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2010 tax deadline 2. 2010 tax deadline   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. 2010 tax deadline Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. 2010 tax deadline Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). 2010 tax deadline You must do this to figure your net capital gain or loss. 2010 tax deadline For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. 2010 tax deadline See Capital Gains Tax Rates in chapter 4. 2010 tax deadline Your deduction for a net capital loss may be limited. 2010 tax deadline See Treatment of Capital Losses in chapter 4. 2010 tax deadline Capital gain or loss. 2010 tax deadline   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. 2010 tax deadline You also may have a capital gain if your section 1231 transactions result in a net gain. 2010 tax deadline Section 1231 transactions. 2010 tax deadline   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. 2010 tax deadline They also include certain involuntary conversions of business or investment property, including capital assets. 2010 tax deadline See Section 1231 Gains and Losses in chapter 3 for more information. 2010 tax deadline Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. 2010 tax deadline Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. 2010 tax deadline For exceptions, see Noncapital Assets, later. 2010 tax deadline The following items are examples of capital assets. 2010 tax deadline Stocks and bonds. 2010 tax deadline A home owned and occupied by you and your family. 2010 tax deadline Timber grown on your home property or investment property, even if you make casual sales of the timber. 2010 tax deadline Household furnishings. 2010 tax deadline A car used for pleasure or commuting. 2010 tax deadline Coin or stamp collections. 2010 tax deadline Gems and jewelry. 2010 tax deadline Gold, silver, and other metals. 2010 tax deadline Personal-use property. 2010 tax deadline   Generally, property held for personal use is a capital asset. 2010 tax deadline Gain from a sale or exchange of that property is a capital gain. 2010 tax deadline Loss from the sale or exchange of that property is not deductible. 2010 tax deadline You can deduct a loss relating to personal-use property only if it results from a casualty or theft. 2010 tax deadline Investment property. 2010 tax deadline   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. 2010 tax deadline This treatment does not apply to property used to produce rental income. 2010 tax deadline See Business assets, later, under Noncapital Assets. 2010 tax deadline Release of restriction on land. 2010 tax deadline   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. 2010 tax deadline Noncapital Assets A noncapital asset is property that is not a capital asset. 2010 tax deadline The following kinds of property are not capital assets. 2010 tax deadline Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. 2010 tax deadline Inventories are discussed in Publication 538, Accounting Periods and Methods. 2010 tax deadline But, see the Tip below. 2010 tax deadline Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. 2010 tax deadline Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). 2010 tax deadline Sales of this type of property are discussed in chapter 3. 2010 tax deadline Real property used in your trade or business or as rental property, even if the property is fully depreciated. 2010 tax deadline A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. 2010 tax deadline But, see the Tip below. 2010 tax deadline U. 2010 tax deadline S. 2010 tax deadline Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. 2010 tax deadline Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. 2010 tax deadline It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. 2010 tax deadline The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. 2010 tax deadline Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. 2010 tax deadline Supplies of a type you regularly use or consume in the ordinary course of your trade or business. 2010 tax deadline You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. 2010 tax deadline See chapter 4 of Publication 550 for details. 2010 tax deadline Property held mainly for sale to customers. 2010 tax deadline   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. 2010 tax deadline Inventories are discussed in Publication 538. 2010 tax deadline Business assets. 2010 tax deadline   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. 2010 tax deadline The sale or disposition of business property is discussed in chapter 3. 2010 tax deadline Letters and memoranda. 2010 tax deadline   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. 2010 tax deadline Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. 2010 tax deadline For this purpose, letters and memoranda addressed to you are considered prepared for you. 2010 tax deadline If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. 2010 tax deadline Commodities derivative financial instrument. 2010 tax deadline   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). 2010 tax deadline Commodities derivative dealer. 2010 tax deadline   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. 2010 tax deadline Hedging transaction. 2010 tax deadline   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. 2010 tax deadline Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. 2010 tax deadline Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. 2010 tax deadline Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. 2010 tax deadline If these rules apply, gains may be treated as ordinary income and losses may not be deductible. 2010 tax deadline See Transfers to Spouse in chapter 1 for rules that apply to spouses. 2010 tax deadline Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. 2010 tax deadline It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. 2010 tax deadline Depreciable property transaction. 2010 tax deadline   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. 2010 tax deadline A person and the person's controlled entity or entities. 2010 tax deadline A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. 2010 tax deadline An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). 2010 tax deadline An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). 2010 tax deadline Controlled entity. 2010 tax deadline   A person's controlled entity is either of the following. 2010 tax deadline A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. 2010 tax deadline An entity whose relationship with that person is one of the following. 2010 tax deadline A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. 2010 tax deadline Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. 2010 tax deadline Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2010 tax deadline Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2010 tax deadline Controlled partnership transaction. 2010 tax deadline   A gain recognized in a controlled partnership transaction may be ordinary income. 2010 tax deadline The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. 2010 tax deadline   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. 2010 tax deadline A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. 2010 tax deadline Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. 2010 tax deadline Determining ownership. 2010 tax deadline   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. 2010 tax deadline Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2010 tax deadline (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. 2010 tax deadline ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. 2010 tax deadline Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. 2010 tax deadline For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. 2010 tax deadline But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. 2010 tax deadline Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. 2010 tax deadline This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. 2010 tax deadline For the list of related persons, see Related persons next. 2010 tax deadline If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. 2010 tax deadline The gain on each item is taxable. 2010 tax deadline The loss on any item is nondeductible. 2010 tax deadline Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. 2010 tax deadline Related persons. 2010 tax deadline   The following is a list of related persons. 2010 tax deadline Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 2010 tax deadline ), and lineal descendants (children, grandchildren, etc. 2010 tax deadline ). 2010 tax deadline An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. 2010 tax deadline Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. 2010 tax deadline A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. 2010 tax deadline A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 2010 tax deadline Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 2010 tax deadline A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. 