File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

State Income Taxes

File Past TaxesAmended Tax Return Form 2011Fed 1040ez2009 Turbo TaxForm 1040ezForms To File 2011 TaxesH&r Block BasicAmended 1040ez FormIrs Free State Tax FilingHow Long Does An Amended Tax Return TakeIrs Form 1040 EzHow To Ammend A Tax Return2010 Irs Form 1040Irs Free Tax FilingAmend A ReturnTurbo Tax Ammend1040 Ez Tax FormH&r Block EfileState Tax Forms 2012How To File 2010 Tax ReturnsFree Tax Filing Online For Military1040ez FormsWhere To File Taxes For FreeH And R Block Tax Software1040ez 2013 Tax FormMyfreetaxes ComH And R TaxFree Online Tax Filing 2011How Can I File 2011 Taxes OnlineFree State Taxes FilingForm 1040ez Mailing AddressState Income Tax Forms 2011File Federal And State Taxes Online Free1040 Ez 2010 FormFree State Tax Efile For Low IncomeFree Form 1040ez OnlineTax Form 1040nr EzTax Return Forms 2012Form 1040 XNeed Help Filing A 1040x

State Income Taxes

State income taxes 37. State income taxes   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. State income taxes  The maximum adoption credit is $12,970 for 2013. State income taxes See Adoption Credit . State income taxes Plug-in electric vehicle credit. State income taxes  This credit has expired. State income taxes Credit for prior year minimum tax. State income taxes  The refundable portion of the credit for prior year minimum tax has expired. State income taxes Excess withholding of social security and railroad retirement tax. State income taxes  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. State income taxes 2% of wages up to $113,700. State income taxes If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. State income taxes See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . State income taxes Introduction This chapter discusses the following nonrefundable credits. State income taxes Adoption credit. State income taxes Alternative motor vehicle credit. State income taxes Alternative fuel vehicle refueling property credit. State income taxes Credit to holders of tax credit bonds. State income taxes Foreign tax credit. State income taxes Mortgage interest credit. State income taxes Nonrefundable credit for prior year minimum tax. State income taxes Plug-in electric drive motor vehicle credit. State income taxes Residential energy credits. State income taxes Retirement savings contributions credit. State income taxes This chapter also discusses the following refundable credits. State income taxes Credit for tax on undistributed capital gain. State income taxes Health coverage tax credit. State income taxes Credit for excess social security tax or railroad retirement tax withheld. State income taxes Several other credits are discussed in other chapters in this publication. State income taxes Child and dependent care credit (chapter 32). State income taxes Credit for the elderly or the disabled (chapter 33). State income taxes Child tax credit (chapter 34). State income taxes Education credits (chapter 35). State income taxes Earned income credit (chapter 36). State income taxes Nonrefundable credits. State income taxes   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. State income taxes These credits may reduce your tax to zero. State income taxes If these credits are more than your tax, the excess is not refunded to you. State income taxes Refundable credits. State income taxes   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. State income taxes These credits are added to the federal income tax withheld and any estimated tax payments you made. State income taxes If this total is more than your total tax, the excess will be refunded to you. State income taxes Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. State income taxes However, if the total of these credits is more than your tax, the excess is not refunded to you. State income taxes Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. State income taxes The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. State income taxes If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. State income taxes If your modified AGI is $234,580 or more, you cannot take the credit. State income taxes Qualified adoption expenses. State income taxes   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. State income taxes These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. State income taxes Nonqualified expenses. State income taxes   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. State income taxes Eligible child. State income taxes   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. State income taxes Child with special needs. State income taxes   An eligible child is a child with special needs if all three of the following apply. State income taxes The child was a citizen or resident of the United States (including U. State income taxes S. State income taxes possessions) at the time the adoption process began. State income taxes A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. State income taxes The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. State income taxes Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. State income taxes When to take the credit. State income taxes   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. State income taxes If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. State income taxes See the Instructions for Form 8839 for more specific information on when to take the credit. State income taxes Foreign child. State income taxes   If the child is not a U. State income taxes S. State income taxes citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. State income taxes You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. State income taxes How to take the credit. State income taxes   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. State income taxes Include the credit in your total for Form 1040, line 53. State income taxes Check box c and enter “8839” on the line next to that box. State income taxes More information. State income taxes   For more information, see the Instructions for Form 8839. State income taxes Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. State income taxes Amount of credit. State income taxes   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. State income taxes In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. State income taxes   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. State income taxes How to take the credit. State income taxes   To take the credit, you must complete Form 8910 and attach it to your Form 1040. State income taxes Include the credit in your total for Form 1040, line 53. State income taxes Check box c and enter “8910” on the line next to that box. State income taxes More information. State income taxes   For more information on the credit, see the Instructions for Form 8910. State income