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Military H&r Block

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Military H&r Block

Military h&r block 8. Military h&r block   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Military h&r block Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Military h&r block It is similar to the straight line method of depreciation. Military h&r block The various amortizable costs covered in this chapter are included in the list below. Military h&r block However, this chapter does not discuss amortization of bond premium. Military h&r block For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Military h&r block Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Military h&r block How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Military h&r block To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Military h&r block For example, in 2012, you began to amortize a lease. Military h&r block In 2013, you began to amortize a second lease. Military h&r block Report amortization from the new lease on line 42 of your 2013 Form 4562. Military h&r block Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Military h&r block If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Military h&r block Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Military h&r block Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Military h&r block Generally, you recover costs for particular assets through depreciation deductions. Military h&r block However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Military h&r block For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Military h&r block For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Military h&r block The costs that are not deducted currently can be amortized ratably over a 180-month period. Military h&r block The amortization period starts with the month you begin operating your active trade or business. Military h&r block You are not required to attach a statement to make this election. Military h&r block You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Military h&r block Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Military h&r block See Regulations sections 1. Military h&r block 195-1, 1. Military h&r block 248-1, and 1. Military h&r block 709-1. Military h&r block For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Military h&r block Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Military h&r block If the election is made, you must attach any statement required by Regulations sections 1. Military h&r block 195-1(b), 1. Military h&r block 248-1(c), and 1. Military h&r block 709-1(c), as in effect before September 9, 2008. Military h&r block Note. Military h&r block You can apply the provisions of Regulations sections 1. Military h&r block 195-1, 1. Military h&r block 248-1, and 1. Military h&r block 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Military h&r block Otherwise, the provisions under Regulations sections 1. Military h&r block 195-1(b), 1. Military h&r block 248-1(c), and 1. Military h&r block 709-1(c), as in effect before September 9, 2008, will apply. Military h&r block For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Military h&r block See How To Make the Election , later. Military h&r block The cost must qualify as one of the following. Military h&r block A business start-up cost. Military h&r block An organizational cost for a corporation. Military h&r block An organizational cost for a partnership. Military h&r block Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Military h&r block Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Military h&r block Qualifying costs. Military h&r block   A start-up cost is amortizable if it meets both of the following tests. Military h&r block It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Military h&r block It is a cost you pay or incur before the day your active trade or business begins. Military h&r block   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Military h&r block Advertisements for the opening of the business. Military h&r block Salaries and wages for employees who are being trained and their instructors. Military h&r block Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Military h&r block Salaries and fees for executives and consultants, or for similar professional services. Military h&r block Nonqualifying costs. Military h&r block   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Military h&r block See Research and Experimental Costs , later. Military h&r block Purchasing an active trade or business. Military h&r block   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Military h&r block These are costs that help you decide whether to purchase a business. Military h&r block Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Military h&r block Example. Military h&r block On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Military h&r block They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Military h&r block In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Military h&r block The letter stated that a binding commitment would result only after a purchase agreement was signed. Military h&r block The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Military h&r block On October 22nd, you signed a purchase agreement with XYZ, Inc. Military h&r block All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Military h&r block Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Military h&r block Disposition of business. Military h&r block   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Military h&r block However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Military h&r block Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Military h&r block Qualifying costs. Military h&r block   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Military h&r block   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Military h&r block   Examples of organizational costs include: The cost of temporary directors. Military h&r block The cost of organizational meetings. Military h&r block State incorporation fees. Military h&r block The cost of legal services. Military h&r block Nonqualifying costs. Military h&r block   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Military h&r block Costs associated with the transfer of assets to the corporation. Military h&r block Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Military h&r block Qualifying costs. Military h&r block   A partnership can amortize an organizational cost only if it meets all the following tests. Military h&r block It is for the creation of the partnership and not for starting or operating the partnership trade or business. Military h&r block It is chargeable to a capital account (see chapter 1). Military h&r block It could be amortized over the life of the partnership if the partnership had a fixed life. Military h&r block It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Military h&r block However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Military h&r block It is for a type of item normally expected to benefit the partnership throughout its entire life. Military h&r block   Organizational costs include the following fees. Military h&r block Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Military h&r block Accounting fees for services incident to the organization of the partnership. Military h&r block Filing fees. Military h&r block Nonqualifying costs. Military h&r block   The following costs cannot be amortized. Military h&r block The cost of acquiring assets for the partnership or transferring assets to the partnership. Military h&r block The cost of admitting or removing partners, other than at the time the partnership is first organized. Military h&r block The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Military h&r block The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Military h&r block These “syndication fees” are capital expenses that cannot be depreciated or amortized. Military h&r block Liquidation of partnership. Military h&r block   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Military h&r block However, these costs can be deducted only to the extent they qualify as a loss from a business. Military h&r block How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Military h&r block You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Military h&r block Once you choose an amortization period, you cannot change it. Military h&r block To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Military h&r block The result is the amount you can deduct for each month. Military h&r block Cash method partnership. Military h&r block   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Military h&r block However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Military h&r block How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Military h&r block You may also be required to attach an accompanying statement (described later) to your return. Military h&r block For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Military h&r block Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Military h&r block 195-1, 1. Military h&r block 248-1, and 1. Military h&r block 709-1, you must also attach an accompanying statement to elect to amortize the costs. Military h&r block If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Military h&r block See Starting a Business , earlier, for more information. Military h&r block Generally, you must file the return by the due date (including any extensions). Military h&r block However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Military h&r block For more information, see the instructions for Part VI of Form 4562. Military h&r block You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Military h&r block Note. Military h&r block The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Military h&r block If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Military h&r block A shareholder or partner cannot make this election. Military h&r block You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Military h&r block Only the corporation or partnership can amortize these costs. Military h&r block However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Military h&r block These costs qualify as business start-up costs if you acquire the partnership interest. Military h&r block Start-up costs election statement. Military h&r block   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Military h&r block A description of the business to which the start-up costs relate. Military h&r block A description of each start-up cost incurred. Military h&r block The month your active business began (or was acquired). Military h&r block The number of months in your amortization period (which is generally 180 months). Military h&r block Filing the statement early. Military h&r block   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Military h&r block If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Military h&r block Revised statement. Military h&r block   You can file a revised statement to include any start-up costs not included in your original statement. Military h&r block However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Military h&r block You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Military h&r block Organizational costs election statement. Military h&r block   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Military h&r block A description of each cost. Military h&r block The amount of each cost. Military h&r block The date each cost was incurred. Military h&r block The month your corporation or partnership began active business (or acquired the business). Military h&r block The number of months in your amortization period (which is generally 180 months). Military h&r block Partnerships. Military h&r block   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Military h&r block   You do not need to separately list any partnership organizational cost that is less than $10. Military h&r block Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Military h&r block   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Military h&r block Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Military h&r block The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Military h&r block However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Military h&r block For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Military h&r block How to amortize. Military h&r block   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Military h&r block Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Military h&r block You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Military h&r block You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Military h&r block See Anti-Churning Rules, later. Military h&r block Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Military h&r block The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Military h&r block You cannot deduct amortization for the month you dispose of the intangible. Military h&r block If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Military h&r block You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Military h&r block Tax-exempt use property subject to a lease. Military h&r block   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Military h&r block Cost attributable to other property. Military h&r block   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Military h&r block