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Turbotax 2007 Free

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Turbotax 2007 free 24. Turbotax 2007 free   Contributions Table of Contents Introduction Useful Items - You may want to see: Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions of PropertyException. Turbotax 2007 free Household items. Turbotax 2007 free Deduction more than $500. Turbotax 2007 free Form 1098-C. Turbotax 2007 free Filing deadline approaching and still no Form 1098-C. Turbotax 2007 free Exception 1—vehicle used or improved by organization. Turbotax 2007 free Exception 2—vehicle given or sold to needy individual. Turbotax 2007 free Deduction $500 or less. Turbotax 2007 free Right to use property. Turbotax 2007 free Tangible personal property. Turbotax 2007 free Future interest. Turbotax 2007 free Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value When To DeductChecks. Turbotax 2007 free Text message. Turbotax 2007 free Credit card. Turbotax 2007 free Pay-by-phone account. Turbotax 2007 free Stock certificate. Turbotax 2007 free Promissory note. Turbotax 2007 free Option. Turbotax 2007 free Borrowed funds. Turbotax 2007 free Limits on DeductionsCarryovers Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To Report Introduction This chapter explains how to claim a deduction for your charitable contributions. Turbotax 2007 free It discusses the following topics. Turbotax 2007 free The types of organizations to which you can make deductible charitable contributions. Turbotax 2007 free The types of contributions you can deduct. Turbotax 2007 free How much you can deduct. Turbotax 2007 free What records you must keep. Turbotax 2007 free How to report your charitable contributions. Turbotax 2007 free A charitable contribution is a donation or gift to, or for the use of, a qualified organization. Turbotax 2007 free It is voluntary and is made without getting, or expecting to get, anything of equal value. Turbotax 2007 free Form 1040 required. Turbotax 2007 free    To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. Turbotax 2007 free The amount of your deduction may be limited if certain rules and limits explained in this chapter apply to you. Turbotax 2007 free The limits are explained in detail in Publication 526. Turbotax 2007 free Useful Items - You may want to see: Publication 526 Charitable Contributions 561 Determining the Value of Donated Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 8283 Noncash Charitable Contributions Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. Turbotax 2007 free Most organizations other than churches and governments must apply to the IRS to become a qualified organization. Turbotax 2007 free How to check whether an organization can receive deductible charitable contributions. Turbotax 2007 free   You can ask any organization whether it is a qualified organization, and most will be able to tell you. Turbotax 2007 free Or go to IRS. Turbotax 2007 free gov. Turbotax 2007 free Click on “Tools” and then on “Exempt Organizations Select Check” (www. Turbotax 2007 free irs. Turbotax 2007 free gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). Turbotax 2007 free This online tool will enable you to search for qualified organizations. Turbotax 2007 free You can also call the IRS to find out if an organization is qualified. Turbotax 2007 free Call 1-877-829-5500. Turbotax 2007 free People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. Turbotax 2007 free Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. Turbotax 2007 free gsa. Turbotax 2007 free gov/fedrelay. Turbotax 2007 free Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. Turbotax 2007 free A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). Turbotax 2007 free It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Turbotax 2007 free Certain organizations that foster national or international amateur sports competition also qualify. Turbotax 2007 free War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). Turbotax 2007 free Domestic fraternal societies, orders, and associations operating under the lodge system. Turbotax 2007 free (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Turbotax 2007 free ) Certain nonprofit cemetery companies or corporations. Turbotax 2007 free (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. Turbotax 2007 free ) The United States or any state, the District of Columbia, a U. Turbotax 2007 free S. Turbotax 2007 free possession (including Puerto Rico), a political subdivision of a state or U. Turbotax 2007 free S. Turbotax 2007 free possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. Turbotax 2007 free (Your contribution to this type of organization is only deductible if it is to be used solely for public purposes. Turbotax 2007 free ) Examples. Turbotax 2007 free    The following list gives some examples of qualified organizations. Turbotax 2007 free Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. Turbotax 2007 free Most nonprofit charitable organizations such as the American Red Cross and the United Way. Turbotax 2007 free Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. Turbotax 2007 free This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. Turbotax 2007 free However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . Turbotax 2007 free Nonprofit hospitals and medical research organizations. Turbotax 2007 free Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. Turbotax 2007 free Nonprofit volunteer fire companies. Turbotax 2007 free Nonprofit organizations that develop and maintain public parks and recreation facilities. Turbotax 2007 free Civil defense organizations. Turbotax 2007 free Certain foreign charitable organizations. Turbotax 2007 free   Under income tax treaties with Canada, Israel, and Mexico, you may be able to deduct contributions to certain Canadian, Israeli, or Mexican charitable organizations. Turbotax 2007 free Generally, you must have income from sources in that country. Turbotax 2007 free For additional information on the deduction of contributions to Canadian charities, see Publication 597, Information on the United States–Canada Income Tax Treaty. Turbotax 2007 free If you need more information on how to figure your contribution to Mexican and Israeli charities, see Publication 526. Turbotax 2007 free Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. Turbotax 2007 free A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. Turbotax 2007 free The contributions must be made to a qualified organization and not set aside for use by a specific person. Turbotax 2007 free If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. Turbotax 2007 free See Contributions of Property , later in this chapter. Turbotax 2007 free Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. Turbotax 2007 free See Limits on Deductions , later. Turbotax 2007 free In addition, the total of your charitable contribution deduction and certain other itemized deductions may be limited. Turbotax 2007 free See chapter 29. Turbotax 2007 free Table 24-1 gives examples of contributions you can and cannot deduct. Turbotax 2007 free Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Turbotax 2007 free Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. Turbotax 2007 free If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. Turbotax 2007 free For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. Turbotax 2007 free Example 1. Turbotax 2007 free You pay $65 for a ticket to a dinner-dance at a church. Turbotax 2007 free Your entire $65 payment goes to the church. Turbotax 2007 free The ticket to the dinner-dance has a fair market value of $25. Turbotax 2007 free When you buy your ticket, you know that its value is less than your payment. Turbotax 2007 free To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). Turbotax 2007 free You can deduct $40 as a contribution to the church. Turbotax 2007 free Example 2. Turbotax 2007 free At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. Turbotax 2007 free The amount you pay is no more than the fair rental value. Turbotax 2007 free You have not made a deductible charitable contribution. Turbotax 2007 free Athletic events. Turbotax 2007 free   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. Turbotax 2007 free   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. Turbotax 2007 free Subtract the price of the tickets from your payment. Turbotax 2007 free You can deduct 80% of the remaining amount as a charitable contribution. Turbotax 2007 free Example 1. Turbotax 2007 free You pay $300 a year for membership in a university's athletic scholarship program. Turbotax 2007 free The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. Turbotax 2007 free You can deduct $240 (80% of $300) as a charitable contribution. Turbotax 2007 free Table 24-1. Turbotax 2007 free Examples of Charitable Contributions—A Quick Check Use the following lists for a quick check of whether you can deduct a contribution. Turbotax 2007 free See the rest of this chapter for more information and additional rules and limits that may apply. Turbotax 2007 free Deductible As  Charitable Contributions Not Deductible  As Charitable Contributions Money or property you give to:  Churches, synagogues, temples, mosques, and other religious organizations Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park) Nonprofit schools and hospitals The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. Turbotax 2007 free War veterans groups   Expenses paid for a student living with you, sponsored by a qualified organization  Out-of-pocket expenses when you serve a qualified organization as a volunteer Money or property you give to:  Civic leagues, social and sports clubs, labor unions, and chambers of commerce Foreign organizations (except certain Canadian, Israeli, and Mexican charities) Groups that are run for personal profit Groups whose purpose is to lobby for law changes Homeowners' associations Individuals Political groups or candidates for public office   Cost of raffle, bingo, or lottery tickets  Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups  Tuition  Value of your time or services  Value of blood given to a blood bank    Example 2. Turbotax 2007 free The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. Turbotax 2007 free You must subtract the usual price of a ticket ($120) from your $300 payment. Turbotax 2007 free The result is $180. Turbotax 2007 free Your deductible charitable contribution is $144 (80% of $180). Turbotax 2007 free Charity benefit events. Turbotax 2007 free   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. Turbotax 2007 free   If there is an established charge for the event, that charge is the value of your benefit. Turbotax 2007 free If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. Turbotax 2007 free Whether you use the tickets or other privileges has no effect on the amount you can deduct. Turbotax 2007 free However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. Turbotax 2007 free    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. Turbotax 2007 free If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. Turbotax 2007 free Example. Turbotax 2007 free You pay $40 to see a special showing of a movie for the benefit of a qualified organization. Turbotax 2007 free Printed on the ticket is “Contribution—$40. Turbotax 2007 free ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). Turbotax 2007 free Membership fees or dues. Turbotax 2007 free    You may be able to deduct membership fees or dues you pay to a qualified organization. Turbotax 2007 free However, you can deduct only the amount that is more than the value of the benefits you receive. Turbotax 2007 free    You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. Turbotax 2007 free They are not qualified organizations. Turbotax 2007 free Certain membership benefits can be disregarded. Turbotax 2007 free   Both you and the organization can disregard the following membership benefits if you receive them in return for an annual payment of $75 or less. Turbotax 2007 free Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. Turbotax 2007 free Admission, while you are a member, to events open only