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Www. Www.freestatetaxsites.com freestatetaxsites. Www.freestatetaxsites.com com Publication 1542 - Main Content Table of Contents How To Use Per Diem Rate TablesThe Two Substantiation Methods Transition Rules Per Diem Rate Tables How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Www.freestatetaxsites.com How To Use Per Diem Rate Tables This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year. Www.freestatetaxsites.com The Two Substantiation Methods The tables in this publication reflect the high-low substantiation method and the regular federal per diem rate method. Www.freestatetaxsites.com High-low method. Www.freestatetaxsites.com   Tables 1 and 2 in this publication list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Www.freestatetaxsites.com Table 1 lists the localities that are eligible for $233 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2010. Www.freestatetaxsites.com For travel on or after October 1, 2010, all other localities within CONUS are eligible for $160 ($52 M&IE) per diem under the high-low method. Www.freestatetaxsites.com    Table 2 lists the localities that are eligible for $242 ($65 M&IE) per diem, effective October 1, 2011. Www.freestatetaxsites.com For travel on or after October 1, 2011, the per diem for all other localities decreases to $163 ($52 M&IE). Www.freestatetaxsites.com Regular federal per diem rate method. Www.freestatetaxsites.com   Tables 3 and 4 give the regular federal per diem rates published by the General Services Administration (GSA). Www.freestatetaxsites.com Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. Www.freestatetaxsites.com The rates listed in Table 3 are effective October 1, 2010; those in Table 4 are effective October 1, 2011. Www.freestatetaxsites.com The standard rate for all locations within CONUS not specifically listed in Table 3 is $123 ($77 for lodging and $46 for M&IE). Www.freestatetaxsites.com For Table 4, this rate is $123 ($77 for lodging and $46 for M&IE). Www.freestatetaxsites.com Transition Rules The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally October 1) through December 31. Www.freestatetaxsites.com During this period, you generally may change to the new rates or finish out the year with the rates you had been using. Www.freestatetaxsites.com High-low method. Www.freestatetaxsites.com   If you use the high-low substantiation method for an employee, when new rates become effective (generally October 1) you can either continue with the rates you used for the first part of the year or change to the new rates. Www.freestatetaxsites.com However, you must continue using the high-low method for that employee for the rest of the calendar year (through December 31). Www.freestatetaxsites.com Also, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. Www.freestatetaxsites.com   For example, Employee A travels extensively during March and April of 2012, and you determine A's travel allowance (reimbursement) using the high-low method (Table 2). Www.freestatetaxsites.com Employee A does not travel again until November 2012. Www.freestatetaxsites.com For A's November trip and any others during the remainder of 2012, you may continue using the same set of rates (Table 2) or change to the new rates that generally will be effective in October. Www.freestatetaxsites.com Assume that two of your other employees, B and C, are also reimbursed under the high-low method—your choice of rates must also apply to them. Www.freestatetaxsites.com   For Employee A's travel on or after January 1, 2013, you must use the rates in effect for 2013, but may either continue with the high-low method or choose the regular federal per diem rate method. Www.freestatetaxsites.com The choice of method stays in effect for the entire 2013 calendar year. Www.freestatetaxsites.com   The new rates and localities for the high-low method are included each year in a revenue procedure that is generally published in mid- to late-September. Www.freestatetaxsites.com You can find the revenue procedure in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. Www.freestatetaxsites.com irs. Www.freestatetaxsites.com gov/irb. Www.freestatetaxsites.com Federal per diem rate method. Www.freestatetaxsites.com   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Www.freestatetaxsites.com Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). Www.freestatetaxsites.com However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates. Www.freestatetaxsites.com Your choice applies to all employees reimbursed under the per diem rate method during that calendar year. Www.freestatetaxsites.com Just as for the high-low method, you must continue using the same method for an employee for the entire calendar year. Www.freestatetaxsites.com   For example, Employees P and Q attend an industry conference in February 2012, and you reimburse their expenses using the per diem rate method (Table 4). Www.freestatetaxsites.com Employee P attends other conferences in July (reimbursed using Table 4) and December 2012, while Employee Q's only other travel occurs in October 2012. Www.freestatetaxsites.com When determining Q's travel allowance for the October travel, you must decide whether to continue with the old (Table 4) rates or adopt the new ones effective October 1, 2012. Www.freestatetaxsites.com Your choice of rates will also apply to Employee P's December travel. Www.freestatetaxsites.com Both employees must continue being reimbursed under the per diem rate method for travel through December 31, 2012. Www.freestatetaxsites.com You can choose a new method for either or both employees; this choice will become effective on January 1, 2013. Www.freestatetaxsites.com   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. Www.freestatetaxsites.com Go to www. Www.freestatetaxsites.com gsa. Www.freestatetaxsites.com gov/perdiem. Www.freestatetaxsites.com Per diem rates for localities listed in Table 4 may change at any time during the rest of 2011 or 2012. Www.freestatetaxsites.com To be sure you have the most current rate, check IRS. Www.freestatetaxsites.com gov for an updated Publication 1542, the other Internet website listed earlier under Per diem rates on the Internet, or call the IRS at 1-800-829-1040. Www.freestatetaxsites.com Per Diem Rate Tables Table 1. Www.freestatetaxsites.com Localities Eligible for $233 ($65 M&IE) Per Diem Amount Under the High-Low Substantiation Method (Effective October 1, 2010 – September 30, 2011)1,2 Note: The standard (“low”) rate of $160 ($108 for lodging and $52 for M&IE) applies to all locations within the continental United States (CONUS) not specifically listed below or encompassed by the boundary definition of a listed point. Www.freestatetaxsites.com Per Diem Locality Effective Date of State Key City County and/or Other Defined Location $233 Rate AZ Phoenix, Scottsdale Maricopa 1/1 - 5/31   Sedona City limits of Sedona 3/1 - 4/30 CA Monterey Monterey All year   Napa Napa 4/1 - 9/30 10/1 - 11/30   San Diego San Diego All year   San Francisco San Francisco All year   Santa Barbara Santa Barbara All year   Santa Monica City limits of Santa Monica All year   South Lake Tahoe El Dorado All year   Yosemite National Park Mariposa All year CO Aspen Pitkin 1/1 - 3/31 6/1 - 8/31 12/1 - 12/31   Denver, Aurora Denver, Adams, Arapahoe, Jefferson All year   Silverthorne, Breckenridge Summit 1/1 - 3/31 12/1 - 12/31   Steamboat Springs Routt 1/1 - 3/31 12/1 - 12/31   Telluride San Miguel 1/1 - 3/31 12/1 - 12/31   Vail Eagle 1/1 - 8/31 12/1 - 12/31 DC Washington, DC (also the cities of Alexandria, Fairfax, and Falls Church, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George's in Maryland)   All year FL Fort Lauderdale Broward 1/1 - 5/31   Fort Walton Beach, DeFuniak Springs Okaloosa, Walton 6/1 - 7/31   Key West Monroe All year   Miami Miami-Dade 1/1 - 3/31 12/1 - 12/31   Naples Collier 1/1 - 4/30 IL Chicago Cook, Lake All year LA New Orleans Orleans, St. Www.freestatetaxsites.com Bernard, Jefferson, Plaquemines Parishes 1/1 - 6/30 10/1 - 12/31 MA Boston, Cambridge Suffolk, City of Cambridge All year   Falmouth City limits of Falmouth 7/1 - 8/31   Martha's Vineyard Dukes 7/1 - 8/31   Nantucket Nantucket 6/1 - 9/30 MD Counties of Montgomery and Prince George's   All year Table 1. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Effective Date of State Key City County and/or Other Defined Location $233 Rate MD Baltimore Baltimore City 3/1 - 9/30 10/1 - 11/30   Cambridge, St. Www.freestatetaxsites.com Michaels Dorchester, Talbot 6/1 - 8/31   Ocean City Worcester 6/1 - 8/31 ME Bar Harbor Hancock 7/1 - 8/31 NC Kill Devil Dare 6/1 - 8/31 NH Conway Carroll 7/1 - 8/31 NY Floral Park, Garden City, Great Neck Nassau All year   Glens Falls Warren 7/1 - 8/31   Lake Placid Essex 7/1 - 8/31   Manhattan (includes the boroughs of Manhattan, Brooklyn, the Bronx, Queens, and Staten Island) Bronx, Kings, New York, Queens, Richmond All year   Riverhead, Ronkonkoma, Melville Suffolk 6/1 - 8/31   Saratoga Springs, Schenectady Saratoga, Schenectady 7/1 - 8/31   Tarrytown, White Plains, New Rochelle Westchester All year PA Philadelphia Philadelphia All year RI Jamestown, Middletown, Newport Newport 5/1 - 9/30 10/1 - 10/31 UT Park City Summit 1/1 - 3/31 VA Cities of Alexandria, Falls Church, and Fairfax; Counties of Arlington and Fairfax   All year   Virginia Beach City of Virginia Beach 6/1 - 8/31 VT Stowe Lamoille 1/1 - 3/31 6/1 - 12/31 WA Seattle King All year WY Jackson, Pinedale Teton, Sublette 7/1 - 8/31 1 Transition rule. Www.freestatetaxsites.com A payor who uses the high-low substantiation method  in Table 1 for an employee during the first 9 months of calendar year 2011 must continue to use the high-low substantiation method for the remainder  of calendar year 2011 for that employee. Www.freestatetaxsites.com For travel on or after October 1, 2011, and before January 1, 2012, the payor may continue to use the rates and high-cost localities published in Table 1 or the updated rates and high-cost localities published in the revenue procedure that supersedes Revenue Procedure 2010-39, as long as those rates and localities are used consistently during this period for all employees reimbursed under this method. Www.freestatetaxsites.com See Transition Rules under How To Use Per Diem Rate Tables for an example. Www.freestatetaxsites.com    2 Revenue Procedure 2010-39 in Internal Revenue Bulletin 2010-42. Www.freestatetaxsites.com Table 2. Www.freestatetaxsites.com Localities Eligible for $242 ($65 M&IE) Per Diem Amount Under the High-Low Substantiation Method (Effective October 1, 2011)1,2 Note: The standard (“low”) rate of $163 ($111 for lodging and $52 for M&IE) applies to all locations within the continental United States (CONUS) not specifically listed below or encompassed by the boundary definition of a listed point. Www.freestatetaxsites.com Per Diem Locality Effective Date of State Key City County and/or Other Defined Location $242 Rate AZ Sedona City limits of Sedona 3/1 - 4/30 CA Monterey Monterey All year   Napa Napa 4/1 - 9/30 10/1 - 11/30   San Diego San Diego All year   San Francisco San Francisco All year   Santa Barbara Santa Barbara All year   Santa Monica City limits of Santa Monica All year   Yosemite National Park Mariposa 6/1 - 8/31 CO Aspen Pitkin 1/1 - 3/31 6/1 - 8/31 12/1 - 12/31   Denver, Aurora Denver, Adams, Arapahoe, Jefferson All year   Steamboat Springs Routt 1/1 - 3/31 12/1 - 12/31   Telluride San Miguel 1/1 - 3/31 12/1 - 12/31   Vail Eagle 1/1 - 8/31 12/1 - 12/31 DC Washington, DC (also the cities of Alexandria, Fairfax, and Falls Church, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George's in Maryland)   All year FL Fort Lauderdale Broward 1/1 - 5/31   Fort Walton Beach, DeFuniak Springs Okaloosa, Walton 6/1 - 7/31   Key West Monroe All year   Miami Miami-Dade 1/1 - 3/31 12/1 - 12/31   Naples Collier 1/1 - 4/30 IL Chicago Cook, Lake 4/1 - 9/30 10/1 - 11/30 LA New Orleans Orleans, St. Www.freestatetaxsites.com Bernard, Jefferson, Plaquemines Parishes 1/1 - 6/30 10/1 - 12/31 MA Boston, Cambridge Suffolk, City of Cambridge All year   Falmouth City limits of Falmouth 7/1 - 8/31   Martha's Vineyard Dukes 7/1 - 8/31   Nantucket Nantucket 6/1 - 9/30 Table 2. Www.freestatetaxsites.com (Effective October 1, 2011) (Continued) Per Diem Locality Effective Date of State Key City County and/or Other Defined Location $242 Rate MD Counties of Montgomery and Prince George's   All year   Baltimore Baltimore City 3/1 - 9/30 10/1 - 11/30   Cambridge, St. Www.freestatetaxsites.com Michaels Dorchester, Talbot 6/1 - 8/31   Ocean City Worcester 6/1 - 8/31 ME Bar Harbor Hancock 7/1 - 8/31 NC Kill Devil Dare 6/1 - 8/31 NH Conway Carroll 7/1 - 8/31 NY Floral Park, Garden City, Great Neck Nassau All year   Glens Falls Warren 7/1 - 8/31   Lake Placid Essex 7/1 - 8/31   Manhattan (includes the boroughs of Manhattan, Brooklyn, the Bronx, Queens, and Staten Island) Bronx, Kings, New York, Queens, Richmond All year   Saratoga Springs, Schenectady Saratoga, Schenectady 7/1 - 8/31   Tarrytown, White Plains, New Rochelle Westchester All year PA Philadelphia Philadelphia All year RI Jamestown, Middletown, Newport Newport 5/1 - 9/30 10/1 - 10/31 UT Park City Summit 1/1 - 3/31 VA Cities of Alexandria, Falls Church, and Fairfax; Counties of Arlington and Fairfax   All year   Virginia Beach City of Virginia Beach 6/1 - 8/31 WA Seattle King All year WY Jackson, Pinedale Teton, Sublette 7/1 - 8/31 1 Transition rule. Www.freestatetaxsites.com A payor who uses the high-low substantiation method  in Table 2 for an employee during the first 9 months of calendar year 2012 must continue to use the high-low substantiation method for the remainder  of calendar year 2012 for that employee. Www.freestatetaxsites.com For travel on or after October 1, 2012, and before January 1, 2013, the payor may continue to use the rates and high-cost localities published in Table 2 or the updated rates and high-cost localities published in the revenue procedure that supersedes Revenue Procedure 2011-47 and Notice 2011-81, as long as those rates and localities are used consistently during this period for all employees reimbursed under this method. Www.freestatetaxsites.com See Transition Rules under How To Use Per Diem Rate Tables for an example. Www.freestatetaxsites.com    2 Revenue Procedure 2011-47 and Notice 2011-81 in Internal Revenue Bulletin 2011-42. Www.freestatetaxsites.com Table 3. Www.freestatetaxsites.com Maximum Federal Per Diem Rates (Effective October 1, 2010 – September 30, 2011)1 Note: The standard rate of $123 ($77 for lodging and $46 for M&IE) applies to all locations within the continental United States (CONUS) not specifically listed below or encompassed by the boundary definition of a listed point. Www.freestatetaxsites.com However, the standard CONUS rate applies to all locations within CONUS, including those defined below, for certain relocation allowances. Www.freestatetaxsites.com (See parts 302-2, 302-4, and 302-5 of 41 CFR. Www.freestatetaxsites.com ) Table 4 lists all per diem rates alphabetically by state abbreviation. Www.freestatetaxsites.com Click on a link below to find rates for your state: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas , Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate AL Birmingham Jefferson, Shelby All year $88   $56   $144     Gulf Shores Baldwin 1/1 - 5/31 101   51   152         6/1 - 7/31 126   51   177         8/1 - 12/31 101   51   152     Huntsville Madison, Limestone All year 86   51   137     Mobile Mobile 1/1 - 2/28 98   51   149         3/1 - 12/31 90   51   141   AR Hot Springs Garland All year 101   46   147     Little Rock Pulaski All year 88   61   149   AZ Grand Canyon, Flagstaff Coconino (except city limits of Sedona), Yavapai 1/1 - 2/28 77   66   143         3/1 - 10/31 95   66   161         11/1 - 12/31 77   66   143     Kayenta Navajo 1/1 - 4/30 77   46   123         5/1 - 9/30 89   46   135         10/1 - 12/31 77   46   123     Phoenix, Scottsdale Maricopa 1/1 - 5/31 126   71   197         6/1 - 8/31 81   71   152         9/1 - 12/31 106   71   177     Sedona City limits of Sedona 1/1 - 2/28 129   66   195         3/1 - 4/30 145   66   211         5/1 - 12/31 129   66   195     Sierra Vista Cochise All year 81   46   127     Tucson Pima 1/1 - 1/31 93   56   149         2/1 - 5/31 111   56   167         6/1 - 8/31 77   56   133         9/1 - 12/31 93   56   149     Yuma Yuma All year 81   46   127   CA Antioch, Brentwood, Concord Contra Costa All year 101   66   167     Barstow, Ontario, Victorville San Bernardino Before 4/01/11 83   56   139         After 3/31/11 99   56   155     Benicia, Dixon, Fairfield Solano All year 84   56   140     Death Valley Inyo All year 92   46   138     Eureka, Arcata, Humboldt 1/1 - 5/31 82   61   143     McKinleyville   6/1 - 8/31 92   61   153         9/1 - 12/31 82   61   143     Fresno Fresno All year 91   61   152     Los Angeles Los Angeles (except the city of Santa Monica), Orange, Ventura; Edwards AFB All year 123   71   194     Mammoth Lakes Mono All year 116   61   177   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate CA Mill Valley, San Rafael, Novato Marin All year $106   $56   $162     Modesto Stanislaus All year 85   51   136     Monterey Monterey 1/1 - 6/30 126   71   197         7/1 - 8/31 152   71   223         9/1 - 12/31 126   71   197     Napa Napa 1/1 - 3/31 107   66   173         4/1 - 11/30 142   66   208         12/1 - 12/31 107   66   173     Oakhurst Madera 1/1 - 4/30 78   56   134         5/1 - 8/31 92   56   148         9/1 - 12/31 78   56   134     Oakland Alameda All year 94   61   155     Palm Springs Riverside 1/1 - 4/30 120   71   191         5/1 - 8/31 90   71   161         9/1 - 12/31 104   71   175     Point Arena, Gualala Mendocino All year 88   66   154     Redding Shasta All year 87   61   148     Sacramento Sacramento All year 101   61   162     San Diego San Diego All year 131   71   202     San Francisco San Francisco Before 1/1/11:                   10/1 - 10/31 174   71   245         11/1 - 12/31 142   71   213         After 12/31/10:                   1/1 - 3/31 142   71   213         4/1 - 8/31 150   71   221         9/1 - 12/31 180   71   251     San Luis Obispo San Luis Obispo 1/1 - 6/30 104   66   170         7/1 - 8/31 121   66   187         9/1 - 12/31 104   66   170     San Mateo, Foster City, Belmont San Mateo All year 108   61   169     Santa Barbara Santa Barbara 1/1 - 6/30 143   66   209         7/1 - 8/31 172   66   238         9/1 - 12/31 143   66   209     Santa Cruz Santa Cruz All year 93   66   159     Santa Monica City limits of Santa Monica All year 180   71   251     Santa Rosa Sonoma All year 109   61   170     South Lake Tahoe El Dorado All year 125   71   196     Stockton San Joaquin All year 80   56   136     Sunnyvale, Palo Alto, San Jose Santa Clara All year 116   56   172     Tahoe City Placer All year 87   61   148     Truckee Nevada 1/1 - 2/28 113   71   184         3/1 - 11/30 96   71   167         12/1 - 12/31 113   71   184     Visalia, Lemoore Tulare, Kings All year 83   61   144     West Sacramento Yolo All year 91   51   142     Yosemite National Mariposa 1/1 - 5/31 129   71   200     Park   6/1 - 8/31 162   71   233         9/1 - 12/31 129   71   200   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate CO Aspen Pitkin 1/1 - 3/31 $202   $71   $273         4/1 - 5/31 107   71   178         6/1 - 8/31 143   71   214         9/1 - 11/30 103   71   174         12/1 - 12/31 202   71   273     Boulder, Broomfield Boulder, Broomfield All year 104   61   165     Colorado Springs El Paso All year 84   66   150     Cortez Montezuma 1/1 - 5/31 87   51   138         6/1 - 8/31 105   51   156         9/1 - 12/31 87   51   138     Crested Butte, Gunnison Gunnison 1/1 - 3/31 82   51   133         4/1 - 5/31 77   51   128         6/1 - 8/31 95   51   146         9/1 - 12/31 82   51   133     Denver, Aurora Denver, Adams, Arapahoe, and Jefferson All year 141   66   207     Douglas County Douglas All year 101   61   162     Durango La Plata 1/1 - 5/31 93   61   154         6/1 - 9/30 128   61   189         10/1 - 12/31 93   61   154     Fort Collins, Loveland Larimer All year 84   56   140     Glenwood Springs, Grand Junction Garfield, Mesa All year 86   51   137     Montrose Montrose 1/1 - 5/31 79   56   135         6/1 - 9/30 94   56   150         10/1 - 12/31 79   56   135     Silverthorne, Summit 1/1 - 3/31 147   56   203     Breckenridge   4/1 - 11/30 93   56   149         12/1 - 12/31 147   56   203     Steamboat Springs Routt 1/1 - 3/31 179   56   235         4/1 - 11/30 103   56   159         12/1 - 12/31 179   56   235     Telluride San Miguel 1/1 - 3/31 141   71   212         4/1 - 5/31 93   71   164         6/1 - 9/30 124   71   195         10/1 - 11/30 94   71   165         12/1 - 12/31 141   71   212     Vail Eagle 1/1 - 3/31 261   71   332         4/1 - 8/31 130   71   201         9/1 - 11/30 105   71   176         12/1 - 12/31 261   71   332   CT Bridgeport, Danbury Fairfield All year 114   71   185     Cromwell, Old Saybrook Middlesex All year 83   61   144     Hartford Hartford All year 106   56   162     Lakeville, Salisbury Litchfield All year 93   66   159     New Haven New Haven All year 92   61   153     New London, Groton New London All year 98   61   159   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate DC District of Columbia Washington, DC (also the cities of Alexandria, 1/1 - 2/28 $181   $71   $252       Fairfax, and Falls Church, and the counties of 3/1 - 6/30 211   71   282       Arlington and Fairfax, in Virginia; and the counties 7/1 - 8/31 157   71   228       of Montgomery and Prince George's in Maryland) 9/1 - 10/31 211   71   282       (see also Maryland and Virginia) 11/1 - 12/31 181   71   252   DE Dover Kent 1/1 - 4/30 77   46   123         5/1 - 9/30 92   46   138         10/1 - 12/31 77   46   123     Lewes Sussex 1/1 - 6/30 82   46   128         7/1 - 8/31 123   46   169         9/1 - 12/31 82   46   128     Wilmington New Castle All year 109   56   165   FL Altamonte Springs Seminole All year 80   61   141     Boca Raton, Delray Palm Beach 1/1 - 4/30 111   71   182     Beach, Jupiter   5/1 - 12/31 82   71   153     Bradenton Manatee 1/1 - 4/30 100   56   156         5/1 - 12/31 84   56   140     Cocoa Beach Brevard All year 99   51   150     Daytona Beach Volusia 1/1 - 1/31 84   51   135         2/1 - 7/31 107   51   158         8/1 - 12/31 84   51   135     Fort Lauderdale Broward 1/1 - 2/28 173   71   244         3/1 - 5/31 149   71   220         6/1 - 9/30 103   71   174         10/1 - 12/31 124   71   195     Fort Myers Lee 1/1 - 4/30 115   56   171         5/1 - 12/31 87   56   143     Fort Walton Beach, Okaloosa, Walton 1/1 - 2/28 78   51   129     DeFuniak Springs   3/1 - 5/31 126   51   177         6/1 - 7/31 164   51   215         8/1 - 10/31 112   51   163         11/1 - 12/31 78   51   129     Gainesville Alachua All year 89   51   140     Gulf Breeze Santa Rosa 1/1 - 2/28 92   51   143         3/1 - 5/31 114   51   165         6/1 - 8/31 140   51   191         9/1 - 12/31 92   51   143     Jacksonville, Jacksonville Beach, Mayport Naval Station Duval, Nassau; City of Jacksonville All year 82   51   133     Key West Monroe 1/1 - 1/31 193   71   264         2/1 - 4/30 209   71   280         5/1 - 11/30 145   71   216         12/1 - 12/31 193   71   264     Kissimmee Osceola 1/1 - 5/31 84   46   130         6/1 - 8/31 77   46   123         9/1 - 12/31 84   46   130     Lakeland Polk All year 81   46   127   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate FL Miami Miami-Dade 1/1 - 3/31 $151   $66   $217         4/1 - 5/31 128   66   194         6/1 - 11/30 104   66   170         12/1 - 12/31 151   66   217     Naples Collier 1/1 - 4/30 155   61   216         5/1 - 9/30 101   61   162         10/1 - 12/31 111   61   172     Orlando Orange 1/1 - 5/31 104   56   160         6/1 - 12/31 90   56   146     Panama City Bay 1/1 - 2/28 77   51   128         3/1 - 7/31 110   51   161         8/1 - 12/31 77   51   128     Pensacola, Pensacola Beach Escambia All year 103   46   149     Punta Gorda Charlotte 1/1 - 1/31 77   51   128         2/1 - 4/30 88   51   139         5/1 - 12/31 77   51   128     Sarasota Sarasota 1/1 - 4/30 110   56   166         5/1 - 12/31 86   56   142     Sebring Highlands 1/1 - 3/31 123   46   169         4/1 - 12/31 82   46   128     St. Www.freestatetaxsites.com Augustine St. Www.freestatetaxsites.com Johns All year 97   56   153     Stuart Martin 1/1 - 4/30 102   51   153         5/1 - 12/31 82   51   133     Tallahassee Leon All year 87   46   133     Tampa, St. Www.freestatetaxsites.com Petersburg Pinellas, Hillsborough 1/1 - 4/30 108   51   159         5/1 - 12/31 92   51   143     Vero Beach Indian River 1/1 - 1/31 83   51   134         2/1 - 3/31 99   51   150         4/1 - 12/31 83   51   134   GA Athens Clarke All year 93   46   139     Atlanta Fulton, DeKalb, Cobb All year 132   56   188     Augusta Richmond All year 84   51   135     Columbus Muscogee All year 85   46   131     Jekyll Island, Brunswick Glynn 1/1 - 3/31 92   56   148         4/1 - 11/30 136   56   192         12/1 - 12/31 92   56   148     Savannah Chatham All year 97   56   153   IA Cedar Rapids Linn All year 81   51   132     Des Moines Polk All year 83   51   134     West Des Moines Dallas All year 95   51   146   ID Bonner's Ferry, Boundary, Bonner, Shoshone 1/1 - 6/30 77   61   138     Sandpoint   7/1 - 8/31 99   61   160         9/1 - 12/31 77   61   138     Coeur d'Alene Kootenai 1/1 - 5/31 77   61   138         6/1 - 8/31 105   61   166         9/1 - 12/31 77   61   138     Driggs, Idaho Falls Teton, Bonneville, Fremont All year 78   46   124   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate ID Sun Valley, Ketchum Blaine 1/1 - 5/31 $79   $71   $150         6/1 - 8/31 95   71   166         9/1 - 12/31 79   71   150   IL Bolingbrook, Romeoville, Lemont Will All year 82   51   133     Chicago Cook, Lake 1/1 - 3/31 128   71   199         4/1 - 6/30 166   71   237         7/1 - 8/31 146   71   217         9/1 - 11/30 173   71   244         12/1 - 12/31 128   71   199     Oakbrook Terrace DuPage All year 92   61   153     O'Fallon, Fairview Bond, Calhoun, Clinton, Jersey, Macoupin, All year 105   56   161     Heights, Collinsville Madison, Monroe, St. Www.freestatetaxsites.com Clair                 Springfield Sangamon All year 82   56   138   IN Bloomington Monroe All year 91   56   147     Fort Wayne Allen All year 81   56   137     Hammond, Munster, Merrillville Lake All year 85   46   131     Indianapolis, Carmel Marion, Hamilton; Fort Benjamin Harrison All year 91   61   152     Lafayette Tippecanoe All year 80   51   131     South Bend St. Www.freestatetaxsites.com Joseph All year 87   56   143     Valparaiso, Burlington Beach Porter All year 79   51   130   KS Kansas City, Overland Park Wyandotte, Johnson, Leavenworth All year 99   61   160     Wichita Sedgwick All year 89   56   145   KY Boone County Boone All year 88   51   139     Kenton County Kenton All year 115   56   171     Lexington