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Where To File Amended 1040x

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Where To File Amended 1040x

Where to file amended 1040x Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Where to file amended 1040x Computer used in a home office. Where to file amended 1040x Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Where to file amended 1040x You can claim the amount of expenses that is more than 2% of your adjusted gross income. Where to file amended 1040x You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Where to file amended 1040x Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Where to file amended 1040x Generally, you apply the 2% limit after you apply any other deduction limit. Where to file amended 1040x For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Where to file amended 1040x Deductions subject to the 2% limit are discussed in the following three categories. Where to file amended 1040x Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Where to file amended 1040x Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Where to file amended 1040x Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Where to file amended 1040x Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Where to file amended 1040x You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Where to file amended 1040x An expense is ordinary if it is common and accepted in your trade, business, or profession. Where to file amended 1040x An expense is necessary if it is appropriate and helpful to your business. Where to file amended 1040x An expense does not have to be required to be considered necessary. Where to file amended 1040x You may be able to deduct the following items as unreimbursed employee expenses. Where to file amended 1040x Business bad debt of an employee. Where to file amended 1040x Business liability insurance premiums. Where to file amended 1040x Damages paid to a former employer for breach of an employment contract. Where to file amended 1040x Depreciation on a computer your employer requires you to use in your work. Where to file amended 1040x Dues to a chamber of commerce if membership helps you do your job. Where to file amended 1040x Dues to professional societies. Where to file amended 1040x Educator expenses. Where to file amended 1040x Home office or part of your home used regularly and exclusively in your work. Where to file amended 1040x Job search expenses in your present occupation. Where to file amended 1040x Laboratory breakage fees. Where to file amended 1040x Legal fees related to your job. Where to file amended 1040x Licenses and regulatory fees. Where to file amended 1040x Malpractice insurance premiums. Where to file amended 1040x Medical examinations required by an employer. Where to file amended 1040x Occupational taxes. Where to file amended 1040x Passport for a business trip. Where to file amended 1040x Repayment of an income aid payment received under an employer's plan. Where to file amended 1040x Research expenses of a college professor. Where to file amended 1040x Rural mail carriers' vehicle expenses. Where to file amended 1040x Subscriptions to professional journals and trade magazines related to your work. Where to file amended 1040x Tools and supplies used in your work. Where to file amended 1040x Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Where to file amended 1040x Union dues and expenses. Where to file amended 1040x Work clothes and uniforms if required and not suitable for everyday use. Where to file amended 1040x Work-related education. Where to file amended 1040x Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Where to file amended 1040x Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Where to file amended 1040x A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Where to file amended 1040x Example. Where to file amended 1040x You make a bona fide loan to the corporation you work for. Where to file amended 1040x It fails to pay you back. Where to file amended 1040x You had to make the loan in order to keep your job. Where to file amended 1040x You have a business bad debt as an employee. Where to file amended 1040x More information. Where to file amended 1040x   For more information on business bad debts, see chapter 10 in Publication 535. Where to file amended 1040x For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Where to file amended 1040x Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Where to file amended 1040x Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Where to file amended 1040x Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Where to file amended 1040x For the convenience of your employer. Where to file amended 1040x   This means that your use of the computer is for a substantial business reason of your employer. Where to file amended 1040x You must consider all facts in making this determination. Where to file amended 1040x Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Where to file amended 1040x Required as a condition of your employment. Where to file amended 1040x   This means that you cannot properly perform your duties without the computer. Where to file amended 1040x Whether you can properly perform your duties without it depends on all the facts and circumstances. Where to file amended 1040x It is not necessary that your employer explicitly requires you to use your computer. Where to file amended 1040x But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Where to file amended 1040x Example. Where to file amended 1040x You are an engineer with an engineering firm. Where to file amended 1040x You occasionally take work home at night rather than work late at the office. Where to file amended 1040x You own and use a computer that is similar to the one you use at the office to complete your work at home. Where to file amended 1040x Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Where to file amended 1040x Which depreciation method to use. Where to file amended 1040x   The depreciation method you use depends on whether you meet the more-than-50%-use test. Where to file amended 1040x More-than-50%-use test met. Where to file amended 1040x   You meet this test if you use the computer more than 50% in your work. Where to file amended 1040x If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Where to file amended 1040x In addition, you may be able to take the section 179 deduction for the year you place the item in service. Where to file amended 1040x More-than-50%-use test not met. Where to file amended 1040x   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Where to file amended 1040x You also cannot claim the section 179 deduction. Where to file amended 1040x (But if you use your computer in a home office, see the exception below. Where to file amended 1040x ) Investment use. Where to file amended 1040x   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Where to file amended 1040x However, you can combine your investment use with your work use in figuring your depreciation deduction. Where to file amended 1040x Exception for computer used in a home office. Where to file amended 1040x   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Where to file amended 1040x You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Where to file amended 1040x You also may be able to take a section 179 deduction for the year you place the computer in service. Where to file amended 1040x See Computer used in a home office under How To Report, later. Where to file amended 1040x More information. Where to file amended 1040x   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Where to file amended 1040x Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Where to file amended 1040x Reporting your depreciation deduction. Where to file amended 1040x    See How To Report, later, for information about reporting a deduction for depreciation. Where to file amended 1040x You must keep records to prove your percentage of business and investment use. Where to file amended 1040x Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Where to file amended 1040x Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Where to file amended 1040x Lobbying and political activities. Where to file amended 1040x    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Where to file amended 1040x See Lobbying Expenses under Nondeductible Expenses, later. Where to file amended 1040x Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Where to file amended 1040x If you file Form 1040A, you can deduct these expenses on line 16. Where to file amended 1040x If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Where to file amended 1040x However, neither spouse can deduct more than $250 of his or her qualified expenses. Where to file amended 1040x Eligible educator. Where to file amended 1040x   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Where to file amended 1040x Qualified expenses. Where to file amended 1040x   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Where to file amended 1040x An ordinary expense is one that is common and accepted in your educational field. Where to file amended 1040x A necessary expense is one that is helpful and appropriate for your profession as an educator. Where to file amended 1040x An expense does not have to be required to be considered necessary. Where to file amended 1040x   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Where to file amended 1040x You must reduce your qualified expenses by the following amounts. Where to file amended 1040x Excludable U. Where to file amended 1040x S. Where to file amended 1040x series EE and I savings bond interest from Form 8815. Where to file amended 1040x Nontaxable qualified state tuition program earnings. Where to file amended 1040x Nontaxable earnings from Coverdell education savings accounts. Where to file amended 1040x Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Where to file amended 1040x Educator expenses over limit. Where to file amended 1040x   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Where to file amended 1040x Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Where to file amended 1040x You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Where to file amended 1040x The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Where to file amended 1040x Principal place of business. Where to file amended 1040x   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Where to file amended 1040x   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Where to file amended 1040x You should keep records that will give the information needed to figure the deduction according to these rules. Where to file amended 1040x Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Where to file amended 1040x More information. Where to file amended 1040x   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Where to file amended 1040x Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Where to file amended 1040x You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Where to file amended 1040x Employment and outplacement agency fees. Where to file amended 1040x    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Where to file amended 1040x Employer pays you back. Where to file amended 1040x   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Where to file amended 1040x See Recoveries in Publication 525. Where to file amended 1040x Employer pays the employment agency. Where to file amended 1040x   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Where to file amended 1040x Résumé. Where to file amended 1040x   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Where to file amended 1040x Travel and transportation expenses. Where to file amended 1040x   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Where to file amended 1040x You can deduct the travel expenses if the trip is primarily to look for a new job. Where to file amended 1040x