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1040ez printable tax forms Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. 1040ez printable tax forms Proc. 1040ez printable tax forms 2009-37 Table of Contents SECTION 1. 1040ez printable tax forms PURPOSE SECTION 2. 1040ez printable tax forms BACKGROUND SECTION 3. 1040ez printable tax forms SCOPE SECTION 4. 1040ez printable tax forms ELECTION PROCEDURES SECTION 5. 1040ez printable tax forms REQUIRED INFORMATION STATEMENT SECTION 6. 1040ez printable tax forms EFFECTIVE DATE SECTION 7. 1040ez printable tax forms TRANSITION RULE SECTION 8. 1040ez printable tax forms PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. 1040ez printable tax forms PURPOSE . 1040ez printable tax forms 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. 1040ez printable tax forms . 1040ez printable tax forms 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. 1040ez printable tax forms This revenue procedure describes the time and manner of providing this additional information. 1040ez printable tax forms . 1040ez printable tax forms 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. 1040ez printable tax forms Taxpayers should be aware that these regulations may be retroactive. 1040ez printable tax forms See § 7805(b)(2). 1040ez printable tax forms This revenue procedure may be modified to provide procedures consistent with additional guidance. 1040ez printable tax forms SECTION 2. 1040ez printable tax forms BACKGROUND . 1040ez printable tax forms 01 Section 108(i), Generally. 1040ez printable tax forms Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. 1040ez printable tax forms L. 1040ez printable tax forms No. 1040ez printable tax forms 111-5, 123 Stat. 1040ez printable tax forms 338. 1040ez printable tax forms In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. 1040ez printable tax forms Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). 1040ez printable tax forms The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. 1040ez printable tax forms 1273-1(d) of the Income Tax Regulations. 1040ez printable tax forms The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. 1040ez printable tax forms For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). 1040ez printable tax forms A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). 1040ez printable tax forms See § 108(i)(5)(D). 1040ez printable tax forms The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. 1040ez printable tax forms Section 108(i)(5)(D)(ii). 1040ez printable tax forms For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. 1040ez printable tax forms . 1040ez printable tax forms 02 Applicable Debt Instrument. 1040ez printable tax forms Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. 1040ez printable tax forms The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). 1040ez printable tax forms Section 108(i)(3)(B). 1040ez printable tax forms For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. 1040ez printable tax forms 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. 1040ez printable tax forms 1502-13(g)(5). 1040ez printable tax forms . 1040ez printable tax forms 03 Reacquisition. 1040ez printable tax forms Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). 1040ez printable tax forms The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. 1040ez printable tax forms See § 108(i)(4)(B). 1040ez printable tax forms The term “acquisition” also includes an indirect acquisition within the meaning of § 1. 1040ez printable tax forms 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). 1040ez printable tax forms For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. 1040ez printable tax forms . 1040ez printable tax forms 04 General Requirements for the Section 108(i) Election. 1040ez printable tax forms Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. 1040ez printable tax forms (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. 1040ez printable tax forms ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. 1040ez printable tax forms Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. 1040ez printable tax forms . 1040ez printable tax forms 05 Section 108(i) Elections Made by Pass-through Entities. 1040ez printable tax forms In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. 1040ez printable tax forms Section 108(i)(5)(B)(iii). 1040ez printable tax forms . 1040ez printable tax forms 06 Additional Information on Subsequent Years’ Returns. 1040ez printable tax forms Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. 1040ez printable tax forms . 1040ez printable tax forms 07 Exclusivity. 1040ez printable tax forms Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). 1040ez printable tax forms . 1040ez printable tax forms 08 Allocation of Deferred COD Income on Partnership Indebtedness. 1040ez printable tax forms Section 4. 1040ez printable tax forms 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. 1040ez printable tax forms If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. 1040ez printable tax forms 704-1(b)(2)(iii). 1040ez printable tax forms Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). 1040ez printable tax forms The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). 1040ez printable tax forms The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). 1040ez printable tax forms . 1040ez printable tax forms 09 Partner’s Deferred § 752 Amount. 1040ez printable tax forms A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). 1040ez printable tax forms A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). 1040ez printable tax forms To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. 1040ez printable tax forms 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). 1040ez printable tax forms See Rev. 1040ez printable tax forms Rul. 1040ez printable tax forms 92-97, 1992-2 C. 1040ez printable tax forms B. 1040ez printable tax forms 124, and Rev. 1040ez printable tax forms Rul. 1040ez printable tax forms 94-4, 1994-1 C. 1040ez printable tax forms B. 1040ez printable tax forms 195. 1040ez printable tax forms A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). 1040ez printable tax forms . 1040ez printable tax forms 10 Allocation of Deferred COD Income on S Corporation Indebtedness. 1040ez printable tax forms For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. 1040ez printable tax forms . 1040ez printable tax forms 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. 1040ez printable tax forms (1) In general. 1040ez printable tax forms The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). 1040ez printable tax forms These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. 1040ez printable tax forms OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). 1040ez printable tax forms COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. 1040ez printable tax forms See § 1. 1040ez printable tax forms 56(g)-1(c)(1). 1040ez printable tax forms (2) Exceptions for certain special status corporations. 1040ez printable tax forms The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. 1040ez printable tax forms OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. 