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Tax Amendment

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Tax Amendment

Tax amendment Publication 504 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Tax amendment Tax questions. Tax amendment Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 504, such as legislation enacted after this publication was published, go to www. Tax amendment irs. Tax amendment gov/pub504. Tax amendment Reminders Relief from joint liability. Tax amendment  In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint tax return. Tax amendment For more information, see Relief from joint liability under Married Filing Jointly. Tax amendment Social security numbers for dependents. Tax amendment  You must include on your tax return the taxpayer identification number (generally the social security number) of every person for whom you claim an exemption. Tax amendment See Exemptions for Dependents under Exemptions, later. Tax amendment Individual taxpayer identification number (ITIN). Tax amendment  The IRS will issue an ITIN to a nonresident or resident alien who does not have and is not eligible to get a social security number (SSN). Tax amendment To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. Tax amendment It takes about 6 to 10 weeks to get an ITIN. Tax amendment The ITIN is entered wherever an SSN is requested on a tax return. Tax amendment If you are required to include another person's SSN on your return and that person does not have and cannot get an SSN, enter that person's ITIN. Tax amendment Change of address. Tax amendment  If you change your mailing address, be sure to notify the Internal Revenue Service. Tax amendment You can use Form 8822, Change of Address. Tax amendment Mail it to the Internal Revenue Service Center for your old address. Tax amendment (Addresses for the Service Centers are on the back of the form. Tax amendment ) Change of name. Tax amendment  If you change your name, be sure to notify the Social Security Administration using Form SS-5, Application for a Social Security Card. Tax amendment Change of withholding. Tax amendment  If you have been claiming a withholding exemption for your spouse, and you divorce or legally separate, you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate, within 10 days after the divorce or separation showing the correct number of exemptions. Tax amendment Photographs of missing children. Tax amendment  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Tax amendment Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Tax amendment You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Tax amendment Introduction This publication explains tax rules that apply if you are divorced or separated from your spouse. Tax amendment It covers general filing information and can help you choose your filing status. Tax amendment It also can help you decide which exemptions you are entitled to claim, including exemptions for dependents. Tax amendment The publication also discusses payments and transfers of property that often occur as a result of divorce and how you must treat them on your tax return. Tax amendment Examples include alimony, child support, other court-ordered payments, property settlements, and transfers of individual retirement arrangements. Tax amendment In addition, this publication also explains deductions allowed for some of the costs of obtaining a divorce and how to handle tax withholding and estimated tax payments. Tax amendment The last part of the publication explains special rules that may apply to persons who live in community property states. Tax amendment Comments and suggestions. Tax amendment   We welcome your comments about this publication and your suggestions for future editions. Tax amendment   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Tax amendment NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Tax amendment Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Tax amendment   You can send your comments from www. Tax amendment irs. Tax amendment gov/formspubs/. Tax amendment Click on “More Information. Tax amendment ”and then on “Comment on Tax Forms and Publications”. Tax amendment   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Tax amendment Ordering forms and publications. Tax amendment   Visit www. Tax amendment irs. Tax amendment gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Tax amendment Internal Revenue Service 1201 N. Tax amendment Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Tax amendment   If you have a tax question, check the information available on IRS. Tax amendment gov or call 1-800-829-1040. Tax amendment We cannot answer tax questions sent to either of the above addresses. Tax amendment Useful Items - You may want to see: Publications 501 Exemptions, Standard Deduction, and Filing Information 544 Sales and Other Dispositions of Assets 555 Community Property 590 Individual Retirement Arrangements (IRAs) 971 Innocent Spouse Relief Form (and Instructions) 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent 8379 Injured Spouse Allocation 8857 Request for Innocent Spouse Relief See How To Get Tax Help near the end of this publication for information about getting publications and forms. Tax amendment Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in North Carolina

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours Of Service Telephone*
Asheville 151 Patton Ave.
Asheville, NC 28801 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

Services Provided

(828) 271-4764 
Charlotte  Five Resource Square, 
10715 David Taylor Drive
Charlotte, NC 28262 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(704) 548-4100 
Durham  3308 Chapel Hill Blvd.
Durham, NC 27707 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m.-1:30 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(919) 401-0300 
Fayetteville  225 Green St.
Fayetteville, NC 28301 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

Services Provided

(910) 223-3580 
Greensboro  4905 Koger Boulevard
Greensboro, NC 27407 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(336) 574-6024 
Greenville  2835 South Charles Blvd.
Greenville, NC 27858

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(252) 561-4040 
Hickory  115 Fifth Ave. NW
Hickory, NC 28601 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon -1:00 p.m.)

