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Vita Tax Program

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Vita Tax Program

Vita tax program 33. Vita tax program   Crédito para Ancianos o Personas Incapacitadas Table of Contents Introduction Useful Items - You may want to see: ¿Reúne los Requisitos del Crédito?Persona que Reúne los Requisitos Límites sobre los Ingresos Cómo Reclamar el CréditoEl Crédito Calculado por el IRS El Crédito Calculado por Usted Mismo Introduction Si reúne los requisitos, tal vez pueda reducir los impuestos que adeuda tomando el crédito para ancianos o personas incapacitadas, el cual se calcula en el Anexo R (Formulario 1040A o Formulario 1040). Vita tax program Este capítulo trata lo siguiente: Quién reúne los requisitos para reclamar el crédito para ancianos o personas incapacitadas. Vita tax program Cómo reclamar el crédito. Vita tax program Tal vez pueda tomar el crédito para ancianos o personas incapacitadas si: Tiene 65 años de edad o más al final del año 2013 o Se jubiló por incapacidad total y permanente y recibe ingresos por incapacidad sujetos a impuestos. Vita tax program Useful Items - You may want to see: Publicación 524 Credit for the Elderly or the Disabled (Crédito para ancianos o personas incapacitadas), en inglés 554 Tax Guide for Seniors (Guía tributaria para personas de la tercera edad), en inglés Formulario (e Instrucciones) Anexo R (Formulario 1040A o 1040) Credit for the Elderly or the Disabled (Crédito para ancianos o personas incapacitadas), en inglés ¿Reúne los Requisitos del Crédito? Puede reclamar el crédito para ancianos o personas incapacitadas si le corresponden ambas situaciones: Usted es una persona que reúne los requisitos. Vita tax program Sus ingresos no sobrepasan determinados límites. Vita tax program Puede utilizar la Figura 33-A y la Tabla 33-1 como guía para ver si tiene derecho al crédito. Vita tax program Primero, utilice la Figura 33-A para saber si reúne los requisitos. Vita tax program En tal caso, pase a la Tabla 33-1 para asegurarse que sus ingresos no superen los límites correspondientes al crédito. Vita tax program Puede reclamar el crédito sólo si presenta el Formulario 1040 o el Formulario 1040A. Vita tax program No puede reclamar el crédito si presenta el Formulario 1040EZ. Vita tax program Persona que Reúne los Requisitos Usted reúne los requisitos de este crédito si es ciudadano estadounidense o extranjero residente y cualquiera de las siguientes situaciones le corresponden: Tenía 65 años de edad o más al final del año 2013. Vita tax program Tenía menos de 65 años de edad al final del año 2013 y se cumplen las tres condiciones siguientes: Se jubiló por incapacidad total y permanente (se explica más adelante). Vita tax program Recibió ingresos sujetos a impuestos por incapacidad durante 2013. Vita tax program En el día 1 de enero de 2013, no había alcanzado la edad de jubilación obligatoria (se define más adelante bajo Ingresos por incapacidad ). Vita tax program 65 años de edad. Vita tax program   Se considera que tiene 65 años el día antes de cumplir los 65 años. Vita tax program Por lo tanto, si nació el 1 de enero de 1949, se considera que tiene 65 años de edad al final de 2013. Vita tax program Ciudadano o Extranjero Residente de los Estados Unidos Para reclamar el crédito, tiene que ser ciudadano o extranjero residente de los Estados Unidos (o ser tratado como extranjero residente). Vita tax program Normalmente, no puede reclamar el crédito si fue extranjero no residente en algún momento durante el año tributario. Vita tax program Excepciones. Vita tax program   Tal vez pueda tomar el crédito si es extranjero no residente casado con un ciudadano o extranjero residente de los EE. Vita tax program UU. Vita tax program al final del año tributario, y usted y su cónyuge optan por tratarlo a usted como extranjero residente de los Estados Unidos. Vita tax program En tal caso, se gravan impuestos sobre los ingresos que usted y su cónyuge reciban de cualquier parte del mundo. Vita tax program Si era extranjero no residente al comenzar el año y residente extranjero al final del año, y estaba casado con un ciudadano o extranjero residente de los EE. Vita tax program UU. Vita tax program al final del año, tal vez pueda optar por ser considerado extranjero residente de los EE. Vita tax program UU. Vita tax program durante todo el año. Vita tax program En ese caso, quizás se le permita reclamar el crédito. Vita tax program Para más información sobre estas opciones, vea el capítulo 1 de la Publicación 519, U. Vita tax program S. Vita tax program Tax Guide for Aliens (Guía tributaria sobre los impuestos estadounidenses para extranjeros), en inglés. Vita tax program Personas Casadas Normalmente, si está casado al final del año tributario, usted y su cónyuge tienen que presentar una declaración conjunta para reclamar el crédito. Vita tax program No obstante, si usted y su cónyuge no vivieron en la misma vivienda en ningún momento durante el año tributario, pueden presentar una declaración conjunta o declaraciones separadas y aún reclamar el crédito. Vita tax program Cabeza de familia. Vita tax program   Puede presentar la declaración como cabeza de familia y satisfacer las condiciones del crédito, aun si su cónyuge vivió con usted durante los primeros 6 meses del año, si cumple ciertos requisitos. Vita tax program Vea Cabeza de Familia en el capítulo 2, para averiguar qué requisitos tiene que cumplir. Vita tax program Personas Menores de 65 Años de Edad Si tiene menos de 65 años de edad al final del año 2013, puede reunir los requisitos del crédito sólo si está jubilado por incapacidad total y permanente (se explica a continuación) y ha recibido ingresos por incapacidad sujetos a impuestos (se explica más adelante, bajo el tema Ingresos por incapacidad ). Vita tax program Se le considera jubilado por incapacidad total y permanente si: Estaba total y permanentemente incapacitado cuando se jubiló y Se jubiló por incapacidad antes del cierre del año tributario. Vita tax program Aunque no se jubile oficialmente, puede que se le considere jubilado por incapacidad cuando haya dejado de trabajar debido a su incapacidad. Vita tax program Si se jubiló por incapacidad antes de 1977 y no estaba total y permanentemente incapacitado en ese momento, puede cumplir los requisitos del crédito si estaba total y permanentemente incapacitado el 1 de enero de 1976 o el 1 de enero de 1977. Vita tax program Total y permanentemente incapacitado. Vita tax program    Está total y permanentemente incapacitado si no puede dedicarse a ninguna actividad sustancial remunerada a causa de una condición física o mental. Vita tax program Un médico calificado tiene que confirmar por escrito que dicha condición ha durado o puede durar 12 meses o más, o que dicha condición puede culminar en la muerte. Vita tax program Vea Declaración del médico , más adelante. Vita tax program Actividad sustancial remunerada. Vita tax program   Se define “actividad sustancial remunerada” como el desempeño de deberes importantes a lo largo de un período de tiempo razonable, mientras uno trabaje para recibir remuneración u obtener ganancias; o un trabajo generalmente realizado a cambio de remuneración o ganancias. Vita tax program El mantener un empleo a tiempo completo (o un empleo a tiempo parcial a conveniencia de su empleador) en un ambiente laboral competitivo donde se paga por lo menos el salario mínimo se considera una prueba contundente de que puede dedicarse a una actividad sustancial remunerada. Vita tax program   Los trabajos realizados para cuidarse a sí mismo o cuidar su vivienda no se consideran actividades sustanciales remuneradas. Vita tax program Tampoco se considera actividad sustancial remunerada: el trabajo no remunerado desempeñado en relación con los pasatiempos, la capacitación o terapia institucional, asistencia a una escuela, los clubes, programas sociales y otras actividades semejantes. Vita tax program No obstante, realizar este tipo de trabajo puede demostrar que usted es capaz de dedicarse a una actividad sustancial remunerada. Vita tax program    El hecho de que no haya trabajado por algún tiempo no se considera una prueba concluyente de que no pueda dedicarse a una actividad sustancial remunerada. Vita tax program Empleo en establecimientos protegidos. Vita tax program   Ciertos trabajos ofrecidos a personas con incapacidad física o mental en establecimientos que reúnen ciertos requisitos se consideran empleo protegido. Vita tax program Dichos sitios se ubican en establecimientos protegidos, tales como talleres, hospitales e instituciones parecidas, programas laborales o educativos en el hogar y asilos patrocinados por el Departamento de Asuntos de Veteranos (VA, por sus siglas en inglés). Vita tax program   En comparación con el empleo comercial, la remuneración del empleo en establecimientos protegidos es más baja. Vita tax program Por lo tanto, una persona no suele buscar empleo en establecimientos protegidos si puede encontrar otro empleo. Vita tax program El hecho de que una persona haya aceptado un empleo en establecimientos protegidos no comprueba que la persona pueda dedicarse a una actividad sustancial remunerada. Vita tax program Declaración del médico. Vita tax program   Si tiene menos de 65 años de edad, su médico tiene que certificar por escrito que usted estaba total y permanentemente incapacitado en la fecha en que se jubiló. Vita tax program Puede utilizar la declaración en las Instrucciones del Anexo R (Fomulario 1040A o 1040). Vita tax program    Please click here for the text description of the image. Vita tax program Figura 33−A. Vita tax program ¿Es Usted una Persona que Reúne los Requisitos? Tabla 33-1. Vita tax program Límites sobre los Ingresos SI su estado civil para efectos de la declaración es . Vita tax program . Vita tax program . Vita tax program . Vita tax program ENTONCES aun si reúne los requisitos (vea la Figura 33-A ), NO PUEDE reclamar el crédito si . Vita tax program . Vita tax program . Vita tax program . Vita tax program Tiene ingresos brutos ajustados (AGI, por sus siglas en inglés)* iguales o superiores a . Vita tax program . Vita tax program . Vita tax program . Vita tax program O el total de su Seguro Social no sujeto a impuestos además de otras pensiones, anualidades o ingreso por incapacidad no sujetos a impuestos es igual o superior a . Vita tax program . Vita tax program . Vita tax program . Vita tax program soltero, cabeza de familia o viudo que reúne los requisitos con hijo dependiente $17,500 $5,000 casado que presenta una declaración conjunta y sólo uno de los cónyuges reúne los requisitos de la Figura 33-A $20,000 $5,000 casado que presenta una declaración conjunta y ambos cónyuges reúnen los requisitos de la Figura 33-A $25,000 $7,500 casado que presenta una declaración por separado y usted y su cónyuge no vivieron en la misma vivienda en ningún momento del año 2013 $12,500 $3,750 *El AGI es la cantidad indicada en la línea 22 del Formulario 1040A o la línea 38 del Formulario 1040. Vita tax program   No tiene que presentar esta declaración escrita junto con el Formulario 1040 o Formulario 1040A, pero tiene que guardarla con su documentación. Vita tax program Veteranos. Vita tax program   Si el Departamento de Asuntos de Veteranos (VA, por sus siglas en inglés) certifica que está total y permanentemente incapacitado, puede utilizar el Formulario 21-0172 del VA, Certification of Permanent and Total Disability (Certificación de incapacidad total y permanente), en inglés, en lugar de la declaración escrita de un médico que usted está obligado a conservar. Vita tax program El Formulario 21-0172 del VA tiene que ser firmado por una persona autorizada por el VA. Vita tax program Puede obtener este formulario de la oficina regional del VA de su área. Vita tax program Declaración escrita de un médico obtenida en un año anterior. Vita tax program   Si obtuvo una declaración escrita de su médico en un año anterior y, por su condición continua de incapacidad, no pudo dedicarse a ninguna actividad sustancial remunerada durante 2013, quizás no necesite obtener otra declaración escrita de su médico para 2013. Vita tax program Para leer una explicación detallada de las condiciones que tiene que cumplir, consulte la Parte II de las Instrucciones del Anexo R (Formulario 1040A o 1040). Vita tax program Si satisface las condiciones obligatorias, marque el recuadro 2 de la Parte II del Anexo R (Formulario 1040A o 1040). Vita tax program   Si marcó el recuadro 4, 5 ó 6 de la Parte I del Anexo R (Formulario 1040A o 1040), anote en el espacio por encima del recuadro de la línea 2 de la Parte II el (los) primer(os) nombre(s) del (de los) cónyuge(s) para el (los) cual(es) está marcado dicho recuadro. Vita tax program Ingresos por incapacidad. Vita tax program   Si tiene menos de 65 años de edad, tiene que tener también ingresos tributables de compensación por incapacidad para reunir los requisitos del crédito. Vita tax program Los ingresos de compensación por incapacidad tienen que cumplir los siguientes requisitos: Se tienen que pagar conforme al seguro de accidente o médico, o el plan de pensiones de su empleador. Vita tax program Se tienen que incluir en los ingresos como salario (o pagos en lugar de salario) durante el tiempo por el cual se ausentó del trabajo a raíz de una incapacidad total y permanente. Vita tax program Pagos que no se consideran ingresos por incapacidad. Vita tax program   Todo pago que reciba de un plan que no ofrece una opción para la jubilación por incapacidad no se considera ingreso por incapacidad. Vita tax program Todo pago global que reciba por vacaciones acumuladas al jubilarse por incapacidad se considera pago de salario en vez de ingreso por incapacidad. Vita tax program   Para propósitos del crédito para ancianos o personas incapacitadas, los ingresos por incapacidad no incluyen cantidades que usted reciba después de cumplir la edad obligatoria de jubilación. Vita tax program La edad obligatoria de jubilación es la edad establecida por su empleador en la que usted habría estado obligado a jubilarse si no se hubiera quedado incapacitado. Vita tax program Límites sobre los Ingresos Para determinar si puede reclamar el crédito, tiene que tener en cuenta dos límites sobre los ingresos. Vita tax program El primer límite es la cantidad de ingresos brutos ajustados (AGI, por sus siglas en inglés). Vita tax program El segundo límite es la cantidad de Seguro Social no sujeta a impuestos y otras pensiones, anualidades o compensación por incapacidad no sujetas a impuestos que haya recibido. Vita tax program Se indican los límites en la Tabla 33-1. Vita tax program Si tiene ingresos brutos ajustados y pensiones, anualidades o compensación por incapacidad no sujetos a impuestos inferiores a los límites de ingresos, quizás pueda reclamar el crédito. Vita tax program Vea Cómo Reclamar el Crédito , más adelante. Vita tax program Si tiene ingresos brutos ajustados o pensiones, anualidades o compensación por incapacidad no sujetos a impuestos iguales o superiores a los límites de ingresos, no puede reclamar el crédito. Vita tax program Cómo Reclamar el Crédito Puede calcular el crédito usted mismo o el Servicio de Impuestos Internos (IRS, por sus siglas en inglés) se lo calculará. Vita tax program El Crédito Calculado por el IRS Si opta por que el IRS le calcule el crédito, lea el tema presentado a continuación relacionado con el formulario que usted va a presentar (el Formulario 1040 o el Formulario 1040A). Vita tax program Si desea que el IRS le calcule su impuesto, vea el capítulo 30 . Vita tax program Formulario 1040. Vita tax program   Si desea que el IRS le calcule el crédito, vea Datos a Incluir en el Formulario 1040 bajo Impuestos Calculados por el IRS en el capítulo 30. Vita tax program Formulario 1040A. Vita tax program   Si desea que el IRS le calcule el crédito, vea Datos a Incluir en el Formulario 1040A bajo Impuestos Calculados por el IRS en el capítulo 30. Vita tax program El Crédito Calculado por Usted Mismo Si opta por calcular el crédito usted mismo, llene la primera página del Anexo R (Formulario 1040A o 1040). Vita tax program Luego, llene la Parte III del Anexo R (Formulario 1040A o 1040). Vita tax program Si presenta el Formulario 1040A, anote en la línea 30 de este formulario la cantidad proveniente de la línea 22 del Anexo R (Formulario 1040A o 1040). Vita tax program Si presenta el Formulario 1040, anote en la línea 53 de este formulario la cantidad proveniente de la línea 22 del Anexo R (Formulario 1040A o 1040), marque el recuadro c y escriba “Sch R” en la línea al lado de dicho recuadro. Vita tax program Para leer una explicación detallada sobre cómo llenar la Parte III del Anexo R, vea Figuring the Credit Yourself (Cómo calcular el crédito usted mismo), en la Publicación 524, en inglés. Vita tax program Límite del crédito. Vita tax program   La cantidad del crédito que puede reclamar, por lo general, suele limitarse a la cantidad de impuestos que tiene que pagar. Vita tax program Utilice la Credit Limit Worksheet (Hoja de trabajo para calcular el límite del crédito), en las Instrucciones del Anexo R (Formulario 1040A o Formulario 1040) para determinar si su crédito es limitado. Vita tax program Prev  Up  Next   Home   More Online Publications
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The Vita Tax Program

Vita tax program 3. Vita tax program   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Vita tax program Form 4797. Vita tax program Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Vita tax program Granting the right to remove deposits. Vita tax program Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Vita tax program You must report the income from all the different sources on your tax return, unless it is excluded by law. Vita tax program Where you report the income on your tax return depends on its source. Vita tax program This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Vita tax program For information on where to report other income, see the Instructions for Form 1040, U. Vita tax program S. Vita tax program Individual Income Tax Return. Vita tax program Accounting method. Vita tax program   The rules discussed in this chapter assume you use the cash method of accounting. Vita tax program Under the cash method, you generally include an item of income in gross income in the year you receive it. Vita tax program See Cash Method in chapter 2. Vita tax program   If you use an accrual method of accounting, different rules may apply to your situation. Vita tax program See Accrual Method in chapter 2. Vita tax program Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Vita tax program Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Vita tax program Use this schedule to figure the net profit or loss from regular farming operations. Vita tax program Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Vita tax program This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Vita tax program It also includes income from the sale of crop shares if you materially participate in producing the crop. Vita tax program See Rents (Including Crop Shares) , later. Vita tax program Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Vita tax program Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Vita tax program Land. Vita tax program Depreciable farm equipment. Vita tax program Buildings and structures. Vita tax program Livestock held for draft, breeding, sport, or dairy purposes. Vita tax program Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Vita tax program Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Vita tax program Sales of Farm Products Where to report. Vita tax program    Table 3-1 shows where to report the sale of farm products on your tax return. Vita tax program Schedule F. Vita tax program   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Vita tax program This includes money and the fair market value of any property or services you receive. Vita tax program When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Vita tax program See chapter 6 for information on the basis of assets. Vita tax program You generally report these amounts on Schedule F for the year you receive payment. Vita tax program Example. Vita tax program In 2012, you bought 20 feeder calves for $11,000 for resale. Vita tax program You sold them in 2013 for $21,000. Vita tax program You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Vita tax program Form 4797. Vita tax program   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Vita tax program In either case, you should always report these sales on Form 4797 instead of Schedule F. Vita tax program See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Vita tax program Animals you do not hold primarily for sale are considered business assets of your farm. Vita tax program Table 3-1. Vita tax program Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Vita tax program   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Vita tax program This applies even if your agent pays you in a later year. Vita tax program For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Vita tax program Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Vita tax program You must meet all the following conditions to qualify. Vita tax program Your principal trade or business is farming. Vita tax program You use the cash method of accounting. Vita tax program You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Vita tax program The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Vita tax program Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Vita tax program The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Vita tax program A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Vita tax program See Other Involuntary Conversions in chapter 11. Vita tax program Usual business practice. Vita tax program   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Vita tax program Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Vita tax program If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Vita tax program Connection with affected area. Vita tax program   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Vita tax program However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Vita tax program This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Vita tax program Classes of livestock. Vita tax program   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Vita tax program Do not separate animals into classes based on age, sex, or breed. Vita tax program Amount to be postponed. Vita tax program   Follow these steps to figure the amount of gain to be postponed for each class of animals. Vita tax program Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Vita tax program For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Vita tax program Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Vita tax program Example. Vita tax program You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Vita tax program As a result of drought, you sold 135 head during 2012. Vita tax program You realized $70,200 from the sale. Vita tax program On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Vita tax program The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Vita tax program How to postpone gain. Vita tax program   To postpone gain, attach a statement to your tax return for the year of the sale. Vita tax program The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Vita tax program A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Vita tax program Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Vita tax program A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Vita tax program The number of animals sold in each of the 3 preceding years. Vita tax program The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Vita tax program The total number of animals sold and the number sold because of weather-related conditions during the tax year. Vita tax program A computation, as described above, of the income to be postponed for each class of livestock. Vita tax program   Generally, you must file the statement and the return by the due date of the return, including extensions. Vita tax program However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Vita tax program For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Vita tax program Attach the statement to the amended return and write “Filed pursuant to section 301. Vita tax program 9100-2” at the top of the amended return. Vita tax program File the amended return at the same address you filed the original return. Vita tax program Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Vita tax program Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Vita tax program However, if you materially participate in farming operations on the land, the rent is farm income. Vita tax program See Landlord Participation in Farming in chapter 12. Vita tax program Pasture income and rental. Vita tax program   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Vita tax program You must enter it as Other income on Schedule F. Vita tax program If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Vita tax program Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Vita tax program It does not matter whether you use the cash method of accounting or an accrual method of accounting. Vita tax program If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Vita tax program See Landlord Participation in Farming in chapter 12. Vita tax program Report the rental income on Schedule F. Vita tax program If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Vita tax program The income is not included in self-employment income. Vita tax program Crop shares you use to feed livestock. Vita tax program   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Vita tax program You must include the fair market value of the crop shares in income at that time. Vita tax program You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Vita tax program Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Vita tax program See  chapter 12. Vita tax program Crop shares you give to others (gift). Vita tax program   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Vita tax program You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Vita tax program Example. Vita tax program A tenant farmed part of your land under a crop-share arrangement. Vita tax program The tenant harvested and delivered the crop in your name to an elevator company. Vita tax program Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Vita tax program They sell their crop shares in the following year and the elevator company makes payments directly to your children. Vita tax program In this situation, you are considered to have received rental income and then made a gift of that income. Vita tax program You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Vita tax program Crop share loss. Vita tax program   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Vita tax program See Publication 925 for information on these rules. Vita tax program Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Vita tax program However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Vita tax program See Cost-Sharing Exclusion (Improvements) , later. Vita tax program Report the agricultural program payment on the appropriate line of Schedule F, Part I. Vita tax program Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Vita tax program However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Vita tax program Claim the deduction on Schedule F for the year of repayment or reduction. Vita tax program Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Vita tax program However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Vita tax program You do not need approval from the IRS to adopt this method of reporting CCC loans. Vita tax program Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Vita tax program However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Vita tax program For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Vita tax program Revenue Procedure 2008-52, 2008-36 I. Vita tax program R. Vita tax program B. Vita tax program 587, is available at  www. Vita tax program irs. Vita tax program gov/irb/2008-36_IRB/ar09. Vita tax program html. Vita tax program You can request income tax withholding from CCC loan payments you receive. Vita tax program Use Form W-4V, Voluntary Withholding Request. Vita tax program See chapter 16 for information about ordering the form. Vita tax program To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Vita tax program Attach a statement to your return showing the details of the loan. Vita tax program You must file the statement and the return by the due date of the return, including extensions. Vita tax program If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Vita tax program Attach the statement to the amended return and write “Filed pursuant to section 301. Vita tax program 9100-2” at the top of the return. Vita tax program File the amended return at the same address you filed the original return. Vita tax program When you make this election, the amount you report as income becomes your basis in the commodity. Vita tax program See chapter 6 for information on the basis of assets. Vita tax program If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Vita tax program If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Vita tax program If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Vita tax program If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Vita tax program Form 1099-A. Vita tax program   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Vita tax program “CCC” should be shown in box 6. Vita tax program The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Vita tax program Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Vita tax program If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Vita tax program Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Vita tax program Market gain should be reported as follows. Vita tax program If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Vita tax program However, adjust the basis of the commodity for the amount of the market gain. Vita tax program If you did not include the CCC loan in income in the year received, include the market gain in your income. Vita tax program The following examples show how to report market gain. Vita tax program Example 1. Vita tax program Mike Green is a cotton farmer. Vita tax program He uses the cash method of accounting and files his tax return on a calendar year basis. Vita tax program He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Vita tax program In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Vita tax program 00 per pound). Vita tax program In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Vita tax program 50 per pound (lower than the loan amount). Vita tax program Later in 2013, he sold the cotton for $2,500. Vita tax program The market gain on the redemption was $. Vita tax program 50 ($2. Vita tax program 00 – $1. Vita tax program 50) per pound. Vita tax program Mike realized total market gain of $500 ($. Vita tax program 50 x 1,000 pounds). Vita tax program How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Vita tax program Included CCC loan. Vita tax program   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Vita tax program The $500 market gain is not recognized on the redemption. Vita tax program He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Vita tax program   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Vita tax program His gain from the sale is $1,000 ($2,500 – $1,500). Vita tax program He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Vita tax program Excluded CCC loan. Vita tax program   Mike has income of $500 from market gain in 2013. Vita tax program He reports it on Schedule F, lines 4a and 4b. Vita tax program His basis in the cotton is zero, so his gain from its sale is $2,500. Vita tax program He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Vita tax program Example 2. Vita tax program The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Vita tax program Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Vita tax program In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Vita tax program How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Vita tax program Included CCC loan. Vita tax program   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Vita tax program The $500 market gain is not recognized on the redemption. Vita tax program Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Vita tax program   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Vita tax program Mike has no gain or loss on its sale to the cotton buyer for that amount. Vita tax program Excluded CCC loan. Vita tax program   As in Example 1, Mike has income of $500 from market gain in 2013. Vita tax program He reports it on Schedule F, lines 4a and 4b. Vita tax program His basis in the cotton is zero, so his gain from its sale is $1,500. Vita tax program He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Vita tax program Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Vita tax program You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Vita tax program Cost-share payments you receive may qualify for the cost-sharing exclusion. Vita tax program See Cost-Sharing Exclusion (Improvements) , later. Vita tax program CRP payments are reported to you on Form 1099-G. Vita tax program Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Vita tax program See the instructions for Schedule SE (Form 1040). Vita tax program Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Vita tax program You generally include them in the year you receive them. Vita tax program Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Vita tax program You can request income tax withholding from crop disaster payments you receive from the federal government. Vita tax program Use Form W-4V, Voluntary Withholding Request. Vita tax program See chapter 16 for information about ordering the form. Vita tax program Election to postpone reporting until the following year. Vita tax program   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Vita tax program You use the cash method of accounting. Vita tax program You receive the crop insurance proceeds in the same tax year the crops are damaged. Vita tax program You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Vita tax program   Deferral is not permitted for proceeds received from revenue insurance policies. Vita tax program   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Vita tax program Check the box on line 8c and attach a statement to your tax return. Vita tax program The statement must include your name and address and contain the following information. Vita tax program A statement that you are making an election under IRC section 451(d) and Regulations section 1. Vita tax program 451-6. Vita tax program The specific crop or crops physically destroyed or damaged. Vita tax program A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Vita tax program The cause of the physical destruction or damage and the date or dates it occurred. Vita tax program The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Vita tax program The name of each insurance carrier from whom you received payments. Vita tax program   One election covers all crops representing a single trade or business. Vita tax program If you have more than one farming business, make a separate election for each one. Vita tax program For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Vita tax program   An election is binding for the year unless the IRS approves your request to change it. Vita tax program To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Vita tax program Ogden Submission Processing Center P. Vita tax program O. Vita tax program Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Vita tax program These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Vita tax program They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Vita tax program Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Vita tax program You must include these benefits in income in the year you receive them. Vita tax program You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Vita tax program Report the benefits on Schedule F, Part I, as agricultural program payments. Vita tax program You can usually take a current deduction for the same amount as a feed expense. Vita tax program Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Vita tax program A payment is any economic benefit you get as a result of an improvement. Vita tax program However, this exclusion applies only to that part of a payment that meets all three of the following tests. Vita tax program It was for a capital expense. Vita tax program You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Vita tax program You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Vita tax program See chapter 5 for information on deducting soil and water conservation expenses. Vita tax program It does not substantially increase your annual income from the property for which it is made. Vita tax program An increase in annual income is substantial if it is more than the greater of the following amounts. Vita tax program 10% of the average annual income derived from the affected property before receiving the improvement. Vita tax program $2. Vita tax program 50 times the number of affected acres. Vita tax program The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Vita tax program Qualifying programs. Vita tax program   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Vita tax program The rural clean water program authorized by the Federal Water Pollution Control Act. Vita tax program The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Vita tax program The water bank program authorized by the Water Bank Act. Vita tax program The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Vita tax program The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Vita tax program The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Vita tax program The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Vita tax program Certain small watershed programs, listed later. Vita tax program Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Vita tax program Several state programs have been approved. Vita tax program For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Vita tax program Small watershed programs. Vita tax program   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Vita tax program The programs under the Watershed Protection and Flood Prevention Act. Vita tax program The flood prevention projects under the Flood Control Act of 1944. Vita tax program The Emergency Watershed Protection Program under the Flood Control Act of 1950. Vita tax program Certain programs under the Colorado River Basin Salinity Control Act. Vita tax program The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Vita tax program The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Vita tax program The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Vita tax program The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Vita tax program The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Vita tax program The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Vita tax program The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Vita tax program The Conservation Security Program authorized by the Food Security Act of 1985. Vita tax program The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Vita tax program Income realized. Vita tax program   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Vita tax program Value of the improvement. Vita tax program   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Vita tax program The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Vita tax program Any government payments under a program not listed earlier. Vita tax program Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Vita tax program Any government payment to you for rent or for your services. Vita tax program The denominator of the fraction is the total cost of the improvement. Vita tax program Excludable portion. Vita tax program   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Vita tax program 10% of the prior average annual income from the affected acreage. Vita tax program The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Vita tax program $2. Vita tax program 50 times the number of affected acres. Vita tax program The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Vita tax program You may need to consult your tax advisor for assistance. Vita tax program Example. Vita tax program One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Vita tax program The total cost of the improvement was $500,000. Vita tax program The USDA paid $490,000. Vita tax program You paid $10,000. Vita tax program The value of the cost-sharing improvement is $15,000. Vita tax program The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Vita tax program The excludable portion is the greater amount, $1,550. Vita tax program You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Vita tax program   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Vita tax program Any payment excluded from income is not part of your basis. Vita tax program In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Vita tax program   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Vita tax program How to report the exclusion. Vita tax program   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Vita tax program The statement must include the following information. Vita tax program The dollar amount of the cost funded by the government payment. Vita tax program The value of the improvement. Vita tax program The amount you are excluding. Vita tax program   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Vita tax program Recapture. Vita tax program   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Vita tax program In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Vita tax program You must report the recapture on Form 4797. Vita tax program See Section 1255 property under Other Gains in chapter 9. Vita tax program Electing not to exclude payments. Vita tax program   You can elect not to exclude all or part of any payments you receive under these programs. Vita tax program If you make this election for all of these payments, none of the above restrictions and rules apply. Vita tax program You must make this election by the due date, including extensions, for filing your return. Vita tax program In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Vita tax program If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Vita tax program Write “Filed pursuant to section 301. Vita tax program 9100-2” at the top of the amended return and file it at the same address you filed the original return. Vita tax program Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Vita tax program You must include these payments on Schedule F, lines 4a and 4b. Vita tax program The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Vita tax program You must include these payments on Schedule F, lines 6a and 6b. Vita tax program The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Vita tax program Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Vita tax program As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Vita tax program If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Vita tax program If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Vita tax program Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Vita tax program Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Vita tax program The gain or loss is capital or ordinary depending on how you used the quota. Vita tax program See Capital or ordinary gain or loss , later. Vita tax program Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Vita tax program Adjusted basis. Vita tax program   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Vita tax program The basis of a quota derived from an original grant by the federal government is zero. Vita tax program The basis of a purchased quota is the purchase price. Vita tax program The basis of a quota received as a gift is generally the same as the donor's basis. Vita tax program However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Vita tax program If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Vita tax program The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Vita tax program Reduction of basis. Vita tax program   You are required to reduce the basis of your tobacco quota by the following amounts. Vita tax program Deductions you took for amortization, depletion, or depreciation. Vita tax program Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Vita tax program The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Vita tax program Amount treated as interest. Vita tax program   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Vita tax program The interest is reportable as ordinary income. Vita tax program If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Vita tax program   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Vita tax program You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Vita tax program For more information, see Notice 2005-57, 2005-32 I. Vita tax program R. Vita tax program B. Vita tax program 267, available at www. Vita tax program irs. Vita tax program gov/irb/2005-32_IRB/ar13. Vita tax program html. Vita tax program Installment method. Vita tax program   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Vita tax program Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Vita tax program See chapter 10 for more information. Vita tax program Capital or ordinary gain or loss. Vita tax program   Whether your gain or loss is ordinary or capital depends on how you used the quota. Vita tax program Quota used in the trade or business of farming. Vita tax program   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Vita tax program See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Vita tax program Quota held for investment. Vita tax program   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Vita tax program The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Vita tax program Gain treated as ordinary income. Vita tax program   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Vita tax program Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Vita tax program The cost of acquiring a quota. Vita tax program Amounts for amortization, depletion, or depreciation. Vita tax program Amounts to reflect a reduction in the quota pounds. Vita tax program   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Vita tax program Self-employment income. Vita tax program   The tobacco quota buyout payments are not self-employment income. Vita tax program Income averaging for farmers. Vita tax program   The gain or loss resulting from the quota payments does not qualify for income averaging. Vita tax program A tobacco quota is considered an interest in land. Vita tax program Income averaging is not available for gain or loss arising from the sale or other disposition of land. Vita tax program Involuntary conversion. Vita tax program   The buyout of the tobacco quota is not an involuntary conversion. Vita tax program Form 1099-S. Vita tax program   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Vita tax program The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Vita tax program Like-kind exchange of quota. Vita tax program   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Vita tax program See Notice 2005-57 for more information. Vita tax program Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Vita tax program Taxation of payments to tobacco growers. Vita tax program   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Vita tax program Individuals will generally report the payments as an Agricultural program payment on Schedule F. Vita tax program If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Vita tax program Self-employment income. Vita tax program   Payments to growers generally represent self-employment income. Vita tax program If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Vita tax program Income averaging for farmers. Vita tax program   Payments to growers who are individuals qualify for farm income averaging. Vita tax program Form 1099-G. Vita tax program   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Vita tax program Other Payments You must include most other government program payments in income. Vita tax program Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Vita tax program How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Vita tax program Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Vita tax program You must also capitalize the full cost of the improvement. Vita tax program Since you have included the payments in income, they do not reduce your basis. Vita tax program However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Vita tax program National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Vita tax program You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Vita tax program If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Vita tax program If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Vita tax program Payment to More Than One Person The USDA reports program payments to the IRS. Vita tax program It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Vita tax program If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Vita tax program You should file Form 1099-G to report the identity of the actual recipient to the IRS. Vita tax program You should also give this information to the recipient. Vita tax program You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Vita tax program Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Vita tax program However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Vita tax program See chapter 16 for information about ordering Form 1099-G. Vita tax program Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Vita tax program If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Vita tax program Form 1099-PATR. Vita tax program   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Vita tax program Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Vita tax program For information on the alternative minimum tax, see the Instructions for Form 6251. Vita tax program Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Vita tax program They include the following items. Vita tax program Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Vita tax program The stated dollar value of qualified written notices of allocation. Vita tax program The fair market value of other property. Vita tax program Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Vita tax program You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Vita tax program Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Vita tax program If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Vita tax program Qualified written notice of allocation. Vita tax program   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Vita tax program A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Vita tax program The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Vita tax program You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Vita tax program Signing and giving a written agreement to the cooperative. Vita tax program Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Vita tax program The cooperative must notify you in writing of this bylaw and give you a copy. Vita tax program Endorsing and cashing a qualified check paid as part of the same patronage dividend. Vita tax program You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Vita tax program Qualified check. Vita tax program   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Vita tax program It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Vita tax program It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Vita tax program Loss on redemption. Vita tax program   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Vita tax program The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Vita tax program Nonqualified notice of allocation. Vita tax program   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Vita tax program Your basis in the notice is zero. Vita tax program You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Vita tax program Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Vita tax program However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Vita tax program   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Vita tax program For example, if it represents interest income, report it on your return as interest. Vita tax program Buying or selling capital assets or depreciable property. Vita tax program   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Vita tax program You must, however, reduce the basis of these assets by the dividends. Vita tax program This reduction is taken into account as of the first day of the tax year in which the dividends are received. Vita tax program If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Vita tax program   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Vita tax program Example. Vita tax program On July 1, 2012, Mr. Vita tax program Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Vita tax program The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Vita tax program Mr. Vita tax program Brown files his return on a calendar year basis. Vita tax program For 2012, he claimed a depreciation deduction of $311, using the 10. Vita tax program 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Vita tax program On July 2, 2013, the cooperative association paid Mr. Vita tax program Brown a $300 cash patronage dividend for buying the machine. Vita tax program Mr. Vita tax program Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Vita tax program Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Vita tax program 38% × 1. Vita tax program 5 = 23. Vita tax program 07% Depreciation deduction for 2013 ($2,289 × 23. Vita tax program 07%) $528 Exceptions. Vita tax program   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Vita tax program If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Vita tax program If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Vita tax program   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Vita tax program Personal purchases. Vita tax program   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Vita tax program This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Vita tax program Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Vita tax program A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Vita tax program These allocations can be paid in money, other property, or qualified certificates. Vita tax program Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Vita tax program Qualified certificates. Vita tax program   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Vita tax program The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Vita tax program If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Vita tax program Nonqualified certificates. Vita tax program   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Vita tax program Your basis in the certificate is zero. Vita tax program You must include in income any amount you receive from its sale, redemption, or other disposition. Vita tax program Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Vita tax program Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Vita tax program For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Vita tax program General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Vita tax program Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Vita tax program It is excluded from taxable income (see Exclusions , later). Vita tax program Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Vita tax program If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Vita tax program Election to defer income from discharge of indebtedness. Vita tax program   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Vita tax program Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Vita tax program See IRC section 108(i) and Publication 4681 for details. Vita tax program Form 1099-C. Vita tax program   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Vita tax program The amount of debt canceled is shown in box 2. Vita tax program Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Vita tax program These exceptions apply before the exclusions discussed below. Vita tax program Price reduced after purchase. Vita tax program   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Vita tax program Reduce your basis in the property by the amount of the reduction in the debt. Vita tax program The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Vita tax program Deductible debt. Vita tax program   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Vita tax program This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Vita tax program Example. Vita tax program You get accounting services for your farm on credit. Vita tax program Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Vita tax program Your accountant forgives part of the amount you owe for the accounting services. Vita tax program How you treat the canceled debt depends on your method of accounting. Vita tax program Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Vita tax program Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Vita tax program Exclusions Do not include canceled debt in income in the following situations. Vita tax program The cancellation takes place in a bankruptcy case under title 11 of the U. Vita tax program S. Vita tax program Code. Vita tax program The cancellation takes place when you are insolvent. Vita tax program The canceled debt is a qualified farm debt. Vita tax program The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Vita tax program See Publication 334, Tax Guide for Small Business, chapter 5. Vita tax program The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Vita tax program The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Vita tax program If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Vita tax program If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Vita tax program See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Vita tax program Debt. Vita tax program   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Vita tax program Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Vita tax program Bankruptcy. Vita tax program   A bankruptcy case is a case under title 11 of the U. Vita tax program S. Vita tax program Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Vita tax program   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Vita tax program Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Vita tax program Insolvency. Vita tax program   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Vita tax program   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Vita tax program If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Vita tax program Otherwise, you include the difference in gross income. Vita tax program Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Vita tax program You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Vita tax program Example. Vita tax program You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Vita tax program Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Vita tax program Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Vita tax program You can exclude this amount from income. Vita tax program The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Vita tax program If not, you must include it in income. Vita tax program Reduction of tax attributes. Vita tax program   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Vita tax program Order of reduction. Vita tax program   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Vita tax program Net operating loss (NOL). Vita tax program Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Vita tax program Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Vita tax program General business credit carryover. Vita tax program Reduce the credit carryover to or from the tax year of the debt cancellation. Vita tax program Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Vita tax program Minimum tax credit. Vita tax program Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Vita tax program Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Vita tax program Capital loss. Vita tax program Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Vita tax program Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Vita tax program Basis. Vita tax program Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Vita tax program Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Vita tax program Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Vita tax program Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Vita tax program Inventory and accounts and notes receivable. Vita tax program Other property. Vita tax program Reduce the basis one dollar for each dollar of excluded canceled debt. Vita tax program However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Vita tax program For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Vita tax program 1017-1(b)(2). Vita tax program Also see Electing to reduce the basis of depreciable property