For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Military h&r block Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Military h&r block Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Military h&r block You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Military h&r block Goodwill. Military h&r block   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Military h&r block Going concern value. Military h&r block   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Military h&r block It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Military h&r block It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Military h&r block Workforce in place, etc. Military h&r block   This includes the composition of a workforce (for example, its experience, education, or training). Military h&r block It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Military h&r block   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Military h&r block Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Military h&r block Business books and records, etc. Military h&r block   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Military h&r block It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Military h&r block Patents, copyrights, etc. Military h&r block   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Military h&r block Customer-based intangible. Military h&r block   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Military h&r block For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Military h&r block A customer base. Military h&r block A circulation base. Military h&r block An undeveloped market or market growth. Military h&r block Insurance in force. Military h&r block A mortgage servicing contract. Military h&r block An investment management contract. Military h&r block Any other relationship with customers involving the future provision of goods or services. Military h&r block   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Military h&r block Supplier-based intangible. Military h&r block   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Military h&r block The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Military h&r block Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Military h&r block Also, see Assets That Are Not Section 197 Intangibles below. Military h&r block Government-granted license, permit, etc. Military h&r block   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Military h&r block For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Military h&r block Covenant not to compete. Military h&r block   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Military h&r block An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Military h&r block   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Military h&r block Franchise, trademark, or trade name. Military h&r block   A franchise, trademark, or trade name is a section 197 intangible. Military h&r block You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Military h&r block For information on currently deductible contingent payments, see chapter 11. Military h&r block Professional sports franchise. Military h&r block   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Military h&r block Contract for the use of, or a term interest in, a section 197 intangible. Military h&r block   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Military h&r block It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Military h&r block Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Military h&r block Any interest in a corporation, partnership, trust, or estate. Military h&r block Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Military h&r block Any interest in land. Military h&r block Most computer software. Military h&r block (See Computer software , later. Military h&r block ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Military h&r block An interest in a film, sound recording, video tape, book, or similar property. Military h&r block A right to receive tangible property or services under a contract or from a governmental agency. Military h&r block An interest in a patent or copyright. Military h&r block Certain rights that have a fixed duration or amount. Military h&r block (See Rights of fixed duration or amount , later. Military h&r block ) An interest under either of the following. Military h&r block An existing lease or sublease of tangible property. Military h&r block A debt that was in existence when the interest was acquired. Military h&r block A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Military h&r block Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Military h&r block Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Military h&r block You generally must use the straight line method over its useful life. Military h&r block For certain intangibles, the depreciation period is specified in the law and regulations. Military h&r block For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Military h&r block For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Military h&r block Computer software. Military h&r block   Section 197 intangibles do not include the following types of computer software. Military h&r block Software that meets all the following requirements. Military h&r block It is, or has been, readily available for purchase by the general public. Military h&r block It is subject to a nonexclusive license. Military h&r block It has not been substantially modified. Military h&r block This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Military h&r block Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Military h&r block Computer software defined. Military h&r block   Computer software includes all programs designed to cause a computer to perform a desired function. Military h&r block It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Military h&r block Rights of fixed duration or amount. Military h&r block   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Military h&r block However, this does not apply to the following intangibles. Military h&r block Goodwill. Military h&r block Going concern value. Military h&r block A covenant not to compete. Military h&r block A franchise, trademark, or trade name. Military h&r block A customer-related information base, customer-based intangible, or similar item. Military h&r block Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Military h&r block You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Military h&r block If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Military h&r block Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Military h&r block Amortize these costs using the rules of Revenue Procedure 2004-36. Military h&r block For more information, see Revenue Procedure 2004-36, 2004-24 I. Military h&r block R. Military h&r block B. Military h&r block 1063, available at  www. Military h&r block irs. Military h&r block gov/irb/2004-24_IRB/ar16. Military h&r block html. Military h&r block A change in the treatment of creative property costs is a change in method of accounting. Military h&r block Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Military h&r block These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Military h&r block Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Military h&r block You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Military h&r block You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Military h&r block You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Military h&r block This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Military h&r block See Related person , later, for more information. Military h&r block Exceptions. Military h&r block   The anti-churning rules do not apply in the following situations. Military h&r block You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Military h&r block The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Military h&r block This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Military h&r block The gain-recognition exception, discussed later, applies. Military h&r block Related person. Military h&r block   For purposes of the anti-churning rules, the following are related persons. Military h&r block An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Military h&r block ), and lineal descendants (children, grandchildren, etc. Military h&r block ). Military h&r block A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Military h&r block Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Military h&r block (For an exception, see section 1. Military h&r block 197-2(h)(6)(iv) of the regulations. Military h&r block ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Military h&r block The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Military h&r block The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Military h&r block The executor and beneficiary of an estate. Military h&r block A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Military h&r block A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Military h&r block Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Military h&r block Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Military h&r block A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Military h&r block Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Military h&r block When to determine relationship. Military h&r block   Persons are treated as related if the relationship existed at the following time. Military h&r block In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Military h&r block In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Military h&r block Ownership of stock. Military h&r block   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Military h&r block Rule 1. Military h&r block   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Military h&r block Rule 2. Military h&r block   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Military h&r block Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Military h&r block Rule 3. Military h&r block   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Military h&r block Rule 4. Military h&r block   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Military h&r block Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Military h&r block Gain-recognition exception. Military h&r block   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Military h&r block That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Military h&r block That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Military h&r block See chapter 2 in Publication 544 for information on making this choice. Military h&r block   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Military h&r block Notification. Military h&r block   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Military h&r block Anti-abuse rule. Military h&r block   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Military h&r block To avoid the requirement that the intangible be acquired after August 10, 1993. Military h&r block To avoid any of the anti-churning rules. Military h&r block More information. Military h&r block   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Military h&r block 197-2(h). Military h&r block Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Military h&r block See Amended Return , next. Military h&r block If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Military h&r block See Changing Your Accounting Method , later. Military h&r block Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Military h&r block A mathematical error made in any year. Military h&r block A posting error made in any year. Military h&r block An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Military h&r block When to file. Military h&r block   If an amended return is allowed, you must file it by the later of the following dates. Military h&r block 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Military h&r block (A return filed early is considered filed on the due date. Military h&r block ) 2 years from the time you paid your tax for that year. Military h&r block Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Military h&r block File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Military h&r block The following are examples of a change in method of accounting for amortization. Military h&r block A change in the amortization method, period of recovery, or convention of an amortizable asset. Military h&r block A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Military h&r block A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Military h&r block Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Military h&r block An adjustment in the useful life of an amortizable asset. Military h&r block Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Military h&r block Any change in the placed-in-service date of an amortizable asset. Military h&r block See Regulations section 1. Military h&r block 446-1(e)(2)(ii)(a) for more information and examples. Military h&r block Automatic approval. Military h&r block   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Military h&r block For a list of automatic accounting method changes, see the Instructions for Form 3115. Military h&r block Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Military h&r block For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Military h&r block See Revenue Procedure 2006-12, 2006-3 I. Military h&r block R. Military h&r block B. Military h&r block 310, available at  www. Military h&r block irs. Military