to members of the organization, if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. Turbotax 2007 free 20. Turbotax 2007 free Token items. Turbotax 2007 free   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. Turbotax 2007 free You receive only a small item or other benefit of token value. Turbotax 2007 free The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. Turbotax 2007 free Written statement. Turbotax 2007 free   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. Turbotax 2007 free The statement must say that you can deduct only the amount of your payment that is more than the value of the goods or services you received. Turbotax 2007 free It must also give you a good faith estimate of the value of those goods or services. Turbotax 2007 free   The organization can give you the statement either when it solicits or when it receives the payment from you. Turbotax 2007 free Exception. Turbotax 2007 free   An organization will not have to give you this statement if one of the following is true. Turbotax 2007 free The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. Turbotax 2007 free You receive only items whose value is not substantial as described under Token items , earlier. Turbotax 2007 free You receive only membership benefits that can be disregarded, as described earlier. Turbotax 2007 free Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. Turbotax 2007 free You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student, Is not your relative or dependent, and Is a full-time student in the twelfth or any lower grade at a school in the United States. Turbotax 2007 free You can deduct up to $50 a month for each full calendar month the student lives with you. Turbotax 2007 free Any month when conditions (1) through (3) are met for 15 days or more counts as a full month. Turbotax 2007 free For additional information, see Expenses Paid for Student Living With You in Publication 526. Turbotax 2007 free Mutual exchange program. Turbotax 2007 free   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. Turbotax 2007 free Table 24-2. Turbotax 2007 free Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. Turbotax 2007 free All of the rules explained in this chapter also apply. Turbotax 2007 free See, in particular, Out-of-Pocket Expenses in Giving Services . Turbotax 2007 free Question Answer I volunteer 6 hours a week in the office of a qualified organization. Turbotax 2007 free The receptionist is paid $10 an hour for the same work. Turbotax 2007 free Can I deduct $60 a week for my time?    No, you cannot deduct the value of your time or services. Turbotax 2007 free The office is 30 miles from my home. Turbotax 2007 free Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. Turbotax 2007 free If you don't want to figure your actual costs, you can deduct 14 cents for each mile. Turbotax 2007 free I volunteer as a Red Cross nurse's aide at a hospital. Turbotax 2007 free Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. Turbotax 2007 free I pay a babysitter to watch my children while I volunteer for a qualified organization. Turbotax 2007 free Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. Turbotax 2007 free (If you have childcare expenses so you can work for pay, see chapter 32. Turbotax 2007 free ) Out-of-Pocket Expenses in Giving Services Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. Turbotax 2007 free The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. Turbotax 2007 free Table 24-2 contains questions and answers that apply to some individuals who volunteer their services. Turbotax 2007 free Conventions. Turbotax 2007 free   If a qualified organization selects you to attend a convention as its representative, you can deduct unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight in connection with the convention. Turbotax 2007 free However, see Travel , later. Turbotax 2007 free   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. Turbotax 2007 free You also cannot deduct transportation, meals and lodging, and other expenses for your spouse or children. Turbotax 2007 free    You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. Turbotax 2007 free You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. Turbotax 2007 free Uniforms. Turbotax 2007 free   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. Turbotax 2007 free Foster parents. Turbotax 2007 free   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. Turbotax 2007 free A qualified organization must select the individuals you take into your home for foster care. Turbotax 2007 free    You can deduct expenses that meet both of the following requirements. Turbotax 2007 free They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. Turbotax 2007 free They are incurred primarily to benefit the qualified organization. Turbotax 2007 free   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. Turbotax 2007 free For details, see chapter 3. Turbotax 2007 free Example. Turbotax 2007 free You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. Turbotax 2007 free Your unreimbursed expenses are not deductible as charitable contributions. Turbotax 2007 free Car expenses. Turbotax 2007 free   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. Turbotax 2007 free You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. Turbotax 2007 free    If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. Turbotax 2007 free   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. Turbotax 2007 free   You must keep reliable written records of your car expenses. Turbotax 2007 free For more information, see Car expenses under Records To Keep, later. Turbotax 2007 free Travel. Turbotax 2007 free   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. Turbotax 2007 free This applies whether you pay the expenses directly or indirectly. Turbotax 2007 free You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. Turbotax 2007 free   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Turbotax 2007 free Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. Turbotax 2007 free However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. Turbotax 2007 free Example 1. Turbotax 2007 free You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. Turbotax 2007 free You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. Turbotax 2007 free You participate in the activities of the group and enjoy your time with them. Turbotax 2007 free You oversee the breaking of camp and you transport the group home. Turbotax 2007 free You can deduct your travel expenses. Turbotax 2007 free Example 2. Turbotax 2007 free You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. Turbotax 2007 free The project is sponsored by a charitable organization. Turbotax 2007 free In most circumstances, you cannot deduct your expenses. Turbotax 2007 free Example 3. Turbotax 2007 free You work for several hours each morning on an archaeological dig sponsored by a charitable organization. Turbotax 2007 free The rest of the day is free for recreation and sightseeing. Turbotax 2007 free You cannot take a charitable contribution deduction even though you work very hard during those few hours. Turbotax 2007 free Example 4. Turbotax 2007 free You spend the entire day attending a charitable organization's regional meeting as a chosen representative. Turbotax 2007 free In the evening you go to the theater. Turbotax 2007 free You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. Turbotax 2007 free Daily allowance (per diem). Turbotax 2007 free   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. Turbotax 2007 free You may be able to deduct any necessary travel expenses that are more than the allowance. Turbotax 2007 free Deductible travel expenses. Turbotax 2007 free   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. Turbotax 2007 free Because these travel expenses are not business-related, they are not subject to the same limits as business-related expenses. Turbotax 2007 free For information on business travel expenses, see Travel Expenses in chapter 26. Turbotax 2007 free Contributions You Cannot Deduct There are some contributions you cannot deduct, such as those made to specific individuals and those made to nonqualified organizations. Turbotax 2007 free (See Contributions to Individuals and Contributions to Nonqualified Organizations , next. Turbotax 2007 free ) There are others you can deduct only part of, as discussed later under Contributions From Which You Benefit . Turbotax 2007 free Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. Turbotax 2007 free Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members. Turbotax 2007 free Contributions to individuals who are needy or worthy. Turbotax 2007 free You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. Turbotax 2007 free But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. Turbotax 2007 free Example. Turbotax 2007 free You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. Turbotax 2007 free However, you cannot deduct contributions earmarked for relief of a particular individual or family. Turbotax 2007 free Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. Turbotax 2007 free Expenses you paid for another person who provided services to a qualified organization. Turbotax 2007 free Example. Turbotax 2007 free Your son does missionary work. Turbotax 2007 free You pay his expenses. Turbotax 2007 free You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. Turbotax 2007 free Payments to a hospital that are for a specific patient's care or for services for a specific patient. Turbotax 2007 free You cannot deduct these payments even if the hospital is operated by a city, a state, or other qualified organization. Turbotax 2007 free Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. Turbotax 2007 free Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. Turbotax 2007 free Chambers of commerce and other business leagues or organizations (but see chapter 28). Turbotax 2007 free Civic leagues and associations. Turbotax 2007 free Communist organizations. Turbotax 2007 free Country clubs and other social clubs. Turbotax 2007 free Most foreign organizations (other than certain Canadian, Israeli, or Mexican charitable organizations). Turbotax 2007 free For details, see Publication 526. Turbotax 2007 free Homeowners' associations. Turbotax 2007 free Labor unions (but see chapter 28). Turbotax 2007 free Political organizations and candidates. Turbotax 2007 free Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. Turbotax 2007 free See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. Turbotax 2007 free These contributions include the following. Turbotax 2007 free Contributions for lobbying. Turbotax 2007 free This includes amounts that you earmark for use in, or in connection with, influencing specific legislation. Turbotax 2007 free Contributions to a retirement home for room, board, maintenance, or admittance. Turbotax 2007 free Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. Turbotax 2007 free Costs of raffles, bingo, lottery, etc. Turbotax 2007 free You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. Turbotax 2007 free For information on how to report gambling winnings and losses, see Gambling winnings in chapter 12 and Gambling Losses Up to the Amount of Gambling Winnings in chapter 28. Turbotax 2007 free Dues to fraternal orders and similar groups. Turbotax 2007 free However, see Membership fees or dues , earlier, under Contributions You Can Deduct. Turbotax 2007 free Tuition, or amounts you pay instead of tuition. Turbotax 2007 free You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. Turbotax 2007 free You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. Turbotax 2007 free ” Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. Turbotax 2007 free Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. Turbotax 2007 free The cost of meals you eat while you perform services for a qualified organization unless it is necessary for you to be away from home overnight while performing the services. Turbotax 2007 free Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final (but see Adoption Credit in chapter 37, and the instructions for Form 8839, Qualified Adoption Expenses). Turbotax 