taxes Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. State income taxes Qualified alternative fuel vehicle refueling property. State income taxes   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. State income taxes To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. State income taxes To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. State income taxes   The following are alternative fuels. State income taxes Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. State income taxes Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. State income taxes Electricity. State income taxes Amount of the credit. State income taxes   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. State income taxes For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. State income taxes How to take the credit. State income taxes   To take the credit, you must complete Form 8911 and attach it to your Form 1040. State income taxes Include the credit in your total for Form 1040, line 53. State income taxes Check box c and enter “8911” on the line next to that box. State income taxes More information. State income taxes   For more information on the credit, see the Form 8911 instructions. State income taxes Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. State income taxes You may be able to take a credit if you are a holder of one of the following bonds. State income taxes Clean renewable energy bonds (issued before 2010). State income taxes New clean renewable energy bonds. State income taxes Qualified energy conservation bonds. State income taxes Qualified school construction bonds. State income taxes Qualified zone academy bonds. State income taxes Build America bonds. State income taxes In some instances, an issuer may elect to receive a credit for interest paid on the bond. State income taxes If the issuer makes this election, you cannot also claim a credit. State income taxes Interest income. State income taxes   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. State income taxes How to take the credit. State income taxes   Complete Form 8912 and attach it to your Form 1040. State income taxes Include the credit in your total for Form 1040, line 53. State income taxes Check box c and enter “8912” on the line next to that box. State income taxes More information. State income taxes   For more information, see the Instructions for Form 8912. State income taxes Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. State income taxes S. State income taxes possession as a credit against your U. State income taxes S. State income taxes income tax. State income taxes Or, you can deduct them as an itemized deduction (see chapter 22). State income taxes You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. State income taxes S. State income taxes tax under any of the following. State income taxes Foreign earned income exclusion. State income taxes Foreign housing exclusion. State income taxes Income from Puerto Rico exempt from U. State income taxes S. State income taxes tax. State income taxes Possession exclusion. State income taxes Limit on the credit. State income taxes   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. State income taxes S. State income taxes tax liability (Form 1040, line 44), multiplied by a fraction. State income taxes The numerator of the fraction is your taxable income from sources outside the United States. State income taxes The denominator is your total taxable income from U. State income taxes S. State income taxes and foreign sources. State income taxes See Publication 514 for more information. State income taxes How to take the credit. State income taxes   Complete Form 1116 and attach it to your Form 1040. State income taxes Enter the credit on Form 1040, line 47. State income taxes Exception. State income taxes   You do not have to complete Form 1116 to take the credit if all of the following apply. State income taxes All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). State income taxes If you had dividend income from shares of stock, you held those shares for at least 16 days. State income taxes You are not filing Form 4563 or excluding income from sources within Puerto Rico. State income taxes The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). State income taxes All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. State income taxes More information. State income taxes   For more information on the credit and these requirements, see the Instructions for Form 1116. State income taxes Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. State income taxes If you qualify, you can take the credit each year for part of the home mortgage interest you pay. State income taxes Who qualifies. State income taxes   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. State income taxes Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. State income taxes Amount of credit. State income taxes   Figure your credit on Form 8396. State income taxes If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. State income taxes   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. State income taxes To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. State income taxes      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. State income taxes   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. State income taxes If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. State income taxes See Publication 530 for more information. State income taxes Carryforward. State income taxes   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. State income taxes If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. State income taxes   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). State income taxes How to take the credit. State income taxes    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. State income taxes Be sure to include any credit carryforward from 2010, 2011, and 2012. State income taxes   Include the credit in your total for Form 1040, line 53. State income taxes Check box c and enter “8396” on the line next to that box. State income taxes Reduced home mortgage interest deduction. State income taxes   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. State income taxes You must do this even if part of that amount is to be carried forward to 2014. State income taxes For more information about the home mortgage interest deduction, see chapter 23. State income taxes Recapture of federal mortgage subsidy. State income taxes   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. State income taxes The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. State income taxes See the Instructions for Form 8828 and chapter 15 for more information. State income taxes More information. State income taxes   For more information on the credit, see the Form 8396 instructions. State income