2010 tax deadline A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. 2010 tax deadline Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 2010 tax deadline Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2010 tax deadline An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. 2010 tax deadline Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. 2010 tax deadline A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. 2010 tax deadline Partnership interests. 2010 tax deadline   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. 2010 tax deadline Controlled groups. 2010 tax deadline   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. 2010 tax deadline   For more information, see section 267(f) of the Internal Revenue Code. 2010 tax deadline Ownership of stock or partnership interests. 2010 tax deadline   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. 2010 tax deadline Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2010 tax deadline (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. 2010 tax deadline ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. 2010 tax deadline Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. 2010 tax deadline An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 2010 tax deadline For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. 2010 tax deadline But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. 2010 tax deadline Indirect transactions. 2010 tax deadline   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. 2010 tax deadline This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. 2010 tax deadline Property received from a related person. 2010 tax deadline   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. 2010 tax deadline This rule applies only to the original transferee. 2010 tax deadline Example 1. 2010 tax deadline Your brother sold stock to you for $7,600. 2010 tax deadline His cost basis was $10,000. 2010 tax deadline His loss of $2,400 was not deductible. 2010 tax deadline You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). 2010 tax deadline Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. 2010 tax deadline Example 2. 2010 tax deadline Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. 2010 tax deadline Your recognized loss is only $700 ($7,600 − $6,900). 2010 tax deadline You cannot deduct the loss not allowed to your brother. 2010 tax deadline Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. 2010 tax deadline Sale of a Business The sale of a business usually is not a sale of one asset. 2010 tax deadline Instead, all the assets of the business are sold. 2010 tax deadline Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. 2010 tax deadline A business usually has many assets. 2010 tax deadline When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. 2010 tax deadline The gain or loss on each asset is figured separately. 2010 tax deadline The sale of capital assets results in capital gain or loss. 2010 tax deadline The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). 2010 tax deadline The sale of inventory results in ordinary income or loss. 2010 tax deadline Partnership interests. 2010 tax deadline   An interest in a partnership or joint venture is treated as a capital asset when sold. 2010 tax deadline The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. 2010 tax deadline For more information, see Disposition of Partner's Interest in Publication 541. 2010 tax deadline Corporation interests. 2010 tax deadline   Your interest in a corporation is represented by stock certificates. 2010 tax deadline When you sell these certificates, you usually realize capital gain or loss. 2010 tax deadline For information on the sale of stock, see chapter 4 in Publication 550. 2010 tax deadline Corporate liquidations. 2010 tax deadline   Corporate liquidations of property generally are treated as a sale or exchange. 2010 tax deadline Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. 2010 tax deadline Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. 2010 tax deadline   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. 2010 tax deadline For more information, see section 332 of the Internal Revenue Code and the related regulations. 2010 tax deadline Allocation of consideration paid for a business. 2010 tax deadline   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. 2010 tax deadline Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. 2010 tax deadline This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. 2010 tax deadline It also determines the buyer's basis in the business assets. 2010 tax deadline Consideration. 2010 tax deadline   The buyer's consideration is the cost of the assets acquired. 2010 tax deadline The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. 2010 tax deadline Residual method. 2010 tax deadline   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. 2010 tax deadline This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. 2010 tax deadline Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. 2010 tax deadline   A group of assets constitutes a trade or business if either of the following applies. 2010 tax deadline Goodwill or going concern value could, under any circumstances, attach to them. 2010 tax deadline The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. 2010 tax deadline   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). 2010 tax deadline The consideration remaining after this reduction must be allocated among the various business assets in a certain order. 2010 tax deadline See Classes of assets next for the complete order. 2010 tax deadline Classes of assets. 2010 tax deadline   The following definitions are the classifications for deemed or actual asset acquisitions. 2010 tax deadline Allocate the consideration among the assets in the following order. 2010 tax deadline The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. 2010 tax deadline The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. 2010 tax deadline Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). 2010 tax deadline Class II assets are certificates of deposit, U. 2010 tax deadline S. 2010 tax deadline Government securities, foreign currency, and actively traded personal property, including stock and securities. 2010 tax deadline Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. 2010 tax deadline However, see section 1. 2010 tax deadline 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. 2010 tax deadline Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. 2010 tax deadline Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. 2010 tax deadline    Note. 2010 tax deadline Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. 2010 tax deadline Class VI assets are section 197 intangibles (other than goodwill and going concern value). 2010 tax deadline Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). 2010 tax deadline   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. 2010 tax deadline For example, if an asset is described in both Class II and Class IV, choose Class II. 2010 tax deadline Example. 2010 tax deadline The total paid in the sale of the assets of Company SKB is $21,000. 2010 tax deadline No cash or deposit accounts or similar accounts were sold. 2010 tax deadline The company's U. 2010 tax deadline S. 2010 tax deadline Government securities sold had a fair market value of $3,200. 2010 tax deadline The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. 2010 tax deadline Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. 2010 tax deadline S. 2010 tax deadline Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. 2010 tax deadline Agreement. 2010 tax deadline   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. 2010 tax deadline This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. 2010 tax deadline Reporting requirement. 2010 tax deadline   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. 2010 tax deadline Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. 2010 tax deadline Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. 2010 tax deadline See the Instructions for Form 8594. 2010 tax deadline Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. 2010 tax deadline It includes such items as patents, copyrights, and the goodwill value of a business. 2010 tax deadline Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. 2010 tax deadline The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. 2010 tax deadline See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. 2010 tax deadline Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. 2010 tax deadline The following discussions explain special rules that apply to certain dispositions of intangible property. 2010 tax deadline Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. 2010 tax deadline They include the following assets. 2010 tax deadline Goodwill. 2010 tax deadline Going concern value. 