2007 free You also may be able to claim an exemption for the child. Turbotax 2007 free See Adopted child in chapter 3. Turbotax 2007 free Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property (but see chapter 28). Turbotax 2007 free Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. Turbotax 2007 free However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. Turbotax 2007 free See Giving Property That Has Increased in Value , later. Turbotax 2007 free For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. Turbotax 2007 free Clothing and household items. Turbotax 2007 free   You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. Turbotax 2007 free Exception. Turbotax 2007 free   You can take a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. Turbotax 2007 free Household items. Turbotax 2007 free   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. Turbotax 2007 free   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. Turbotax 2007 free Cars, boats, and airplanes. Turbotax 2007 free    The following rules apply to any donation of a qualified vehicle. Turbotax 2007 free A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. Turbotax 2007 free Deduction more than $500. Turbotax 2007 free   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. Turbotax 2007 free If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. Turbotax 2007 free Form 1098-C. Turbotax 2007 free   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. Turbotax 2007 free The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. Turbotax 2007 free   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453 and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. Turbotax 2007 free   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. Turbotax 2007 free    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. Turbotax 2007 free But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. Turbotax 2007 free Filing deadline approaching and still no Form 1098-C. Turbotax 2007 free   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. Turbotax 2007 free Request an automatic 6-month extension of time to file your return. Turbotax 2007 free You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. Turbotax 2007 free S. Turbotax 2007 free Individual Income Tax Return. Turbotax 2007 free  For more information, see Automatic Extension in chapter 1. Turbotax 2007 free File the return on time without claiming the deduction for the qualified vehicle. Turbotax 2007 free After receiving the Form 1098-C, file an amended return, Form 1040X, claiming the deduction. Turbotax 2007 free Attach Copy B of Form 1098-C (or other statement) to the amended return. Turbotax 2007 free For more information about amended returns, see Amended Returns and Claims for Refund in chapter 1. Turbotax 2007 free Exceptions. Turbotax 2007 free   There are two exceptions to the rules just described for deductions of more than $500. Turbotax 2007 free Exception 1—vehicle used or improved by organization. Turbotax 2007 free   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. Turbotax 2007 free But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. Turbotax 2007 free The Form 1098-C (or other statement) will show whether this exception applies. Turbotax 2007 free Exception 2—vehicle given or sold to needy individual. Turbotax 2007 free   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. Turbotax 2007 free But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. Turbotax 2007 free The Form 1098-C (or other statement) will show whether this exception applies. Turbotax 2007 free   This exception does not apply if the organization sells the vehicle at auction. Turbotax 2007 free In that case, you cannot deduct the vehicle's fair market value. Turbotax 2007 free Example. Turbotax 2007 free Anita donates a used car to a qualified organization. Turbotax 2007 free She bought it 3 years ago for $9,000. Turbotax 2007 free A used car guide shows the fair market value for this type of car is $6,000. Turbotax 2007 free However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. Turbotax 2007 free Neither exception 1 nor exception 2 applies. Turbotax 2007 free If Anita itemizes her deductions, she can deduct $2,900 for her donation. Turbotax 2007 free She must attach Form 1098-C and Form 8283 to her return. Turbotax 2007 free Deduction $500 or less. Turbotax 2007 free   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. Turbotax 2007 free But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. Turbotax 2007 free   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. Turbotax 2007 free The statement must contain the information and meet the tests for an acknowledgment described under Deductions of At Least $250 But Not More Than $500 under Records To Keep, later. Turbotax 2007 free Partial interest in property. Turbotax 2007 free   Generally, you cannot deduct a charitable contribution of less than your entire interest in property. Turbotax 2007 free Right to use property. Turbotax 2007 free   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. Turbotax 2007 free For exceptions and more information, see Partial Interest in Property Not in Trust in Publication 561. Turbotax 2007 free Future interests in tangible personal property. Turbotax 2007 free   You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. Turbotax 2007 free Tangible personal property. Turbotax 2007 free   This is any property, other than land or buildings, that can be seen or touched. Turbotax 2007 free It includes furniture, books, jewelry, paintings, and cars. Turbotax 2007 free Future interest. Turbotax 2007 free   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. Turbotax 2007 free Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. Turbotax 2007 free Publication 561 contains a more complete discussion. Turbotax 2007 free Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. Turbotax 2007 free Used clothing and household items. Turbotax 2007 free   The fair market value of used clothing and household goods is usually far less than what you paid for them when they were new. Turbotax 2007 free   For used clothing, you should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. Turbotax 2007 free See Household Goods in Publication 561 for information on the valuation of household goods, such as furniture, appliances, and linens. Turbotax 2007 free Example. Turbotax 2007 free Dawn Greene donated a coat to a thrift store operated by her church. Turbotax 2007 free She paid $300 for the coat 3 years ago. Turbotax 2007 free Similar coats in the thrift store sell for $50. Turbotax 2007 free The fair market value of the coat is $50. Turbotax 2007 free Dawn's donation is limited to $50. Turbotax 2007 free Cars, boats, and airplanes. Turbotax 2007 free   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. Turbotax 2007 free Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. Turbotax 2007 free The guides may be published monthly or seasonally and for different regions of the country. Turbotax 2007 free These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Turbotax 2007 free The prices are not “official” and these publications are not considered an appraisal of any specific donated property. Turbotax 2007 free But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Turbotax 2007 free   You can also find used car pricing information on the Internet. Turbotax 2007 free Example. Turbotax 2007 free You donate a used car in poor condition to a local high school for use by students studying car repair. Turbotax 2007 free A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Turbotax 2007 free However, the guide shows the price for a private party sale of the car is only $750. Turbotax 2007 free The fair market value of the car is considered to be $750. Turbotax 2007 free Large quantities. Turbotax 2007 free   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. Turbotax 2007 free Giving Property That Has Decreased in Value If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value. Turbotax 2007 free You cannot claim a deduction for the difference between the property's basis and its fair market value. Turbotax 2007 free Giving Property That Has Increased in Value If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. Turbotax 2007 free Your basis in property is generally what you paid for it. Turbotax 2007 free See chapter 13 if you need more information about basis. Turbotax 2007 free Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. Turbotax 2007 free Ordinary income property. Turbotax 2007 free   Property is ordinary income property if you would have recognized ordinary income or short-term capital gain had you sold it at fair market value on the date it was contributed. Turbotax 2007 free Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined in chapter 14) held 1 year or less. Turbotax 2007 free Amount of deduction. Turbotax 2007 free   The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. Turbotax 2007 free Generally, this rule limits the deduction to your basis in the property. Turbotax 2007 free Example. Turbotax 2007 free You donate stock you held for 5 months to your church. Turbotax 2007 free The fair market value of the stock on the day you donate it is $1,000, but you paid only $800 (your basis). Turbotax 2007 free Because the $200 of appreciation would be short-term capital gain if you sold the stock, your deduction is limited to $800 (fair market value minus the appreciation). Turbotax 2007 free Capital gain property. Turbotax 2007 free   Property is capital gain property if you would have recognized long-term capital gain had you sold it at fair market value on the date of the contribution. Turbotax 2007 free It includes capital assets held more than 1 year, as well as certain real property and depreciable property used in your trade or business and, generally, held more than 1 year. Turbotax 2007 free Amount of deduction — general rule. Turbotax 2007 free   When figuring your deduction for a contribution of capital gain property, you generally can use the fair market value of the property. Turbotax 2007 free Exceptions. Turbotax 2007 free   In certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value. Turbotax 2007 free Generally, this means reducing the fair market value to the property's cost or other basis. Turbotax 2007 free Bargain sales. Turbotax 2007 free   A bargain sale of property is a sale or exchange for less than the property's fair market value. Turbotax 2007 free A bargain sale to a qualified organization is partly a charitable contribution and partly a sale or exchange. Turbotax 2007 free A bargain sale may result in a taxable gain. Turbotax 2007 free More information. Turbotax 2007 free   For more information on donating appreciated property, see Giving Property That Has Increased in Value in Publication 526. Turbotax 2007 free When To Deduct You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as explained later under Carryovers ). Turbotax 2007 free This applies whether you use the cash or an accrual method of accounting. Turbotax 2007 free Time of making contribution. Turbotax 2007 free   Usually, you make a contribution at the time of its unconditional delivery. Turbotax 2007 free Checks. Turbotax 2007 free   A check you mail to a charity is considered delivered on the date you mail it. Turbotax 2007 free Text message. Turbotax 2007 free   Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. Turbotax 2007 free Credit card. Turbotax 2007 free    Contributions charged on your credit card are deductible in the year you make the charge. Turbotax 2007 free Pay-by-phone account. Turbotax 2007 free    Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount. Turbotax 2007 free Stock certificate. Turbotax 2007 free   A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity's agent. Turbotax 2007 free However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the charity, your contribution is not delivered until the date the stock is transferred on the books of the corporation. Turbotax 2007 free Promissory note. Turbotax 2007 free   If you issue and deliver a promissory note to a charity as a contribution, it is not a contribution until you make the note