1040ez printable tax forms . 1040ez printable tax forms 12 Extension of Time to Make Election. 1040ez printable tax forms Under § 301. 1040ez printable tax forms 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. 1040ez printable tax forms An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. 1040ez printable tax forms Section 301. 1040ez printable tax forms 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. 1040ez printable tax forms SECTION 3. 1040ez printable tax forms SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). 1040ez printable tax forms SECTION 4. 1040ez printable tax forms ELECTION PROCEDURES . 1040ez printable tax forms 01 In General. 1040ez printable tax forms (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. 1040ez printable tax forms 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. 1040ez printable tax forms 07, 4. 1040ez printable tax forms 08, 4. 1040ez printable tax forms 09, or 4. 1040ez printable tax forms 10 of this revenue procedure. 1040ez printable tax forms (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. 1040ez printable tax forms 01(1)(a) of this revenue procedure for making the § 108(i) election. 1040ez printable tax forms The rules that apply to an automatic extension under § 301. 1040ez printable tax forms 9100-2(a) apply to this automatic extension. 1040ez printable tax forms . 1040ez printable tax forms 02 Section 108(i) Elections Made by Members of Consolidated Groups. 1040ez printable tax forms The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. 1040ez printable tax forms See § 1. 1040ez printable tax forms 1502-77(a). 1040ez printable tax forms . 1040ez printable tax forms 03 Aggregation Rule. 1040ez printable tax forms A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. 1040ez printable tax forms A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. 1040ez printable tax forms 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. 1040ez printable tax forms . 1040ez printable tax forms 04 Partial Elections. 1040ez printable tax forms (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. 1040ez printable tax forms Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. 1040ez printable tax forms The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. 1040ez printable tax forms (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). 1040ez printable tax forms Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. 1040ez printable tax forms (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. 1040ez printable tax forms Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). 1040ez printable tax forms A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. 1040ez printable tax forms The provisions of this section 4. 1040ez printable tax forms 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. 1040ez printable tax forms . 1040ez printable tax forms 05 Contents of Election Statement. 1040ez printable tax forms A statement meets the requirements of this section 4. 1040ez printable tax forms 05 if the statement— (1) Label. 1040ez printable tax forms States “Section 108(i) Election” across the top. 1040ez printable tax forms (2) Required information. 1040ez printable tax forms Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. 1040ez printable tax forms 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. 1040ez printable tax forms . 1040ez printable tax forms 06 Supplemental information. 1040ez printable tax forms The statement described in section 4. 1040ez printable tax forms 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. 1040ez printable tax forms 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. 1040ez printable tax forms 05(2)(d) of this revenue procedure. 1040ez printable tax forms This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. 1040ez printable tax forms If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. 1040ez printable tax forms If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. 1040ez printable tax forms In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. 1040ez printable tax forms 08, 2. 1040ez printable tax forms 10 and, if applicable, 4. 1040ez printable tax forms 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. 1040ez printable tax forms . 1040ez printable tax forms 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. 1040ez printable tax forms The rules of this section 4. 1040ez printable tax forms 07 apply to partnerships other than partnerships described in section 4. 1040ez printable tax forms 10 of this revenue procedure. 1040ez printable tax forms (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). 1040ez printable tax forms For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. 1040ez printable tax forms , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. 1040ez printable tax forms Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). 1040ez printable tax forms (2) Election information statement provided to partners. 1040ez printable tax forms The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. 1040ez printable tax forms 07(2). 1040ez printable tax forms The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. 1040ez printable tax forms A statement meets the requirements of this section 4. 1040ez printable tax forms 07(2) if the statement— (a) Label. 1040ez printable tax forms States “Section 108(i) Election Information Statement for Partners” across the top. 1040ez printable tax forms (b) Required information. 1040ez printable tax forms Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. 1040ez printable tax forms 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. 1040ez printable tax forms 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. 1040ez printable tax forms 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. 1040ez printable tax forms (c) If a partner fails to provide the written statement required by section 4. 1040ez printable tax forms 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. 1040ez printable tax forms 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. 1040ez printable tax forms (3) Partner reporting requirements. 1040ez printable tax forms The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. 1040ez printable tax forms 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. 1040ez printable tax forms Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. 1040ez printable tax forms A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. 1040ez printable tax forms If a partner provides its written statement under this section 4. 1040ez printable tax forms 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. 1040ez printable tax forms 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. 1040ez printable tax forms . 1040ez printable tax forms 08 Additional Requirements for an S Corporation Making a § 108(i) Election. 1040ez printable tax forms (1) Information filing on Schedule K-1 (Form 1120S). 1040ez printable tax forms For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. 1040ez printable tax forms , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. 1040ez printable tax forms S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. 