The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Where to file amended 1040x   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Where to file amended 1040x    You can choose to use the standard mileage rate to figure your car expenses. Where to file amended 1040x The 2013 rate for business use of a vehicle is 56½ cents per mile. Where to file amended 1040x See Publication 463 for more information on travel and car expenses. Where to file amended 1040x Legal Fees You can deduct legal fees related to doing or keeping your job. Where to file amended 1040x Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Where to file amended 1040x Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Where to file amended 1040x If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Where to file amended 1040x Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Where to file amended 1040x If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Where to file amended 1040x Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Where to file amended 1040x You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Where to file amended 1040x However, you cannot deduct the cost of travel as a form of education. Where to file amended 1040x Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Where to file amended 1040x See chapter 4 of Publication 463 for more information. Where to file amended 1040x Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Where to file amended 1040x You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Where to file amended 1040x For more information about depreciation, see Publication 946. Where to file amended 1040x Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Where to file amended 1040x Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Where to file amended 1040x Travel expenses. Where to file amended 1040x   Travel expenses are those incurred while traveling away from home for your employer. Where to file amended 1040x You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Where to file amended 1040x Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Where to file amended 1040x   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Where to file amended 1040x ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Where to file amended 1040x   Travel expenses are discussed more fully in chapter 1 of Publication 463. Where to file amended 1040x Temporary work assignment. Where to file amended 1040x    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Where to file amended 1040x Indefinite work assignment. Where to file amended 1040x   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Where to file amended 1040x If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Where to file amended 1040x Federal crime investigation and prosecution. Where to file amended 1040x   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Where to file amended 1040x This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Where to file amended 1040x   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Where to file amended 1040x Armed Forces reservists traveling more than 100 miles from home. Where to file amended 1040x   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Where to file amended 1040x The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Where to file amended 1040x The balance, if any, is reported on Schedule A. Where to file amended 1040x   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Where to file amended 1040x   For more information on travel expenses, see Publication 463. Where to file amended 1040x Local transportation expenses. Where to file amended 1040x   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Where to file amended 1040x They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Where to file amended 1040x   You can choose to use the standard mileage rate to figure your car expenses. Where to file amended 1040x The 2013 rate for business use of a vehicle is 56½ cents per mile. Where to file amended 1040x    In general, the costs of commuting between your residence and your place of business are nondeductible. Where to file amended 1040x Work at two places in a day. Where to file amended 1040x   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Where to file amended 1040x Temporary work location. Where to file amended 1040x   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Where to file amended 1040x The work location is outside the metropolitan area where you live and normally work. Where to file amended 1040x You have at least one regular work location (other than your home) for the same trade or business. Where to file amended 1040x (If this applies, the distance between your home and the temporary work location does not matter. Where to file amended 1040x )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Where to file amended 1040x It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Where to file amended 1040x If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Where to file amended 1040x For more information, see chapter 1 of Publication 463. Where to file amended 1040x Home office. Where to file amended 1040x   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Where to file amended 1040x (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Where to file amended 1040x ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Where to file amended 1040x Meals and entertainment. Where to file amended 1040x   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Where to file amended 1040x However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Where to file amended 1040x   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Where to file amended 1040x You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Where to file amended 1040x Meals when subject to “hours of service” limits. Where to file amended 1040x   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Where to file amended 1040x You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Where to file amended 1040x Gift expenses. Where to file amended 1040x   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Where to file amended 1040x The following items do not count toward the $25 limit. Where to file amended 1040x Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Where to file amended 1040x Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Where to file amended 1040x Local lodging. Where to file amended 1040x   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Where to file amended 1040x   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Where to file amended 1040x Additional information. Where to file amended 1040x    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Where to file amended 1040x Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Where to file amended 1040x You can also deduct assessments for benefit payments to unemployed union members. Where to file amended 1040x However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Where to file amended 1040x Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Where to file amended 1040x You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Where to file amended 1040x See Lobbying Expenses under Nondeductible Expenses, later. Where to file amended 1040x Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Where to file amended 1040x You must wear them as a condition of your employment. Where to file amended 1040x The clothes are not suitable for everyday wear. Where to file amended 1040x It is not enough that you wear distinctive clothing. Where to file amended 1040x The clothing must be specifically required by your employer. Where to file amended 1040x Nor is it enough that you do not, in fact, wear your work clothes away from work. Where to file amended 1040x The clothing must not be suitable for taking the place of your regular clothing. Where to file amended 1040x Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Where to file amended 1040x ). Where to file amended 1040x Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Where to file amended 1040x However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Where to file amended 1040x Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Where to file amended 1040x Protective clothing. Where to file amended 1040x   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Where to file amended 1040x   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Where to file amended 1040x Military uniforms. Where to file amended 1040x   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Where to file amended 1040x However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Where to file amended 1040x In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Where to file amended 1040x   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Where to file amended 1040x   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Where to file amended 1040x However, you can deduct the cost of insignia, shoulder boards, and related items. Where to file amended 1040x    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Where to file amended 1040x Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Where to file amended 1040x It maintains or improves skills required in your present work. Where to file amended 1040x It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Where to file amended 1040x You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Where to file amended 1040x If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Where to file amended 1040x If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Where to file amended 1040x Travel as education. Where to file amended 1040x   You cannot deduct the cost of travel that in itself constitutes a form of education. Where to file amended 1040x For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Where to file amended 1040x More information. Where to file amended 1040x    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Where to file amended 1040x Education Expenses During Unemployment If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Where to file amended 1040x Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Where to file amended 1040x Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Where to file amended 1040x Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Where to file amended 1040x These fees include the cost of tax preparation software programs and tax publications. Where to file amended 1040x They also include any fee you paid for electronic filing of your return. Where to file amended 1040x See Tax preparation fees under How To Report, later. Where to file amended 1040x Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Where to file amended 1040x On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Where to file amended 1040x You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Where to file amended 1040x These other expenses include the following items. Where to file amended 1040x Appraisal fees for a casualty loss or charitable contribution. Where to file amended 1040x Casualty and theft losses from property used in performing services as an employee. Where to file amended 1040x Clerical help and office rent in caring for investments. Where to file amended 1040x Depreciation on home computers used for investments. Where to file amended 1040x Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Where to file amended 1040x Fees to collect interest and dividends. Where to file amended 1040x Hobby expenses, but generally not more than hobby income. Where to file amended 1040x Indirect miscellaneous deductions from pass-through entities. Where to file amended 1040x Investment fees and expenses. Where to file amended 1040x Legal fees related to producing or collecting taxable income or getting tax advice. Where to file amended 1040x Loss on deposits in an insolvent or bankrupt financial institution. Where to file amended 1040x Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Where to file amended 