payments. Turbotax 2007 free Option. Turbotax 2007 free    If you grant a charity an option to buy real property at a bargain price, it is not a contribution until the organization exercises the option. Turbotax 2007 free Borrowed funds. Turbotax 2007 free   If you contribute borrowed funds, you can deduct the contribution in the year you deliver the funds to the charity, regardless of when you repay the loan. Turbotax 2007 free Limits on Deductions The amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income (AGI). Turbotax 2007 free Your deduction may be further limited to 30% or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. Turbotax 2007 free If your total contributions for the year are 20% or less of your AGI, these limits do not apply to you. Turbotax 2007 free The limits are discussed in detail under Limits on Deductions in Publication 526. Turbotax 2007 free A higher limit applies to certain qualified conservation contributions. Turbotax 2007 free See Publication 526 for details. Turbotax 2007 free Carryovers You can carry over any contributions you cannot deduct in the current year because they exceed your adjusted-gross-income limits. Turbotax 2007 free You can deduct the excess in each of the next 5 years until it is used up, but not beyond that time. Turbotax 2007 free For more information, see Carryovers in Publication 526. Turbotax 2007 free Records To Keep You must keep records to prove the amount of the contributions you make during the year. Turbotax 2007 free The kind of records you must keep depends on the amount of your contributions and whether they are: Cash contributions, Noncash contributions, or Out-of-pocket expenses when donating your services. Turbotax 2007 free Note. Turbotax 2007 free An organization generally must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods or services. Turbotax 2007 free (See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. Turbotax 2007 free ) Keep the statement for your records. Turbotax 2007 free It may satisfy all or part of the recordkeeping requirements explained in the following discussions. Turbotax 2007 free Cash Contributions Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. Turbotax 2007 free You cannot deduct a cash contribution, regardless of the amount, unless you keep one of the following. Turbotax 2007 free A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Turbotax 2007 free Bank records may include: A canceled check, A bank or credit union statement, or A credit card statement. Turbotax 2007 free A receipt (or a letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution. Turbotax 2007 free The payroll deduction records described next. Turbotax 2007 free Payroll deductions. Turbotax 2007 free   If you make a contribution by payroll deduction, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the date and amount of the contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization. Turbotax 2007 free If your employer withheld $250 or more from a single paycheck, see Contributions of $250 or More , next. Turbotax 2007 free Contributions of $250 or More You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records. Turbotax 2007 free If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions. Turbotax 2007 free Amount of contribution. Turbotax 2007 free   In figuring whether your contribution is $250 or more, do not combine separate contributions. Turbotax 2007 free For example, if you gave your church $25 each week, your weekly payments do not have to be combined. Turbotax 2007 free Each payment is a separate contribution. Turbotax 2007 free   If contributions are made by payroll deduction, the deduction from each paycheck is treated as a separate contribution. Turbotax 2007 free   If you made a payment that is partly for goods and services, as described earlier under Contributions From Which You Benefit , your contribution is the amount of the payment that is more than the value of the goods and services. Turbotax 2007 free Acknowledgment. Turbotax 2007 free   The acknowledgment must meet these tests. Turbotax 2007 free It must be written. Turbotax 2007 free It must include: The amount of cash you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), A description and good faith estimate of the value of any goods or services described in (b) (other than intangible religious benefits), and A statement that the only benefit you received was an intangible religious benefit, if that was the case. Turbotax 2007 free The acknowledgment does not need to describe or estimate the value of an intangible religious benefit. Turbotax 2007 free An intangible religious benefit is a benefit that generally is not sold in commercial transactions outside a donative (gift) context. Turbotax 2007 free An example is admission to a religious ceremony. Turbotax 2007 free You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. Turbotax 2007 free   If the acknowledgment does not show the date of the contribution, you must also have a bank record or receipt, as described earlier, that does show the date of the contribution. Turbotax 2007 free If the acknowledgment shows the date of the contribution and meets the other tests just described, you do not need any other records. Turbotax 2007 free Payroll deductions. Turbotax 2007 free   If you make a contribution by payroll deduction and your employer withholds $250 or more from a single paycheck, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the amount withheld as a contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization and states the organization does not provide goods or services in return for any contribution made to it by payroll deduction. Turbotax 2007 free A single pledge card may be kept for all contributions made by payroll deduction regardless of amount as long as it contains all the required information. Turbotax 2007 free   If the pay stub, Form W-2, pledge card, or other document does not show the date of the contribution, you must have another document that does show the date of the contribution. Turbotax 2007 free If the pay stub, Form W-2, pledge card, or other document shows the date of the contribution, you do not need any other records except those just described in (1) and (2). Turbotax 2007 free Noncash Contributions For a contribution not made in cash, the records you must keep depend on whether your deduction for the contribution is: Less than $250, At least $250 but not more than $500, Over $500 but not more than $5,000, or Over $5,000. Turbotax 2007 free Amount of deduction. Turbotax 2007 free   In figuring whether your deduction is $500 or more, combine your claimed deductions for all similar items of property donated to any charitable organization during the year. Turbotax 2007 free   If you received goods or services in return, as described earlier in Contributions From Which You Benefit , reduce your contribution by the value of those goods or services. Turbotax 2007 free If you figure your deduction by reducing the fair market value of the donated property by its appreciation, as described earlier in Giving Property That Has Increased in Value , your contribution is the reduced amount. Turbotax 2007 free Deductions of Less Than $250 If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing: The name of the charitable organization, The date and location of the charitable contribution, and A reasonably detailed description of the property. Turbotax 2007 free A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt. Turbotax 2007 free You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site). Turbotax 2007 free Additional records. Turbotax 2007 free   You must also keep reliable written records for each item of contributed property. Turbotax 2007 free Your written records must include the following information. Turbotax 2007 free The name and address of the organization to which you contributed. Turbotax 2007 free The date and location of the contribution. Turbotax 2007 free A description of the property in detail reasonable under the circumstances. Turbotax 2007 free For a security, keep the name of the issuer, the type of security, and whether it is regularly traded on a stock exchange or in an over-the-counter market. Turbotax 2007 free The fair market value of the property at the time of the contribution and how you figured the fair market value. Turbotax 2007 free If it was determined by appraisal, keep a signed copy of the appraisal. Turbotax 2007 free The cost or other basis of the property, if you must reduce its fair market value by appreciation. Turbotax 2007 free Your records should also include the amount of the reduction and how you figured it. Turbotax 2007 free The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. Turbotax 2007 free Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. Turbotax 2007 free They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed it. Turbotax 2007 free The terms of any conditions attached to the contribution of property. Turbotax 2007 free Deductions of At Least $250 But Not More Than $500 If you claim a deduction of at least $250 but not more than $500 for a noncash charitable contribution, you must get and keep an acknowledgment of your contribution from the qualified organization. Turbotax 2007 free If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that shows your total contributions. Turbotax 2007 free The acknowledgment must contain the information in items (1) through (3) under Deductions of Less Than $250 , earlier, and your written records must include the information listed in that discussion under Additional records . Turbotax 2007 free The acknowledgment must also meet these tests. Turbotax 2007 free It must be written. Turbotax 2007 free It must include: A description (but not necessarily the value) of any property you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), and A description and good faith estimate of the value of any goods or services described in (b). Turbotax 2007 free If the only benefit you received was an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in a commercial transaction outside the donative context, the acknowledgment must say so and does not need to describe or estimate the value of the benefit. Turbotax 2007 free You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. Turbotax 2007 free Deductions Over $500 You are required to give additional information if you claim a deduction over $500 for noncash charitable contributions. Turbotax 2007 free See Records To Keep in Publication 526 for more information. Turbotax 2007 free Out-of-Pocket Expenses If you give services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following two rules apply. Turbotax 2007 free You must have adequate records to prove the amount of the expenses. Turbotax 2007 free If any of your unreimbursed out-of-pocket expenses, considered separately, are $250 or more (for example, you pay $250 or more for an airline ticket to attend a convention of a qualified organization as a chosen representative), you must get an acknowledgment from the qualified organization that contains: A description of the services you provided, A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred, A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and A statement that the only benefit you received was an intangible religious benefit, if that was the case. Turbotax 2007 free The acknowledgment does not need to describe or estimate the value of an intangible religious benefit (defined earlier under Acknowledgment ). Turbotax 2007 free You must get the acknowledgment on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. Turbotax 2007 free Car expenses. Turbotax 2007 free   If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. Turbotax 2007 free Whether your records are considered reliable depends on all the facts and circumstances. Turbotax 2007 free Generally, they may be considered reliable if you made them regularly and at or near the time you had the expenses. Turbotax 2007 free   For example, your records might show the name of the organization you were serving and the dates you used your car for a charitable purpose. Turbotax 2007 free If you use the standard mileage rate of 14 cents a mile, your records must show the miles you drove your car for the charitable purpose. Turbotax 2007 free If you deduct your actual expenses, your records must show the costs of operating the car that are directly related to a charitable purpose. Turbotax 2007 free   See Car expenses under Out-of-Pocket Expenses in Giving Services, earlier, for the expenses you can deduct. Turbotax 2007 free How To Report Report your charitable contributions on Schedule A (Form 1040). Turbotax 2007 free If your total deduction for all noncash contributions for the year is over $500, you must also file Form 8283. Turbotax 2007 free See How To Report in Publication 526 for more information. Turbotax 2007 free Prev  Up  Next   Home   More Online Publications