1040ez printable tax forms (2) Election information statement provided to shareholders. 1040ez printable tax forms The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. 1040ez printable tax forms 08(2). 1040ez printable tax forms The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. 1040ez printable tax forms A statement meets the requirements of this section 4. 1040ez printable tax forms 08(2) if the statement— (a) Label. 1040ez printable tax forms States “Section 108(i) Election Information Statement for Shareholders” across the top. 1040ez printable tax forms (b) Required information. 1040ez printable tax forms Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. 1040ez printable tax forms 06 of this revenue procedure. 1040ez printable tax forms . 1040ez printable tax forms 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. 1040ez printable tax forms The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. 1040ez printable tax forms 964-1(c)(3). 1040ez printable tax forms Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. 1040ez printable tax forms 05 of this revenue procedure and, if applicable, section 4. 1040ez printable tax forms 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. 1040ez printable tax forms . 1040ez printable tax forms 10 Section 108(i) Elections Made By Certain Foreign Partnerships. 1040ez printable tax forms The rules of this section 4. 1040ez printable tax forms 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). 1040ez printable tax forms See § 1. 1040ez printable tax forms 6031(a)-1(b). 1040ez printable tax forms (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. 1040ez printable tax forms 05 of this revenue procedure and, if applicable, section 4. 1040ez printable tax forms 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. 1040ez printable tax forms 6031(a)-1(b)(5) it files with the Service. 1040ez printable tax forms In addition, a nonfiling foreign partnership must include in the information required in section 4. 1040ez printable tax forms 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. 1040ez printable tax forms S. 1040ez printable tax forms persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). 1040ez printable tax forms (2) The nonfiling foreign partnership must make the election, in accordance with § 1. 1040ez printable tax forms 6031(a)-1(b)(5), by the date provided in section 4. 1040ez printable tax forms 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. 1040ez printable tax forms (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. 1040ez printable tax forms 07(1) of this revenue procedure. 1040ez printable tax forms Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). 1040ez printable tax forms The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. 1040ez printable tax forms 07(2) of this revenue procedure by the date provided in section 4. 1040ez printable tax forms 01(1)(a) of this revenue procedure. 1040ez printable tax forms The partnership should not attach any statement described in section 4. 1040ez printable tax forms 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. 1040ez printable tax forms However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. 1040ez printable tax forms (4) The partnership and each affected partner must satisfy the requirements of section 4. 1040ez printable tax forms 07(3) of this revenue procedure. 1040ez printable tax forms . 1040ez printable tax forms 11 Protective § 108(i) Election. 1040ez printable tax forms (1) In general. 1040ez printable tax forms A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. 1040ez printable tax forms If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). 1040ez printable tax forms Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. 1040ez printable tax forms A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. 1040ez printable tax forms 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. 1040ez printable tax forms 01(1)(a) of this revenue procedure. 1040ez printable tax forms The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. 1040ez printable tax forms A statement meets the requirements of this section 4. 1040ez printable tax forms 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. 1040ez printable tax forms 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. 1040ez printable tax forms 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. 1040ez printable tax forms 06 of this revenue procedure. 1040ez printable tax forms (2) Statements provided to shareholders and partners. 1040ez printable tax forms (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. 1040ez printable tax forms 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. 1040ez printable tax forms 11(1)(d) of this revenue procedure. 1040ez printable tax forms (b) The partnership or S corporation should not attach the statements described in this section 4. 1040ez printable tax forms 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. 1040ez printable tax forms . 1040ez printable tax forms 12 Election-Year Reporting by Tiered Pass-Through Entities. 1040ez printable tax forms (1) A partnership required to file a U. 1040ez printable tax forms S. 1040ez printable tax forms partnership return other than under § 1. 1040ez printable tax forms 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. 1040ez printable tax forms 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. 1040ez printable tax forms 07(1)(a) through (d) of this revenue procedure). 1040ez printable tax forms (2) If a partnership described in section 4. 1040ez printable tax forms 12(1) of this revenue procedure receives a statement described in sections 4. 1040ez printable tax forms 07(2) or 4. 1040ez printable tax forms 10(3) of this revenue procedure or this section 4. 1040ez printable tax forms 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. 1040ez printable tax forms 07(2)(b)(x) of this revenue procedure. 1040ez printable tax forms If an S corporation receives a statement described in sections 4. 1040ez printable tax forms 07(2) or 4. 1040ez printable tax forms 10(3) of this revenue procedure or this section 4. 1040ez printable tax forms 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. 1040ez printable tax forms 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. 1040ez printable tax forms The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. 1040ez printable tax forms The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. 1040ez printable tax forms (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. 1040ez printable tax forms 704-1(b)(2)(iii). 1040ez printable tax forms The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. 1040ez printable tax forms No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. 1040ez printable tax forms The partnership allocates amounts described in section 4. 1040ez printable tax forms 06 of this revenue procedure under this section 4. 1040ez printable tax forms 12(3) as if the additional COD income was realized. 1040ez printable tax forms (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. 1040ez printable tax forms No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. 1040ez printable tax forms (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. 1040ez printable tax forms (6) This paragraph 4. 1040ez printable tax forms 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. 1040ez printable tax forms S. 1040ez printable tax forms Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. 1040ez printable tax forms 07(1) of this revenue procedure, or a statement described in sections 4. 1040ez printable tax forms 07(2) or 4. 1040ez printable tax forms 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). 1040ez printable tax forms (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. 1040ez printable tax forms 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. 1040ez printable tax forms 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. 1040ez printable tax forms (b) A Category 2 filer must include its share of the information described in section 4. 1040ez printable tax forms 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. 1040ez printable tax forms Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. 1040ez printable tax forms (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. 1040ez printable tax forms 12(6)(a)(ii) and 4. 1040ez printable tax forms 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. 1040ez printable tax forms However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. 1040ez printable tax forms (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. 1040ez printable tax forms 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. 1040ez printable tax forms 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. 1040ez printable tax forms 12(1) and (2) of this revenue procedure. 1040ez printable tax forms Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. 1040ez printable tax forms 12(6) of this revenue procedure. 1040ez printable tax forms (8) The provisions of section 4. 1040ez printable tax forms 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. 1040ez printable tax forms 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. 1040ez printable tax forms 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. 1040ez printable tax forms 11(1)(d) of this revenue procedure. 1040ez printable tax forms SECTION 5. 1040ez printable tax forms REQUIRED INFORMATION STATEMENT . 1040ez printable tax forms 01 Annual Information Statements. 1040ez printable tax forms Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. 1040ez printable tax forms 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. 1040ez printable tax forms 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. 1040ez printable tax forms . 1040ez printable tax forms 02 Contents of Statement. 1040ez printable tax forms A statement meets the requirements of this section 5. 1040ez printable tax forms 02 if the statement— (1) Label. 1040ez printable tax forms States “Section 108(i) Information Statement” across the top; (2) Required information. 1040ez printable tax forms Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. 1040ez printable tax forms (3) Election attached. 1040ez printable tax forms Includes a copy of the election statement described in section 4. 1040ez printable tax forms 05 of this revenue procedure. 1040ez printable tax forms . 1040ez printable tax forms 03 Additional Annual Reporting Requirements for Certain Partnerships. 1040ez printable tax forms The rules of this section 5. 1040ez printable tax forms 03 apply to partnerships other than partnerships described in section 5. 1040ez printable tax forms 05 of this revenue procedure. 1040ez printable tax forms (1) In general. 1040ez printable tax forms A partnership that makes an election under § 108(i) (except for a protective election under section 4. 1040ez printable tax forms 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. 1040ez printable tax forms 01 of this revenue procedure. 1040ez printable tax forms In addition, for each taxable year in which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. 1040ez printable tax forms 07(1) of this revenue procedure. 1040ez printable tax forms (2) Annual information statements provided to partners. 1040ez printable tax forms The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure, a statement meeting the requirements of this section 5. 1040ez printable tax forms 03(2). 1040ez printable tax forms The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. 1040ez printable tax forms A statement meets the requirements of this section 5. 1040ez printable tax forms 03(2) if the statement— (a) Label. 1040ez printable tax forms States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. 1040ez printable tax forms (b) Required information. 1040ez printable tax forms Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. 1040ez printable tax forms If a partner fails to provide the written statement required by section 4. 1040ez printable tax forms 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. 1040ez printable tax forms 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. 1040ez printable tax forms . 1040ez printable tax forms 04 Additional Annual Reporting Requirements for an S Corporation. 1040ez printable tax forms (1) In general. 1040ez printable tax forms An S corporation that makes an election under § 108(i) (except for a protective election under section 4. 1040ez printable tax forms 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. 1040ez printable tax forms 01 of this revenue procedure. 1040ez printable tax forms In addition, for each taxable year in which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. 1040ez printable tax forms 08(1) of this revenue procedure. 1040ez printable tax forms (2) Annual information statements provided to shareholders. 1040ez printable tax forms The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure a statement meeting the requirements of this section 5. 1040ez printable tax forms 04(2). 1040ez printable tax forms The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. 1040ez printable tax forms A statement meets the requirements of this section 5. 1040ez printable tax forms 04(2) if the statement— (a) Label. 1040ez printable tax forms States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. 1040ez printable tax forms Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. 1040ez printable tax forms . 1040ez printable tax forms 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. 1040ez printable tax forms (1) The rules of this section 5. 1040ez printable tax forms 05 apply to nonfiling foreign partnerships. 1040ez printable tax forms (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. 1040ez printable tax forms 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. 1040ez printable tax forms 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. 1040ez printable tax forms 01 of this revenue procedure. 1040ez printable tax forms (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. 1040ez printable tax forms 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. 1040ez printable tax forms (4) For each taxable year in which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. 1040ez printable tax forms 07(1) of this revenue procedure. 1040ez printable tax forms Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). 