h&r block gov/irb/2006-03_IRB/ar14. Military h&r block html. Military h&r block  See Revenue Procedure 2006-37, 2006-38 I. Military h&r block R. Military h&r block B. Military h&r block 499, available at  www. Military h&r block irs. Military h&r block gov/irb/2006-38_IRB/ar10. Military h&r block html. Military h&r block  See Revenue Procedure 2008-52, 2008-36 I. Military h&r block R. Military h&r block B. Military h&r block 587, available at www. Military h&r block irs. Military h&r block gov/irb/2008-36_IRB/ar09. Military h&r block html. Military h&r block  See Revenue Procedure 2009-39, 2009-38 I. Military h&r block R. Military h&r block B. Military h&r block 371, available at  www. Military h&r block irs. Military h&r block gov/irb/2009-38_IRB/ar08. Military h&r block html. Military h&r block  See Revenue Procedure 2011-14, 2011-4 I. Military h&r block R. Military h&r block B. Military h&r block 330, available at  www. Military h&r block irs. Military h&r block gov/irb/2011-04_IRB/ar08. Military h&r block html. Military h&r block  See Revenue Procedure 2011-22, 2011-18 I. Military h&r block R. Military h&r block B. Military h&r block 737, available at  www. Military h&r block irs. Military h&r block gov/irb/2011-18_IRB/ar08. Military h&r block html. Military h&r block Also, see Revenue Procedure 2012-39, 2012-41 I. Military h&r block R. Military h&r block B. Military h&r block 470 available at www. Military h&r block irs. Military h&r block gov/irb/2012-41_IRB/index. Military h&r block html. Military h&r block Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Military h&r block If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Military h&r block If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Military h&r block Any remaining gain, or any loss, is a section 1231 gain or loss. Military h&r block If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Military h&r block For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Military h&r block Nondeductible loss. Military h&r block   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Military h&r block Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Military h&r block Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Military h&r block The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Military h&r block The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Military h&r block Covenant not to compete. Military h&r block   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Military h&r block Nonrecognition transfers. Military h&r block   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Military h&r block You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Military h&r block Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Military h&r block   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Military h&r block Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Military h&r block Example. Military h&r block You own a section 197 intangible you have amortized for 4 full years. Military h&r block It has a remaining unamortized basis of $30,000. Military h&r block You exchange the asset plus $10,000 for a like-kind section 197 intangible. Military h&r block The nonrecognition provisions of like-kind exchanges apply. Military h&r block You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Military h&r block You amortize the other $10,000 of adjusted basis over a new 15-year period. Military h&r block For more information, see Regulations section 1. Military h&r block 197-2(g). Military h&r block Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Military h&r block See Reforestation Costs in chapter 7. Military h&r block You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Military h&r block There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Military h&r block The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Military h&r block A partner, shareholder, or beneficiary cannot make that election. Military h&r block A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Military h&r block , of a partnership or S corporation. Military h&r block The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Military h&r block Qualifying costs. Military h&r block   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Military h&r block Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Military h&r block They include costs for the following items. Military h&r block Site preparation. Military h&r block Seeds or seedlings. Military h&r block Labor. Military h&r block Tools. Military h&r block Depreciation on equipment used in planting and seeding. Military h&r block Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Military h&r block Qualified timber property. Military h&r block   Qualified timber property is property that contains trees in significant commercial quantities. Military h&r block It can be a woodlot or other site that you own or lease. Military h&r block The property qualifies only if it meets all of the following requirements. Military h&r block It is located in the United States. Military h&r block It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Military h&r block It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Military h&r block Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Military h&r block Amortization period. Military h&r block   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Military h&r block You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Military h&r block Life tenant and remainderman. Military h&r block   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Military h&r block Any remainder interest in the property is ignored for amortization purposes. Military h&r block Recapture. Military h&r block   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Military h&r block See chapter 3 of Publication 544 for more information. Military h&r block How to make the election. Military h&r block   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Military h&r block A description of the costs and the dates you incurred them. Military h&r block A description of the type of timber being grown and the purpose for which it is grown. Military h&r block Attach a separate statement for each property for which you amortize reforestation costs. Military h&r block   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Military h&r block However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Military h&r block Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Military h&r block 9100-2” on Form 4562. Military h&r block File the amended return at the same address you filed the original return. Military h&r block Revoking the election. Military h&r block   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Military h&r block Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Military h&r block Please provide your daytime telephone number (optional), in case we need to contact you. Military h&r block You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Military h&r block    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Military h&r block NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Military h&r block These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Military h&r block For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Military h&r block If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Military h&r block Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Military h&r block However, see Atmospheric pollution control facilities for an exception. Military h&r block The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Military h&r block Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Military h&r block You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Military h&r block See chapter 3 of Publication 946. Military h&r block A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Military h&r block The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Military h&r block The facility must be certified by state and federal certifying authorities. Military h&r block The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Military h&r block Also, it must not significantly change the nature of the manufacturing or production process or facility. Military h&r block The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Military h&r block The federal certifying authority will describe the nature of the potential cost recovery. Military h&r block You must then reduce the amortizable basis of the facility by this potential recovery. Military h&r block New identifiable treatment facility. Military h&r block   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Military h&r block It does not include a building and its structural components unless the building is exclusively a treatment facility. Military h&r block Atmospheric pollution control facilities. Military h&r block   Certain atmospheric pollution control facilities can be amortized over 84 months. Military h&r block To qualify, the following must apply. Military h&r block The facility must be acquired and placed in service after April 11, 2005. Military h&r block If acquired, the original use must begin with you after April 11, 2005. Military h&r block The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Military h&r block If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Military h&r block Basis reduction for corporations. Military h&r block   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Military h&r block More information. Military h&r block   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Military h&r block Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Military h&r block If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Military h&r block The amortization period begins the month you first receive an economic benefit from the costs. Military h&r block For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Military h&r block Optional write-off method. Military h&r block   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Military h&r block For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Military h&r block Costs you can amortize. Military h&r block   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Military h&r block You paid or incurred the costs in your trade or business. Military h&r block You are not deducting the costs currently. Military h&r block How to make the election. Military h&r block   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Military h&r block Generally, you must file the return by the due date (including extensions). Military h&r block However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Military h&r block Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Military h&r block 9100-2” on Form 4562. Military h&r block File the amended return at the same address you filed the original return. Military h&r block   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Military h&r block Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Military h&r block If you make this election, there is no AMT adjustment. Military h&r block The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Military h&r block How to make the election. Military h&r block   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Military h&r block   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Military h&r block However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Military h&r block Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Military h&r block 9100-2” on Form 4562. Military h&r block File the amended return at the same address you filed the original return. Military h&r block Revoking the election. Military h&r block   You must obtain consent from the IRS to revoke your election. Military h&r block Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Military h&r block The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Military h&r block If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Military h&r block Prev  Up  Next   Home   More Online Publications
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Employer ID Numbers (EINs)

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An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN. You may apply for an EIN in various ways, and now you may apply online. This is a free service offered by the Internal Revenue Service. You must check with your state to make sure you need a state number or charter.

Apply for an EIN Online

Check out our Interview-style online EIN application. No need to file a Form SS-4! We ask you the questions and you give us the answers. The application includes embedded help topics and hyperlinked keywords and definitions so separate instructions aren’t needed. After all validations are done you will get your EIN immediately upon completion. You can then download, save, and print your confirmation notice. It’s fast, free, and user-friendly!

Change of Ownership or Structure

Generally, businesses need a new EIN when their ownership or structure has changed. Refer to "Do You Need a New EIN?" to determine if this applies to your business.

Verify Your EIN

If you want to verify your EIN, see the Lost or Misplaced Your EIN page for instructions.

Daily Limitation of an Employer Identification Number

Effective May 21, 2012, to ensure fair and equitable treatment for all taxpayers, the Internal Revenue Service will limit Employer Identification Number (EIN) issuance to one per responsible party per day. This limitation is applicable to all requests for EINs whether online or by fax or mail. We apologize for any inconvenience this may cause.

