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Taxact 2011 Sign In

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Taxact 2011 Sign In

Taxact 2011 sign in 28. Taxact 2011 sign in   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. Taxact 2011 sign in  The 2013 rate for business use of a vehicle is 56½ cents per mile. Taxact 2011 sign in Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). Taxact 2011 sign in You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Taxact 2011 sign in This chapter covers the following topics. Taxact 2011 sign in Deductions subject to the 2% limit. Taxact 2011 sign in Deductions not subject to the 2% limit. Taxact 2011 sign in Expenses you cannot deduct. Taxact 2011 sign in You must keep records to verify your deductions. Taxact 2011 sign in You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. Taxact 2011 sign in For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. Taxact 2011 sign in Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). Taxact 2011 sign in You can claim the amount of expenses that is more than 2% of your adjusted gross income. Taxact 2011 sign in You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Taxact 2011 sign in Your adjusted gross income is the amount on Form 1040, line 38. Taxact 2011 sign in Generally, you apply the 2% limit after you apply any other deduction limit. Taxact 2011 sign in For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. Taxact 2011 sign in Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). Taxact 2011 sign in Unreimbursed employee expenses (line 21). Taxact 2011 sign in Tax preparation fees (line 22). Taxact 2011 sign in Other expenses (line 23). Taxact 2011 sign in Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Taxact 2011 sign in An expense is ordinary if it is common and accepted in your trade, business, or profession. Taxact 2011 sign in An expense is necessary if it is appropriate and helpful to your business. Taxact 2011 sign in An expense does not have to be required to be considered necessary. Taxact 2011 sign in Examples of unreimbursed employee expenses are listed next. Taxact 2011 sign in The list is followed by discussions of additional unreimbursed employee expenses. Taxact 2011 sign in Business bad debt of an employee. Taxact 2011 sign in Education that is work related. Taxact 2011 sign in (See chapter 27. Taxact 2011 sign in ) Legal fees related to your job. Taxact 2011 sign in Licenses and regulatory fees. Taxact 2011 sign in Malpractice insurance premiums. Taxact 2011 sign in Medical examinations required by an employer. Taxact 2011 sign in Occupational taxes. Taxact 2011 sign in Passport for a business trip. Taxact 2011 sign in Subscriptions to professional journals and trade magazines related to your work. Taxact 2011 sign in Travel, transportation, entertainment, and gifts related to your work. Taxact 2011 sign in (See chapter 26. Taxact 2011 sign in ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Taxact 2011 sign in Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. Taxact 2011 sign in Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Taxact 2011 sign in For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. Taxact 2011 sign in Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Taxact 2011 sign in Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Taxact 2011 sign in Lobbying and political activities. Taxact 2011 sign in   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Taxact 2011 sign in See Dues used for lobbying under Nondeductible Expenses, later. Taxact 2011 sign in Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Taxact 2011 sign in If you file Form 1040A, you can deduct these expenses on line 16. Taxact 2011 sign in If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Taxact 2011 sign in However, neither spouse can deduct more than $250 of his or her qualified expenses. Taxact 2011 sign in Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Taxact 2011 sign in You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Taxact 2011 sign in The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Taxact 2011 sign in See Publication 587 for more detailed information and a worksheet. Taxact 2011 sign in Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Taxact 2011 sign in You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Taxact 2011 sign in Employment and outplacement agency fees. Taxact 2011 sign in   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Taxact 2011 sign in Employer pays you back. Taxact 2011 sign in   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Taxact 2011 sign in (See Recoveries in chapter 12. Taxact 2011 sign in ) Employer pays the employment agency. Taxact 2011 sign in   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Taxact 2011 sign in Résumé. Taxact 2011 sign in   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Taxact 2011 sign in Travel and transportation expenses. Taxact 2011 sign in   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Taxact 2011 sign in You can deduct the travel expenses if the trip is primarily to look for a new job. Taxact 2011 sign in The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Taxact 2011 sign in   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Taxact 2011 sign in   You can choose to use the standard mileage rate to figure your car expenses. Taxact 2011 sign in The 2013 rate for business use of a vehicle is 56½ cents per mile. Taxact 2011 sign in See chapter 26 for more information. Taxact 2011 sign in Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Taxact 2011 sign in Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Taxact 2011 sign in If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Taxact 2011 sign in Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Taxact 2011 sign in If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Taxact 2011 sign in Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Taxact 2011 sign in You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Taxact 2011 sign in However, you cannot deduct the cost of travel as a form of education. Taxact 2011 sign in Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Taxact 2011 sign in You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Taxact 2011 sign in For more information about depreciation, see Publication 946. Taxact 2011 sign in Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Taxact 2011 sign in You can also deduct assessments for benefit payments to unemployed union members. Taxact 2011 sign in However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Taxact 2011 sign in Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. Taxact 2011 sign in You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Taxact 2011 sign in See Lobbying Expenses under Nondeductible Expenses, later. Taxact 2011 sign in Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Taxact 2011 sign in You must wear them as a condition of your employment. Taxact 2011 sign in The clothes are not suitable for everyday wear. Taxact 2011 sign in It is not enough that you wear distinctive clothing. Taxact 2011 sign in The clothing must be specifically required by your employer. Taxact 2011 sign in Nor is it enough that you do not, in fact, wear your work clothes away from work. Taxact 2011 sign in The clothing must not be suitable for taking the place of your regular clothing. Taxact 2011 sign in Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Taxact 2011 sign in ). Taxact 2011 sign in Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Taxact 2011 sign in However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Taxact 2011 sign in Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Taxact 2011 sign in Protective clothing. Taxact 2011 sign in   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Taxact 2011 sign in   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Taxact 2011 sign in Military uniforms. Taxact 2011 sign in   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Taxact 2011 sign in However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Taxact 2011 sign in In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Taxact 2011 sign in   