1040ez printable tax forms The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. 1040ez printable tax forms 6031(b)-1T(b). 1040ez printable tax forms The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. 1040ez printable tax forms 05(2) of this revenue procedure. 1040ez printable tax forms (5) For each taxable year for which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. 1040ez printable tax forms 03(2) of this revenue procedure. 1040ez printable tax forms The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. 1040ez printable tax forms . 1040ez printable tax forms 06 Information Statements Made on Behalf of Certain Foreign Corporations. 1040ez printable tax forms Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. 1040ez printable tax forms 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. 1040ez printable tax forms 01 of this revenue procedure. 1040ez printable tax forms . 1040ez printable tax forms 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. 1040ez printable tax forms (1) A partnership required to file a U. 1040ez printable tax forms S. 1040ez printable tax forms partnership return other than under § 1. 1040ez printable tax forms 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. 1040ez printable tax forms 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. 1040ez printable tax forms 07(1)(a) through (d) of this revenue procedure). 1040ez printable tax forms (2) If a partnership described in section 5. 1040ez printable tax forms 07(1) of this revenue procedure receives a statement described in sections 5. 1040ez printable tax forms 03(2) or 5. 1040ez printable tax forms 05(5) of this revenue procedure or this section 5. 1040ez printable tax forms 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. 1040ez printable tax forms If an S corporation receives a statement described in sections 5. 1040ez printable tax forms 03(2) or 5. 1040ez printable tax forms 05(5) of this revenue procedure or this section 5. 1040ez printable tax forms 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. 1040ez printable tax forms 03(2)(b)(i) through (viii) of this revenue procedure. 1040ez printable tax forms The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. 1040ez printable tax forms The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. 1040ez printable tax forms (3) This paragraph 5. 1040ez printable tax forms 07(3) provides the rules for persons described in section 4. 1040ez printable tax forms 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. 1040ez printable tax forms 03(1) of this revenue procedure, or a statement described in sections 5. 1040ez printable tax forms 03(2) or 5. 1040ez printable tax forms 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). 1040ez printable tax forms (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. 1040ez printable tax forms 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. 1040ez printable tax forms 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. 1040ez printable tax forms (b) A Category 2 filer must include its share of the information described in section 4. 1040ez printable tax forms 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. 1040ez printable tax forms Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. 1040ez printable tax forms (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. 1040ez printable tax forms 07(3)(a)(ii) and 5. 1040ez printable tax forms 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. 1040ez printable tax forms However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. 1040ez printable tax forms (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. 1040ez printable tax forms 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. 1040ez printable tax forms 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. 1040ez printable tax forms 07(1) and (2) of this revenue procedure. 1040ez printable tax forms Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. 1040ez printable tax forms 12(6) of this revenue procedure. 1040ez printable tax forms SECTION 6. 1040ez printable tax forms EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. 1040ez printable tax forms SECTION 7. 1040ez printable tax forms TRANSITION RULE . 1040ez printable tax forms 01 Noncomplying Election. 1040ez printable tax forms Except as otherwise provided in this section 7. 1040ez printable tax forms 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. 1040ez printable tax forms However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. 1040ez printable tax forms . 1040ez printable tax forms 02 Modification of Election. 1040ez printable tax forms A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). 1040ez printable tax forms To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. 1040ez printable tax forms . 1040ez printable tax forms 03 Notations. 1040ez printable tax forms A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. 1040ez printable tax forms A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. 1040ez printable tax forms See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. 1040ez printable tax forms SECTION 8. 1040ez printable tax forms PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. 1040ez printable tax forms S. 1040ez printable tax forms C. 1040ez printable tax forms 3507) under control number 1545-2147. 1040ez printable tax forms An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. 1040ez printable tax forms The collection of information in this revenue procedure is in sections 4, 5 and 7. 1040ez printable tax forms This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. 1040ez printable tax forms This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. 1040ez printable tax forms The collection of information is required to obtain a benefit. 1040ez printable tax forms The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. 1040ez printable tax forms The estimated total annual reporting burden is 300,000 hours. 1040ez printable tax forms The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. 1040ez printable tax forms The estimated number of respondents is 50,000. 1040ez printable tax forms Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. 1040ez printable tax forms Generally, tax returns and return information are confidential, as required by § 6103. 1040ez printable tax forms DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. 1040ez printable tax forms Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). 1040ez printable tax forms For further information regarding this revenue procedure, contact Megan A. 1040ez printable tax forms Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. 1040ez printable tax forms Blanchard at (202) 622-3950 for questions involving OID, Ronald M. 1040ez printable tax forms Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). 1040ez printable tax forms Prev  Up  Next   Home   More Internal Revenue Bulletins
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Denali Commission

The Denali Commission is an independent federal agency designed to provide critical utilities, infrastructure, and economic support throughout Alaska.

Contact the Agency or Department

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Anchorage, AK 99501

Phone Number: (907) 271-1414

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The 1040ez Printable Tax Forms

1040ez printable tax forms 1. 1040ez printable tax forms   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. 1040ez printable tax forms Generally, each year you will report all income and deduct all out-of-pocket expenses in full. 1040ez printable tax forms The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. 1040ez printable tax forms If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). 1040ez printable tax forms Rental Income In most cases, you must include in your gross income all amounts you receive as rent. 1040ez printable tax forms Rental income is any payment you receive for the use or occupation of property. 1040ez printable tax forms In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. 1040ez printable tax forms When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. 1040ez printable tax forms Most individual taxpayers use the cash method. 1040ez printable tax forms Cash method. 1040ez printable tax forms   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. 1040ez printable tax forms You constructively receive income when it is made available to you, for example, by being credited to your bank account. 1040ez printable tax forms Accrual method. 1040ez printable tax forms    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. 1040ez printable tax forms You generally deduct your expenses when you incur them, rather than when you pay them. 1040ez printable tax forms More information. 1040ez printable tax forms   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. 1040ez printable tax forms Types of Income The following are common types of rental income. 1040ez printable tax forms Advance rent. 1040ez printable tax forms   Advance rent is any amount you receive before the period that it covers. 1040ez printable tax forms Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. 1040ez printable tax forms Example. 1040ez printable tax forms On March 18, 2013, you signed a 10-year lease to rent your property. 1040ez printable tax forms During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. 1040ez printable tax forms You must include $19,200 in your rental income in the first year. 1040ez printable tax forms Canceling a lease. 1040ez printable tax forms   If your tenant pays you to cancel a lease, the amount you receive is rent. 1040ez printable tax forms Include the payment in your income in the year you receive it regardless of your method of accounting. 1040ez printable tax forms Expenses paid by tenant. 1040ez printable tax forms   If your tenant pays any of your expenses, those payments are rental income. 1040ez printable tax forms Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. 1040ez printable tax forms For more information, see Rental Expenses , later. 1040ez printable tax forms Example 1. 1040ez printable tax forms Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. 1040ez printable tax forms Under the terms of the lease, your tenant does not have to pay this bill. 1040ez printable tax forms Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. 1040ez printable tax forms You can deduct the utility payment made by your tenant as a rental expense. 1040ez printable tax forms Example 2. 1040ez printable tax forms While you are out of town, the furnace in your rental property stops working. 1040ez printable tax forms Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. 1040ez printable tax forms Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. 1040ez printable tax forms You can deduct the repair payment made by your tenant as a rental expense. 1040ez printable tax forms Property or services. 1040ez printable tax forms   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. 1040ez printable tax forms   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 1040ez printable tax forms Example. 1040ez printable tax forms Your tenant is a house painter. 1040ez printable tax forms He offers to paint your rental property instead of paying 2 months rent. 1040ez printable tax forms You accept his offer. 1040ez printable tax forms Include in your rental income the amount the tenant would have paid for 2 months rent. 1040ez printable tax forms You can deduct that same amount as a rental expense for painting your property. 1040ez printable tax forms Security deposits. 1040ez printable tax forms   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. 1040ez printable tax forms But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 1040ez printable tax forms    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. 1040ez printable tax forms Include it in your income when you receive it. 1040ez printable tax forms Other Sources of Rental Income Lease with option to buy. 1040ez printable tax forms   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. 1040ez printable tax forms If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. 1040ez printable tax forms Part interest. 1040ez printable tax forms   If you own a part interest in rental property, you must report your part of the rental income from the property. 1040ez printable tax forms Rental of property also used as your home. 1040ez printable tax forms   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. 1040ez printable tax forms However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. 1040ez printable tax forms See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040ez printable tax forms Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. 1040ez printable tax forms Personal use of rental property. 1040ez printable tax forms   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. 1040ez printable tax forms Also, your rental expense deductions may be limited. 1040ez printable tax forms See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040ez printable tax forms Part interest. 1040ez printable tax forms   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. 1040ez printable tax forms Example. 1040ez printable tax forms Roger owns a one-half undivided interest in a rental house. 1040ez printable tax forms Last year he paid $968 for necessary repairs on the property. 1040ez printable tax forms Roger can deduct $484 (50% × $968) as a rental expense. 1040ez printable tax forms He is entitled to reimbursement for the remaining half from the co-owner. 1040ez printable tax forms When To Deduct You generally deduct your rental expenses in the year you pay them. 1040ez printable tax forms If you use the accrual method, see Publication 538 for more information. 1040ez printable tax forms Types of Expenses Listed below are the most common rental expenses. 1040ez printable tax forms Advertising. 1040ez printable tax forms Auto and travel expenses. 1040ez printable tax forms Cleaning and maintenance. 1040ez printable tax forms Commissions. 1040ez printable tax forms Depreciation. 1040ez printable tax forms Insurance. 1040ez printable tax forms Interest (other). 1040ez printable tax forms Legal and other professional fees. 1040ez printable tax forms Local transportation expenses. 1040ez printable tax forms Management fees. 1040ez printable tax forms Mortgage interest paid to banks, etc. 1040ez printable tax forms Points. 1040ez printable tax forms Rental payments. 1040ez printable tax forms Repairs. 1040ez printable tax forms Taxes. 1040ez printable tax forms Utilities. 1040ez printable tax forms Some of these expenses, as well as other less common ones, are discussed below. 1040ez printable tax forms Depreciation. 1040ez printable tax forms   Depreciation is a capital expense. 1040ez printable tax forms It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. 1040ez printable tax forms   You can begin to depreciate rental property when it is ready and available for rent. 1040ez printable tax forms See Placed in Service under When Does Depreciation Begin and End in chapter 2. 1040ez printable tax forms Insurance premiums paid in advance. 1040ez printable tax forms   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. 1040ez printable tax forms You cannot deduct the total premium in the year you pay it. 1040ez printable tax forms See chapter 6 of Publication 535 for information on deductible premiums. 1040ez printable tax forms Interest expense. 1040ez printable tax forms   You can deduct mortgage interest you pay on your rental property. 1040ez printable tax forms When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 1040ez printable tax forms Chapter 4 of Publication 535 explains mortgage interest in detail. 1040ez printable tax forms Expenses paid to obtain a mortgage. 1040ez printable tax forms   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. 1040ez printable tax forms These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. 1040ez printable tax forms Form 1098, Mortgage Interest Statement. 1040ez printable tax forms   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. 1040ez printable tax forms If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. 1040ez printable tax forms Attach a statement to your return showing the name and address of the other person. 1040ez printable tax forms On the dotted line next to line 13, enter “See attached. 1040ez printable tax forms ” Legal and other professional fees. 1040ez printable tax forms   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. 1040ez printable tax forms For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. 1040ez printable tax forms You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. 1040ez printable tax forms Local benefit taxes. 1040ez printable tax forms   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. 1040ez printable tax forms These charges are nondepreciable capital expenditures and must be added to the basis of your property. 1040ez printable tax forms However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. 1040ez printable tax forms Local transportation expenses. 1040ez printable tax forms   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. 1040ez printable tax forms However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. 1040ez printable tax forms See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 1040ez printable tax forms   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. 1040ez printable tax forms For 2013, the standard mileage rate for business use is 56. 1040ez printable tax forms 5 cents per mile. 1040ez printable tax forms For more information, see chapter 4 of Publication 463. 1040ez printable tax forms    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. 1040ez printable tax forms In addition, you must complete Form 4562, Part V, and attach it to your tax return. 1040ez printable tax forms Pre-rental expenses. 1040ez printable tax forms   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. 1040ez printable tax forms Rental of equipment. 1040ez printable tax forms   You can deduct the rent you pay for equipment that you use for rental purposes. 1040ez printable tax forms However, in some cases, lease contracts are actually purchase contracts. 1040ez printable tax forms If so, you cannot deduct these payments. 1040ez printable tax forms You can recover the cost of purchased equipment through depreciation. 1040ez printable tax forms Rental of property. 1040ez printable tax forms   You can deduct the rent you pay for property that you use for rental purposes. 1040ez printable tax forms If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. 1040ez printable tax forms Travel expenses. 1040ez printable tax forms   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. 1040ez printable tax forms You must properly allocate your expenses between rental and nonrental activities. 1040ez printable tax forms You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. 1040ez printable tax forms The cost of improvements is recovered by taking depreciation. 1040ez printable tax forms For information on travel expenses, see chapter 1 of Publication 463. 1040ez printable tax forms    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. 1040ez printable tax forms Uncollected rent. 1040ez printable tax forms   If you are a cash basis taxpayer, do not deduct uncollected rent. 1040ez printable tax forms Because you have not included it in your income, it is not deductible. 1040ez printable tax forms   If you use an accrual method, report income when you earn it. 1040ez printable tax forms If you are unable to collect the rent, you may be able to deduct it as a business bad debt. 1040ez printable tax forms See chapter 10 of Publication 535 for more information about business bad debts. 1040ez printable tax forms Vacant rental property. 1040ez printable tax forms   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. 