1040x Repayments of income. Where to file amended 1040x Repayments of social security benefits. Where to file amended 1040x Safe deposit box rental, except for storing jewelry and other personal effects. Where to file amended 1040x Service charges on dividend reinvestment plans. Where to file amended 1040x Tax advice fees. Where to file amended 1040x Trustee's fees for your IRA, if separately billed and paid. Where to file amended 1040x If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Where to file amended 1040x Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Where to file amended 1040x Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Where to file amended 1040x First report the loss in Section B of Form 4684, Casualties and Thefts. Where to file amended 1040x You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Where to file amended 1040x To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Where to file amended 1040x For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Where to file amended 1040x Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Where to file amended 1040x Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Where to file amended 1040x The fees are deductible on the return for the year in which you paid them. Where to file amended 1040x For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Where to file amended 1040x Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Where to file amended 1040x You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Where to file amended 1040x But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Where to file amended 1040x For more information on depreciation, see Publication 946. Where to file amended 1040x Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Where to file amended 1040x Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Where to file amended 1040x The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Where to file amended 1040x For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Where to file amended 1040x Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Where to file amended 1040x But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Where to file amended 1040x You must add the fee to the cost of the property. Where to file amended 1040x You cannot deduct the fee you pay to a broker to sell securities. Where to file amended 1040x You can use the fee only to figure gain or loss from the sale. Where to file amended 1040x See the instructions for Schedule D (Form 1040) for information on how to report the fee. Where to file amended 1040x Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Where to file amended 1040x A hobby is not a business because it is not carried on to make a profit. Where to file amended 1040x See Not-for-Profit Activities in chapter 1 of Publication 535. Where to file amended 1040x Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Where to file amended 1040x Deductions of pass-through entities are passed through to the partners or shareholders. Where to file amended 1040x The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Where to file amended 1040x Example. Where to file amended 1040x You are a member of an investment club that is formed solely to invest in securities. Where to file amended 1040x The club is treated as a partnership. Where to file amended 1040x The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Where to file amended 1040x In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Where to file amended 1040x However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Where to file amended 1040x Publicly offered mutual funds. Where to file amended 1040x   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Where to file amended 1040x A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Where to file amended 1040x   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Where to file amended 1040x This net figure is the amount you report on your return as income. Where to file amended 1040x You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Where to file amended 1040x Information returns. Where to file amended 1040x   You should receive information returns from pass-through entities. Where to file amended 1040x Partnerships and S corporations. Where to file amended 1040x   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Where to file amended 1040x Nonpublicly offered mutual funds. Where to file amended 1040x   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Where to file amended 1040x You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Where to file amended 1040x Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Where to file amended 1040x Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Where to file amended 1040x You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Where to file amended 1040x You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Where to file amended 1040x You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Where to file amended 1040x See Tax Preparation Fees, earlier. Where to file amended 1040x Unlawful discrimination claims. Where to file amended 1040x   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Where to file amended 1040x S. Where to file amended 1040x Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Where to file amended 1040x However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Where to file amended 1040x See Publication 525 for more information. Where to file amended 1040x Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Where to file amended 1040x If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Where to file amended 1040x If elected, the casualty loss is subject to certain deduction limitations. Where to file amended 1040x The election is made on Form 4684. Where to file amended 1040x Once you make this choice, you cannot change it without IRS approval. Where to file amended 1040x If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Where to file amended 1040x As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Where to file amended 1040x Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Where to file amended 1040x This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Where to file amended 1040x As a casualty loss. Where to file amended 1040x Report it on Form 4684 first and then on Schedule A (Form 1040). Where to file amended 1040x See Publication 547 for details. Where to file amended 1040x As a nonbusiness bad debt. Where to file amended 1040x Report it on Schedule D (Form 1040). Where to file amended 1040x If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Where to file amended 1040x Exception. Where to file amended 1040x   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Where to file amended 1040x For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Where to file amended 1040x Actual loss different from estimated loss. Where to file amended 1040x   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Where to file amended 1040x See Recoveries in Publication 525. Where to file amended 1040x If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Where to file amended 1040x Choice not made. Where to file amended 1040x   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Where to file amended 1040x See Nonbusiness Bad Debts in chapter 4 of Publication 550. Where to file amended 1040x Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Where to file amended 1040x For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Where to file amended 1040x Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Where to file amended 1040x If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Where to file amended 1040x If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Where to file amended 1040x Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Where to file amended 1040x The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Where to file amended 1040x The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Where to file amended 1040x It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Where to file amended 1040x If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Where to file amended 1040x See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Where to file amended 1040x Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Where to file amended 1040x You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Where to file amended 1040x Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Where to file amended 1040x These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Where to file amended 1040x Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Where to file amended 1040x Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Where to file amended 1040x They are not subject to the 2% limit. Where to file amended 1040x Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Where to file amended 1040x List of Deductions Amortizable premium on taxable bonds. Where to file amended 1040x Casualty and theft losses from income-producing property. Where to file amended 1040x Federal estate tax on income in respect of a decedent. Where to file amended 1040x Gambling losses up to the amount of gambling winnings. Where to file amended 1040x Impairment-related work expenses of persons with disabilities. Where to file amended 1040x Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Where to file amended 1040x Losses from Ponzi-type investment schemes. Where to file amended 1040x Repayments of more than $3,000 under a claim of right. Where to file amended 1040x Unrecovered investment in an annuity. Where to file amended 1040x Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Where to file amended 1040x You can elect to amortize the premium on taxable bonds. Where to file amended 1040x The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Where to file amended 1040x Pre-1998 election to amortize bond premium. Where to file amended 1040x   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Where to file amended 1040x Bonds acquired after October 22, 1986, and before 1988. Where to file amended 1040x   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Where to file amended 1040x Bonds acquired before October 23, 1986. Where to file amended 1040x   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Where to file amended 1040x Deduction for excess premium. Where to file amended 1040x   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Where to file amended 1040x If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Where to file amended 1040x However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Where to file amended 1040x If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Where to file amended 1040x    Pre-1998 choice to amortize bond premium. Where to file amended 1040x If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Where to file amended 1040x More information. Where to file amended 1040x    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Where to file amended 1040x Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Where to file amended 1040x First report the loss in Section B of Form 4684. Where to file amended 1040x You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Where to file amended 1040x To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Where to file amended 1040x For more information on casualty and theft losses, see Publication 547. Where to file amended 1040x Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Where to file amended 1040x Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Where to file amended 1040x See Publication 559 for information about figuring the amount of this deduction. Where to file amended 1040x Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Where to file amended 1040x You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Where to file amended 1040x You cannot deduct gambling losses that are more than your winnings. Where to file amended 1040x Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Where