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The Turbotax 2007 Free

Turbotax 2007 free 1. Turbotax 2007 free   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. Turbotax 2007 free Amount realized on a recourse debt. Turbotax 2007 free Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. Turbotax 2007 free S. Turbotax 2007 free Individual Income Tax Return 1040X Amended U. Turbotax 2007 free S. Turbotax 2007 free Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. Turbotax 2007 free However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Turbotax 2007 free See chapter 5 for information about getting publications and forms. Turbotax 2007 free Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Turbotax 2007 free An exchange is a transfer of property for other property or services. Turbotax 2007 free The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Turbotax 2007 free Sale or lease. Turbotax 2007 free    Some agreements that seem to be leases may really be conditional sales contracts. Turbotax 2007 free The intention of the parties to the agreement can help you distinguish between a sale and a lease. Turbotax 2007 free   There is no test or group of tests to prove what the parties intended when they made the agreement. Turbotax 2007 free You should consider each agreement based on its own facts and circumstances. Turbotax 2007 free For more information, see chapter 3 in Publication 535, Business Expenses. Turbotax 2007 free Cancellation of a lease. Turbotax 2007 free    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Turbotax 2007 free Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. Turbotax 2007 free Copyright. Turbotax 2007 free    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. Turbotax 2007 free It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. Turbotax 2007 free Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Turbotax 2007 free   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. Turbotax 2007 free For more information, see Section 1231 Gains and Losses in chapter 3. Turbotax 2007 free Easement. Turbotax 2007 free   The amount received for granting an easement is subtracted from the basis of the property. Turbotax 2007 free If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. Turbotax 2007 free If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. Turbotax 2007 free   Any amount received that is more than the basis to be reduced is a taxable gain. Turbotax 2007 free The transaction is reported as a sale of property. Turbotax 2007 free   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. Turbotax 2007 free However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. Turbotax 2007 free   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Turbotax 2007 free Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. Turbotax 2007 free See Gain or Loss From Condemnations, later. Turbotax 2007 free Property transferred to satisfy debt. Turbotax 2007 free   A transfer of property to satisfy a debt is an exchange. Turbotax 2007 free Note's maturity date extended. Turbotax 2007 free   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Turbotax 2007 free Also, it is not considered a closed and completed transaction that would result in a gain or loss. Turbotax 2007 free However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. Turbotax 2007 free Each case must be determined by its own facts. Turbotax 2007 free For more information, see Regulations section 1. Turbotax 2007 free 1001-3. Turbotax 2007 free Transfer on death. Turbotax 2007 free   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. Turbotax 2007 free No taxable gain or deductible loss results from the transfer. Turbotax 2007 free Bankruptcy. Turbotax 2007 free   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Turbotax 2007 free Consequently, the transfer generally does not result in gain or loss. Turbotax 2007 free For more information, see Publication 908, Bankruptcy Tax Guide. Turbotax 2007 free Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Turbotax 2007 free A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Turbotax 2007 free A loss is the adjusted basis of the property that is more than the amount you realize. Turbotax 2007 free   Table 1-1. Turbotax 2007 free How To Figure Whether You Have a Gain or Loss IF your. Turbotax 2007 free . Turbotax 2007 free . Turbotax 2007 free THEN you have a. Turbotax 2007 free . Turbotax 2007 free . Turbotax 2007 free Adjusted basis is more than the amount realized, Loss. Turbotax 2007 free Amount realized is more than the adjusted basis, Gain. Turbotax 2007 free Basis. Turbotax 2007 free   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Turbotax 2007 free The basis of property you buy is usually its cost. Turbotax 2007 free However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. Turbotax 2007 free See Basis Other Than Cost in Publication 551, Basis of Assets. Turbotax 2007 free Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. Turbotax 2007 free See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Turbotax 2007 free Adjusted basis. Turbotax 2007 free   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Turbotax 2007 free Increases include costs of any improvements having a useful life of more than 1 year. Turbotax 2007 free Decreases include depreciation and casualty losses. Turbotax 2007 free For more details and additional examples, see Adjusted Basis in Publication 551. Turbotax 2007 free Amount realized. Turbotax 2007 free   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. Turbotax 2007 free The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Turbotax 2007 free Fair market value. Turbotax 2007 free   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. Turbotax 2007 free If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Turbotax 2007 free If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Turbotax 2007 free Example. Turbotax 2007 free You used a building in your business that cost you $70,000. Turbotax 2007 free You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Turbotax 2007 free You sold the building for $100,000 plus property having an FMV of $20,000. Turbotax 2007 free The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Turbotax 2007 free The selling expenses were $4,000. Turbotax 2007 free Your gain on the sale is figured as follows. Turbotax 2007 free Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. Turbotax 2007 free   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Turbotax 2007 free Recognized gains must be included in gross income. Turbotax 2007 free Recognized losses are deductible from gross income. Turbotax 2007 free However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Turbotax 2007 free See Nontaxable Exchanges, later. Turbotax 2007 free Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. Turbotax 2007 free Interest in property. Turbotax 2007 free   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. Turbotax 2007 free If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. Turbotax 2007 free Your basis in the property is disregarded. Turbotax 2007 free This rule does not apply if all interests in the property are disposed of at the same time. Turbotax 2007 free Example 1. Turbotax 2007 free Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Turbotax 2007 free You decide to sell your life interest in the farm. Turbotax 2007 free The entire amount you receive is a recognized gain. Turbotax 2007 free Your basis in the farm is disregarded. Turbotax 2007 free Example 2. Turbotax 2007 free The facts are the same as in Example 1, except that your brother joins you in selling the farm. Turbotax 2007 free The entire interest in the property is sold, so your basis in the farm is not disregarded. Turbotax 2007 free Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Turbotax 2007 free Canceling a sale of real property. Turbotax 2007 free   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. Turbotax 2007 free If the buyer returns the property in the year of sale, no gain or loss is recognized. Turbotax 2007 free This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. Turbotax 2007 free If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. Turbotax 2007 free When the property is returned in a later year, you acquire a new basis in the property. Turbotax 2007 free That basis is equal to the amount you pay to the buyer. Turbotax 2007 free Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. Turbotax 2007 free You have a gain if the amount realized is more than your adjusted basis in the property. Turbotax 2007 free However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Turbotax 2007 free Bargain sales to charity. Turbotax 2007 free   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Turbotax 2007 free If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. Turbotax 2007 free The adjusted basis of the part sold is figured as follows. Turbotax 2007 free Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. Turbotax 2007 free This allocation rule does not apply if a charitable contribution deduction is not allowable. Turbotax 2007 free   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Turbotax 2007 free Example. Turbotax 2007 free You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. Turbotax 2007 free Your adjusted basis in the property is $4,000. Turbotax 2007 free Your gain on the sale is $1,200, figured as follows. Turbotax 2007 free Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. Turbotax 2007 free You must subtract depreciation you took or could have taken from the basis of the business or rental part. Turbotax 2007 free However, see the special rule below for a home used partly for business or rental. Turbotax 2007 free You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Turbotax 2007 free Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. Turbotax 2007 free Any gain on the personal part of the property is a capital gain. Turbotax 2007 free You cannot deduct a loss on the personal part. Turbotax 2007 free Home used partly for business or rental. Turbotax 2007 free    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Turbotax 2007 free See Property Used Partly for Business or Rental, in Publication 523. Turbotax 2007 free Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. Turbotax 2007 free You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. Turbotax 2007 free However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. Turbotax 2007 free Figure the loss you can deduct as follows. Turbotax 2007 free Use the lesser of the property's adjusted basis or fair market value at the time of the change. Turbotax 2007 free Add to (1) the cost of any improvements and other increases to basis since the change. Turbotax 2007 free Subtract from (2) depreciation and any other decreases to basis since the change. Turbotax 2007 free Subtract the amount you realized on the sale from the result in (3). Turbotax 2007 free If the amount you realized is more than the result in (3), treat this result as zero. Turbotax 2007 free The result in (4) is the loss you can deduct. Turbotax 2007 free Example. Turbotax 2007 free You changed your main home to rental property 5 years ago. Turbotax 2007 free At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Turbotax 2007 free This year, you sold the property for $55,000. Turbotax 2007 free You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Turbotax 2007 free Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. Turbotax 