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Taxact 2011 sign in   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Taxact 2011 sign in Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. Taxact 2011 sign in Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Taxact 2011 sign in These fees include the cost of tax preparation software programs and tax publications. Taxact 2011 sign in They also include any fee you paid for electronic filing of your return. Taxact 2011 sign in Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. Taxact 2011 sign in On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Taxact 2011 sign in You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. Taxact 2011 sign in Some of these other expenses are explained in the following discussions. Taxact 2011 sign in If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. Taxact 2011 sign in Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Taxact 2011 sign in Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Taxact 2011 sign in First report the loss in Section B of Form 4684, Casualties and Thefts. Taxact 2011 sign in You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Taxact 2011 sign in To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Taxact 2011 sign in For other casualty and theft losses, see chapter 25. Taxact 2011 sign in Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Taxact 2011 sign in Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Taxact 2011 sign in The fees are deductible in the year paid. Taxact 2011 sign in Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Taxact 2011 sign in You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Taxact 2011 sign in But if you work as an employee and also use the computer in that work, see Publication 946. Taxact 2011 sign in Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Taxact 2011 sign in Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Taxact 2011 sign in The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Taxact 2011 sign in For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Taxact 2011 sign in Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Taxact 2011 sign in But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Taxact 2011 sign in You must add the fee to the cost of the property. Taxact 2011 sign in You cannot deduct the fee you pay to a broker to sell securities. Taxact 2011 sign in You can use the fee only to figure gain or loss from the sale. Taxact 2011 sign in See the Instructions for Form 8949 for information on how to report the fee. Taxact 2011 sign in Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Taxact 2011 sign in A hobby is not a business because it is not carried on to make a profit. Taxact 2011 sign in See Activity not for profit in chapter 12 under Other Income. Taxact 2011 sign in Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Taxact 2011 sign in Deductions of pass-through entities are passed through to the partners or shareholders. Taxact 2011 sign in The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Taxact 2011 sign in Example. Taxact 2011 sign in You are a member of an investment club that is formed solely to invest in securities. Taxact 2011 sign in The club is treated as a partnership. Taxact 2011 sign in The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Taxact 2011 sign in In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Taxact 2011 sign in However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Taxact 2011 sign in Publicly offered mutual funds. Taxact 2011 sign in   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Taxact 2011 sign in A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Taxact 2011 sign in   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Taxact 2011 sign in This net figure is the amount you report on your return as income. Taxact 2011 sign in You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Taxact 2011 sign in Information returns. Taxact 2011 sign in   You should receive information returns from pass-through entities. Taxact 2011 sign in Partnerships and S corporations. Taxact 2011 sign in   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. Taxact 2011 sign in Nonpublicly offered mutual funds. Taxact 2011 sign in   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. Taxact 2011 sign in You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Taxact 2011 sign in Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Taxact 2011 sign in Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Taxact 2011 sign in You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Taxact 2011 sign in You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. Taxact 2011 sign in You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). Taxact 2011 sign in See Tax Preparation Fees , earlier. Taxact 2011 sign in Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. Taxact 2011 sign in Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Taxact 2011 sign in If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Taxact 2011 sign in If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Taxact 2011 sign in Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. Taxact 2011 sign in Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Taxact 2011 sign in You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Taxact 2011 sign in Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Taxact 2011 sign in These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Taxact 2011 sign in Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Taxact 2011 sign in For more information about IRAs, see chapter 17. Taxact 2011 sign in Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Taxact 2011 sign in They are not subject to the 2% limit. Taxact 2011 sign in Report these items on Schedule A (Form 1040), line 28. Taxact 2011 sign in List of Deductions Each of the following items is discussed in detail after the list (except where indicated). Taxact 2011 sign in Amortizable premium on taxable bonds. Taxact 2011 sign in Casualty and theft losses from income- producing property. Taxact 2011 sign in Federal estate tax on income in respect of a decedent. Taxact 2011 sign in Gambling losses up to the amount of gambling winnings. Taxact 2011 sign in Impairment-related work expenses of persons with disabilities. Taxact 2011 sign in Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Taxact 2011 sign in Losses from Ponzi-type investment schemes. Taxact 2011 sign in See Losses from Ponzi-type investment schemes under Theft in chapter 25. Taxact 2011 sign in Repayments of more than $3,000 under a claim of right. Taxact 2011 sign in Unrecovered investment in an annuity. Taxact 2011 sign in Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Taxact 2011 sign in You can elect to amortize the premium on taxable bonds. Taxact 2011 sign in The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Taxact 2011 sign in Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. Taxact 2011 sign in For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. Taxact 2011 sign in Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Taxact 2011 sign in First, report the loss in Form 4684, Section B. Taxact 2011 sign in You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. Taxact 2011 sign in To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Taxact 2011 sign in For more information on casualty and theft losses, see chapter 25. Taxact 2011 sign in Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Taxact 2011 sign in Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Taxact 2011 sign in See Publication 559 for more information. Taxact 2011 sign in Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Taxact 2011 sign in You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Taxact 2011 sign in You cannot deduct gambling losses that are more than your winnings. Taxact 2011 sign in You cannot reduce your gambling winnings by your gambling losses and report the difference. Taxact 2011 sign in You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Taxact 2011 sign in Therefore, your records should show your winnings separately from your losses. Taxact 2011 sign in Diary of winnings and losses. Taxact 2011 sign in You must keep an accurate diary or similar record of your losses and winnings. Taxact 2011 sign in Your diary should contain at least the following information. Taxact 2011 sign in The date and type of your specific wager or wagering activity. Taxact 2011 sign in The name and address or location of the gambling establishment. Taxact 2011 sign in The names of other persons present with you at the gambling establishment. Taxact 2011 sign in The amount(s) you won or lost. Taxact 2011 sign in See Publication 529 for more information. Taxact 2011 sign in Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Taxact 2011 sign in Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. Taxact 2011 sign in Self-employed. Taxact 2011 sign in   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Taxact 2011 sign in Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. Taxact 2011 sign in It is not subject to the passive activity limitations. Taxact 2011 sign in Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. Taxact 2011 sign in See Repayments in chapter 12 for more information. Taxact 2011 sign in Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Taxact 2011 sign in If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Taxact 2011 sign in See chapter 10 for more information about the tax treatment of pensions and annuities. Taxact 2011 sign in Nondeductible Expenses Examples of nondeductible expenses are listed next. Taxact 2011 sign in The list is followed by discussions of additional nondeductible expenses. Taxact 2011 sign in List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. Taxact 2011 sign in Burial or funeral expenses, including the cost of a cemetery lot. Taxact 2011 sign in Capital expenses. Taxact 2011 sign in Fees and licenses, such as car licenses, marriage licenses, and dog tags. Taxact 2011 sign in Hobby losses, but see Hobby Expenses , earlier. Taxact 2011 sign in Home repairs, insurance, and rent. Taxact 2011 sign in Illegal bribes and kickbacks. Taxact 2011 sign in See Bribes and kickbacks in chapter 11 of Publication 535. Taxact 2011 sign in Losses from the sale of your home, furniture, personal car, etc. Taxact 2011 sign in Personal disability insurance premiums. Taxact 2011 sign in Personal, living, or family expenses. Taxact 2011 sign in The value of wages never received or lost vacation time. Taxact 2011 sign in Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. Taxact 2011 sign in See chapter 37. Taxact 2011 sign in Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Taxact 2011 sign in These include qualification and registration fees for primary elections. Taxact 2011 sign in Legal fees. Taxact 2011 sign in   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Taxact 2011 sign in Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Taxact 2011 sign in Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Taxact 2011 sign in This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Taxact 2011 sign in You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Taxact 2011 sign in Dues paid to airline, hotel, and luncheon clubs are not deductible. Taxact 2011 sign in Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Taxact 2011 sign in If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. Taxact 2011 sign in Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Taxact 2011 sign in This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Taxact 2011 sign in Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Taxact 2011 sign in Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Taxact 2011 sign in Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Taxact 2011 sign in However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Taxact 2011 sign in See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. Taxact 2011 sign in Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Taxact 2011 sign in Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Taxact 2011 sign in You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Taxact 2011 sign in See chapter 18 for information on alimony. Taxact 2011 sign in Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Taxact 2011 sign in These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Taxact 2011 sign in Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Taxact 2011 sign in Dues used for lobbying. Taxact 2011 sign in   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Taxact 2011 sign in See Lobbying Expenses in Publication 529 for information on exceptions. Taxact 2011 sign in Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Taxact 2011 sign in However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Taxact 2011 sign in See chapter 25. Taxact 2011 sign in Example. Taxact 2011 sign in A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Taxact 2011 sign in The diamond falls from the ring and is never found. Taxact 2011 sign in The loss of the diamond is a casualty. Taxact 2011 sign in Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Taxact 2011 sign in See chapter 26 for information on deductible expenses while traveling away from home. Taxact 2011 sign in Meals While Working Late You cannot deduct the cost of meals while working late. Taxact 2011 sign in However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. Taxact 2011 sign in See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. Taxact 2011 sign in Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Taxact 2011 sign in Custody of children. Taxact 2011 sign in Breach of promise to marry suit. Taxact 2011 sign in Civil or criminal charges resulting from a personal relationship. Taxact 2011 sign in Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. Taxact 2011 sign in Preparation of a title (or defense or perfection of a title). Taxact 2011 sign in Preparation of a will. Taxact 2011 sign in Property claims or property settlement in a divorce. Taxact 2011 sign in You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Taxact 2011 sign in Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Taxact 2011 sign in Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Taxact 2011 sign in Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Taxact 2011 sign in Accounting certificate fees paid for the initial right to practice accounting. Taxact 2011 sign in Bar exam fees and incidental expenses in securing initial admission to the bar. Taxact 2011 sign in Medical and dental license fees paid to get initial licensing. Taxact 2011 sign in Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Taxact 2011 sign in Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Taxact 2011 sign in Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Taxact 2011 sign in Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Taxact 2011 sign in You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Taxact 2011 sign in Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Taxact 2011 sign in You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. Taxact 2011 sign in If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. Taxact 2011 sign in Example. Taxact 2011 sign in During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. Taxact 2011 sign in In earning this income, you had total expenses of $500 during the year. Taxact 2011 sign in You cannot identify the amount of each expense item that is for each income item. Taxact 2011 sign in Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. Taxact 2011 sign in You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). Taxact 2011 sign in Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. Taxact 2011 sign in See chapter 26 for more information on deductible travel expenses. Taxact 2011 sign in Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. Taxact 2011 sign in However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. Taxact 2011 sign in Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. Taxact 2011 sign in Prev  Up  Next   Home   More Online Publications
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U.S. Military Academy, West Point

The U.S. Military Academy at West Point provides higher education and training for Army cadets. Graduates go on to become commissioned officers in the U.S. Army.

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The Taxact 2011 Sign In

Taxact 2011 sign in Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Taxact 2011 sign in Cost Basis The basis of property you buy is usually its cost. Taxact 2011 sign in The cost is the amount you pay in cash, debt obligations, other property, or services. Taxact 2011 sign in Your cost also includes amounts you pay for the following items. Taxact 2011 sign in Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if assumed for the seller). Taxact 2011 sign in  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. Taxact 2011 sign in Loans with low or no interest. Taxact 2011 sign in   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Taxact 2011 sign in You generally have unstated interest if your interest rate is less than the applicable federal rate. Taxact 2011 sign in For more information, see Unstated Interest and Original Issue Discount in Publication 537. Taxact 2011 sign in Purchase of a business. Taxact 2011 sign in   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. Taxact 2011 sign in Allocate the price among the various assets, including any section 197 intangibles. Taxact 2011 sign in See Allocating the Basis, later. Taxact 2011 sign in Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Taxact 2011 sign in If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. Taxact 2011 sign in You must adjust the basis of stocks for certain events that occur after purchase. Taxact 2011 sign in See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. Taxact 2011 sign in Identifying stock or bonds sold. Taxact 2011 sign in   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Taxact 2011 sign in If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Taxact 2011 sign in For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Taxact 2011 sign in Mutual fund shares. Taxact 2011 sign in   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. Taxact 2011 sign in For more information, see Publication 550. Taxact 2011 sign in Real Property Real property, also called real estate, is land and generally anything built on or attached to it. Taxact 2011 sign in If you buy real property, certain fees and other expenses become part of your cost basis in the property. Taxact 2011 sign in Real estate taxes. Taxact 2011 sign in   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Taxact 2011 sign in You cannot deduct them as taxes. Taxact 2011 sign in   If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Taxact 2011 sign in Do not include that amount in the basis of the property. Taxact 2011 sign in If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Taxact 2011 sign in Settlement costs. Taxact 2011 sign in   Your basis includes the settlement fees and closing costs for buying property. Taxact 2011 sign in You cannot include in your basis the fees and costs for getting a loan on property. Taxact 2011 sign in A fee for buying property is a cost that must be paid even if you bought the property for cash. Taxact 2011 sign in   The following items are some of the settlement fees or closing costs you can include in the basis of your property. Taxact 2011 sign in Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Taxact 2011 sign in   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Taxact 2011 sign in   The following items are some settlement fees and closing costs you cannot include in the basis of the property. Taxact 2011 sign in Casualty insurance premiums. Taxact 2011 sign in Rent for occupancy of the property before closing. Taxact 2011 sign in Charges for utilities or other services related to occupancy of the property before closing. Taxact 2011 sign in Charges connected with getting a loan. Taxact 2011 sign in The following are examples of these charges. Taxact 2011 sign in Points (discount points, loan origination fees). Taxact 2011 sign in Mortgage insurance premiums. Taxact 2011 sign in Loan assumption fees. Taxact 2011 sign in Cost of a credit report. Taxact 2011 sign in Fees for an appraisal required by a lender. Taxact 2011 sign in Fees for refinancing a mortgage. Taxact 2011 sign in If these costs relate to business property, items (1) through (3) are deductible as business expenses. Taxact 2011 sign in Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. Taxact 2011 sign in Points. Taxact 2011 sign in   If you pay points to obtain a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Taxact 2011 sign in Generally, you deduct the points over the term of the loan. Taxact 2011 sign in For more information on how to deduct points, see Points in chapter 4 of Publication 535. Taxact 2011 sign in Points on home mortgage. Taxact 2011 sign in   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. Taxact 2011 sign in If certain requirements are met, you can deduct the points in full for the year in which they are paid. Taxact 2011 sign in Reduce the basis of your home by any seller-paid points. Taxact 2011 sign in For more information, see Points in Publication 936, Home Mortgage Interest Deduction. Taxact 2011 sign in Assumption of mortgage. Taxact 2011 sign in   If you buy property and assume (or buy subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Taxact 2011 sign in Example. Taxact 2011 sign in If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. Taxact 2011 sign in Constructing assets. Taxact 2011 sign in   If you build property or have assets built for you, your expenses for this construction are part of your basis. Taxact 2011 sign in Some of these expenses include the following costs. Taxact 2011 sign in Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Taxact 2011 sign in In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. Taxact 2011 sign in You must include them in the asset's basis. Taxact 2011 sign in Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. Taxact 2011 sign in    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Taxact 2011 sign in Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. Taxact 2011 sign in If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. Taxact 2011 sign in In certain circumstances, you may be subject to the uniform capitalization rules, next. Taxact 2011 sign in Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. Taxact 2011 sign in Activities subject to the rules. Taxact 2011 sign in   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. Taxact 2011 sign in Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. Taxact 2011 sign in However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. Taxact 2011 sign in   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. Taxact 2011 sign in Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. Taxact 2011 sign in Tangible personal property includes films, sound recordings, video tapes, books, or similar property. Taxact 2011 sign in    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. Taxact 2011 sign in To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. Taxact 2011 sign in You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Taxact 2011 sign in   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. Taxact 2011 sign in Example. Taxact 2011 sign in If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. Taxact 2011 sign in The nondeductible part of the cost is not subject to the uniform capitalization rules. Taxact 2011 sign in More information. Taxact 2011 sign in   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. Taxact 2011 sign in Exceptions. Taxact 2011 sign in   The following are not subject to the uniform capitalization rules. Taxact 2011 sign in Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. Taxact 2011 sign in For other exceptions to the uniform capitalization rules, see section 1. Taxact 2011 sign in 263A-1(b) of the regulations. Taxact 2011 sign in   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. Taxact 2011 sign in Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. Taxact 2011 sign in The basis of an intangible asset is usually the cost to buy or create it. Taxact 2011 sign in If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. Taxact 2011 sign in The basis of certain intangibles can be amortized. Taxact 2011 sign in See chapter 8 of Publication 535 for information on the amortization of these costs. Taxact 2011 sign in Patents. Taxact 2011 sign in   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. Taxact 2011 sign in If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. Taxact 2011 sign in The value of the inventor's time spent on an invention is not part of the basis. Taxact 2011 sign in Copyrights. Taxact 2011 sign in   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. Taxact 2011 sign in Do not include the value of your time as the author, or any other person's time you did not pay for. Taxact 2011 sign in Franchises, trademarks, and trade names. Taxact 2011 sign in   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. Taxact 2011 sign in Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. Taxact 2011 sign in You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Taxact 2011 sign in See Trade or Business Acquired below. Taxact 2011 sign in Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. Taxact 2011 sign in If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Taxact 2011 sign in However, see Trade or Business Acquired, next. Taxact 2011 sign in Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. Taxact 2011 sign in Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. Taxact 2011 sign in Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. Taxact 2011 sign in Certificates of deposit, U. Taxact 2011 sign in S. Taxact 2011 sign in Government securities, foreign currency, and actively traded personal property, including stock and securities. Taxact 2011 sign in Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. Taxact 2011 sign in Property of a kind that would properly 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. Taxact 2011 sign in All other assets except section 197 intangibles, goodwill, and going concern value. Taxact 2011 sign in Section 197 intangibles except goodwill and going concern value. Taxact 2011 sign in Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Taxact 2011 sign in Agreement. Taxact 2011 sign in   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. Taxact 2011 sign in This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Taxact 2011 sign in Reporting requirement. Taxact 2011 sign in   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Taxact 2011 sign in Use Form 8594 to provide this information. Taxact 2011 sign in The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Taxact 2011 sign in More information. Taxact 2011 sign in   See Sale of a Business in chapter 2 of Publication 544 for more information. Taxact 2011 sign in Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. Taxact 2011 sign in Figure the basis of each asset by multiplying the lump sum by a fraction. Taxact 2011 sign in The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Taxact 2011 sign in If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. Taxact 2011 sign in Demolition of building. Taxact 2011 sign in   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Taxact 2011 sign in Do not claim the costs as a current deduction. Taxact 2011 sign in Modification of building. Taxact 2011 sign in   A modification of a building will not be treated as a demolition if the following conditions are satisfied. Taxact 2011 sign in 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. Taxact 2011 sign in   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. Taxact 2011 sign in   If these conditions are met, add the costs of the modifications to the basis of the building. Taxact 2011 sign in Subdivided lots. Taxact 2011 sign in   If you buy a tract of land and subdivide it, you must determine the basis of each lot. Taxact 2011 sign in This is necessary because you must figure the gain or loss on the sale of each individual lot. Taxact 2011 sign in As a result, you do not recover your entire cost in the tract until you have sold all of the lots. Taxact 2011 sign in   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. Taxact 2011 sign in The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. Taxact 2011 sign in Future improvement costs. Taxact 2011 sign in   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. Taxact 2011 sign in See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. Taxact 2011 sign in Use of erroneous cost basis. Taxact 2011 sign in   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. Taxact 2011 sign in Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. Taxact 2011 sign in Example. Taxact 2011 sign in You bought a tract of land to which you assigned a cost of $15,000. Taxact 2011 sign in You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. Taxact 2011 sign in You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. Taxact 2011 sign in Several years later you determine that your original basis in the tract was $22,500 and not $15,000. Taxact 2011 sign in You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. Taxact 2011 sign in You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). Taxact 2011 sign in You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. Taxact 2011 sign in Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. Taxact 2011 sign in The result of these adjustments to the basis is the adjusted basis. Taxact 2011 sign in Increases to Basis Increase the basis of any property by all items properly added to a capital account. Taxact 2011 sign in These include the cost of any improvements having a useful life of more than 1 year. Taxact 2011 sign in Rehabilitation expenses also increase basis. Taxact 2011 sign in However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. Taxact 2011 sign in If you have to recapture any of the credit, increase your basis by the recaptured amount. Taxact 2011 sign in If you make additions or improvements to business property, keep separate accounts for them. Taxact 2011 sign in Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. Taxact 2011 sign in For more information, see Publication 946. Taxact 2011 sign in The following items increase the basis of property. Taxact 2011 sign in The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. Taxact 2011 sign in Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. Taxact 2011 sign in Do not deduct them as taxes. Taxact 2011 sign in However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. Taxact 2011 sign in Example. Taxact 2011 sign in Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. Taxact 2011 sign in Add the assessment to your property's basis. Taxact 2011 sign in In this example, the assessment is a depreciable asset. Taxact 2011 sign in Deducting vs. Taxact 2011 sign in Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. Taxact 2011 sign in For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. Taxact 2011 sign in However, you can choose either to deduct or to capitalize certain other costs. Taxact 2011 sign in If you capitalize these costs, include them in your basis. Taxact 2011 sign in If you deduct them, do not include them in your basis. Taxact 2011 sign in See Uniform Capitalization Rules earlier. Taxact 2011 sign in The costs you can choose to deduct or to capitalize include the following. Taxact 2011 sign in Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. Taxact 2011 sign in If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Taxact 2011 sign in For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. Taxact 2011 sign in Table 1. Taxact 2011 sign in Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. Taxact 2011 sign in Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. Taxact 2011 sign in Some of these items are discussed next. Taxact 2011 sign in Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. Taxact 2011 sign in You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. Taxact 2011 sign in To make this determination, compare the repaired property to the property before the casualty. Taxact 2011 sign in For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Taxact 2011 sign in Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. Taxact 2011 sign in It reduces the basis of the affected part of the property. Taxact 2011 sign in If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Taxact 2011 sign in Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. Taxact 2011 sign in For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. Taxact 2011 sign in Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. Taxact 2011 sign in This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. Taxact 2011 sign in If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. Taxact 2011 sign in Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Taxact 2011 sign in For more information about the section 179 deduction, see Publication 946. Taxact 2011 sign in Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. Taxact 2011 sign in Reduce the basis of the property for which you received the subsidy by the excluded amount. Taxact 2011 sign in For more information on this subsidy, see Publication 525. Taxact 2011 sign in Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Taxact 2011 sign in If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Taxact 2011 sign in If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Taxact 2011 sign in Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. Taxact 2011 sign in If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. Taxact 2011 sign in In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. Taxact 2011 sign in For information on figuring depreciation, see Publication 946. Taxact 2011 sign in If you are claiming depreciation on a business vehicle, see Publication 463. Taxact 2011 sign in If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. Taxact 2011 sign in Include the excess depreciation in your gross income and add it to your basis in the property. Taxact 2011 sign in For information on the computation of excess depreciation, see chapter 4 in Publication 463. Taxact 2011 sign in Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Taxact 2011 sign in A debt includes any indebtedness for which you are liable or which attaches to property you hold. Taxact 2011 sign in You can exclude canceled debt from income in the following situations. Taxact 2011 sign in Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). Taxact 2011 sign in If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Taxact 2011 sign in However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. Taxact 2011 sign in For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. Taxact 2011 sign in For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. Taxact 2011 sign in For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. Taxact 2011 sign in Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. Taxact 2011 sign in For more information on the rules for the sale of a home, see Publication 523. Taxact 2011 sign in Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. Taxact 2011 sign in This also applies to amounts you received under an employer's adoption assistance program and excluded from income. Taxact 2011 sign in For more information Form 8839, Qualified Adoption Expenses. Taxact 2011 sign in Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. Taxact 2011 sign in You must reduce your basis in that property by the credit claimed. Taxact 2011 sign in For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. Taxact 2011 sign in Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. Taxact 2011 sign in You also paid commissions of $2,000 and title search and legal fees of $600. Taxact 2011 sign in You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. Taxact 2011 sign in Immediately you spent $20,000 in remodeling the building before you placed it in service. Taxact 2011 sign in You were allowed depreciation of $14,526 for the years 2005 through 2009. Taxact 2011 sign in In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. Taxact 2011 sign in You claimed a deduction for this loss. Taxact 2011 sign in You spent $5,500 to repair the damages and extend the useful life of the building. Taxact 2011 sign in The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. Taxact 2011 sign in It is not affected by any of the above adjustments. Taxact 2011 sign in Basis Other Than Cost There are many times when you cannot use cost as basis. Taxact 2011 sign in In these cases, the fair market value or the adjusted basis of property may be used. Taxact 2011 sign in Adjusted basis is discussed earlier. Taxact 2011 sign in Fair market value (FMV). Taxact 2011 sign in   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Taxact 2011 sign in Sales of similar property on or about the same date may be helpful in figuring the property's FMV. Taxact 2011 sign in Property Received for Services If you receive property for services, include the property's FMV in income. Taxact 2011 sign in The amount you include in income becomes your basis. Taxact 2011 sign in If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Taxact 2011 sign in Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. Taxact 2011 sign in If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Taxact 2011 sign in Your basis in the property is its FMV (your purchase price plus the amount you include in income). Taxact 2011 sign in If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. Taxact 2011 sign in However, your basis in the property is still its FMV. Taxact 2011 sign in See Employee Discounts in Publication 15-B. Taxact 2011 sign in Restricted Property If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested unless you make the election discussed later. Taxact 2011 sign in Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. Taxact 2011 sign in There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. Taxact 2011 sign in When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. Taxact 2011 sign in Example. Taxact 2011 sign in Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. Taxact 2011 sign in The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. Taxact 2011 sign in You do not report any income until you have completed the 5 years of service that satisfy the condition. Taxact 2011 sign in Fair market value. Taxact 2011 sign in   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. Taxact 2011 sign in Example. Taxact 2011 sign in You received stock from your employer for services you performed. Taxact 2011 sign in If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. Taxact 2011 sign in At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. Taxact 2011 sign in This is a restriction that by its terms will never end and you must consider it when you figure the FMV. Taxact 2011 sign in Election. Taxact 2011 sign in   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. Taxact 2011 sign in If you make this choice, the substantially vested rules do not apply. Taxact 2011 sign in Your basis is the amount you paid plus the amount you included in income. Taxact 2011 sign in   See the discussion of Restricted Property in Publication 525 for more information. Taxact 2011 sign in Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Taxact 2011 sign in A taxable gain or deductible loss is also known as a recognized gain or loss. Taxact 2011 sign in If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. Taxact 2011 sign in A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. Taxact 2011 sign in Example. Taxact 2011 sign in You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. Taxact 2011 sign in You must report a taxable gain of $3,000 for the land. Taxact 2011 sign in The tractor has a basis of $6,000. Taxact 2011 sign in Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. Taxact 2011 sign in Similar or related property. Taxact 2011 sign in   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. Taxact 2011 sign in However, make the following adjustments. Taxact 2011 sign in Decrease the basis by the following. Taxact 2011 sign in Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. Taxact 2011 sign in Increase the basis by the following. Taxact 2011 sign in Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. Taxact 2011 sign in Money or property not similar or related. Taxact 2011 sign in   If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the new property is its cost decreased by the gain not recognized on the conversion. Taxact 2011 sign in Example. Taxact 2011 sign in The state condemned your property. Taxact 2011 sign in The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. Taxact 2011 sign in You realized a gain of $5,000 ($31,000 − $26,000). Taxact 2011 sign in You bought replacement property similar in use to the converted property for $29,000. Taxact 2011 sign in You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Taxact 2011 sign in Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Taxact 2011 sign in The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. Taxact 2011 sign in   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Taxact 2011 sign in Example. Taxact 2011 sign in The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. Taxact 2011 sign in Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. Taxact 2011 sign in More information. Taxact 2011 sign in   For more information about condemnations, see Involuntary Conversions in Publication 544. Taxact 2011 sign in For more information about casualty and theft losses, see Publication 547. Taxact 2011 sign in Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Taxact 2011 sign in If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Taxact 2011 sign in A nontaxable gain or loss is also known as an unrecognized gain or loss. Taxact 2011 sign in Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Taxact 2011 sign in To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Taxact 2011 sign in There must also be an exchange of like-kind property. Taxact 2011 sign in For more information, see Like-Kind Exchanges in Publication 544. Taxact 2011 sign in The basis of the property you receive is the same as the basis of the property you gave up. Taxact 2011 sign in Example. Taxact 2011 sign in You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. Taxact 2011 sign in Your basis in the new property is the same as the basis of the old ($50,000). Taxact 2011 sign in Exchange expenses. Taxact 2011 sign in   Exchange expenses are generally the closing costs you pay. Taxact 2011 sign in They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. Taxact 2011 sign in Add them to the basis of the like-kind property received. Taxact 2011 sign in Property plus cash. Taxact 2011 sign in   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. Taxact 2011 sign in Example. Taxact 2011 sign in You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. Taxact 2011 sign in Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). Taxact 2011 sign in Special rules for related persons. Taxact 2011 sign in   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Taxact 2011 sign in Each person must report any gain or loss not recognized on the original exchange. Taxact 2011 sign in Each person reports it on the tax return filed for the year in which the later disposition occurs. Taxact 2011 sign in If this rule applies, the basis of the property received in the original exchange will be its fair market value. Taxact 2011 sign in   These rules generally do not apply to the following kinds of property dispositions. Taxact 2011 sign in Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. Taxact 2011 sign in Related persons. Taxact 2011 sign in   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. Taxact 2011 sign in   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. Taxact 2011 sign in ), see Nondeductible Loss in chapter 2 of Publication 544. Taxact 2011 sign in Exchange of business property. Taxact 2011 sign in   Exchanging the assets of one business for the assets of another business is a multiple property exchange. Taxact 2011 sign in For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Taxact 2011 sign in Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. Taxact 2011 sign in The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. Taxact 2011 sign in Decrease the basis by the following amounts. Taxact 2011 sign in Any money you receive, and Any loss you recognize on the exchange. Taxact 2011 sign in Increase the basis by the following amounts. Taxact 2011 sign in Any additional costs you incur, and Any gain you recognize on the exchange. Taxact 2011 sign in If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Taxact 2011 sign in Example. Taxact 2011 sign in You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. Taxact 2011 sign in You realized a gain of $200 ($6,200 − $6,000). Taxact 2011 sign in This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). Taxact 2011 sign in You include all the gain in income (recognized gain) because the gain is less than the cash received. Taxact 2011 sign in Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. Taxact 2011 sign in   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Taxact 2011 sign in The rest is the basis of the like property. Taxact 2011 sign in Example. Taxact 2011 sign in You had an adjusted basis of $15,000 in real estate you held for investment. Taxact 2011 sign in You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. Taxact 2011 sign in The truck is unlike property. Taxact 2011 sign in You realized a gain of $1,500 ($16,500 − $15,000). Taxact 2011 sign in This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). Taxact 2011 sign in You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Taxact 2011 sign in Your basis in the properties you received is figured as follows. Taxact 2011 sign in Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). Taxact 2011 sign in This is the truck's FMV. Taxact 2011 sign in The rest ($12,500) is the basis of the real estate. Taxact 2011 sign in Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Taxact 2011 sign in Example. Taxact 2011 sign in You are a salesperson and you use one of your cars 100% for business. Taxact 2011 sign in You have used this car in your sales activities for 2 years and have depreciated it. Taxact 2011 sign in Your adjusted basis in the car is $22,600 and its FMV is $23,100. Taxact 2011 sign in You are interested in a new car, which sells for $28,000. Taxact 2011 sign in If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). Taxact 2011 sign in However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. Taxact 2011 sign in Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). Taxact 2011 sign in Your basis for depreciating the new car is $27,500, the same as if you traded the old car. Taxact 2011 sign in Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. Taxact 2011 sign in The first is an exchange of like-kind property. Taxact 2011 sign in The second is personal-use property on which gain is recognized and loss is not recognized. Taxact 2011 sign in First, figure your adjusted basis in the property as if you transferred two separate properties. Taxact 2011 sign in Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. Taxact 2011 sign in Deduct the depreciation you took or could have taken from the adjusted basis of the business part. Taxact 2011 sign in Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. Taxact 2011 sign in The business part of the property is permitted to be exchanged tax free. Taxact 2011 sign in However, you must recognize any gain from the exchange of the nonbusiness part. Taxact 2011 sign in You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. Taxact 2011 sign in The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. Taxact 2011 sign in If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. Taxact 2011 sign in For more information, see Publication 523. Taxact 2011 sign in Trade of car used partly in business. Taxact 2011 sign in   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. Taxact 2011 sign in   For information on figuring your basis for depreciation, see Publication 463. Taxact 2011 sign in Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. Taxact 2011 sign in However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. Taxact 2011 sign in This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Taxact 2011 sign in If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. Taxact 2011 sign in Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Taxact 2011 sign in For more information on these bonds, see Publication 550. Taxact 2011 sign in At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. Taxact 2011 sign in For more information, see Publication 504, Divorced or Separated Individuals. Taxact 2011 sign in Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Taxact 2011 sign in FMV Less Than Donor's Adjusted Basis If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Taxact 2011 sign in Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. Taxact 2011 sign in Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). Taxact 2011 sign in If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. Taxact 2011 sign in Example. Taxact 2011 sign in You received an acre of land as a gift. Taxact 2011 sign in At the time of the gift, the land had an FMV of $8,000. Taxact 2011 sign in The donor's adjusted basis was $10,000. Taxact 2011 sign in After you received the land, no events occurred to increase or decrease your basis. Taxact 2011 sign in If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. Taxact 2011 sign in If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. Taxact 2011 sign in If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Taxact 2011 sign in For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. Taxact 2011 sign in If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. Taxact 2011 sign in Business property. Taxact 2011 sign in   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Taxact 2011 sign in FMV Equal to or More Than Donor's Adjusted Basis If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Taxact 2011 sign in Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Taxact 2011 sign in Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. Taxact 2011 sign in See Adjusted Basis earlier. Taxact 2011 sign in Gift received before 1977. Taxact 2011 sign in   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. Taxact 2011 sign in However, do not increase your basis above the FMV of the gift at the time it was given to you. Taxact 2011 sign in Example 1. Taxact 2011 sign in You were given a house in 1976 with an FMV of $21,000. Taxact 2011 sign in The donor's adjusted basis was $20,000. Taxact 2011 sign in The donor paid a gift tax of $500. Taxact 2011 sign in Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. Taxact 2011 sign in Example 2. Taxact 2011 sign in If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. Taxact 2011 sign in This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. Taxact 2011 sign in Gift received after 1976. Taxact 2011 sign in   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. Taxact 2011 sign in Figure the increase by multiplying the gift tax paid by a fraction. Taxact 2011 sign in The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Taxact 2011 sign in   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. Taxact 2011 sign in The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Taxact 2011 sign in For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Taxact 2011 sign in Example. Taxact 2011 sign in In 2010, you received a gift of property from your mother that had an FMV of $50,000. Taxact 2011 sign in Her adjusted basis was $20,000. Taxact 2011 sign in The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). Taxact 2011 sign in She paid a gift tax of $9,000. Taxact 2011 sign in Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . Taxact 2011 sign in 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. Taxact 2011 sign in See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Taxact 2011 sign in If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. Taxact 2011 sign in The FMV of the property at the date of the individual's death. Taxact 2011 sign in The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. Taxact 2011 sign in For information on the alternate valuation date, see the Instructions for Form 706. Taxact 2011 sign in The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. Taxact 2011 sign in This method is discussed later. Taxact 2011 sign in The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Taxact 2011 sign in For information on a qualified conservation easement, see the Instructions for Form 706. Taxact 2011 sign in If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Taxact 2011 sign in For more information, see the Instructions for Form 706. Taxact 2011 sign in Appreciated property. Taxact 2011 sign in   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. Taxact 2011 sign in Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. Taxact 2011 sign in Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. Taxact 2011 sign in Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Taxact 2011 sign in When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Taxact 2011 sign in For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. Taxact 2011 sign in For example, you and your spouse owned community property that had a basis of $80,000. Taxact 2011 sign in When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Taxact 2011 sign in The FMV of the community interest was $100,000. Taxact 2011 sign in The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Taxact 2011 sign in The basis of the other half to your spouse's heirs is also $50,000. Taxact 2011 sign in For more information on community property, see Publication 555, Community Property. Taxact 2011 sign in Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. Taxact 2011 sign in Example. Taxact 2011 sign in John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. Taxact 2011 sign in John furnished two-thirds of the purchase price and Jim furnished one-third. Taxact 2011 sign in Depreciation deductions allowed before John's death were $12,000. Taxact 2011 sign in Under local law, each had a half interest in the income from the property. Taxact 2011 sign in At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. Taxact 2011 sign in Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. Taxact 2011 sign in This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. Taxact 2011 sign in If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. Taxact 2011 sign in Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. Taxact 2011 sign in It does not matter how much each spouse contributed to the purchase price. Taxact 2011 sign in Also, it does not matter which spouse dies first. Taxact 2011 sign in A qualified joint interest is any interest in property held by husband and wife as either of the following. Taxact 2011 sign in Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. Taxact 2011 sign in Basis. Taxact 2011 sign in   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Taxact 2011 sign in Decrease the cost by any deductions allowed to you for depreciation and depletion. Taxact 2011 sign in Increase the reduced cost by your basis in the half you inherited. Taxact 2011 sign in Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. Taxact 2011 sign in If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. Taxact 2011 sign in If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. Taxact 2011 sign in Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Taxact 2011 sign in Special-use valuation. Taxact 2011 sign in   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. Taxact 2011 sign in Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Taxact 2011 sign in Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. Taxact 2011 sign in Figure all FMVs without regard to the special-use valuation. Taxact 2011 sign in   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Taxact 2011 sign in This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. Taxact 2011 sign in   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. Taxact 2011 sign in If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Taxact 2011 sign in The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. Taxact 2011 sign in   You make the election by filing with Form 706-A a statement that does all of the following. Taxact 2011 sign in Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. Taxact 2011 sign in   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. Taxact 2011 sign in Property Changed to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Taxact 2011 sign in An example of changing property held for personal use to business use would be renting out your former main home. Taxact 2011 sign in Basis for depreciation. Taxact 2011 sign in   The basis for depreciation is the lesser of the following amounts. Taxact 2011 sign in The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Taxact 2011 sign in Example. Taxact 2011 sign in Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. Taxact 2011 sign in You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Taxact 2011 sign in Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Taxact 2011 sign in Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Taxact 2011 sign in On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Taxact 2011 sign in The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). Taxact 2011 sign in Sale of property. Taxact 2011 sign in   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. Taxact 2011 sign in Gain. Taxact 2011 sign in   The basis for figuring a gain is your adjusted basis when you sell the property. Taxact 2011 sign in Example. Taxact 2011 sign in Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Taxact 2011 sign in Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Taxact 2011 sign in Loss. Taxact 2011 sign in   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Taxact 2011 sign in Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. Taxact 2011 sign in Example. Taxact 2011 sign in Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Taxact 2011 sign in In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000) on that date. Taxact 2011 sign in Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). Taxact 2011 sign in How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Taxact 2011 sign in By selecting the method that is best for you, you will have quick and easy access to tax help. Taxact 2011 sign in Contacting your Taxpayer Advocate. Taxact 2011 sign in   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. Taxact 2011 sign in We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. Taxact 2011 sign in Here are seven things every taxpayer should know about TAS. Taxact 2011 sign in TAS is your voice at the IRS. Taxact 2011 sign in Our service is free, confidential, and tailored to meet your needs. Taxact 2011 sign in You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Taxact 2011 sign in We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Taxact 2011 sign in This includes businesses as well as individuals. Taxact 2011 sign in Our employees know the IRS and how to navigate it. Taxact 2011 sign in If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Taxact 2011 sign in We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Taxact 2011 sign in You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Taxact 2011 sign in irs. Taxact 2011 sign in gov/advocate. Taxact 2011 sign in You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Taxact 2011 sign in You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Taxact 2011 sign in taxtoolkit. Taxact 2011 sign in irs. Taxact 2011 sign in gov. Taxact 2011 sign in You can get updates on hot tax topics by visiting our YouTube channel at www. Taxact 2011 sign in youtube. Taxact 2011 sign in com/tasnta and our Facebook page at www. Taxact 2011 sign in facebook. Taxact 2011 sign in com/YourVoiceAtIRS, or by following our tweets at www. Taxact 2011 sign in twitter. Taxact 2011 sign in com/YourVoiceAtIRS. Taxact 2011 sign in Low Income Taxpayer Clinics (LITCs). Taxact 2011 sign in   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Taxact 2011 sign in LITCs are independent from the IRS. Taxact 2011 sign in Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Taxact 2011 sign in If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Taxact 2011 sign in For more information, see Publication 4134, Low Income Taxpayer Clinic List. Taxact 2011 sign in This publication is available at IRS. Taxact 2011 sign in gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Taxact 2011 sign in Free tax services. Taxact 2011 sign in   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Taxact 2011 sign in Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Taxact 2011 sign in The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Taxact 2011 sign in The majority of the information and services listed in this publication are available to you free of charge. Taxact 2011 sign in If there is a fee associated with a resource or service, it is listed in the publication. Taxact 2011 sign in   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d