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Student Filing Taxes

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Student Filing Taxes

Student filing taxes Index Symbols 529 program (see Qualified tuition program (QTP)) A Academic period American opportunity credit, Academic period. Student filing taxes Lifetime learning credit, Academic period. Student filing taxes Student loan interest deduction, Academic period. Student filing taxes Tuition and fees deduction, Academic period. Student filing taxes Accountable plans, Accountable Plans, Allocating your reimbursements for meals. Student filing taxes Additional tax Coverdell ESA On excess contributions, Additional Tax on Excess Contributions, Figuring and reporting the additional tax. Student filing taxes On taxable distributions, Additional Tax on Taxable Distributions IRA distributions, education exception, Education Exception to Additional Tax on Early IRA Distributions Qualified tuition program (QTP), on taxable distributions, Additional Tax on Taxable Distributions Adjusted qualified education expenses (see Qualified education expenses) American opportunity credit Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Claiming dependent's expenses, Who Can Claim a Dependent's Expenses, Tuition reduction. Student filing taxes Tuition reduction, Tuition reduction. Student filing taxes Claiming the credit, Can You Claim the Credit, Who Cannot Claim the Credit, Claiming the Credit Qualifying to claim (Figure 2-1), Coordination with Coverdell ESA distributions, Figuring the Taxable Portion of a Distribution Coordination with qualified tuition program (QTP) distributions, Coordination With American Opportunity and Lifetime Learning Credits Eligible educational institution, Eligible educational institution. Student filing taxes Eligible student, Who Is an Eligible Student Requirements (Figure 2-2), Expenses qualifying for, What Expenses Qualify, Adjustments to Qualified Education Expenses Figuring the credit, Figuring the Credit Income level, effect on amount of credit, Effect of the Amount of Your Income on the Amount of Your Credit, Phaseout. Student filing taxes Income limits, Effect of the Amount of Your Income on the Amount of Your Credit, Phaseout. Student filing taxes Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Student filing taxes Worksheet 2-1, Claiming the Credit Overview of American opportunity credit (Table 2-1), Introduction Phaseout, Phaseout. Student filing taxes Qualified education expenses, Qualified Education Expenses Tax benefit of, What is the tax benefit of the American opportunity credit. Student filing taxes Armed Forces Health Professions Scholarship and Financial Assistance Program, Exceptions. Student filing taxes Assistance (see Tax help) Athletic scholarships, Athletic Scholarships B Bar review course, Bar or CPA Review Course Bonds, education savings (see Education savings bond program) Business deduction for work-related education, Business Deduction for Work-Related Education, Illustrated Example Accountable plans, Accountable Plans, Allocating your reimbursements for meals. Student filing taxes Adjustments to qualifying work-related education expenses, Adjustments to Qualifying Work-Related Education Expenses Allocating meal reimbursements, Allocating your reimbursements for meals. Student filing taxes Deductible education expenses, What Expenses Can Be Deducted, Adjustments to Qualifying Work-Related Education Expenses Deducting business expenses, Deducting Business Expenses, Impairment-Related Work Expenses Double benefit not allowed, No Double Benefit Allowed Education required by employer or by law, Education Required by Employer or by Law Education to maintain or improve skills, Education To Maintain or Improve Skills Education to meet minimum requirements, Education To Meet Minimum Requirements, Certification in a new state. Student filing taxes Education to qualify for new trade or business, Education That Qualifies You for a New Trade or Business, Teaching and Related Duties Excess expenses, accountable plan, Excess expenses. Student filing taxes , Allocating your reimbursements for meals. Student filing taxes Indefinite absence, Education during indefinite absence. Student filing taxes Maintaining skills vs. Student filing taxes qualifying for new job, Maintaining skills vs. Student filing taxes qualifying for new job. Student filing taxes Nonaccountable plans, Nonaccountable Plans Nondeductible expenses, Nondeductible expenses. Student filing taxes Qualified education expenses, What Expenses Can Be Deducted, Adjustments to Qualifying Work-Related Education Expenses Recordkeeping requirements, Recordkeeping, Examples of records to keep. Student filing taxes Reimbursements, treatment of, How To Treat Reimbursements, Reimbursements for nondeductible expenses. Student filing taxes Tax benefit of, What is the tax benefit of taking a business deduction for work-related education. Student filing taxes Tax-free educational assistance, Tax-free educational assistance. Student filing taxes Teachers, Requirements for Teachers, Teaching and Related Duties Temporary absence to acquire education, Education during temporary absence. Student filing taxes Transportation expenses, Transportation Expenses, Using your car. Student filing taxes Travel expenses, Travel Expenses C Cancellation of student loan (see Student loan cancellation) Candidate for a degree Scholarships and fellowships, Candidate for a degree. Student filing taxes Change of designated beneficiary Coverdell ESA, Changing the Designated Beneficiary Qualified tuition program, Changing the Designated Beneficiary Collapsed loans, Interest on refinanced student loans. Student filing taxes Comprehensive or bundled fees American opportunity credit, Comprehensive or bundled fees. Student filing taxes Lifetime learning credit, Comprehensive or bundled fees. Student filing taxes Tuition and fees deduction, Comprehensive or bundled fees. Student filing taxes Consolidated loans used to refinance student loans, Interest on refinanced student loans. Student filing taxes Conventions outside U. Student filing taxes S. Student filing taxes , Cruises and conventions. Student filing taxes Coverdell education savings account (ESA), Coverdell Education Savings Account (ESA), Figuring the Taxable