2007 free Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. Turbotax 2007 free   If you have a gain on the sale, you generally must recognize the full amount of the gain. Turbotax 2007 free You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Turbotax 2007 free   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Turbotax 2007 free However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Turbotax 2007 free   For more information, see Business Use or Rental of Home in Publication 523. Turbotax 2007 free In addition, special rules apply if the home sold was acquired in a like-kind exchange. Turbotax 2007 free See Special Situations in Publication 523. Turbotax 2007 free Also see Like-Kind Exchanges, later. Turbotax 2007 free Abandonments The abandonment of property is a disposition of property. Turbotax 2007 free You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Turbotax 2007 free Generally, abandonment is not treated as a sale or exchange of the property. Turbotax 2007 free If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Turbotax 2007 free If your adjusted basis is more than the amount you realize (if any), then you have a loss. Turbotax 2007 free Loss from abandonment of business or investment property is deductible as a loss. Turbotax 2007 free A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Turbotax 2007 free This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Turbotax 2007 free If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Turbotax 2007 free The abandonment loss is deducted in the tax year in which the loss is sustained. Turbotax 2007 free If the abandoned property is secured by debt, special rules apply. Turbotax 2007 free The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). Turbotax 2007 free For more information, including examples, see chapter 3 of Publication 4681. Turbotax 2007 free You cannot deduct any loss from abandonment of your home or other property held for personal use only. Turbotax 2007 free Cancellation of debt. Turbotax 2007 free   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. Turbotax 2007 free This income is separate from any loss realized from abandonment of the property. Turbotax 2007 free   You must report this income on your tax return unless one of the following applies. Turbotax 2007 free The cancellation is intended as a gift. Turbotax 2007 free The debt is qualified farm debt. Turbotax 2007 free The debt is qualified real property business debt. Turbotax 2007 free You are insolvent or bankrupt. Turbotax 2007 free The debt is qualified principal residence indebtedness. Turbotax 2007 free File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Turbotax 2007 free For more information, including other exceptions and exclusion, see Publication 4681. Turbotax 2007 free Forms 1099-A and 1099-C. Turbotax 2007 free   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. Turbotax 2007 free However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. Turbotax 2007 free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Turbotax 2007 free For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Turbotax 2007 free Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Turbotax 2007 free The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Turbotax 2007 free This is true even if you voluntarily return the property to the lender. Turbotax 2007 free You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Turbotax 2007 free Buyer's (borrower's) gain or loss. Turbotax 2007 free   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. Turbotax 2007 free The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Turbotax 2007 free See Gain or Loss From Sales and Exchanges, earlier. Turbotax 2007 free You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Turbotax 2007 free Amount realized on a nonrecourse debt. Turbotax 2007 free   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. Turbotax 2007 free The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Turbotax 2007 free Example 1. Turbotax 2007 free Chris bought a new car for $15,000. Turbotax 2007 free He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Turbotax 2007 free Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Turbotax 2007 free The credit company repossessed the car because he stopped making loan payments. Turbotax 2007 free The balance due after taking into account the payments Chris made was $10,000. Turbotax 2007 free The fair market value of the car when repossessed was $9,000. Turbotax 2007 free The amount Chris realized on the repossession is $10,000. Turbotax 2007 free That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. Turbotax 2007 free Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Turbotax 2007 free He has a $5,000 nondeductible loss. Turbotax 2007 free Example 2. Turbotax 2007 free Abena paid $200,000 for her home. Turbotax 2007 free She paid $15,000 down and borrowed the remaining $185,000 from a bank. Turbotax 2007 free Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Turbotax 2007 free The bank foreclosed on the loan because Abena stopped making payments. Turbotax 2007 free When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. Turbotax 2007 free The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Turbotax 2007 free She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Turbotax 2007 free She has a $5,000 realized gain. Turbotax 2007 free Amount realized on a recourse debt. Turbotax 2007 free   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. Turbotax 2007 free You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. Turbotax 2007 free The amount realized does not include the canceled debt that is your income from cancellation of debt. Turbotax 2007 free See Cancellation of debt, below. Turbotax 2007 free Seller's (lender's) gain or loss on repossession. Turbotax 2007 free   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. Turbotax 2007 free For more information, see Repossession in Publication 537. Turbotax 2007 free    Table 1-2. Turbotax 2007 free Worksheet for Foreclosures and Repossessions Part 1. Turbotax 2007 free Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Turbotax 2007 free Complete this part only  if you were personally liable for the debt. Turbotax 2007 free Otherwise,  go to Part 2. Turbotax 2007 free   1. Turbotax 2007 free Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. Turbotax 2007 free Enter the fair market value of the transferred property   3. Turbotax 2007 free Ordinary income from cancellation of debt upon foreclosure or    repossession. Turbotax 2007 free * Subtract line 2 from line 1. Turbotax 2007 free   If less than zero, enter zero   Part 2. Turbotax 2007 free Figure your gain or loss from foreclosure or repossession. Turbotax 2007 free   4. Turbotax 2007 free If you completed Part 1, enter the smaller of line 1 or line 2. Turbotax 2007 free   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. Turbotax 2007 free Enter any proceeds you received from the foreclosure sale   6. Turbotax 2007 free Add lines 4 and 5   7. Turbotax 2007 free Enter the adjusted basis of the transferred property   8. Turbotax 2007 free Gain or loss from foreclosure or repossession. Turbotax 2007 free Subtract line 7  from line 6   * The income may not be taxable. Turbotax 2007 free See Cancellation of debt. Turbotax 2007 free Cancellation of debt. Turbotax 2007 free   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. Turbotax 2007 free This income is separate from any gain or loss realized from the foreclosure or repossession. Turbotax 2007 free Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Turbotax 2007 free    You can use Table 1-2 to figure your income from cancellation of debt. Turbotax 2007 free   You must report this income on your tax return unless one of the following applies. Turbotax 2007 free The cancellation is intended as a gift. Turbotax 2007 free The debt is qualified farm debt. Turbotax 2007 free The debt is qualified real property business debt. Turbotax 2007 free You are insolvent or bankrupt. Turbotax 2007 free The debt is qualified principal residence indebtedness. Turbotax 2007 free File Form 982 to report the income exclusion. Turbotax 2007 free Example 1. Turbotax 2007 free Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). Turbotax 2007 free In this case, the amount he realizes is $9,000. Turbotax 2007 free This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Turbotax 2007 free Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Turbotax 2007 free He has a $6,000 nondeductible loss. Turbotax 2007 free He also is treated as receiving ordinary income from cancellation of debt. Turbotax 2007 free That income is $1,000 ($10,000 − $9,000). Turbotax 2007 free This is the part of the canceled debt not included in the amount realized. Turbotax 2007 free Example 2. Turbotax 2007 free Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). Turbotax 2007 free In this case, the amount she realizes is $170,000. Turbotax 2007 free This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Turbotax 2007 free Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Turbotax 2007 free She has a $5,000 nondeductible loss. Turbotax 2007 free She also is treated as receiving ordinary income from cancellation of debt. Turbotax 2007 free (The debt is not exempt from tax as discussed under Cancellation of debt, above. Turbotax 2007 free ) That income is $10,000 ($180,000 − $170,000). Turbotax 2007 free This is the part of the canceled debt not included in the amount realized. Turbotax 2007 free Forms 1099-A and 1099-C. Turbotax 2007 free   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. Turbotax 2007 free However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. Turbotax 2007 free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Turbotax 2007 free For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Turbotax 2007 free Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Turbotax 2007 free Involuntary conversions are also called involuntary exchanges. Turbotax 2007 free Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Turbotax 2007 free You report the gain or deduct the loss on your tax return for the year you realize it. Turbotax 2007 free You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. Turbotax 2007 free However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Turbotax 2007 free Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Turbotax 2007 free Your basis for the new property is the same as your basis for the converted property. Turbotax 2007 free This means that the gain is deferred until a taxable sale or exchange occurs. Turbotax 2007 free If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. Turbotax 2007 free This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Turbotax 2007 free If you have a gain or loss from the destruction or theft of property, see Publication 547. Turbotax 2007 free Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Turbotax 2007 free The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. Turbotax 2007 free The owner receives a condemnation award (money or property) in exchange for the property taken. Turbotax 2007 free A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Turbotax 2007 free Example. Turbotax 2007 free A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Turbotax 2007 free After the local government took action to condemn your property, you went to court to keep it. Turbotax 2007 free But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Turbotax 2007 free This is a condemnation of private property for public use. Turbotax 2007 free Threat of condemnation. Turbotax 2007 free   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. Turbotax 2007 free You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Turbotax 2007 free   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. Turbotax 2007 free If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. Turbotax 2007 free Reports of condemnation. Turbotax 2007 free   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. Turbotax 2007 free You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Turbotax 2007 free If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. Turbotax 