Fayette All year 89   61   150     Louisville Jefferson 1/1 - 5/31 101   61   162         6/1 - 8/31 95   61   156         9/1 - 12/31 101   61   162   LA Baton Rouge East Baton Rouge Parish All year 96   56   152     Covington, Slidell St. Www.freestatetaxsites.com Tammany Parish All year 88   56   144     Lafayette Lafayette Consolidated Government All year 87   56   143     Lake Charles Calcasieu Parish All year 79   61   140     New Orleans Orleans, Jefferson, Plaquemines, and 1/1 - 6/30 131   71   202       St. Www.freestatetaxsites.com Bernard Parishes 7/1 - 9/30 98   71   169         10/1 - 12/31 131   71   202   MA Andover Essex All year 83   56   139     Boston, Cambridge Suffolk; City of Cambridge 1/1 - 3/31 154   71   225         4/1 - 6/30 190   71   261         7/1 - 8/31 171   71   242         9/1 - 10/31 206   71   277         11/1 - 12/31 154   71   225     Burlington, Woburn Middlesex less the city of Cambridge All year 108   71   179   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate MA Falmouth City limits of Falmouth 1/1 - 4/30 $95   $51   $146         5/1 - 6/30 107   51   158         7/1 - 8/31 161   51   212         9/1 - 12/31 95   51   146     Hyannis Barnstable less the city of Falmouth 1/1 - 6/30 85   56   141         7/1 - 8/31 123   56   179         9/1 - 12/31 85   56   141     Martha's Vineyard Dukes 1/1 - 6/30 114   71   185         7/1 - 8/31 201   71   272         9/1 - 12/31 114   71   185     Nantucket Nantucket 1/1 - 5/31 128   61   189         6/1 - 9/30 243   61   304         10/1 - 12/31 128   61   189     Northampton Hampshire All year 92   56   148     Pittsfield Berkshire 1/1 - 6/30 107   61   168         7/1 - 8/31 126   61   187         9/1 - 12/31 107   61   168     Plymouth, Taunton, New Bedford Plymouth, Bristol All year 88   56   144     Quincy Norfolk All year 114   51   165     Springfield Hampden All year 93   51   144     Worcester Worcester All year 90   61   151   MD Counties of Montgomery   1/1 - 2/28 181   71   252     and Prince George's   3/1 - 6/30 211   71   282         7/1 - 8/31 157   71   228         9/1 - 10/31 211   71   282         11/1 - 12/31 181   71   252     Aberdeen, Bel Air, Belcamp Harford All year 84   56   140     Annapolis Anne Arundel 1/1 - 4/30 100   61   161         5/1 - 10/31 114   61   175         11/1 - 12/31 100   61   161     Baltimore City Baltimore City 1/1 - 2/28 121   71   192         3/1 - 11/30 144   71   215         12/1 - 12/31 121   71   192     Baltimore County Baltimore All year 99   61   160     Cambridge, St. Www.freestatetaxsites.com Michaels Dorchester, Talbot 1/1 - 3/31 101   61   162         4/1 - 5/31 119   61   180         6/1 - 8/31 170   61   231         9/1 - 10/31 131   61   192         11/1 - 12/31 101   61   162     Centreville Queen Anne All year 103   51   154     Columbia Howard All year 105   61   166     Frederick Frederick All year 92   56   148     Hagerstown Washington All year 78   56   134     La Plata, Indian Head Charles All year 84   51   135     Lexington Park, Leonardtown, Lusby St. Www.freestatetaxsites.com Mary's, Calvert All year 102   61   163   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate MD Ocean City Worcester 1/1 - 3/31 $77   $71   $148         4/1 - 5/31 88   71   159         6/1 - 8/31 192   71   263         9/1 - 10/31 105   71   176         11/1 - 12/31 77   71   148   ME Bar Harbor Hancock 1/1 - 6/30 86   61   147         7/1 - 8/31 140   61   201         9/1 - 10/31 112   61   173         11/1 - 12/31 86   61   147     Kennebunk, Kittery, York 1/1 - 3/31 77   56   133     Sanford   4/1 - 6/30 86   56   142         7/1 - 8/31 122   56   178         9/1 - 10/31 96   56   152         11/1 - 12/31 77   56   133     Portland Cumberland, Sagadahoc 1/1 - 6/30 89   56   145         7/1 - 9/30 109   56   165         10/1 - 12/31 89   56   145     Rockport Knox 1/1 - 6/30 80   56   136         7/1 - 9/30 106   56   162         10/1 - 12/31 80   56   136   MI Ann Arbor Washtenaw All year 87   56   143     Detroit Wayne All year 95   56   151     East Lansing, Lansing Ingham, Eaton All year 82   51   133     Grand Rapids Kent All year 81   51   132     Holland Ottawa All year 81   56   137     Kalamazoo, Battle Creek Kalamazoo, Calhoun All year 87   51   138     Midland Midland All year 90   46   136     Muskegon Muskegon 1/1 - 5/31 77   46   123         6/1 - 8/31 101   46   147         9/1 - 12/31 77   46   123     Petoskey Emmet 1/1 - 6/30 77   51   128         7/1 - 8/31 99   51   150         9/1 - 12/31 77   51   128     Pontiac, Auburn Hills Oakland All year 87   56   143     South Haven Van Buren 1/1 - 5/31 77   56   133         6/1 - 8/31 89   56   145         9/1 - 12/31 77   56   133     Traverse City, Leland Grand Traverse, Leelanau 1/1 - 6/30 77   51   128         7/1 - 8/31 109   51   160         9/1 - 12/31 77   51   128   MN Duluth St. Www.freestatetaxsites.com Louis 1/1 - 5/31 80   56   136         6/1 - 10/31 99   56   155         11/1 - 12/31 80   56   136     Eagan, Burnsville, Mendota Heights Dakota All year 82   56   138     Minneapolis, St. Www.freestatetaxsites.com Paul Hennepin, Ramsey All year 120   71   191     Rochester Olmsted All year 95   51   146   MO Columbia Boone All Year 78   51   129   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate MO Kansas City Jackson, Clay, Cass, Platte All year $99   $61   $160     St. Www.freestatetaxsites.com Louis St. Www.freestatetaxsites.com Louis, St. Www.freestatetaxsites.com Charles, Crawford, Franklin, Jefferson, Lincoln, Warren, Washington; St. Www.freestatetaxsites.com Louis City All year 105   66   171     St. Www.freestatetaxsites.com Robert Pulaski All year 78   46   124   MS Gulfport, Biloxi Harrison All year 82   56   138     Hattiesburg Forrest, Lamar All year 85   51   136     Oxford Lafayette County Before 4/01/11 77   46   123         After 3/31/11 96   51   147     Robinsonville Tunica All year 82   51   133     Southaven Desoto All year 88   46   134     Starkville Oktibbeha All year 91   46   137   MT Big Sky, West Gallatin 1/1 - 5/31 80   61   141     Yellowstone   6/1 - 8/31 105   61   166         9/1 - 12/31 80   61   141     Butte Silver Bow All year 86   51   137     Helena Lewis and Clark All year 81   56   137     Missoula, Polson, Missoula, Lake, Flathead 1/1 - 6/30 87   51   138     Kalispell   7/1 - 8/31 104   51   155         9/1 - 12/31 87   51   138   NC Asheville Buncombe 1/1 - 6/30 81   51   132         7/1 - 10/31 90   51   141         11/1 - 12/31 81   51   132     Atlantic Beach, Carteret 1/1 - 5/31 81   56   137     Morehead City   6/1 - 8/31 110   56   166         9/1 - 12/31 81   56   137     Chapel Hill Orange All year 86   56   142     Charlotte Mecklenburg All year 95   51   146     Durham Durham All year 89   51   140     Fayetteville Cumberland All year 91   51   142     Greensboro Guilford All year 85   56   141     Greenville Pitt All year 79   51   130     Kill Devil Dare 1/1 - 5/31 90   61   151         6/1 - 8/31 143   61   204         9/1 - 12/31 90   61   151     New Bern, Havelock Craven All year 94   46   140     Raleigh Wake All year 90   66   156     Wilmington New Hanover All year 97   56   153     Winston-Salem Forsyth All year 83   56   139   ND The standard CONUS rate of $123 ($77 for lodging and $46 for M&IE) applies to all per diem localities in North Dakota. Www.freestatetaxsites.com NE Omaha Douglas 1/1 - 4/30 93   61   154         5/1 - 6/30 104   61   165         7/1 - 12/31 93   61   154   NH Concord Merrimack 1/1 - 5/31 82   51   133         6/1 - 9/30 92   51   143         10/1 - 12/31 82   51   133     Conway Carroll 1/1 - 2/28 116   61   177         3/1 - 6/30 102   61   163         7/1 - 8/31 141   61   202         9/1 - 12/31 116   61   177   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate NH Durham Strafford All year $94   $46   $140     Laconia Belknap 1/1 - 5/31 85   51   136         6/1 - 10/31 101   51   152         11/1 - 12/31 85   51   136     Lebanon, Lincoln, West Lebanon Grafton, Sullivan All year 101   56   157     Manchester Hillsborough All year 86   56   142     Portsmouth Rockingham 1/1 - 6/30 102   61   163         7/1 - 9/30 126   61   187         10/1 - 12/31 102   61   163   NJ Atlantic City, Cape Atlantic, Cape May 1/1 - 3/31 87   66   153     May, Ocean City   4/1 - 12/31 100   66   166     Belle Mead Somerset All year 116   56   172     Cherry Hill, Moorestown Camden, Burlington All year 92   61   153     Eatontown, Freehold Monmouth All year 110   56   166     Edison, Piscataway Middlesex All year 109   51   160     Flemington Hunterdon All year 107   61   168     Newark Bergen, Essex, Hudson, Passaic All year 116   61   177     Parsippany Morris All year 125   56   181     Princeton, Trenton Mercer All year 126   61   187     Springfield, Cranford, New Providence Union All year 94   56   150     Toms River Ocean 1/1 - 5/31 78   51   129         6/1 - 8/31 99   51   150         9/1 - 12/31 78   51   129   NM Albuquerque Bernalillo All year 81   56   137     Las Cruces Dona Ana All year 79   56   135     Los Alamos Los Alamos All year 86   51   137     Santa Fe Santa Fe 1/1 - 6/30 82   71   153         7/1 - 10/31 100   71   171         11/1 - 12/31 82   71   153     Taos Taos All year 87   66   153   NV Incline Village, Washoe 1/1 - 6/30 98   51   149     Reno, Sparks   7/1 - 8/31 123   51   174         9/1 - 12/31 98   51   149     Las Vegas Clark All year 93   71   164     Stateline, Carson City Douglas, Carson City All year 93   61   154   NY Albany Albany All year 104   61   165     Binghamton, Owego Broome, Tioga All year 90   46   136     Buffalo Erie All year 98   56   154     Floral Park, Garden City, Great Neck Nassau All year 143   66   209     Glens Falls Warren 1/1 - 6/30 92   66   158         7/1 - 8/31 133   66   199         9/1 - 12/31 92   66   158     Ithaca, Waterloo, Romulus Tompkins, Seneca All year 114   46   160   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate NY Kingston Ulster All year $101   $66   $167     Lake Placid Essex 1/1 - 2/28 124   61   185         3/1 - 6/30 99   61   160         7/1 - 8/31 145   61   206         9/1 - 11/30 103   61   164         12/1 - 12/31 124   61   185     Manhattan (includes Bronx, Kings, New York, Queens, Richmond Before 1/1/11:               the boroughs of   10/1 - 12/31 269   71   340     Manhattan, Brooklyn   After 12/31/10:               the Bronx, Queens, and Staten Island)   1/1 - 3/31 192   71   263         4/1 - 5/31 212   71   283         6/1 - 8/31 224   71   295         9/1 - 12/31 295   71   366     Niagara Falls Niagara 1/1 - 5/31 77   51   128         6/1 - 8/31 100   51   151         9/1 - 12/31 77   51   128     Nyack, Palisades Rockland All year 103   61   164     Poughkeepsie Dutchess All year 95   66   161     Riverhead, Suffolk 1/1 - 5/31 114   71   185     Ronkonkoma, Melville   6/1 - 8/31 137   71   208         9/1 - 12/31 114   71   185     Rochester Monroe All year 96   51   147     Saratoga Springs, Saratoga, Schenectady 1/1 - 6/30 104   56   160     Schenectady   7/1 - 8/31 151   56   207         9/1 - 12/31 104   56   160     Syracuse, Oswego Onondaga, Oswego All year 93   56   149     Tarrytown, White Plains, New Rochelle Westchester All year 142   71   213     Troy Rensselaer All year 94   51   145     West Point Orange All year 109   51   160   OH Akron Summit All year 85   51   136     Canton Stark All year 88   51   139     Cincinnati Hamilton, Clermont All year 115   56   171     Cleveland Cuyahoga All year 102   56   158     Columbus Franklin All year 94   56   150     Dayton, Fairborn Greene, Darke, Montgomery All year 81   56   137     Hamilton Butler, Warren All year 92   51   143     Mentor Lake All year 88   46   134     Rittman Wayne, Medina All year 87   51   138     Sandusky, Bellevue Erie, Huron 1/1 - 5/31 77   46   123         6/1 - 8/31 83   46   129         9/1 - 12/31 77   46   123     Youngstown Mahoning, Trumbull All year 82   51   133   OK Oklahoma City Oklahoma All year 82   66   148     Tulsa Tulsa, Creek, Osage, Rogers All year 80   61   141   OR Ashland, Crater Lake Jackson, Klamath All year 80   56   136     Beaverton Washington All year 90   51   141   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate OR Bend Deschutes 1/1 - 6/30 $88   $61   $149         7/1 - 8/31 110   61   171         9/1 - 12/31 88   61   149     Clackamas Clackamas All year 87   61   148     Eugene, Florence Lane All year 97   51   148     Lincoln City Lincoln 1/1 - 6/30 83   56   139         7/1 - 8/31 104   56   160         9/1 - 12/31 83   56   139     Portland Multnomah All year 113   66   179     Seaside Clatsop 1/1 - 6/30 93   51   144         7/1 - 8/31 130   51   181         9/1 - 12/31 93   51   144   PA Allentown, Easton, Bethlehem Lehigh, Northampton All year 84   51   135     Bucks County Bucks All year 95   71   166     Chester, Radnor, Essington Delaware All year 96   51   147     Erie Erie All year 82   46   128     Gettysburg Adams 1/1 - 3/31 79   51   130         4/1 - 10/31 98   51   149         11/1 - 12/31 79   51   130     Harrisburg, Hershey Dauphin Before 1/1/11:                   10/31 - 12/31 106   51   157         After 12/31/10:                   1/1 - 3/31 106   51   157         3/31 - 5/31 107   51   158         6/1 - 8/31 134   51   185         9/1 - 12/31 107   51   158     Lancaster Lancaster All year 96   56   152     Malvern, Frazer, Berwyn Chester All year 116   51   167     Mechanicsburg Cumberland All year 83   56   139     Montgomery County Montgomery All year 115   66   181     Philadelphia Philadelphia 1/1 - 8/31 136   66   202         9/1 - 11/30 149   66   215         12/1 - 12/31 136   66   202     Pittsburgh Allegheny All year 115   71   186     Reading Berks All year 89   56   145     Scranton Lackawanna All year 80   56   136     State College Centre All year 86   56   142   RI East Greenwich, Warwick, North Kingstown Kent, Washington All year 84   56   140     Jamestown, Middletown, Newport 1/1 - 4/30 96   71   167     Newport   5/1 - 10/31 145   71   216         11/1 - 12/31 96   71   167     Providence, Bristol Providence, Bristol All year 122   71   193   SC Aiken Aiken All year 81   46   127     Charleston Charleston, Berkeley, Dorchester All year 132   56   188     Columbia Richland, Lexington All year 85   51   136     Greenville Greenville All year 82   56   138   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate SC Hilton Head Beaufort 1/1 - 3/31 $87   $61   $148         4/1 - 8/31 127   61   188         9/1 - 10/31 104   61   165         11/1 - 12/31 87   61   148     Myrtle Beach Horry 1/1 - 3/31 77   51   128         4/1 - 5/31 89   51   140         6/1 - 8/31 116   51   167         9/1 - 10/31 80   51   131         11/1 - 12/31 77   51   128   SD Hot Springs Fall River, Custer 1/1 - 5/31 77   46   123         6/1 - 8/31 101   46   147         9/1 - 12/31 77   46   123     Rapid City Pennington 1/1 - 5/31 77   51   128         6/1 - 8/31 121   51   172         9/1 - 12/31 77   51   128     Sturgis, Spearfish Meade, Butte, Lawrence 1/1 - 5/31 77   51   128         6/1 - 8/31 108   51   159         9/1 - 12/31 77   51   128   TN Brentwood, Franklin Williamson All year 94   56   150     Chattanooga Hamilton All year 88   56   144     Knoxville Knox All year 84   56   140     Memphis Shelby All year 96   61   157     Nashville Davidson All year 110   66   176     Oak Ridge Anderson All year 90   46   136   TX Arlington, Fort Worth, Grapevine Tarrant; City limits of Grapevine All year 138   56   194     Austin Travis All year 104   71   175     Beaumont Jefferson All year 86   51   137     College Station Brazos All year 93   56   149     Corpus Christi Nueces All year 87   51   138     Dallas Dallas; City of Dallas All year 107   71   178     El Paso El Paso All year 88   51   139     Galveston Galveston 1/1 - 2/28 84   56   140         3/1 - 8/31 101   56   157         9/1 - 12/31 84   56   140     Greenville Hunt Before 4/01/2011 78   51   129         After 3/31/2011 86   51   137     Houston Montgomery, Fort Bend, Harris; L. Www.freestatetaxsites.com B. Www.freestatetaxsites.com Johnson Space Center All year 109   71   180     Laredo Webb All year 78   56   134     McAllen Hidalgo All year 85   56   141     Midland Midland All year 92   51   143     Plano Collin All year 100   61   161     Round Rock Williamson All year 90   51   141     San Antonio Bexar All year 106   66   172     South Padre Island Cameron 1/1 - 5/31 85   56   141         6/1 - 7/31 107   56   163         8/1 - 12/31 85   56   141     Waco McLennan All year 85   51   136   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate UT Moab Grand 1/1 - 2/28 $77   $56   $133         3/1 - 10/31 97   56   153         11/1 - 12/31 77   56   133     Park City Summit 1/1 - 3/31 153   71   224         4/1 - 12/31 89   71   160     Provo Utah All year 80   51   131     Salt Lake City Salt Lake, Tooele All year 95   61   156   VA Cities of Alexandria,   1/1 - 2/28 181   71   252     Fairfax, and Falls   3/1 - 6/30 211   71   282     Church; Counties of   7/1 - 8/31 157   71   228     Arlington and Fairfax   9/1 - 10/31 11/1 - 12/31 211 181   71 71   282 252     Abingdon Washington All year 86   46   132     Blacksburg Montgomery All year 95   46   141     Bowling Green Caroline County Before 4/01/2011 77   46   123         After 3/31/2011 89   56   145     Charlottesville Albemarle, Greene; City of Charlottesville All year 113   56   169     Chesapeake, Suffolk City of Chesapeake, City of Suffolk 1/1 - 5/31 78   56   134         6/1 - 8/31 88   56   144         9/1 - 12/31 78   56   134     Chesterfield, Henrico Counties Chesterfield, Henrico All year 87   51   138     Fredericksburg Stafford, Spotsylvania; City of Fredericksburg All year 89   56   145     James City, York, James City and York Counties; City of 1/1 - 3/31 77   51   128     Williamsburg Williamsburg 4/1 - 8/31 91   51   142         9/1 - 12/31 77   51   128     Loudoun County Loudoun All year 111   61   172     Lynchburg Campbell; City of Lynchburg All year 79   51   130     Manassas City of Manassas All year 82   46   128     Norfolk, Portsmouth City of Norfolk, City of Portsmouth All year 92   61   153     Prince William County Prince William All year 89   56   145     Richmond City City of Richmond All year 114   66   180     Roanoke City limits of Roanoke All year 99   51   150     Virginia Beach City of Virginia Beach 1/1 - 5/31 89   56   145         6/1 - 8/31 144   56   200         9/1 - 12/31 89   56   145     Wallops Island Accomack 1/1 - 6/30 84   56   140         7/1 - 8/31 125   56   181         9/1 - 12/31 84   56   140     Warrenton Fauquier All year 93   46   139   VT Burlington, St. Www.freestatetaxsites.com Albans Chittenden, Franklin 1/1 - 5/31 92   66   158         6/1 - 10/31 111   66   177         11/1 - 12/31 92   66   158     Manchester Bennington All year 87   71   158     Middlebury Addison All year 115   61   176     Montpelier Washington All year 100   61   161     Stowe Lamoille 1/1 - 3/31 133   71   204         4/1 - 5/31 101   71   172         6/1 - 12/31 133   71   204   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate VT White River Junction Windsor 1/1 - 2/28 $101   $56   $157         3/1 - 5/31 89   56   145         6/1 - 12/31 101   56   157   WA Anacortes, Coupeville, Oak Harbor San Juan, Skagit, Island All year 90   61   151     Bremerton Kitsap All year 78   66   144     Everett, Lynnwood Snohomish All year 94   61   155     Ocean Shores Grays Harbor 1/1 - 6/30 88   51   139         7/1 - 8/31 107   51   158         9/1 - 12/31 88   51   139     Olympia, Tumwater Thurston All year 86   61   147     Port Angeles, Port Clallam, Jefferson 1/1 - 6/30 94   61   155     Townsend   7/1 - 8/31 123   61   184         9/1 - 12/31 94   61   155     Richland Benton All year 88   46   134     Seattle King All year 139   71   210     Spokane Spokane All year 86   61   147     Tacoma Pierce All year 109   61   170     Vancouver Clark, Cowlitz, Skamania All year 113   56   169   WI Appleton Outagamie All year 81   46   127     Brookfield, Racine Waukesha, Racine All year 87   56   143     Lake Geneva Walworth 1/1 - 5/31 90   51   141         6/1 - 9/30 122   51   173         10/1 - 12/31 90   51   141     Madison Dane All year 88   56   144     Milwaukee Milwaukee All year 95   61   156     Sturgeon Bay Door 1/1 - 6/30 77   56   133         7/1 - 9/30 86   56   142         10/1 - 12/31 77   56   133     Wisconsin Dells Columbia 1/1 - 6/30 77   61   138         7/1 - 8/31 85   61   146         9/1 - 12/31 77   61   138   WV Charleston Kanawha All year 95   51   146     Morgantown Monongalia All year 83   46   129     Shepherdstown Jefferson, Berkeley All year 82   51   133     Wheeling Ohio All year 94   46   140   WY Cody Park 1/1 - 5/31 84   51   135         6/1 - 9/30 117   51   168         10/1 - 12/31 84   51   135     Evanston, Rock Springs Uinta, Sweetwater All year 80   51   131   Table 3. Www.freestatetaxsites.com (Effective October 1, 2010 – September 30, 2011) (Continued) Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate WY Gillette Campbell 1/1 - 5/31 $91   $51   $142         6/1 - 8/31 109   51   160         9/1 - 12/31 91   51   142     Jackson, Pinedale Teton, Sublette 1/1 - 6/30 109   56   165         7/1 - 8/31 158   56   214         9/1 - 12/31 109   56   165     Sheridan Sheridan 1/1 - 5/31 77   56   133         6/1 - 8/31 89   56   145         9/1 - 12/31 77   56   133   1Transition rule. Www.freestatetaxsites.com In lieu of the updated GSA rates that will be effective October 1, 2011, taxpayers may continue to use the CONUS rates in effect for the first 9 months of 2011 (Table 3) for expenses of all CONUS travel away from home that are paid or incurred during calendar year 2011. Www.freestatetaxsites.com A taxpayer must consistently use either these rates or the updated rates for the period of October 1, 2011, through December 31, 2011. Www.freestatetaxsites.com See Transition Rules under How To Use Per Diem Rate Tables for an example. Www.freestatetaxsites.com    2Unless otherwise specified, the per diem locality is defined as “all locations within, or entirely surrounded by, the corporate limits of the key city, including independent entities located within those boundaries. Www.freestatetaxsites.com ”   3Per diem localities with county definitions shall include “all locations within, or entirely surrounded by, the corporate limits of the key city as well as the boundaries of the listed counties, including independent entities located within the boundaries of the key city and the listed counties (unless otherwise listed separately). Www.freestatetaxsites.com ” 4When a military installation or Government-related facility (whether or not specifically named) is located partially within more than one city or county boundary, the applicable per diem rate for the entire installation or facility is the higher of the two rates which apply to the cities and/or counties, even though part(s) of such activities may be located outside the defined per diem locality. Www.freestatetaxsites.com   Note: Recognizing that all locations are not incorporated cities, the term “city limits” has been used as a general phrase to denote the commonly recognized local boundaries of the location cited. Www.freestatetaxsites.com         Table 4. Www.freestatetaxsites.com Maximum Federal Per Diem Rates (Effective October 1, 2011 – September 30, 2012)1 Note: The standard rate of $123 ($77 for lodging and $46 for M&IE) applies to all locations within the continental United States (CONUS) not specifically listed below or encompassed by the boundary definition of a listed point. Www.freestatetaxsites.com However, the standard CONUS rate applies to all locations within CONUS, including those defined below, for certain relocation allowances. Www.freestatetaxsites.com (See parts 302-2, 302-4, and 302-5 of 41 CFR. Www.freestatetaxsites.com ) Table 4 lists all per diem rates alphabetically by state abbreviation. Www.freestatetaxsites.com Click on a link below to find rates for your state: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas , Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming Per Diem Locality Computing Maximum Rate State Key City2 County and/or Other Defined Location3,4 Effective Dates Maximum  Lodging  Rate M&IE  Rate Maximum  Per Diem  Rate AL Birmingham Jefferson, Shelby All year $86   $56   $142     Gulf Shores Baldwin 1/1 - 5/31 100   51   151         6/1 - 7/31 117   51   168         8/1 - 12/31 100   51   151     Huntsville Madison, Limestone All year 87   51   138     Mobile Mobile All year 94   51   145     Montgomery/Prattville Montgomery/Autauga All year 80   51   131   AR Hot Springs Garland All year 101   46   147     Little Rock Pulaski All year 86   61   147   AZ Grand Canyon, Flagstaff Coconino (except city limits of Sedona), Yavapai 1/1 - 2/29 77   66   143         3/1 - 10/31 97   66   163         11/1 - 12/31 77   66   143     Kayenta Navajo 1/1 - 4/30 79   46   125         5/1 - 9/30 90   46   136         10/1 - 12/31 79   46   125     Phoenix, Scottsdale Maricopa 1/1 - 5/31 128   71   199         6/1 - 8/31 80   71   151         9/1 - 12/31 105   71   176     Sedona City limits of Sedona 1/1 - 2/29 127   66   193         3/1 - 4/30 145   66   211         5/1 - 12/31 127   66   193     Sierra Vista Cochise All year 83   46   129     Tucson Pima 1/1 - 1/31 90   56   146         2/1 - 5/31 103   56   159         6/1 - 8/31 77   56   133         9/1 - 12/31 90   56   146     Yuma Yuma All year 78   46
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Tax Information for Private Foundations

Life Cycle of a Private Foundation
During its existence, a private foundation has numerous interactions with the IRS - from filing an application for recognition of tax-exempt status, to filing required annual information returns, to making changes in its mission and purpose.

Exemption Requirements - 501(c)(3) Organizations
A brief description of the requirements for exemption under IRC Section 501(c)(3).

Private Foundations
A brief explanation of the rules for classifying charitable organizations as private foundations, and the effect of private foundation classification.

Life Cycle of a Private Foundation - Required Filings
Annual filings required to be made by private foundations.

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations
Political Campaign Activity by section 501(c)(3) tax-exempt organizations

Unrelated Business Income Defined
A general description of the unrelated business income tax requirements for tax-exempt organizations.

Tax Information for Charitable Organizations
Tax information for charitable, religious, scientific, literary, and other organizations exempt under Internal Revenue Code ("IRC") section 501(c)(3)

Private Foundations Manual
Scroll down the table of contents for the Internal Revenue Manual to reach the Private Foundations Manual, procedures the IRS uses to administer the tax law rules that apply to private foundations.

Employment Taxes for Exempt Organizations
Links to information about employment taxes for tax-exempt organizations.

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Www. Www.freestatetaxsites.com freestatetaxsites. Www.freestatetaxsites.com com 4. Www.freestatetaxsites.com   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Www.freestatetaxsites.com Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Debt paid off. Www.freestatetaxsites.com Payment of cash. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com S. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Exception 2. Www.freestatetaxsites.com Section 1256 contracts and straddles. Www.freestatetaxsites.com Market discount bonds. Www.freestatetaxsites.com File Form 1099-B or Form 1099-S with the IRS. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Investment property. Www.freestatetaxsites.com   This is property that produces investment income. Www.freestatetaxsites.com Examples include stocks, bonds, and Treasury bills and notes. Www.freestatetaxsites.com Property used in a trade or business is not investment property. Www.freestatetaxsites.com Form 1099-B. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com You should receive the statement by February 15 of the next year. Www.freestatetaxsites.com It will show the gross proceeds from the sale. Www.freestatetaxsites.com The IRS will also get a copy of Form 1099-B from the broker. Www.freestatetaxsites.com   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Www.freestatetaxsites.com If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Www.freestatetaxsites.com This will help you complete Form 8949. Www.freestatetaxsites.com Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Www.freestatetaxsites.com    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Www.freestatetaxsites.com Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Www.freestatetaxsites.com Nominees. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Other property transactions. Www.freestatetaxsites.com   Certain transfers of property are discussed in other IRS publications. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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 . Www.freestatetaxsites.com 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. Www.freestatetaxsites.com What Is a Sale or Trade? This section explains what is a sale or trade. Www.freestatetaxsites.com It also explains certain transactions and events that are treated as sales or trades. Www.freestatetaxsites.com A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Www.freestatetaxsites.com A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Www.freestatetaxsites.com Sale and purchase. Www.freestatetaxsites.com   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Www.freestatetaxsites.com The sale and purchase are two separate transactions. Www.freestatetaxsites.com But see Like-Kind Exchanges under Nontaxable Trades, later. Www.freestatetaxsites.com Redemption of stock. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Dividend versus sale or trade. Www.freestatetaxsites.com   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Www.freestatetaxsites.com Both direct and indirect ownership of stock will be considered. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Redemption or retirement of bonds. Www.freestatetaxsites.com   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Www.freestatetaxsites.com See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Www.freestatetaxsites.com   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Www.freestatetaxsites.com For details, see Regulations section 1. Www.freestatetaxsites.com 1001-3. Www.freestatetaxsites.com Surrender of stock. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Www.freestatetaxsites.com Trade of investment property for an annuity. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Www.freestatetaxsites.com Transfer by inheritance. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com No taxable gain or deductible loss results from the transfer. Www.freestatetaxsites.com Termination of certain rights and obligations. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Any gain or loss is treated as a capital gain or loss. Www.freestatetaxsites.com   This rule does not apply to the retirement of a debt instrument. Www.freestatetaxsites.com See Redemption or retirement of bonds , earlier. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com This affects whether your capital loss is long term or short term. Www.freestatetaxsites.com See Holding Period , later. Www.freestatetaxsites.com Worthless securities also include securities that you abandon after March 12, 2008. Www.freestatetaxsites.com To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Do not deduct them in the year the stock became worthless. Www.freestatetaxsites.com How to report loss. Www.freestatetaxsites.com   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Www.freestatetaxsites.com    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Www.freestatetaxsites.com See Form 8949 and the Instructions for Form 8949. Www.freestatetaxsites.com Filing a claim for refund. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com You must use Form 1040X, Amended U. Www.freestatetaxsites.com S. Www.freestatetaxsites.com Individual Income Tax Return, to amend your return for the year the security became worthless. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com (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. Www.freestatetaxsites.com ) For more information about filing a claim, see Publication 556. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Www.freestatetaxsites.com This gives you a new holding period for the position that begins on the date of the constructive sale. Www.freestatetaxsites.com Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Www.freestatetaxsites.com Constructive sale. Www.freestatetaxsites.com   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). Www.freestatetaxsites.com   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. Www.freestatetaxsites.com For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Www.freestatetaxsites.com Exception for nonmarketable securities. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Exception for certain closed transactions. Www.freestatetaxsites.com   Do not treat a transaction as a constructive sale if all of the following are true. Www.freestatetaxsites.com You closed the transaction on or before the 30th day after the end of your tax year. Www.freestatetaxsites.com You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Www.freestatetaxsites.com Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   This exception also applies to successive short sales of an entire appreciated financial position. Www.freestatetaxsites.com For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Www.freestatetaxsites.com This bulletin is available at www. Www.freestatetaxsites.com irs. Www.freestatetaxsites.com gov/pub/irs-irbs/irb03-03. Www.freestatetaxsites.com pdf. Www.freestatetaxsites.com Appreciated financial position. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Exceptions. Www.freestatetaxsites.com   An appreciated financial position does not include the following. Www.freestatetaxsites.com 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 ). Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Www.freestatetaxsites.com Any hedge with respect to a position described in (2). Www.freestatetaxsites.com Certain trust instruments treated as stock. Www.freestatetaxsites.com   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). Www.freestatetaxsites.com Sale of appreciated financial position. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Exceptions. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com For more details, including definitions of these terms, see section 1256. Www.freestatetaxsites.com Regulated futures contract. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Foreign currency contract. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   Special rules apply to certain foreign currency transactions. Www.freestatetaxsites.com These transactions may result in ordinary gain or loss treatment. Www.freestatetaxsites.com For details, see Internal Revenue Code section 988 and Regulations sections 1. Www.freestatetaxsites.com 988-1(a)(7) and 1. Www.freestatetaxsites.com 988-3. Www.freestatetaxsites.com Nonequity option. Www.freestatetaxsites.com   This is any listed option (defined later) that is not an equity option. Www.freestatetaxsites.com Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Www.freestatetaxsites.com 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). Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Cash-settled options. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   This rule does not apply to options established before the SEC determines that the stock index is broad based. Www.freestatetaxsites.com Listed option. Www.freestatetaxsites.com   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Www.freestatetaxsites.com A listed option, however, does not include an option that is a right to acquire stock from the issuer. Www.freestatetaxsites.com Dealer equity option. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Www.freestatetaxsites.com Equity option. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Www.freestatetaxsites.com Dealer securities futures contract. Www.freestatetaxsites.com   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). Www.freestatetaxsites.com A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Hedging exception. Www.freestatetaxsites.com   The marked-to-market rules do not apply to hedging transactions. Www.freestatetaxsites.com See Hedging Transactions , later. Www.freestatetaxsites.com 60/40 rule. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com This is true regardless of how long you actually held the property. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com On June 22, 2012, you bought a regulated futures contract for $50,000. Www.freestatetaxsites.com On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Www.freestatetaxsites.com You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Www.freestatetaxsites.com On February 1, 2013, you sold the contract for $56,000. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Limited partners or entrepreneurs. Www.freestatetaxsites.com   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 ). Www.freestatetaxsites.com Instead, these gains or losses are treated as short term. Www.freestatetaxsites.com Terminations and transfers. Www.freestatetaxsites.com   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Www.freestatetaxsites.com Loss carryback election. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See How To Report , later, for information about reporting this election on your return. Www.freestatetaxsites.com   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Www.freestatetaxsites.com In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com (See Capital Losses under Reporting Capital Gains and Losses, later. Www.freestatetaxsites.com ) 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Net section 1256 contracts loss. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Net section 1256 contracts gain. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com  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. Www.freestatetaxsites.com Traders in section 1256 contracts. Www.freestatetaxsites.com   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Www.freestatetaxsites.com However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Www.freestatetaxsites.com Treatment of underlying property. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Form 6781. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com This includes the amount shown in box 10 of Form 1099-B. Www.freestatetaxsites.com Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Www.freestatetaxsites.com Include a copy of Form 6781 with your income tax return. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Follow the Form 6781 instructions for completing Part I. Www.freestatetaxsites.com Loss carryback election. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Follow the instructions for completing Form 6781 for the loss year to make this election. Www.freestatetaxsites.com Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Www.freestatetaxsites.com A transaction is a hedging transaction if both of the following conditions are met. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Www.freestatetaxsites.com This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Hedging loss limit. Www.freestatetaxsites.com   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Ignore any hedging transaction items in determining this taxable income. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Www.freestatetaxsites.com Sale of property used in a hedge. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com See the Instructions for Schedule SE (Form 1040). Www.freestatetaxsites.com In addition, the rules relating to contributions to self-employment retirement plans apply. Www.freestatetaxsites.com For information on retirement plan contributions, see Publication 560 and Publication 590. Www.freestatetaxsites.com Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Www.freestatetaxsites.com You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Www.freestatetaxsites.com Investment property you buy normally has an original basis equal to its cost. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Cost Basis The basis of property you buy is usually its cost. Www.freestatetaxsites.com The cost is the amount you pay in cash, debt obligations, or other property or services. Www.freestatetaxsites.com Unstated interest. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com You generally have unstated interest if your interest rate is less than the applicable federal rate. Www.freestatetaxsites.com For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Www.freestatetaxsites.com Basis Other Than Cost There are times when you must use a basis other than cost. Www.freestatetaxsites.com In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Www.freestatetaxsites.com Fair market value. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Sales of similar property, around the same date, may be helpful in figuring fair market value. Www.freestatetaxsites.com Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Www.freestatetaxsites.com The amount you include in income then becomes your basis in the property. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Restricted property. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Www.freestatetaxsites.com See Restricted Property in Publication 525 for more information. Www.freestatetaxsites.com Bargain purchases. Www.freestatetaxsites.com   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Www.freestatetaxsites.com Your basis in the property is the price you pay plus the amount you include in income. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You trade A Company stock for B Company stock having a fair market value of $1,200. Www.freestatetaxsites.com If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Www.freestatetaxsites.com If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Www.freestatetaxsites.com The basis of your B Company stock is $1,200. Www.freestatetaxsites.com If you later sell the B Company stock for $1,300, you will have a gain of $100. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com See Nontaxable Trades , later. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com See Transfers Between Spouses , later. Www.freestatetaxsites.com Recordkeeping. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Fair market value less than donor's adjusted basis. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com No gain or loss. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Www.freestatetaxsites.com The fair market value at the time of the gift is $9,000. Www.freestatetaxsites.com You later sell the property for $9,500. Www.freestatetaxsites.com You have neither gain nor loss. Www.freestatetaxsites.com Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Www.freestatetaxsites.com Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Www.freestatetaxsites.com Fair market value equal to or more than donor's adjusted basis. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Gift received before 1977. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Www.freestatetaxsites.com Example 1. Www.freestatetaxsites.com You were given XYZ Company stock in 1976. Www.freestatetaxsites.com At the time of the gift, the stock had a fair market value of $21,000. Www.freestatetaxsites.com The donor's adjusted basis was $20,000. Www.freestatetaxsites.com The donor paid a gift tax of $500 on the gift. Www.freestatetaxsites.com Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Www.freestatetaxsites.com Example 2. Www.freestatetaxsites.com The facts are the same as in Example 1 except that the gift tax paid was $1,500. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Gift received after 1976. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com You figure this part by multiplying the gift tax paid on the gift by a fraction. Www.freestatetaxsites.com The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Www.freestatetaxsites.com   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com In 2013, you received a gift of property from your mother. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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 . Www.freestatetaxsites.com 701 ($61,000 ÷ $87,000) . Www.freestatetaxsites.com 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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Www.freestatetaxsites.com For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Www.freestatetaxsites.com Gift tax information. Www.freestatetaxsites.com   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Www.freestatetaxsites.com For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Www.freestatetaxsites.com Property Received as Inheritance Before or after 2010. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Appreciated property you gave the decedent. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Www.freestatetaxsites.com More information. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Inherited in 2010 and executor elected to file Form 8939. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com The result of these adjustments to the basis is the adjusted basis. Www.freestatetaxsites.com Adjustments to the basis of stocks and bonds are explained in the following discussion. Www.freestatetaxsites.com For information about other adjustments to basis, see Publication 551. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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 . Www.freestatetaxsites.com The basis of stock must be adjusted for certain events that occur after purchase. Www.freestatetaxsites.com For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Www.freestatetaxsites.com You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Www.freestatetaxsites.com These distributions, up to the amount of your basis, are a nontaxable return of capital. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com To find out more, go to www. Www.freestatetaxsites.com irs. Www.freestatetaxsites.com gov/Filing/Filing-Options. Www.freestatetaxsites.com Identifying stock or bonds sold. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Adequate identification. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Broker holds stock. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com  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. Www.freestatetaxsites.com Single stock certificate. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Bonds. Www.freestatetaxsites.com   These methods of identification also apply to bonds sold or transferred. Www.freestatetaxsites.com Identification not possible. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Www.freestatetaxsites.com In January 1999 you bought another 200 shares for $11 a share. Www.freestatetaxsites.com In July 1999 you gave your son 50 shares. Www.freestatetaxsites.com In December 2001 you bought 100 shares for $9 a share. Www.freestatetaxsites.com In April 2013 you sold 130 shares. Www.freestatetaxsites.com You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Www.freestatetaxsites.com The shares of stock you gave your son had a basis of $500 (50 × $10). Www.freestatetaxsites.com 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. Www.freestatetaxsites.com    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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You bought 100 shares of Fund A for $10 a share. Www.freestatetaxsites.com You paid a $50 commission to the broker for the purchase. Www.freestatetaxsites.com Your cost basis for each share is $10. Www.freestatetaxsites.com 50 ($1,050 ÷ 100). Www.freestatetaxsites.com Commissions and load charges. Www.freestatetaxsites.com   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Www.freestatetaxsites.com You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Www.freestatetaxsites.com A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Www.freestatetaxsites.com   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. Www.freestatetaxsites.com You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Www.freestatetaxsites.com You dispose of the shares within 90 days of the purchase date. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Www.freestatetaxsites.com 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). Www.freestatetaxsites.com Choosing average basis for mutual fund shares. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com The methods you can use to figure average basis are explained later. Www.freestatetaxsites.com Undistributed capital gains. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Www.freestatetaxsites.com Reinvestment right. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com      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. Www.freestatetaxsites.com This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Www.freestatetaxsites.com Table 4-1. Www.freestatetaxsites.com This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Www.freestatetaxsites.com Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Www.freestatetaxsites.com This worksheet will help you figure the adjusted basis when you sell or redeem shares. Www.freestatetaxsites.com Table 4-1. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 2 Cost plus or minus adjustments. Www.freestatetaxsites.com Automatic investment service. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Dividend reinvestment plans. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com You must include the amount of the discount in your income. Www.freestatetaxsites.com Public utilities. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Stock dividends. Www.freestatetaxsites.com   Stock dividends are distributions made by a corporation of its own stock. Www.freestatetaxsites.com Generally, stock dividends are not taxable to you. Www.freestatetaxsites.com However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Www.freestatetaxsites.com If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Www.freestatetaxsites.com New and old stock identical. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com The result is your basis for each share of stock. Www.freestatetaxsites.com Example 1. Www.freestatetaxsites.com You owned one share of common stock that you bought for $45. Www.freestatetaxsites.com The corporation distributed two new shares of common stock for each share held. Www.freestatetaxsites.com You then had three shares of common stock. Www.freestatetaxsites.com Your basis in each share is $15 ($45 ÷ 3). Www.freestatetaxsites.com Example 2. Www.freestatetaxsites.com You owned two shares of common stock. Www.freestatetaxsites.com You bought one for $30 and the other for $45. Www.freestatetaxsites.com The corporation distributed two new shares of common stock for each share held. Www.freestatetaxsites.com 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). Www.freestatetaxsites.com New and old stock not identical. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You bought a share of common stock for $100. Www.freestatetaxsites.com Later, the corporation distributed a share of preferred stock for each share of common stock held. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com You figure the basis of the old and new stock by dividing your $100 basis between them. Www.freestatetaxsites.com The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Www.freestatetaxsites.com Stock bought at various times. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Taxable stock dividends. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com The basis of your old stock does not change. Www.freestatetaxsites.com Stock splits. Www.freestatetaxsites.com   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Www.freestatetaxsites.com Stock rights. Www.freestatetaxsites.com   A stock right is a right to acquire a corporation's stock. Www.freestatetaxsites.com It may be exercised, it may be sold if it has a market value, or it may expire. Www.freestatetaxsites.com Stock rights are rarely taxable when you receive them. Www.freestatetaxsites.com See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Www.freestatetaxsites.com Taxable stock rights. Www.freestatetaxsites.com   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Www.freestatetaxsites.com The basis of the old stock does not change. Www.freestatetaxsites.com Nontaxable stock rights. Www.freestatetaxsites.com   If you receive nontaxable stock rights and allow them to expire, they have no basis. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Www.freestatetaxsites.com   If the fair market value of the stock rights was less than 15%, their basis is zero. Www.freestatetaxsites.com However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Basis of new stock. Www.freestatetaxsites.com   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You own 100 shares of ABC Company stock, which cost you $22 per share. Www.freestatetaxsites.com The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Www.freestatetaxsites.com At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Www.freestatetaxsites.com Each stock right had a market value of $3. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Www.freestatetaxsites.com 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Www.freestatetaxsites.com 18 ($21. Www.freestatetaxsites.com 78 ÷ 10) per right. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 18), or $28. Www.freestatetaxsites.com 18 per share. Www.freestatetaxsites.com The remaining basis of the old stock is $21. Www.freestatetaxsites.com 78 per share. Www.freestatetaxsites.com Investment property received in liquidation. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com S corporation stock. Www.freestatetaxsites.com   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Www.freestatetaxsites.com All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Www.freestatetaxsites.com The nonseparately stated income of the S corporation. Www.freestatetaxsites.com The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Www.freestatetaxsites.com   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Www.freestatetaxsites.com Distributions by the S corporation that were not included in your income. Www.freestatetaxsites.com All loss and deduction items of the S corporation that are separately stated and passed through to you. Www.freestatetaxsites.com Any nonseparately stated loss of the S corporation. Www.freestatetaxsites.com Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com However, your basis in the stock cannot be reduced below zero. Www.freestatetaxsites.com Specialized small business investment company stock or partnership interest. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Rollover of Gain From Publicly Traded Securities , later. Www.freestatetaxsites.com Qualified small business stock. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Gains on Qualified Small Business Stock , later. Www.freestatetaxsites.com Short sales. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Www.freestatetaxsites.com Premiums on bonds. Www.freestatetaxsites.com   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Www.freestatetaxsites.com You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Www.freestatetaxsites.com   See Bond Premium Amortization in chapter 3 for more information. Www.freestatetaxsites.com Market discount on bonds. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Market Discount Bonds in chapter 1 for more information. Www.freestatetaxsites.com Bonds purchased at par value. Www.freestatetaxsites.com   A bond purchased at par value (face amount) has no premium or discount. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You purchased a bond several years ago for its par value of $10,000. Www.freestatetaxsites.com You sold the bond this year for $10,100. Www.freestatetaxsites.com You have a gain of $100. Www.freestatetaxsites.com However, if you had sold the bond for $9,900, you would have a loss of $100. Www.freestatetaxsites.com Acquisition discount on short-term obligations. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Discount on Short-Term Obligations in chapter 1 for more information. Www.freestatetaxsites.com Original issue discount (OID) on debt instruments. Www.freestatetaxsites.com   Increase the basis of a debt instrument by the OID you include in your income. Www.freestatetaxsites.com See Original Issue Discount (OID) in chapter 1. Www.freestatetaxsites.com Discounted tax-exempt obligations. Www.freestatetaxsites.com   OID on tax-exempt obligations is generally not taxable. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com The accrued OID is added to the basis of the obligation to determine your gain or loss. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Discount on Short-Term Obligations in chapter 1. Www.freestatetaxsites.com Stripped tax-exempt obligation. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Www.freestatetaxsites.com You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Www.freestatetaxsites.com   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Gain. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Loss. Www.freestatetaxsites.com   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Www.freestatetaxsites.com Amount realized. Www.freestatetaxsites.com   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). Www.freestatetaxsites.com Amount realized includes the money you receive plus the fair market value of any property or services you receive. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com For more information, see Publication 537. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com See Regulations section 1. Www.freestatetaxsites.com 1001-1(g). Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Fair market value. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Your gain is $3,000 ($10,000 – $7,000). Www.freestatetaxsites.com 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). Www.freestatetaxsites.com Debt paid off. Www.freestatetaxsites.com   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. Www.freestatetaxsites.com This is true even if neither you nor the buyer is personally liable for the debt. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com Example. Www.freestatetaxsites.com You sell stock that you had pledged as security for a bank loan of $8,000. Www.freestatetaxsites.com Your basis in the stock is $6,000. Www.freestatetaxsites.com The buyer pays off your bank loan and pays you $20,000 in cash. Www.freestatetaxsites.com The amount realized is $28,000 ($20,000 + $8,000). Www.freestatetaxsites.com Your gain is $22,000 ($28,000 – $6,000). Www.freestatetaxsites.com Payment of cash. Www.freestatetaxsites.com   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com If the result is a positive number, it is a gain. Www.freestatetaxsites.com If the result is a negative number, it is a loss. Www.freestatetaxsites.com No gain or loss. Www.freestatetaxsites.com   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Www.freestatetaxsites.com In this case, you may have neither a gain nor a loss. Www.freestatetaxsites.com See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Www.freestatetaxsites.com 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. Www.freestatetaxsites.com 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