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1040ez 2012 Tax Form

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1040ez 2012 Tax Form

1040ez 2012 tax form Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. 1040ez 2012 tax form For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. 1040ez 2012 tax form If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. 1040ez 2012 tax form Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. 1040ez 2012 tax form A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. 1040ez 2012 tax form Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. 1040ez 2012 tax form Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). 1040ez 2012 tax form It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. 1040ez 2012 tax form A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. 1040ez 2012 tax form Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. 1040ez 2012 tax form It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. 1040ez 2012 tax form Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. 1040ez 2012 tax form Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. 1040ez 2012 tax form Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. 1040ez 2012 tax form Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. 1040ez 2012 tax form Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. 1040ez 2012 tax form Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. 1040ez 2012 tax form Listed property placed in service before 1987. 1040ez 2012 tax form   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. 1040ez 2012 tax form Listed property placed in service after 1986. 1040ez 2012 tax form   For information on listed property placed in service after 1986, see Publication 946. 1040ez 2012 tax form Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. 1040ez 2012 tax form You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. 1040ez 2012 tax form The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. 1040ez 2012 tax form However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. 1040ez 2012 tax form Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. 1040ez 2012 tax form Example. 1040ez 2012 tax form Sarah Bradley uses a home computer 50% of the time to manage her investments. 1040ez 2012 tax form She also uses the computer 40% of the time in her part-time consumer research business. 1040ez 2012 tax form Sarah's home computer is listed property because it is not used at a regular business establishment. 1040ez 2012 tax form Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. 1040ez 2012 tax form Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. 1040ez 2012 tax form Her combined rate of business/investment use for determining her depreciation deduction is 90%. 1040ez 2012 tax form Qualified Business Use A qualified business use is any use in your trade or business. 1040ez 2012 tax form However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. 1040ez 2012 tax form See Employees, later. 1040ez 2012 tax form 5% owner. 1040ez 2012 tax form   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. 1040ez 2012 tax form   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. 1040ez 2012 tax form Related person. 1040ez 2012 tax form   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. 1040ez 2012 tax form Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. 1040ez 2012 tax form See Publication 463. 1040ez 2012 tax form Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. 1040ez 2012 tax form Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. 1040ez 2012 tax form Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. 1040ez 2012 tax form Any payment to you for the use of the automobile is treated as a rent payment for 3). 1040ez 2012 tax form Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. 1040ez 2012 tax form Use for the employer's convenience. 1040ez 2012 tax form   Whether the use of listed property is for the employer's convenience must be determined from all the facts. 1040ez 2012 tax form The use is for the employer's convenience if it is for a substantial business reason of the employer. 1040ez 2012 tax form The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. 1040ez 2012 tax form Use required as a condition of employment. 1040ez 2012 tax form   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. 1040ez 2012 tax form The use of property must be required for the employee to perform duties properly. 1040ez 2012 tax form The employer need not explicitly require the employee to use the property. 1040ez 2012 tax form A mere statement by the employer that the use of the property is a condition of employment is not sufficient. 1040ez 2012 tax form Example 1. 1040ez 2012 tax form Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. 1040ez 2012 tax form She owns and uses a motorcycle to deliver packages to downtown offices. 1040ez 2012 tax form We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. 1040ez 2012 tax form The company reimburses delivery persons for their costs. 1040ez 2012 tax form Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. 1040ez 2012 tax form Example 2. 1040ez 2012 tax form Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. 1040ez 2012 tax form He must travel to these sites on a regular basis. 1040ez 2012 tax form Uplift does not furnish an automobile or explicitly require him to use his own automobile. 1040ez 2012 tax form However, it reimburses him for any costs he incurs in traveling to the various sites. 1040ez 2012 tax form The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. 1040ez 2012 tax form Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. 1040ez 2012 tax form You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. 1040ez 2012 tax form For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. 1040ez 2012 tax form For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. 1040ez 2012 tax form Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. 1040ez 2012 tax form First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. 1040ez 2012 tax form Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. 1040ez 2012 tax form It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. 1040ez 2012 tax form Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. 1040ez 2012 tax form Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. 1040ez 2012 tax form See Recapture of excess depreciation, next. 1040ez 2012 tax form Recapture of excess depreciation. 1040ez 2012 tax form   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. 1040ez 2012 tax form Any excess depreciation must also be added to the adjusted basis of your property. 1040ez 2012 tax form Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. 1040ez 2012 tax form This means you figure your depreciation using the percentages fromTable 16 or 17. 1040ez 2012 tax form For information on investment credit recapture, see the instructions for Form 4255. 1040ez 2012 tax form Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. 1040ez 2012 tax form In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. 1040ez 2012 tax form To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. 1040ez 2012 tax form See Car Used 50% or Less for Business in Publication 917. 1040ez 2012 tax form Leased Property The limitations on cost recovery deductions apply to the rental of listed property. 1040ez 2012 tax form The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). 1040ez 2012 tax form SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. 1040ez 2012 tax form Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. 1040ez 2012 tax form A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. 1040ez 2012 tax form This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. 1040ez 2012 tax form Occasional or incidental leasing activity is insufficient. 1040ez 2012 tax form For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. 1040ez 2012 tax form An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. 1040ez 2012 tax form Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. 1040ez 2012 tax form Inclusion amount for property leased before 1987. 1040ez 2012 tax form   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. 1040ez 2012 tax form You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. 1040ez 2012 tax form   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. 1040ez 2012 tax form For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. 1040ez 2012 tax form You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. 1040ez 2012 tax form Special rules. 1040ez 2012 tax form   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. 1040ez 2012 tax form The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. 1040ez 2012 tax form   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. 1040ez 2012 tax form Maximum inclusion amount. 1040ez 2012 tax form   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. 1040ez 2012 tax form What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. 1040ez 2012 tax form How long to keep records. 1040ez 2012 tax form   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). 1040ez 2012 tax form Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. 1040ez 2012 tax form It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. 1040ez 2012 tax form However, your records should back up your receipts in an orderly manner. 1040ez 2012 tax form Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. 1040ez 2012 tax form Written documents of your expenditure or use are generally better evidence than oral statements alone. 1040ez 2012 tax form A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. 1040ez 2012 tax form A daily log is not required. 1040ez 2012 tax form However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. 1040ez 2012 tax form Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. 1040ez 2012 tax form An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. 1040ez 2012 tax form For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. 1040ez 2012 tax form Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. 1040ez 2012 tax form However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. 1040ez 2012 tax form A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. 1040ez 2012 tax form For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. 1040ez 2012 tax form Business Use Supported An adequate record contains enough information on each element of every business or investment use. 1040ez 2012 tax form The amount of detail required to support the use depends on the facts and circumstances. 1040ez 2012 tax form For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. 1040ez 2012 tax form Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. 1040ez 2012 tax form Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. 1040ez 2012 tax form However, repeated uses can be combined as a single item. 1040ez 2012 tax form Each expenditure is recorded as a separate item and not combined with other expenditures. 1040ez 2012 tax form If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. 1040ez 2012 tax form If these expenses are combined, you do not need to support the business purpose of each expense. 1040ez 2012 tax form Instead, you can divide the expenses based on the total business use of the listed property. 1040ez 2012 tax form Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. 1040ez 2012 tax form For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. 1040ez 2012 tax form Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. 1040ez 2012 tax form Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. 1040ez 2012 tax form Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. 1040ez 2012 tax form It must be kept elsewhere and made available as support to the district director on request. 1040ez 2012 tax form Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. 1040ez 2012 tax form If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. 1040ez 2012 tax form If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. 1040ez 2012 tax form If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. 1040ez 2012 tax form Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. 1040ez 2012 tax form Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. 1040ez 2012 tax form Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. 1040ez 2012 tax form If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. 1040ez 2012 tax form Employees. 1040ez 2012 tax form   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. 1040ez 2012 tax form Employees claiming the standard mileage rate may be able to use Form 2106–EZ. 1040ez 2012 tax form Employer who provides vehicles to employees. 1040ez 2012 tax form   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. 1040ez 2012 tax form   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. 1040ez 2012 tax form Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. 1040ez 2012 tax form   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. 1040ez 2012 tax form See the instructions for Form 4562. 1040ez 2012 tax form Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. 1040ez 2012 tax form In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. 1040ez 2012 tax form In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. 1040ez 2012 tax form For more information about deductions after the recovery period for automobiles, see Publication 917. 1040ez 2012 tax form Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. 1040ez 2012 tax form Table 1. 1040ez 2012 tax form 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. 1040ez 2012 tax form Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications
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The 1040ez 2012 Tax Form

1040ez 2012 tax form 11. 1040ez 2012 tax form   Casualties, Thefts, and Condemnations Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Casualties and TheftsDeductible losses. 1040ez 2012 tax form Nondeductible losses. 1040ez 2012 tax form Family pet. 1040ez 2012 tax form Progressive deterioration. 1040ez 2012 tax form Decline in market value of stock. 1040ez 2012 tax form Mislaid or lost property. 1040ez 2012 tax form Farming Losses How To Figure a Loss Deduction Limits on Losses of Personal-Use Property When Loss Is Deductible Proof of Loss Figuring a Gain Other Involuntary ConversionsCondemnation Irrigation Project Livestock Losses Tree Seedlings Postponing GainException. 1040ez 2012 tax form Related persons. 1040ez 2012 tax form Replacement Property Replacement Period How To Postpone Gain Disaster Area LossesWho is eligible. 1040ez 2012 tax form Covered disaster area. 1040ez 2012 tax form Reporting Gains and Losses Introduction This chapter explains the tax treatment of casualties, thefts, and condemnations. 1040ez 2012 tax form A casualty occurs when property is damaged, destroyed, or lost due to a sudden, unexpected, or unusual event. 1040ez 2012 tax form A theft occurs when property is stolen. 1040ez 2012 tax form A condemnation occurs when private property is legally taken for public use without the owner's consent. 1040ez 2012 tax form A casualty, theft, or condemnation may result in a deductible loss or taxable gain on your federal income tax return. 1040ez 2012 tax form You may have a deductible loss or a taxable gain even if only a portion of your property was affected by a casualty, theft, or condemnation. 1040ez 2012 tax form An involuntary conversion occurs when you receive money or other property as reimbursement for a casualty, theft, condemnation, disposition of property under threat of condemnation, or certain other events discussed in this chapter. 1040ez 2012 tax form If an involuntary conversion results in a gain and you buy qualified replacement property within the specified replacement period, you can postpone reporting the gain on your income tax return. 1040ez 2012 tax form For more information, see Postponing Gain , later. 1040ez 2012 tax form Topics - This chapter discusses: Casualties and thefts How to figure a loss or gain Other involuntary conversions Postponing gain Disaster area losses Reporting gains and losses Drought involving property connected with a trade or business or a transaction entered into for profit Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and Theft Loss Workbook Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 4684 Casualties and Thefts 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. 1040ez 2012 tax form Casualties and Thefts If your property is destroyed, damaged, or stolen, you may have a deductible loss. 1040ez 2012 tax form If the insurance or other reimbursement is more than the adjusted basis of the destroyed, damaged, or stolen property, you may have a taxable gain. 1040ez 2012 tax form Casualty. 1040ez 2012 tax form   A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 1040ez 2012 tax form A sudden event is one that is swift, not gradual or progressive. 1040ez 2012 tax form An unexpected event is one that is ordinarily unanticipated and unintended. 1040ez 2012 tax form An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. 1040ez 2012 tax form Deductible losses. 1040ez 2012 tax form   Deductible casualty losses can result from a number of different causes, including the following. 1040ez 2012 tax form Airplane crashes. 1040ez 2012 tax form Car, truck, or farm equipment accidents not resulting from your willful act or willful negligence. 1040ez 2012 tax form Earthquakes. 1040ez 2012 tax form Fires (but see Nondeductible losses next for exceptions). 1040ez 2012 tax form Floods. 1040ez 2012 tax form Freezing. 1040ez 2012 tax form Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses, in Publication 547. 1040ez 2012 tax form Lightning. 1040ez 2012 tax form Storms, including hurricanes and tornadoes. 1040ez 2012 tax form Terrorist attacks. 1040ez 2012 tax form Vandalism. 1040ez 2012 tax form Volcanic eruptions. 1040ez 2012 tax form Nondeductible losses. 1040ez 2012 tax form   A casualty loss is not deductible if the damage or destruction is caused by the following. 1040ez 2012 tax form Accidentally breaking articles such as glassware or china under normal conditions. 1040ez 2012 tax form A family pet (explained below). 1040ez 2012 tax form A fire if you willfully set it, or pay someone else to set it. 1040ez 2012 tax form A car, truck, or farm equipment accident if your willful negligence or willful act caused it. 1040ez 2012 tax form The same is true if the willful act or willful negligence of someone acting for you caused the accident. 1040ez 2012 tax form Progressive deterioration (explained below). 1040ez 2012 tax form Family pet. 1040ez 2012 tax form   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed above under Casualty are met. 1040ez 2012 tax form Example. 1040ez 2012 tax form You keep your horse in your yard. 1040ez 2012 tax form The ornamental fruit trees in your yard were damaged when your horse stripped the bark from them. 1040ez 2012 tax form Some of the trees were completely girdled and died. 1040ez 2012 tax form Because the damage was not unexpected or unusual, the loss is not deductible. 1040ez 2012 tax form Progressive deterioration. 1040ez 2012 tax form   Loss of property due to progressive deterioration is not deductible as a casualty loss. 1040ez 2012 tax form This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. 1040ez 2012 tax form Examples of damage due to progressive deterioration include damage from rust, corrosion, or termites. 1040ez 2012 tax form However, weather-related conditions or disease may cause another type of involuntary conversion. 1040ez 2012 tax form See Other Involuntary Conversions , later. 1040ez 2012 tax form Theft. 1040ez 2012 tax form   A theft is the taking and removing of money or property with the intent to deprive the owner of it. 1040ez 2012 tax form The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. 1040ez 2012 tax form You do not need to show a conviction for theft. 1040ez 2012 tax form   Theft includes the taking of money or property by the following means: Blackmail, Burglary, Embezzlement, Extortion, Kidnapping for ransom, Larceny, Robbery, or Threats. 1040ez 2012 tax form The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 1040ez 2012 tax form Decline in market value of stock. 1040ez 2012 tax form   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. 1040ez 2012 tax form However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. 1040ez 2012 tax form You report a capital loss on Schedule D (Form 1040). 1040ez 2012 tax form For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. 1040ez 2012 tax form Mislaid or lost property. 1040ez 2012 tax form   The simple disappearance of money or property is not a theft. 1040ez 2012 tax form However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 1040ez 2012 tax form Example. 1040ez 2012 tax form A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 1040ez 2012 tax form The diamond falls from the ring and is never found. 1040ez 2012 tax form The loss of the diamond is a casualty. 1040ez 2012 tax form Farming Losses You can deduct certain casualty or theft losses that occur in the business of farming. 1040ez 2012 tax form The following is a discussion of some losses you can deduct and some you cannot deduct. 1040ez 2012 tax form Livestock or produce bought for resale. 1040ez 2012 tax form   Casualty or theft losses of livestock or produce bought for resale are deductible if you report your income on the cash method. 1040ez 2012 tax form If you report your income on an accrual method, take casualty and theft losses on property bought for resale by omitting the item from the closing inventory for the year of the loss. 1040ez 2012 tax form You cannot take a separate deduction. 1040ez 2012 tax form Livestock, plants, produce, and crops raised for sale. 1040ez 2012 tax form   Losses of livestock, plants, produce, and crops raised for sale are generally not deductible if you report your income on the cash method. 1040ez 2012 tax form You have already deducted the cost of raising these items as farm expenses, so their basis is equal to zero. 1040ez 2012 tax form   For plants with a preproductive period of more than 2 years, you may have a deductible loss if you have a tax basis in the plants. 1040ez 2012 tax form You usually have a tax basis if you capitalized the expenses associated with these plants under the uniform capitalization rules. 1040ez 2012 tax form The uniform capitalization rules are discussed in chapter 6. 1040ez 2012 tax form   If you report your income on an accrual method, casualty or theft losses are deductible only if you included the items in your inventory at the beginning of your tax year. 1040ez 2012 tax form You get the deduction by omitting the item from your inventory at the close of your tax year. 1040ez 2012 tax form You cannot take a separate casualty or theft deduction. 1040ez 2012 tax form Income loss. 1040ez 2012 tax form   A loss of future income is not deductible. 1040ez 2012 tax form Example. 1040ez 2012 tax form A severe flood destroyed your crops. 1040ez 2012 tax form Because you are a cash method taxpayer and already deducted the cost of raising the crops as farm expenses, this loss is not deductible, as explained above under Livestock, plants, produce, and crops raised for sale . 1040ez 2012 tax form You estimate that the crop loss will reduce your farm income by $25,000. 1040ez 2012 tax form This loss of future income is also not deductible. 1040ez 2012 tax form Loss of timber. 1040ez 2012 tax form   If you sell timber downed as a result of a casualty, treat the proceeds from the sale as a reimbursement. 1040ez 2012 tax form If you use the proceeds to buy qualified replacement property, you can postpone reporting the gain. 1040ez 2012 tax form See Postponing Gain , later. 1040ez 2012 tax form Property used in farming. 1040ez 2012 tax form   Casualty and theft losses of property used in your farm business usually result in deductible losses. 1040ez 2012 tax form If a fire or storm destroyed your barn, or you lose by casualty or theft an animal you bought for draft, breeding, dairy, or sport, you may have a deductible loss. 1040ez 2012 tax form See How To Figure a Loss , later. 1040ez 2012 tax form Raised draft, breeding, dairy, or sporting animals. 1040ez 2012 tax form   Generally, losses of raised draft, breeding, dairy, or sporting animals do not result in deductible casualty or theft losses because you have no basis in the animals. 1040ez 2012 tax form However, you may have a basis in the animal and therefore may be able to claim a deduction if either of the following situations applies to you. 1040ez 2012 tax form You use inventories to determine your income and you included the animals in your inventory. 1040ez 2012 tax form You capitalized the expenses associated with the animals under the uniform capitalization rules and therefore have a tax basis in the animals subject to a casualty or theft. 1040ez 2012 tax form When you include livestock in inventory, its last inventory value is its basis. 1040ez 2012 tax form When you lose an inventoried animal held for draft, breeding, dairy, or sport by casualty or theft during the year, decrease ending inventory by the amount you included in inventory for the animal. 1040ez 2012 tax form You cannot take a separate deduction. 1040ez 2012 tax form How To Figure a Loss How you figure a deductible casualty or theft loss depends on whether the loss was to farm or personal-use property and whether the property was stolen or partly or completely destroyed. 1040ez 2012 tax form Farm property. 1040ez 2012 tax form   Farm property is the property you use in your farming business. 1040ez 2012 tax form If your farm property was completely destroyed or stolen, your loss is figured as follows:      Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive      You can use the schedules in Publication 584-B to list your stolen, damaged, or destroyed business property and to figure your loss. 1040ez 2012 tax form   If your farm property was partially damaged, use the steps shown under Personal-use property next to figure your casualty loss. 1040ez 2012 tax form However, the deduction limits, discussed later, do not apply to farm property. 1040ez 2012 tax form Personal-use property. 1040ez 2012 tax form   Personal-use property is property used by you or your family members for personal purposes and not used in your farm business or for income-producing purposes. 1040ez 2012 tax form The following items are examples of personal-use property: Your main home. 1040ez 2012 tax form Furniture and electronics used in your main home and not used in a home office or for business purposes. 1040ez 2012 tax form Clothing and jewelry. 1040ez 2012 tax form An automobile used for nonbusiness purposes. 1040ez 2012 tax form You figure the casualty or theft loss on this property by taking the following steps. 1040ez 2012 tax form Determine your adjusted basis in the property before the casualty or theft. 1040ez 2012 tax form Determine the decrease in fair market value of the property as a result of the casualty or theft. 1040ez 2012 tax form From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you receive or expect to receive. 1040ez 2012 tax form You must apply the deduction limits, discussed later, to determine your deductible loss. 1040ez 2012 tax form    You can use Publication 584 to list your stolen or damaged personal-use property and figure your loss. 1040ez 2012 tax form It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. 1040ez 2012 tax form Adjusted basis. 1040ez 2012 tax form   Adjusted basis is your basis (usually cost) increased or decreased by various events, such as improvements and casualty losses. 1040ez 2012 tax form For more information about adjusted basis, see chapter 6. 1040ez 2012 tax form Decrease in fair market value (FMV). 1040ez 2012 tax form   The decrease in FMV is the difference between the property's value immediately before the casualty or theft and its value immediately afterward. 1040ez 2012 tax form FMV is defined in chapter 10 under Payments Received or Considered Received . 1040ez 2012 tax form Appraisal. 1040ez 2012 tax form   To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. 1040ez 2012 tax form But other measures, such as the cost of cleaning up or making repairs (discussed next) can be used to establish decreases in FMV. 1040ez 2012 tax form   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. 1040ez 2012 tax form The appraiser must recognize the effects of any general market decline that may occur along with the casualty. 1040ez 2012 tax form This information is needed to limit any deduction to the actual loss resulting from damage to the property. 1040ez 2012 tax form Cost of cleaning up or making repairs. 1040ez 2012 tax form   The cost of cleaning up after a casualty is not part of a casualty loss. 1040ez 2012 tax form Neither is the cost of repairing damaged property after a casualty. 1040ez 2012 tax form But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. 1040ez 2012 tax form The repairs are actually made. 1040ez 2012 tax form The repairs are necessary to bring the property back to its condition before the casualty. 1040ez 2012 tax form The amount spent for repairs is not excessive. 1040ez 2012 tax form The repairs fix the damage only. 1040ez 2012 tax form The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. 1040ez 2012 tax form Related expenses. 1040ez 2012 tax form   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, temporary housing, or a rental car, are not part of your casualty or theft loss. 1040ez 2012 tax form However, they may be deductible as farm business expenses if the damaged or stolen property is farm property. 1040ez 2012 tax form Separate computations for more than one item of property. 1040ez 2012 tax form   Generally, if a single casualty or theft involves more than one item of property, you must figure your loss separately for each item of property. 1040ez 2012 tax form Then combine the losses to determine your total loss. 1040ez 2012 tax form    There is an exception to this rule for personal-use real property. 1040ez 2012 tax form See Exception for personal-use real property, later. 1040ez 2012 tax form Example. 1040ez 2012 tax form A fire on your farm damaged a tractor and the barn in which it was stored. 1040ez 2012 tax form The tractor had an adjusted basis of $3,300. 1040ez 2012 tax form Its FMV was $28,000 just before the fire and $10,000 immediately afterward. 1040ez 2012 tax form The barn had an adjusted basis of $28,000. 1040ez 2012 tax form Its FMV was $55,000 just before the fire and $25,000 immediately afterward. 1040ez 2012 tax form You received insurance reimbursements of $2,100 on the tractor and $26,000 on the barn. 1040ez 2012 tax form Figure your deductible casualty loss separately for the two items of property. 1040ez 2012 tax form     Tractor Barn 1) Adjusted basis $3,300 $28,000 2) FMV before fire $28,000 $55,000 3) FMV after fire 10,000 25,000 4) Decrease in FMV  (line 2 − line 3) $18,000 $30,000 5) Loss (lesser of line 1 or line 4) $3,300 $28,000 6) Minus: Insurance 2,100 26,000 7) Deductible casualty loss $1,200 $2,000 8) Total deductible casualty loss $3,200 Exception for personal-use real property. 1040ez 2012 tax form   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. 1040ez 2012 tax form Figure the loss using the smaller of the following. 1040ez 2012 tax form The decrease in FMV of the entire property. 1040ez 2012 tax form The adjusted basis of the entire property. 1040ez 2012 tax form Example. 1040ez 2012 tax form You bought a farm in 1990 for $160,000. 1040ez 2012 tax form The adjusted basis of the residential part is now $128,000. 1040ez 2012 tax form In 2013, a windstorm blew down shade trees and three ornamental trees planted at a cost of $7,500 on the residential part. 1040ez 2012 tax form The adjusted basis of the residential part includes the $7,500. 1040ez 2012 tax form The fair market value (FMV) of the residential part immediately before the storm was $400,000, and $385,000 immediately after the storm. 1040ez 2012 tax form The trees were not covered by insurance. 1040ez 2012 tax form 1) Adjusted basis $128,000 2) FMV before the storm $400,000 3) FMV after the storm 385,000 4) Decrease in FMV (line 2 − line 3) $15,000 5) Loss before insurance (lesser of line 1 or line 4) $15,000 6) Minus: Insurance -0- 7) Amount of loss $15,000 Insurance and other reimbursements. 1040ez 2012 tax form   If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. 1040ez 2012 tax form You do not have a casualty or theft loss to the extent you are reimbursed. 1040ez 2012 tax form   If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. 1040ez 2012 tax form You must reduce your loss even if you do not receive payment until a later tax year. 1040ez 2012 tax form    Do not subtract from your loss any insurance payments you receive for living expenses if you lose the use of your main home or are denied access to it because of a casualty. 1040ez 2012 tax form You may have to include a portion of these payments in your income. 1040ez 2012 tax form See Insurance payments for living expenses in Publication 547 for details. 1040ez 2012 tax form Disaster relief. 1040ez 2012 tax form   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. 1040ez 2012 tax form Excludable cash gifts you receive also do not reduce your casualty loss if there are no limits on how you can use the money. 1040ez 2012 tax form   Generally, disaster relief grants received under the Robert T. 1040ez 2012 tax form Stafford Disaster Relief and Emergency Assistance Act are not included in your income. 1040ez 2012 tax form See Federal disaster relief grants , later, under Disaster Area Losses . 1040ez 2012 tax form   Qualified disaster relief payments for expenses you incurred as a result of a federally declared disaster are not taxable income to you. 1040ez 2012 tax form See Qualified disaster relief payments , later, under Disaster Area Losses . 1040ez 2012 tax form Reimbursement received after deducting loss. 1040ez 2012 tax form   If you figure your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. 1040ez 2012 tax form Actual reimbursement less than expected. 1040ez 2012 tax form   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. 1040ez 2012 tax form Actual reimbursement more than expected. 1040ez 2012 tax form   If you later receive more reimbursement than you expected after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. 1040ez 2012 tax form However, if any part of your original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. 1040ez 2012 tax form Do not refigure your tax for the year you claimed the deduction. 1040ez 2012 tax form See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. 1040ez 2012 tax form If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. 1040ez 2012 tax form See Figuring a Gain in Publication 547 for information on how to treat a gain from the reimbursement you receive because of a casualty or theft. 1040ez 2012 tax form Actual reimbursement same as expected. 1040ez 2012 tax form   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. 1040ez 2012 tax form Lump-sum reimbursement. 1040ez 2012 tax form   If you have a casualty or theft loss of several assets at the same time without an allocation of reimbursement to specific assets, divide the lump-sum reimbursement among the assets according to the fair market value of each asset at the time of the loss. 1040ez 2012 tax form Figure the gain or loss separately for each asset that has a separate basis. 1040ez 2012 tax form Adjustments to basis. 1040ez 2012 tax form   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. 1040ez 2012 tax form The result is your adjusted basis in the property. 1040ez 2012 tax form Amounts you spend on repairs to restore your property to its pre-casualty condition increase your adjusted basis. 1040ez 2012 tax form See Adjusted Basis in chapter 6 for more information. 1040ez 2012 tax form Example. 1040ez 2012 tax form You built a new silo for $25,000. 1040ez 2012 tax form This is the basis in your silo because that is the total cost you incurred to build it. 1040ez 2012 tax form During the year, a tornado damaged your silo and your allowable casualty loss deduction was $1,000. 1040ez 2012 tax form In addition, your insurance company reimbursed you $4,000 for the damage and you spent $6,000 to restore the silo to its pre-casualty condition. 1040ez 2012 tax form Your adjusted basis in the silo after the casualty is $26,000 ($25,000 - $1,000 - $4,000 + $6,000). 1040ez 2012 tax form Deduction Limits on Losses of Personal-Use Property Casualty and theft losses of property held for personal use may be deductible if you itemize deductions on Schedule A (Form 1040). 1040ez 2012 tax form There are two limits on the deduction for casualty or theft loss of personal-use property. 1040ez 2012 tax form You figure these limits on Form 4684. 1040ez 2012 tax form $100 rule. 1040ez 2012 tax form   You must reduce each casualty or theft loss on personal-use property by $100. 1040ez 2012 tax form This rule applies after you have subtracted any reimbursement. 1040ez 2012 tax form 10% rule. 1040ez 2012 tax form   You must further reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. 1040ez 2012 tax form Apply this rule after you reduce each loss by $100. 1040ez 2012 tax form Adjusted gross income is on line 38 of Form 1040. 1040ez 2012 tax form Example. 1040ez 2012 tax form In June, you discovered that your house had been burglarized. 1040ez 2012 tax form Your loss after insurance reimbursement was $2,000. 1040ez 2012 tax form Your adjusted gross income for the year you discovered the burglary is $57,000. 1040ez 2012 tax form Figure your theft loss deduction as follows: 1. 1040ez 2012 tax form Loss after insurance $2,000 2. 1040ez 2012 tax form Subtract $100 100 3. 1040ez 2012 tax form Loss after $100 rule $1,900 4. 1040ez 2012 tax form Subtract 10% (. 1040ez 2012 tax form 10) × $57,000 AGI $5,700 5. 1040ez 2012 tax form Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($5,700). 1040ez 2012 tax form    If you have a casualty or theft gain in addition to a loss, you will have to make a special computation before you figure your 10% limit. 1040ez 2012 tax form See 10% Rule in Publication 547. 1040ez 2012 tax form When Loss Is Deductible Generally, you can deduct casualty losses that are not reimbursable only in the tax year in which they occur. 1040ez 2012 tax form You generally can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. 1040ez 2012 tax form However, losses in federally declared disaster areas are subject to different rules. 1040ez 2012 tax form See Disaster Area Losses , later, for an exception. 1040ez 2012 tax form If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. 1040ez 2012 tax form Leased property. 1040ez 2012 tax form   If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is fixed. 1040ez 2012 tax form This is true even if the loss occurred or the liability was paid in a different year. 1040ez 2012 tax form You are not entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. 1040ez 2012 tax form Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned. 1040ez 2012 tax form Example. 1040ez 2012 tax form Robert leased a tractor from First Implement, Inc. 1040ez 2012 tax form , for use in his farm business. 1040ez 2012 tax form The tractor was destroyed by a tornado in June 2012. 1040ez 2012 tax form The loss was not insured. 1040ez 2012 tax form First Implement billed Robert for the fair market value of the tractor on the date of the loss. 1040ez 2012 tax form Robert disagreed with the bill and refused to pay it. 1040ez 2012 tax form First Implement later filed suit in court against Robert. 1040ez 2012 tax form In 2013, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. 1040ez 2012 tax form Robert paid $20,000 in June 2013. 1040ez 2012 tax form He can claim the $20,000 as a loss on his 2013 tax return. 1040ez 2012 tax form Net operating loss (NOL). 1040ez 2012 tax form   If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. 1040ez 2012 tax form An NOL can be carried back or carried forward and deducted from income in other years. 1040ez 2012 tax form See Publication 536 for more information on NOLs. 1040ez 2012 tax form Proof of Loss To deduct a casualty or theft loss, you must be able to prove that there was a casualty or theft. 1040ez 2012 tax form You must have records to support the amount you claim for the loss. 1040ez 2012 tax form Casualty loss proof. 1040ez 2012 tax form   For a casualty loss, your records should show all the following information. 1040ez 2012 tax form The type of casualty (car accident, fire, storm, etc. 1040ez 2012 tax form ) and when it occurred. 1040ez 2012 tax form That the loss was a direct result of the casualty. 1040ez 2012 tax form That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. 1040ez 2012 tax form Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 1040ez 2012 tax form Theft loss proof. 1040ez 2012 tax form   For a theft loss, your records should show all the following information. 1040ez 2012 tax form When you discovered your property was missing. 1040ez 2012 tax form That your property was stolen. 1040ez 2012 tax form That you were the owner of the property. 1040ez 2012 tax form Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 1040ez 2012 tax form Figuring a Gain A casualty or theft may result in a taxable gain. 1040ez 2012 tax form If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. 1040ez 2012 tax form You generally report your gain as income in the year you receive the reimbursement. 1040ez 2012 tax form However, depending on the type of property you receive, you may not have to report your gain. 1040ez 2012 tax form See Postponing Gain , later. 1040ez 2012 tax form Your gain is figured as follows: The amount you receive, minus Your adjusted basis in the property at the time of the casualty or theft. 1040ez 2012 tax form Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. 1040ez 2012 tax form Amount you receive. 1040ez 2012 tax form   The amount you receive includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. 1040ez 2012 tax form It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. 1040ez 2012 tax form Example. 1040ez 2012 tax form A tornado severely damaged your barn. 1040ez 2012 tax form The adjusted basis of the barn was $25,000. 1040ez 2012 tax form Your insurance company reimbursed you $40,000 for the damaged barn. 1040ez 2012 tax form However, you had legal expenses of $2,000 to collect that insurance. 1040ez 2012 tax form Your insurance minus your expenses to collect the insurance is more than your adjusted basis in the barn, so you have a gain. 1040ez 2012 tax form 1) Insurance reimbursement $40,000 2) Legal expenses 2,000 3) Amount received  (line 1 − line 2) $38,000 4) Adjusted basis 25,000 5) Gain on casualty (line 3 − line 4) $13,000 Other Involuntary Conversions In addition to casualties and thefts, other events cause involuntary conversions of property. 1040ez 2012 tax form Some of these are discussed in the following paragraphs. 1040ez 2012 tax form Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes. 1040ez 2012 tax form You report the gain or deduct the loss on your tax return for the year you realize it. 1040ez 2012 tax form However, depending on the type of property you receive, you may not have to report your gain on the involuntary conversion. 1040ez 2012 tax form See Postponing Gain , later. 1040ez 2012 tax form Condemnation Condemnation is the process by which private property is legally taken for public use without the owner's consent. 1040ez 2012 tax form The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take property. 1040ez 2012 tax form The owner receives a condemnation award (money or property) in exchange for the property taken. 1040ez 2012 tax form A condemnation is a forced sale, the owner being the seller and the condemning authority being the buyer. 1040ez 2012 tax form Threat of condemnation. 1040ez 2012 tax form   Treat the sale of your property under threat of condemnation as a condemnation, provided you have reasonable grounds to believe that your property will be condemned. 1040ez 2012 tax form Main home condemned. 1040ez 2012 tax form   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. 1040ez 2012 tax form For information on this exclusion, see Publication 523. 1040ez 2012 tax form If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. 1040ez 2012 tax form See Postponing Gain , later. 1040ez 2012 tax form (You cannot deduct a loss from the condemnation of your main home. 1040ez 2012 tax form ) More information. 1040ez 2012 tax form   For information on how to figure the gain or loss on condemned property, see chapter 1 in Publication 544. 1040ez 2012 tax form Also see Postponing Gain , later, to find out if you can postpone reporting the gain. 1040ez 2012 tax form Irrigation Project The sale or other disposition of property located within an irrigation project to conform to the acreage limits of federal reclamation laws is an involuntary conversion. 1040ez 2012 tax form Livestock Losses Diseased livestock. 1040ez 2012 tax form   If your livestock die from disease, or are destroyed, sold, or exchanged because of disease, even though the disease is not of epidemic proportions, treat these occurrences as involuntary conversions. 1040ez 2012 tax form If the livestock were raised or purchased for resale, follow the rules for livestock discussed earlier under Farming Losses . 1040ez 2012 tax form Otherwise, figure the gain or loss from these conversions using the rules discussed under Determining Gain or Loss in chapter 8. 1040ez 2012 tax form If you replace the livestock, you may be able to postpone reporting the gain. 1040ez 2012 tax form See Postponing Gain below. 1040ez 2012 tax form Reporting dispositions of diseased livestock. 1040ez 2012 tax form   If you choose to postpone reporting gain on the disposition of diseased livestock, you must attach a statement to your return explaining that the livestock were disposed of because of disease. 1040ez 2012 tax form You must also include other information on this statement. 1040ez 2012 tax form See How To Postpone Gain , later, under Postponing Gain . 1040ez 2012 tax form Weather-related sales of livestock. 1040ez 2012 tax form   If you sell or exchange livestock (other than poultry) held for draft, breeding, or dairy purposes solely because of drought, flood, or other weather-related conditions, treat the sale or exchange as an involuntary conversion. 1040ez 2012 tax form Only livestock sold in excess of the number you normally would sell under usual business practice, in the absence of weather-related conditions, are considered involuntary conversions. 1040ez 2012 tax form Figure the gain or loss using the rules discussed under Determining Gain or Loss in chapter 8. 1040ez 2012 tax form If you replace the livestock, you may be able to postpone reporting the gain. 1040ez 2012 tax form See Postponing Gain below. 1040ez 2012 tax form Example. 1040ez 2012 tax form It is your usual business practice to sell five of your dairy animals during the year. 1040ez 2012 tax form This year you sold 20 dairy animals because of drought. 1040ez 2012 tax form The sale of 15 animals is treated as an involuntary conversion. 1040ez 2012 tax form    If you do not replace the livestock, you may be able to report the gain in the following year's income. 1040ez 2012 tax form This rule also applies to other livestock (including poultry). 1040ez 2012 tax form See Sales Caused by Weather-Related Conditions in chapter 3. 1040ez 2012 tax form Tree Seedlings If, because of an abnormal drought, the failure of planted tree seedlings is greater than normally anticipated, you may have a deductible loss. 1040ez 2012 tax form Treat the loss as a loss from an involuntary conversion. 1040ez 2012 tax form The loss equals the previously capitalized reforestation costs you had to duplicate on replanting. 1040ez 2012 tax form You deduct the loss on the return for the year the seedlings died. 1040ez 2012 tax form Postponing Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed, stolen, or other involuntarily converted property. 1040ez 2012 tax form Your basis in the new property is generally the same as your adjusted basis in the property it replaces. 1040ez 2012 tax form You must ordinarily report the gain on your stolen, destroyed, or other involuntarily converted property if you receive money or unlike property as reimbursement. 1040ez 2012 tax form However, you can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involuntarily converted property within a specific replacement period. 1040ez 2012 tax form If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. 1040ez 2012 tax form To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. 1040ez 2012 tax form If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. 1040ez 2012 tax form Example 1. 1040ez 2012 tax form In 1985, you constructed a barn to store farm equipment at a cost of $20,000. 1040ez 2012 tax form In 1987, you added a silo to the barn at a cost of $15,000 to store grain. 1040ez 2012 tax form In May of this year, the property was worth $100,000. 1040ez 2012 tax form In June the barn and silo were destroyed by a tornado. 1040ez 2012 tax form At the time of the tornado, you had an adjusted basis of $0 in the property. 1040ez 2012 tax form You received $85,000 from the insurance company. 1040ez 2012 tax form You had a gain of $85,000 ($85,000 – $0). 1040ez 2012 tax form You spent $80,000 to rebuild the barn and silo. 1040ez 2012 tax form Since this is less than the insurance proceeds received, you must include $5,000 ($85,000 – $80,000) in your income. 1040ez 2012 tax form Example 2. 1040ez 2012 tax form In 1970, you bought a cabin in the mountains for your personal use at a cost of $18,000. 1040ez 2012 tax form You made no further improvements or additions to it. 1040ez 2012 tax form When a storm destroyed the cabin this January, the cabin was worth $250,000. 1040ez 2012 tax form You received $146,000 from the insurance company in March. 1040ez 2012 tax form You had a gain of $128,000 ($146,000 − $18,000). 1040ez 2012 tax form You spent $144,000 to rebuild the cabin. 1040ez 2012 tax form Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. 1040ez 2012 tax form Buying replacement property from a related person. 1040ez 2012 tax form   You cannot postpone reporting a gain from a casualty, theft, or other involuntary conversion if you buy the replacement property from a related person (discussed later). 1040ez 2012 tax form This rule applies to the following taxpayers. 1040ez 2012 tax form C corporations. 1040ez 2012 tax form Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. 1040ez 2012 tax form Individuals, partnerships (other than those in (2) above), and S corporations if the total realized gain for the tax year on all involuntarily converted properties on which there are realized gains is more than $100,000. 1040ez 2012 tax form For involuntary conversions described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. 1040ez 2012 tax form If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. 1040ez 2012 tax form If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. 1040ez 2012 tax form Exception. 1040ez 2012 tax form   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the involuntarily converted property. 1040ez 2012 tax form Related persons. 1040ez 2012 tax form   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. 1040ez 2012 tax form For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 1040ez 2012 tax form Death of a taxpayer. 1040ez 2012 tax form   If a taxpayer dies after having a gain, but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. 1040ez 2012 tax form The executor of the estate or the person succeeding to the funds from the involuntary conversion cannot postpone reporting the gain by buying replacement property. 1040ez 2012 tax form Replacement Property You must buy replacement property for the specific purpose of replacing your property. 1040ez 2012 tax form Your replacement property must be similar or related in service or use to the property it replaces. 1040ez 2012 tax form You do not have to use the same funds you receive as reimbursement for your old property to acquire the replacement property. 1040ez 2012 tax form If you spend the money you receive for other purposes, and borrow money to buy replacement property, you can still choose to postpone reporting the gain if you meet the other requirements. 1040ez 2012 tax form Property you acquire by gift or inheritance does not qualify as replacement property. 1040ez 2012 tax form Owner-user. 1040ez 2012 tax form   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. 1040ez 2012 tax form Examples of property that functions in the same way as the property it replaces are a home that replaces another home, a dairy cow that replaces another dairy cow, and farm land that replaces other farm land. 1040ez 2012 tax form A grinding mill that replaces a tractor does not qualify. 1040ez 2012 tax form Neither does a breeding or draft animal that replaces a dairy cow. 1040ez 2012 tax form Soil or other environmental contamination. 1040ez 2012 tax form   If, because of soil or other environmental contamination, it is not feasible for you to reinvest your insurance money or other proceeds from destroyed or damaged livestock in property similar or related in service or use to the livestock, you can treat other property (including real property) used for farming purposes, as property similar or related in service or use to the destroyed or damaged livestock. 1040ez 2012 tax form Weather-related conditions. 1040ez 2012 tax form   If, because of drought, flood, or other weather-related conditions, it is not feasible for you to reinvest the insurance money or other proceeds in property similar or related in service or use to the livestock, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the livestock you disposed of. 1040ez 2012 tax form Example. 1040ez 2012 tax form Each year you normally sell 25 cows from your beef herd. 1040ez 2012 tax form However, this year you had to sell 50 cows. 1040ez 2012 tax form This is because a severe drought significantly reduced the amount of hay and pasture yield needed to feed your herd for the rest of the year. 1040ez 2012 tax form Because, as a result of the severe drought, it is not feasible for you to use the proceeds from selling the extra cows to buy new cows, you can treat other property (excluding real property) used for farming purposes, as property similar or related in service or use to the cows you sold. 1040ez 2012 tax form Standing crop destroyed by casualty. 1040ez 2012 tax form   If a storm or other casualty destroyed your standing crop and you use the insurance money to acquire either another standing crop or a harvested crop, this purchase qualifies as replacement property. 1040ez 2012 tax form The costs of planting and raising a new crop qualify as replacement costs for the destroyed crop only if you use the crop method of accounting (discussed in chapter 2). 1040ez 2012 tax form In that case, the costs of bringing the new crop to the same level of maturity as the destroyed crop qualify as replacement costs to the extent they are incurred during the replacement period. 1040ez 2012 tax form Timber loss. 1040ez 2012 tax form   Standing timber you bought with the proceeds from the sale of timber downed as a result of a casualty, such as high winds, earthquakes, or volcanic eruptions, qualifies as replacement property. 1040ez 2012 tax form If you bought the standing timber within the replacement period, you can postpone reporting the gain. 1040ez 2012 tax form Business or income-producing property located in a federally declared disaster area. 1040ez 2012 tax form   If your destroyed business or income-producing property was located in a federally declared disaster area, any tangible replacement property you acquire for use in any business is treated as similar or related in service or use to the destroyed property. 1040ez 2012 tax form For more information, see Disaster Area Losses in Publication 547. 1040ez 2012 tax form Substituting replacement property. 1040ez 2012 tax form   Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you cannot substitute other qualified replacement property. 1040ez 2012 tax form This is true even if you acquire the other property within the replacement period. 1040ez 2012 tax form However, if you discover that the original replacement property was not qualified replacement property, you can, within the replacement period, substitute the new qualified replacement property. 1040ez 2012 tax form Basis of replacement property. 1040ez 2012 tax form   You must reduce the basis of your replacement property (its cost) by the amount of postponed gain. 1040ez 2012 tax form In this way, tax on the gain is postponed until you dispose of the replacement property. 1040ez 2012 tax form Replacement Period To postpone reporting your gain, you must buy replacement property within a specified period of time. 1040ez 2012 tax form This is the replacement period. 1040ez 2012 tax form The replacement period begins on the date your property was damaged, destroyed, stolen, sold, or exchanged. 1040ez 2012 tax form The replacement period generally ends 2 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. 1040ez 2012 tax form Example. 1040ez 2012 tax form You are a calendar year taxpayer. 1040ez 2012 tax form While you were on vacation, farm equipment that cost $2,200 was stolen from your farm. 1040ez 2012 tax form You discovered the theft when you returned to your farm on November 11, 2012. 1040ez 2012 tax form Your insurance company investigated the theft and did not settle your claim until January 5, 2013, when they paid you $3,000. 1040ez 2012 tax form You first realized a gain from the reimbursement for the theft during 2013, so you have until December 31, 2015, to replace the property. 1040ez 2012 tax form Main home in disaster area. 1040ez 2012 tax form   For your main home (or its contents) located in a federally declared disaster area, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the involuntary conversion. 1040ez 2012 tax form See Disaster Area Losses , later. 1040ez 2012 tax form Property in the Midwestern disaster areas. 1040ez 2012 tax form   For property located in the Midwestern disaster areas (defined in Table 4 in the 2008 Publication 547) that was destroyed, damaged, stolen, or condemned, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. 1040ez 2012 tax form This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Midwestern disaster areas. 1040ez 2012 tax form Property in the Kansas disaster area. 1040ez 2012 tax form   For property located in the Kansas disaster area that was destroyed, damaged, stolen, or condemned after May 3, 2007, as a result of the Kansas storms and tornadoes, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. 1040ez 2012 tax form This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Kansas disaster area. 1040ez 2012 tax form Property in the Hurricane Katrina disaster area. 1040ez 2012 tax form   For property located in the Hurricane Katrina disaster area that was destroyed, damaged, stolen, or condemned after August 24, 2005, as a result of Hurricane Katrina, the replacement period ends 5 years after the close of the first tax year in which any part of your gain is realized. 1040ez 2012 tax form This 5-year replacement period applies only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. 1040ez 2012 tax form Weather-related sales of livestock in an area eligible for federal assistance. 1040ez 2012 tax form   For the sale or exchange of livestock due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. 1040ez 2012 tax form The IRS may extend the replacement period on a regional basis if the weather-related conditions continue for longer than 3 years. 1040ez 2012 tax form   For information on extensions of the replacement period because of persistent drought, see Notice 2006-82, 2006-39 I. 1040ez 2012 tax form R. 1040ez 2012 tax form B. 1040ez 2012 tax form 529, available at  www. 1040ez 2012 tax form irs. 1040ez 2012 tax form gov/irb/2006-39_IRB/ar11. 1040ez 2012 tax form html. 1040ez 2012 tax form For a list of counties for which exceptional, extreme, or severe drought was reported during the 12 months ending August 31, 2013, see Notice 2013-62, available at IRS. 1040ez 2012 tax form gov. 1040ez 2012 tax form Condemnation. 1040ez 2012 tax form   The replacement period for a condemnation begins on the earlier of the following dates. 1040ez 2012 tax form The date on which you disposed of the condemned property. 1040ez 2012 tax form The date on which the threat of condemnation began. 1040ez 2012 tax form The replacement period generally ends 2 years after the close of the first tax year in which any part of the gain on the condemnation is realized. 1040ez 2012 tax form But see Main home in disaster area , Property in the Midwestern disaster areas , Property in the Kansas disaster area , and Property in the Hurricane Katrina disaster area , earlier, for exceptions. 1040ez 2012 tax form Business or investment real property. 1040ez 2012 tax form   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the close of the first tax year in which any part of the gain on the condemnation is realized. 1040ez 2012 tax form Extension. 1040ez 2012 tax form   You can apply for an extension of the replacement period. 1040ez 2012 tax form Send your written application to the Internal Revenue Service Center where you file your tax return. 1040ez 2012 tax form See your tax return instructions for the address. 1040ez 2012 tax form Include all the details about your need for an extension. 1040ez 2012 tax form Make your application before the end of the replacement period. 1040ez 2012 tax form However, you can file an application within a reasonable time after the replacement period ends if you can show a good reason for the delay. 1040ez 2012 tax form You will get an extension of the replacement period if you can show reasonable cause for not making the replacement within the regular period. 1040ez 2012 tax form How To Postpone Gain You postpone reporting your gain by reporting your choice on your tax return for the year you have the gain. 1040ez 2012 tax form You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. 1040ez 2012 tax form Required statement. 1040ez 2012 tax form   You should attach a statement to your return for the year you have the gain. 1040ez 2012 tax form This statement should include all the following information. 1040ez 2012 tax form The date and details of the casualty, theft, or other involuntary conversion. 1040ez 2012 tax form The insurance or other reimbursement you received. 1040ez 2012 tax form How you figured the gain. 1040ez 2012 tax form Replacement property acquired before return filed. 1040ez 2012 tax form   If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all the following items. 1040ez 2012 tax form The replacement property. 1040ez 2012 tax form The postponed gain. 1040ez 2012 tax form The basis adjustment that reflects the postponed gain. 1040ez 2012 tax form Any gain you are reporting as income. 1040ez 2012 tax form Replacement property acquired after return filed. 1040ez 2012 tax form   If you intend to buy replacement property after you file your return for the year you realize gain, your statement should also say that you are choosing to replace the property within the required replacement period. 1040ez 2012 tax form   You should then attach another statement to your return for the year in which you buy the replacement property. 1040ez 2012 tax form This statement should contain detailed information on the replacement property. 1040ez 2012 tax form If you acquire part of your replacement property in one year and part in another year, you must attach a statement to each year's return. 1040ez 2012 tax form Include in the statement detailed information on the replacement property bought in that year. 1040ez 2012 tax form Reporting weather-related sales of livestock. 1040ez 2012 tax form   If you choose to postpone reporting the gain on weather-related sales or exchanges of livestock, show all the following information on a statement attached to your return for the tax year in which you first realize any of the gain. 1040ez 2012 tax form Evidence of the weather-related conditions that forced the sale or exchange of the livestock. 1040ez 2012 tax form The gain realized on the sale or exchange. 1040ez 2012 tax form The number and kind of livestock sold or exchanged. 1040ez 2012 tax form The number of livestock of each kind you would have sold or exchanged under your usual business practice. 1040ez 2012 tax form   Show all the following information and the preceding information on the return for the year in which you replace the livestock. 1040ez 2012 tax form The dates you bought the replacement property. 1040ez 2012 tax form The cost of the replacement property. 1040ez 2012 tax form Description of the replacement property (for example, the number and kind of the replacement livestock). 1040ez 2012 tax form Amended return. 1040ez 2012 tax form   You must file an amended return (Form 1040X) for the tax year of the gain in either of the following situations. 1040ez 2012 tax form You do not acquire replacement property within the replacement period, plus extensions. 1040ez 2012 tax form On this amended return, you must report the gain and pay any additional tax due. 1040ez 2012 tax form You acquire replacement property within the required replacement period, plus extensions, but at a cost less than the amount you receive from the casualty, theft, or other involuntary conversion. 1040ez 2012 tax form On this amended return, you must report the part of the gain that cannot be postponed and pay any additional tax due. 1040ez 2012 tax form Disaster Area Losses Special rules apply to federally declared disaster area losses. 1040ez 2012 tax form A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. 1040ez 2012 tax form Stafford Disaster Relief and Emergency Assistance Act. 1040ez 2012 tax form It includes a major disaster or emergency declaration under the act. 1040ez 2012 tax form A list of the areas warranting public or individual assistance (or both) under the Act is available at the Federal Emergency Management Agency (FEMA) web site at www. 1040ez 2012 tax form fema. 1040ez 2012 tax form gov. 1040ez 2012 tax form This part discusses the special rules for when to deduct a disaster area loss and what tax deadlines may be postponed. 1040ez 2012 tax form For other special rules, see Disaster Area Losses in Publication 547. 1040ez 2012 tax form When to deduct the loss. 1040ez 2012 tax form   You generally must deduct a casualty loss in the year it occurred. 1040ez 2012 tax form However, if you have a deductible loss from a disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. 1040ez 2012 tax form If you make this choice, the loss is treated as having occurred in the preceding year. 1040ez 2012 tax form    Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund. 1040ez 2012 tax form   You must make the choice to take your casualty loss for the disaster in the preceding year by the later of the following dates. 1040ez 2012 tax form The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred. 1040ez 2012 tax form The due date (with extensions) for the return for the preceding tax year. 1040ez 2012 tax form Federal disaster relief grants. 1040ez 2012 tax form   Do not include post-disaster relief grants received under the Robert T. 1040ez 2012 tax form Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. 1040ez 2012 tax form Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. 1040ez 2012 tax form If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement received after deducting loss , earlier. 1040ez 2012 tax form Unemployment assistance payments under the Act are taxable unemployment compensation. 1040ez 2012 tax form Qualified disaster relief payments. 1040ez 2012 tax form   Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. 1040ez 2012 tax form These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). 1040ez 2012 tax form No withholding applies to these payments. 1040ez 2012 tax form   Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses. 1040ez 2012 tax form Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster. 1040ez 2012 tax form Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. 1040ez 2012 tax form (A personal residence can be a rented residence or one you own. 1040ez 2012 tax form ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster. 1040ez 2012 tax form   Qualified disaster relief payments include amounts paid by a federal, state, or local government in connection with a federally declared disaster to individuals affected by the disaster. 1040ez 2012 tax form    Qualified disaster relief payments do not include: Payments for expenses otherwise paid for by insurance or other reimbursements, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. 1040ez 2012 tax form Qualified disaster mitigation payments. 1040ez 2012 tax form   Qualified disaster mitigation payments made under the Robert T. 1040ez 2012 tax form Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. 1040ez 2012 tax form These are payments you, as a property owner, receive to reduce the risk of future damage to your property. 1040ez 2012 tax form You cannot increase your basis in property, or take a deduction or credit, for expenditures made with respect to those payments. 1040ez 2012 tax form Sale of property under hazard mitigation program. 1040ez 2012 tax form   Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. 1040ez 2012 tax form You report the gain or deduct the loss on your tax return for the year you realize it. 1040ez 2012 tax form (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier. 1040ez 2012 tax form ) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. 1040ez 2012 tax form See Postponing Gain , earlier, for the rules that apply. 1040ez 2012 tax form Other federal assistance programs. 1040ez 2012 tax form    For more information about other federal assistance programs, see Crop Insurance and Crop Disaster Payments and Feed Assistance and Payments in chapter 3 earlier. 1040ez 2012 tax form Postponed tax deadlines. 1040ez 2012 tax form   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. 1040ez 2012 tax form The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA. 1040ez 2012 tax form   If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). 1040ez 2012 tax form Go to http://www. 1040ez 2012 tax form irs. 1040ez 2012 tax form gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. 1040ez 2012 tax form Who is eligible. 1040ez 2012 tax form   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. 1040ez 2012 tax form Any individual whose main home is located in a covered disaster area (defined next). 1040ez 2012 tax form Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. 1040ez 2012 tax form Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area. 1040ez 2012 tax form Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 1040ez 2012 tax form The main home or principal place of business does not have to be located in the covered disaster area. 1040ez 2012 tax form Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 1040ez 2012 tax form The spouse on a joint return with a taxpayer who is eligible for postponements. 1040ez 2012 tax form Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose necessary records to meet a postponed tax deadline are located in the covered disaster area. 1040ez 2012 tax form Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. 1040ez 2012 tax form Any other person determined by the IRS to be affected by a federally declared disaster. 1040ez 2012 tax form Covered disaster area. 1040ez 2012 tax form   This is an area of a federally declared disaster area in which the IRS has decided to postpone tax deadlines for up to 1 year. 1040ez 2012 tax form Abatement of interest and penalties. 1040ez 2012 tax form   The IRS may abate the interest and penalties on the underpaid income tax for the length of any postponement of tax deadlines. 1040ez 2012 tax form Reporting Gains and Losses You will have to file one or more of the following forms to report your gains or losses from involuntary conversions. 1040ez 2012 tax form Form 4684. 1040ez 2012 tax form   Use this form to report your gains and losses from casualties and thefts. 1040ez 2012 tax form Form 4797. 1040ez 2012 tax form   Use this form to report involuntary conversions (other than from casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. 1040ez 2012 tax form Also use this form if you have a gain from a casualty or theft on trade, business or income-producing property held for more than 1 year and you have to recapture some or all of your gain as ordinary income. 1040ez 2012 tax form Form 8949. 1040ez 2012 tax form   Use this form to report gain from an involuntary conversion (other than from casualty or theft) of personal-use property. 1040ez 2012 tax form Schedule A (Form 1040). 1040ez 2012 tax form   Use this form to deduct your losses from casualties and thefts of personal-use property and income-producing property, that you reported on Form 4684. 1040ez 2012 tax form Schedule D (Form 1040). 1040ez 2012 tax form   Use this form to carry over the following gains. 1040ez 2012 tax form Net gain shown on Form 4797 from an involuntary conversion of business property held for more than 1 year. 1040ez 2012 tax form Net gain shown on Form 4684 from the casualty or theft of personal-use property. 1040ez 2012 tax form    Also use this form to figure the overall gain or loss from transactions reported on Form 8949. 1040ez 2012 tax form Schedule F (Form 1040). 1040ez 2012 tax form   Use this form to deduct your losses from casualty or theft of livestock or produce bought for sale under Other expenses in Part II, line 32, if you use the cash method of accounting and have not otherwise deducted these losses. 1040ez 2012 tax form Prev  Up  Next   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