2010 tax deadline Workforce in place. 2010 tax deadline Business books and records, operating systems, and other information bases. 2010 tax deadline Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. 2010 tax deadline Customer-based intangibles. 2010 tax deadline Supplier-based intangibles. 2010 tax deadline Licenses, permits, and other rights granted by a governmental unit. 2010 tax deadline Covenants not to compete entered into in connection with the acquisition of a business. 2010 tax deadline Franchises, trademarks, and trade names. 2010 tax deadline See chapter 8 of Publication 535 for a description of each intangible. 2010 tax deadline Dispositions. 2010 tax deadline   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. 2010 tax deadline Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. 2010 tax deadline If you retain more than one section 197 intangible, increase each intangible's adjusted basis. 2010 tax deadline Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. 2010 tax deadline   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. 2010 tax deadline For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. 2010 tax deadline Covenant not to compete. 2010 tax deadline   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. 2010 tax deadline Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. 2010 tax deadline Anti-churning rules. 2010 tax deadline   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. 2010 tax deadline However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. 2010 tax deadline Recognize gain on the transfer of the property. 2010 tax deadline Pay income tax on the gain at the highest tax rate. 2010 tax deadline   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. 2010 tax deadline But each partner or shareholder must pay the tax on his or her share of gain. 2010 tax deadline   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. 2010 tax deadline You must file the tax return by the due date (including extensions). 2010 tax deadline You must also notify the transferee of the election in writing by the due date of the return. 2010 tax deadline   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). 2010 tax deadline Attach the statement to the amended return and write “Filed pursuant to section 301. 2010 tax deadline 9100-2” at the top of the statement. 2010 tax deadline File the amended return at the same address the original return was filed. 2010 tax deadline For more information about making the election, see Regulations section 1. 2010 tax deadline 197-2(h)(9). 2010 tax deadline For information about reporting the tax on your income tax return, see the Instructions for Form 4797. 2010 tax deadline Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. 2010 tax deadline This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. 2010 tax deadline For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. 2010 tax deadline This treatment applies to your transfer of a patent if you meet all the following conditions. 2010 tax deadline You are the holder of the patent. 2010 tax deadline You transfer the patent other than by gift, inheritance, or devise. 2010 tax deadline You transfer all substantial rights to the patent or an undivided interest in all such rights. 2010 tax deadline You do not transfer the patent to a related person. 2010 tax deadline Holder. 2010 tax deadline   You are the holder of a patent if you are either of the following. 2010 tax deadline The individual whose effort created the patent property and who qualifies as the original and first inventor. 2010 tax deadline The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. 2010 tax deadline All substantial rights. 2010 tax deadline   All substantial rights to patent property are all rights that have value when they are transferred. 2010 tax deadline A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. 2010 tax deadline   All substantial rights to a patent are not transferred if any of the following apply to the transfer. 2010 tax deadline The rights are limited geographically within a country. 2010 tax deadline The rights are limited to a period less than the remaining life of the patent. 2010 tax deadline The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. 2010 tax deadline The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. 2010 tax deadline Related persons. 2010 tax deadline   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. 2010 tax deadline Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. 2010 tax deadline Substitute “25% or more” ownership for “more than 50%. 2010 tax deadline ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. 2010 tax deadline For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. 2010 tax deadline The brother-sister exception does not apply because the trust relationship is independent of family status. 2010 tax deadline Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. 2010 tax deadline A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. 2010 tax deadline Significant power, right, or continuing interest. 2010 tax deadline   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. 2010 tax deadline   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. 2010 tax deadline A right to disapprove any assignment of the interest, or any part of it. 2010 tax deadline A right to end the agreement at will. 2010 tax deadline A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. 2010 tax deadline A right to make the recipient sell or advertise only your products or services. 2010 tax deadline A right to make the recipient buy most supplies and equipment from you. 2010 tax deadline A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. 2010 tax deadline Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. 2010 tax deadline However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. 2010 tax deadline See section 1237 of the Internal Revenue Code. 2010 tax deadline Timber Standing timber held as investment property is a capital asset. 2010 tax deadline Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. 2010 tax deadline If you held the timber primarily for sale to customers, it is not a capital asset. 2010 tax deadline Gain or loss on its sale is ordinary business income or loss. 2010 tax deadline It is reported in the gross receipts or sales and cost of goods sold items of your return. 2010 tax deadline Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. 2010 tax deadline These sales constitute a very minor part of their farm businesses. 2010 tax deadline In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. 2010 tax deadline , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. 2010 tax deadline Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. 2010 tax deadline Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. 2010 tax deadline This is true whether the timber is cut under contract or whether you cut it yourself. 2010 tax deadline Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. 2010 tax deadline See chapter 3. 2010 tax deadline Gain or loss is reported on Form 4797. 2010 tax deadline Christmas trees. 2010 tax deadline   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. 2010 tax deadline They qualify for both rules discussed below. 2010 tax deadline Election to treat cutting as a sale or exchange. 2010 tax deadline   Under the general rule, the cutting of timber results in no gain or loss. 2010 tax deadline It is not until a sale or exchange occurs that gain or loss is realized. 2010 tax deadline But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. 2010 tax deadline Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. 2010 tax deadline Any later sale results in ordinary business income or loss. 2010 tax deadline See Example, later. 2010 tax deadline   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. 2010 tax deadline Making the election. 2010 tax deadline   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. 2010 tax deadline You do not have to make the election in the first year you cut timber. 2010 tax deadline You can make it in any year to which the election would apply. 2010 tax deadline If the timber is partnership property, the election is made on the partnership return. 2010 tax deadline This election cannot be made on an amended return. 2010 tax deadline   Once you have made the election, it remains in effect for all later years unless you cancel it. 2010 tax deadline   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. 2010 tax deadline The prior election (and revocation) is disregarded for purposes of making a subsequent election. 2010 tax deadline See Form T (Timber), Forest Activities Schedule, for more information. 2010 tax deadline Gain or loss. 2010 tax deadline   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. 2010 tax deadline   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. 2010 tax deadline Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. 2010 tax deadline   Timber depletion is discussed in chapter 9 of Publication 535. 2010 tax deadline Example. 2010 tax deadline In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. 2010 tax deadline It had an adjusted basis for depletion of $40 per MBF. 2010 tax deadline You are a calendar year taxpayer. 2010 tax deadline On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. 2010 tax deadline It was cut in April for sale. 2010 tax deadline On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. 2010 tax deadline You report the difference between the fair market value and your adjusted basis for depletion as a gain. 2010 tax deadline This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. 2010 tax deadline You figure your gain as follows. 2010 tax deadline FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. 2010 tax deadline Outright sales of timber. 2010 tax deadline   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). 2010 tax deadline However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). 2010 tax deadline Cutting contract. 2010 tax deadline   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. 2010 tax deadline You are the owner of the timber. 2010 tax deadline You held the timber longer than 1 year before its disposal. 2010 tax deadline You kept an economic interest in the timber. 2010 tax deadline   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. 2010 tax deadline   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. 2010 tax deadline Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. 2010 tax deadline Date of disposal. 2010 tax deadline   The date of disposal is the date the timber is cut. 2010 tax deadline However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. 2010 tax deadline   This election applies only to figure the holding period of the timber. 2010 tax deadline It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). 2010 tax deadline   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. 2010 tax deadline The statement must identify the advance payments subject to the election and the contract under which they were made. 2010 tax deadline   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). 2010 tax deadline Attach the statement to the amended return and write “Filed pursuant to section 301. 2010 tax deadline 9100-2” at the top of the statement. 2010 tax deadline File the amended return at the same address the original return was filed. 2010 tax deadline Owner. 2010 tax deadline   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. 2010 tax deadline You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. 2010 tax deadline Tree stumps. 2010 tax deadline   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. 2010 tax deadline Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. 2010 tax deadline However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. 2010 tax deadline Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. 2010 tax deadline   See Form T (Timber) and its separate instructions for more information about dispositions of timber. 2010 tax deadline Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. 2010 tax deadline , are capital assets except when they are held for sale by a dealer. 2010 tax deadline Any gain or loss from their sale or exchange generally is a capital gain or loss. 2010 tax deadline If you are a dealer, the amount received from the sale is ordinary business income. 2010 tax deadline Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. 2010 tax deadline You owned the coal or iron ore longer than 1 year before its disposal. 2010 tax deadline You kept an economic interest in the coal or iron ore. 2010 tax deadline For this rule, the date the coal or iron ore is mined is considered the date of its disposal. 2010 tax deadline Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). 2010 tax deadline This amount is included on Form 4797 along with your other section 1231 gains and losses. 2010 tax deadline You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. 2010 tax deadline If you own only an option to buy the coal in place, you do not qualify as an owner. 2010 tax deadline In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. 2010 tax deadline The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. 2010 tax deadline Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. 2010 tax deadline If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. 2010 tax deadline Special rule. 2010 tax deadline   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. 2010 tax deadline A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). 2010 tax deadline An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. 2010 tax deadline Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. 2010 tax deadline This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. 2010 tax deadline An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). 2010 tax deadline A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. 2010 tax deadline Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. 2010 tax deadline For more information, see chapter 4 of Publication 550. 2010 tax deadline Prev  Up  Next   Home   More Online Publications
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The 2010 Tax Deadline

2010 tax deadline Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. 2010 tax deadline A pension is generally a series of payments made to you after you retire from work. 2010 tax deadline Pension payments are made regularly and are for past services with an employer. 2010 tax deadline An annuity is a series of payments under a contract. 2010 tax deadline You can buy the contract alone or you can buy it with the help of your employer. 2010 tax deadline Annuity payments are made regularly for more than one full year. 2010 tax deadline Note. 2010 tax deadline Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. 2010 tax deadline Types of pensions and annuities. 2010 tax deadline   Particular types of pensions and annuities include: Fixed period annuities. 2010 tax deadline You receive definite amounts at regular intervals for a definite length of time. 2010 tax deadline Annuities for a single life. 2010 tax deadline You receive definite amounts at regular intervals for life. 2010 tax deadline The payments end at death. 2010 tax deadline Joint and survivor annuities. 2010 tax deadline The first annuitant receives a definite amount at regular intervals for life. 2010 tax deadline After he or she dies, a second annuitant receives a definite amount at regular intervals for life. 2010 tax deadline The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. 2010 tax deadline Variable annuities. 2010 tax deadline You receive payments that may vary in amount for a definite length of time or for life. 2010 tax deadline The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. 2010 tax deadline Disability pensions. 2010 tax deadline You are under minimum retirement age and receive payments because you retired on disability. 2010 tax deadline If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. 2010 tax deadline If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. 2010 tax deadline A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. 2010 tax deadline This plan must meet Internal Revenue Code requirements. 2010 tax deadline It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. 2010 tax deadline However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. 2010 tax deadline A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. 2010 tax deadline A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. 2010 tax deadline   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. 2010 tax deadline A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. 2010 tax deadline It does not qualify for most of the tax benefits of a qualified plan. 2010 tax deadline Annuity worksheets. 2010 tax deadline   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. 2010 tax deadline Request for a ruling. 2010 tax deadline   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. 2010 tax deadline This is treated as a request for a ruling. 2010 tax deadline See Requesting a Ruling on Taxation of Annuity near the end of this publication. 2010 tax deadline Withholding tax and estimated tax. 2010 tax deadline   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. 2010 tax deadline If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. 2010 tax deadline Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. 2010 tax deadline Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). 2010 tax deadline These payments are also known as amounts received as an annuity. 2010 tax deadline If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. 2010 tax deadline In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. 2010 tax deadline The amount of each payment that is more than the part that represents your net cost is taxable. 2010 tax deadline Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. 2010 tax deadline These terms are explained in the following discussions. 2010 tax deadline Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. 2010 tax deadline First, find your net cost of the contract as of the annuity starting date (defined later). 2010 tax deadline To find this amount, you must first figure the total premiums, contributions, or other amounts paid. 2010 tax deadline This includes the amounts your employer contributed if you were required to include these amounts in income. 2010 tax deadline It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). 2010 tax deadline From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. 2010 tax deadline Any additional premiums paid for double indemnity or disability benefits. 2010 tax deadline Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). 2010 tax deadline The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. 2010 tax deadline Example. 2010 tax deadline On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. 2010 tax deadline The annuity starting date is July 1. 2010 tax deadline This is the date you use in figuring your investment in the contract and your expected return (discussed later). 2010 tax deadline Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. 2010 tax deadline Foreign employment. 2010 tax deadline   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. 2010 tax deadline The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. 2010 tax deadline Foreign employment contributions while a nonresident alien. 2010 tax deadline   In determining your cost, special rules apply if you are a U. 2010 tax deadline S. 2010 tax deadline citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. 2010 tax deadline Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. 2010 tax deadline Death benefit exclusion. 2010 tax deadline   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. 2010 tax deadline The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. 2010 tax deadline How to adjust your total cost. 2010 tax deadline   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. 2010 tax deadline Add it to the cost or unrecovered cost of the annuity at the annuity starting date. 2010 tax deadline See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. 2010 tax deadline Net cost. 2010 tax deadline   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. 2010 tax deadline This is the unrecovered investment in the contract as of the annuity starting date. 2010 tax deadline If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. 2010 tax deadline Refund feature. 2010 tax deadline   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. 2010 tax deadline Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. 2010 tax deadline   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. 2010 tax deadline Zero value of refund feature. 2010 tax deadline   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. 2010 tax deadline   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). 2010 tax deadline   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. 2010 tax deadline Examples. 2010 tax deadline The first example shows how to figure the value of the refund feature when there is only one beneficiary. 2010 tax deadline Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. 2010 tax deadline In both examples, the taxpayer elects to use Tables V through VIII. 2010 tax deadline If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. 2010 tax deadline Example 1. 2010 tax deadline At age 65, Barbara bought for $21,053 an annuity with a refund feature. 2010 tax deadline She will get $100 a month for life. 2010 tax deadline Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. 2010 tax deadline In this case, the contract cost and the total guaranteed return are the same ($21,053). 2010 tax deadline Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. 2010 tax deadline 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. 2010 tax deadline For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). 2010 tax deadline In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. 2010 tax deadline Example 2. 2010 tax deadline John died while still employed. 2010 tax deadline His widow, Eleanor, age 48, receives $171 a month for the rest of her life. 2010 tax deadline John's son, Elmer, age 9, receives $50 a month until he reaches age 18. 2010 tax deadline John's contributions to the retirement fund totaled $7,559. 2010 tax deadline 45, with interest on those contributions of $1,602. 2010 tax deadline 53. 2010 tax deadline The guarantee or total refund feature of the contract is $9,161. 2010 tax deadline 98 ($7,559. 2010 tax deadline 45 plus $1,602. 2010 tax deadline 53). 2010 tax deadline The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. 2010 tax deadline 9 $71,614. 2010 tax deadline 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. 2010 tax deadline 0 5,400. 2010 tax deadline 00   3) Total expected return   $77,014. 2010 tax deadline 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. 2010 tax deadline 45   2) Guaranteed amount (contributions of $7,559. 2010 tax deadline 45 plus interest of $1,602. 2010 tax deadline 53) $9,161. 2010 tax deadline 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. 2010 tax deadline 00   4) Net guaranteed amount $3,761. 2010 tax deadline 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. 2010 tax deadline 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. 2010 tax deadline 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. 2010 tax deadline See the discussion of expected return, later in this publication. 2010 tax deadline Free IRS help. 2010 tax deadline   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. 2010 tax deadline Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. 2010 tax deadline The following discussions explain how to figure the expected return with each type of annuity. 2010 tax deadline A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. 2010 tax deadline Fixed period annuity. 2010 tax deadline   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. 2010 tax deadline It is the total amount you will get beginning at the annuity starting date. 2010 tax deadline You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). 2010 tax deadline To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. 2010 tax deadline Single life annuity. 2010 tax deadline   If you are to get annuity payments for the rest of your life, find your expected return as follows. 2010 tax deadline You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. 2010 tax deadline These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). 2010 tax deadline   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. 2010 tax deadline See Adjustments to Tables I, II, V, VI, and VIA following Table I. 2010 tax deadline Example. 2010 tax deadline Henry bought an annuity contract that will give him an annuity of $500 a month for his life. 2010 tax deadline If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. 2010 tax deadline 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. 2010 tax deadline 2 multiple by +. 2010 tax deadline 1. 2010 tax deadline His expected return would then be $115,800 ($6,000 × 19. 2010 tax deadline 3). 2010 tax deadline Annuity for shorter of life or specified period. 2010 tax deadline   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. 2010 tax deadline To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. 2010 tax deadline Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. 2010 tax deadline Example. 2010 tax deadline Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. 2010 tax deadline She was age 65 at her birthday nearest the annuity starting date. 2010 tax deadline She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. 2010 tax deadline 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. 2010 tax deadline See Special Elections, later. 2010 tax deadline Joint and survivor annuities. 2010 tax deadline   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. 2010 tax deadline To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. 2010 tax deadline If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. 2010 tax deadline See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. 2010 tax deadline Example. 2010 tax deadline John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. 2010 tax deadline At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. 2010 tax deadline The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. 2010 tax deadline 0 Expected return $132,000 Different payments to survivor. 2010 tax deadline   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. 2010 tax deadline Example 1. 2010 tax deadline Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. 2010 tax deadline If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. 2010 tax deadline 0 Multiple for Gerald, age 70 (from Table V)   16. 2010 tax deadline 0 Difference: Multiple applicable to Mary   6. 2010 tax deadline 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. 2010 tax deadline 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. 2010 tax deadline 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. 2010 tax deadline Your husband died while still employed. 2010 tax deadline Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. 2010 tax deadline Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. 2010 tax deadline You were 50 years old at the annuity starting date. 2010 tax deadline Marie was 16 and Jean was 14. 2010 tax deadline Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. 2010 tax deadline 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. 2010 tax deadline 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. 2010 tax deadline 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. 2010 tax deadline Computation Under the General Rule Note. 2010 tax deadline Variable annuities use a different computation for determining the exclusion amounts. 2010 tax deadline See Variable annuities later. 2010 tax deadline Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. 2010 tax deadline   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. 2010 tax deadline See Death benefit exclusion , earlier. 2010 tax deadline Step 2. 2010 tax deadline   Figure your expected return. 2010 tax deadline Step 3. 2010 tax deadline   Divide Step 1 by Step 2 and round to three decimal places. 2010 tax deadline This will give you the exclusion percentage. 2010 tax deadline Step 4. 2010 tax deadline   Multiply the exclusion percentage by the first regular periodic payment. 2010 tax deadline The result is the tax-free part of each pension or annuity payment. 2010 tax deadline   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. 2010 tax deadline However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. 2010 tax deadline   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. 2010 tax deadline Step 5. 2010 tax deadline   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. 2010 tax deadline This will give you the tax-free part of the total payment for the year. 2010 tax deadline    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. 2010 tax deadline This fractional amount is multiplied by your exclusion percentage to get the tax-free part. 2010 tax deadline Step 6. 2010 tax deadline   Subtract the tax-free part from the total payment you received. 2010 tax deadline The rest is the taxable part of your pension or annuity. 2010 tax deadline Example 1. 2010 tax deadline You purchased an annuity with an investment in the contract of $10,800. 2010 tax deadline Under its terms, the annuity will pay you $100 a month for life. 2010 tax deadline The multiple for your age (age 65) is 20. 2010 tax deadline 0 as shown in Table V. 2010 tax deadline Your expected return is $24,000 (20 × 12 × $100). 2010 tax deadline Your cost of $10,800, divided by your expected return of $24,000, equals 45. 2010 tax deadline 0%. 2010 tax deadline This is the percentage you will not have to include in income. 2010 tax deadline Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. 2010 tax deadline If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). 2010 tax deadline Example 2. 2010 tax deadline Gerald bought a joint and survivor annuity. 2010 tax deadline Gerald's investment in the contract is $62,712 and the expected return is $121,200. 2010 tax deadline The exclusion percentage is 51. 2010 tax deadline 7% ($62,712 ÷ $121,200). 2010 tax deadline Gerald will receive $500 a month ($6,000 a year). 2010 tax deadline Each year, until his net cost is recovered, $3,102 (51. 2010 tax deadline 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. 2010 tax deadline If Gerald dies, his wife will receive $350 a month ($4,200 a year). 2010 tax deadline If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. 2010 tax deadline 7%). 2010 tax deadline Each year, until the entire net cost is recovered, his wife will receive $2,171. 2010 tax deadline 40 (51. 2010 tax deadline 7% of her payments received of $4,200) tax free. 2010 tax deadline She will include $2,028. 2010 tax deadline 60 ($4,200 − $2,171. 2010 tax deadline 40) in her income tax return. 2010 tax deadline Example 3. 2010 tax deadline Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. 2010 tax deadline Your two daughters each receive annual annuities of $1,800 until they reach age 18. 2010 tax deadline Your husband contributed $25,576 to the plan. 2010 tax deadline You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. 2010 tax deadline Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. 2010 tax deadline The exclusion percentage of 18. 2010 tax deadline 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. 2010 tax deadline Each full year $864 (18. 2010 tax deadline 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. 2010 tax deadline Each year, until age 18, $324 (18. 2010 tax deadline 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. 2010 tax deadline Part-year payments. 2010 tax deadline   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. 2010 tax deadline   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. 2010 tax deadline For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. 2010 tax deadline   If you received a fractional payment, follow Step 5, discussed earlier. 2010 tax deadline This gives you the tax-free part of your total payment. 2010 tax deadline Example. 2010 tax deadline On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. 2010 tax deadline The applicable multiple from Table V is 23. 2010 tax deadline 3 (age 61). 2010 tax deadline Her expected return is $34,950 ($125 × 12 × 23. 2010 tax deadline 3). 2010 tax deadline Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. 2010 tax deadline 1%. 2010 tax deadline Each payment received will consist of 63. 2010 tax deadline 1% return of cost and 36. 2010 tax deadline 9% taxable income, until her net cost of the contract is fully recovered. 2010 tax deadline During the first year, Mary received three payments of $125, or $375, of which $236. 2010 tax deadline 63 (63. 2010 tax deadline 1% × $375) is a return of cost. 2010 tax deadline The remaining $138. 2010 tax deadline 37 is included in income. 2010 tax deadline Increase in annuity payments. 2010 tax deadline   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. 2010 tax deadline All increases in the installment payments are fully taxable. 2010 tax deadline   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. 2010 tax deadline 72-5(a)(5) of the regulations. 2010 tax deadline Example. 2010 tax deadline Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. 2010 tax deadline In figuring the taxable part, Joe elects to use Tables V through VIII. 2010 tax deadline The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. 2010 tax deadline His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. 2010 tax deadline 0 × $1,764 annual payment). 2010 tax deadline The exclusion percentage is $7,938 ÷ $35,280, or 22. 2010 tax deadline 5%. 2010 tax deadline During the year he received 11 monthly payments of $147, or $1,617. 2010 tax deadline Of this amount, 22. 2010 tax deadline 5% × $147 × 11 ($363. 2010 tax deadline 83) is tax free as a return of cost and the balance of $1,253. 2010 tax deadline 17 is taxable. 2010 tax deadline Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). 2010 tax deadline The tax-free part is still only 22. 2010 tax deadline 5% of the annuity payments as of the annuity starting date (22. 2010 tax deadline 5% × $147 × 12 = $396. 2010 tax deadline 90 for a full year). 2010 tax deadline The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. 2010 tax deadline Variable annuities. 2010 tax deadline   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. 2010 tax deadline   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. 2010 tax deadline If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. 2010 tax deadline Example. 2010 tax deadline Frank purchased a variable annuity at age 65. 2010 tax deadline The total cost of the contract was $12,000. 2010 tax deadline The annuity starting date is January 1 of the year of purchase. 2010 tax deadline His annuity will be paid, starting July 1, in variable annual installments for his life. 2010 tax deadline The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. 2010 tax deadline   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. 2010 tax deadline Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. 2010 tax deadline The result is added to the previously figured periodic tax-free part. 2010 tax deadline The sum is the amount of each future payment that will be tax free. 2010 tax deadline Example. 2010 tax deadline Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. 2010 tax deadline Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. 2010 tax deadline Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. 2010 tax deadline 00 Amount received in second year 500. 2010 tax deadline 00 Difference $100. 2010 tax deadline 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. 2010 tax deadline 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. 2010 tax deadline 4) $5. 2010 tax deadline 43 Revised annual tax-free part for third and later years ($600 + $5. 2010 tax deadline 43) $605. 2010 tax deadline 43 Amount taxable in third year ($1,200 − $605. 2010 tax deadline 43) $594. 2010 tax deadline 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. 2010 tax deadline 72–4(d)(3) of the Income Tax Regulations. 2010 tax deadline The statement must also show the following information: The annuity starting date and your age on that date. 2010 tax deadline The first day of the first period for which you received an annuity payment in the current year. 2010 tax deadline Your investment in the contract as originally figured. 2010 tax deadline The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. 2010 tax deadline Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. 2010 tax deadline Exclusion limited to net cost. 2010 tax deadline   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). 2010 tax deadline This is the unrecovered investment in the contract as of the annuity starting date. 2010 tax deadline   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2010 tax deadline This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2010 tax deadline Example 1. 2010 tax deadline Your annuity starting date is after 1986. 2010 tax deadline Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. 2010 tax deadline There is no refund feature. 2010 tax deadline Your monthly annuity payment is $833. 2010 tax deadline 33. 2010 tax deadline Your exclusion ratio is 12% and you exclude $100 a month. 2010 tax deadline Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. 2010 tax deadline Thereafter, your annuity payments are fully taxable. 2010 tax deadline Example 2. 2010 tax deadline The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. 2010 tax deadline The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. 2010 tax deadline The exclusion ratio is 10. 2010 tax deadline 8%, and your monthly exclusion is $90. 2010 tax deadline After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). 2010 tax deadline An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. 2010 tax deadline Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. 2010 tax deadline Exclusion not limited to net cost. 2010 tax deadline   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. 2010 tax deadline If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. 2010 tax deadline The total exclusion may be more than your investment in the contract. 2010 tax deadline How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. 2010 tax deadline Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. 2010 tax deadline These tables correspond to the old Tables I through IV. 2010 tax deadline In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. 2010 tax deadline If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. 2010 tax deadline However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). 2010 tax deadline Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. 2010 tax deadline Contributions made both before July 1986 and after June 1986. 2010 tax deadline   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. 2010 tax deadline (See the examples below. 2010 tax deadline )    Making the election. 2010 tax deadline Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. 2010 tax deadline 72–6 of the Income Tax Regulations. 2010 tax deadline ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. 2010 tax deadline   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. 2010 tax deadline You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. 2010 tax deadline    Advantages of election. 2010 tax deadline In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. 2010 tax deadline    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. 2010 tax deadline If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. 2010 tax deadline   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. 2010 tax deadline Example 1. 2010 tax deadline Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. 2010 tax deadline Payment of the $42,000 contribution is guaranteed under a refund feature. 2010 tax deadline Bill is 55 years old as of the annuity starting date. 2010 tax deadline For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. 2010 tax deadline       Pre- July 1986   Post- June 1986 A. 2010 tax deadline Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. 2010 tax deadline of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. 2010 tax deadline Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. 2010 tax deadline Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. 2010 tax deadline 7   28. 2010 tax deadline 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. 2010 tax deadline Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . 2010 tax deadline 079   . 2010 tax deadline 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). 2010 tax deadline The taxable part of his annuity is $22,080 ($24,000 minus $1,920). 2010 tax deadline If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). 2010 tax deadline Example 2. 2010 tax deadline Al is age 62 at his nearest birthday to the annuity starting date. 2010 tax deadline Al's wife is age 60 at her nearest birthday to the annuity starting date. 2010 tax deadline The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. 2010 tax deadline The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. 2010 tax deadline Al makes the election described in Example 1 . 2010 tax deadline For purposes of this example, assume the refund feature adjustment is zero. 2010 tax deadline If an adjustment is required, IRS will figure the amount. 2010 tax deadline See Requesting a Ruling on Taxation of Annuity near the end of this publication. 2010 tax deadline       Pre-  July 1986   Post-  June 1986 A. 2010 tax deadline Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. 2010 tax deadline Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. 2010 tax deadline Expected return         1) Multiple for both annuitants from Tables II and VI 25. 2010 tax deadline 4   28. 2010 tax deadline 8   2) Multiple for first annuitant from Tables I and V 16. 2010 tax deadline 9   22. 2010 tax deadline 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. 2010 tax deadline 5   6. 2010 tax deadline 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. 2010 tax deadline Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . 2010 tax deadline 209   . 2010 tax deadline 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). 2010 tax deadline The taxable part of his annuity is $9,216 ($12,000 − $2,784). 2010 tax deadline The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. 2010 tax deadline After Al's death, his widow will apply the same exclusion percentages (20. 2010 tax deadline 9% and 2. 2010 tax deadline 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. 2010 tax deadline Annuity received after June 30, 1986. 2010 tax deadline   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. 2010 tax deadline Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. 2010 tax deadline    Make the election by attaching the following statement to your income tax return. 2010 tax deadline    “I elect, under section 1. 2010 tax deadline 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. 2010 tax deadline ”   The statement must also include your name, address, and social security number. 2010 tax deadline   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. 2010 tax deadline Disqualifying form of payment or settlement. 2010 tax deadline   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. 2010 tax deadline See regulations section 1. 2010 tax deadline 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. 2010 tax deadline You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. 2010 tax deadline Worksheets for Determining Taxable Annuity Worksheets I and II. 2010 tax deadline   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. 2010 tax deadline 72–6(d)(6) Election. 2010 tax deadline Worksheet I For Determining Taxable Annuity Under Regulations Section 1. 2010 tax deadline 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. 2010 tax deadline   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. 2010 tax deadline )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. 2010 tax deadline If not, the IRS will calculate the refund feature percentage. 2010 tax deadline             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. 2010 tax deadline   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. 2010 tax deadline   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. 2010 tax deadline   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. 2010 tax deadline     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. 2010 tax deadline 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. 2010 tax deadline   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. 2010 tax deadline )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. 2010 tax deadline If not, the IRS will calculate the refund feature percentage. 2010 tax deadline             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. 2010 tax deadline   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. 2010 tax deadline   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. 2010 tax deadline Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. 2010 tax deadline   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. 2010 tax deadline   Actuarial Tables Please click here for the text description of the image. 2010 tax deadline Actuarial Tables Please click here 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User fee. 2010 tax deadline   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. 2010 tax deadline You should call the IRS for the proper fee. 2010 tax deadline A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. 2010 tax deadline Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. 2010 tax deadline O. 2010 tax deadline Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. 2010 tax deadline When to make the request. 2010 tax deadline   Please note that requests sent between February 1 and April 15 may experience some delay. 2010 tax deadline We process requests in the order received, and we will reply to your request as soon as we can process it. 2010 tax deadline If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. 2010 tax deadline S. 2010 tax deadline Individual Income Tax Return, to get an extension of time to file. 2010 tax deadline Information you must furnish. 2010 tax deadline   You must furnish the information listed below so the IRS can comply with your request. 2010 tax deadline Failure to furnish the information will result in a delay in processing your request. 2010 tax deadline Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. 2010 tax deadline Copies of any documents showing distributions, annuity rates, and annuity options available to you. 2010 tax deadline A copy of any Form 1099–R you received since your annuity began. 2010 tax deadline A statement indicating whether you have filed your return for the year for which you are making the request. 2010 tax deadline If you have requested an extension of time to file that return, please indicate the extension date. 2010 tax deadline Your daytime phone number. 2010 tax deadline Your current mailing address. 2010 tax deadline A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. 2010 tax deadline Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. 2010 tax deadline A completed Tax Information Sheet (or facsimile) shown on the next page. 2010 tax deadline Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. 2010 tax deadline This statement must be signed by the retiree or the survivor annuitant. 2010 tax deadline It cannot be signed by a representative. 2010 tax deadline Tax Information Sheet Please click here for the text description of the image. 2010 tax deadline Tax Information Sheet Please click here for the text description of the image. 2010 tax deadline Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 2010 tax deadline Free help with your tax return. 2010 tax deadline   You can get free help preparing your return nationwide from IRS-certified volunteers. 2010 tax deadline The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 2010 tax deadline The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2010 tax deadline Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2010 tax deadline In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 2010 tax deadline To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 2010 tax deadline gov, download the IRS2Go app, or call 1-800-906-9887. 2010 tax deadline   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2010 tax deadline To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2010 tax deadline aarp. 2010 tax deadline org/money/taxaide or call 1-888-227-7669. 2010 tax deadline For more information on these programs, go to IRS. 2010 tax deadline gov and enter “VITA” in the search box. 2010 tax deadline Internet. 2010 tax deadline    IRS. 2010 tax deadline gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 2010 tax deadline Download the free IRS2Go app from the iTunes app store or from Google Play. 2010 tax deadline Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 2010 tax deadline Check the status of your 2013 refund with the Where's My Refund? application on IRS. 2010 tax deadline gov or download the IRS2Go app and select the Refund Status option. 2010 tax deadline The IRS issues more than 9 out of 10 refunds in less than 21 days. 2010 tax deadline Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 2010 tax deadline You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2010 tax deadline The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2010 tax deadline Use the Interactive Tax Assistant (ITA) to research your tax questions. 2010 tax deadline No need to wait on the phone or stand in line. 2010 tax deadline The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 2010 tax deadline When you reach the response screen, you can print the entire interview and the final response for your records. 2010 tax deadline New subject areas are added on a regular basis. 2010 tax deadline  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 2010 tax deadline gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 2010 tax deadline You can use the IRS Tax Map, to search publications and instructions by topic or keyword. 2010 tax deadline The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 2010 tax deadline When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 2010 tax deadline Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 2010 tax deadline You can also ask the IRS to mail a return or an account transcript to you. 2010 tax deadline Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 2010 tax deadline gov or by calling 1-800-908-9946. 2010 tax deadline Tax return and tax account transcripts are generally available for the current year and the past three years. 2010 tax deadline Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 2010 tax deadline Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 2010 tax deadline If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 2010 tax deadline Check the status of your amended return using Where's My Amended Return? Go to IRS. 2010 tax deadline gov and enter Where's My Amended Return? in the search box. 2010 tax deadline You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2010 tax deadline It can take up to 3 weeks from the date you mailed it to show up in our system. 2010 tax deadline Make a payment using one of several safe and convenient electronic payment options available on IRS. 2010 tax deadline gov. 2010 tax deadline Select the Payment tab on the front page of IRS. 2010 tax deadline gov for more information. 2010 tax deadline Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 2010 tax deadline Figure your income tax withholding with the IRS Withholding Calculator on IRS. 2010 tax deadline gov. 2010 tax deadline Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 2010 tax deadline Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 2010 tax deadline gov. 2010 tax deadline Request an Electronic Filing PIN by going to IRS. 2010 tax deadline gov and entering Electronic Filing PIN in the search box. 2010 tax deadline Download forms, instructions and publications, including accessible versions for people with disabilities. 2010 tax deadline Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 2010 tax deadline gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 2010 tax deadline An employee can answer questions about your tax account or help you set up a payment plan. 2010 tax deadline Before you visit, check the Office Locator on IRS. 2010 tax deadline gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 2010 tax deadline If you have a special need, such as a disability, you can request an appointment. 2010 tax deadline Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 2010 tax deadline Apply for an Employer Identification Number (EIN). 2010 tax deadline Go to IRS. 2010 tax deadline gov and enter Apply for an EIN in the search box. 2010 tax deadline Read the Internal Revenue Code, regulations, or other official guidance. 2010 tax deadline Read Internal Revenue Bulletins. 2010 tax deadline Sign up to receive local and national tax news and more by email. 2010 tax deadline Just click on “subscriptions” above the search box on IRS. 2010 tax deadline gov and choose from a variety of options. 2010 tax deadline    Phone. 2010 tax deadline You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 2010 tax deadline Download the free IRS2Go app from the iTunes app store or from Google Play. 2010 tax deadline Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. 2010 tax deadline gov, or download the IRS2Go app. 2010 tax deadline Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 2010 tax deadline The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2010 tax deadline Mos