2007 free Example. Turbotax 2007 free Your property lies along public utility lines. Turbotax 2007 free The utility company has the authority to condemn your property. Turbotax 2007 free The company informs you that it intends to acquire your property by negotiation or condemnation. Turbotax 2007 free A threat of condemnation exists when you receive the notice. Turbotax 2007 free Related property voluntarily sold. Turbotax 2007 free   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. Turbotax 2007 free A substantial economic relationship exists if together the properties were one economic unit. Turbotax 2007 free You also must show that the condemned property could not reasonably or adequately be replaced. Turbotax 2007 free You can elect to postpone reporting the gain by buying replacement property. Turbotax 2007 free See Postponement of Gain, later. Turbotax 2007 free Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. Turbotax 2007 free If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Turbotax 2007 free You can postpone reporting gain from a condemnation if you buy replacement property. Turbotax 2007 free If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. Turbotax 2007 free See Postponement of Gain, later. Turbotax 2007 free If your net condemnation award is less than your adjusted basis, you have a loss. Turbotax 2007 free If your loss is from property you held for personal use, you cannot deduct it. Turbotax 2007 free You must report any deductible loss in the tax year it happened. Turbotax 2007 free You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Turbotax 2007 free Main home condemned. Turbotax 2007 free   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Turbotax 2007 free You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Turbotax 2007 free For information on this exclusion, see Publication 523. Turbotax 2007 free If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. Turbotax 2007 free See Postponement of Gain, later. Turbotax 2007 free Table 1-3. Turbotax 2007 free Worksheet for Condemnations Part 1. Turbotax 2007 free Gain from severance damages. Turbotax 2007 free  If you did not receive severance damages, skip Part 1 and go to Part 2. Turbotax 2007 free   1. Turbotax 2007 free Enter gross severance damages received   2. Turbotax 2007 free Enter your expenses in getting severance damages   3. Turbotax 2007 free Subtract line 2 from line 1. Turbotax 2007 free If less than zero, enter -0-   4. Turbotax 2007 free Enter any special assessment on remaining property taken out of your award   5. Turbotax 2007 free Net severance damages. Turbotax 2007 free Subtract line 4 from line 3. Turbotax 2007 free If less than zero, enter -0-   6. Turbotax 2007 free Enter the adjusted basis of the remaining property   7. Turbotax 2007 free Gain from severance damages. Turbotax 2007 free Subtract line 6 from line 5. Turbotax 2007 free If less than zero, enter -0-   8. Turbotax 2007 free Refigured adjusted basis of the remaining property. Turbotax 2007 free Subtract line 5 from line 6. Turbotax 2007 free If less than zero, enter -0-   Part 2. Turbotax 2007 free Gain or loss from condemnation award. Turbotax 2007 free   9. Turbotax 2007 free Enter the gross condemnation award received   10. Turbotax 2007 free Enter your expenses in getting the condemnation award   11. Turbotax 2007 free If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Turbotax 2007 free If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Turbotax 2007 free Otherwise, enter -0-   12. Turbotax 2007 free Add lines 10 and 11   13. Turbotax 2007 free Net condemnation award. Turbotax 2007 free Subtract line 12 from line 9   14. Turbotax 2007 free Enter the adjusted basis of the condemned property   15. Turbotax 2007 free Gain from condemnation award. Turbotax 2007 free If line 14 is more than line 13, enter -0-. Turbotax 2007 free Otherwise, subtract line 14 from  line 13 and skip line 16   16. Turbotax 2007 free Loss from condemnation award. Turbotax 2007 free Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Turbotax 2007 free )   Part 3. Turbotax 2007 free Postponed gain from condemnation. Turbotax 2007 free  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. Turbotax 2007 free )   17. Turbotax 2007 free If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Turbotax 2007 free Otherwise, enter -0-   18. Turbotax 2007 free If line 15 is more than zero, enter the amount from line 13. Turbotax 2007 free Otherwise, enter -0-   19. Turbotax 2007 free Add lines 17 and 18. Turbotax 2007 free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. Turbotax 2007 free Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. Turbotax 2007 free Subtract line 20 from line 19. Turbotax 2007 free If less than zero, enter -0-   22. Turbotax 2007 free If you completed Part 1, add lines 7 and 15. Turbotax 2007 free Otherwise, enter the amount from line 15. Turbotax 2007 free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. Turbotax 2007 free Recognized gain. Turbotax 2007 free Enter the smaller of line 21 or line 22. Turbotax 2007 free   24. Turbotax 2007 free Postponed gain. Turbotax 2007 free Subtract line 23 from line 22. Turbotax 2007 free If less than zero, enter -0-   Condemnation award. Turbotax 2007 free   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Turbotax 2007 free The award is also the amount you are paid for the sale of your property under threat of condemnation. Turbotax 2007 free Payment of your debts. Turbotax 2007 free   Amounts taken out of the award to pay your debts are considered paid to you. Turbotax 2007 free Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. Turbotax 2007 free Example. Turbotax 2007 free The state condemned your property for public use. Turbotax 2007 free The award was set at $200,000. Turbotax 2007 free The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Turbotax 2007 free You are considered to have received the entire $200,000 as a condemnation award. Turbotax 2007 free Interest on award. Turbotax 2007 free   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Turbotax 2007 free You must report the interest separately as ordinary income. Turbotax 2007 free Payments to relocate. Turbotax 2007 free   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. Turbotax 2007 free Do not include them in your income. Turbotax 2007 free Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Turbotax 2007 free Net condemnation award. Turbotax 2007 free   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. Turbotax 2007 free If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. Turbotax 2007 free This is discussed later under Special assessment taken out of award. Turbotax 2007 free Severance damages. Turbotax 2007 free    Severance damages are not part of the award paid for the property condemned. Turbotax 2007 free They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. Turbotax 2007 free   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. Turbotax 2007 free Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. Turbotax 2007 free   The contracting parties should agree on the specific amount of severance damages in writing. Turbotax 2007 free If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Turbotax 2007 free   You cannot make a completely new allocation of the total award after the transaction is completed. Turbotax 2007 free However, you can show how much of the award both parties intended for severance damages. Turbotax 2007 free The severance damages part of the award is determined from all the facts and circumstances. Turbotax 2007 free Example. Turbotax 2007 free You sold part of your property to the state under threat of condemnation. Turbotax 2007 free The contract you and the condemning authority signed showed only the total purchase price. Turbotax 2007 free It did not specify a fixed sum for severance damages. Turbotax 2007 free However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Turbotax 2007 free You may treat this part as severance damages. Turbotax 2007 free Treatment of severance damages. Turbotax 2007 free   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Turbotax 2007 free Use them to reduce the basis of the remaining property. Turbotax 2007 free If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. Turbotax 2007 free   If your net severance damages are more than the basis of your retained property, you have a gain. Turbotax 2007 free You may be able to postpone reporting the gain. Turbotax 2007 free See Postponement of Gain, later. Turbotax 2007 free    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. Turbotax 2007 free Net severance damages. Turbotax 2007 free   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Turbotax 2007 free You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. Turbotax 2007 free The balance is your net severance damages. Turbotax 2007 free Expenses of obtaining a condemnation award and severance damages. Turbotax 2007 free   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Turbotax 2007 free Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Turbotax 2007 free If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Turbotax 2007 free Example. Turbotax 2007 free You receive a condemnation award and severance damages. Turbotax 2007 free One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Turbotax 2007 free You had legal expenses for the entire condemnation proceeding. Turbotax 2007 free You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Turbotax 2007 free You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Turbotax 2007 free Special assessment retained out of award. Turbotax 2007 free   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. Turbotax 2007 free An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Turbotax 2007 free Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Turbotax 2007 free   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Turbotax 2007 free Example. Turbotax 2007 free To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Turbotax 2007 free You were awarded $5,000 for this and spent $300 to get the award. Turbotax 2007 free Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Turbotax 2007 free The city then paid you only $4,300. Turbotax 2007 free Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Turbotax 2007 free If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). Turbotax 2007 free The net award would not change, even if you later paid the assessment from the amount you received. Turbotax 2007 free Severance damages received. Turbotax 2007 free   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. Turbotax 2007 free Any balance of the special assessment is used to reduce the condemnation award. Turbotax 2007 free Example. Turbotax 2007 free You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Turbotax 2007 free You spent $300 to obtain the severance damages. Turbotax 2007 free A special assessment of $800 was retained out of the award. Turbotax 2007 free The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Turbotax 2007 free Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Turbotax 2007 free Part business or rental. Turbotax 2007 free   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. Turbotax 2007 free Figure your gain or loss separately because gain or loss on each part may be treated differently. Turbotax 2007 free   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. Turbotax 2007 free Example. Turbotax 2007 free You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Turbotax 2007 free You rented half the building and lived in the other half. Turbotax 2007 free You paid $25,000 for the building and spent an additional $1,000 for a new roof. Turbotax 2007 free You claimed allowable depreciation of $4,600 on the rental half. Turbotax 2007 free You spent $200 in legal expenses to obtain the condemnation award. Turbotax 2007 free Figure your gain or loss as follows. Turbotax 2007 free     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. Turbotax 2007 free Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. Turbotax 2007 free Your basis for the new property is the same as your basis for the old. Turbotax 2007 free Money or unlike property received. Turbotax 