 

Services Provided

(828) 267-7655 
Raleigh  4405 Bland Rd.
Raleigh, NC 27609 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(919) 850-1100 
Wilmington 3340 Jaeckle Dr.
Wilmington, NC 28403 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

Services Provided

(910) 254-5198 
Winston-Salem  1677 Westbrook Plaza
Suite 160
Winston-Salem, NC 27103 

Monday-Friday - 8:30 a.m.-4:30 p.m.   
(Closed for lunch 12:00 noon -1:00 p.m.) 

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(336) 659-2740 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (336) 574-6119 in Greensboro or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service 
6635 Executive Circle 
Suite 180 
Charlotte, NC 28212

Internal Revenue Service
4905 Koger Blvd.
Greensboro, NC 27407

Internal Revenue Service
4405 Bland Road
Raleigh, NC 27609

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Tax Amendment

Tax amendment 14. Tax amendment   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Tax amendment  If you are a U. Tax amendment S. Tax amendment citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Tax amendment S. Tax amendment law. Tax amendment This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Tax amendment Introduction This chapter discusses the tax consequences of selling or trading investment property. Tax amendment It explains the following. Tax amendment What a sale or trade is. Tax amendment Figuring gain or loss. Tax amendment Nontaxable trades. Tax amendment Related party transactions. Tax amendment Capital gains or losses. Tax amendment Capital assets and noncapital assets. Tax amendment Holding period. Tax amendment Rollover of gain from publicly traded securities. Tax amendment Other property transactions. Tax amendment   Certain transfers of property are not discussed here. Tax amendment They are discussed in other IRS publications. Tax amendment These include the following. Tax amendment Sales of a main home, covered in chapter 15. Tax amendment Installment sales, covered in Publication 537, Installment Sales. Tax amendment Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Tax amendment Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Tax amendment    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Tax amendment Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Tax amendment It also discusses investment-related expenses. Tax amendment Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Tax amendment Generally, you should receive the statement by February 15 of the next year. Tax amendment It will show the gross proceeds from the sale. Tax amendment If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Tax amendment Generally, a covered security is a security you acquired after 2010, with certain exceptions. Tax amendment See the Instructions for Form 8949. Tax amendment The IRS will also get a copy of Form 1099-B from the broker. Tax amendment Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Tax amendment What Is a Sale or Trade? This section explains what is a sale or trade. Tax amendment It also explains certain transactions and events that are treated as sales or trades. Tax amendment A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Tax amendment A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Tax amendment Sale and purchase. Tax amendment   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Tax amendment The sale and purchase are two separate transactions. Tax amendment But see Like-kind exchanges under Nontaxable Trades, later. Tax amendment Redemption of stock. Tax amendment   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Tax amendment Dividend versus sale or trade. Tax amendment   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Tax amendment Both direct and indirect ownership of stock will be considered. Tax amendment The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Tax amendment Redemption or retirement of bonds. Tax amendment   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Tax amendment   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Tax amendment For details, see Regulations section 1. Tax amendment 1001-3. Tax amendment Surrender of stock. Tax amendment   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Tax amendment The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Tax amendment Worthless securities. Tax amendment    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Tax amendment This affects whether your capital loss is long term or short term. Tax amendment See Holding Period , later. Tax amendment   Worthless securities also include securities that you abandon after March 12, 2008. Tax amendment To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Tax amendment All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Tax amendment    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Tax amendment Do not deduct them in the year the stock became worthless. Tax amendment How to report loss. Tax amendment    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Tax amendment In column (a), enter “Worthless. Tax amendment ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Tax amendment See Form 8949 and the Instructions for Form 8949. Tax amendment For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Tax amendment See also Schedule D (Form 1040), Form 8949, and their separate instructions. Tax amendment Filing a claim for refund. Tax amendment   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Tax amendment You must use Form 1040X, Amended U. Tax amendment S. Tax amendment Individual Income Tax Return, to amend your return for the year the security became worthless. Tax amendment You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Tax amendment For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Tax amendment How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Tax amendment Gain. Tax amendment   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Tax amendment Loss. Tax amendment   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Tax amendment Adjusted basis. Tax amendment   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Tax amendment See chapter 13 for more information about determining the adjusted basis of property. Tax amendment Amount realized. Tax amendment   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Tax amendment Amount realized includes the money you receive plus the fair market value of any property or services you receive. Tax amendment If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Tax amendment If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Tax amendment For more information, see Publication 537. Tax amendment Fair market value. Tax amendment   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Tax amendment Example. Tax amendment You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Tax amendment Your gain is $3,000 ($10,000 − $7,000). Tax amendment Debt paid off. Tax amendment    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Tax amendment This is true even if neither you nor the buyer is personally liable for the debt. Tax amendment For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Tax amendment Example. Tax amendment You sell stock that you had pledged as security for a bank loan of $8,000. Tax amendment Your basis in the stock is $6,000. Tax amendment The buyer pays off your bank loan and pays you $20,000 in cash. Tax amendment The amount realized is $28,000 ($20,000 + $8,000). Tax amendment Your gain is $22,000 ($28,000 − $6,000). Tax amendment Payment of cash. Tax amendment   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Tax amendment Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Tax amendment If the result is a positive number, it is a gain. Tax amendment If the result is a negative number, it is a loss. Tax amendment No gain or loss. Tax amendment   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Tax amendment In this case, you may have neither a gain nor a loss. Tax amendment See Basis Other Than Cost in chapter 13. Tax amendment Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Tax amendment For more information on nontaxable trades, see chapter 1 of Publication 544. Tax amendment Like-kind exchanges. Tax amendment   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Tax amendment To be nontaxable, a trade must meet all six of the following conditions. Tax amendment The property must be business or investment property. Tax amendment You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Tax amendment Neither property may be property used for personal purposes, such as your home or family car. Tax amendment The property must not be held primarily for sale. Tax amendment The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Tax amendment The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Tax amendment However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Tax amendment Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Tax amendment There must be a trade of like property. Tax amendment The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Tax amendment The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Tax amendment The trade of a piece of machinery for a store building is not a trade of like property. Tax amendment Real property located in the United States and real property located outside the United States are not like property. Tax amendment Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Tax amendment The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Tax amendment The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Tax amendment    If you trade property with a related party in a like-kind exchange, a special rule may apply. Tax amendment See Related Party Transactions , later in this chapter. Tax amendment Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Tax amendment Partly nontaxable exchange. Tax amendment   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Tax amendment You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Tax amendment You cannot deduct a loss. Tax amendment Like property and unlike property transferred. Tax amendment   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Tax amendment The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Tax amendment Like property and money transferred. Tax amendment   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Tax amendment Basis of property received. Tax amendment   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Tax amendment How to report. Tax amendment   You must report the trade of like property on Form 8824. Tax amendment If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Tax amendment See the instructions for Line 22 in the Instructions for Form 8824. Tax amendment   For information on using Form 4797, see chapter 4 of Publication 544. Tax amendment Corporate stocks. Tax amendment   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Tax amendment Corporate reorganizations. Tax amendment   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Tax amendment If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Tax amendment Stock for stock of the same corporation. Tax amendment   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Tax amendment This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Tax amendment Convertible stocks and bonds. Tax amendment   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Tax amendment Property for stock of a controlled corporation. Tax amendment   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Tax amendment This rule applies both to individuals and to groups who transfer property to a corporation. Tax amendment It does not apply if the corporation is an investment company. Tax amendment   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Tax amendment   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Tax amendment For details, see Regulations section 1. Tax amendment 351-3. Tax amendment Additional information. Tax amendment   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Tax amendment Insurance policies and annuities. Tax amendment   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Tax amendment   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Tax amendment For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Tax amendment Revenue Ruling 2003-76 is available at www. Tax amendment irs. Tax amendment gov/irb/2003-33_IRB/ar11. Tax amendment html. Tax amendment Revenue Procedure 2008-24 is available at www. Tax amendment irs. Tax amendment gov/irb/2008-13_IRB/ar13. Tax amendment html. Tax amendment For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Tax amendment Revenue Procedure 2011-38 is available at www. Tax amendment irs. Tax amendment gov/irb/2011-30_IRB/ar09. Tax amendment html. Tax amendment   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Tax amendment A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Tax amendment The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Tax amendment   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Tax amendment Demutualization of life insurance companies. Tax amendment   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Tax amendment See Demutualization of Life Insurance Companies in Publication 550. Tax amendment U. Tax amendment S. Tax amendment Treasury notes or bonds. Tax amendment   You can trade certain issues of U. Tax amendment S. Tax amendment Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Tax amendment See Savings bonds traded in chapter 1 of Publication 550 for more information. Tax amendment Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Tax amendment This nonrecognition rule does not apply in the following situations. Tax amendment The recipient spouse or former spouse is a nonresident alien. Tax amendment Property is transferred in trust and liability exceeds basis. Tax amendment Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Tax amendment For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Tax amendment Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Tax amendment The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Tax amendment This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Tax amendment This rule applies for purposes of determining loss as well as gain. Tax amendment Any gain recognized on a transfer in trust increases the basis. Tax amendment A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Tax amendment Related Party Transactions Special rules apply to the sale or trade of property between related parties. Tax amendment Gain on sale or trade of depreciable property. Tax amendment   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Tax amendment See chapter 3 of Publication 544 for more information. Tax amendment Like-kind exchanges. Tax amendment   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Tax amendment See Like-kind exchanges , earlier, under Nontaxable Trades. Tax amendment   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Tax amendment However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Tax amendment See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Tax amendment Losses on sales or trades of property. Tax amendment   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Tax amendment Members of your family. Tax amendment This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Tax amendment ), and lineal descendants (children, grandchildren, etc. Tax amendment ). Tax amendment A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Tax amendment A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Tax amendment (See Constructive ownership of stock , later. Tax amendment ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Tax amendment   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Tax amendment A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Tax amendment Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Tax amendment A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Tax amendment 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 the profits interest, in the partnership. Tax amendment Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Tax amendment 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. Tax amendment An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Tax amendment Two corporations that are members of the same controlled group. Tax amendment (Under certain conditions, however, these losses are not disallowed but must be deferred. Tax amendment ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Tax amendment Multiple property sales or trades. Tax amendment   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Tax amendment The gain on each item may be taxable. Tax amendment However, you cannot deduct the loss on any item. Tax amendment Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Tax amendment Indirect transactions. Tax amendment   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Tax amendment This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Tax amendment Constructive ownership of stock. Tax amendment   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Tax amendment Rule 1. Tax amendment   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Tax amendment Rule 2. Tax amendment   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Tax amendment Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Tax amendment Rule 3. Tax amendment   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Tax amendment Rule 4. Tax amendment   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Tax amendment But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Tax amendment Property received from a related party. Tax amendment    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Tax amendment This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Tax amendment This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Tax amendment   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Tax amendment Example 1. Tax amendment Your brother sells you stock for $7,600. Tax amendment His cost basis is $10,000. Tax amendment Your brother cannot deduct the loss of $2,400. Tax amendment Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Tax amendment Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Tax amendment Example 2. Tax amendment If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Tax amendment You cannot deduct the loss that was not allowed to your brother. Tax amendment Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Tax amendment Character of gain or loss. Tax amendment   You need to classify your gains and losses as either ordinary or capital gains or losses. Tax amendment You then need to classify your capital gains and losses as either short term or long term. Tax amendment If you have long-term gains and losses, you must identify your 28% rate gains and losses. Tax amendment If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Tax amendment   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Tax amendment Reporting capital gains and losses is explained in chapter 16. Tax amendment Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Tax amendment Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Tax amendment A sale or trade of a noncapital asset generally results in ordinary gain or loss. Tax amendment Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Tax amendment In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Tax amendment Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Tax amendment Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Tax amendment Any property you own is a capital asset, except the following noncapital assets. Tax amendment Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Tax amendment For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Tax amendment Depreciable property used in your trade or business, even if fully depreciated. Tax amendment Real property used in your trade or business. Tax amendment A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired 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. Tax amendment For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Tax amendment Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Tax amendment U. Tax amendment S. Tax amendment Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Tax amendment Certain commodities derivative financial instruments held by commodities derivatives dealers. Tax amendment Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Tax amendment Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Tax amendment Investment Property Investment property is a capital asset. Tax amendment Any gain or loss from its sale or trade is generally a capital gain or loss. Tax amendment Gold, silver, stamps, coins, gems, etc. Tax amendment   These are capital assets except when they are held for sale by a dealer. Tax amendment Any gain or loss you have from their sale or trade generally is a capital gain or loss. Tax amendment Stocks, stock rights, and bonds. Tax amendment   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Tax amendment However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Tax amendment Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Tax amendment However, you cannot deduct a loss from selling personal use property. Tax amendment Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property 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. Tax amendment You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Tax amendment You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Tax amendment You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Tax amendment For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Tax amendment See also Schedule D (Form 1040), Form 8949, and their separate instructions. Tax amendment You can revoke the election if you have IRS approval. Tax amendment To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Tax amendment See, for example, Rev. Tax amendment Proc. Tax amendment 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Tax amendment Proc. Tax amendment 2013–32, available at www. Tax amendment irs. Tax amendment gov/irb/2013-01_IRB/ar06. Tax amendment html. Tax amendment Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Tax amendment Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Tax amendment Short-term government obligations. Tax amendment   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Tax amendment This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Tax amendment Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Tax amendment   However, do not treat these gains as income to the extent you previously included the discount in income. Tax amendment See Discount on Short-Term Obligations in chapter 1 of Publication 550. Tax amendment Short-term nongovernment obligations. Tax amendment   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Tax amendment This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Tax amendment   However, to the extent you previously included the discount in income, you do not have to include it in income again. Tax amendment See Discount on Short-Term Obligations in chapter 1 of Publication 550. Tax amendment Tax-exempt state and local government bonds. Tax amendment   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Tax amendment To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Tax amendment   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Tax amendment For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Tax amendment   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Tax amendment If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Tax amendment If you bought the bonds after April 30, 1993, the gain is ordinary income. Tax amendment   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Tax amendment For more information, see Market Discount Bonds in chapter 1 of Publication 550. Tax amendment    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Tax amendment Redeemed before maturity. Tax amendment   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Tax amendment   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Tax amendment However, you must report the unearned part of OID as a capital gain. Tax amendment Example. Tax amendment On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Tax amendment The face amount of the bond was $1,000. Tax amendment The $200 discount was OID. Tax amendment At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Tax amendment The bond was callable at its face amount beginning 10 years after the issue date. Tax amendment The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Tax amendment The OID earned during the time you held the bond, $73, is not taxable. Tax amendment The $60 accrued annual interest also is not taxable. Tax amendment However, you must report the unearned part of OID ($127) as a capital gain. Tax amendment Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Tax amendment   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Tax amendment The rest of the gain is capital gain. Tax amendment If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Tax amendment This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Tax amendment Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Tax amendment   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Tax amendment Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Tax amendment See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Tax amendment   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Tax amendment However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Tax amendment In this case, the rest of the gain is capital gain. Tax amendment Market discount bonds. Tax amendment   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Tax amendment If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Tax amendment The rest of the gain is capital gain. Tax amendment See Market Discount Bonds in chapter 1 of Publication 550. Tax amendment   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Tax amendment See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Tax amendment Retirement of debt instrument. Tax amendment   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Tax amendment Notes of individuals. Tax amendment   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Tax amendment An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Tax amendment The lender is not in the business of lending money. Tax amendment The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Tax amendment Avoiding federal tax is not one of the principal purposes of the loan. Tax amendment   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Tax amendment When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Tax amendment The rest of the gain, if any, is capital gain. Tax amendment Any loss on the sale or redemption is capital loss. Tax amendment Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Tax amendment Ordinary loss. Tax amendment Casualty loss. Tax amendment Nonbusiness bad debt (short-term capital loss). Tax amendment  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Tax amendment Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Tax amendment Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Tax amendment Report the loss on Form 4797, line 10. Tax amendment Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Tax amendment Report the gain on Form 8949. Tax amendment See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Tax amendment For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Tax amendment See also Schedule D (Form 1040), Form 8949, and their separate instructions. Tax amendment Holding Period If you sold or traded investment property, you must determine your holding period for the property. Tax amendment Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Tax amendment Long-term or short-term. Tax amendment   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Tax amendment If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Tax amendment   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Tax amendment The day you disposed of the property is part of your holding period. Tax amendment Example. Tax amendment If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Tax amendment If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Tax amendment Securities traded on established market. Tax amendment   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Tax amendment    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Tax amendment Example. Tax amendment You are a cash method, calendar year taxpayer. Tax amendment You sold stock at a gain on December 30, 2013. Tax amendment According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Tax amendment You received payment of the sales price on that same day. Tax amendment Report your gain on your 2013 return, even though you received the payment in 2014. Tax amendment The gain is long term or short term depending on whether you held the stock more than 1 year. Tax amendment Your holding period ended on December 30. Tax amendment If you had sold the stock at a loss, you would also report it on your 2013 return. Tax amendment U. Tax amendment S. Tax amendment Treasury notes and bonds. Tax amendment   The holding period of U. Tax amendment S. Tax amendment Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Tax amendment The holding period of U. Tax amendment S. Tax amendment Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Tax amendment Automatic investment service. Tax amendment   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Tax amendment Your holding period starts on the day after the bank's purchase date. Tax amendment If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Tax amendment A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Tax amendment Nontaxable trades. Tax amendment   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Tax amendment Property received as a gift. Tax amendment   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Tax amendment   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Tax amendment Inherited property. Tax amendment   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Tax amendment This is true regardless of how long you actually held the property. Tax amendment However, if you inherited property from someone who died in 2010, see the information below. Tax amendment Inherited property from someone who died in 2010. Tax amendment   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Tax amendment Real property bought. Tax amendment   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Tax amendment However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Tax amendment The holding period cannot start until there is an actual contract of sale. Tax amendment The holding period of the seller cannot end before that time. Tax amendment Real property repossessed. Tax amendment   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Tax amendment Your holding period does not include the time between the original sale and the repossession. Tax amendment That is, it does not include the period during which the first buyer held the property. Tax amendment Stock dividends. Tax amendment   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Tax amendment   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Tax amendment This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Tax amendment Nontaxable stock rights. Tax amendment   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Tax amendment The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Tax amendment Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Tax amendment You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Tax amendment Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Tax amendment To be deductible, nonbusiness bad debts must be totally worthless. Tax amendment You cannot deduct a partly worthless nonbusiness debt. Tax amendment Genuine debt required. Tax amendment   A debt must be genuine for you to deduct a loss. Tax amendment A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Tax amendment Basis in bad debt required. Tax amendment    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Tax amendment For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Tax amendment If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Tax amendment When deductible. Tax amendment   You can take a bad debt deduction only in the year the debt becomes worthless. Tax amendment You do not have to wait until a debt is due to determine whether it is worthless. Tax amendment A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Tax amendment   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Tax amendment You must only show that you have taken reasonable steps to collect the debt. Tax amendment Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Tax amendment How to report bad debts. Tax amendment    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Tax amendment    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Tax amendment    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Tax amendment See also Schedule D (Form 1040), Form 8949, and their separate instructions. Tax amendment   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Tax amendment For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Tax amendment Filing a claim for refund. Tax amendment    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Tax amendment To do this, use Form 1040X to amend your return for the year the debt became worthless. Tax amendment You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Tax amendment For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Tax amendment Additional information. Tax amendment   For more information, see Nonbusiness Bad Debts in Publication 550. Tax amendment For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Tax amendment Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Tax amendment A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Tax amendment If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Tax amendment The result is your basis in the new stock or securities. Tax amendment This adjustment postpones the loss deduction until the disposition of the new stock or securities. Tax amendment Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Tax amendment For more information, see Wash Sales, in chapter 4 of Publication 550. Tax amendment Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Tax amendment This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Tax amendment You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Tax amendment This postpones your gain until the year you dispose of the replacement property. Tax amendment You qualify to make this choice if you meet all the following tests. Tax amendment You sell publicly traded securities at a gain. Tax amendment Publicly traded securities are securities traded on an established securities market. Tax amendment Your gain from the sale is a capital gain. Tax amendment During the 60-day period beginning on the date of the sale, you buy replacement property. Tax amendment This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Tax amendment This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Tax amendment Amount of gain recognized. Tax amendment   If you make the choice described in this section, you must recognize gain only up to the following amount. Tax amendment The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Tax amendment  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Tax amendment If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Tax amendment Limit on gain postponed. Tax amendment   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Tax amendment Basis of replacement property. Tax amendment   You must subtract the amount of postponed gain from the basis of your replacement property. Tax amendment How to report and postpone gain. Tax amendment    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 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