Portion of a Distribution, Coordination With American Opportunity and Lifetime Learning Credits, Worksheet 7-3. Student filing taxes Coverdell ESA—Taxable Distributions and Basis Additional tax On excess contributions, Additional Tax on Excess Contributions, Figuring and reporting the additional tax. Student filing taxes On taxable distributions, Additional Tax on Taxable Distributions Assets to be distributed at age 30 or death of beneficiary, When Assets Must Be Distributed Contribution limits, Contribution Limits, Figuring the limit. Student filing taxes Figuring the limit (Worksheet 6-2), Figuring the limit. Student filing taxes Contributions to, Contributions, Figuring and reporting the additional tax. Student filing taxes Table 7-2, Contributions Coordination with American opportunity and lifetime learning credits, Coordination With American Opportunity and Lifetime Learning Credits Coordination with qualified tuition program (QTP), Coordination With Qualified Tuition Program (QTP) Distributions Defined, What Is a Coverdell ESA Distributions, Distributions, How To Figure the Taxable Earnings Overview (Table 7-3), Distributions Divorce, transfer due to, Transfer Because of Divorce Eligible educational institution, Eligible Educational Institution Figuring taxable portion of distribution, Figuring the Taxable Portion of a Distribution Worksheet 7-3, Worksheet 7-3. Student filing taxes Coverdell ESA—Taxable Distributions and Basis Figuring the taxable earnings in required distribution, How To Figure the Taxable Earnings Losses, Losses on Coverdell ESA Investments Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Student filing taxes , MAGI when using Form 1040NR-EZ. Student filing taxes Worksheet 6-1, Worksheet 7-1. Student filing taxes MAGI for a Coverdell ESA Overview (Table 6-1), Coverdell Education Savings Account (ESA) Qualified education expenses, Qualified Education Expenses, Qualified Elementary and Secondary Education Expenses Rollovers, Rollovers Tax benefit of, What is the tax benefit of the Coverdell ESA. Student filing taxes Tax-free distributions, Tax-Free Distributions Taxable distributions, Taxable Distributions, Figuring the additional tax. Student filing taxes Worksheet 7-3 to figure, Worksheet 7-3. Student filing taxes Coverdell ESA—Taxable Distributions and Basis Transfers, Rollovers CPA review course, Bar or CPA Review Course Credits American opportunity (see American opportunity credit) Lifetime learning (see Lifetime learning credit) Cruises, educational, Cruises and conventions. Student filing taxes D Deductions (see Business deduction for work-related education) Designated beneficiary Coverdell ESA, What Is a Coverdell ESA, Changing the Designated Beneficiary Qualified tuition program (QTP), Designated beneficiary. Student filing taxes , Changing the Designated Beneficiary Disabilities, persons with Impairment-related work expenses, Impairment-Related Work Expenses Distributions (see specific benefit ) Divorce Coverdell ESA transfer due to, Transfer Because of Divorce Expenses paid under decree American opportunity credit, Expenses paid by dependent. Student filing taxes Lifetime learning credit, Expenses paid by dependent. Student filing taxes Tuition and fees deduction, Expenses paid under divorce decree. Student filing taxes Double benefit not allowed American opportunity credit, No Double Benefit Allowed Lifetime learning credit, No Double Benefit Allowed Student loan interest deduction, No Double Benefit Allowed Tuition and fees deduction, No Double Benefit Allowed Work-related education, No Double Benefit Allowed E Early distributions from IRAs, Education Exception to Additional Tax on Early IRA Distributions, Reporting Early Distributions Eligible educational institution, Eligible educational institution. Student filing taxes Figuring amount not subject to 10% tax, Figuring the Amount Not Subject to the 10% Tax Qualified education expenses, Qualified education expenses. Student filing taxes Reporting, Reporting Early Distributions Education IRA (see Coverdell education savings account (ESA)) Education loans (see Student loan interest deduction) Education savings account (see Coverdell education savings account (ESA)) Education savings bond program Cashing in bonds tax free, Who Can Cash In Bonds Tax Free, MAGI when using Form 1040. Student filing taxes Claiming dependent's exemption, Dependent for whom you claim an exemption. Student filing taxes Claiming exclusion, Claiming the Exclusion Eligible educational institution, Eligible educational institution. Student filing taxes Figuring tax-free amount, Figuring the Tax-Free Amount Income level, effect on amount of exclusion, Effect of the Amount of Your Income on the Amount of Your Exclusion Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Student filing taxes , MAGI when using Form 1040. Student filing taxes Phaseout, Effect of the Amount of Your Income on the Amount of Your Exclusion Qualified education expenses, Qualified education expenses. Student filing taxes Educational assistance, employer-provided (see Employer-provided educational assistance) Eligible educational institution American opportunity credit, Eligible educational institution. Student filing taxes Cancellation of student loan, Eligible educational institution. Student filing taxes Coverdell ESA, Eligible Educational Institution Early distributions from IRAs, Eligible educational institution. Student filing taxes Education savings bond program, Eligible educational institution. Student filing taxes Lifetime learning credit, Eligible educational institution. Student filing taxes Qualified tuition program (QTP), Eligible educational institution. Student filing taxes Qualified tuition reduction, Qualified Tuition Reduction Scholarships and fellowships, Eligible educational institution. Student filing taxes , Eligible educational institution. Student filing taxes Student loan cancellation, Eligible educational institution. Student filing taxes Student loan interest deduction, Eligible educational institution. Student filing taxes Tuition and fees deduction, Eligible educational institution. Student filing taxes Eligible elementary or secondary school Coverdell ESA, Eligible elementary or secondary school. Student filing taxes Eligible student American opportunity credit, Who Is an Eligible Student Lifetime learning credit, Who Is an Eligible Student Student loan interest deduction, Eligible student. Student filing taxes Tuition and fees deduction, Who Is an Eligible Student Employees Deducting work-related education expenses, Employees Employer-provided educational assistance, Employer-Provided Educational Assistance, Working condition fringe benefit. Student filing taxes ESAs (see Coverdell education savings account (ESA)) Estimated tax, Reminders Excess contributions Coverdell ESA, Additional Tax on Excess Contributions, Figuring and reporting the additional tax. Student filing taxes Excess expenses, accountable plan, Excess expenses. Student filing taxes , Allocating your reimbursements for meals. Student filing taxes Expenses (see specific benefit ) F Family members, beneficiary Coverdell ESA, Members of the beneficiary's family. Student filing taxes Qualified tuition program (QTP), Members of the beneficiary's family. Student filing taxes Fee-basis officials, work-related education deduction, Performing Artists and Fee-Basis Officials Fellowships (see Scholarships and fellowships) Figures (see Tables and figures) Financial aid (see Scholarships and fellowships) Form 1098-E Student loan interest deduction, Loan origination fee. Student filing taxes , Form 1098-E. Student filing taxes Form 1098-T, Reminders American opportunity credit, Form 1098-T. Student filing taxes Lifetime learning credit, Form 1098-T. Student filing taxes Tuition and fees deduction, Form 1098-T. Student filing taxes Form 1099-Q Coverdell ESA, Exceptions. Student filing taxes , Earnings and basis. Student filing taxes Qualified tuition program (QTP), Earnings and return of investment. Student filing taxes Form 1099-R Early distributions from IRAs, Reporting Early Distributions Form 2106, 50% limit on meals. Student filing taxes , Form 2106 or 2106-EZ. Student filing taxes Form 2106-EZ, 50% limit on meals. Student filing taxes , Form 2106 or 2106-EZ. Student filing taxes , Using Form 2106-EZ. Student filing taxes Filled-in example, Form 5329 Coverdell ESA, Figuring the additional tax. Student filing taxes Early distributions from IRAs, Reporting Early Distributions Qualified tuition program (QTP), Figuring the additional tax. Student filing taxes Form 8815, MAGI when using Form 1040. Student filing taxes , Claiming the Exclusion Form 8863 Filled-in examples, Form 8917 Filled-in examples, Form W-9S, Form 1098-T. Student filing taxes , Form 1098-T. Student filing taxes , Form 1098-E. Student filing taxes , Form 1098-T. Student filing taxes Free tax services, Free help with your tax return. Student filing taxes Fulbright grants, Fulbright Grants G Glossary, Glossary. Student filing taxes , Glossary, Transfer: Graduate education tuition reduction, Graduate Education Grants Fulbright, Fulbright Grants Pell, Pell Grants and Other Title IV Need-Based Education Grants Title IV need-based education, Pell Grants and Other Title IV Need-Based Education Grants H Half-time student American opportunity credit, Enrolled at least half-time. Student filing taxes Coverdell ESA, Half-time student. Student filing taxes Early distributions from IRAs, Half-time student. Student filing taxes Student loan interest deduction, Enrolled at least half-time. Student filing taxes Help (see Tax help) I Illustrated example of education credits (Appendix A), Appendix A. Student filing taxes Illustrated Example of Education Credits, Impairment-related work expenses Work-related education deduction, Impairment-Related Work Expenses Individual retirement arrangements (IRAs), Coverdell Education Savings Account (ESA) Early distributions (see Early distributions from IRAs) L Lifetime learning credit, Differences between the American opportunity and lifetime learning credits. Student filing taxes Academic period, Academic period. Student filing taxes Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Claiming dependent's expenses, Who Can Claim a Dependent's Expenses Tuition reduction, Tuition reduction. Student filing taxes Claiming the credit, Can You Claim the Credit, Who Cannot Claim the Credit, Claiming the Credit Qualifying to claim (Figure 3-1), Coordination with Coverdell ESA distributions, Figuring the Taxable Portion of a Distribution, Coordination With American Opportunity and Lifetime Learning Credits Coordination with qualified tuition program (QTP) distributions, Coordination With American Opportunity and Lifetime Learning Credits Eligible educational institution, Eligible educational institution. Student filing taxes Eligible student, Who Is an Eligible Student Expenses qualifying for, What Expenses Qualify, Amounts that do not reduce qualified education expenses. Student filing taxes Figuring the credit, Figuring the Credit, Claiming the Credit Income level, effect on amount of credit, Effect of the Amount of Your Income on the Amount of Your Credit Income limits, Effect of the Amount of Your Income on the Amount of Your Credit Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Student filing taxes Worksheet 3-1, MAGI when using Form 1040. Student filing taxes Overview (Table 3-1), Table 3-1. Student filing taxes Overview of the Lifetime Learning Credit Phaseout, Phaseout. Student filing taxes Qualified education expenses, Qualified Education Expenses, Amounts that do not reduce qualified education expenses. Student filing taxes Qualifying to claim (Figure 3-1), Tax benefit of, What is the tax benefit of the lifetime learning credit. Student filing taxes Loans Cancellation (see Student loan cancellation) Capitalized interest on student loan, Capitalized interest. Student filing taxes Origination fees on student loan, Loan origination fee. Student filing taxes Qualified education expenses paid with American opportunity credit, Academic period. Student filing taxes Lifetime learning credit, Paid with borrowed funds. Student filing taxes Student loan repayment assistance, Student Loan Repayment Assistance Losses, deducting Coverdell ESA, Losses on Coverdell ESA Investments Qualified tuition program (QTP), Losses on QTP Investments Luxury water transportation, Cruises and conventions. Student filing taxes M Mileage deduction for work-related education, What's New, Using your car. Student filing taxes Military academy cadets, Payment to Service Academy Cadets Missing children, photographs of, Reminders Modified adjusted gross income (MAGI) American opportunity credit Worksheet 2-1, Claiming the Credit Coverdell ESA, Modified adjusted gross income (MAGI). Student filing taxes , MAGI when using Form 1040NR-EZ. Student filing taxes Worksheet 6-1, Worksheet 7-1. Student filing taxes MAGI for a Coverdell ESA Education savings bond program, Modified adjusted gross income (MAGI). Student filing taxes , MAGI when using Form 1040. Student filing taxes Lifetime learning credit, Modified adjusted gross income (MAGI). Student filing taxes Worksheet 3-1, MAGI when using Form 1040. Student filing taxes Student loan interest deduction, Modified adjusted gross income (MAGI). Student filing taxes Table 4-2, Table 4-2. Student filing taxes Effect of MAGI on Student Loan Interest Deduction Tuition and fees deduction, Modified adjusted gross income (MAGI). Student filing taxes Table 6-2, Table 6-2. Student filing taxes Effect of MAGI on Maximum Tuition and Fees Deduction Worksheet 6-1, Worksheet 6-1. Student filing taxes MAGI for the Tuition and Fees Deduction N National Health Service Corps Scholarship Program, Exceptions. Student filing taxes , Exceptions. Student filing taxes Nonaccountable plans Work-related education, Nonaccountable Plans P Pell grants, Pell Grants and Other Title IV Need-Based Education Grants, Coordination with Pell grants and other scholarships. Student filing taxes , Coordination with Pell grants and other scholarships. Student filing taxes Performing artists, work-related education deduction, Performing Artists and Fee-Basis Officials Phaseout American opportunity credit, Phaseout. Student filing taxes Education savings bond program, Effect of the Amount of Your Income on the Amount of Your Exclusion Lifetime learning credit, Phaseout. Student filing taxes Student loan interest deduction, Phaseout. Student filing taxes , Effect of the Amount of Your Income on the Amount of Your Deduction Publications (see Tax help) Q Qualified education expenses Adjustments to American opportunity credit, Adjustments to Qualified Education Expenses Coverdell ESA, Adjusted qualified education expenses. Student filing taxes Education savings bond program, Adjusted qualified education expenses. Student filing taxes Lifetime learning credit, Adjustments to Qualified Education Expenses Qualified tuition program (QTP), Adjusted qualified education expenses. Student filing taxes Student loan interest deduction, Adjustments to Qualified Education Expenses Tuition and fees deduction, Adjustments to Qualified Education Expenses Work-related education, Adjustments to Qualifying Work-Related Education Expenses American opportunity credit, Qualified Education Expenses, Adjustments to Qualified Education Expenses Coverdell ESA, Qualified Education Expenses, Qualified Elementary and Secondary Education Expenses Early distributions from IRAs, Qualified education expenses. Student filing taxes Education savings bond program, Qualified education expenses. Student filing taxes Expenses not qualified American opportunity credit, Expenses That Do Not Qualify, Comprehensive or bundled fees. Student filing taxes Lifetime learning credit, Expenses That Do Not Qualify Tuition and fees deduction, Expenses That Do Not Qualify Lifetime learning credit, Qualified Education Expenses, Amounts that do not reduce qualified education expenses. Student filing taxes Qualified tuition program (QTP), Qualified education expenses. Student filing taxes Scholarships and fellowships, Qualified education expenses. Student filing taxes Student loan interest deduction, Qualified Education Expenses Tuition and fees deduction, What Expenses Qualify, Adjustments to Qualified Education Expenses Work-related education, What Expenses Can Be Deducted, Adjustments to Qualifying Work-Related Education Expenses Qualified elementary and secondary education expenses Coverdell ESAs, Qualified Elementary and Secondary Education Expenses Qualified employer plans Student loan interest deduction not allowed, Qualified employer plan. Student filing taxes Qualified student loans, Qualified Student Loan, Qualified employer plan. Student filing taxes Qualified tuition program (QTP), Qualified Tuition Program (QTP), Changing the Designated Beneficiary Additional tax on taxable distributions, Additional Tax on Taxable Distributions Change of designated beneficiary, Changing the Designated Beneficiary Contributions to, How Much Can You Contribute Coordination with American opportunity and lifetime learning credits, Coordination With American Opportunity and Lifetime Learning Credits Coordination with Coverdell ESA distributions, Coordination With Coverdell ESA Distributions Defined, What Is a Qualified Tuition Program Eligible educational institution, Eligible educational institution. Student filing taxes Figuring taxable portion of distribution, Figuring the Taxable Portion of a Distribution, Losses on QTP Investments Losses, Losses on QTP Investments Qualified education expenses, Qualified education expenses. Student filing taxes Rollovers, Rollovers and Other Transfers, Changing the Designated Beneficiary Tax benefit of, What is the tax benefit of a QTP. Student filing taxes Taxability of distributions, Are Distributions Taxable, Figuring the additional tax. Student filing taxes Taxable earnings, Taxable earnings. Student filing taxes Transfers, Rollovers and Other Transfers, Changing the Designated Beneficiary Qualified tuition reduction, Qualified Tuition Reduction, How To Report Qualified U. Student filing taxes S. Student filing taxes savings bonds, Qualified U. Student filing taxes S. Student filing taxes savings bonds. Student filing taxes Qualifying work-related education, Qualifying Work-Related Education, Teaching and Related Duties Determining if qualified (Figure 11-1), R Recapture American opportunity credit, Credit recapture. Student filing taxes Lifetime learning credit, Credit recapture. Student filing taxes Tuition and fees deduction, Credit recapture. Student filing taxes Recordkeeping requirements Work-related education, Recordkeeping, Examples of records to keep. Student filing taxes Refinanced student loans, Interest on refinanced student loans. Student filing taxes , Refinanced Loan Reimbursements Nondeductible expenses, Reimbursements for nondeductible expenses. Student filing taxes Work-related education, How To Treat Reimbursements, Reimbursements for nondeductible expenses. Student filing taxes Related persons Coverdell ESA, Members of the beneficiary's family. Student filing taxes Qualified tuition program (QTP), Members of the beneficiary's family. Student filing taxes Student loan interest deduction, Related person. Student filing taxes Repayment programs (see Student loan repayment assistance) Reporting American opportunity credit, Claiming the Credit Coverdell ESA, Exceptions. Student filing taxes , Figuring and reporting the additional tax. Student filing taxes , Figuring the Taxable Portion of a Distribution, Figuring the additional tax. Student filing taxes Early distributions from IRAs, Reporting Early Distributions Education savings bond program, Claiming the Exclusion Lifetime learning credit, Claiming the Credit Qualified tuition program (QTP), Taxable earnings. Student filing taxes , Losses on QTP Investments, Rollovers Scholarships and fellowships, taxable, Reporting Scholarships and Fellowships Student loan interest deduction, Claiming the Deduction Tuition and fees deduction, Claiming the Deduction Tuition reduction, taxable, How To Report Work-related education expenses, Deducting Business Expenses, Impairment-Related Work Expenses Revolving lines of credit, interest on, Interest on revolving lines of credit. Student filing taxes Rollovers Coverdell ESA, Rollovers Qualified tuition program (QTP), Rollovers and Other Transfers, Changing the Designated Beneficiary S Scholarships and fellowships, Scholarships and Fellowships, Form 1040NR-EZ. Student filing taxes , Coordination with Pell grants and other scholarships. Student filing taxes , Coordination with Pell grants and other scholarships. Student filing taxes Athletic scholarships, Athletic Scholarships Eligible educational institution, Eligible educational institution. Student filing taxes , Eligible educational institution. Student filing taxes Figuring tax-free and taxable parts (Worksheet 1-1), Worksheet 1-1. Student filing taxes Qualified education expenses, Qualified education expenses. Student filing taxes Reporting, Reporting Scholarships and Fellowships Scholarship, defined, Scholarships and Fellowships Tax treatment of (Table 1-1), Tax-Free Scholarships and Fellowships Tax-free, Tax-Free Scholarships and Fellowships, Athletic Scholarships Taxable, Taxable Scholarships and Fellowships Section 501(c)(3) organizations (see Student loan cancellation) Section 529 program (see Qualified tuition program (QTP)) Self-employed persons Deducting work-related education expenses, Self-Employed Persons Service academy cadets, Payment to Service Academy Cadets Sports, games, hobbies, and noncredit courses American opportunity credit, Sports, games, hobbies, and noncredit courses. Student filing taxes Education savings bond program, Qualified education expenses. Student filing taxes Lifetime learning credit, Sports, games, hobbies, and noncredit courses. Student filing taxes Tuition and fees deduction, Sports, games, hobbies, and noncredit courses. Student filing taxes Standard mileage rate Work-related education, What's New, Using your car. Student filing taxes State prepaid education accounts (see Qualified tuition program (QTP)) Student loan cancellation, Student Loan Cancellation Eligible educational institution, Eligible educational institution. Student filing taxes Section 501(c)(3) organizations, Section 501(c)(3) organization. Student filing taxes Student loan interest deduction Academic period, Academic period. Student filing taxes Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Allocation between interest and principal, Allocating Payments Between Interest and Principal Claiming the deduction, Claiming the Deduction Eligible educational institution, Eligible educational institution. Student filing taxes Eligible student, Eligible student. Student filing taxes Figuring the deduction, Figuring the Deduction, Which Worksheet To Use Include as interest, Include As Interest Income level, effect on amount of deduction, Effect of the Amount of Your Income on the Amount of Your Deduction Loan repayment assistance, Do Not Include As Interest Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Student filing taxes , Which Worksheet To Use Table 4-2, Table 4-2. Student filing taxes Effect of MAGI on Student Loan Interest Deduction Not included as interest, Do Not Include As Interest Phaseout, Phaseout. Student filing taxes , Effect of the Amount of Your Income on the Amount of Your Deduction Qualified education expenses, Qualified Education Expenses Qualified employer plans, Qualified employer plan. Student filing taxes Qualified student loans, Qualified Student Loan, Qualified employer plan. Student filing taxes Reasonable period of time, Reasonable period of time. Student filing taxes Related persons, Related person. Student filing taxes Student loan interest, defined, Student Loan Interest Defined, When Must Interest Be Paid Third party interest payments, Interest paid by others. Student filing taxes When interest must be paid, When Must Interest Be Paid Worksheet 4-1, Worksheet 4-1. Student filing taxes Student Loan Interest Deduction Worksheet Student loan repayment assistance, Student Loan Repayment Assistance Surviving spouse Coverdell ESA transfer to, Exception for Transfer to Surviving Spouse or Family Member T Tables and figures American opportunity credit Eligible student requirements (Figure 2-2), Overview (Table 2-1), Introduction Qualifying to claim (Figure 2-1), Comparison of education tax benefits (Appendix B), Coverdell ESAs Contributions to (Table 7-2), Contribution Limits Distributions (Table 7-3), Distributions Overview (Table 6-1), Coverdell Education Savings Account (ESA) Education credits Overview of American opportunity credit (Table 2-1), Introduction Overview of lifetime learning credit (Table 3-1), Table 3-1. Student filing taxes Overview of the Lifetime Learning Credit Lifetime learning credit Overview (Table 3-1), Table 3-1. Student filing taxes Overview of the Lifetime Learning Credit Qualifying to claim (Figure 3-1), Scholarships and fellowships, taxability of (Table 1-1), Tax-Free Scholarships and Fellowships Student loan interest deduction MAGI, effect of (Table 4-2), Table 4-2. Student filing taxes Effect of MAGI on Student Loan Interest Deduction Overview (Table 4-1), Table 4-1. Student filing taxes Student Loan Interest Deduction at a Glance Summary chart of differences between education tax benefits (Appendix B), Tuition and fees deduction MAGI, effect of (Table 6-2), Table 6-2. Student filing taxes Effect of MAGI on Maximum Tuition and Fees Deduction Overview (Table 6-1), Table 6-1. Student filing taxes Tuition and Fees Deduction at a Glance Work-related education, qualifying (Figure 112-1), Tax help, How To Get Tax Help Tax-free educational assistance American opportunity credit, Tax-free educational assistance. Student filing taxes Coverdell ESA, Adjusted qualified education expenses. Student filing taxes Early distributions from IRAs, Figuring the Amount Not Subject to the 10% Tax Education savings bond program, Adjusted qualified education expenses. Student filing taxes Lifetime learning credit, Tax-free educational assistance. Student filing taxes Qualified tuition program (QTP), Adjusted qualified education expenses. Student filing taxes Tuition and fees deduction, Tax-free educational assistance. Student filing taxes Work-related education, Tax-free educational assistance. Student filing taxes Taxable scholarships and fellowships, Taxable Scholarships and Fellowships Teachers, Requirements for Teachers, Teaching and Related Duties Temporary-basis student, transportation expenses of, Temporary basis. Student filing taxes Title IV need-based education grants, Pell Grants and Other Title IV Need-Based Education Grants Transfers Coverdell ESA, Rollovers Qualified tuition program (QTP), Rollovers and Other Transfers, Changing the Designated Beneficiary Transportation expenses Work-related education, Transportation Expenses, Using your car. Student filing taxes Travel expenses 50% limit on meals, 50% limit on meals. Student filing taxes Not deductible as form of education, Travel as Education Work-related education, Travel Expenses TTY/TDD information, How To Get Tax Help Tuition and fees deduction, Tuition and Fees Deduction, Illustrated Example Academic period, Academic period. Student filing taxes Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Can you claim the deduction, Can You Claim the Deduction Claiming dependent's expenses, Who Can Claim a Dependent's Expenses Claiming the deduction, Claiming the Deduction Double benefit not allowed, No Double Benefit Allowed Eligible educational institution, Eligible educational institution. Student filing taxes Eligible student, Who Is an Eligible Student Expenses not qualifying for, Expenses That Do Not Qualify Expenses qualifying for, What Expenses Qualify, Adjustments to Qualified Education Expenses Figuring the deduction, Figuring the Deduction, MAGI when using Form 1040. Student filing taxes Income level, effect on amount of deduction, Effect of the Amount of Your Income on the Amount of Your Deduction Loan used to pay tuition and fees, Paid with borrowed funds. Student filing taxes Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). Student filing taxes Table 6-2, Table 6-2. Student filing taxes Effect of MAGI on Maximum Tuition and Fees Deduction Worksheet 6-1, Worksheet 6-1. Student filing taxes MAGI for the Tuition and Fees Deduction Overview (Table 4-1), Table 4-1. Student filing taxes Student Loan Interest Deduction at a Glance Overview (Table 6-1), Table 6-1. Student filing taxes Tuition and Fees Deduction at a Glance Qualified education expenses, What Expenses Qualify, Adjustments to Qualified Education Expenses Qualifying for deduction, Can You Claim the Deduction Tax benefit of, What is the tax benefit of the tuition and fees deduction. Student filing taxes Tax-free educational assistance, Tax-free educational assistance. Student filing taxes Tuition reduction American opportunity credit, Tuition reduction. Student filing taxes Lifetime learning credit, Tuition reduction. Student filing taxes Qualified, Qualified Tuition Reduction, How To Report Tuition and fees deduction, Tuition reduction. Student filing taxes U U. Student filing taxes S. Student filing taxes savings bonds, Qualified U. Student filing taxes S. Student filing taxes savings bonds. Student filing taxes Unclaimed reimbursement Work-related education, Unclaimed reimbursement. Student filing taxes V Veterans' benefits, Veterans' Benefits Voluntary interest payments, Voluntary interest payments. Student filing taxes W Withholding, Analyzing your tax withholding. Student filing taxes Work-related education (see Business deduction for work-related education) Working condition fringe benefit, Working condition fringe benefit. Student filing taxes Worksheets Coverdell ESA Contribution limit (Worksheet 6-2), Figuring the limit. Student filing taxes MAGI, calculation of (Worksheet 6-1), Worksheet 7-1. Student filing taxes MAGI for a Coverdell ESA Taxable distributions and basis (Worksheet 6-3), Worksheet 7-3. Student filing taxes Coverdell ESA—Taxable Distributions and Basis Taxable distributions and basis (Worksheet 7-3), Worksheet 7-3. Student filing taxes Coverdell ESA—Taxable Distributions and Basis Lifetime learning credit MAGI calculation (Worksheet 3-1), MAGI when using Form 1040. Student filing taxes Scholarships and fellowships, taxable income (Worksheet 1-1), Worksheet 1-1. Student filing taxes Student loan interest deduction (Worksheet 4-1), Worksheet 4-1. Student filing taxes Student Loan Interest Deduction Worksheet Tuition and fees deduction, MAGI calculation (Worksheet 6-1), Worksheet 6-1. Student filing taxes MAGI for the Tuition and Fees Deduction Prev  Up     Home   More Online Publications
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IRS Advisory Committees General Information

The Advisory Committee on Tax Exempt and Government Entities (ACT) is an organized public forum for discussion of relevant employee plans, exempt organizations, tax-exempt bonds, and federal, state, local and Indian tribal government issues. The ACT also enables the IRS to receive regular input on the development and implementation of IRS policy concerning these communities. ACT members present interested public's observations about current or proposed IRS policies, programs and procedures as well as suggest improvements through a yearly final report.


The Art Advisory Panel assists IRS by reviewing and evaluating property appraisals submitted by taxpayers in support of the fair market value claimed in works of art involved in federal income, estate and gift tax cases in accordance with the Internal Revenue Code. The panel consists of 25 renowned art experts who serve without compensation.


The Electronic Tax Administration Advisory Committee (ETAAC) provides an organized public forum for discussion of electronic tax administration issues in support of the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns. ETAAC members convey the public’s perception of the IRS electronic tax administration activities, offer constructive observations about current or proposed policies, programs, and procedures, and suggest improvements. Read past reports.


The Information Reporting Program Advisory Committee (IRPAC) advises the IRS on information reporting issues of mutual concern to the private sector and the federal government. The committee works with the Commissioner and other IRS executives to provide recommendations on a wide range of information reporting administration issues. Membership is balanced to include representation from the taxpaying public, the tax professional community, and small and large businesses, state tax administration, and the payroll community. Read past reports and comment letters.


The Internal Revenue Service Advisory Council (IRSAC) provides an organized public forum for IRS officials and representatives of the public to discuss relevant tax administration issues. The Council advises the IRS on issues that have a substantive effect on federal tax administration. As a body designed to focus on broad policy matters, the IRSAC reviews existing tax policy and/or recommends policies with respect to emerging tax administration issues. The IRSAC suggests operational improvements, offers constructive observations about IRS’ current or proposed policies, programs, and procedures and advises the IRS on particular issues having substantive effect on federal tax administration. Find out what IRSAC is doing now and read past reports.


The Taxpayer Advocacy Panel (TAP) is a group of 75 citizen volunteers who listen to taxpayers, identify taxpayers’ issues, and make suggestions for improving IRS service and customer satisfaction. The Panel is demographically and geographically diverse with taxpayers from all walks of life representing each state, the District of Columbia and Puerto Rico. In 2014, the TAP will also have at least one member living abroad to represent international taxpayers.

Page Last Reviewed or Updated: 28-Feb-2014

The Student Filing Taxes

Student filing taxes 2. Student filing taxes   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Student filing taxes Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Student filing taxes S. Student filing taxes or foreign source income. Student filing taxes This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Student filing taxes S. Student filing taxes Virgin Islands (USVI). Student filing taxes Generally, the same rules that apply for determining U. Student filing taxes S. Student filing taxes source income also apply for determining possession source income. Student filing taxes However, there are some important exceptions to these rules. Student filing taxes Both the general rules and the exceptions are discussed in this chapter. Student filing taxes U. Student filing taxes S. Student filing taxes income rule. Student filing taxes   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Student filing taxes Table 2-1 shows the general rules for determining whether income is from sources within the United States. Student filing taxes Table 2-1. Student filing taxes General Rules for Determining U. Student filing taxes S. Student filing taxes Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Student filing taxes Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Student filing taxes For more information, see Regulations section 1. Student filing taxes 863-1(b). Student filing taxes Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Student filing taxes Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Student filing taxes Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Student filing taxes It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Student filing taxes Services performed wholly within a relevant possession. Student filing taxes   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Student filing taxes However, there is an exception for income earned as a member of the U. Student filing taxes S. Student filing taxes Armed Forces or a civilian spouse. Student filing taxes U. Student filing taxes S. Student filing taxes Armed Forces. Student filing taxes   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Student filing taxes However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Student filing taxes Civilian spouse of active duty member of the U. Student filing taxes S. Student filing taxes Armed Forces. Student filing taxes   If you are a bona fide resident of a U. Student filing taxes S. Student filing taxes possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Student filing taxes Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Student filing taxes S. Student filing taxes possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Student filing taxes Services performed partly inside and partly outside a relevant possession. Student filing taxes   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Student filing taxes Compensation (other than certain fringe benefits) is sourced on a time basis. Student filing taxes Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Student filing taxes   Or, you may be permitted to use an alternative basis to determine the source of compensation. Student filing taxes See Alternative basis , later. Student filing taxes   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Student filing taxes In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Student filing taxes Time basis. Student filing taxes   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Student filing taxes Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Student filing taxes The time period for which the income is made does not have to be a year. Student filing taxes Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Student filing taxes Example. Student filing taxes In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Student filing taxes Your Puerto Rico source income is $60,000, figured as follows. Student filing taxes       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Student filing taxes   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Student filing taxes Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Student filing taxes You determine the period to which the income is attributable based on the facts and circumstances of your case. Student filing taxes For more information on multi-year compensation, see Treasury Decision (T. Student filing taxes D. Student filing taxes ) 9212 and Regulations section 1. Student filing taxes 861-4, 2005-35 I. Student filing taxes R. Student filing taxes B. Student filing taxes 429, available at www. Student filing taxes irs. Student filing taxes gov/irb/2005-35_IRB/ar14. Student filing taxes html. Student filing taxes Certain fringe benefits sourced on a geographical basis. Student filing taxes   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Student filing taxes Housing. Student filing taxes Education. Student filing taxes Local transportation. Student filing taxes Tax reimbursement. Student filing taxes Hazardous or hardship duty pay. Student filing taxes Moving expense reimbursement. Student filing taxes For information on determining the source of the fringe benefits listed above, see Regulations section 1. Student filing taxes 861-4. Student filing taxes Alternative basis. Student filing taxes   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Student filing taxes If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Student filing taxes De minimis exception. Student filing taxes   There is an exception to the rule for determining the source of income earned in a possession. Student filing taxes Generally, you will not have income from a possession if during a tax year you: Are a U. Student filing taxes S. Student filing taxes citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Student filing taxes This exception began with income earned during your 2008 tax year. Student filing taxes Pensions. Student filing taxes   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Student filing taxes The contribution portion is sourced according to where services were performed that earned the pension. Student filing taxes The investment earnings portion is sourced according to the location of the pension trust. Student filing taxes Example. Student filing taxes You are a U. Student filing taxes S. Student filing taxes citizen who worked in Puerto Rico for a U. Student filing taxes S. Student filing taxes company. Student filing taxes All services were performed in Puerto Rico. Student filing taxes Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Student filing taxes S. Student filing taxes pension trust of your employer. Student filing taxes Distributions from the U. Student filing taxes S. Student filing taxes pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Student filing taxes S. Student filing taxes source income. Student filing taxes Investment Income This category includes such income as interest, dividends, rents, and royalties. Student filing taxes Interest income. Student filing taxes   The source of interest income is generally determined by the residence of the payer. Student filing taxes Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Student filing taxes   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Student filing taxes See Regulations section 1. Student filing taxes 937-2(i) for more information. Student filing taxes Dividends. Student filing taxes   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Student filing taxes There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Student filing taxes For more information, see Regulations section 1. Student filing taxes 937-2(g). Student filing taxes Rental income. Student filing taxes   Rents from property located in a relevant possession are treated as income from sources within that possession. Student filing taxes Royalties. Student filing taxes   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Student filing taxes   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Student filing taxes Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Student filing taxes The most common situations are discussed below. Student filing taxes Real property. Student filing taxes   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Student filing taxes The location of the property generally determines the source of income from the sale. Student filing taxes For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Student filing taxes If, however, the home you sold was located in the United States, the gain is U. Student filing taxes S. Student filing taxes source income. Student filing taxes Personal property. Student filing taxes   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Student filing taxes Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Student filing taxes If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Student filing taxes   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Student filing taxes The rules applying to sales of inventory are discussed below. Student filing taxes For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Student filing taxes Inventory. Student filing taxes   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Student filing taxes The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Student filing taxes Purchased. Student filing taxes   Income from the sale of inventory that you purchased is sourced where you sell the property. Student filing taxes Generally, this is where title to the property passes to the buyer. Student filing taxes Produced. Student filing taxes   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Student filing taxes For information on making the allocation, see Regulations section 1. Student filing taxes 863-3(f). Student filing taxes Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Student filing taxes S. Student filing taxes citizen or resident alien prior to becoming a bona fide resident of a possession. Student filing taxes You are subject to these special rules if you meet both of the following conditions. Student filing taxes For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Student filing taxes For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Student filing taxes If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Student filing taxes Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Student filing taxes S. Student filing taxes tax return. Student filing taxes (See chapter 3 for additional filing information. Student filing taxes ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Student filing taxes These rules apply to dispositions after April 11, 2005. Student filing taxes For details, see Regulations section 1. Student filing taxes 937-2(f)(1) and Examples 1 and 2 of section 1. Student filing taxes 937-2(k). Student filing taxes Example 1. Student filing taxes In 2007, Cheryl Jones, a U. Student filing taxes S. Student filing taxes citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Student filing taxes S. Student filing taxes corporation listed on the New York Stock Exchange. Student filing taxes On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Student filing taxes Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Student filing taxes On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Student filing taxes On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Student filing taxes Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Student filing taxes The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Student filing taxes This existing special rule applies if you are a U. Student filing taxes S. Student filing taxes citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Student filing taxes S. Student filing taxes assets during the 10-year period beginning when you became a bona fide resident. Student filing taxes The gain is U. Student filing taxes S. Student filing taxes source income that generally is subject to U. Student filing taxes S. Student filing taxes tax if the property is either (1) located in the United States; (2) stock issued by a U. Student filing taxes S. Student filing taxes corporation or a debt obligation of a U. Student filing taxes S. Student filing taxes person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Student filing taxes See chapter 3 for filing information. Student filing taxes Special election. Student filing taxes   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Student filing taxes Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Student filing taxes This election overrides both of the special rules discussed earlier. Student filing taxes   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Student filing taxes Marketable securities. Student filing taxes   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Student filing taxes Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Student filing taxes S. Student filing taxes holding periods. Student filing taxes   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Student filing taxes The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Student filing taxes This is your gain (or loss) that is treated as being from sources within the relevant possession. Student filing taxes If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Student filing taxes Example 2. Student filing taxes Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Student filing taxes S. Student filing taxes and possession holding periods. Student filing taxes Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Student filing taxes Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Student filing taxes By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Student filing taxes Other personal property. Student filing taxes   For personal property other than marketable securities, use a time-based allocation. Student filing taxes Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Student filing taxes      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Student filing taxes Example 3. Student filing taxes In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Student filing taxes On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Student filing taxes On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Student filing taxes She had owned the interest for a total of 1,720 days. Student filing taxes Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Student filing taxes The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Student filing taxes By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Student filing taxes Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Student filing taxes Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Student filing taxes These rules do not apply to amounts paid as salary or other compensation for services. Student filing taxes See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Student filing taxes Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Student filing taxes These circumstances are listed below. Student filing taxes You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Student filing taxes That office or place of business is a material factor in producing the income. Student filing taxes The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Student filing taxes An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Student filing taxes The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Student filing taxes Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Student filing taxes Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Student filing taxes Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Student filing taxes Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Student filing taxes Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Student filing taxes Example. Student filing taxes Marcy Jackson is a bona fide resident of American Samoa. Student filing taxes Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Student filing taxes A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Student filing taxes Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Student filing taxes The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Student filing taxes However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Student filing taxes Prev  Up  Next   Home   More Online Publications