Page Last Reviewed or Updated: 03-Jan-2014

The Military H&r Block

Military h&r block Publication 4492 - Main Contents Table of Contents DefinitionsHurricane Katrina Disaster Area Katrina Covered Disaster Area Gulf Opportunity (GO) Zone (Core Disaster Area) Hurricane Rita Disaster Area (Rita Covered Disaster Area) Rita GO Zone Hurricane Wilma Disaster Area Wilma Covered Disaster Area Wilma GO Zone Extended Tax Deadlines Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Charitable Deduction for Contributions of Food Inventory Charitable Deduction for Contributions of Book Inventories to Public Schools Casualty and Theft LossesTime limit for making election. Military h&r block Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Hurricane Distributions Repayment of Qualified Hurricane Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by Hurricane Katrina Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Work Opportunity Credit Employee Retention Credit Hurricane Katrina Housing Credit Reforestation Costs Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax Help Definitions The following definitions are used throughout this publication. Military h&r block Hurricane Katrina Disaster Area The Hurricane Katrina disaster area covers the area for which the President declared a major disaster before September 14, 2005, because of Hurricane Katrina. Military h&r block The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. Military h&r block Katrina Covered Disaster Area A portion of the Hurricane Katrina disaster area has been designated by the IRS as a covered disaster area. Military h&r block The Katrina covered disaster area covers the following areas in four states. Military h&r block Alabama. Military h&r block   The counties of Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale, Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry, Pickens, Sumter, Tuscaloosa, Washington, Wilcox, and Winston. Military h&r block Florida. Military h&r block   The counties of Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe, Okaloosa, Santa Rosa, and Walton. Military h&r block Louisiana. Military h&r block   All parishes. Military h&r block Mississippi. Military h&r block   All counties. Military h&r block Gulf Opportunity (GO) Zone (Core Disaster Area) The GO Zone (also called the core disaster area) covers the portion of the Hurricane Katrina disaster area determined by the Federal Emergency Management Agency (FEMA) to be eligible for either individual only or both individual and public assistance from the Federal Government. Military h&r block The GO Zone covers the following areas in three states. Military h&r block Alabama. Military h&r block   The counties of Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington. Military h&r block Louisiana. Military h&r block   The parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Military h&r block Bernard, St. Military h&r block Charles, St. Military h&r block Helena, St. Military h&r block James, St. Military h&r block John the Baptist, St. Military h&r block Martin, St. Military h&r block Mary, St. Military h&r block Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana. Military h&r block Mississippi. Military h&r block   The counties of Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo. Military h&r block Hurricane Rita Disaster Area (Rita Covered Disaster Area) The Hurricane Rita disaster area (also designated by the IRS as the Rita covered disaster area) covers the area for which the President declared a major disaster before October 6, 2005, because of Hurricane Rita. Military h&r block This area covers the entire states of Louisiana and Texas. Military h&r block Rita GO Zone The Rita GO Zone covers the portion of the Hurricane Rita disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. Military h&r block The Rita GO Zone covers the following areas in two states. Military h&r block Louisiana. Military h&r block   The parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. Military h&r block Landry, St. Military h&r block Martin, St. Military h&r block Mary, St. Military h&r block Tammany, Terrebonne, Vermilion, Vernon, and West Baton Rouge. Military h&r block Texas. Military h&r block   The counties of Angelina, Brazoria, Chambers, Fort Bend, Galveston, Hardin, Harris, Jasper, Jefferson, Liberty, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Shelby, Trinity, Tyler, and Walker. Military h&r block Hurricane Wilma Disaster Area The Hurricane Wilma disaster area covers the area for which the President declared a major disaster before November 14, 2005, because of Hurricane Wilma. Military h&r block The Hurricane Wilma disaster area covers the entire state of Florida. Military h&r block Wilma Covered Disaster Area A portion of the Hurricane Wilma disaster area has been designated by the IRS as a covered disaster area. Military h&r block The Wilma covered disaster area covers the following counties. Military h&r block Florida. Military h&r block   Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Polk, St. Military h&r block Lucie, and Sarasota. Military h&r block Wilma GO Zone The Wilma GO Zone covers the portion of the Hurricane Wilma disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. Military h&r block The Wilma GO Zone covers the following counties. Military h&r block Florida. Military h&r block   Brevard, Broward, Collier, Glades, Hendry, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. Military h&r block Lucie. Military h&r block Extended Tax Deadlines The IRS has extended deadlines that apply to filing returns, paying taxes, and performing certain other time-sensitive acts for certain taxpayers affected by Hurricane Katrina, Rita, or Wilma, until February 28, 2006. Military h&r block The extension applies to deadlines (either an original or extended due date) that occur during the following periods. Military h&r block After August 28, 2005 (August 23, 2005, for Florida affected taxpayers), and before February 28, 2006, for taxpayers affected by Hurricane Katrina. Military h&r block After September 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Rita. Military h&r block After October 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Wilma. Military h&r block Affected taxpayer. Military h&r block   The following taxpayers are eligible for the extension. Military h&r block Any individual whose main home is located in a covered disaster area. Military h&r block Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Military h&r block Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained or whose tax professional's office is in a covered disaster area. Military h&r block The main home or principal place of business does not have to be located in the covered area. Military h&r block Any individual visiting a county or parish in the Hurricane Katrina or Hurricane Rita covered disaster area that was injured or killed (and the estate of an individual killed) as a result of the hurricane or its aftermath. Military h&r block Any estate or trust whose tax records needed to meet a filing or payment deadline are maintained in a covered disaster area. Military h&r block Generally, any individual who is a worker assisting in the relief activities in a covered disaster area. Military h&r block However, a relief worker assisting in the Wilma covered disaster area is not an affected taxpayer unless the worker is affiliated with a recognized government or philanthropic organization assisting in the relief activities. Military h&r block The spouse of an affected taxpayer, solely with regard to a joint income tax return with that taxpayer. Military h&r block   To ensure correct processing, affected taxpayers should write the assigned disaster designation (for example, “Hurricane Katrina”) in red ink at the top of any forms or documents filed with the IRS. Military h&r block Affected taxpayers can also identify themselves to the IRS or ask hurricane-related questions by calling the special IRS disaster hotline at 1-866-562-5227. Military h&r block Acts extended. Military h&r block   Deadlines for performing the following acts are extended. Military h&r block Filing any return of income, estate, gift, generation-skipping transfer, excise, or employment tax. Military h&r block Paying any income, estate, gift, generation-skipping transfer, excise, or employment tax. Military h&r block This includes making estimated tax payments. Military h&r block Making certain contributions, distributions, recharacterizing contributions, or making a rollover to or from a qualified retirement plan. Military h&r block Filing certain petitions with the Tax Court. Military h&r block Filing a claim for credit or refund of any tax. Military h&r block Bringing suit upon a claim for credit or refund. Military h&r block Certain other acts described in Revenue Procedure 2005-27. Military h&r block You can find Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www. Military h&r block irs. Military h&r block gov/pub/irs-irbs/irb05-20. Military h&r block pdf. Military h&r block Forgiveness of interest and penalties. Military h&r block   The IRS may forgive the interest and penalties on any underpaid income, estate, gift, employment, or excise tax for the length of any extension. Military h&r block Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions Individuals. Military h&r block   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% adjusted gross income (AGI) limit. Military h&r block A qualified contribution is a charitable contribution paid in cash or by check after August 27, 2005, and before January 1, 2006, to a 50% limit organization (other than certain private foundations described in section 509(a)(3)) if you make an election to have the 50% limit not apply to these contributions. Military h&r block   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. Military h&r block You can carry over any contributions you are not able to deduct for 2005 because of this limit. Military h&r block In 2006, treat the carryover of your unused qualified contributions as a carryover of contributions subject to the 50% limit. Military h&r block Exception. Military h&r block   Qualified contributions do not include a contribution to a segregated fund or account for which you (or any person you appoint or designate) have or expect to have advisory privileges with respect to distributions or investments based on your contribution. Military h&r block Corporations. Military h&r block   A corporation may elect to deduct qualified cash contributions without regard to the 10% taxable income limit if the contributions were made after August 27, 2005, and before January 1, 2006, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3)), for Hurricane Katrina, Rita, or Wilma relief efforts. Military h&r block The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. Military h&r block Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% limit. Military h&r block Partners and shareholders. Military h&r block   Each partner in a partnership and each shareholder in an S corporation makes a separate election to have the appropriate limit not apply. Military h&r block More information. Military h&r block   For more information, see Publication 526 or Publication 542, Corporations. Military h&r block Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. Military h&r block Standard Mileage Rate for Charitable Use of Vehicles The following are special standard mileage rates in effect in 2005 and 2006 for the cost of operating your automobile for providing charitable services solely related to Hurricane Katrina. Military h&r block 29 cents per mile for the period August 25 through August 31, 2005. Military h&r block 34 cents per mile for the period September 1 through December 31, 2005. Military h&r block 32 cents per mile for the period January 1 through December 31, 2006. Military h&r block Mileage Reimbursements to Charitable Volunteers You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger automobile for the benefit of a qualified charitable organization in providing relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. Military h&r block You cannot claim a deduction or credit for amounts you receive as a mileage reimbursement. Military h&r block You must keep records of miles driven, time, place (or use), and purpose of the mileage. Military h&r block The amount you can exclude from income cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. Military h&r block 40. Military h&r block 5 cents per mile for the period August 25 through August 31, 2005. Military h&r block 48. Military h&r block 5 cents per mile for the period September 1 through December 31, 2005. Military h&r block 44. Military h&r block 5 cents per mile for the period January 1 through December 31, 2006. Military h&r block Charitable Deduction for Contributions of Food Inventory Any taxpayer engaged in a trade or business is eligible to claim a deduction for a contribution of “apparently wholesome food” inventory to a qualified charitable organization described in section 501(c)(3) (except for private nonoperating foundations) after August 27, 2005, and before January 1, 2006. Military h&r block “Apparently wholesome food” is food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. Military h&r block The deduction is equal to the lesser of: The basis of the donated food plus one-half of the gain that would have been realized if the donated food had been sold at fair market value on the date of the donation, or Two times the basis of the donated food. Military h&r block The taxpayer must receive written certification from the donee stating: The donated food is related to the purpose or function of the donee's basis for exemption under section 501(c)(3) and is to be used solely for the care of the ill, the needy, or infants; and The food was not given in exchange for money, other property, or services. Military h&r block For a taxpayer other than a C corporation, the deduction is limited to 10% of the taxpayer's total net income from all trades or businesses from which the food contributions were made (figured without regard to the deduction for charitable contributions). Military h&r block For example, if a taxpayer is a sole proprietor, a shareholder in an S corporation, and a partner in a partnership, and each made a contribution of apparently wholesome food inventory, the taxpayer's deduction is limited to 10% of the taxpayer's total net income from the sole proprietorship, S corporation, and partnership (figured without regard to the deduction for charitable contributions). Military h&r block Charitable Deduction for Contributions of Book Inventories to Public Schools A corporation (other than an S corporation) may be allowed a charitable deduction for a qualified book contribution made after August 27, 2005, and before January 1, 2006, to a public school that: Provides elementary or secondary education (kindergarten through grade 12), and Normally maintains a regular faculty and curriculum and has a regular enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. Military h&r block . Military h&r block The deduction is equal to the lesser of: The basis of the donated books plus one-half of the gain that would have been realized if the donated books had been sold at fair market value on the date of the donation, or Two times the basis of the donated books. Military h&r block The corporation must receive written certification from the school stating that the donated books are suitable for the organization's educational programs and will be used for such programs. Military h&r block Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that were caused by Hurricane Katrina, Rita, or Wilma. Military h&r block For more information, see Publication 547. Military h&r block Limits on personal casualty or theft losses caused by Hurricane Katrina, Rita, or Wilma. Military h&r block   The following losses to personal use property are not subject to the $100 or 10% of adjusted gross income limits. Military h&r block Losses that arose in the Hurricane Katrina disaster area after August 24, 2005, and that were caused by Hurricane Katrina. Military h&r block Losses that arose in the Hurricane Rita disaster area after September 22, 2005, and that were caused by Hurricane Rita. Military h&r block Losses that arose in the Hurricane Wilma disaster area after October 22, 2005, and that were caused by Hurricane Wilma. Military h&r block Qualifying losses include losses from flooding or other casualty, and from theft, that arose in the hurricane disaster area and that were caused by the hurricane. Military h&r block Special instructions for individuals who elect to claim a Hurricane Katrina, Rita, or Wilma casualty or theft loss for 2004. Military h&r block   Casualty and theft losses are generally deductible only in the year the casualty occurred or theft was discovered. Military h&r block However, Hurricane Katrina, Rita, and Wilma are Presidentially declared disasters. Military h&r block Therefore, you can elect to deduct losses from these hurricanes on your tax return for the previous year. Military h&r block If you make this election, use the following additional instructions to complete your forms. Military h&r block   Individuals filing or amending their 2004 tax return whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina, Rita, or Wilma should write “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” at the top of Form 1040 or 1040X. Military h&r block They must also complete and attach the 2004 Form 4684 and write “Hurricane Katrina,”“Hurricane Rita,” or “Hurricane Wilma” on the dotted line next to line 11 and enter -0- on lines 11 and 17. Military h&r block   Individuals filing or amending their 2004 tax return who also have casualty or theft losses to personal use property not related to Hurricane Katrina, Rita, or Wilma should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 on two Forms 4684. Military h&r block The Form 1040 or 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina, Rita, or Wilma losses only. Military h&r block The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina, Rita or Wilma losses. Military h&r block If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. Military h&r block If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D (Form 1040), and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684. Military h&r block , Time limit for making election. Military h&r block   You must make this election to claim your casualty or theft loss in 2004 by the later of the following dates. Military h&r block The due date (without extensions) for filing your 2005 income tax return. Military h&r block The due date (with extensions) for filing your 2004 income tax return. Military h&r block Example. Military h&r block If you are a calendar year individual taxpayer, you have until April 17, 2006, to amend your 2004 tax return to claim a casualty or theft loss that occurred during 2005. Military h&r block Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. Military h&r block Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). Military h&r block However, for property that was involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Military h&r block For more information, see the Instructions for Form 4684. Military h&r block Net Operating Losses Qualified GO Zone loss. Military h&r block   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. Military h&r block However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. Military h&r block In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. Military h&r block   A qualified GO Zone loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified GO Zone casualty loss (as defined below), Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone, Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone, Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone. Military h&r block Qualified GO Zone casualty loss. Military h&r block   A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. Military h&r block For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. Military h&r block Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year. Military h&r block 5-year NOL carryback of certain timber losses. Military h&r block   Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. Military h&r block You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below. Military h&r block August 27, 2005, if any portion of the property is located in the GO Zone. Military h&r block September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). Military h&r block October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone). Military h&r block   These rules will not apply after 2006. Military h&r block   However, these rules apply only to a timber producer who: Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below: August 28, 2005, if any portion of the property is located in the GO Zone, September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone); Is not a corporation with stock publicly traded on an established securities market; Is not a real estate investment trust; and Did not hold more than 500 acres of qualified timber property on the applicable date above. Military h&r block More information. Military h&r block   For more information on NOLs, see Publication 536 or Publication 542, Corporations. Military h&r block IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. Military h&r block Definitions Qualified hurricane distribution. Military h&r block   A qualified hurricane distribution is any distribution you received from an eligible retirement plan if all of the following apply. Military h&r block The distribution was made: After August 24, 2005, and before January 1, 2007, for Hurricane Katrina; After September 22, 2005, and before January 1, 2007, for Hurricane Rita; or After October 22, 2005, and before January 1, 2007, for Hurricane Wilma. Military h&r block Your main home was located in a hurricane disaster area listed below on the date shown for that area. Military h&r block August 28, 2005, for the Hurricane Katrina disaster area. Military h&r block September 23, 2005, for the Hurricane Rita disaster area. Military h&r block October 23, 2005, for the Hurricane Wilma disaster area. Military h&r block You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster area on the date shown in (2) above for that hurricane. Military h&r block Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Military h&r block   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution was made on account of Hurricane Katrina, Rita, or Wilma. Military h&r block Qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss. Military h&r block   The total of your qualified hurricane distributions from all plans is limited to $100,000. Military h&r block If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. Military h&r block   A reduction or offset (after August 24, 2005, for Katrina; after September 22, 2005, for Rita; or after October 22, 2005, for Wilma) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified hurricane distribution. Military h&r block Eligible retirement plan. Military h&r block   An eligible retirement plan can be any of the following. Military h&r block A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). Military h&r block A qualified annuity plan. Military h&r block A tax-sheltered annuity contract. Military h&r block A governmental section 457 deferred compensation plan. Military h&r block A traditional, SEP, SIMPLE, or Roth IRA. Military h&r block Main home. Military h&r block   Generally, your main home is the home where you live most of the time. Military h&r block A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. Military h&r block Taxation of Qualified Hurricane Distributions Qualified hurricane distributions are included in income in equal amounts over three years. Military h&r block However, if you elect, you can include the entire distribution in your income in the year it was received. Military h&r block Qualified hurricane distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). Military h&r block However, any distributions you receive in excess of the $100,000 qualified hurricane distribution limit may be subject to the additional tax on early distributions. Military h&r block For more information, see Form 8915. Military h&r block Repayment of Qualified Hurricane Distributions If you choose, you generally can repay any portion of a qualified hurricane distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Military h&r block Also, you can repay a qualified hurricane distribution made on account of a hardship from a retirement plan. Military h&r block However, see Exceptions below for qualified hurricane distributions you cannot repay. Military h&r block You have three years from the day after the date you received the distribution to make a repayment. Military h&r block Amounts that are repaid are treated as a qualified rollover and are not included in income. Military h&r block Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. Military h&r block See Form 8915 for more information on how to report repayments. Military h&r block Exceptions. Military h&r block   You cannot repay the following types of distributions. Military h&r block Qualified hurricane distributions received as a beneficiary (other than a surviving spouse). Military h&r block Required minimum distributions. Military h&r block Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. Military h&r block Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area, you can repay that distribution before March 1, 2006, to an eligible retirement plan after August 24, 2005 (Katrina); after September 22, 2005 (Rita); or after October 22, 2005 (Wilma). Military h&r block For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. Military h&r block To be a qualified distribution, the distribution must meet all of the following requirements. Military h&r block The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. Military h&r block The distribution was received in 2005 after February 28 and before: August 29 for Hurricane Katrina; September 24 for Hurricane Rita; or October 24 for Hurricane Wilma. Military h&r block The distribution was to be used to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area that was not purchased or constructed because of Hurricane Katrina, Rita, or Wilma. Military h&r block Amounts that are repaid before March 1, 2006, are treated as a qualified rollover and are not included in income. Military h&r block Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. Military h&r block A qualified distribution not repaid before March 1, 2006, may be taxable for 2005 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. Military h&r block You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before March 1, 2006. Military h&r block Loans From Qualified Plans The following benefits are available to qualified individuals. Military h&r block Increases to the limits for distributions treated as loans from employer plans. Military h&r block A 1-year suspension for payments due on plan loans. Military h&r block Qualified individual. Military h&r block   You are a qualified individual if any of the following apply. Military h&r block Your main home on August 28, 2005, was located in the Hurricane Katrina disaster area and you had an economic loss because of Hurricane Katrina. Military h&r block Your main home on September 23, 2005, was located in the Hurricane Rita disaster area and you had an economic loss because of Hurricane Rita. Military h&r block Your main home on October 23, 2005, was located in the Hurricane Wilma disaster area and you had an economic loss because of Hurricane Wilma. Military h&r block Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Military h&r block Limits on plan loans. Military h&r block   The $50,000 limit for distributions treated as plan loans is increased to $100,000. Military h&r block In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. Military h&r block The higher limits apply only to loans received during the following period. Military h&r block If your main home was located in the Hurricane Katrina disaster area, the period began on September 24, 2005, and ends on December 31, 2006. Military h&r block If your main home was located in the Hurricane Rita or Wilma disaster area, the period began on December 21, 2005, and ends on December 31, 2006. Military h&r block If you are a qualified individual based on Hurricane Katrina and another hurricane, use the period based on Hurricane Katrina. Military h&r block One-year suspension of loan payments. Military h&r block   Payments on plan loans due before 2007 may be suspended for 1 year by the plan administrator. Military h&r block To qualify for the suspension, the due date for any loan payment must occur during the period beginning on: August 28, 2005, if your main home was located in the Hurricane Katrina disaster area. Military h&r block September 23, 2005, if your main home was located in the Hurricane Rita disaster area. Military h&r block October 23, 2005, if your main home was located in the Hurricane Wilma disaster area. Military h&r block If you are a qualified individual based on more than one hurricane, use the period with the earliest beginning date. Military h&r block Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit You can elect to use your 2004 earned income to figure your earned income credit (EIC) and additional child tax credit for 2005 if: Your 2005 earned income is less than your 2004 earned income, and At least one of the following statements is true. Military h&r block Your main home on August 25, 2005, was in the Gulf Opportunity (GO) Zone. Military h&r block Your main home on August 25, 2005, was in the Hurricane Katrina disaster area and you were displaced from that home because of Hurricane Katrina. Military h&r block Your main home on September 23, 2005, was in the Rita GO Zone. Military h&r block Your main home on September 23, 2005, was in the Hurricane Rita disaster area and you were displaced from that home because of Hurricane Rita. Military h&r block Your main home on October 23, 2005, was in the Wilma GO Zone. Military h&r block Your main home on October 23, 2005, was in the Hurricane Wilma disaster area and you were displaced from that home because of Hurricane Wilma. Military h&r block Earned income. Military h&r block    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. Military h&r block If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. Military h&r block Joint returns. Military h&r block   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. Military h&r block If you make the election, your 2004 earned income is the sum of your 2004 earned income and your spouse's 2004 earned income. Military h&r block Making the election. Military h&r block   If you make the election to use your 2004 earned income, the election applies for figuring both the EIC and the additional child tax credit. Military h&r block However, you can make the election for the additional child tax credit even if you do not take the EIC. Military h&r block   Electing to use your 2004 earned income may increase or decrease your EIC. Military h&r block Take the following steps to decide whether to make the election. Military h&r block Figure your 2005 EIC using your 2004 earned income. Military h&r block Figure your 2005 additional child tax credit using your 2004 earned income for EIC purposes. Military h&r block Add the results of (1) and (2). Military h&r block Figure your 2005 EIC using your 2005 earned income. Military h&r block Figure your 2005 additional child tax credit using your 2005 earned income for additional child tax credit purposes. Military h&r block Add the results of (4) and (5). Military h&r block Compare the results of (3) and (6). Military h&r block If (3) is larger than (6), it is to your benefit to make the election. Military h&r block If (3) is equal to or smaller than (6), making the election will not help you. Military h&r block   If you elect to use your 2004 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2004 earned income on the dotted line next to line 66a of Form 1040, on the line next to line 41a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. Military h&r block   If you elect to use your 2004 earned income and you are claiming the additional child tax credit, enter your 2004 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. Military h&r block   Because Form 8812 was released before the GO Zone legislation was enacted, the instructions refer only to individuals whose main home was in the Hurricane Katrina disaster area. Military h&r block When completing Form 8812, line 4a, use the above rules to determine your eligibility to make the election (instead of the Form 8812 instructions). Military h&r block Getting your 2004 tax return information. Military h&r block   If you do not have your 2004 tax records, you can get the amount of earned income used to figure your 2004 EIC by calling 1-866-562-5227. Military h&r block You can also get this information by visiting the IRS website at www. Military h&r block irs. Military h&r block gov. Military h&r block   If you prefer to figure your 2004 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. Military h&r block See Request for Copy or Transcript of Tax Return on page 16. Military h&r block Additional Exemption for Housing Individuals Displaced by Hurricane Katrina You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by Hurricane Katrina. Military h&r block The additional exemption amount is claimed on new Form 8914. Military h&r block The additional exemption amount is allowable once per taxpayer for a specific individual in 2005 or 2006, but not in both years. Military h&r block The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). Military h&r block The additional exemption amount you claim for displaced individuals in 2005 will reduce the $2,000 maximum for 2006. Military h&r block If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. Military h&r block If married filing separately, only one spouse may claim the additional exemption amount for a specific displaced individual. Military h&r block In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). Military h&r block To qualify as a displaced individual, the individual: Must have had his or her main home in the Hurricane Katrina disaster area on August 28, 2005, and he or she must have been displaced from that home. Military h&r block If the individual's main home was located outside the core disaster area, that home must have been damaged by Hurricane Katrina or the individual must have been evacuated from that home because of Hurricane Katrina, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. Military h&r block You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. Military h&r block You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. Military h&r block Food, clothing, or personal items consumed or used by the displaced individual. Military h&r block Reimbursement for the cost of any long distance telephone calls made by the displaced individual. Military h&r block Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. Military h&r block However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. Military h&r block Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. Military h&r block For more information, see Form 8914. Military h&r block Education Credits The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. Military h&r block The Hope credit for a GOZ student is increased to 100% of the first $2,000 in qualified education expenses and 50% of the next $2,000 of qualified education expenses for a maximum credit of $3,000 per student. Military h&r block The lifetime learning credit rate for a GOZ student is increased from 20% to 40%. Military h&r block The definition of qualified education expenses for a GOZ student also has been expanded. Military h&r block In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a GOZ student include the following. Military h&r block Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Military h&r block For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. Military h&r block For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. Military h&r block The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Military h&r block The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Military h&r block You will need to contact the eligible educational institution for qualified room and board costs. Military h&r block For more information, see Form 8863. Military h&r block Recapture of Federal Mortgage Subsidy Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Military h&r block However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. Military h&r block This amount is increased to $150,000 if the loan was provided before 2011 and was used to: Repair damage caused by Hurricane Katrina to a residence in the Hurricane Katrina disaster area, or Alter, repair, or improve an existing owner-occupied residence in the GO Zone, Rita GO Zone, or Wilma GO Zone. Military h&r block Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Generally, discharges of nonbusiness debts (such as mortgages) made after August 24, 2005, and before January 1, 2007, are excluded from income for individuals whose main home was in the Hurricane Katrina disaster area on August 25, 2005. Military h&r block If the individual's main home was located outside the core disaster area, the individual also must have had an economic loss because of Hurricane Katrina. Military h&r block Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Military h&r block This relief does not apply to any debt secured by real property located outside the Hurricane Katrina disaster area. Military h&r block You may also have to reduce certain tax attributes by the amount excluded. Military h&r block For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Military h&r block Tax Relief for Temporary Relocation Under the Gulf Opportunity Zone Act of 2005, the IRS may adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2005 or 2006 as a result of a temporary relocation caused by Hurricane Katrina, Rita, or Wilma. Military h&r block However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. Military h&r block The IRS has exercised this authority as follows. Military h&r block In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. Military h&r block In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. Military h&r block You can treat as a student an individual who enrolled in school before August 25, 2005, and who is unable to attend classes because of Hurricane Katrina, for each month of the enrollment period that individual is prevented by Hurricane Katrina from attending school as planned. Military h&r block You can treat as a student an individual who enrolled in school before September 23, 2005, and who is unable to attend classes because of Hurricane Rita, for each month of the enrollment period that individual is prevented by Hurricane Rita from attending school as planned. Military h&r block You can treat as a student an individual who enrolled in school before October 23, 2005, and who is unable to attend classes because of Hurricane Wilma, for each month of the enrollment period that individual is prevented by Hurricane Wilma from attending school as planned. Military h&r block Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. Military h&r block The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). Military h&r block The special allowance applies only for the first year the property is placed in service. Military h&r block The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). Military h&r block There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Military h&r block You can elect not to deduct the special GO Zone depreciation allowance for qualified property. Military h&r block If you make this election for any property, it applies to all property in the same class placed in service during the year. Military h&r block Qualified GO Zone property. Military h&r block   Property that qualifies for the special GO Zone depreciation allowance includes the following. Military h&r block Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Military h&r block Water utility property. Military h&r block Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Military h&r block (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Military h&r block ) Qualified leasehold improvement property. Military h&r block Nonresidential real property and residential rental property. Military h&r block   For more information on this property, see Publication 946. Military h&r block Other tests to be met. Military h&r block   To be qualified GO Zone property, the property must also meet all of the following tests. Military h&r block You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005. Military h&r block The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property). Military h&r block Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone. Military h&r block The original use of the property in the GO Zone must begin with you after August 27, 2005. Military h&r block Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. Military h&r block Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you. Military h&r block Excepted property. Military h&r block   Qualified GO Zone property does not include any of the following. Military h&r block Property required to be depreciated using the Alternative Depreciation System (ADS). Military h&r block Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. Military h&r block Property for which you are claiming a commercial revitalization deduction. Military h&r block Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. Military h&r block Any gambling or animal racing property (as defined below). Military h&r block Property in the same class as that for which you elected not to claim the special GO Zone depreciation allowance. Military h&r block   Gambling or animal racing property is: Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and The portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. Military h&r block Recapture of special allowance. Military h&r block   If, in any year after the year you claim the special allowance, the property ceases to be qualified GO Zone property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. Military h&r block Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 Gulf Opportunity (GO) Zone property (as defined later) placed in service in the GO Zone. Military h&r block Increased dollar limit. Military h&r block   The limit on the section 179 deduction ($105,000 for 2005, $108,000 for 2006) for qualified section 179 GO Zone property acquired after August 27, 2005, is increased by the smaller of: $100,000, or The cost of qualified section 179 GO Zone property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). Military h&r block   The amount for which you can make the election is reduced if the cost of all qualified section 179 GO Zone property you placed in service during the year exceeds $420,000 for 2005 ($430,000 for 2006) increased by the smaller of: $600,000, or The cost of qualified section 179 GO Zone property placed in service during the year. Military h&r block Qualified section 179 GO Zone property. Military h&r block   Qualified section 179 GO Zone property is section 179 property that is qualified GO Zone property (explained earlier under Special Depreciation Allowance). Military h&r block Section 179 property does not include nonresidential real property or residential rental property. Military h&r block For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. Military h&r block Work Opportunity Credit For the work opportunity credit, the definition of “targeted group employee” has been expanded to include a Hurricane Katrina employee. Military h&r block Hurricane Katrina employee. Military h&r block   A Hurricane Katrina employee is: A person who, on August 28, 2005, had a main home in the core disaster area and, within a two-year period beginning on that date, is hired to perform services principally in the core disaster area; or A person who, on August 28, 2005, had a main home in the core disaster area, was displaced from that main home as a result of Hurricane Katrina, and was hired during the period beginning on August 28, 2005, and ending on December 31, 2005. Military h&r block Qualified wages. Military h&r block   Generally, qualified wages do not include wages you paid to a targeted group employee who worked for you previously. Military h&r block However, wages will qualify if: You paid them to an employee who is a Hurricane Katrina employee, The employee was not in your employment on August 28, 2005, and This is your first hire of the employee as a Hurricane Katrina employee after August 28, 2005. Military h&r block   For more information, see Form 5884. Military h&r block Certification requirements. Military h&r block   An employee must provide to the employer reasonable evidence that he or she is a Hurricane Katrina employee. Military h&r block An employer may accept a completed Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, as such evidence. Military h&r block The certification requirements described in Form 8850 do not apply to a Hurricane Katrina employee. Military h&r block Do not send any Forms 8850 that have only box 1 checked to the state employment security agency. Military h&r block Instead, the employer should keep these Forms 8850 with the employer's other records. Military h&r block For more information, see Form 8850 and its instructions. Military h&r block Employee Retention Credit An eligible employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone, the Rita GO Zone, or the Wilma GO Zone can claim the employee retention credit. Military h&r block The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). Military h&r block Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Military h&r block Use Form 5884-A to claim the credit. Military h&r block See the following rules and definitions for each hurricane. Military h&r block Employers affected by Hurricane Katrina. Military h&r block   The following definitions apply to employers affected by Hurricane Katrina. Military h&r block Eligible employer. Military h&r block   For this purpose, an eligible employer is any employer who conducted an active trade or business on August 28, 2005, in the GO Zone and whose trade or business was inoperable on any day after August 28, 2005, and before January 1, 2006, because of damage caused by Hurricane Katrina. Military h&r block Eligible employee. Military h&r block   For this purpose, an eligible employee is an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone. Military h&r block An employee is not an eligible employee for purposes of Hurricane Katrina if the employee is treated as an eligible employee for the work opportunity credit. Military h&r block Employers affected by Hurricane Rita. Military h&r block   The following definitions apply to employers affected by Hurricane Rita. Military h&r block Eligible employer. Military h&r block   For this purpose, an eligible employer is any employer who conducted an active trade or business on September 23, 2005, in the Rita GO Zone and whose trade or business was inoperable on any day after September 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Rita. Military h&r block Eligible employee. Military h&r block   For this purpose, an eligible employee is an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone. Military h&r block An employee is not an eligible employee for purposes of Hurricane Rita if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina employee retention credit. Military h&r block Employers affected by Hurricane Wilma. Military h&r block   The following definitions apply to employers affected by Hurricane Wilma. Military h&r block Eligible employer. Military h&r block   For this purpose, an eligible employer is any employer who conducted an active trade or business on October 23, 2005, in the Wilma GO Zone and whose trade or business was inoperable on any day after October 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Wilma. Military h&r block Eligible employee. Military h&r block   For this purpose, an eligible employee is an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma GO Zone. Military h&r block An employee is not an eligible employee for purposes of Hurricane Wilma if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina or Rita employee retention credit. Military h&r block Qualified wages. Military h&r block   Qualified wages are wages you paid or incurred before January 1, 2006, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable hurricane, and ending on the date your trade or business resumed significant operations at that place. Military h&r block In addition, the wages must have been paid or incurred after the following date. Military h&r block August 28, 2005, for Hurricane Katrina. Military h&r block September 23, 2005, for Hurricane Rita. Military h&r block October 23, 2005, for Hurricane Wilma. Military h&r block    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. Military h&r block    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). Military h&r block Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. Military h&r block Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. Military h&r block   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. Military h&r block For a special rule that applies to railroad employees, see section 51(h)(1)(B). Military h&r block   Qualified wages do not include the following. Military h&r block Wages paid to your dependent or a related individual. Military h&r block See section 51(i)(1). Military h&r block Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. Military h&r block Wages for services of replacement workers during a strike or lockout. Military h&r block   For more information, see Form 5884-A. Military h&r block Hurricane Katrina Housing Credit An employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone can claim the Hurricane Katrina housing credit. Military h&r block The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from January 1, 2006, through July 1, 2006. Military h&r block The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). Military h&r block Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Military h&r block The employer must use Form 5884-A to claim the credit. Military h&r block A qualified employee is an individual who had a main home in the GO Zone on August 28, 2005, and who performs substantially all employment services in the GO Zone for the employer furnishing the lodging. Military h&r block The employee cannot be your dependent or a related individual. Military h&r block See section 51(i)(1). Military h&r block For more information, see Form 5884-A. Military h&r block Reforestation Costs You may be able to elect to deduct a limited amount of reforestation costs for each qualified timber property. Military h&r block The deduction for any tax year generally is limited to $10,000 ($5,000 if married filing separately, $0 for a trust). Military h&r block However, this limit is increased if you paid or incurred reforestation costs after the applicable date below and any portion of the qualified timber property is located in one of the following areas. Military h&r block August 27, 2005, if any portion of the property is located in the GO Zone. Military h&r block September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). Military h&r block October 22, 2005, if any portion of the property is located in the Wilma GO Zone. Military h&r block The limit for each qualified timber property is increased by the smaller of: $10,000 ($5,000 if married filing separately, $0 for a trust), or The amount of reforestation costs you paid or incurred after the applicable date for the qualified timber property, any portion of which is located in the zone described above. Military h&r block The increase in the limit applies only to costs paid or incurred before 2008. Military h&r block However, these rules do not apply to any timber producer who: Held more than 500 acres of qualified timber property at any time during the tax year, Is a corporation with stock publicly traded on an established securities market, or Is a real estate investment trust. Military h&r block For more information about the election to deduct reforestation costs, see chapter 8 in Publication 535, Business Expenses. Military h&r block Demolition and Clean-up Costs You can elect to deduct 50% of any qualified GO Zone clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. Military h&r block Qualified GO Zone clean-up costs are any amounts paid or incurred after August 27, 2005, and before January 1, 2008, for the removal of debris from, or the demolition of structures on, real property located in the GO Zone that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. Military h&r block Increase in Rehabilitation Tax Credit The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred after August 27, 2005, and before January 1, 2009, on buildings located in the GO Zone as follows. Military h&r block For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. Military h&r block For certified historic structures, the credit percentage is increased from 20% to 26%. Military h&r block For more information, see Form 3468, Investment Credit. Military h&r block Request for Copy or Transcript of Tax Return Request for copy of tax return. Military h&r block   You can use Form 4506 to order a copy of your tax return. Military h&r block Generally, there is a $39. Military h&r block 00 fee for requesting each copy of a tax return. Military h&r block If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Hurricane Katrina”) is written in red across the top of the form when filed. Military h&r block Request for transcript of tax return. Military h&r block   You can use Form 4506-T to order a free transcript of your tax return. Military h&r block A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. Military h&r block You can also call 1-800-829-1040 to order a transcript. Military h&r block How To Get Tax Help Special IRS assistance. Military h&r block   The IRS is providing special help for those affected by Hurricane Katrina, Rita, or Wilma, as well as survivors and personal representatives of the victims. Military h&r block We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by Hurricane Katrina, Rita, or Wilma, or who have other tax issues related to the hurricanes. Military h&r block Call 1-866-562-5227 Monday through Friday In English-7 a. Military h&r block m. Military h&r block to 10 p. Military h&r block m. Military h&r block local time In Spanish-8 a. Military h&r block m. Military h&r block to 9:30 p. Military h&r block m. Military h&r block local time   The IRS website at www. Military h&r block irs. Military h&r block gov has notices and other tax relief information. Military h&r block Check it periodically for any new guidance. Military h&r block Other help from the IRS. Military h&r block   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Military h&r block By selecting the method that is best for you, you will have quick and easy access to tax help. Military h&r block Contacting your Taxpayer Advocate. Military h&r block   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Military h&r block   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Military h&r block While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Military h&r block   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778. Military h&r block Call, write, or fax the Taxpayer Advocate office in your area. Military h&r block Call 1-800-829-4059 if you are a TTY/TDD user. Military h&r block Visit www. Military h&r block irs. Military h&r block gov/advocate. Military h&r block   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). Military h&r block Free tax services. Military h&r block   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Military h&r block It contains a list of free tax publications and an index of tax topics. Military h&r block It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Military h&r block Internet. Military h&r block You can access the IRS website 24 hours a day, 7 days a week, at www. Military h&r block irs. Military h&r block gov to: E-file your return. Military h&r block Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Military h&r block Check the status of your refund. Military h&r block Click on Where's My Refund. Military h&r block Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Military h&r block Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Military h&r block Download forms, instructions, and publications. Military h&r block Order IRS products online. Military h&r block Research your tax questions online. Military h&r block Search publications online by topic or keyword. Military h&r block View Internal Revenue Bulletins (IRBs) published in the last few years. Military h&r block Figure your withholdin