taxes Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. State income taxes If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. State income taxes This is called the alternative minimum tax. State income taxes The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. State income taxes If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. State income taxes You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. State income taxes How to take the credit. State income taxes    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. State income taxes Include the credit in your total for Form 1040, line 53, and check box b. State income taxes You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. State income taxes More information. State income taxes   For more information on the credit, see the Instructions for Form 8801. State income taxes Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. State income taxes Qualified plug-in electric drive motor vehicle. State income taxes   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. State income taxes Qualified two- or three-wheeled plug-in electric vehicle. State income taxes   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. State income taxes 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. State income taxes Certification and other requirements. State income taxes   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. State income taxes However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. State income taxes   The following requirements must also be met to qualify for the credit. State income taxes You are the owner of the vehicle. State income taxes If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. State income taxes You placed the vehicle in service during 2013. State income taxes The vehicle is manufactured primarily for use on public streets, roads, and highways. State income taxes The original use of the vehicle began with you. State income taxes You acquired the vehicle for your use or to lease to others, and not for resale. State income taxes In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. State income taxes You use the vehicle primarily in the United States. State income taxes How to take the credit. State income taxes   To take the credit, you must complete Form 8936 and attach it to your Form 1040. State income taxes Include the credit in your total for Form 1040, line 53. State income taxes Check box c and enter “8936” on the line next to that box. State income taxes More information. State income taxes   For more information on the credit, see the Form 8936 instructions. State income taxes Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. State income taxes Nonbusiness energy property credit. State income taxes Residential energy efficient property credit. State income taxes If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. State income taxes Nonbusiness energy property credit. State income taxes   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. State income taxes   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. State income taxes    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. State income taxes   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. State income taxes Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. State income taxes Exterior window (including skylights). State income taxes Exterior doors. State income taxes Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. State income taxes   Residential energy property is any of the following. State income taxes Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. State income taxes Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. State income taxes Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. State income taxes Residential energy efficient property credit. State income taxes   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. State income taxes The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. State income taxes Basis reduction. State income taxes   You must reduce the basis of your home by the amount of any credit allowed. State income taxes How to take the credit. State income taxes   Complete Form 5695 and attach it to your Form 1040. State income taxes Enter the credit on Form 1040, line 52. State income taxes More information. State income taxes   For more information on these credits, see the Form 5695 instructions. State income taxes Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. State income taxes However, you cannot take the credit if either of the following applies. State income taxes The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). State income taxes The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). State income taxes Student. State income taxes   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. State income taxes School. State income taxes   A school includes a technical, trade, or mechanical school. State income taxes It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. State income taxes How to take the credit. State income taxes   Figure the credit on Form 8880. State income taxes Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. State income taxes More information. State income taxes   For more information on the credit, see the Form 8880 instructions. State income taxes Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. State income taxes If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. State income taxes Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. State income taxes If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. State income taxes The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. State income taxes How to take the credit. State income taxes   To take the credit, attach Copy B of Form 2439 to your Form 1040. State income taxes Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. State income taxes More information. State income taxes   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. State income taxes Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. State income taxes You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. State income taxes You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. State income taxes S. State income taxes Treasury–HCTC. State income taxes ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. State income taxes You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). State income taxes You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. State income taxes S. State income taxes military health system (TRICARE). State income taxes You were not imprisoned under federal, state, or local authority. State income taxes Your employer did not pay 50% or more of the cost of coverage. State income taxes You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. State income taxes But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. State income taxes If you meet all of these conditions, you may be able to take a credit of up to 72. State income taxes 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. State income taxes You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. State income taxes The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. State income taxes You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. State income taxes If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. State income taxes TAA recipient. State income taxes   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). State income taxes Example. State income taxes You received a trade adjustment allowance for January 2013. State income taxes You were an eligible TAA recipient on the first day of January and February. State income taxes Alternative TAA recipient. State income taxes   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. State income taxes Example. State income taxes You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. State income taxes The program was established by the Department of Labor. State income taxes You were an eligible alternative TAA recipient on the first day of October and November. State income taxes RTAA recipient. State income taxes   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. State income taxes PBGC pension recipient. State income taxes   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. State income taxes You were age 55 or older on the first day of the month. State income taxes You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). State income taxes If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. State income taxes How to take the credit. State income taxes   To take the credit, complete Form 8885 and attach it to your Form 1040. State income taxes Include your credit in the total for Form 1040, line 71, and check box c. State income taxes   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. State income taxes For details, see Publication 502 or Form 8885. State income taxes More information. State income taxes   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. State income taxes Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. State income taxes If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. State income taxes If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. State income taxes If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. State income taxes 2% rate. State income taxes You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. State income taxes For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. State income taxes 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. State income taxes 45%) or the Additional Medicare Tax rate (. State income taxes 9%). State income taxes The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. State income taxes Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. State income taxes 40 RRTA tier 2 $84,300 $3,709. State income taxes 20 All wages are subject to Medicare tax withholding. State income taxes   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. State income taxes Be sure to attach a copy of all of your W-2 forms. State income taxes Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. State income taxes Employer's error. State income taxes   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. State income taxes The employer should adjust the tax for you. State income taxes If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. State income taxes Joint return. State income taxes   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. State income taxes Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. State income taxes How to figure the credit if you did not work for a railroad. State income taxes   If you did not work for a railroad during 2013, figure the credit as follows: 1. State income taxes Add all social security tax withheld (but not more than $7,049. State income taxes 40 for each employer). State income taxes Enter the total here   2. State income taxes Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. State income taxes Add lines 1 and 2. State income taxes If $7,049. State income taxes 40 or less, stop here. State income taxes You cannot take  the credit   4. State income taxes Social security tax limit 7,049. State income taxes 40 5. State income taxes Credit. State income taxes Subtract line 4 from line 3. State income taxes Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. State income taxes You are married and file a joint return with your spouse who had no gross income in 2013. State income taxes During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. State income taxes Social security tax of $3,720 was withheld. State income taxes You also worked for another employer in 2013 and earned $55,000 in wages. State income taxes $3,410 of social security tax was withheld from these wages. State income taxes Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. State income taxes 60 for the excess social security tax withheld. State income taxes 1. State income taxes Add all social security tax withheld (but not more than $7,049. State income taxes 40 for each employer). State income taxes Enter the total here $7,130. State income taxes 00 2. State income taxes Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. State income taxes Add lines 1 and 2. State income taxes If $7,049. State income taxes 40 or less, stop here. State income taxes You cannot take the credit 7,130. State income taxes 00 4. State income taxes Social security tax limit 7,049. State income taxes 40 5. State income taxes Credit. State income taxes Subtract line 4 from line 3. State income taxes Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. State income taxes 60 How to figure the credit if you worked for a railroad. State income taxes   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. State income taxes Add all social security and tier 1 RRTA tax withheld at the 6. State income taxes 2% rate (but not more than $7,049. State income taxes 40 for each employer). State income taxes Enter the total here   2. State income taxes Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. State income taxes Add lines 1 and 2. State income taxes If $7,049. State income taxes 40 or less, stop here. State income taxes You cannot take  the credit   4. State income taxes Social security and tier 1 RRTA  tax limit 7,049. State income taxes 40 5. State income taxes Credit. State income taxes Subtract line 4 from line 3. State income taxes Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. State income taxes   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. State income taxes More information. State income taxes   For more information on the credit, see Publication 505. State income taxes Prev  Up  Next   Home   More Online Publications
Español

Occupational Safety and Health Administration (OSHA)

The Occupational Safety and Health Administration (OSHA) assures safe and healthful working conditions for working men and women by setting and enforcing standards, and by providing training, outreach, education and assistance.

Contact the Agency or Department

Website: Occupational Safety and Health Administration (OSHA)

Contact In-Person: Find an OSHA Office Near You

Address: Department of Labor
200 Constitution Ave., NW

Washington, DC 20210

Toll-free: 1-800-321-6742

TTY: 1-877-889-5627

The State Income Taxes

State income taxes 2. State income taxes   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. State income taxes Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. State income taxes Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). State income taxes You must do this to figure your net capital gain or loss. State income taxes For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. State income taxes See Capital Gains Tax Rates in chapter 4. State income taxes Your deduction for a net capital loss may be limited. State income taxes See Treatment of Capital Losses in chapter 4. State income taxes Capital gain or loss. State income taxes   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. State income taxes You also may have a capital gain if your section 1231 transactions result in a net gain. State income taxes Section 1231 transactions. State income taxes   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. State income taxes They also include certain involuntary conversions of business or investment property, including capital assets. State income taxes See Section 1231 Gains and Losses in chapter 3 for more information. State income taxes Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. State income taxes Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. State income taxes For exceptions, see Noncapital Assets, later. State income taxes The following items are examples of capital assets. State income taxes Stocks and bonds. State income taxes A home owned and occupied by you and your family. State income taxes Timber grown on your home property or investment property, even if you make casual sales of the timber. State income taxes Household furnishings. State income taxes A car used for pleasure or commuting. State income taxes Coin or stamp collections. State income taxes Gems and jewelry. State income taxes Gold, silver, and other metals. State income taxes Personal-use property. State income taxes   Generally, property held for personal use is a capital asset. State income taxes Gain from a sale or exchange of that property is a capital gain. State income taxes Loss from the sale or exchange of that property is not deductible. State income taxes You can deduct a loss relating to personal-use property only if it results from a casualty or theft. State income taxes Investment property. State income taxes   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. State income taxes This treatment does not apply to property used to produce rental income. State income taxes See Business assets, later, under Noncapital Assets. State income taxes Release of restriction on land. State income taxes   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. State income taxes Noncapital Assets A noncapital asset is property that is not a capital asset. State income taxes The following kinds of property are not capital assets. State income taxes Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. State income taxes Inventories are discussed in Publication 538, Accounting Periods and Methods. State income taxes But, see the Tip below. State income taxes Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. State income taxes Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). State income taxes Sales of this type of property are discussed in chapter 3. State income taxes Real property used in your trade or business or as rental property, even if the property is fully depreciated. State income taxes A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. State income taxes But, see the Tip below. State income taxes U. State income taxes S. State income taxes Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. State income taxes Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. State income taxes It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. State income taxes The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. State income taxes Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. State income taxes Supplies of a type you regularly use or consume in the ordinary course of your trade or business. State income taxes You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. State income taxes See chapter 4 of Publication 550 for details. State income taxes Property held mainly for sale to customers. State income taxes   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. State income taxes Inventories are discussed in Publication 538. State income taxes Business assets. State income taxes   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. State income taxes The sale or disposition of business property is discussed in chapter 3. State income taxes Letters and memoranda. State income taxes   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. State income taxes Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. State income taxes For this purpose, letters and memoranda addressed to you are considered prepared for you. State income taxes If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. State income taxes Commodities derivative financial instrument. State income taxes   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). State income taxes Commodities derivative dealer. State income taxes   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. State income taxes Hedging transaction. State income taxes   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. State income taxes Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. State income taxes Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. State income taxes Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. State income taxes If these rules apply, gains may be treated as ordinary income and losses may not be deductible. State income taxes See Transfers to Spouse in chapter 1 for rules that apply to spouses. State income taxes Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. State income taxes It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. State income taxes Depreciable property transaction. State income taxes   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. State income taxes A person and the person's controlled entity or entities. State income taxes A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. State income taxes An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). State income taxes An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). State income taxes Controlled entity. State income taxes   A person's controlled entity is either of the following. State income taxes A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. State income taxes An entity whose relationship with that person is one of the following. State income taxes A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. State income taxes 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 50%” is substituted for “at least 80%” in that definition. State income taxes Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. State income taxes Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. State income taxes Controlled partnership transaction. State income taxes   A gain recognized in a controlled partnership transaction may be ordinary income. State income taxes The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. State income taxes   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. State income taxes A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. State income taxes Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. State income taxes Determining ownership. State income taxes   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. State income taxes Stock or a partnership interest 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. State income taxes (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. State income taxes ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. State income taxes Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. State income taxes For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. State income taxes But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. State income taxes Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. State income taxes This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. State income taxes For the list of related persons, see Related persons next. State income taxes If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. State income taxes The gain on each item is taxable. State income taxes The loss on any item is nondeductible. State income taxes Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. State income taxes Related persons. State income taxes   The following is a list of related persons. State income taxes Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. State income taxes ), and lineal descendants (children, grandchildren, etc. State income taxes ). State income taxes An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. State income taxes Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. State income taxes A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. State income taxes A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. State income taxes Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. State income taxes A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. State income taxes A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. State income taxes Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. State income taxes Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. State income taxes An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. State income taxes Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. State income taxes A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. State income taxes Partnership interests. State income taxes   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. State income taxes Controlled groups. State income taxes   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. State income taxes   For more information, see section 267(f) of the Internal Revenue Code. State income taxes Ownership of stock or partnership interests. State income taxes   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. State income taxes Stock or a partnership interest 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. State income taxes (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. State income taxes ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. State income taxes Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. State income taxes An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. State income taxes For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. State income taxes But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. State income taxes Indirect transactions. State income taxes   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. State income taxes This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. State income taxes Property received from a related person. State income taxes   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. State income taxes This rule applies only to the original transferee. State income taxes Example 1. State income taxes Your brother sold stock to you for $7,600. State income taxes His cost basis was $10,000. State income taxes His loss of $2,400 was not deductible. State income taxes You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). State income taxes Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. State income taxes Example 2. State income taxes Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. State income taxes Your recognized loss is only $700 ($7,600 − $6,900). State income taxes You cannot deduct the loss not allowed to your brother. State income taxes Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. State income taxes Sale of a Business The sale of a business usually is not a sale of one asset. State income taxes Instead, all the assets of the business are sold. State income taxes Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. State income taxes A business usually has many assets. State income taxes When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. State income taxes The gain or loss on each asset is figured separately. State income taxes The sale of capital assets results in capital gain or loss. State income taxes The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). State income taxes The sale of inventory results in ordinary income or loss. State income taxes Partnership interests. State income taxes   An interest in a partnership or joint venture is treated as a capital asset when sold. State income taxes The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. State income taxes For more information, see Disposition of Partner's Interest in Publication 541. State income taxes Corporation interests. State income taxes   Your interest in a corporation is represented by stock certificates. State income taxes When you sell these certificates, you usually realize capital gain or loss. State income taxes For information on the sale of stock, see chapter 4 in Publication 550. State income taxes Corporate liquidations. State income taxes   Corporate liquidations of property generally are treated as a sale or exchange. State income taxes Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. State income taxes Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. State income taxes   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. State income taxes For more information, see section 332 of the Internal Revenue Code and the related regulations. State income taxes Allocation of consideration paid for a business. State income taxes   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. State income taxes Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. State income taxes This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. State income taxes It also determines the buyer's basis in the business assets. State income taxes Consideration. State income taxes   The buyer's consideration is the cost of the assets acquired. State income taxes The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. State income taxes Residual method. State income taxes   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. State income taxes This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. State income taxes Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. State income taxes   A group of assets constitutes a trade or business if either of the following applies. State income taxes Goodwill or going concern value could, under any circumstances, attach to them. State income taxes The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. State income taxes   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). State income taxes The consideration remaining after this reduction must be allocated among the various business assets in a certain order. State income taxes See Classes of assets next for the complete order. State income taxes Classes of assets. State income taxes   The following definitions are the classifications for deemed or actual asset acquisitions. State income taxes Allocate the consideration among the assets in the following order. State income taxes The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. State income taxes The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. State income taxes Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). State income taxes Class II assets are certificates of deposit, U. State income taxes S. State income taxes Government securities, foreign currency, and actively traded personal property, including stock and securities. State income taxes Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. State income taxes However, see section 1. State income taxes 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. State income taxes Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. State income taxes Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. State income taxes    Note. State income taxes Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. State income taxes Class VI assets are section 197 intangibles (other than goodwill and going concern value). State income taxes Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). State income taxes   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. State income taxes For example, if an asset is described in both Class II and Class IV, choose Class II. State income taxes Example. State income taxes The total paid in the sale of the assets of Company SKB is $21,000. State income taxes No cash or deposit accounts or similar accounts were sold. State income taxes The company's U. State income taxes S. State income taxes Government securities sold had a fair market value of $3,200. State income taxes The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. State income taxes Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. State income taxes S. State income taxes Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. State income taxes Agreement. State income taxes   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. State income taxes This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. State income taxes Reporting requirement. State income taxes   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. State income taxes Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. State income taxes Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. State income taxes See the Instructions for Form 8594. State income taxes Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. State income taxes It includes such items as patents, copyrights, and the goodwill value of a business. State income taxes Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. State income taxes The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. State income taxes See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. State income taxes Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. State income taxes The following discussions explain special rules that apply to certain dispositions of intangible property. State income taxes Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. State income taxes They include the following assets. State income taxes Goodwill. State income taxes Going concern value. State income taxes Workforce in place. State income taxes Business books and records, operating systems, and other information bases. State income taxes Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. State income taxes Customer-based intangibles. State income taxes Supplier-based intangibles. State income taxes Licenses, permits, and other rights granted by a governmental unit. State income taxes Covenants not to compete entered into in connection with the acquisition of a business. State income taxes Franchises, trademarks, and trade names. State income taxes See chapter 8 of Publication 535 for a description of each intangible. State income taxes Dispositions. State income taxes   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. State income taxes Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. State income taxes If you retain more than one section 197 intangible, increase each intangible's adjusted basis. State income taxes Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. State income taxes   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. State income taxes For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. State income taxes Covenant not to compete. State income taxes   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. State income taxes Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. State income taxes Anti-churning rules. State income taxes   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. State income taxes However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. State income taxes Recognize gain on the transfer of the property. State income taxes Pay income tax on the gain at the highest tax rate. State income taxes   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. State income taxes But each partner or shareholder must pay the tax on his or her share of gain. State income taxes   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. State income taxes You must file the tax return by the due date (including extensions). State income taxes You must also notify the transferee of the election in writing by the due date of the return. State income taxes   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). State income taxes Attach the statement to the amended return and write “Filed pursuant to section 301. State income taxes 9100-2” at the top of the statement. State income taxes File the amended return at the same address the original return was filed. State income taxes For more information about making the election, see Regulations section 1. State income taxes 197-2(h)(9). State income taxes For information about reporting the tax on your income tax return, see the Instructions for Form 4797. State income taxes Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. State income taxes This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. State income taxes For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. State income taxes This treatment applies to your transfer of a patent if you meet all the following conditions. State income taxes You are the holder of the patent. State income taxes You transfer the patent other than by gift, inheritance, or devise. State income taxes You transfer all substantial rights to the patent or an undivided interest in all such rights. State income taxes You do not transfer the patent to a related person. State income taxes Holder. State income taxes   You are the holder of a patent if you are either of the following. State income taxes The individual whose effort created the patent property and who qualifies as the original and first inventor. State income taxes The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. State income taxes All substantial rights. State income taxes   All substantial rights to patent property are all rights that have value when they are transferred. State income taxes A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. State income taxes   All substantial rights to a patent are not transferred if any of the following apply to the transfer. State income taxes The rights are limited geographically within a country. State income taxes The rights are limited to a period less than the remaining life of the patent. State income taxes The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. State income taxes The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. State income taxes Related persons. State income taxes   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. State income taxes Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. State income taxes Substitute “25% or more” ownership for “more than 50%. State income taxes ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. State income taxes For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. State income taxes The brother-sister exception does not apply because the trust relationship is independent of family status. State income taxes Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. State income taxes A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. State income taxes Significant power, right, or continuing interest. State income taxes   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. State income taxes   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. State income taxes A right to disapprove any assignment of the interest, or any part of it. State income taxes A right to end the agreement at will. State income taxes A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. State income taxes A right to make the recipient sell or advertise only your products or services. State income taxes A right to make the recipient buy most supplies and equipment from you. State income taxes A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. State income taxes Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. State income taxes However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. State income taxes See section 1237 of the Internal Revenue Code. State income taxes Timber Standing timber held as investment property is a capital asset. State income taxes Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. State income taxes If you held the timber primarily for sale to customers, it is not a capital asset. State income taxes Gain or loss on its sale is ordinary business income or loss. State income taxes It is reported in the gross receipts or sales and cost of goods sold items of your return. State income taxes Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. State income taxes These sales constitute a very minor part of their farm businesses. State income taxes In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. State income taxes , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. State income taxes Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. State income taxes Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. State income taxes This is true whether the timber is cut under contract or whether you cut it yourself. State income taxes Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. State income taxes See chapter 3. State income taxes Gain or loss is reported on Form 4797. State income taxes Christmas trees. State income taxes   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. State income taxes They qualify for both rules discussed below. State income taxes Election to treat cutting as a sale or exchange. State income taxes   Under the general rule, the cutting of timber results in no gain or loss. State income taxes It is not until a sale or exchange occurs that gain or loss is realized. State income taxes But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. State income taxes Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. State income taxes Any later sale results in ordinary business income or loss. State income taxes See Example, later. State income taxes   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. State income taxes Making the election. State income taxes   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. State income taxes You do not have to make the election in the first year you cut timber. State income taxes You can make it in any year to which the election would apply. State income taxes If the timber is partnership property, the election is made on the partnership return. State income taxes This election cannot be made on an amended return. State income taxes   Once you have made the election, it remains in effect for all later years unless you cancel it. State income taxes   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. State income taxes The prior election (and revocation) is disregarded for purposes of making a subsequent election. State income taxes See Form T (Timber), Forest Activities Schedule, for more information. State income taxes Gain or loss. State income taxes   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. State income taxes   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. State income taxes Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. State income taxes   Timber depletion is discussed in chapter 9 of Publication 535. State income taxes Example. State income taxes In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. State income taxes It had an adjusted basis for depletion of $40 per MBF. State income taxes You are a calendar year taxpayer. State income taxes On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. State income taxes It was cut in April for sale. State income taxes On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. State income taxes You report the difference between the fair market value and your adjusted basis for depletion as a gain. State income taxes This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. State income taxes You figure your gain as follows. State income taxes FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. State income taxes Outright sales of timber. State income taxes   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). State income taxes However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). State income taxes Cutting contract. State income taxes   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. State income taxes You are the owner of the timber. State income taxes You held the timber longer than 1 year before its disposal. State income taxes You kept an economic interest in the timber. State income taxes   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. State income taxes   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. State income taxes Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. State income taxes Date of disposal. State income taxes   The date of disposal is the date the timber is cut. State income taxes However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. State income taxes   This election applies only to figure the holding period of the timber. State income taxes It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). State income taxes   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. State income taxes The statement must identify the advance payments subject to the election and the contract under which they were made. State income taxes   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). State income taxes Attach the statement to the amended return and write “Filed pursuant to section 301. State income taxes 9100-2” at the top of the statement. State income taxes File the amended return at the same address the original return was filed. State income taxes Owner. State income taxes   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. State income taxes You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. State income taxes Tree stumps. State income taxes   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. State income taxes Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. State income taxes However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. State income taxes Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. State income taxes   See Form T (Timber) and its separate instructions for more information about dispositions of timber. State income taxes Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. State income taxes , are capital assets except when they are held for sale by a dealer. State income taxes Any gain or loss from their sale or exchange generally is a capital gain or loss. State income taxes If you are a dealer, the amount received from the sale is ordinary business income. State income taxes Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. State income taxes You owned the coal or iron ore longer than 1 year before its disposal. State income taxes You kept an economic interest in the coal or iron ore. State income taxes For this rule, the date the coal or iron ore is mined is considered the date of its disposal. State income taxes Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). State income taxes This amount is included on Form 4797 along with your other section 1231 gains and losses. State income taxes You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. State income taxes If you own only an option to buy the coal in place, you do not qualify as an owner. State income taxes In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. State income taxes The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. State income taxes Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. State income taxes If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. State income taxes Special rule. State income taxes   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. State income taxes A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). State income taxes An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. State income taxes Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. State income taxes This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. State income taxes An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). State income taxes A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. State income taxes Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. State income taxes For more information, see chapter 4 of Publication 550. State income taxes Prev  Up  Next   Home   More Online Publications