to file amended 1040x You cannot reduce your gambling winnings by your gambling losses and report the difference. Where to file amended 1040x You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Where to file amended 1040x Therefore, your records should show your winnings separately from your losses. Where to file amended 1040x Diary of winnings and losses. Where to file amended 1040x You must keep an accurate diary or similar record of your losses and winnings. Where to file amended 1040x Your diary should contain at least the following information. Where to file amended 1040x The date and type of your specific wager or wagering activity. Where to file amended 1040x The name and address or location of the gambling establishment. Where to file amended 1040x The names of other persons present with you at the gambling establishment. Where to file amended 1040x The amount(s) you won or lost. Where to file amended 1040x Proof of winnings and losses. Where to file amended 1040x   In addition to your diary, you should also have other documentation. Where to file amended 1040x You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Where to file amended 1040x   For specific wagering transactions, you can use the following items to support your winnings and losses. Where to file amended 1040x    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Where to file amended 1040x They are not all-inclusive. Where to file amended 1040x Your tax liability depends on your particular facts and circumstances. Where to file amended 1040x Keno. Where to file amended 1040x   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Where to file amended 1040x Slot machines. Where to file amended 1040x   A record of the machine number and all winnings by date and time the machine was played. Where to file amended 1040x Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Where to file amended 1040x ). Where to file amended 1040x   The number of the table at which you were playing. Where to file amended 1040x Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Where to file amended 1040x Bingo. Where to file amended 1040x   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Where to file amended 1040x Supplemental records include any receipts from the casino, parlor, etc. Where to file amended 1040x Racing (horse, harness, dog, etc. Where to file amended 1040x ). Where to file amended 1040x   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Where to file amended 1040x Supplemental records include unredeemed tickets and payment records from the racetrack. Where to file amended 1040x Lotteries. Where to file amended 1040x   A record of ticket purchases, dates, winnings, and losses. Where to file amended 1040x Supplemental records include unredeemed tickets, payment slips, and winnings statements. Where to file amended 1040x Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Where to file amended 1040x Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Where to file amended 1040x Example. Where to file amended 1040x You are blind. Where to file amended 1040x You must use a reader to do your work. Where to file amended 1040x You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Where to file amended 1040x The reader's services are only for your work. Where to file amended 1040x You can deduct your expenses for the reader as impairment-related work expenses. Where to file amended 1040x Self-employed. Where to file amended 1040x   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Where to file amended 1040x See Impairment-related work expenses. Where to file amended 1040x , later under How To Report. Where to file amended 1040x Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Where to file amended 1040x S. Where to file amended 1040x trade or business). Where to file amended 1040x It is not subject to the passive activity limitations. Where to file amended 1040x Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Where to file amended 1040x See Publication 463 for more information. Where to file amended 1040x Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Where to file amended 1040x If you are an employee, complete Form 2106 or Form 2106-EZ. Where to file amended 1040x See Publication 463 for more information. Where to file amended 1040x Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Where to file amended 1040x You figure the deductible loss in Section B of Form 4684. Where to file amended 1040x However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Where to file amended 1040x Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Where to file amended 1040x You do not need to complete Appendix A. Where to file amended 1040x See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Where to file amended 1040x Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Where to file amended 1040x See Repayments in Publication 525 for more information. Where to file amended 1040x Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Where to file amended 1040x If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Where to file amended 1040x See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Where to file amended 1040x Nondeductible Expenses You cannot deduct the following expenses. Where to file amended 1040x List of Nondeductible Expenses Adoption expenses. Where to file amended 1040x Broker's commissions. Where to file amended 1040x Burial or funeral expenses, including the cost of a cemetery lot. Where to file amended 1040x Campaign expenses. Where to file amended 1040x Capital expenses. Where to file amended 1040x Check-writing fees. Where to file amended 1040x Club dues. Where to file amended 1040x Commuting expenses. Where to file amended 1040x Fees and licenses, such as car licenses, marriage licenses, and dog tags. Where to file amended 1040x Fines and penalties, such as parking tickets. Where to file amended 1040x Health spa expenses. Where to file amended 1040x Hobby losses—but see Hobby Expenses, earlier. Where to file amended 1040x Home repairs, insurance, and rent. Where to file amended 1040x Home security system. Where to file amended 1040x Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Where to file amended 1040x Investment-related seminars. Where to file amended 1040x Life insurance premiums paid by the insured. Where to file amended 1040x Lobbying expenses. Where to file amended 1040x Losses from the sale of your home, furniture, personal car, etc. Where to file amended 1040x Lost or misplaced cash or property. Where to file amended 1040x Lunches with co-workers. Where to file amended 1040x Meals while working late. Where to file amended 1040x Medical expenses as business expenses other than medical examinations required by your employer. Where to file amended 1040x Personal disability insurance premiums. Where to file amended 1040x Personal legal expenses. Where to file amended 1040x Personal, living, or family expenses. Where to file amended 1040x Political contributions. Where to file amended 1040x Professional accreditation fees. Where to file amended 1040x Professional reputation, expenses to improve. Where to file amended 1040x Relief fund contributions. Where to file amended 1040x Residential telephone line. Where to file amended 1040x Stockholders' meeting, expenses of attending. Where to file amended 1040x Tax-exempt income, expenses of earning or collecting. Where to file amended 1040x The value of wages never received or lost vacation time. Where to file amended 1040x Travel expenses for another individual. Where to file amended 1040x Voluntary unemployment benefit fund contributions. Where to file amended 1040x Wristwatches. Where to file amended 1040x Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Where to file amended 1040x For details, see Form 8839, Qualified Adoption Expenses. Where to file amended 1040x Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Where to file amended 1040x Instead, these fees must be added to the taxpayer's cost of the securities. Where to file amended 1040x Commissions paid on the sale are deductible as business expenses only by dealers. Where to file amended 1040x Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Where to file amended 1040x These include qualification and registration fees for primary elections. Where to file amended 1040x Legal fees. Where to file amended 1040x   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Where to file amended 1040x Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Where to file amended 1040x If you use such property in your work, you may be able to take a depreciation deduction. Where to file amended 1040x See Publication 946. Where to file amended 1040x If the property is a car used in your work, also see Publication 463. Where to file amended 1040x Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Where to file amended 1040x Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Where to file amended 1040x This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Where to file amended 1040x You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Where to file amended 1040x Dues paid to airline, hotel, and luncheon clubs are not deductible. Where to file amended 1040x Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Where to file amended 1040x If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Where to file amended 1040x Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Where to file amended 1040x This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Where to file amended 1040x Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Where to file amended 1040x Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Where to file amended 1040x Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Where to file amended 1040x However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Where to file amended 1040x See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Where to file amended 1040x Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Where to file amended 1040x Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Where to file amended 1040x You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Where to file amended 1040x See Publication 504, Divorced or Separated Individuals, for information on alimony. Where to file amended 1040x Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Where to file amended 1040x These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Where to file amended 1040x Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Where to file amended 1040x Covered executive branch official. Where to file amended 1040x   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Where to file amended 1040x The President. Where to file amended 1040x The Vice President. Where to file amended 1040x Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office. Where to file amended 1040x Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Where to file amended 1040x Dues used for lobbying. Where to file amended 1040x   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Where to file amended 1040x Exceptions. Where to file amended 1040x   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Where to file amended 1040x You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Where to file amended 1040x An Indian tribal government is considered a local council or similar governing body. Where to file amended 1040x You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Where to file amended 1040x If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Where to file amended 1040x Payments by the other person to you for lobbying activities cannot be deducted. Where to file amended 1040x Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Where to file amended 1040x However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Where to file amended 1040x See Publication 547. Where to file amended 1040x Example. Where to file amended 1040x A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Where