1040ez printable tax forms However, you cannot deduct any loss of rental income for the period the property is vacant. 1040ez printable tax forms Vacant while listed for sale. 1040ez printable tax forms   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. 1040ez printable tax forms If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. 1040ez printable tax forms Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. 1040ez printable tax forms These charges are also called loan origination fees, maximum loan charges, or premium charges. 1040ez printable tax forms Any of these charges (points) that are solely for the use of money are interest. 1040ez printable tax forms Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. 1040ez printable tax forms The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. 1040ez printable tax forms In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). 1040ez printable tax forms The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. 1040ez printable tax forms If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. 1040ez printable tax forms De minimis OID. 1040ez printable tax forms   The OID is de minimis if it is less than one-fourth of 1% (. 1040ez printable tax forms 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). 1040ez printable tax forms   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. 1040ez printable tax forms On a constant-yield basis over the term of the loan. 1040ez printable tax forms On a straight line basis over the term of the loan. 1040ez printable tax forms In proportion to stated interest payments. 1040ez printable tax forms In its entirety at maturity of the loan. 1040ez printable tax forms You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. 1040ez printable tax forms Example. 1040ez printable tax forms Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. 1040ez printable tax forms The loan is to be repaid over 30 years. 1040ez printable tax forms During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. 1040ez printable tax forms When the loan was made, she paid $1,500 in points to the lender. 1040ez printable tax forms The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. 1040ez printable tax forms Carol determines that the points (OID) she paid are de minimis based on the following computation. 1040ez printable tax forms Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. 1040ez printable tax forms 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). 1040ez printable tax forms Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. 1040ez printable tax forms Under the straight line method, she can deduct $50 each year for 30 years. 1040ez printable tax forms Constant-yield method. 1040ez printable tax forms   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. 1040ez printable tax forms   You figure your deduction for the first year in the following manner. 1040ez printable tax forms Determine the issue price of the loan. 1040ez printable tax forms If you paid points on the loan, the issue price generally is the difference between the principal and the points. 1040ez printable tax forms Multiply the result in (1) by the yield to maturity (defined later). 1040ez printable tax forms Subtract any qualified stated interest payments (defined later) from the result in (2). 1040ez printable tax forms This is the OID you can deduct in the first year. 1040ez printable tax forms Yield to maturity (YTM). 1040ez printable tax forms   This rate is generally shown in the literature you receive from your lender. 1040ez printable tax forms If you do not have this information, consult your lender or tax advisor. 1040ez printable tax forms In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. 1040ez printable tax forms Qualified stated interest (QSI). 1040ez printable tax forms   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. 1040ez printable tax forms Example—Year 1. 1040ez printable tax forms The facts are the same as in the previous example. 1040ez printable tax forms The yield to maturity on Carol's loan is 10. 1040ez printable tax forms 2467%, compounded annually. 1040ez printable tax forms She figured the amount of points (OID) she could deduct in 2013 as follows. 1040ez printable tax forms Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . 1040ez printable tax forms 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. 1040ez printable tax forms To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. 1040ez printable tax forms Then follow steps (2) and (3), earlier. 1040ez printable tax forms Example—Year 2. 1040ez printable tax forms Carol figured the deduction for 2014 as follows. 1040ez printable tax forms Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . 1040ez printable tax forms 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. 1040ez printable tax forms    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. 1040ez printable tax forms A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. 1040ez printable tax forms However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. 1040ez printable tax forms Points when loan refinance is more than the previous outstanding balance. 1040ez printable tax forms   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 1040ez printable tax forms For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. 1040ez printable tax forms Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. 1040ez printable tax forms Improvements. 1040ez printable tax forms   You must capitalize any expense you pay to improve your rental property. 1040ez printable tax forms An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. 1040ez printable tax forms Betterments. 1040ez printable tax forms   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. 1040ez printable tax forms Restoration. 1040ez printable tax forms   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. 1040ez printable tax forms Adaptation. 1040ez printable tax forms   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. 1040ez printable tax forms Separate the costs of repairs and improvements, and keep accurate records. 1040ez printable tax forms You will need to know the cost of improvements when you sell or depreciate your property. 1040ez printable tax forms The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. 1040ez printable tax forms Table 1-1. 1040ez printable tax forms Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications