h and r block Code. Military h and r block See Publication 908, Bankruptcy Tax Guide. Military h and r block The debt is canceled when you are insolvent. Military h and r block However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Military h and r block See Publication 908. Military h and r block The debt is qualified farm debt and is canceled by a qualified person. Military h and r block See chapter 3 of Publication 225, Farmer's Tax Guide. Military h and r block The debt is qualified real property business debt. Military h and r block See chapter 5 of Publication 334. Military h and r block The cancellation is intended as a gift. Military h and r block The debt is qualified principal residence indebtedness. Military h and r block See Publication 525 for additional information. Military h and r block Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Military h and r block You must report this item as income at its fair market value. Military h and r block Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Military h and r block These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Military h and r block For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Military h and r block Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Military h and r block This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Military h and r block However, interest income received as a result of life insurance proceeds may be taxable. Military h and r block Proceeds not received in installments. Military h and r block   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Military h and r block If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Military h and r block Proceeds received in installments. Military h and r block   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Military h and r block   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Military h and r block Include anything over this excluded part in your income as interest. Military h and r block Surviving spouse. Military h and r block   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Military h and r block If you remarry, you can continue to take the exclusion. Military h and r block Surrender of policy for cash. Military h and r block   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Military h and r block In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Military h and r block    You should receive a Form 1099-R showing the total proceeds and the taxable part. Military h and r block Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Military h and r block More information. Military h and r block   For more information, see Life Insurance Proceeds in Publication 525. Military h and r block Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Military h and r block Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Military h and r block To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Military h and r block Include the part of the lump sum payment that is more than your cost in your income. Military h and r block Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Military h and r block Viatical settlement. Military h and r block   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Military h and r block A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Military h and r block Exclusion for terminal illness. Military h and r block    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Military h and r block This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Military h and r block Exclusion for chronic illness. Military h and r block    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Military h and r block Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Military h and r block This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Military h and r block For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Military h and r block Exception. Military h and r block   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Military h and r block Form 8853. Military h and r block   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Military h and r block You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Military h and r block Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Military h and r block For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Military h and r block For more information, see Publication 559, Survivors, Executors, and Administrators. Military h and r block Partnership Income A partnership generally is not a taxable entity. Military h and r block The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Military h and r block Schedule K-1 (Form 1065). Military h and r block    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Military h and r block S. Military h and r block Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Military h and r block In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Military h and r block Keep Schedule K-1 (Form 1065) for your records. Military h and r block Do not attach it to your Form 1040, unless you are specifically required to do so. Military h and r block For more information on partnerships, see Publication 541, Partnerships. Military h and r block Qualified joint venture. Military h and r block   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Military h and r block To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Military h and r block For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Military h and r block S Corporation Income In most cases, an S corporation does not pay tax on its income. Military h and r block Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Military h and r block Schedule K-1 (Form 1120S). Military h and r block   An S corporation must file a return on Form 1120S, U. Military h and r block S. Military h and r block Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Military h and r block In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Military h and r block Keep Schedule K-1 (Form 1120S) for your records. Military h and r block Do not attach it to your Form 1040, unless you are specifically required to do so. Military h and r block For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Military h and r block Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Military h and r block The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Military h and r block You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Military h and r block Tax benefit rule. Military h and r block   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Military h and r block For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Military h and r block For more information, see Publication 525. Military h and r block Federal income tax refund. Military h and r block   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Military h and r block State tax refund. Military h and r block   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Military h and r block The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Military h and r block The IRS also will receive a copy of the Form 1099-G. Military h and r block If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Military h and r block See Publication 525 for when you must use another worksheet. Military h and r block   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Military h and r block For examples, see Publication 525. Military h and r block Mortgage interest refund. Military h and r block    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Military h and r block Do not subtract the refund amount from the interest you paid in 2013. Military h and r block You may have to include it in your income under the rules explained in the following discussions. Military h and r block Interest on recovery. Military h and r block   Interest on any of the amounts you recover must be reported as interest income in the year received. Military h and r block For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Military h and r block Recovery and expense in same year. Military h and r block   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Military h and r block Recovery for 2 or more years. Military h and r block   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Military h and r block This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Military h and r block For information on how to compute the allocation, see Recoveries in Publication 525. Military h and r block Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Military h and r block Where to report. Military h and r block   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Military h and r block You cannot use Form 1040A or Form 1040EZ. Military h and r block Standard deduction limit. Military h and r block   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Military h and r block Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Military h and r block If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Military h and r block Example. Military h and r block For 2012, you filed a joint return. Military h and r block Your taxable income was $60,000 and you were not entitled to any tax credits. Military h and r block Your standard deduction was $11,900, and you had itemized deductions of $14,000. Military h and r block In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Military h and r block The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Military h and r block Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Military h and r block Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Military h and r block Standard deduction for earlier years. Military h and r block   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Military h and r block Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Military h and r block Example. Military h and r block You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Military h and r block Your itemized deductions were $12,350. Military h and r block The standard deduction that you could have claimed was $11,900. Military h and r block In 2013, you recovered $2,100 of your 2012 itemized deductions. Military h and r block None of the recoveries were more than the actual deductions for 2012. Military h and r block Include $450 of the recoveries in your 2013 income. Military h and r block This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Military h and r block Recovery limited to deduction. Military h and r block   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Military h and r block The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Military h and r block Example. Military h and r block During 2012 you paid $1,700 for medical expenses. Military h and r block From this amount you subtracted $1,500, which was 7. Military h and r block 5% of your adjusted gross income. Military h and r block Your actual medical expense deduction was $200. Military h and r block In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Military h and r block The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Military h and r block Other recoveries. Military h and r block   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Military h and r block Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Military h and r block In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Military h and r block See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Military h and r block Reporting business income and expenses. Military h and r block    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Military h and r block The form instructions have information on how to complete them. Military h and r block Reporting nonbusiness income. Military h and r block   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Military h and r block List the type and amount of the income on the dotted line next to line 21. Military h and r block Reporting nonbusiness expenses. Military h and r block   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Military h and r block Also enter the amount and “PPR” on the dotted line next to line 36. Military h and r block   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Military h and r block See Activity not for profit , under Other Income, later. Military h and r block Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Military h and r block Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Military h and r block Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Military h and r block Type of deduction. Military h and r block   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Military h and r block You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Military h and r block For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Military h and r block If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Military h and r block If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Military h and r block Repaid social security benefits. Military h and r block   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Military h and r block Repayment of $3,000 or less. Military h and r block   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Military h and r block If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Military h and r block Repayment over $3,000. Military h and r block   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Military h and r block However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Military h and r block This means that at the time you included the income, it appeared that you had an unrestricted right to it. Military h and r block If you qualify for this choice, figure your tax under both methods and compare the results. Military h and r block Use the method (deduction or credit) that results in less tax. Military h and r block When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Military h and r block Each instance of repayment is not considered separately. Military h and r block Method 1. Military h and r block   Figure your tax for 2013 claiming a deduction for the repaid amount. Military h and r block If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Military h and r block Method 2. Military h and r block   Figure your tax for 2013 claiming a credit for the repaid amount. Military h and r block Follow these steps. Military h and r block Figure your tax for 2013 without deducting the repaid amount. Military h and r block Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Military h and r block Subtract the tax in (2) from the tax shown on your return for the earlier year. Military h and r block This is the credit. Military h and r block Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Military h and r block   If method 1 results in less tax, deduct the amount repaid. Military h and r block If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Military h and r block R. Military h and r block C. Military h and r block 1341” in the column to the right of line 71. Military h and r block   An example of this computation can be found in Publication 525. Military h and r block Repaid wages subject to social security and Medicare taxes. Military h and r block   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Military h and r block If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Military h and r block File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Military h and r block Repaid wages subject to Additional Medicare Tax. Military h and r block   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Military h and r block If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Military h and r block To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Military h and r block S. Military h and r block Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Military h and r block See the Instructions for Form 1040X. Military h and r block Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Military h and r block In most cases you report royalties in Part I of Schedule E (Form 1040). Military h and r block However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Military h and r block , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Military h and r block Copyrights and patents. Military h and r block   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Military h and r block Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Military h and r block Oil, gas, and minerals. Military h and r block   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Military h and r block The royalties are based on units, such as barrels, tons, etc. Military h and r block , and are paid to you by a person or company who leases the property from you. Military h and r block Depletion. Military h and r block   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Military h and r block For information on this subject, see chapter 9 of Publication 535. Military h and r block Coal and iron ore. Military h and r block   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Military h and r block For information about gain or loss from the sale of coal and iron ore, see Publication 544. Military h and r block Sale of property interest. Military h and r block   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Military h and r block Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Military h and r block For more information on selling section 1231 property, see chapter 3 of Publication 544. Military h and r block   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Military h and r block Part of future production sold. Military h and r block   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Military h and r block Do not include it in your income or take depletion based on it. Military h and r block   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Military h and r block Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Military h and r block Unemployment compensation. Military h and r block   You must include in income all unemployment compensation you receive. Military h and r block You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Military h and r block In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Military h and r block Types of unemployment compensation. Military h and r block   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Military h and r block It includes the following benefits. Military h and r block Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Military h and r block State unemployment insurance benefits. Military h and r block Railroad unemployment compensation benefits. Military h and r block Disability payments from a government program paid as a substitute for unemployment compensation. Military h and r block (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Military h and r block See chapter 5 for more information. Military h and r block ) Trade readjustment allowances under the Trade Act of 1974. Military h and r block Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Military h and r block Unemployment assistance under the Airline Deregulation Act of 1974 Program. Military h and r block Governmental program. Military h and r block   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Military h and r block If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Military h and r block Repayment of unemployment compensation. Military h and r block   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Military h and r block On the dotted line next to your entry enter “Repaid” and the amount you repaid. Military h and r block If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Military h and r block If the amount is more than $3,000, see Repayments , earlier. Military h and r block Tax withholding. Military h and r block   You can choose to have federal income tax withheld from your unemployment compensation. Military h and r block To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Military h and r block Tax will be withheld at 10% of your payment. Military h and r block    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Military h and r block If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Military h and r block For more information on estimated tax, see chapter 4. Military h and r block Supplemental unemployment benefits. Military h and r block   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Military h and r block They are taxable as wages and are subject to withholding for income tax. Military h and r block They may be subject to social security and Medicare taxes. Military h and r block For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Military h and r block Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Military h and r block Repayment of benefits. Military h and r block   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Military h and r block If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Military h and r block If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Military h and r block   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Military h and r block (You cannot use Form 1040A or Form 1040EZ. Military h and r block ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Military h and r block If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Military h and r block For more information on this, see Repayments , earlier. Military h and r block Private unemployment fund. Military h and r block   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Military h and r block Report the taxable amount on Form 1040, line 21. Military h and r block Payments by a union. Military h and r block   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Military h and r block However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Military h and r block Guaranteed annual wage. Military h and r block   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Military h and r block Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Military h and r block State employees. Military h and r block   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Military h and r block Although the payments are fully taxable, do not report them as unemployment compensation. Military h and r block Report these payments on Form 1040, line 21. Military h and r block Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Military h and r block Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Military h and r block Do not deduct medical expenses that are reimbursed by such a fund. Military h and r block You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Military h and r block Reemployment Trade Adjustment Assistance (RTAA) payments. Military h and r block   RTAA payments received from a state must be included in your income. Military h and r block The state must send you Form 1099-G to advise you of the amount you should include in income. Military h and r block The amount should be reported on Form 1040, line 21. Military h and r block Persons with disabilities. Military h and r block   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Military h and r block However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Military h and r block Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Military h and r block Disaster relief grants. Military h and r block    Do not include post-disaster grants received under the Robert T. Military h and r block Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Military h and r block Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Military h and r block If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Military h and r block See Recoveries , earlier. Military h and r block Unemployment assistance payments under the Act are taxable unemployment compensation. Military h and r block See Unemployment compensation under Unemployment Benefits, earlier. Military h and r block Disaster relief payments. Military h and r block   You can exclude from income any amount you receive that is a qualified disaster relief payment. Military h and r block A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Military h and r block You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Military h and r block The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Military h and r block   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Military h and r block   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Military h and r block Disaster mitigation payments. Military h and r block   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Military h and r block Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Military h and r block However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Military h and r block They are paid to you through state and local governments based on the provisions of the Robert T. Military h and r block Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Military h and r block   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Military h and r block Home Affordable Modification Program (HAMP). Military h and r block   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Military h and r block Mortgage assistance payments under section 235 of the National Housing Act. Military h and r block   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Military h and r block Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Military h and r block Medicare. Military h and r block   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Military h and r block This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Military h and r block Old-age, survivors, and disability insurance benefits (OASDI). Military h and r block   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Military h and r block This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Military h and r block Nutrition Program for the Elderly. Military h and r block    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Military h and r block If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Military h and r block Payments to reduce cost of winter energy. Military h and r block   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Military h and r block Other Income The following brief discussions are arranged in alphabetical order. Military h and r block Other income items briefly discussed below are referenced to publications which provide more topical information. Military h and r block Activity not for profit. Military h and r block   You must include on your return income from an activity from which you do not expect to make a profit. Military h and r block An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Military h and r block Enter this income on Form 1040, line 21. Military h and r block Deductions for expenses related to the activity are limited. Military h and r block They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Military h and r block See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Military h and r block Alaska Permanent Fund dividend. Military h and r block   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Military h and r block The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Military h and r block The amount also is reported to IRS. Military h and r block Alimony. Military h and r block   Include in your income on Form 1040, line 11, any alimony payments you receive. Military h and r block Amounts you receive for child support are not income to you. Military h and r block Alimony and child support payments are discussed in chapter 18. Military h and r block Bribes. Military h and r block   If you receive a bribe, include it in your income. Military h and r block Campaign contributions. Military h and r block   These contributions are not income to a candidate unless they are diverted to his or her personal use. Military h and r block To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Military h and r block However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Military h and r block S. Military h and r block Income Tax Return for Certain Political Organizations. Military h and r block Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Military h and r block Car pools. Military h and r block   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Military h and r block These amounts are considered reimbursement for your expenses. Military h and r block However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Military h and r block Cash rebates. Military h and r block   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Military h and r block Example. Military h and r block You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Military h and r block The $2,000 is not income to you. Military h and r block Your basis in the car is $22,000. Military h and r block This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Military h and r block Casualty insurance and other reimbursements. Military h and r block   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Military h and r block See chapter 25 for more information. Military h and r block Child support payments. Military h and r block   You should not report these payments on your return. Military h and r block See chapter 18 for more information. Military h and r block Court awards and damages. Military h and r block   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Military h and r block The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Military h and r block Include the following as ordinary income. Military h and r block Interest on any award. Military h and r block Compensation for lost wages or lost profits in most cases. Military h and r block Punitive damages, in most cases. Military h and r block It does not matter if they relate to a physical injury or physical sickness. Military h and r block Amounts received in settlement of pension rights (if you did not contribute to the plan). Military h and r block Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Military h and r block Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Military h and r block Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Military h and r block   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Military h and r block Emotional distress. Military h and r block   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Military h and r block Do not include them in your income. Military h and r block   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Military h and r block Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Military h and r block Deduction for costs involved in unlawful discrimination suits. Military h and r block   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Military h and r block For more information, see Publication 525. Military h and r block Credit card insurance. Military h and r block   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Military h and r block These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Military h and r block Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Military h and r block Down payment assistance. Military h and r block   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Military h and r block If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Military h and r block If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Military h and r block Employment agency fees. Military h and r block   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Military h and r block However, if you pay it and your employer reimburses you for it, it is includible in your income. Military h and r block Energy conservation subsidies. Military h and r block   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Military h and r block Energy conservation measure. Military h and r block   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Military h and r block Dwelling unit. Military h and r block   This includes a house, apartment, condominium, mobile home, boat, or similar property. Military h and r block If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Military h and r block Estate and trust income. Military h and r block    An estate or trust, unlike a partnership, may have to pay federal income tax. Military h and r block If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Military h and r block However, there is never a double tax. Military h and r block Estates and trusts file their returns on Form 1041, U. Military h and r block S. Military h and r block Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Military h and r block Current income required to be distributed. Military h and r block   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Military h and r block Current income not required to be distributed. Military h and r block    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Military h and r block How to report. Military h and r block   Treat each item of income the same way that the estate or trust would treat it. Military h and r block For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Military h and r block The same rule applies to distributions of tax-exempt interest and capital gains. Military h and r block   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Military h and r block Losses. Military h and r block   Losses of estates and trusts generally are not deductible by the beneficiaries. Military h and r block Grantor trust. Military h and r block   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Military h and r block (The grantor is the one who transferred property to the trust. Military h and r block ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Military h and r block   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Military h and r block Expenses paid by another. Military h and r block   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Military h and r block But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Military h and r block Fees for services. Military h and r block   Include all fees for your services in your income. Military h and r block Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Military h and r block Nonemployee compensation. Military h and r block   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Military h and r block You may need to report your fees as self-employment income. Military h and r block See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Military h and r block Corporate director. Military h and r block   Corporate director fees are self-employment income. Military h and r block Report these payments on Schedule C or Schedule C-EZ (Form 1040). Military h and r block Personal representatives. Military h and r block   All personal representatives must include in their gross income fees paid to them from an estate. Military h and r block If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Military h and r block If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Military h and r block The fee is not includible in income if it is waived. Military h and r block Manager of trade or business for bankruptcy estate. Military h and r block   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Military h and r block Report this income on Form 1040, line 21. Military h and r block Notary public. Military h and r block    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Military h and r block These payments are not subject to self-employment tax. Military h and r block See the separate instructions for Schedule SE (Form 1040) for details. Military h and r block Election precinct official. Military h and r block    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Military h and r block Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Military h and r block Foster care providers. Military h and r block   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Military h and r block However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Military h and r block   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Military h and r block Difficulty-of-care payments. Military h and r block   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Military h and r block A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Military h and r block   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Military h and r block Maintaining space in home. Military h and r block   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Military h and r block Reporting taxable payments. Military h and r block    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Military h and r block Report the payments on Schedule C or Schedule C-EZ (Form 1040). Military h and r block See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Military h and r block Found property. Military h and r block   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Military h and r block Free tour. Military h and r block   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Military h and r block Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Military h and r block You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Military h and r block If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Military h and r block Gambling winnings. Military h and r block   You must include your gambling winnings in income on Form 1040, line 21. Military h and r block If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Military h and r block Lotteries and raffles. Military h and r block   Winnings from lotteries and raffles are gambling winnings. Military h and r block In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Military h and r block    If you win a state lottery prize payable in installments, see Publication 525 for more information. Military h and r block Form W-2G. Military h and r block   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Military h and r block Include the amount from box 1 on Form 1040, line 21. Military h and r block Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Military h and r block Reporting winnings and recordkeeping. Military h and r block   For more information on reporting gam
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Managing Household Records

When was the last time you couldn't find an important paper you knew you had carefully put away? How do people decide where to store and keep such records? And how do they know what to keep, what to throw away, and when? Do you have a simple system or roadmap for important papers (PDF |download Adobe Reader) to which you or a loved one can refer to in case of an emergency?

Every household must work out its own records management system, but some general guidelines can help. A good system will provide an overview of what happens to property after a major life event occurs.

Active File

First, gather your important papers and important documents from throughout your home. Put these documents into three piles: an active file, dead storage, and items to discard or shred. The active file should include documents and financial records you deal with on a regular basis and need to refer to. Keep these readily accessible at home:

  • Appliance manuals, warranties and service contracts
  • Bank statements
  • Bill payment receipts
  • Bills awaiting payment
  • Credit card information
  • Education records, diploma, transcripts, etc.
  • Employment records
  • Family health records, including vaccination histories
  • Health benefit information
  • Household inventory
  • Income tax working papers
  • Insurance policies
  • Loan statements and payment books
  • Password list
  • Receipts for items under warranty
  • Safe deposit box inventory (and key)
  • Tax receipts, such as those received for charitable deductions


Dead Storage

All active file papers over 3-years-old are considered dead storage. This may not necessarily apply to everything—for example, appliance manuals that you use frequently should stay in the active file.

Items to Discard

  • Cancelled checks for cash or nondeductible expenses
  • Expired warranties
  • Pay stubs, after reconciling with W-2
  • Other records no longer needed, such as those that were replaced by newer versions, manuals of appliances that you've replaced, etc.
How Long to Keep Documents
Document How Long to Keep It
Bank statements 1 year, unless needed to support tax filings
Birth certificates, marriage licenses, divorce decrees, passports, education records, military service records Forever
Contracts Until updated
Credit card records Until paid, unless needed to support tax filings
Home purchase and improvement records As long as you own the property
Household inventory Forever; update as needed
Insurance, life Forever
Insurance, car, home, etc. Until you renew the policy
Investment statements Shred your monthly statements; keep annual statements until you sell the investments
Investment certificates Until you cash or sell the item
Loan documents Until you sell the item the loan was for
Real estate deeds As long as you own the property
Receipts for large purchases Until you sell or discard the item
Service contracts and warranties Until you sell or discard the item
Social Security card Forever
Social Security statement When you get your new statement online, shred the old one
Tax records 7 years from the filing date
Vehicle titles Until you sell or dispose of the car
Will Until updated

Create Your Filing System

Generally, your home file should include all the items you refer to frequently including bills, warranties, bank statements, etc. You’ll also need a secondary storage location for your more important, difficult to replace papers, such as passports, vehicle titles, birth certificates, etc. A fireproof/waterproof safe may be one possibility, but it's better to store those records in a location away from home, such as a bank safe deposit box.

Organize your home filing system (PDF | download Adobe Reader) in a way that you can understand and manage. Choose one member of your household as file manager who will take responsibility for keeping the filing up-to-date and consistent. However, in case of an emergency, everyone in the household needs to be familiar with the system, including children old enough to understand how to use it. Develop and stick to a regular filing and paperwork schedule to avoid having to deal with backlogged papers. A few minutes once or twice a week should be sufficient.

Consider scanning and storing some documents electronically since it's best to save your important documents and files in a way that can easily be carried away and accessed later. Scanning will give you easy access to your documents and allow you to transfer them via e-mail and easily make back-up copies. Investing in an external hard drive for your computer and regularly backing up important documents will allow you to carry away the external hard drive at a moment's notice.

If you don’t have the time or the desire to take these steps, or have realized that the task is too much to handle, consider asking a friend or family member to help you focus and give a fresh perspective. Or, you may want to consider hiring a professional organizer to provide structure, solutions, and systems, and help you gain a sense of control.

Safe Deposit Box

Once you have organized your documents, you’ll want to consider getting an off-site storage location, such as a safe deposit box. Use the safe deposit box for originals, but remember, you'll still need copies at home if something tragic should happen to you and your safe deposit box gets sealed. Always seal documents stored in a safe deposit box in airtight waterproof containers (like Ziploc bags) to ensure they don’t get damaged. If you'd rather keep your records at home, then get a fireproof/waterproof safe. A good rule of thumb is: Put documents in the box if you can't easily replace them or if you don't know what might happen if you don't have them.

If applicable, you should have official or certified copies of documents for your safe deposit box. "Official" means an original copy with all required signatures. Select documents, such as birth certificates, must also be certified or notarized to be considered valid. You can get most government records for free or at low cost from a government office or online at a government agency's website. If you are unsure whether you need a certified copy, or want more information about which local government office can give you originals of these documents, contact your local consumer protection office. Consult your attorney before you put an original copy of your will in a safe deposit box—some states don’t permit access after a person dies.

If you need to obtain documents regarding birth, death, marriage, or divorce, check out Where to Write for Vital Records for guidance. Be wary of companies that offer to sell you copies of official papers; you should check with the appropriate government agency to see if they will provide the same information free or at a lower price.

Consider keeping copies of the following documents in a safe deposit box or locked in a fireproof/waterproof safe in your home:

  • Adoption papers
  • Advance directives*
  • Birth and death certificates
  • Citizenship papers
  • Contracts of importance
  • Deeds and property titles
  • Household inventory
  • Life insurance policies
  • Marriage licenses and divorce decrees
  • Military discharge papers
  • Passports
  • Powers of attorney*
  • Social Security cards
  • Stock and bond certificates
  • Wills*

*Since the safe deposit box will be sealed at your death, keep a copy of your will somewhere accessible. The same goes for the advance directive and powers of attorney since you may not be able to give others access to the safe deposit box.

Grab and Go Kit for Emergencies

Disasters like floods, fires, earthquakes, and tornadoes strike without warning and can affect anyone. Your number one priority in these situations is making sure your family is safe—not finding your most recent copies of insurance policies or bank statements. An easy-to-grab emergency financial records kit (PDF | download Adobe Reader) will make sure you have access to important documents in case the unexpected happens to you.

What Documents Should You Have Ready?

Store the documents in an accordion file and keep it in your emergency supply kit so that everything you need is together. Items you should put in the kit include originals or copies of:

  • Birth and marriage certificates, divorce decrees
  • Social Security cards of household members
  • Driver's license and other wallet cards
  • Will and/or trust documents; powers of attorney
  • Recent income tax return
  • Passports and/or other identity documents
  • Military discharge papers
  • A list of your prescriptions: name of medication, dosage, pharmacy

Other important papers include:

  • Contacts for family members, employer, financial advisors, attorney, accountant, and banker
  • Insurance policy information
  • Bank, credit union, and credit card account list
  • Summary of personal, financial, property, and other vital information

Other items to consider including:

  • Safe deposit box keys and/or safe combination
  • Computer user names and passwords; CD with relevant personal, financial, legal files
  • Some emergency cash

Remember that these documents contain personal information like social security numbers and bank account information that could be used against you if it fell into the wrong hands. Be sure your emergency financial records kit is stored in a secure location in your home so it is easy for you to carry away in a disaster not for a thief to carry away in a robbery.

The Military H And R Block

Military h and r block 3. Military h and r block   Unrelated Trade or Business Table of Contents Selling of products of exempt functions. Military h and r block Dual use of assets or facilities. Military h and r block Exploitation of exempt functions. Military h and r block ExamplesExceptions. Military h and r block Excluded Trade or Business ActivitiesQualified sponsorship payment. Military h and r block Advertising. Military h and r block Exception for contingent payments. Military h and r block Exception for periodicals. Military h and r block Exception for conventions and trade shows. Military h and r block Legal definition. Military h and r block Legal where played. Military h and r block No for-profit games where played. Military h and r block Unrelated business income. Military h and r block   Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity. Military h and r block   Certain trade or business activities are not treated as an unrelated trade or business. Military h and r block See Excluded Trade or Business Activities, later. Military h and r block Trade or business. Military h and r block   The term “trade or business” generally includes any activity conducted for the production of income from selling goods or performing services. Military h and r block An activity does not lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purposes of the organization. Military h and r block   For example, the regular sale of pharmaceutical supplies to the general public by a hospital pharmacy does not lose its identity as a trade or business, even though the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purpose. Military h and r block Similarly, soliciting, selling, and publishing commercial advertising is a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial matter related to the organization's exempt purpose. Military h and r block Regularly conducted. Military h and r block   Business activities of an exempt organization ordinarily are considered regularly conducted if they show a frequency and continuity, and are pursued in a manner similar to comparable commercial activities of nonexempt organizations. Military h and r block   For example, a hospital auxiliary's operation of a sandwich stand for 2 weeks at a state fair would not be the regular conduct of a trade or business. Military h and r block The stand would not compete with similar facilities that a nonexempt organization would ordinarily operate year-round. Military h and r block However, operating a commercial parking lot every Saturday, year-round, would be the regular conduct of a trade or business. Military h and r block Not substantially related. Military h and r block    A business activity is not substantially related to an organization's exempt purpose if it does not contribute importantly to accomplishing that purpose (other than through the production of funds). Military h and r block Whether an activity contributes importantly depends in each case on the facts involved. Military h and r block   In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt function that they intend to serve. Military h and r block For example, to the extent an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. Military h and r block The part of the activity that is more than needed to accomplish the exempt purpose is an unrelated trade or business. Military h and r block   Also in determining whether activities contribute importantly to the accomplishment of an exempt purpose, the following principles apply. Military h and r block Selling of products of exempt functions. Military h and r block   Ordinarily, selling products that result from the performance of exempt functions is not an unrelated trade or business if the product is sold in substantially the same state it is in when the exempt functions are completed. Military h and r block Thus, for an exempt organization engaged in rehabilitating handicapped persons (its exempt function), selling articles made by these persons as part of their rehabilitation training is not an unrelated trade or business. Military h and r block   However, if a completed product resulting from an exempt function is used or exploited in further business activity beyond what is reasonably appropriate or necessary to dispose of it as is, the activity is an unrelated trade or business. Military h and r block For example, if an exempt organization maintains an experimental dairy herd for scientific purposes, the sale of milk and cream produced in the ordinary course of operation of the project is not an unrelated trade or business. Military h and r block But if the organization uses the milk and cream in the further manufacture of food items such as ice cream, pastries, etc. Military h and r block , the sale of these products is an unrelated trade or business unless the manufacturing activities themselves contribute importantly to the accomplishment of an exempt purpose of the organization. Military h and r block Dual use of assets or facilities. Military h and r block   If an asset or facility necessary to the conduct of exempt functions is also used in commercial activities, its use for exempt functions does not, by itself, make the commercial activities a related trade or business. Military h and r block The test, as discussed earlier, is whether the activities contribute importantly to the accomplishment of exempt purposes. Military h and r block   For example, a museum has a theater auditorium designed for showing educational films in connection with its program of public education in the arts and sciences. Military h and r block The theater is a principal feature of the museum and operates continuously while the museum is open to the public. Military h and r block If the organization also operates the theater as a motion picture theater for the public when the museum is closed, the activity is an unrelated trade or business. Military h and r block   For information on allocating expenses for the dual use of assets or facilities, see Deductions in chapter 4. Military h and r block Exploitation of exempt functions. Military h and r block   Exempt activities sometimes create goodwill or other intangibles that can be exploited in a commercial way. Military h and r block When an organization exploits such an intangible in commercial activities, the fact that the income depends in part upon an exempt function of the organization does not make the commercial activities a related trade or business. Military h and r block Unless the commercial exploitation contributes importantly to the accomplishment of the exempt purpose, the commercial activities are an unrelated trade or business. Military h and r block   For the treatment of expenses attributable to the exploitation of exempt activities, see Deductions in chapter 4. Military h and r block Examples The following are examples of activities that were determined to be (or not to be) unrelated trades or businesses using the definitions and principles just discussed. Military h and r block Sales commissions. Military h and r block   An agricultural organization, whose exempt purposes are to promote better conditions for cattle breeders and to improve the breed generally, engages in an unrelated trade or business when it regularly sells cattle for its members on a commission basis. Military h and r block Artists' facilities. Military h and r block   An organization whose exempt purpose is to stimulate and foster public interest in the fine arts by promoting art exhibits, sponsoring cultural events, and furnishing information about fine arts leases studio apartments to artist tenants and operates a dining hall primarily for these tenants. Military h and r block These two activities do not contribute importantly to accomplishing the organization's exempt purpose. Military h and r block Therefore, they are unrelated trades or businesses. Military h and r block Membership list sales. Military h and r block   An exempt educational organization regularly sells membership mailing lists to business firms. Military h and r block This activity does not contribute importantly to the accomplishment of the organization's exempt purpose and therefore is an unrelated trade or business. Military h and r block Also see Exchange or rental of member lists under Excluded Trade or Business Activities, later. Military h and r block Hospital facilities. Military h and r block   An exempt hospital leases its adjacent office building and furnishes certain office services to a hospital-based medical group for a fee. Military h and r block The group provides all diagnostic and therapeutic procedures to the hospital's patients and operates the hospital's emergency room on a 24-hour basis. Military h and r block The leasing activity is substantially related to the hospital's exempt purpose and is not an unrelated trade or business. Military h and r block   The hospital also operates a gift shop patronized by patients, visitors making purchases for patients, and employees; a cafeteria and coffee shop primarily for employees and medical staff; and a parking lot for patients and visitors only. Military h and r block These activities are also substantially related to the hospital's exempt purpose and do not constitute unrelated trades or businesses. Military h and r block Book publishing. Military h and r block   An exempt organization engages primarily in activities that further its exempt purposes. Military h and r block It also owns the publication rights to a book that does not relate to any of its exempt purposes. Military h and r block The organization exploits the book in a commercial manner by arranging for printing, distribution, publicity, and advertising in connection with the sale of the book. Military h and r block These activities constitute a trade or business regularly conducted. Military h and r block Because exploiting the book is unrelated to the organization's exempt purposes (except for the use of the book's profits), the income is unrelated business income. Military h and r block   However, if the organization transfers publication rights to a commercial publisher in return for royalties, the royalty income received will not be unrelated business income. Military h and r block See Royalties under Exclusions in chapter 4. Military h and r block School handicraft shop. Military h and r block   An exempt vocational school operates a handicraft shop that sells articles made by students in their regular courses of instruction. Military h and r block The students are paid a percentage of the sales price. Military h and r block In addition, the shop sells products made by local residents who make articles at home according to the shop's specifications. Military h and r block The shop manager periodically inspects the articles during their manufacture to ensure that they meet desired standards of style and quality. Military h and r block Although many local participants are former students of the school, any qualified person may participate in the program. Military h and r block The sale of articles made by students does not constitute an unrelated trade or business, but the sale of products made by local residents is an unrelated trade or business and is subject to unrelated business income tax. Military h and r block School facilities. Military h and r block   An exempt school has tennis courts and dressing rooms that it uses during the regular school year in its educational program. Military h and r block During the summer, the school operates a tennis club open to the general public. Military h and r block Employees of the school run the club, including collecting membership fees and scheduling court time. Military h and r block   Another exempt school leases the same type of facilities to an unrelated individual who runs a tennis club for the summer. Military h and r block The lease is for a fixed fee that does not depend on the income or profits derived from the leased property. Military h and r block   In both situations, the exempt purpose is the advancement of education. Military h and r block Furnishing tennis facilities in the manner described does not further that exempt purpose. Military h and r block These activities are unrelated trades or businesses. Military h and r block However, in the second situation the income derived from the leasing of the property is excluded from unrelated business taxable income as rent from real property. Military h and r block See Rents under Exclusions in chapter 4. Military h and r block Services provided with lease. Military h and r block   An exempt university leases its football stadium during several months of the year to a professional football team for a fixed fee. Military h and r block Under the lease agreement, the university furnishes heat, light, and water and is responsible for all ground maintenance. Military h and r block It also provides dressing room, linen, and stadium security services for the professional team. Military h and r block   Leasing of the stadium is an unrelated trade or business. Military h and r block In addition, the substantial services furnished for the convenience of the lessee go beyond those usually provided with the rental of space for occupancy only. Military h and r block Therefore, the income from this lease is rent from real property and unrelated business taxable income. Military h and r block Broadcasting rights. Military h and r block   An exempt collegiate athletic conference conducts an annual competitive athletic game between its conference champion and another collegiate team. Military h and r block Income is derived from admission charges and the sale of exclusive broadcasting rights to a national radio and television network. Military h and r block An athletic program is considered an integral part of the educational process of a university. Military h and r block   The educational purposes served by intercollegiate athletics are identical whether conducted directly by individual universities or by their regional athletic conference. Military h and r block Also, the educational purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television or radio before a much larger audience are substantially similar. Military h and r block Therefore, the sale of the broadcasting rights contributes importantly to the accomplishment of the organization's exempt purpose and is not an unrelated trade or business. Military h and r block   In a similar situation, an exempt organization was created as a national governing body for amateur athletes to foster interest in amateur sports and to encourage widespread public participation. Military h and r block The organization receives income each year from the sale of exclusive broadcasting rights to an independent producer, who contracts with a commercial network to broadcast many of the athletic events sponsored, supervised, and regulated by the organization. Military h and r block   The broadcasting of these events promotes the various amateur sports, fosters widespread public interest in the benefits of the organization's nationwide amateur program, and encourages public participation. Military h and r block The sale of the rights and the broadcasting of the events contribute importantly to the organization's exempt purpose. Military h and r block Therefore, the sale of the exclusive broadcasting rights is not an unrelated trade or business. Military h and r block Yearbook advertising. Military h and r block   An exempt organization receives income from the sale of advertising in its annual yearbook. Military h and r block The organization hires an independent commercial firm, under a contract covering a full calendar year, to conduct an intensive advertising solicitation campaign in the organization's name. Military h and r block This firm is paid a percentage of the gross advertising receipts for selling the advertising, collecting from advertisers, and printing the yearbook. Military h and r block This advertising activity is an unrelated trade or business. Military h and r block Pet boarding and grooming services. Military h and r block   An exempt organization, organized and operated for the prevention of cruelty to animals, receives unrelated business income from providing pet boarding and grooming services for the general public. Military h and r block These activities do not contribute importantly to its purpose of preventing cruelty to animals. Military h and r block Museum eating facilities. Military h and r block   An exempt art museum operates a dining room, a cafeteria, and a snack bar for use by the museum staff, employees, and visitors. Military h and r block Eating facilities in the museum help to attract visitors and allow them to spend more time viewing the museum's exhibits without having to seek outside restaurants at mealtime. Military h and r block The eating facilities also allow the museum staff and employees to remain in the museum throughout the day. Military h and r block Thus, the museum's operation of the eating facilities contributes importantly to the accomplishment of its exempt purposes and is not unrelated trade or business. Military h and r block Halfway house workshop. Military h and r block   A halfway house organized to provide room, board, therapy, and counseling for persons discharged from alcoholic treatment centers also operates a furniture shop to provide full-time employment for its residents. Military h and r block The profits are applied to the operating costs of the halfway house. Military h and r block The income from this venture is not unrelated trade or business income because the furniture shop contributes importantly to the organization's purpose of aiding its residents' transition from treatment to a normal and productive life. Military h and r block Travel tour programs. Military h and r block   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose for which tax exemption was granted to the organization. Military h and r block Example 1. Military h and r block A tax-exempt university alumni association provides a travel tour program for its members and their families. Military h and r block The organization works with various travel agencies and schedules approximately ten tours a year to various places around the world. Military h and r block It mails out promotional material and accepts reservations for fees paid by the travel agencies on a per-person basis. Military h and r block The organization provides an employee for each tour as a tour leader. Military h and r block There is no formal educational program conducted with these tours, and they do not differ from regular commercially operated tours. Military h and r block By providing travel tours to its members, the organization is engaging in a regularly conducted trade or business. Military h and r block Even if the tours it offers support the university, financially and otherwise, and encourage alumni to do the same, they do not contribute importantly to the organization's exempt purpose of promoting education. Military h and r block Therefore, the sale of the travel tours is an unrelated trade or business. Military h and r block Example 2. Military h and r block A tax-exempt organization formed for the purpose of educating individuals about the geography and the culture of the United States provides study tours to national parks and other locations within the United States. Military h and r block These tours are conducted by teachers and others certified by the state board of education. Military h and r block The tours are primarily designed for students enrolled in degree programs at state educational institutions but are open to all who agree to participate in the required study program associated with the tour taken. Military h and r block A tour's study program consists of instruction on subjects related to the location being visited on the tour. Military h and r block Each tour group brings along a library of material related to the subjects being studied on the tour. Military h and r block During the tour, 5 or 6 hours per day are devoted to organized study, preparation of reports, lectures, instruction, and recitation by the students. Military h and r block Examinations are given at the end of each tour. Military h and r block The state board of education awards academic credit for tour participation. Military h and r block Because these tours are substantially related to the organization's exempt purpose, they are not an unrelated trade or business. Military h and r block Insurance programs. Military h and r block   An organization that acts as a group insurance policyholder for its members and collects a fee for performing administrative services is normally carrying on an unrelated trade or business. Military h and r block Exceptions. Military h and r block   Organizations whose exempt activities may include the provision of insurance benefits, such as fraternal beneficiary societies, voluntary employees beneficiary associations, and labor organizations, are generally exceptions to this rule. Military h and r block Magazine publishing. Military h and r block   An association of credit unions with tax-exempt status as a business league publishes a consumer-oriented magazine four times a year and makes it available to member credit unions for purchase. Military h and r block   By selling a magazine to its members as a promotional device, the organization furnishes its members with a regular commercial service they can use in their own operations. Military h and r block This service does not promote the improvement of business conditions of one or more lines of business, which is the exempt purpose of a business league. Military h and r block   Since the activity does not contribute importantly to the organization's exempt function, it is an unrelated trade or business. Military h and r block Directory of members. Military h and r block   A business league publishes an annual directory that contains a list of all its members, their addresses, and their area of expertise. Military h and r block Each member has the same amount of space in the directory, and its format does not emphasize the relative importance or reputation of any member. Military h and r block The directory contains no commercial advertisement and is sold only to the organization's members. Military h and r block   The directory facilitates communication among the members and encourages the exchange of ideas and expertise. Military h and r block Because the directory lists the members in a similar noncommercial format without advertising and is not distributed to the public, its sale does not confer private commercial benefits on the members. Military h and r block The sale of the directory does contribute importantly to the organization's exempt purpose and is not an unrelated trade or business. Military h and r block This directory differs from the publication discussed next because of its noncommercial characteristics. Military h and r block Sales of advertising space. Military h and r block   A national association of law enforcement officials publishes a monthly journal that contains articles and other editorial material of professional interest to its members. Military h and r block The journal is distributed without charge, mainly to the organization's members. Military h and r block   The organization sells advertising space in the journal either for conventional advertising or to merely identify the purchaser without a commercial message. Military h and r block Some of the noncommercial advertising identifies the purchaser in a separate space, and some consists of listings of 60 or more purchasers per page. Military h and r block A business firm identified in a separate space is further identified in an Index of Advertisers. Military h and r block   The organization solicits advertising by personal contacts. Military h and r block Advertising from large firms is solicited by contacting their chief executive officer or community relations officer rather than their advertising manager. Military h and r block The organization also solicits advertising in form letters appealing for corporate and personal contributions. Military h and r block   An exempt organization's sale of advertising placed for the purchaser's commercial benefit is a commercial activity. Military h and r block Goodwill derived by the purchaser from being identified as a patron of the organization is usually considered a form of commercial benefit. Military h and r block Therefore, advertising in an exempt organization's publication is generally presumed to be placed for the purchaser's commercial benefit, even if it has no commercial message. Military h and r block However, this presumption is not conclusive if the purchaser's patronage would be difficult to justify commercially in view of the facts and circumstances. Military h and r block In that case, other factors should also be considered in determining whether a commercial benefit can be expected. Military h and r block Those other factors include: The normal manner in which the publication is circulated; The territorial scope of the circulation; The extent to which its readers, promoters, or the like could reasonably be expected to further, either directly or indirectly, the commercial interest of the advertisers; The eligibility of the publishing organization to receive tax-deductible contributions; and The commercial or noncommercial methods used to solicit the advertisers. Military h and r block   In this situation, the purchaser of a separate advertising space without a commercial message can nevertheless expect a commercial benefit from the goodwill derived from being identified in that manner as a patron of the organization. Military h and r block However, the purchaser of a listing cannot expect more than an inconsequential benefit. Military h and r block Therefore, the sale of separate spaces, but not the listings, is an unrelated trade or business. Military h and r block Publishing legal notices. Military h and r block   A bar association publishes a legal journal containing opinions of the county court, articles of professional interest to lawyers, advertisements for products and services used by the legal profession, and legal notices. Military h and r block The legal notices are published to satisfy state laws requiring publication of notices in connection with legal proceedings, such as the administration of estates and actions to quiet title to real property. Military h and r block The state designated the bar association's journal as the place to publish the required notices. Military h and r block   The publication of ordinary commercial advertising does not advance the exempt purposes of the association even when published in a periodical that contains material related to exempt purposes. Military h and r block Although the advertising is directed specifically to members of the legal profession, it is still commercial in nature and does not contribute importantly to the exempt purposes of the association. Military h and r block Therefore, the advertising income is unrelated trade or business income. Military h and r block   On the other hand, the publication of legal notices is distinguishable from ordinary commercial advertising in that its purpose is to inform the general public of significant legal events rather than to stimulate demand for the products or services of an advertiser. Military h and r block This promotes the common interests of the legal profession and contributes importantly to the association's exempt purposes. Military h and r block Therefore, the publishing of legal notices does not constitute an unrelated trade or business. Military h and r block Museum greeting card sales. Military h and r block    An art museum that exhibits modern art sells greeting cards that display printed reproductions of selected works from other art collections. Military h and r block Each card is imprinted with the name of the artist, the title or subject matter of the work, the date or period of its creation, if known, and the museum's name. Military h and r block The cards contain appropriate greetings and are personalized on request. Military h and r block   The organization sells the cards in the shop it operates in the museum and sells them at quantity discounts to retail stores. Military h and r block It also sells them by mail order through a catalog that is advertised in magazines and other publications throughout the year. Military h and r block As a result, a large number of cards are sold at a significant profit. Military h and r block   The museum is exempt as an educational organization on the basis of its ownership, maintenance, and exhibition for public viewing of works of art. Military h and r block The sale of greeting cards with printed reproductions of artworks contributes importantly to the achievement of the museum's exempt educational purposes by enhancing public awareness, interest, and appreciation of art. Military h and r block The cards may encourage more people to visit the museum itself to share in its educational programs. Military h and r block The fact that the cards are promoted and sold in a commercial manner at a profit and in competition with commercial greeting card publishers does not alter the fact that the activity is related to the museum's exempt purpose. Military h and r block Therefore, these sales activities are not an unrelated trade or business. Military h and r block Museum shop. Military h and r block   An art museum maintained and operated for the exhibition of American folk art operates a shop in the museum that sells: Reproductions of works in the museum's own collection and reproductions of artistic works from the collections of other art museums (prints suitable for framing, postcards, greeting cards, and slides); Metal, wood, and ceramic copies of American folk art objects from its own collection and similar copies of art objects from other collections of artworks; Instructional literature and scientific books and souvenir items concerning the history and development of art and, in particular, of American folk art; and Scientific books and souvenir items of the city in which the museum is located. Military h and r block   The shop also rents originals or reproductions of paintings contained in its collection. Military h and r block All of its reproductions are imprinted with the name of the artist, the title or subject matter of the work from which it is reproduced, and the museum's name. Military h and r block   Each line of merchandise must be considered separately to determine if sales are related to the exempt purpose. Military h and r block   The sale and rental of reproductions and copies of works from the museum's own collection and reproductions of artistic works not owned by the museum contribute importantly to the achievement of the museum's exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the public's understanding and appreciation of art. Military h and r block The same is true for the sale of literature relating to art. Military h and r block Therefore, these sales activities are not an unrelated trade or business. Military h and r block   On the other hand, the sale of scientific books and souvenir items of the city where the museum is located has no causal relationship to art or to artistic endeavor and, therefore, does not contribute importantly to the accomplishment of the museum's exempt educational purposes. Military h and r block The fact that selling some of these items could, under different circumstances, be held related to the exempt educational purpose of some other exempt educational organization does not change this conclusion. Military h and r block Additionally, the sale of these items does not lose its identity as a trade or business merely because the museum also sells articles which do contribute importantly to the accomplishment of its exempt function. Military h and r block Therefore, these sales are an unrelated trade or business. Military h and r block Business league's parking and bus services. Military h and r block   A business league, whose purpose is to retain and stimulate trade in a downtown area that has inadequate parking facilities, operates a fringe parking lot and shuttle bus service. Military h and r block It also operates, as an insubstantial part of its activities, a park and shop plan. Military h and r block   The fringe parking lot and shuttle bus service operate in a manner that does not favor any individual or group of downtown merchants. Military h and r block The merchants cannot offer free or discount parking or bus fares to their customers. Military h and r block   The park and shop plan allows customers of particular merchants to park free at certain parking lots in the area. Military h and r block Merchants participating in this plan buy parking stamps, which they distribute to their customers to use to pay for parking. Military h and r block   Operating the fringe parking lot and shuttle bus service provides easy and convenient access to the downtown area and, therefore, stimulates and improves business conditions in the downtown area generally. Military h and r block That activity contributes importantly to the organization's accomplishing its exempt purpose and is not an unrelated trade or business. Military h and r block   The park and shop plan encourages customers to use a limited number of participating member merchants in order to obtain free parking. Military h and r block This provides a particular service to individual members of the organization and does not further its exempt purpose. Military h and r block Therefore, operating the park and shop plan is an unrelated trade or business. Military h and r block Youth residence. Military h and r block   An exempt organization, whose purpose is to provide for the welfare of young people, rents rooms primarily to people under age 25. Military h and r block The residence units are operated on, and as a part of, the premises in which the organization carries on the social, recreational, and guidance programs for which it was recognized as exempt. Military h and r block The facilities are under the management and supervision of trained career professionals who provide residents with personal counseling, physical education programs, and group recreational activities. Military h and r block The rentals are not an unrelated trade or business because renting the rooms is substantially related to the organization's exempt purpose. Military h and r block Health club program. Military h and r block   An exempt charitable organization's purpose is to provide for the welfare of young people. Military h and r block The organization conducts charitable activities and maintains facilities that will contribute to the physical, social, mental, and spiritual health of young people at minimum or no cost to them. Military h and r block Nominal annual dues are charged for membership in the organization and use of the facilities. Military h and r block   In addition, the organization organized a health club program that its members could join for an annual fee in addition to the annual dues. Military h and r block The annual fee is comparable to fees charged by similar local commercial health clubs and is sufficiently high to restrict participation in the program to a limited number of members of the community. Military h and r block   The health club program is in addition to the general physical fitness program of the organization. Military h and r block Operating this program does not contribute importantly to the organization's accomplishing its exempt purpose and, therefore, is an unrelated trade or business. Military h and r block Miniature golf course. Military h and r block   An exempt youth welfare organization operates a miniature golf course that is open to the general public. Military h and r block The course, which is managed by salaried employees, is substantially similar to commercial courses. Military h and r block The admission fees charged are comparable to fees of commercial facilities and are designed to return a profit. Military h and r block   The operation of the miniature golf course in a commercial manner does not contribute importantly to the accomplishment of the organization's exempt purpose and, therefore, is an unrelated trade or business. Military h and r block Sales of hearing aids. Military h and r block   A tax-exempt hospital, whose primary activity is rehabilitation, sells hearing aids to patients. Military h and r block This activity is an essential part of the hospital's program to test and evaluate patients with hearing deficiencies and contributes importantly to its exempt purpose. Military h and r block It is not an unrelated trade or business. Military h and r block Nonpatient laboratory testing. Military h and r block   Nonpatient laboratory testing performed by a tax-exempt teaching hospital on specimens needed for the conduct of its teaching activities is not an unrelated trade or business. Military h and r block However, laboratory testing performed by a tax-exempt non-teaching hospital on referred specimens from private office patients of staff physicians is an unrelated trade or business if these services are otherwise available in the community. Military h and r block Selling endorsements. Military h and r block   An exempt scientific organization enjoys an excellent reputation in the field of biological research. Military h and r block It exploits this reputation regularly by selling endorsements of laboratory equipment to manufacturers. Military h and r block Endorsing laboratory equipment does not contribute importantly to the accomplishment of any purpose for which exemption is granted to the organization. Military h and r block Accordingly, the sale of endorsements is an unrelated trade or business. Military h and r block Sponsoring entertainment events. Military h and r block   An exempt university has a regular faculty and a regularly enrolled student body. Military h and r block During the school year, the university sponsors the appearance of professional theater companies and symphony orchestras that present drama and musical performances for the students and faculty members. Military h and r block Members of the general public also are admitted. Military h and r block The university advertises these performances and supervises advance ticket sales at various places, including such university facilities as the cafeteria and the university bookstore. Military h and r block Although the presentation of the performances makes use of an intangible generated by the university's exempt educational functions—the presence of the student body and faculty—such drama and music events contribute importantly to the overall educational and cultural functions of the university. Military h and r block Therefore, the activity is not an unrelated trade or business. Military h and r block Excluded Trade or Business Activities The following activities are specifically excluded from the definition of unrelated trade or business. Military h and r block Volunteer workforce. Military h and r block   Any trade or business in which substantially all the work is performed for the organization without compensation is not an unrelated trade or business. Military h and r block Example 1. Military h and r block A retail store operated by an exempt orphanage where unpaid volunteers perform substantially all the work in carrying on the business is not an unrelated trade or business. Military h and r block Example 2. Military h and r block A volunteer fire company conducts weekly public dances. Military h and r block Holding public dances and charging admission on a regular basis may, given the facts and circumstances of a particular case, be considered an unrelated trade or business. Military h and r block However, because the work at the dances is performed by unpaid volunteers, the activity is not an unrelated trade or business. Military h and r block Convenience of members. Military h and r block   A trade or business conducted by a 501(c)(3) organization or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees is not an unrelated trade or business. Military h and r block For example, a laundry operated by a college for the purpose of laundering dormitory linens and students' clothing is not an unrelated trade or business. Military h and r block Qualified sponsorship activities. Military h and r block   Soliciting and receiving qualified sponsorship payments is not an unrelated trade or business, and the payments are not subject to unrelated business income tax. Military h and r block Qualified sponsorship payment. Military h and r block   This is any payment made by a person engaged in a trade or business for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization's activities. Military h and r block “Use or acknowledgment” does not include advertising the sponsor's products or services. Military h and r block The organization's activities include all its activities, whether or not related to its exempt purposes. Military h and r block   For example, if, in return for receiving a sponsorship payment, an organization promises to use the sponsor's name or logo in acknowledging the sponsor's support for an educational or fundraising event, the payment is a qualified sponsorship payment and is not subject to the unrelated business income tax. Military h and r block   Providing facilities, services, or other privileges (for example, complimentary tickets, pro-am playing spots in golf tournaments, or receptions for major donors) to a sponsor or the sponsor's designees in connection with a sponsorship payment does not affect whether the payment is a qualified sponsorship payment. Military h and r block Instead, providing these goods or services is treated as a separate transaction in determining whether the organization has unrelated business income from the event. Military h and r block Generally, if the services or facilities are not a substantial benefit or if providing them is a related business activity, the payments will not be subject to the unrelated business income tax. Military h and r block   Similarly, the sponsor's receipt of a license to use an intangible asset (for example, a trademark, logo, or designation) of the organization is treated as separate from the qualified sponsorship transaction in determining whether the organization has unrelated business taxable income. Military h and r block   If part of a payment would be a qualified sponsorship payment if paid separately, that part is treated as a separate payment. Military h and r block For example, if a sponsorship payment entitles the sponsor to both product advertising and the use or acknowledgment of the sponsor's name or logo by the organization, then the unrelated business income tax does not apply to the part of the payment that is more than the fair market value of the product advertising. Military h and r block Advertising. Military h and r block   A payment is not a qualified sponsorship payment if, in return, the organization advertises the sponsor's products or services. Military h and r block For information on the treatment of payments for advertising, see Exploitation of Exempt Activity—Advertising Sales in chapter 4. Military h and r block   Advertising includes: Messages containing qualitative or comparative language, price information, or other indications of savings or value; Endorsements; and Inducements to purchase, sell, or use the products or services. Military h and r block   The use of promotional logos or slogans that are an established part of the sponsor's identity is not, by itself, advertising. Military h and r block In addition, mere distribution or display of a sponsor's product by the organization to the public at a sponsored event, whether for free or for remuneration, is considered use or acknowledgment of the product rather than advertising. Military h and r block Exception for contingent payments. Military h and r block   A payment is not a qualified sponsorship payment if its amount is contingent, by contract or otherwise, upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. Military h and r block However, the fact that a sponsorship payment is contingent upon an event actually taking place or being broadcast does not, by itself, affect whether a payment qualifies. Military h and r block Exception for periodicals. Military h and r block   A payment is not a qualified sponsorship payment if it entitles the payer to the use or acknowledgment of the business name, logo, or product lines in the organization's periodical. Military h and r block For this purpose, a periodical is any regularly scheduled and printed material (for example, a monthly journal) published by or on behalf of the organization. Military h and r block It does not include material that is related to and primarily distributed in connection with a specific event conducted by the organization (for example, a program or brochure distributed at a sponsored event). Military h and r block   The treatment of payments that entitle the payer to the depiction of the payer's name, logo, or products lines in an organization's periodical is determined under the rules that apply to advertising activities. Military h and r block See Sales of advertising space under Examples, earlier in this chapter. Military h and r block Also see Exploitation of Exempt Activity—Advertising Sales in chapter 4. Military h and r block Exception for conventions and trade shows. Military h and r block   A payment is not a qualified sponsorship payment if it is made in connection with any qualified convention or trade show activity. Military h and r block The exclusion of qualified convention or trade show activities from the definition of unrelated trade or business is explained later under Convention or trade show activity. Military h and r block Selling donated merchandise. Military h and r block   A trade or business that consists of selling merchandise, substantially all of which the organization received as gifts or contributions, is not an unrelated trade or business. Military h and r block For example, a thrift shop operated by a tax-exempt organization that sells donated clothes and books to the general public, with the proceeds going to the exempt organization, is not an unrelated trade or business. Military h and r block Employee association sales. Military h and r block   The sale of certain items by a local association of employees described in section 501(c)(4), organized before May 17, 1969, is not an unrelated trade or business if the items are sold for the convenience of the association's members at their usual place of employment. Military h and r block This exclusion applies only to the sale of work-related clothes and equipment and items normally sold through vending machines, food dispensing facilities, or by snack bars. Military h and r block Bingo games. Military h and r block   Certain bingo games are not included in the term “unrelated trade or business. Military h and r block ” To qualify for this exclusion, the bingo game must meet the following requirements. Military h and r block It meets the legal definition of bingo. Military h and r block It is legal where it is played. Military h and r block It is played in a jurisdiction where bingo games are not regularly conducted by for-profit organizations. Military h and r block Legal definition. Military h and r block   For a game to meet the legal definition of bingo, wagers must be placed, winners must be determined, and prizes or other property must be distributed in the presence of all persons placing wagers in that game. Military h and r block   A wagering game that does not meet the legal definition of bingo does not qualify for the exclusion, regardless of its name. Military h and r block For example, “instant bingo,” in which a player buys a pre-packaged bingo card with pull-tabs that the player removes to determine if he or she is a winner, does not qualify. Military h and r block Legal where played. Military h and r block   This exclusion applies only if bingo is legal under the laws of the jurisdiction where it is conducted. Military h and r block The fact that a jurisdiction's law that prohibits bingo is rarely enforced or is widely disregarded does not make the conduct of bingo legal for this purpose. Military h and r block No for-profit games where played. Military h and r block   This exclusion applies only if for-profit organizations cannot regularly conduct bingo games in any part of the same jurisdiction. Military h and r block Jurisdiction is normally the entire state; however, in certain situations, local jurisdiction will control. Military h and r block Example. Military h and r block Tax-exempt organizations X and Y are organized under the laws of state N, which has a law that permits exempt organizations to conduct bingo games. Military h and r block In addition, for-profit organizations are permitted to conduct bingo games in city S, a resort community located in county R. Military h and r block Several for-profit organizations conduct nightly games. Military h and r block Y conducts weekly bingo games in city S, while X conducts weekly games in county R. Military h and r block Since state law confines the for-profit organizations to city S, local jurisdiction controls. Military h and r block Y's bingo games conducted in city S are an unrelated trade or business. Military h and r block However, X's bingo games conducted in county R outside of city S are not an unrelated trade or business. Military h and r block Gambling activities other than bingo. Military h and r block   Any game of chance conducted by an exempt organization in North Dakota is not an unrelated trade or business if conducting the game does not violate any state or local law. Military h and r block Pole rentals. Military h and r block   The term unrelated trade or business does not include qualified pole rentals by a mutual or cooperative telephone or electric company described in section 501(c)(12). Military h and r block A qualified pole rental is the rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that the company uses in providing telephone or electric services to its members, and According to the rental, to support one or more wires (in addition to the wires described in 1 ) for use in connection with the transmission by wire of electricity or of telephone or other communications. Military h and r block For this purpose, the term rental includes any sale of the right to use the pole (or other structure). Military h and r block Distribution of low cost articles. Military h and r block   The term unrelated trade or business does not include activities relating to the distribution of low cost articles incidental to soliciting charitable contributions. Military h and r block This applies to organizations described in section 501 that are eligible to receive charitable contributions. Military h and r block   A distribution is considered incidental to the solicitation of a charitable contribution if: The recipient did not request the distribution, The distribution is made without the express consent of the recipient, and The article is accompanied by a request for a charitable contribution to the organization and a statement that the recipient may keep the low cost article regardless of whether a contribution is made. Military h and r block   An article is considered low cost if the cost of an item (or the aggregate costs if more than one item) distributed to a single recipient in a tax year is not more than $5, indexed annually for inflation. Military h and r block The maximum cost of a low cost article is $9. Military h and r block 70 for 2011. Military h and r block The cost of an article is the cost to the organization that distributes the item or on whose behalf it is distributed. Military h and r block Exchange or rental of member lists. Military h and r block   The exchange or rental of member or donor lists between organizations described in section 501 that are eligible to receive charitable contributions is not included in the term unrelated trade or business. Military h and r block Hospital services. Military h and r block   The providing of certain services at or below cost by an exempt hospital to other exempt hospitals that have facilities for 100 or fewer inpatients is not an unrelated trade or business. Military h and r block This exclusion applies only to services described in section 501(e)(1)(A). Military h and r block Public entertainment activity. Military h and r block   An unrelated trade or business does not include a qualified public entertainment activity. Military h and r block A public entertainment activity is one traditionally conducted at a fair or exposition promoting agriculture and education, including any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment. Military h and r block   A qualified public entertainment activity is one conducted by a qualifying organization: In conjunction with an international, national, state, regional, or local fair or exposition; In accordance with state law that permits the activity to be operated or conducted solely by such an organization or by an agency, instrumentality, or political subdivision of the state; or In accordance with state law that permits an organization to be granted a license to conduct an activity for not more than 20 days on paying the state a lower percentage of the revenue from the activity than the state charges nonqualifying organizations that hold similar activities. Military h and r block   For these purposes, a qualifying organization is an organization described in section 501(c)(3), 501(c)(4), or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial exempt purposes. Military h and r block Its conducting qualified public entertainment activities will not affect determination of its exempt status. Military h and r block Convention or trade show activity. Military h and r block   An unrelated trade or business does not include qualified convention or trade show activities conducted at a convention, annual meeting, or trade show. Military h and r block   A qualified convention or trade show activity is any activity of a kind traditionally conducted by a qualifying organization in conjunction with an international, national, state, regional, or local convention, annual meeting, or show if: One of the purposes of the organization in sponsoring the activity is promoting and stimulating interest in, and demand for, the products and services of that industry or educating the persons in attendance regarding new products and services or new rules and regulations affecting the industry; and The show is designed to achieve its purpose through the character of the exhibits and the extent of the industry products that are displayed. Military h and r block   For these purposes, a qualifying organization is one described in section 501(c)(3), 501(c)(4), 501(c)(5), or 501(c)(6). Military h and r block The organization must regularly conduct, as one of its substantial exempt purposes, a qualified convention or trade show activity. Military h and r block   The rental of display space to exhibitors (including exhibitors who are suppliers) at a qualified convention or trade show is not an unrelated trade or business even if the exhibitors who rent the space are permitted to sell or solicit orders. Military h and r block For this purpose, a supplier's exhibit is one in which the exhibitor displays goods or services that are supplied to, rather than by, members of the qualifying organization in the conduct of these members' own trades or businesses. Military h and r block    Certain Internet activities conducted by a trade association described in section 501(c)(6) will be considered qualified convention and trade show activity if conducted on a special supplementary section of the association's website in conjunction with a trade show conducted by the association. Military h and r block The trade show itself must be a qualified convention and trade show activity. Military h and r block The supplementary section of the website must be ancillary to, and serve to augment and enhance, the trade show, as when it makes available the same information available at the trade show and is available only during a time period that coincides with the time period that the trade show is in operation. Military h and r block Conversely, Internet activities that are not conducted in conjunction with a qualified convention and trade show activity and that do not augment and enhance the trade show cannot themselves be qualified convention and trade show activity. Military h and r block Prev  Up  Next   Home   More Online Publications