to file amended 1040x The diamond falls from the ring and is never found. Where to file amended 1040x The loss of the diamond is a casualty. Where to file amended 1040x Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Where to file amended 1040x See Publication 463 for information on deductible expenses while traveling away from home. Where to file amended 1040x Meals While Working Late You cannot deduct the cost of meals while working late. Where to file amended 1040x However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Where to file amended 1040x See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Where to file amended 1040x Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Where to file amended 1040x Custody of children. Where to file amended 1040x Breach of promise to marry suit. Where to file amended 1040x Civil or criminal charges resulting from a personal relationship. Where to file amended 1040x Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Where to file amended 1040x For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Where to file amended 1040x Preparation of a title (or defense or perfection of a title). Where to file amended 1040x Preparation of a will. Where to file amended 1040x Property claims or property settlement in a divorce. Where to file amended 1040x You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Where to file amended 1040x Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Where to file amended 1040x Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Where to file amended 1040x Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Where to file amended 1040x Accounting certificate fees paid for the initial right to practice accounting. Where to file amended 1040x Bar exam fees and incidental expenses in securing initial admission to the bar. Where to file amended 1040x Medical and dental license fees paid to get initial licensing. Where to file amended 1040x Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Where to file amended 1040x Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Where to file amended 1040x Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Where to file amended 1040x Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Where to file amended 1040x You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Where to file amended 1040x Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Where to file amended 1040x You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Where to file amended 1040x If you have expenses to p
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Where to file amended 1040x 4. Where to file amended 1040x   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Where to file amended 1040x Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Where to file amended 1040x Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Where to file amended 1040x Debt paid off. Where to file amended 1040x Payment of cash. Where to file amended 1040x Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Where to file amended 1040x S. Where to file amended 1040x Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Where to file amended 1040x Exception 2. Where to file amended 1040x Section 1256 contracts and straddles. Where to file amended 1040x Market discount bonds. Where to file amended 1040x File Form 1099-B or Form 1099-S with the IRS. Where to file amended 1040x Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Where to file amended 1040x Investment property. Where to file amended 1040x   This is property that produces investment income. Where to file amended 1040x Examples include stocks, bonds, and Treasury bills and notes. Where to file amended 1040x Property used in a trade or business is not investment property. Where to file amended 1040x Form 1099-B. Where to file amended 1040x   If you sold property such as stocks, bonds, mutual funds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Where to file amended 1040x You should receive the statement by February 15 of the next year. Where to file amended 1040x It will show the gross proceeds from the sale. Where to file amended 1040x The IRS will also get a copy of Form 1099-B from the broker. Where to file amended 1040x   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Where to file amended 1040x If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Where to file amended 1040x This will help you complete Form 8949. Where to file amended 1040x Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Where to file amended 1040x    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Where to file amended 1040x Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Where to file amended 1040x Nominees. Where to file amended 1040x   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Where to file amended 1040x   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Where to file amended 1040x Other property transactions. Where to file amended 1040x   Certain transfers of property are discussed in other IRS publications. Where to file amended 1040x These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Where to file amended 1040x Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Where to file amended 1040x Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Where to file amended 1040x What Is a Sale or Trade? This section explains what is a sale or trade. Where to file amended 1040x It also explains certain transactions and events that are treated as sales or trades. Where to file amended 1040x A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Where to file amended 1040x A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Where to file amended 1040x Sale and purchase. Where to file amended 1040x   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Where to file amended 1040x The sale and purchase are two separate transactions. Where to file amended 1040x But see Like-Kind Exchanges under Nontaxable Trades, later. Where to file amended 1040x Redemption of stock. Where to file amended 1040x   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Where to file amended 1040x Dividend versus sale or trade. Where to file amended 1040x   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Where to file amended 1040x Both direct and indirect ownership of stock will be considered. Where to file amended 1040x The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Where to file amended 1040x Redemption or retirement of bonds. Where to file amended 1040x   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Where to file amended 1040x See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Where to file amended 1040x   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Where to file amended 1040x For details, see Regulations section 1. Where to file amended 1040x 1001-3. Where to file amended 1040x Surrender of stock. Where to file amended 1040x   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Where to file amended 1040x The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Where to file amended 1040x Trade of investment property for an annuity. Where to file amended 1040x   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Where to file amended 1040x If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Where to file amended 1040x Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Where to file amended 1040x Transfer by inheritance. Where to file amended 1040x   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Where to file amended 1040x No taxable gain or deductible loss results from the transfer. Where to file amended 1040x Termination of certain rights and obligations. Where to file amended 1040x   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Where to file amended 1040x Any gain or loss is treated as a capital gain or loss. Where to file amended 1040x   This rule does not apply to the retirement of a debt instrument. Where to file amended 1040x See Redemption or retirement of bonds , earlier. Where to file amended 1040x Worthless Securities Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Where to file amended 1040x This affects whether your capital loss is long term or short term. Where to file amended 1040x See Holding Period , later. Where to file amended 1040x Worthless securities also include securities that you abandon after March 12, 2008. Where to file amended 1040x To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Where to file amended 1040x All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Where to file amended 1040x If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Where to file amended 1040x Do not deduct them in the year the stock became worthless. Where to file amended 1040x How to report loss. Where to file amended 1040x   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Where to file amended 1040x    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Where to file amended 1040x See Form 8949 and the Instructions for Form 8949. Where to file amended 1040x Filing a claim for refund. Where to file amended 1040x   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Where to file amended 1040x You must use Form 1040X, Amended U. Where to file amended 1040x S. Where to file amended 1040x Individual Income Tax Return, to amend your return for the year the security became worthless. Where to file amended 1040x You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Where to file amended 1040x (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Where to file amended 1040x ) For more information about filing a claim, see Publication 556. Where to file amended 1040x Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Where to file amended 1040x You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Where to file amended 1040x This gives you a new holding period for the position that begins on the date of the constructive sale. Where to file amended 1040x Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Where to file amended 1040x Constructive sale. Where to file amended 1040x   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Where to file amended 1040x   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Where to file amended 1040x For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Where to file amended 1040x Exception for nonmarketable securities. Where to file amended 1040x   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Where to file amended 1040x Exception for certain closed transactions. Where to file amended 1040x   Do not treat a transaction as a constructive sale if all of the following are true. Where to file amended 1040x You closed the transaction on or before the 30th day after the end of your tax year. Where to file amended 1040x You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Where to file amended 1040x Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Where to file amended 1040x   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Where to file amended 1040x   This exception also applies to successive short sales of an entire appreciated financial position. Where to file amended 1040x For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Where to file amended 1040x This bulletin is available at www. Where to file amended 1040x irs. Where to file amended 1040x gov/pub/irs-irbs/irb03-03. Where to file amended 1040x pdf. Where to file amended 1040x Appreciated financial position. Where to file amended 1040x   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Where to file amended 1040x Exceptions. Where to file amended 1040x   An appreciated financial position does not include the following. Where to file amended 1040x Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Where to file amended 1040x Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Where to file amended 1040x 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Where to file amended 1040x Any hedge with respect to a position described in (2). Where to file amended 1040x Certain trust instruments treated as stock. Where to file amended 1040x   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Where to file amended 1040x Sale of appreciated financial position. Where to file amended 1040x   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Where to file amended 1040x However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Where to file amended 1040x Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Where to file amended 1040x Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Where to file amended 1040x Exceptions. Where to file amended 1040x   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Where to file amended 1040x For more details, including definitions of these terms, see section 1256. Where to file amended 1040x Regulated futures contract. Where to file amended 1040x   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Where to file amended 1040x A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Where to file amended 1040x Foreign currency contract. Where to file amended 1040x   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Where to file amended 1040x   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Where to file amended 1040x   Special rules apply to certain foreign currency transactions. Where to file amended 1040x These transactions may result in ordinary gain or loss treatment. Where to file amended 1040x For details, see Internal Revenue Code section 988 and Regulations sections 1. Where to file amended 1040x 988-1(a)(7) and 1. Where to file amended 1040x 988-3. Where to file amended 1040x Nonequity option. Where to file amended 1040x   This is any listed option (defined later) that is not an equity option. Where to file amended 1040x Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Where to file amended 1040x A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Where to file amended 1040x Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Where to file amended 1040x Cash-settled options. Where to file amended 1040x   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Where to file amended 1040x   This rule does not apply to options established before the SEC determines that the stock index is broad based. Where to file amended 1040x Listed option. Where to file amended 1040x   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Where to file amended 1040x A listed option, however, does not include an option that is a right to acquire stock from the issuer. Where to file amended 1040x Dealer equity option. Where to file amended 1040x   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Where to file amended 1040x   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Where to file amended 1040x Equity option. Where to file amended 1040x   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Where to file amended 1040x  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Where to file amended 1040x Dealer securities futures contract. Where to file amended 1040x   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Where to file amended 1040x A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Where to file amended 1040x Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Where to file amended 1040x That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Where to file amended 1040x Hedging exception. Where to file amended 1040x   The marked-to-market rules do not apply to hedging transactions. Where to file amended 1040x See Hedging Transactions , later. Where to file amended 1040x 60/40 rule. Where to file amended 1040x   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Where to file amended 1040x This is true regardless of how long you actually held the property. Where to file amended 1040x Example. Where to file amended 1040x On June 22, 2012, you bought a regulated futures contract for $50,000. Where to file amended 1040x On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Where to file amended 1040x You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Where to file amended 1040x On February 1, 2013, you sold the contract for $56,000. Where to file amended 1040x Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Where to file amended 1040x Limited partners or entrepreneurs. Where to file amended 1040x   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Where to file amended 1040x Instead, these gains or losses are treated as short term. Where to file amended 1040x Terminations and transfers. Where to file amended 1040x   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Where to file amended 1040x In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Where to file amended 1040x Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Where to file amended 1040x Loss carryback election. Where to file amended 1040x   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Where to file amended 1040x See How To Report , later, for information about reporting this election on your return. Where to file amended 1040x   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Where to file amended 1040x In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Where to file amended 1040x   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Where to file amended 1040x In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Where to file amended 1040x   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Where to file amended 1040x (See Capital Losses under Reporting Capital Gains and Losses, later. Where to file amended 1040x ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Where to file amended 1040x In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Where to file amended 1040x Net section 1256 contracts loss. Where to file amended 1040x   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Where to file amended 1040x Net section 1256 contracts gain. Where to file amended 1040x   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Where to file amended 1040x  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Where to file amended 1040x Traders in section 1256 contracts. Where to file amended 1040x   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Where to file amended 1040x However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Where to file amended 1040x Treatment of underlying property. Where to file amended 1040x   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Where to file amended 1040x How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Where to file amended 1040x Form 6781. Where to file amended 1040x   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Where to file amended 1040x This includes the amount shown in box 10 of Form 1099-B. Where to file amended 1040x Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Where to file amended 1040x Include a copy of Form 6781 with your income tax return. Where to file amended 1040x   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Where to file amended 1040x Follow the Form 6781 instructions for completing Part I. Where to file amended 1040x Loss carryback election. Where to file amended 1040x   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Where to file amended 1040x Follow the instructions for completing Form 6781 for the loss year to make this election. Where to file amended 1040x Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Where to file amended 1040x A transaction is a hedging transaction if both of the following conditions are met. Where to file amended 1040x You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Where to file amended 1040x You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Where to file amended 1040x This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Where to file amended 1040x A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Where to file amended 1040x A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Where to file amended 1040x However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Where to file amended 1040x Hedging loss limit. Where to file amended 1040x   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Where to file amended 1040x A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Where to file amended 1040x   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Where to file amended 1040x Ignore any hedging transaction items in determining this taxable income. Where to file amended 1040x If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Where to file amended 1040x   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Where to file amended 1040x   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Where to file amended 1040x The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Where to file amended 1040x Sale of property used in a hedge. Where to file amended 1040x   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Where to file amended 1040x Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Where to file amended 1040x See the Instructions for Schedule SE (Form 1040). Where to file amended 1040x In addition, the rules relating to contributions to self-employment retirement plans apply. Where to file amended 1040x For information on retirement plan contributions, see Publication 560 and Publication 590. Where to file amended 1040x Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Where to file amended 1040x You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Where to file amended 1040x Investment property you buy normally has an original basis equal to its cost. Where to file amended 1040x If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Where to file amended 1040x Cost Basis The basis of property you buy is usually its cost. Where to file amended 1040x The cost is the amount you pay in cash, debt obligations, or other property or services. Where to file amended 1040x Unstated interest. Where to file amended 1040x   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Where to file amended 1040x You generally have unstated interest if your interest rate is less than the applicable federal rate. Where to file amended 1040x For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Where to file amended 1040x Basis Other Than Cost There are times when you must use a basis other than cost. Where to file amended 1040x In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Where to file amended 1040x Fair market value. Where to file amended 1040x   This is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Where to file amended 1040x Sales of similar property, around the same date, may be helpful in figuring fair market value. Where to file amended 1040x Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Where to file amended 1040x The amount you include in income then becomes your basis in the property. Where to file amended 1040x If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Where to file amended 1040x Restricted property. Where to file amended 1040x   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Where to file amended 1040x Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Where to file amended 1040x See Restricted Property in Publication 525 for more information. Where to file amended 1040x Bargain purchases. Where to file amended 1040x   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Where to file amended 1040x Your basis in the property is the price you pay plus the amount you include in income. Where to file amended 1040x Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Where to file amended 1040x Example. Where to file amended 1040x You trade A Company stock for B Company stock having a fair market value of $1,200. Where to file amended 1040x If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Where to file amended 1040x If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Where to file amended 1040x The basis of your B Company stock is $1,200. Where to file amended 1040x If you later sell the B Company stock for $1,300, you will have a gain of $100. Where to file amended 1040x Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Where to file amended 1040x See Nontaxable Trades , later. Where to file amended 1040x The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Where to file amended 1040x Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Where to file amended 1040x Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Where to file amended 1040x Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Where to file amended 1040x See Transfers Between Spouses , later. Where to file amended 1040x Recordkeeping. Where to file amended 1040x The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Where to file amended 1040x Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Where to file amended 1040x Fair market value less than donor's adjusted basis. Where to file amended 1040x   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Where to file amended 1040x Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Where to file amended 1040x No gain or loss. Where to file amended 1040x   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Where to file amended 1040x Example. Where to file amended 1040x You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Where to file amended 1040x The fair market value at the time of the gift is $9,000. Where to file amended 1040x You later sell the property for $9,500. Where to file amended 1040x You have neither gain nor loss. Where to file amended 1040x Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Where to file amended 1040x Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Where to file amended 1040x Fair market value equal to or more than donor's adjusted basis. Where to file amended 1040x   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Where to file amended 1040x Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Where to file amended 1040x Gift received before 1977. Where to file amended 1040x   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Where to file amended 1040x However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Where to file amended 1040x Example 1. Where to file amended 1040x You were given XYZ Company stock in 1976. Where to file amended 1040x At the time of the gift, the stock had a fair market value of $21,000. Where to file amended 1040x The donor's adjusted basis was $20,000. Where to file amended 1040x The donor paid a gift tax of $500 on the gift. Where to file amended 1040x Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Where to file amended 1040x Example 2. Where to file amended 1040x The facts are the same as in Example 1 except that the gift tax paid was $1,500. Where to file amended 1040x Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Where to file amended 1040x Gift received after 1976. Where to file amended 1040x   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Where to file amended 1040x You figure this part by multiplying the gift tax paid on the gift by a fraction. Where to file amended 1040x The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Where to file amended 1040x   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Where to file amended 1040x The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Where to file amended 1040x Example. Where to file amended 1040x In 2013, you received a gift of property from your mother. Where to file amended 1040x At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Where to file amended 1040x The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Where to file amended 1040x You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Where to file amended 1040x 701 ($61,000 ÷ $87,000) . Where to file amended 1040x 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Where to file amended 1040x   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Where to file amended 1040x Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Where to file amended 1040x For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Where to file amended 1040x Gift tax information. Where to file amended 1040x   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Where to file amended 1040x For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Where to file amended 1040x Property Received as Inheritance Before or after 2010. Where to file amended 1040x   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Where to file amended 1040x If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Where to file amended 1040x For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Where to file amended 1040x Appreciated property you gave the decedent. Where to file amended 1040x   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Where to file amended 1040x This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Where to file amended 1040x Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Where to file amended 1040x More information. Where to file amended 1040x   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Where to file amended 1040x Inherited in 2010 and executor elected to file Form 8939. Where to file amended 1040x   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Where to file amended 1040x Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Where to file amended 1040x The result of these adjustments to the basis is the adjusted basis. Where to file amended 1040x Adjustments to the basis of stocks and bonds are explained in the following discussion. Where to file amended 1040x For information about other adjustments to basis, see Publication 551. Where to file amended 1040x Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Where to file amended 1040x If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Where to file amended 1040x The basis of stock must be adjusted for certain events that occur after purchase. Where to file amended 1040x For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Where to file amended 1040x You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Where to file amended 1040x These distributions, up to the amount of your basis, are a nontaxable return of capital. Where to file amended 1040x The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Where to file amended 1040x To find out more, go to www. Where to file amended 1040x irs. Where to file amended 1040x gov/Filing/Filing-Options. Where to file amended 1040x Identifying stock or bonds sold. Where to file amended 1040x   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Where to file amended 1040x Adequate identification. Where to file amended 1040x   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Where to file amended 1040x Broker holds stock. Where to file amended 1040x   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Where to file amended 1040x  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Where to file amended 1040x Single stock certificate. Where to file amended 1040x   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Where to file amended 1040x   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Where to file amended 1040x Bonds. Where to file amended 1040x   These methods of identification also apply to bonds sold or transferred. Where to file amended 1040x Identification not possible. Where to file amended 1040x   If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Where to file amended 1040x Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Where to file amended 1040x Example. Where to file amended 1040x You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Where to file amended 1040x In January 1999 you bought another 200 shares for $11 a share. Where to file amended 1040x In July 1999 you gave your son 50 shares. Where to file amended 1040x In December 2001 you bought 100 shares for $9 a share. Where to file amended 1040x In April 2013 you sold 130 shares. Where to file amended 1040x You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Where to file amended 1040x The shares of stock you gave your son had a basis of $500 (50 × $10). Where to file amended 1040x You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Where to file amended 1040x    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Where to file amended 1040x Example. Where to file amended 1040x You bought 100 shares of Fund A for $10 a share. Where to file amended 1040x You paid a $50 commission to the broker for the purchase. Where to file amended 1040x Your cost basis for each share is $10. Where to file amended 1040x 50 ($1,050 ÷ 100). Where to file amended 1040x Commissions and load charges. Where to file amended 1040x   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Where to file amended 1040x You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Where to file amended 1040x A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Where to file amended 1040x   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Where to file amended 1040x You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Where to file amended 1040x You dispose of the shares within 90 days of the purchase date. Where to file amended 1040x You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Where to file amended 1040x   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Where to file amended 1040x The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Where to file amended 1040x Choosing average basis for mutual fund shares. Where to file amended 1040x   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Where to file amended 1040x The methods you can use to figure average basis are explained later. Where to file amended 1040x Undistributed capital gains. Where to file amended 1040x   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Where to file amended 1040x See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Where to file amended 1040x Reinvestment right. Where to file amended 1040x   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Where to file amended 1040x      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Where to file amended 1040x This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Where to file amended 1040x Table 4-1. Where to file amended 1040x This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Where to file amended 1040x Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Where to file amended 1040x This worksheet will help you figure the adjusted basis when you sell or redeem shares. Where to file amended 1040x Table 4-1. Where to file amended 1040x Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Where to file amended 1040x 2 Cost plus or minus adjustments. Where to file amended 1040x Automatic investment service. Where to file amended 1040x   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Where to file amended 1040x Dividend reinvestment plans. Where to file amended 1040x   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Where to file amended 1040x You must include the amount of the discount in your income. Where to file amended 1040x Public utilities. Where to file amended 1040x   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Where to file amended 1040x Stock dividends. Where to file amended 1040x   Stock dividends are distributions made by a corporation of its own stock. Where to file amended 1040x Generally, stock dividends are not taxable to you. Where to file amended 1040x However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Where to file amended 1040x If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Where to file amended 1040x New and old stock identical. Where to file amended 1040x   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Where to file amended 1040x The result is your basis for each share of stock. Where to file amended 1040x Example 1. Where to file amended 1040x You owned one share of common stock that you bought for $45. Where to file amended 1040x The corporation distributed two new shares of common stock for each share held. Where to file amended 1040x You then had three shares of common stock. Where to file amended 1040x Your basis in each share is $15 ($45 ÷ 3). Where to file amended 1040x Example 2. Where to file amended 1040x You owned two shares of common stock. Where to file amended 1040x You bought one for $30 and the other for $45. Where to file amended 1040x The corporation distributed two new shares of common stock for each share held. Where to file amended 1040x You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Where to file amended 1040x New and old stock not identical. Where to file amended 1040x   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Where to file amended 1040x Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Where to file amended 1040x Example. Where to file amended 1040x You bought a share of common stock for $100. Where to file amended 1040x Later, the corporation distributed a share of preferred stock for each share of common stock held. Where to file amended 1040x At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Where to file amended 1040x You figure the basis of the old and new stock by dividing your $100 basis between them. Where to file amended 1040x The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Where to file amended 1040x Stock bought at various times. Where to file amended 1040x   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Where to file amended 1040x Taxable stock dividends. Where to file amended 1040x   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Where to file amended 1040x The basis of your old stock does not change. Where to file amended 1040x Stock splits. Where to file amended 1040x   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Where to file amended 1040x Stock rights. Where to file amended 1040x   A stock right is a right to acquire a corporation's stock. Where to file amended 1040x It may be exercised, it may be sold if it has a market value, or it may expire. Where to file amended 1040x Stock rights are rarely taxable when you receive them. Where to file amended 1040x See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Where to file amended 1040x Taxable stock rights. Where to file amended 1040x   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Where to file amended 1040x The basis of the old stock does not change. Where to file amended 1040x Nontaxable stock rights. Where to file amended 1040x   If you receive nontaxable stock rights and allow them to expire, they have no basis. Where to file amended 1040x   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Where to file amended 1040x Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Where to file amended 1040x   If the fair market value of the stock rights was less than 15%, their basis is zero. Where to file amended 1040x However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Where to file amended 1040x To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Where to file amended 1040x Basis of new stock. Where to file amended 1040x   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Where to file amended 1040x Example. Where to file amended 1040x You own 100 shares of ABC Company stock, which cost you $22 per share. Where to file amended 1040x The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Where to file amended 1040x At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Where to file amended 1040x Each stock right had a market value of $3. Where to file amended 1040x The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Where to file amended 1040x You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Where to file amended 1040x 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Where to file amended 1040x 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Where to file amended 1040x 18 ($21. Where to file amended 1040x 78 ÷ 10) per right. Where to file amended 1040x If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Where to file amended 1040x 18), or $28. Where to file amended 1040x 18 per share. Where to file amended 1040x The remaining basis of the old stock is $21. Where to file amended 1040x 78 per share. Where to file amended 1040x Investment property received in liquidation. Where to file amended 1040x   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Where to file amended 1040x S corporation stock. Where to file amended 1040x   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Where to file amended 1040x All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Where to file amended 1040x The nonseparately stated income of the S corporation. Where to file amended 1040x The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Where to file amended 1040x   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Where to file amended 1040x Distributions by the S corporation that were not included in your income. Where to file amended 1040x All loss and deduction items of the S corporation that are separately stated and passed through to you. Where to file amended 1040x Any nonseparately stated loss of the S corporation. Where to file amended 1040x Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Where to file amended 1040x The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Where to file amended 1040x However, your basis in the stock cannot be reduced below zero. Where to file amended 1040x Specialized small business investment company stock or partnership interest. Where to file amended 1040x   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Where to file amended 1040x See Rollover of Gain From Publicly Traded Securities , later. Where to file amended 1040x Qualified small business stock. Where to file amended 1040x   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Where to file amended 1040x See Gains on Qualified Small Business Stock , later. Where to file amended 1040x Short sales. Where to file amended 1040x   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Where to file amended 1040x   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Where to file amended 1040x Premiums on bonds. Where to file amended 1040x   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Where to file amended 1040x If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Where to file amended 1040x   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Where to file amended 1040x You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Where to file amended 1040x   See Bond Premium Amortization in chapter 3 for more information. Where to file amended 1040x Market discount on bonds. Where to file amended 1040x   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Where to file amended 1040x See Market Discount Bonds in chapter 1 for more information. Where to file amended 1040x Bonds purchased at par value. Where to file amended 1040x   A bond purchased at par value (face amount) has no premium or discount. Where to file amended 1040x When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Where to file amended 1040x Example. Where to file amended 1040x You purchased a bond several years ago for its par value of $10,000. Where to file amended 1040x You sold the bond this year for $10,100. Where to file amended 1040x You have a gain of $100. Where to file amended 1040x However, if you had sold the bond for $9,900, you would have a loss of $100. Where to file amended 1040x Acquisition discount on short-term obligations. Where to file amended 1040x   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Where to file amended 1040x See Discount on Short-Term Obligations in chapter 1 for more information. Where to file amended 1040x Original issue discount (OID) on debt instruments. Where to file amended 1040x   Increase the basis of a debt instrument by the OID you include in your income. Where to file amended 1040x See Original Issue Discount (OID) in chapter 1. Where to file amended 1040x Discounted tax-exempt obligations. Where to file amended 1040x   OID on tax-exempt obligations is generally not taxable. Where to file amended 1040x However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Where to file amended 1040x The accrued OID is added to the basis of the obligation to determine your gain or loss. Where to file amended 1040x   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Where to file amended 1040x   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Where to file amended 1040x See Discount on Short-Term Obligations in chapter 1. Where to file amended 1040x Stripped tax-exempt obligation. Where to file amended 1040x   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Where to file amended 1040x For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Where to file amended 1040x You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Where to file amended 1040x   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Where to file amended 1040x Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Where to file amended 1040x In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Where to file amended 1040x How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Where to file amended 1040x Gain. Where to file amended 1040x   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Where to file amended 1040x Loss. Where to file amended 1040x   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Where to file amended 1040x Amount realized. Where to file amended 1040x   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Where to file amended 1040x Amount realized includes the money you receive plus the fair market value of any property or services you receive. Where to file amended 1040x   If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Where to file amended 1040x For more information, see Publication 537. Where to file amended 1040x   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Where to file amended 1040x See Regulations section 1. Where to file amended 1040x 1001-1(g). Where to file amended 1040x However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Where to file amended 1040x Fair market value. Where to file amended 1040x   Fair market value is the price at which property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Where to file amended 1040x Example. Where to file amended 1040x You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Where to file amended 1040x Your gain is $3,000 ($10,000 – $7,000). Where to file amended 1040x If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Where to file amended 1040x Debt paid off. Where to file amended 1040x   A debt against the property, or against you, that is paid off as a part of the transaction or that is assumed by the buyer must be included in the amount realized. Where to file amended 1040x This is true even if neither you nor the buyer is personally liable for the debt. Where to file amended 1040x For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Where to file amended 1040x Example. Where to file amended 1040x You sell stock that you had pledged as security for a bank loan of $8,000. Where to file amended 1040x Your basis in the stock is $6,000. Where to file amended 1040x The buyer pays off your bank loan and pays you $20,000 in cash. Where to file amended 1040x The amount realized is $28,000 ($20,000 + $8,000). Where to file amended 1040x Your gain is $22,000 ($28,000 – $6,000). Where to file amended 1040x Payment of cash. Where to file amended 1040x   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Where to file amended 1040x Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Where to file amended 1040x If the result is a positive number, it is a gain. Where to file amended 1040x If the result is a negative number, it is a loss. Where to file amended 1040x No gain or loss. Where to file amended 1040x   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Where to file amended 1040x In this case, you may have neither a gain nor a loss. Where to file amended 1040x See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Where to file amended 1040x Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Where to file amended 1040x If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu