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1040ez Instructions 2011

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1040ez Instructions 2011

1040ez instructions 2011 24. 1040ez instructions 2011   Contributions Table of Contents Introduction Useful Items - You may want to see: Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions of PropertyException. 1040ez instructions 2011 Household items. 1040ez instructions 2011 Deduction more than $500. 1040ez instructions 2011 Form 1098-C. 1040ez instructions 2011 Filing deadline approaching and still no Form 1098-C. 1040ez instructions 2011 Exception 1—vehicle used or improved by organization. 1040ez instructions 2011 Exception 2—vehicle given or sold to needy individual. 1040ez instructions 2011 Deduction $500 or less. 1040ez instructions 2011 Right to use property. 1040ez instructions 2011 Tangible personal property. 1040ez instructions 2011 Future interest. 1040ez instructions 2011 Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value When To DeductChecks. 1040ez instructions 2011 Text message. 1040ez instructions 2011 Credit card. 1040ez instructions 2011 Pay-by-phone account. 1040ez instructions 2011 Stock certificate. 1040ez instructions 2011 Promissory note. 1040ez instructions 2011 Option. 1040ez instructions 2011 Borrowed funds. 1040ez instructions 2011 Limits on DeductionsCarryovers Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To Report Introduction This chapter explains how to claim a deduction for your charitable contributions. 1040ez instructions 2011 It discusses the following topics. 1040ez instructions 2011 The types of organizations to which you can make deductible charitable contributions. 1040ez instructions 2011 The types of contributions you can deduct. 1040ez instructions 2011 How much you can deduct. 1040ez instructions 2011 What records you must keep. 1040ez instructions 2011 How to report your charitable contributions. 1040ez instructions 2011 A charitable contribution is a donation or gift to, or for the use of, a qualified organization. 1040ez instructions 2011 It is voluntary and is made without getting, or expecting to get, anything of equal value. 1040ez instructions 2011 Form 1040 required. 1040ez instructions 2011    To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. 1040ez instructions 2011 The amount of your deduction may be limited if certain rules and limits explained in this chapter apply to you. 1040ez instructions 2011 The limits are explained in detail in Publication 526. 1040ez instructions 2011 Useful Items - You may want to see: Publication 526 Charitable Contributions 561 Determining the Value of Donated Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 8283 Noncash Charitable Contributions Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. 1040ez instructions 2011 Most organizations other than churches and governments must apply to the IRS to become a qualified organization. 1040ez instructions 2011 How to check whether an organization can receive deductible charitable contributions. 1040ez instructions 2011   You can ask any organization whether it is a qualified organization, and most will be able to tell you. 1040ez instructions 2011 Or go to IRS. 1040ez instructions 2011 gov. 1040ez instructions 2011 Click on “Tools” and then on “Exempt Organizations Select Check” (www. 1040ez instructions 2011 irs. 1040ez instructions 2011 gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). 1040ez instructions 2011 This online tool will enable you to search for qualified organizations. 1040ez instructions 2011 You can also call the IRS to find out if an organization is qualified. 1040ez instructions 2011 Call 1-877-829-5500. 1040ez instructions 2011 People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. 1040ez instructions 2011 Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. 1040ez instructions 2011 gsa. 1040ez instructions 2011 gov/fedrelay. 1040ez instructions 2011 Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. 1040ez instructions 2011 A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). 1040ez instructions 2011 It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. 1040ez instructions 2011 Certain organizations that foster national or international amateur sports competition also qualify. 1040ez instructions 2011 War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). 1040ez instructions 2011 Domestic fraternal societies, orders, and associations operating under the lodge system. 1040ez instructions 2011 (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. 1040ez instructions 2011 ) Certain nonprofit cemetery companies or corporations. 1040ez instructions 2011 (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. 1040ez instructions 2011 ) The United States or any state, the District of Columbia, a U. 1040ez instructions 2011 S. 1040ez instructions 2011 possession (including Puerto Rico), a political subdivision of a state or U. 1040ez instructions 2011 S. 1040ez instructions 2011 possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. 1040ez instructions 2011 (Your contribution to this type of organization is only deductible if it is to be used solely for public purposes. 1040ez instructions 2011 ) Examples. 1040ez instructions 2011    The following list gives some examples of qualified organizations. 1040ez instructions 2011 Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. 1040ez instructions 2011 Most nonprofit charitable organizations such as the American Red Cross and the United Way. 1040ez instructions 2011 Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. 1040ez instructions 2011 This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. 1040ez instructions 2011 However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . 1040ez instructions 2011 Nonprofit hospitals and medical research organizations. 1040ez instructions 2011 Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. 1040ez instructions 2011 Nonprofit volunteer fire companies. 1040ez instructions 2011 Nonprofit organizations that develop and maintain public parks and recreation facilities. 1040ez instructions 2011 Civil defense organizations. 1040ez instructions 2011 Certain foreign charitable organizations. 1040ez instructions 2011   Under income tax treaties with Canada, Israel, and Mexico, you may be able to deduct contributions to certain Canadian, Israeli, or Mexican charitable organizations. 1040ez instructions 2011 Generally, you must have income from sources in that country. 1040ez instructions 2011 For additional information on the deduction of contributions to Canadian charities, see Publication 597, Information on the United States–Canada Income Tax Treaty. 1040ez instructions 2011 If you need more information on how to figure your contribution to Mexican and Israeli charities, see Publication 526. 1040ez instructions 2011 Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. 1040ez instructions 2011 A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. 1040ez instructions 2011 The contributions must be made to a qualified organization and not set aside for use by a specific person. 1040ez instructions 2011 If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. 1040ez instructions 2011 See Contributions of Property , later in this chapter. 1040ez instructions 2011 Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. 1040ez instructions 2011 See Limits on Deductions , later. 1040ez instructions 2011 In addition, the total of your charitable contribution deduction and certain other itemized deductions may be limited. 1040ez instructions 2011 See chapter 29. 1040ez instructions 2011 Table 24-1 gives examples of contributions you can and cannot deduct. 1040ez instructions 2011 Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. 1040ez instructions 2011 Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. 1040ez instructions 2011 If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. 1040ez instructions 2011 For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. 1040ez instructions 2011 Example 1. 1040ez instructions 2011 You pay $65 for a ticket to a dinner-dance at a church. 1040ez instructions 2011 Your entire $65 payment goes to the church. 1040ez instructions 2011 The ticket to the dinner-dance has a fair market value of $25. 1040ez instructions 2011 When you buy your ticket, you know that its value is less than your payment. 1040ez instructions 2011 To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). 1040ez instructions 2011 You can deduct $40 as a contribution to the church. 1040ez instructions 2011 Example 2. 1040ez instructions 2011 At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. 1040ez instructions 2011 The amount you pay is no more than the fair rental value. 1040ez instructions 2011 You have not made a deductible charitable contribution. 1040ez instructions 2011 Athletic events. 1040ez instructions 2011   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. 1040ez instructions 2011   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. 1040ez instructions 2011 Subtract the price of the tickets from your payment. 1040ez instructions 2011 You can deduct 80% of the remaining amount as a charitable contribution. 1040ez instructions 2011 Example 1. 1040ez instructions 2011 You pay $300 a year for membership in a university's athletic scholarship program. 1040ez instructions 2011 The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. 1040ez instructions 2011 You can deduct $240 (80% of $300) as a charitable contribution. 1040ez instructions 2011 Table 24-1. 1040ez instructions 2011 Examples of Charitable Contributions—A Quick Check Use the following lists for a quick check of whether you can deduct a contribution. 1040ez instructions 2011 See the rest of this chapter for more information and additional rules and limits that may apply. 1040ez instructions 2011 Deductible As  Charitable Contributions Not Deductible  As Charitable Contributions Money or property you give to:  Churches, synagogues, temples, mosques, and other religious organizations Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park) Nonprofit schools and hospitals The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. 1040ez instructions 2011 War veterans groups   Expenses paid for a student living with you, sponsored by a qualified organization  Out-of-pocket expenses when you serve a qualified organization as a volunteer Money or property you give to:  Civic leagues, social and sports clubs, labor unions, and chambers of commerce Foreign organizations (except certain Canadian, Israeli, and Mexican charities) Groups that are run for personal profit Groups whose purpose is to lobby for law changes Homeowners' associations Individuals Political groups or candidates for public office   Cost of raffle, bingo, or lottery tickets  Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups  Tuition  Value of your time or services  Value of blood given to a blood bank    Example 2. 1040ez instructions 2011 The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. 1040ez instructions 2011 You must subtract the usual price of a ticket ($120) from your $300 payment. 1040ez instructions 2011 The result is $180. 1040ez instructions 2011 Your deductible charitable contribution is $144 (80% of $180). 1040ez instructions 2011 Charity benefit events. 1040ez instructions 2011   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. 1040ez instructions 2011   If there is an established charge for the event, that charge is the value of your benefit. 1040ez instructions 2011 If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. 1040ez instructions 2011 Whether you use the tickets or other privileges has no effect on the amount you can deduct. 1040ez instructions 2011 However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. 1040ez instructions 2011    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. 1040ez instructions 2011 If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. 1040ez instructions 2011 Example. 1040ez instructions 2011 You pay $40 to see a special showing of a movie for the benefit of a qualified organization. 1040ez instructions 2011 Printed on the ticket is “Contribution—$40. 1040ez instructions 2011 ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). 1040ez instructions 2011 Membership fees or dues. 1040ez instructions 2011    You may be able to deduct membership fees or dues you pay to a qualified organization. 1040ez instructions 2011 However, you can deduct only the amount that is more than the value of the benefits you receive. 1040ez instructions 2011    You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. 1040ez instructions 2011 They are not qualified organizations. 1040ez instructions 2011 Certain membership benefits can be disregarded. 1040ez instructions 2011   Both you and the organization can disregard the following membership benefits if you receive them in return for an annual payment of $75 or less. 1040ez instructions 2011 Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. 1040ez instructions 2011 Admission, while you are a member, to events open only to members of the organization, if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. 1040ez instructions 2011 20. 1040ez instructions 2011 Token items. 1040ez instructions 2011   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. 1040ez instructions 2011 You receive only a small item or other benefit of token value. 1040ez instructions 2011 The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. 1040ez instructions 2011 Written statement. 1040ez instructions 2011   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. 1040ez instructions 2011 The statement must say that you can deduct only the amount of your payment that is more than the value of the goods or services you received. 1040ez instructions 2011 It must also give you a good faith estimate of the value of those goods or services. 1040ez instructions 2011   The organization can give you the statement either when it solicits or when it receives the payment from you. 1040ez instructions 2011 Exception. 1040ez instructions 2011   An organization will not have to give you this statement if one of the following is true. 1040ez instructions 2011 The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. 1040ez instructions 2011 You receive only items whose value is not substantial as described under Token items , earlier. 1040ez instructions 2011 You receive only membership benefits that can be disregarded, as described earlier. 1040ez instructions 2011 Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. 1040ez instructions 2011 You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student, Is not your relative or dependent, and Is a full-time student in the twelfth or any lower grade at a school in the United States. 1040ez instructions 2011 You can deduct up to $50 a month for each full calendar month the student lives with you. 1040ez instructions 2011 Any month when conditions (1) through (3) are met for 15 days or more counts as a full month. 1040ez instructions 2011 For additional information, see Expenses Paid for Student Living With You in Publication 526. 1040ez instructions 2011 Mutual exchange program. 1040ez instructions 2011   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. 1040ez instructions 2011 Table 24-2. 1040ez instructions 2011 Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. 1040ez instructions 2011 All of the rules explained in this chapter also apply. 1040ez instructions 2011 See, in particular, Out-of-Pocket Expenses in Giving Services . 1040ez instructions 2011 Question Answer I volunteer 6 hours a week in the office of a qualified organization. 1040ez instructions 2011 The receptionist is paid $10 an hour for the same work. 1040ez instructions 2011 Can I deduct $60 a week for my time?    No, you cannot deduct the value of your time or services. 1040ez instructions 2011 The office is 30 miles from my home. 1040ez instructions 2011 Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. 1040ez instructions 2011 If you don't want to figure your actual costs, you can deduct 14 cents for each mile. 1040ez instructions 2011 I volunteer as a Red Cross nurse's aide at a hospital. 1040ez instructions 2011 Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. 1040ez instructions 2011 I pay a babysitter to watch my children while I volunteer for a qualified organization. 1040ez instructions 2011 Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. 1040ez instructions 2011 (If you have childcare expenses so you can work for pay, see chapter 32. 1040ez instructions 2011 ) Out-of-Pocket Expenses in Giving Services Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. 1040ez instructions 2011 The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. 1040ez instructions 2011 Table 24-2 contains questions and answers that apply to some individuals who volunteer their services. 1040ez instructions 2011 Conventions. 1040ez instructions 2011   If a qualified organization selects you to attend a convention as its representative, you can deduct unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight in connection with the convention. 1040ez instructions 2011 However, see Travel , later. 1040ez instructions 2011   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. 1040ez instructions 2011 You also cannot deduct transportation, meals and lodging, and other expenses for your spouse or children. 1040ez instructions 2011    You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. 1040ez instructions 2011 You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. 1040ez instructions 2011 Uniforms. 1040ez instructions 2011   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. 1040ez instructions 2011 Foster parents. 1040ez instructions 2011   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. 1040ez instructions 2011 A qualified organization must select the individuals you take into your home for foster care. 1040ez instructions 2011    You can deduct expenses that meet both of the following requirements. 1040ez instructions 2011 They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. 1040ez instructions 2011 They are incurred primarily to benefit the qualified organization. 1040ez instructions 2011   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. 1040ez instructions 2011 For details, see chapter 3. 1040ez instructions 2011 Example. 1040ez instructions 2011 You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. 1040ez instructions 2011 Your unreimbursed expenses are not deductible as charitable contributions. 1040ez instructions 2011 Car expenses. 1040ez instructions 2011   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. 1040ez instructions 2011 You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. 1040ez instructions 2011    If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. 1040ez instructions 2011   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. 1040ez instructions 2011   You must keep reliable written records of your car expenses. 1040ez instructions 2011 For more information, see Car expenses under Records To Keep, later. 1040ez instructions 2011 Travel. 1040ez instructions 2011   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. 1040ez instructions 2011 This applies whether you pay the expenses directly or indirectly. 1040ez instructions 2011 You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. 1040ez instructions 2011   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. 1040ez instructions 2011 Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. 1040ez instructions 2011 However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. 1040ez instructions 2011 Example 1. 1040ez instructions 2011 You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. 1040ez instructions 2011 You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. 1040ez instructions 2011 You participate in the activities of the group and enjoy your time with them. 1040ez instructions 2011 You oversee the breaking of camp and you transport the group home. 1040ez instructions 2011 You can deduct your travel expenses. 1040ez instructions 2011 Example 2. 1040ez instructions 2011 You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. 1040ez instructions 2011 The project is sponsored by a charitable organization. 1040ez instructions 2011 In most circumstances, you cannot deduct your expenses. 1040ez instructions 2011 Example 3. 1040ez instructions 2011 You work for several hours each morning on an archaeological dig sponsored by a charitable organization. 1040ez instructions 2011 The rest of the day is free for recreation and sightseeing. 1040ez instructions 2011 You cannot take a charitable contribution deduction even though you work very hard during those few hours. 1040ez instructions 2011 Example 4. 1040ez instructions 2011 You spend the entire day attending a charitable organization's regional meeting as a chosen representative. 1040ez instructions 2011 In the evening you go to the theater. 1040ez instructions 2011 You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. 1040ez instructions 2011 Daily allowance (per diem). 1040ez instructions 2011   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. 1040ez instructions 2011 You may be able to deduct any necessary travel expenses that are more than the allowance. 1040ez instructions 2011 Deductible travel expenses. 1040ez instructions 2011   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. 1040ez instructions 2011 Because these travel expenses are not business-related, they are not subject to the same limits as business-related expenses. 1040ez instructions 2011 For information on business travel expenses, see Travel Expenses in chapter 26. 1040ez instructions 2011 Contributions You Cannot Deduct There are some contributions you cannot deduct, such as those made to specific individuals and those made to nonqualified organizations. 1040ez instructions 2011 (See Contributions to Individuals and Contributions to Nonqualified Organizations , next. 1040ez instructions 2011 ) There are others you can deduct only part of, as discussed later under Contributions From Which You Benefit . 1040ez instructions 2011 Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. 1040ez instructions 2011 Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members. 1040ez instructions 2011 Contributions to individuals who are needy or worthy. 1040ez instructions 2011 You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. 1040ez instructions 2011 But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. 1040ez instructions 2011 Example. 1040ez instructions 2011 You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. 1040ez instructions 2011 However, you cannot deduct contributions earmarked for relief of a particular individual or family. 1040ez instructions 2011 Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. 1040ez instructions 2011 Expenses you paid for another person who provided services to a qualified organization. 1040ez instructions 2011 Example. 1040ez instructions 2011 Your son does missionary work. 1040ez instructions 2011 You pay his expenses. 1040ez instructions 2011 You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. 1040ez instructions 2011 Payments to a hospital that are for a specific patient's care or for services for a specific patient. 1040ez instructions 2011 You cannot deduct these payments even if the hospital is operated by a city, a state, or other qualified organization. 1040ez instructions 2011 Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. 1040ez instructions 2011 Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. 1040ez instructions 2011 Chambers of commerce and other business leagues or organizations (but see chapter 28). 1040ez instructions 2011 Civic leagues and associations. 1040ez instructions 2011 Communist organizations. 1040ez instructions 2011 Country clubs and other social clubs. 1040ez instructions 2011 Most foreign organizations (other than certain Canadian, Israeli, or Mexican charitable organizations). 1040ez instructions 2011 For details, see Publication 526. 1040ez instructions 2011 Homeowners' associations. 1040ez instructions 2011 Labor unions (but see chapter 28). 1040ez instructions 2011 Political organizations and candidates. 1040ez instructions 2011 Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. 1040ez instructions 2011 See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. 1040ez instructions 2011 These contributions include the following. 1040ez instructions 2011 Contributions for lobbying. 1040ez instructions 2011 This includes amounts that you earmark for use in, or in connection with, influencing specific legislation. 1040ez instructions 2011 Contributions to a retirement home for room, board, maintenance, or admittance. 1040ez instructions 2011 Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. 1040ez instructions 2011 Costs of raffles, bingo, lottery, etc. 1040ez instructions 2011 You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. 1040ez instructions 2011 For information on how to report gambling winnings and losses, see Gambling winnings in chapter 12 and Gambling Losses Up to the Amount of Gambling Winnings in chapter 28. 1040ez instructions 2011 Dues to fraternal orders and similar groups. 1040ez instructions 2011 However, see Membership fees or dues , earlier, under Contributions You Can Deduct. 1040ez instructions 2011 Tuition, or amounts you pay instead of tuition. 1040ez instructions 2011 You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. 1040ez instructions 2011 You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. 1040ez instructions 2011 ” Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. 1040ez instructions 2011 Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. 1040ez instructions 2011 The cost of meals you eat while you perform services for a qualified organization unless it is necessary for you to be away from home overnight while performing the services. 1040ez instructions 2011 Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final (but see Adoption Credit in chapter 37, and the instructions for Form 8839, Qualified Adoption Expenses). 1040ez instructions 2011 You also may be able to claim an exemption for the child. 1040ez instructions 2011 See Adopted child in chapter 3. 1040ez instructions 2011 Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property (but see chapter 28). 1040ez instructions 2011 Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. 1040ez instructions 2011 However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. 1040ez instructions 2011 See Giving Property That Has Increased in Value , later. 1040ez instructions 2011 For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. 1040ez instructions 2011 Clothing and household items. 1040ez instructions 2011   You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. 1040ez instructions 2011 Exception. 1040ez instructions 2011   You can take a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. 1040ez instructions 2011 Household items. 1040ez instructions 2011   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. 1040ez instructions 2011   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. 1040ez instructions 2011 Cars, boats, and airplanes. 1040ez instructions 2011    The following rules apply to any donation of a qualified vehicle. 1040ez instructions 2011 A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. 1040ez instructions 2011 Deduction more than $500. 1040ez instructions 2011   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. 1040ez instructions 2011 If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. 1040ez instructions 2011 Form 1098-C. 1040ez instructions 2011   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. 1040ez instructions 2011 The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. 1040ez instructions 2011   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453 and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. 1040ez instructions 2011   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. 1040ez instructions 2011    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. 1040ez instructions 2011 But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. 1040ez instructions 2011 Filing deadline approaching and still no Form 1098-C. 1040ez instructions 2011   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. 1040ez instructions 2011 Request an automatic 6-month extension of time to file your return. 1040ez instructions 2011 You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 1040ez instructions 2011 S. 1040ez instructions 2011 Individual Income Tax Return. 1040ez instructions 2011  For more information, see Automatic Extension in chapter 1. 1040ez instructions 2011 File the return on time without claiming the deduction for the qualified vehicle. 1040ez instructions 2011 After receiving the Form 1098-C, file an amended return, Form 1040X, claiming the deduction. 1040ez instructions 2011 Attach Copy B of Form 1098-C (or other statement) to the amended return. 1040ez instructions 2011 For more information about amended returns, see Amended Returns and Claims for Refund in chapter 1. 1040ez instructions 2011 Exceptions. 1040ez instructions 2011   There are two exceptions to the rules just described for deductions of more than $500. 1040ez instructions 2011 Exception 1—vehicle used or improved by organization. 1040ez instructions 2011   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. 1040ez instructions 2011 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 1040ez instructions 2011 The Form 1098-C (or other statement) will show whether this exception applies. 1040ez instructions 2011 Exception 2—vehicle given or sold to needy individual. 1040ez instructions 2011   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. 1040ez instructions 2011 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 1040ez instructions 2011 The Form 1098-C (or other statement) will show whether this exception applies. 1040ez instructions 2011   This exception does not apply if the organization sells the vehicle at auction. 1040ez instructions 2011 In that case, you cannot deduct the vehicle's fair market value. 1040ez instructions 2011 Example. 1040ez instructions 2011 Anita donates a used car to a qualified organization. 1040ez instructions 2011 She bought it 3 years ago for $9,000. 1040ez instructions 2011 A used car guide shows the fair market value for this type of car is $6,000. 1040ez instructions 2011 However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. 1040ez instructions 2011 Neither exception 1 nor exception 2 applies. 1040ez instructions 2011 If Anita itemizes her deductions, she can deduct $2,900 for her donation. 1040ez instructions 2011 She must attach Form 1098-C and Form 8283 to her return. 1040ez instructions 2011 Deduction $500 or less. 1040ez instructions 2011   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. 1040ez instructions 2011 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. 1040ez instructions 2011   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. 1040ez instructions 2011 The statement must contain the information and meet the tests for an acknowledgment described under Deductions of At Least $250 But Not More Than $500 under Records To Keep, later. 1040ez instructions 2011 Partial interest in property. 1040ez instructions 2011   Generally, you cannot deduct a charitable contribution of less than your entire interest in property. 1040ez instructions 2011 Right to use property. 1040ez instructions 2011   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. 1040ez instructions 2011 For exceptions and more information, see Partial Interest in Property Not in Trust in Publication 561. 1040ez instructions 2011 Future interests in tangible personal property. 1040ez instructions 2011   You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. 1040ez instructions 2011 Tangible personal property. 1040ez instructions 2011   This is any property, other than land or buildings, that can be seen or touched. 1040ez instructions 2011 It includes furniture, books, jewelry, paintings, and cars. 1040ez instructions 2011 Future interest. 1040ez instructions 2011   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. 1040ez instructions 2011 Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. 1040ez instructions 2011 Publication 561 contains a more complete discussion. 1040ez instructions 2011 Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. 1040ez instructions 2011 Used clothing and household items. 1040ez instructions 2011   The fair market value of used clothing and household goods is usually far less than what you paid for them when they were new. 1040ez instructions 2011   For used clothing, you should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. 1040ez instructions 2011 See Household Goods in Publication 561 for information on the valuation of household goods, such as furniture, appliances, and linens. 1040ez instructions 2011 Example. 1040ez instructions 2011 Dawn Greene donated a coat to a thrift store operated by her church. 1040ez instructions 2011 She paid $300 for the coat 3 years ago. 1040ez instructions 2011 Similar coats in the thrift store sell for $50. 1040ez instructions 2011 The fair market value of the coat is $50. 1040ez instructions 2011 Dawn's donation is limited to $50. 1040ez instructions 2011 Cars, boats, and airplanes. 1040ez instructions 2011   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. 1040ez instructions 2011 Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. 1040ez instructions 2011 The guides may be published monthly or seasonally and for different regions of the country. 1040ez instructions 2011 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 1040ez instructions 2011 The prices are not “official” and these publications are not considered an appraisal of any specific donated property. 1040ez instructions 2011 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 1040ez instructions 2011   You can also find used car pricing information on the Internet. 1040ez instructions 2011 Example. 1040ez instructions 2011 You donate a used car in poor condition to a local high school for use by students studying car repair. 1040ez instructions 2011 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 1040ez instructions 2011 However, the guide shows the price for a private party sale of the car is only $750. 1040ez instructions 2011 The fair market value of the car is considered to be $750. 1040ez instructions 2011 Large quantities. 1040ez instructions 2011   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. 1040ez instructions 2011 Giving Property That Has Decreased in Value If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value. 1040ez instructions 2011 You cannot claim a deduction for the difference between the property's basis and its fair market value. 1040ez instructions 2011 Giving Property That Has Increased in Value If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. 1040ez instructions 2011 Your basis in property is generally what you paid for it. 1040ez instructions 2011 See chapter 13 if you need more information about basis. 1040ez instructions 2011 Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. 1040ez instructions 2011 Ordinary income property. 1040ez instructions 2011   Property is ordinary income property if you would have recognized ordinary income or short-term capital gain had you sold it at fair market value on the date it was contributed. 1040ez instructions 2011 Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined in chapter 14) held 1 year or less. 1040ez instructions 2011 Amount of deduction. 1040ez instructions 2011   The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. 1040ez instructions 2011 Generally, this rule limits the deduction to your basis in the property. 1040ez instructions 2011 Example. 1040ez instructions 2011 You donate stock you held for 5 months to your church. 1040ez instructions 2011 The fair market value of the stock on the day you donate it is $1,000, but you paid only $800 (your basis). 1040ez instructions 2011 Because the $200 of appreciation would be short-term capital gain if you sold the stock, your deduction is limited to $800 (fair market value minus the appreciation). 1040ez instructions 2011 Capital gain property. 1040ez instructions 2011   Property is capital gain property if you would have recognized long-term capital gain had you sold it at fair market value on the date of the contribution. 1040ez instructions 2011 It includes capital assets held more than 1 year, as well as certain real property and depreciable property used in your trade or business and, generally, held more than 1 year. 1040ez instructions 2011 Amount of deduction — general rule. 1040ez instructions 2011   When figuring your deduction for a contribution of capital gain property, you generally can use the fair market value of the property. 1040ez instructions 2011 Exceptions. 1040ez instructions 2011   In certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value. 1040ez instructions 2011 Generally, this means reducing the fair market value to the property's cost or other basis. 1040ez instructions 2011 Bargain sales. 1040ez instructions 2011   A bargain sale of property is a sale or exchange for less than the property's fair market value. 1040ez instructions 2011 A bargain sale to a qualified organization is partly a charitable contribution and partly a sale or exchange. 1040ez instructions 2011 A bargain sale may result in a taxable gain. 1040ez instructions 2011 More information. 1040ez instructions 2011   For more information on donating appreciated property, see Giving Property That Has Increased in Value in Publication 526. 1040ez instructions 2011 When To Deduct You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as explained later under Carryovers ). 1040ez instructions 2011 This applies whether you use the cash or an accrual method of accounting. 1040ez instructions 2011 Time of making contribution. 1040ez instructions 2011   Usually, you make a contribution at the time of its unconditional delivery. 1040ez instructions 2011 Checks. 1040ez instructions 2011   A check you mail to a charity is considered delivered on the date you mail it. 1040ez instructions 2011 Text message. 1040ez instructions 2011   Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. 1040ez instructions 2011 Credit card. 1040ez instructions 2011    Contributions charged on your credit card are deductible in the year you make the charge. 1040ez instructions 2011 Pay-by-phone account. 1040ez instructions 2011    Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount. 1040ez instructions 2011 Stock certificate. 1040ez instructions 2011   A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity's agent. 1040ez instructions 2011 However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the charity, your contribution is not delivered until the date the stock is transferred on the books of the corporation. 1040ez instructions 2011 Promissory note. 1040ez instructions 2011   If you issue and deliver a promissory note to a charity as a contribution, it is not a contribution until you make the note payments. 1040ez instructions 2011 Option. 1040ez instructions 2011    If you grant a charity an option to buy real property at a bargain price, it is not a contribution until the organization exercises the option. 1040ez instructions 2011 Borrowed funds. 1040ez instructions 2011   If you contribute borrowed funds, you can deduct the contribution in the year you deliver the funds to the charity, regardless of when you repay the loan. 1040ez instructions 2011 Limits on Deductions The amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income (AGI). 1040ez instructions 2011 Your deduction may be further limited to 30% or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. 1040ez instructions 2011 If your total contributions for the year are 20% or less of your AGI, these limits do not apply to you. 1040ez instructions 2011 The limits are discussed in detail under Limits on Deductions in Publication 526. 1040ez instructions 2011 A higher limit applies to certain qualified conservation contributions. 1040ez instructions 2011 See Publication 526 for details. 1040ez instructions 2011 Carryovers You can carry over any contributions you cannot deduct in the current year because they exceed your adjusted-gross-income limits. 1040ez instructions 2011 You can deduct the excess in each of the next 5 years until it is used up, but not beyond that time. 1040ez instructions 2011 For more information, see Carryovers in Publication 526. 1040ez instructions 2011 Records To Keep You must keep records to prove the amount of the contributions you make during the year. 1040ez instructions 2011 The kind of records you must keep depends on the amount of your contributions and whether they are: Cash contributions, Noncash contributions, or Out-of-pocket expenses when donating your services. 1040ez instructions 2011 Note. 1040ez instructions 2011 An organization generally must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods or services. 1040ez instructions 2011 (See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. 1040ez instructions 2011 ) Keep the statement for your records. 1040ez instructions 2011 It may satisfy all or part of the recordkeeping requirements explained in the following discussions. 1040ez instructions 2011 Cash Contributions Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. 1040ez instructions 2011 You cannot deduct a cash contribution, regardless of the amount, unless you keep one of the following. 1040ez instructions 2011 A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. 1040ez instructions 2011 Bank records may include: A canceled check, A bank or credit union statement, or A credit card statement. 1040ez instructions 2011 A receipt (or a letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution. 1040ez instructions 2011 The payroll deduction records described next. 1040ez instructions 2011 Payroll deductions. 1040ez instructions 2011   If you make a contribution by payroll deduction, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the date and amount of the contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization. 1040ez instructions 2011 If your employer withheld $250 or more from a single paycheck, see Contributions of $250 or More , next. 1040ez instructions 2011 Contributions of $250 or More You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records. 1040ez instructions 2011 If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions. 1040ez instructions 2011 Amount of contribution. 1040ez instructions 2011   In figuring whether your contribution is $250 or more, do not combine separate contributions. 1040ez instructions 2011 For example, if you gave your church $25 each week, your weekly payments do not have to be combined. 1040ez instructions 2011 Each payment is a separate contribution. 1040ez instructions 2011   If contributions are made by payroll deduction, the deduction from each paycheck is treated as a separate contribution. 1040ez instructions 2011   If you made a payment that is partly for goods and services, as described earlier under Contributions From Which You Benefit , your contribution is the amount of the payment that is more than the value of the goods and services. 1040ez instructions 2011 Acknowledgment. 1040ez instructions 2011   The acknowledgment must meet these tests. 1040ez instructions 2011 It must be written. 1040ez instructions 2011 It must include: The amount of cash you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), A description and good faith estimate of the value of any goods or services described in (b) (other than intangible religious benefits), and A statement that the only benefit you received was an intangible religious benefit, if that was the case. 1040ez instructions 2011 The acknowledgment does not need to describe or estimate the value of an intangible religious benefit. 1040ez instructions 2011 An intangible religious benefit is a benefit that generally is not sold in commercial transactions outside a donative (gift) context. 1040ez instructions 2011 An example is admission to a religious ceremony. 1040ez instructions 2011 You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. 1040ez instructions 2011   If the acknowledgment does not show the date of the contribution, you must also have a bank record or receipt, as described earlier, that does show the date of the contribution. 1040ez instructions 2011 If the acknowledgment shows the date of the contribution and meets the other tests just described, you do not need any other records. 1040ez instructions 2011 Payroll deductions. 1040ez instructions 2011   If you make a contribution by payroll deduction and your employer withholds $250 or more from a single paycheck, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the amount withheld as a contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization and states the organization does not provide goods or services in return for any contribution made to it by payroll deduction. 1040ez instructions 2011 A single pledge card may be kept for all contributions made by payroll deduction regardless of amount as long as it contains all the required information. 1040ez instructions 2011   If the pay stub, Form W-2, pledge card, or other document does not show the date of the contribution, you must have another document that does show the date of the contribution. 1040ez instructions 2011 If the pay stub, Form W-2, pledge card, or other document shows the date of the contribution, you do not need any other records except those just described in (1) and (2). 1040ez instructions 2011 Noncash Contributions For a contribution not made in cash, the records you must keep depend on whether your deduction for the contribution is: Less than $250, At least $250 but not more than $500, Over $500 but not more than $5,000, or Over $5,000. 1040ez instructions 2011 Amount of deduction. 1040ez instructions 2011   In figuring whether your deduction is $500 or more, combine your claimed deductions for all similar items of property donated to any charitable organization during the year. 1040ez instructions 2011   If you received goods or services in return, as described earlier in Contributions From Which You Benefit , reduce your contribution by the value of those goods or services. 1040ez instructions 2011 If you figure your deduction by reducing the fair market value of the donated property by its appreciation, as described earlier in Giving Property That Has Increased in Value , your contribution is the reduced amount. 1040ez instructions 2011 Deductions of Less Than $250 If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing: The name of the charitable organization, The date and location of the charitable contribution, and A reasonably detailed description of the property. 1040ez instructions 2011 A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt. 1040ez instructions 2011 You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site). 1040ez instructions 2011 Additional records. 1040ez instructions 2011   You must also keep reliable written records for each item of contributed property. 1040ez instructions 2011 Your written records must include the following information. 1040ez instructions 2011 The name and address of the organization to which you contributed. 1040ez instructions 2011 The date and location of the contribution. 1040ez instructions 2011 A description of the property in detail reasonable under the circumstances. 1040ez instructions 2011 For a security, keep the name of the issuer, the type of security, and whether it is regularly traded on a stock exchange or in an over-the-counter market. 1040ez instructions 2011 The fair market value of the property at the time of the contribution and how you figured the fair market value. 1040ez instructions 2011 If it was determined by appraisal, keep a signed copy of the appraisal. 1040ez instructions 2011 The cost or other basis of the property, if you must reduce its fair market value by appreciation. 1040ez instructions 2011 Your records should also include the amount of the reduction and how you figured it. 1040ez instructions 2011 The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. 1040ez instructions 2011 Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. 1040ez instructions 2011 They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed it. 1040ez instructions 2011 The terms of any conditions attached to the contribution of property. 1040ez instructions 2011 Deductions of At Least $250 But Not More Than $500 If you claim a deduction of at least $250 but not more than $500 for a noncash charitable contribution, you must get and keep an acknowledgment of your contribution from the qualified organization. 1040ez instructions 2011 If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that shows your total contributions. 1040ez instructions 2011 The acknowledgment must contain the information in items (1) through (3) under Deductions of Less Than $250 , earlier, and your written records must include the information listed in that discussion under Additional records . 1040ez instructions 2011 The acknowledgment must also meet these tests. 1040ez instructions 2011 It must be written. 1040ez instructions 2011 It must include: A description (but not necessarily the value) of any property you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), and A description and good faith estimate of the value of any goods or services described in (b). 1040ez instructions 2011 If the only benefit you received was an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in a commercial transaction outside the donative context, the acknowledgment must say so and does not need to describe or estimate the value of the benefit. 1040ez instructions 2011 You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. 1040ez instructions 2011 Deductions Over $500 You are required to give additional information if you claim a deduction over $500 for noncash charitable contributions. 1040ez instructions 2011 See Records To Keep in Publication 526 for more information. 1040ez instructions 2011 Out-of-Pocket Expenses If you give services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following two rules apply. 1040ez instructions 2011 You must have adequate records to prove the amount of the expenses. 1040ez instructions 2011 If any of your unreimbursed out-of-pocket expenses, considered separately, are $250 or more (for example, you pay $250 or more for an airline ticket to attend a convention of a qualified organization as a chosen representative), you must get an acknowledgment from the qualified organization that contains: A description of the services you provided, A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred, A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and A statement that the only benefit you received was an intangible religious benefit, if that was the case. 1040ez instructions 2011 The acknowledgment does not need to describe or estimate the value of an intangible religious benefit (defined earlier under Acknowledgment ). 1040ez instructions 2011 You must get the acknowledgment on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. 1040ez instructions 2011 Car expenses. 1040ez instructions 2011   If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. 1040ez instructions 2011 Whether your records are considered reliable depends on all the facts and circumstances. 1040ez instructions 2011 Generally, they may be considered reliable if you made them regularly and at or near the time you had the expenses. 1040ez instructions 2011   For example, your records might show the name of the organization you were serving and the dates you used your car for a charitable purpose. 1040ez instructions 2011 If you use the standard mileage rate of 14 cents a mile, your records must show the miles you drove your car for the charitable purpose. 1040ez instructions 2011 If you deduct your actual expenses, your records must show the costs of operating the car that are directly related to a charitable purpose. 1040ez instructions 2011   See Car expenses under Out-of-Pocket Expenses in Giving Services, earlier, for the expenses you can deduct. 1040ez instructions 2011 How To Report Report your charitable contributions on Schedule A (Form 1040). 1040ez instructions 2011 If your total deduction for all noncash contributions for the year is over $500, you must also file Form 8283. 1040ez instructions 2011 See How To Report in Publication 526 for more information. 1040ez instructions 2011 Prev  Up  Next   Home   More Online Publications
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The 1040ez Instructions 2011

1040ez instructions 2011 9. 1040ez instructions 2011   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. 1040ez instructions 2011 Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. 1040ez instructions 2011 Amount to report as ordinary income. 1040ez instructions 2011 Applicable percentage. 1040ez instructions 2011 Amount to report as ordinary income. 1040ez instructions 2011 Applicable percentage. 1040ez instructions 2011 Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. 1040ez instructions 2011 When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. 1040ez instructions 2011 Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. 1040ez instructions 2011 Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. 1040ez instructions 2011 Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. 1040ez instructions 2011 Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. 1040ez instructions 2011 Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). 1040ez instructions 2011 Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. 1040ez instructions 2011 Table 9-1. 1040ez instructions 2011 Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. 1040ez instructions 2011 Held 24 mos. 1040ez instructions 2011  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. 1040ez instructions 2011 Held 12 mos. 1040ez instructions 2011   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). 1040ez instructions 2011 Do not take that gain into account as section 1231 gain. 1040ez instructions 2011 Section 1231 transactions. 1040ez instructions 2011   Gain or loss on the following transactions is subject to section 1231 treatment. 1040ez instructions 2011 Sale or exchange of cattle and horses. 1040ez instructions 2011 The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. 1040ez instructions 2011 Sale or exchange of other livestock. 1040ez instructions 2011 This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. 1040ez instructions 2011 Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. 1040ez instructions 2011 Other livestock does not include poultry. 1040ez instructions 2011 Sale or exchange of depreciable personal property. 1040ez instructions 2011 This property must be used in your business and held longer than 1 year. 1040ez instructions 2011 Generally, property held for the production of rents or royalties is considered to be used in a trade or business. 1040ez instructions 2011 Examples of depreciable personal property include farm machinery and trucks. 1040ez instructions 2011 It also includes amortizable section 197 intangibles. 1040ez instructions 2011 Sale or exchange of real estate. 1040ez instructions 2011 This property must be used in your business and held longer than 1 year. 1040ez instructions 2011 Examples are your farm or ranch (including barns and sheds). 1040ez instructions 2011 Sale or exchange of unharvested crops. 1040ez instructions 2011 The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. 1040ez instructions 2011 You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). 1040ez instructions 2011 Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. 1040ez instructions 2011 Distributive share of partnership gains and losses. 1040ez instructions 2011 Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). 1040ez instructions 2011 Cutting or disposal of timber. 1040ez instructions 2011 Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . 1040ez instructions 2011 Condemnation. 1040ez instructions 2011 The condemned property (defined in chapter 11) must have been held longer than 1 year. 1040ez instructions 2011 It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. 1040ez instructions 2011 It cannot be property held for personal use. 1040ez instructions 2011 Casualty or theft. 1040ez instructions 2011 The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). 1040ez instructions 2011 You must have held the property longer than 1 year. 1040ez instructions 2011 However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. 1040ez instructions 2011 Section 1231 does not apply to personal casualty gains and losses. 1040ez instructions 2011 See chapter 11 for information on how to treat those gains and losses. 1040ez instructions 2011 If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. 1040ez instructions 2011 See Table 9-1. 1040ez instructions 2011 Property for sale to customers. 1040ez instructions 2011   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. 1040ez instructions 2011 If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. 1040ez instructions 2011 Treatment as ordinary or capital. 1040ez instructions 2011   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. 1040ez instructions 2011 If you have a net section 1231 loss, it is an ordinary loss. 1040ez instructions 2011 If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. 1040ez instructions 2011 The rest, if any, is long-term capital gain. 1040ez instructions 2011 Nonrecaptured section 1231 losses. 1040ez instructions 2011   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. 1040ez instructions 2011 These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. 1040ez instructions 2011 Example. 1040ez instructions 2011 In 2013, Ben has a $2,000 net section 1231 gain. 1040ez instructions 2011 To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. 1040ez instructions 2011 From 2008 through 2012 he had the following section 1231 gains and losses. 1040ez instructions 2011 Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. 1040ez instructions 2011 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. 1040ez instructions 2011 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. 1040ez instructions 2011 To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. 1040ez instructions 2011 For more information, see chapter 3 of Publication 544. 1040ez instructions 2011 Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. 1040ez instructions 2011 Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. 1040ez instructions 2011 See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. 1040ez instructions 2011 Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. 1040ez instructions 2011 Personal property (either tangible or intangible). 1040ez instructions 2011 Other tangible property (except buildings and their structural components) used as any of the following. 1040ez instructions 2011 See Buildings and structural components below. 1040ez instructions 2011 An integral part of manufacturing, production, or extraction, or of furnishing certain services. 1040ez instructions 2011 A research facility in any of the activities in (a). 1040ez instructions 2011 A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). 1040ez instructions 2011 That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. 1040ez instructions 2011 Amortization of certified pollution control facilities. 1040ez instructions 2011 The section 179 expense deduction. 1040ez instructions 2011 Deduction for clean-fuel vehicles and certain refueling property. 1040ez instructions 2011 Expenditures to remove architectural and transportation barriers to the handicapped and elderly. 1040ez instructions 2011 Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. 1040ez instructions 2011 Single purpose agricultural (livestock) or horticultural structures. 1040ez instructions 2011 Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. 1040ez instructions 2011 Buildings and structural components. 1040ez instructions 2011   Section 1245 property does not include buildings and structural components. 1040ez instructions 2011 The term building includes a house, barn, warehouse, or garage. 1040ez instructions 2011 The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. 1040ez instructions 2011   Do not treat a structure that is essentially machinery or equipment as a building or structural component. 1040ez instructions 2011 Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. 1040ez instructions 2011   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. 1040ez instructions 2011 Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. 1040ez instructions 2011 Facility for bulk storage of fungible commodities. 1040ez instructions 2011   This is a facility used mainly for the bulk storage of fungible commodities. 1040ez instructions 2011 Bulk storage means storage of a commodity in a large mass before it is used. 1040ez instructions 2011 For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. 1040ez instructions 2011 To be fungible, a commodity must be such that one part may be used in place of another. 1040ez instructions 2011 Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. 1040ez instructions 2011 The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. 1040ez instructions 2011 The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). 1040ez instructions 2011 For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. 1040ez instructions 2011 For details, see chapter 3 of Publication 544. 1040ez instructions 2011 Use Part III of Form 4797 to figure the ordinary income part of the gain. 1040ez instructions 2011 Depreciation claimed on other property or claimed by other taxpayers. 1040ez instructions 2011   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. 1040ez instructions 2011 Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. 1040ez instructions 2011 For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. 1040ez instructions 2011 Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). 1040ez instructions 2011 Example. 1040ez instructions 2011 Jeff Free paid $120,000 for a tractor in 2012. 1040ez instructions 2011 On February 23, 2013, he traded it for a chopper and paid an additional $30,000. 1040ez instructions 2011 To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. 1040ez instructions 2011 Jeff can also depreciate the additional $30,000 for the chopper. 1040ez instructions 2011 Depreciation and amortization. 1040ez instructions 2011   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. 1040ez instructions 2011 See Depreciation Recapture in chapter 3 of Publication 544 for more details. 1040ez instructions 2011 Ordinary depreciation deductions. 1040ez instructions 2011 Section 179 deduction (see chapter 7). 1040ez instructions 2011 Any special depreciation allowance. 1040ez instructions 2011 Amortization deductions for all the following costs. 1040ez instructions 2011 Acquiring a lease. 1040ez instructions 2011 Lessee improvements. 1040ez instructions 2011 Pollution control facilities. 1040ez instructions 2011 Reforestation expenses. 1040ez instructions 2011 Section 197 intangibles. 1040ez instructions 2011 Qualified disaster expenses. 1040ez instructions 2011 Franchises, trademarks, and trade names acquired before August 11, 1993. 1040ez instructions 2011 Example. 1040ez instructions 2011 You file your returns on a calendar year basis. 1040ez instructions 2011 In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. 1040ez instructions 2011 You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. 1040ez instructions 2011 You did not claim the section 179 expense deduction for the truck. 1040ez instructions 2011 You sold it in May 2013 for $7,000. 1040ez instructions 2011 The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). 1040ez instructions 2011 Figure the gain treated as ordinary income as follows. 1040ez instructions 2011 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. 1040ez instructions 2011   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. 1040ez instructions 2011 If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. 1040ez instructions 2011 If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. 1040ez instructions 2011 This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. 1040ez instructions 2011 Disposition of plants and animals. 1040ez instructions 2011   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. 1040ez instructions 2011 If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. 1040ez instructions 2011 For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. 1040ez instructions 2011 For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. 1040ez instructions 2011 You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. 1040ez instructions 2011 Example. 1040ez instructions 2011 Janet Maple sold her apple orchard in 2013 for $80,000. 1040ez instructions 2011 Her adjusted basis at the time of sale was $60,000. 1040ez instructions 2011 She bought the orchard in 2006, but the trees did not produce a crop until 2009. 1040ez instructions 2011 Her pre-productive expenses were $6,000. 1040ez instructions 2011 She elected not to use the uniform capitalization rules. 1040ez instructions 2011 Janet must treat $6,000 of the gain as ordinary income. 1040ez instructions 2011 Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. 1040ez instructions 2011 It includes buildings and structural components that are not section 1245 property (discussed earlier). 1040ez instructions 2011 It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. 1040ez instructions 2011 A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. 1040ez instructions 2011 Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. 1040ez instructions 2011 To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. 1040ez instructions 2011 You will not have additional depreciation if any of the following apply to the property disposed of. 1040ez instructions 2011 You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. 1040ez instructions 2011 You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. 1040ez instructions 2011 The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. 1040ez instructions 2011 These properties are depreciated using the straight line method. 1040ez instructions 2011 Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. 1040ez instructions 2011 This applies even if no payments are received in that year. 1040ez instructions 2011 If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. 1040ez instructions 2011 For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. 1040ez instructions 2011 If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. 1040ez instructions 2011 To do this, allocate the selling price and the payments you receive in the year of sale to each asset. 1040ez instructions 2011 Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. 1040ez instructions 2011 For more information on installment sales, see chapter 10. 1040ez instructions 2011 Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. 1040ez instructions 2011 By gift. 1040ez instructions 2011 At death. 1040ez instructions 2011 In like-kind exchanges. 1040ez instructions 2011 In involuntary conversions. 1040ez instructions 2011 Publication 544 also explains how to handle a single transaction involving multiple properties. 1040ez instructions 2011 Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. 1040ez instructions 2011 Deductions for soil and water conservation expenditures (section 1252 property). 1040ez instructions 2011 Exclusions from income for certain cost sharing payments (section 1255 property). 1040ez instructions 2011 Section 1252 property. 1040ez instructions 2011   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. 1040ez instructions 2011 Exceptions. 1040ez instructions 2011   Do not treat gain on the following transactions as gain on section 1252 property. 1040ez instructions 2011 Disposition of farmland by gift. 1040ez instructions 2011 Transfer of farm property at death (except for income in respect of a decedent). 1040ez instructions 2011 For more information, see Regulations section 1. 1040ez instructions 2011 1252-2. 1040ez instructions 2011 Amount to report as ordinary income. 1040ez instructions 2011   You report as ordinary income the lesser of the following amounts. 1040ez instructions 2011 Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). 1040ez instructions 2011 The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. 1040ez instructions 2011 Applicable percentage. 1040ez instructions 2011   The applicable percentage is based on the length of time you held the land. 1040ez instructions 2011 If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. 1040ez instructions 2011 If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. 1040ez instructions 2011 If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. 1040ez instructions 2011 Example. 1040ez instructions 2011 You acquired farmland on January 19, 2005. 1040ez instructions 2011 On October 3, 2013, you sold the land at a $30,000 gain. 1040ez instructions 2011 Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. 1040ez instructions 2011 The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. 1040ez instructions 2011 You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. 1040ez instructions 2011 Section 1255 property. 1040ez instructions 2011   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. 1040ez instructions 2011 If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. 1040ez instructions 2011 Amount to report as ordinary income. 1040ez instructions 2011   You report as ordinary income the lesser of the following amounts. 1040ez instructions 2011 The applicable percentage of the total excluded cost-sharing payments. 1040ez instructions 2011 The gain on the disposition of the property. 1040ez instructions 2011 You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. 1040ez instructions 2011 However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. 1040ez instructions 2011 Applicable percentage. 1040ez instructions 2011   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. 1040ez instructions 2011 If the property is held less than 10 years after you receive the payments, the percentage is 100%. 1040ez instructions 2011 After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. 1040ez instructions 2011 Form 4797, Part III. 1040ez instructions 2011   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. 1040ez instructions 2011 Prev  Up  Next   Home   More Online Publications