2007 free   You ordinarily must report the gain if you receive money or unlike property. Turbotax 2007 free You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. Turbotax 2007 free You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. Turbotax 2007 free See Controlling interest in a corporation, later. Turbotax 2007 free   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Turbotax 2007 free If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. Turbotax 2007 free   The basis of the replacement property is its cost, reduced by the postponed gain. Turbotax 2007 free Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. Turbotax 2007 free See Controlling interest in a corporation, later. Turbotax 2007 free You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Turbotax 2007 free Postponing gain on severance damages. Turbotax 2007 free   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. Turbotax 2007 free See Treatment of severance damages, earlier. Turbotax 2007 free You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). Turbotax 2007 free   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. Turbotax 2007 free If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. Turbotax 2007 free   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Turbotax 2007 free Postponing gain on the sale of related property. Turbotax 2007 free   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. Turbotax 2007 free You must meet the requirements explained earlier under Related property voluntarily sold. Turbotax 2007 free You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). Turbotax 2007 free Buying replacement property from a related person. Turbotax 2007 free   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Turbotax 2007 free For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Turbotax 2007 free   This rule applies to the following taxpayers. Turbotax 2007 free C corporations. Turbotax 2007 free Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. Turbotax 2007 free All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. Turbotax 2007 free   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Turbotax 2007 free If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Turbotax 2007 free If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Turbotax 2007 free Exception. Turbotax 2007 free   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Turbotax 2007 free Advance payment. Turbotax 2007 free   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). Turbotax 2007 free Replacement property. Turbotax 2007 free   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Turbotax 2007 free You do not have to use the actual funds from the condemnation award to acquire the replacement property. Turbotax 2007 free Property you acquire by gift or inheritance does not qualify as replacement property. Turbotax 2007 free Similar or related in service or use. Turbotax 2007 free   Your replacement property must be similar or related in service or use to the property it replaces. Turbotax 2007 free   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. Turbotax 2007 free For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Turbotax 2007 free Owner-user. Turbotax 2007 free   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Turbotax 2007 free Example. Turbotax 2007 free Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Turbotax 2007 free Your replacement property is not similar or related in service or use to the condemned property. Turbotax 2007 free To be similar or related in service or use, your replacement property must also be used by you as your home. Turbotax 2007 free Owner-investor. Turbotax 2007 free   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. Turbotax 2007 free You decide this by determining all the following information. Turbotax 2007 free Whether the properties are of similar service to you. Turbotax 2007 free The nature of the business risks connected with the properties. Turbotax 2007 free What the properties demand of you in the way of management, service, and relations to your tenants. Turbotax 2007 free Example. Turbotax 2007 free You owned land and a building you rented to a manufacturing company. Turbotax 2007 free The building was condemned. Turbotax 2007 free During the replacement period, you had a new building built on other land you already owned. Turbotax 2007 free You rented out the new building for use as a wholesale grocery warehouse. Turbotax 2007 free The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. Turbotax 2007 free Your management activities. Turbotax 2007 free The amount and kind of services you provide to your tenants. Turbotax 2007 free The nature of your business risks connected with the properties. Turbotax 2007 free Leasehold replaced with fee simple property. Turbotax 2007 free   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. Turbotax 2007 free   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. Turbotax 2007 free A leasehold is property held under a lease, usually for a term of years. Turbotax 2007 free Outdoor advertising display replaced with real property. Turbotax 2007 free   You can elect to treat an outdoor advertising display as real property. Turbotax 2007 free If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. Turbotax 2007 free For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. Turbotax 2007 free   You can make this election only if you did not claim a section 179 deduction for the display. Turbotax 2007 free You cannot cancel this election unless you get the consent of the IRS. Turbotax 2007 free   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. Turbotax 2007 free Substituting replacement property. Turbotax 2007 free   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Turbotax 2007 free But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Turbotax 2007 free Controlling interest in a corporation. Turbotax 2007 free   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. Turbotax 2007 free You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. Turbotax 2007 free Basis adjustment to corporation's property. Turbotax 2007 free   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Turbotax 2007 free You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). Turbotax 2007 free   Allocate this reduction to the following classes of property in the order shown below. Turbotax 2007 free Property that is similar or related in service or use to the condemned property. Turbotax 2007 free Depreciable property not reduced in (1). Turbotax 2007 free All other property. Turbotax 2007 free If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. Turbotax 2007 free The reduced basis of any single property cannot be less than zero. Turbotax 2007 free Main home replaced. Turbotax 2007 free   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. Turbotax 2007 free The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Turbotax 2007 free   You must reduce the basis of your replacement property by the postponed gain. Turbotax 2007 free Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. Turbotax 2007 free Example. Turbotax 2007 free City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Turbotax 2007 free The city paid you a condemnation award of $400,000. Turbotax 2007 free Your adjusted basis in the property was $80,000. Turbotax 2007 free You realize a gain of $320,000 ($400,000 − $80,000). Turbotax 2007 free You purchased a new home for $100,000. Turbotax 2007 free You can exclude $250,000 of the realized gain from your gross income. Turbotax 2007 free The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). Turbotax 2007 free You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Turbotax 2007 free The remaining $20,000 of realized gain is postponed. Turbotax 2007 free Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Turbotax 2007 free Replacement period. Turbotax 2007 free   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Turbotax 2007 free This is the replacement period. Turbotax 2007 free   The replacement period for a condemnation begins on the earlier of the following dates. Turbotax 2007 free The date on which you disposed of the condemned property. Turbotax 2007 free The date on which the threat of condemnation began. Turbotax 2007 free   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Turbotax 2007 free However, see the exceptions below. Turbotax 2007 free Three-year replacement period for certain property. Turbotax 2007 free   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Turbotax 2007 free However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. Turbotax 2007 free Five-year replacement period for certain property. Turbotax 2007 free   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. Turbotax 2007 free Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. Turbotax 2007 free Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. Turbotax 2007 free Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Turbotax 2007 free Extended replacement period for taxpayers affected by other federally declared disasters. Turbotax 2007 free    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. Turbotax 2007 free For more information visit www. Turbotax 2007 free irs. Turbotax 2007 free gov/uac/Tax-Relief-in-Disaster-Situations. Turbotax 2007 free Weather-related sales of livestock in an area eligible for federal assistance. Turbotax 2007 free   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Turbotax 2007 free    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. Turbotax 2007 free See Notice 2006-82. Turbotax 2007 free You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Turbotax 2007 free irs. Turbotax 2007 free gov/irb/2006-39_IRB/ar13. Turbotax 2007 free html. Turbotax 2007 free    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Turbotax 2007 free If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. Turbotax 2007 free You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Turbotax 2007 free irs. Turbotax 2007 free gov/irb/2013-45_IRB/ar04. Turbotax 2007 free html. Turbotax 2007 free The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Turbotax 2007 free Determining when gain is realized. Turbotax 2007 free   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Turbotax 2007 free If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. Turbotax 2007 free   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Turbotax 2007 free A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. Turbotax 2007 free   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Turbotax 2007 free All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Turbotax 2007 free All or part of the award is actually or constructively received. Turbotax 2007 free For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. Turbotax 2007 free Replacement property bought before the condemnation. Turbotax 2007 free   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. Turbotax 2007 free Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Turbotax 2007 free Example. Turbotax 2007 free On April 3, 2012, city authorities notified you that your property would be condemned. Turbotax 2007 free On June 5, 2012, you acquired property to replace the property to be condemned. Turbotax 2007 free You still had the new property when the city took possession of your old property on September 4, 2013. Turbotax 2007 free You have made a replacement within the replacement period. Turbotax 2007 free Extension. Turbotax 2007 free   You can request an extension of the replacement period from the IRS director for your area. Turbotax 2007 free You should apply before the end of the replacement period. Turbotax 2007 free Your request should explain in detail why you need an extension. Turbotax 2007 free The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Turbotax 2007 free An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Turbotax 2007 free   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Turbotax 2007 free Extensions are usually limited to a period of 1 year or less. Turbotax 2007 free The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Turbotax 2007 free If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri