Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

2011 1040ez

Turbotax Free EditionFiling Previous Year TaxesWhere Can I File My State Taxes Online For FreeIrs 1040ez Form 2011Find 1040ez Irs Form 20102010 Tax TablesMyfreetaxes Com Maine2012 Federal Tax Forms 1040Free 2012 Tax Software DownloadAmend A ReturnFederal Tax Return 20121040ez Tax Form 2012Ohio 1040x2010 Tax Tables1040x Electronic Filing1040ez FormHow Much Do Students Get Back In TaxesFree State Tax ReturnsWww Military ComFree State Tax Filing Only State ReturnsWww Irs Gov Amended Tax Return1040ez 2013Free Federal Tax Return1040ez Tax ReturnTurbo Tax MilitaryTurbo Tax For StudentsStudent Tax Returns2013 1040 EzE File State Taxes Only1040x Form DownloadHow To File 1040xTax Return Amendment Form1040a Tax Form For 20121040ez 2012 Tax FormH&r Block Online Tax FilingTaxslayer Free For MilitaryMy Free Taxes ComStudent TaxExtension FormFile 2006 Federal Taxes Free

2011 1040ez

2011 1040ez Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. 2011 1040ez Stock. 2011 1040ez Options. 2011 1040ez Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). 2011 1040ez What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. 2011 1040ez Fair market value. 2011 1040ez   Fair market value (FMV) is the price that property would sell for on the open market. 2011 1040ez It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. 2011 1040ez If you put a restriction on the use of property you donate, the FMV must reflect that restriction. 2011 1040ez Example 1. 2011 1040ez If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. 2011 1040ez Usually, such items are worth far less than what you paid for them. 2011 1040ez Example 2. 2011 1040ez If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. 2011 1040ez Factors. 2011 1040ez   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. 2011 1040ez These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. 2011 1040ez   These factors are discussed later. 2011 1040ez Also, see Table 1 for a summary of questions to ask as you consider each factor. 2011 1040ez Date of contribution. 2011 1040ez   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. 2011 1040ez Stock. 2011 1040ez   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. 2011 1040ez If the certificate is mailed and received through the regular mail, it is the date of mailing. 2011 1040ez If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. 2011 1040ez Options. 2011 1040ez   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. 2011 1040ez The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. 2011 1040ez Example. 2011 1040ez You grant an option to a local university, which is a qualified organization, to buy real property. 2011 1040ez Under the option, the university could buy the property at any time during a 2-year period for $40,000. 2011 1040ez The FMV of the property on the date the option is granted is $50,000. 2011 1040ez In the following tax year, the university exercises the option. 2011 1040ez The FMV of the property on the date the option is exercised is $55,000. 2011 1040ez Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. 2011 1040ez Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. 2011 1040ez Usually it is not that simple. 2011 1040ez Using such formulas, etc. 2011 1040ez , seldom results in an acceptable determination of FMV. 2011 1040ez There is no single formula that always applies when determining the value of property. 2011 1040ez This is not to say that a valuation is only guesswork. 2011 1040ez You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. 2011 1040ez For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. 2011 1040ez When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. 2011 1040ez On the other hand, it may be an antique, the value of which could not be determined by using any formula. 2011 1040ez Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. 2011 1040ez However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. 2011 1040ez The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. 2011 1040ez Example. 2011 1040ez Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. 2011 1040ez The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. 2011 1040ez The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. 2011 1040ez Tom gave the gems to a qualified charity 13 months after buying them. 2011 1040ez The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. 2011 1040ez The best evidence of FMV depends on actual transactions and not on some artificial estimate. 2011 1040ez The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. 2011 1040ez Terms of the purchase or sale. 2011 1040ez   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. 2011 1040ez These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. 2011 1040ez Rate of increase or decrease in value. 2011 1040ez   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. 2011 1040ez For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. 2011 1040ez Example. 2011 1040ez Bill Brown bought a painting for $10,000. 2011 1040ez Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. 2011 1040ez The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. 2011 1040ez Arm's-length offer. 2011 1040ez   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. 2011 1040ez To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. 2011 1040ez Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. 2011 1040ez Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. 2011 1040ez The weight to be given to each sale depends on the following. 2011 1040ez The degree of similarity between the property sold and the donated property. 2011 1040ez The time of the sale—whether it was close to the valuation date. 2011 1040ez The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. 2011 1040ez The conditions of the market in which the sale was made—whether unusually inflated or deflated. 2011 1040ez The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. 2011 1040ez Example 1. 2011 1040ez Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. 2011 1040ez The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. 2011 1040ez The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. 2011 1040ez Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. 2011 1040ez At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. 2011 1040ez The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. 2011 1040ez Example 2. 2011 1040ez The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. 2011 1040ez The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. 2011 1040ez The principal and interest on the note would not be due for 12 years. 2011 1040ez According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. 2011 1040ez She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. 2011 1040ez At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. 2011 1040ez The difference between the two prices was solely at the discretion of the buyer. 2011 1040ez The promoter was a willing seller for $10,000. 2011 1040ez Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. 2011 1040ez Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. 2011 1040ez However, there must be a reasonable relationship between the replacement cost and the FMV. 2011 1040ez The replacement cost is the amount it would cost to replace the donated item on the valuation date. 2011 1040ez Often there is no relationship between the replacement cost and the FMV. 2011 1040ez If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. 2011 1040ez To determine the replacement cost of the donated property, find the “estimated replacement cost new. 2011 1040ez ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. 2011 1040ez You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. 2011 1040ez ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. 2011 1040ez For an expert's opinion to deserve much weight, the facts must support the opinion. 2011 1040ez For additional information, see Appraisals, later. 2011 1040ez Table 1. 2011 1040ez Factors That Affect FMV IF the factor you are considering is. 2011 1040ez . 2011 1040ez . 2011 1040ez THEN you should ask these questions. 2011 1040ez . 2011 1040ez . 2011 1040ez     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. 2011 1040ez Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. 2011 1040ez When you rely on sales of comparable property, the sales must have been made in an open market. 2011 1040ez If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. 2011 1040ez For example, liquidation sale prices usually do not indicate the FMV. 2011 1040ez Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. 2011 1040ez Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. 2011 1040ez However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. 2011 1040ez The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. 2011 1040ez Example. 2011 1040ez You give a rare, old book to your former college. 2011 1040ez The book is a third edition and is in poor condition because of a missing back cover. 2011 1040ez You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. 2011 1040ez Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. 2011 1040ez Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. 2011 1040ez Future Events You may not consider unexpected events happening after your donation of property in making the valuation. 2011 1040ez You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. 2011 1040ez Example. 2011 1040ez You give farmland to a qualified charity. 2011 1040ez The transfer provides that your mother will have the right to all income and full use of the property for her life. 2011 1040ez Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. 2011 1040ez You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. 2011 1040ez Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. 2011 1040ez Example. 2011 1040ez You give all your rights in a successful patent to your favorite charity. 2011 1040ez Your records show that before the valuation date there were three stages in the patent's history of earnings. 2011 1040ez First, there was rapid growth in earnings when the invention was introduced. 2011 1040ez Then, there was a period of high earnings when the invention was being exploited. 2011 1040ez Finally, there was a decline in earnings when competing inventions were introduced. 2011 1040ez The entire history of earnings may be relevant in estimating the future earnings. 2011 1040ez However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. 2011 1040ez The market conditions at those times do not represent the condition of the market at the valuation date. 2011 1040ez What is most significant is the trend of decline in earnings up to the valuation date. 2011 1040ez For more information about donations of patents, see Patents, later. 2011 1040ez Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. 2011 1040ez For information on appraisals, see Appraisals, later. 2011 1040ez Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. 2011 1040ez Such used property may have little or no market value because of its worn condition. 2011 1040ez It may be out of style or no longer useful. 2011 1040ez You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. 2011 1040ez A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2011 1040ez See Deduction over $500 for certain clothing or household items, later. 2011 1040ez If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. 2011 1040ez Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. 2011 1040ez Valuation of items of clothing does not lend itself to fixed formulas or methods. 2011 1040ez The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. 2011 1040ez You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. 2011 1040ez An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2011 1040ez See Deduction over $500 for certain clothing or household items, later. 2011 1040ez For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. 2011 1040ez Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. 2011 1040ez The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. 2011 1040ez If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. 2011 1040ez The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. 2011 1040ez Sentimental personal value has no effect on FMV. 2011 1040ez But if the jewelry was owned by a famous person, its value might increase. 2011 1040ez Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. 2011 1040ez Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. 2011 1040ez Art valued at $20,000 or more. 2011 1040ez   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. 2011 1040ez For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. 2011 1040ez Art valued at $50,000 or more. 2011 1040ez   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. 2011 1040ez You must request the statement before filing the tax return that reports the donation. 2011 1040ez Your request must include the following. 2011 1040ez A copy of a qualified appraisal of the item. 2011 1040ez See Qualified Appraisal, later. 2011 1040ez A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. 2011 1040ez Add $250 for each item in excess of three. 2011 1040ez A completed Form 8283, Section B. 2011 1040ez The location of the IRS territory that has examination responsibility for your return. 2011 1040ez If your request lacks essential information, you will be notified and given 30 days to provide the missing information. 2011 1040ez   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. 2011 1040ez O. 2011 1040ez Box 27720 McPherson Station Washington, DC 20038 Refunds. 2011 1040ez   You can withdraw your request for a Statement of Value at any time before it is issued. 2011 1040ez However, the IRS will not refund the user fee if you do. 2011 1040ez   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. 2011 1040ez Authenticity. 2011 1040ez   The authenticity of the donated art must be determined by the appraiser. 2011 1040ez Physical condition. 2011 1040ez   Important items in the valuation of antiques and art are physical condition and extent of restoration. 2011 1040ez These have a significant effect on the value and must be fully reported in an appraisal. 2011 1040ez An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. 2011 1040ez Art appraisers. 2011 1040ez   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. 2011 1040ez Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. 2011 1040ez Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. 2011 1040ez They can report more recent comparable sales to support their opinion. 2011 1040ez   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. 2011 1040ez It lists museums both by state and by category. 2011 1040ez   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. 2011 1040ez The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. 2011 1040ez You may be able to find a qualified appraiser on the Internet. 2011 1040ez You may also contact associations of dealers for guidance. 2011 1040ez Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. 2011 1040ez Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. 2011 1040ez Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. 2011 1040ez Reference material. 2011 1040ez   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. 2011 1040ez When using one of these price guides, you must use the current edition at the date of contribution. 2011 1040ez However, these sources are not always reliable indicators of FMV and should be supported by other evidence. 2011 1040ez   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. 2011 1040ez The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. 2011 1040ez The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. 2011 1040ez If you are donating a valuable collection, you should get an appraisal. 2011 1040ez If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. 2011 1040ez Stamp collections. 2011 1040ez   Most libraries have catalogs or other books that report the publisher's estimate of values. 2011 1040ez Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. 2011 1040ez Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. 2011 1040ez Coin collections. 2011 1040ez   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. 2011 1040ez Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. 2011 1040ez Another important factor is the coin's condition. 2011 1040ez For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. 2011 1040ez   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. 2011 1040ez Books. 2011 1040ez   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. 2011 1040ez This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. 2011 1040ez Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. 2011 1040ez Modest value of collection. 2011 1040ez   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. 2011 1040ez   A book that is very old, or very rare, is not necessarily valuable. 2011 1040ez There are many books that are very old or rare, but that have little or no market value. 2011 1040ez Condition of book. 2011 1040ez   The condition of a book may have a great influence on its value. 2011 1040ez Collectors are interested in items that are in fine, or at least good, condition. 2011 1040ez When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. 2011 1040ez Other factors. 2011 1040ez   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). 2011 1040ez Collectors usually want first editions of books. 2011 1040ez However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. 2011 1040ez Manuscripts, autographs, diaries, and similar items. 2011 1040ez   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. 2011 1040ez The writings of unknowns also may be of value if they are of unusual historical or literary importance. 2011 1040ez Determining the value of such material is difficult. 2011 1040ez For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. 2011 1040ez The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. 2011 1040ez Signatures. 2011 1040ez   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. 2011 1040ez But complete sets of the signatures of U. 2011 1040ez S. 2011 1040ez presidents are in demand. 2011 1040ez Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. 2011 1040ez Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. 2011 1040ez Prices are reported for each make, model, and year. 2011 1040ez These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 2011 1040ez The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. 2011 1040ez But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 2011 1040ez These publications are sometimes available from public libraries or at a bank, credit union, or finance company. 2011 1040ez You can also find pricing information about used cars on the Internet. 2011 1040ez An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. 2011 1040ez However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. 2011 1040ez The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. 2011 1040ez Example. 2011 1040ez You donate a used car in poor condition to a local high school for use by students studying car repair. 2011 1040ez A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 2011 1040ez However, the guide shows the price for a private party sale of the car is only $750. 2011 1040ez The FMV of the car is considered to be no more than $750. 2011 1040ez Boats. 2011 1040ez   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. 2011 1040ez More information. 2011 1040ez   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. 2011 1040ez This rule applies if the claimed value of the donated vehicle is more than $500. 2011 1040ez In certain cases, you can deduct the vehicle's FMV. 2011 1040ez For details, see Publication 526. 2011 1040ez Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. 2011 1040ez For more information, see Publication 526. 2011 1040ez Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. 2011 1040ez However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. 2011 1040ez Generally, this means your deduction is the lesser of the property's FMV or its basis. 2011 1040ez For details, see Publication 526. 2011 1040ez Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. 2011 1040ez See Date of contribution, earlier, under What Is Fair Market Value (FMV). 2011 1040ez Selling prices on valuation date. 2011 1040ez   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. 2011 1040ez For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. 2011 1040ez You get the average price by adding $11 and $9 and dividing the sum by 2. 2011 1040ez No sales on valuation date. 2011 1040ez   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. 2011 1040ez Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. 2011 1040ez Example. 2011 1040ez   On the day you gave stock to a qualified organization, there were no sales of the stock. 2011 1040ez Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. 2011 1040ez The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. 2011 1040ez   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. 2011 1040ez This applies if these prices are published in a generally available listing or publication of general circulation. 2011 1040ez If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. 2011 1040ez See also Unavailable prices or closely held corporation, later. 2011 1040ez Bid and asked prices on valuation date. 2011 1040ez   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. 2011 1040ez Example. 2011 1040ez Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. 2011 1040ez The FMV is $15, the average price between the bid and asked prices. 2011 1040ez No prices on valuation date. 2011 1040ez   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. 2011 1040ez Both dates must be within a reasonable period. 2011 1040ez Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. 2011 1040ez Example. 2011 1040ez On the day you gave stock to a qualified organization, no prices were available. 2011 1040ez Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. 2011 1040ez The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. 2011 1040ez   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. 2011 1040ez Large blocks of stock. 2011 1040ez   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. 2011 1040ez On the other hand, market forces may exist that will afford higher prices for large blocks of stock. 2011 1040ez Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. 2011 1040ez Unavailable prices or closely held corporation. 2011 1040ez   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. 2011 1040ez For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. 2011 1040ez For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. 2011 1040ez Other factors. 2011 1040ez   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. 2011 1040ez For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. 2011 1040ez   You should keep complete financial and other information on which the valuation is based. 2011 1040ez This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. 2011 1040ez Restricted securities. 2011 1040ez   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. 2011 1040ez These restricted securities usually trade at a discount in relation to freely traded securities. 2011 1040ez   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. 2011 1040ez Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. 2011 1040ez The appraiser must be thoroughly trained in the application of appraisal principles and theory. 2011 1040ez In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. 2011 1040ez The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. 2011 1040ez The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. 2011 1040ez In general, there are three main approaches to the valuation of real estate. 2011 1040ez An appraisal may require the combined use of two or three methods rather than one method only. 2011 1040ez 1. 2011 1040ez Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. 2011 1040ez The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. 2011 1040ez If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. 2011 1040ez , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. 2011 1040ez For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. 2011 1040ez The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. 2011 1040ez Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. 2011 1040ez Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. 2011 1040ez 2. 2011 1040ez Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. 2011 1040ez The key elements are the determination of the income to be capitalized and the rate of capitalization. 2011 1040ez 3. 2011 1040ez Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. 2011 1040ez Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. 2011 1040ez Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. 2011 1040ez Generally, this method serves to support the value determined from other methods. 2011 1040ez When the replacement cost method is applied to improved realty, the land and improvements are valued separately. 2011 1040ez The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. 2011 1040ez This cost represents the total cost of labor and material, overhead, and profit. 2011 1040ez After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. 2011 1040ez Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. 2011 1040ez The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. 2011 1040ez The value of the goodwill of the business should also be taken into consideration. 2011 1040ez You should keep complete financial and other information on which you base the valuation. 2011 1040ez This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. 2011 1040ez Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. 2011 1040ez The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. 2011 1040ez To determine present value, you must know the applicable interest rate and use actuarial tables. 2011 1040ez Interest rate. 2011 1040ez   The applicable interest rate varies. 2011 1040ez It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. 2011 1040ez The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. 2011 1040ez You can call the IRS office at 1-800-829-1040 to obtain this rate. 2011 1040ez Actuarial tables. 2011 1040ez   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. 2011 1040ez   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). 2011 1040ez Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. 2011 1040ez For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. 2011 1040ez   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. 2011 1040ez Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. 2011 1040ez You can download Publications 1457 and 1458 from www. 2011 1040ez irs. 2011 1040ez gov. 2011 1040ez In addition, they are available for purchase via the website of the U. 2011 1040ez S. 2011 1040ez Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. 2011 1040ez O. 2011 1040ez Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. 2011 1040ez 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. 2011 1040ez 664-4(e), and other transfers in Regulation 20. 2011 1040ez 2031-7(d)(6). 2011 1040ez Special factors. 2011 1040ez   If you need a special factor for an actual transaction, you can request a letter ruling. 2011 1040ez Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. 2011 1040ez Also include copies of the relevant instruments. 2011 1040ez IRS charges a user fee for providing special factors. 2011 1040ez   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. 2011 1040ez R. 2011 1040ez B. 2011 1040ez 1. 2011 1040ez Revenue Procedure 2006-1 is available at www. 2011 1040ez irs. 2011 1040ez gov/irb/2006-01_IRB/ar06. 2011 1040ez html. 2011 1040ez   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. 2011 1040ez Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. 2011 1040ez But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. 2011 1040ez If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. 2011 1040ez Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. 2011 1040ez However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. 2011 1040ez Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. 2011 1040ez To determine this value, you must know the FMV of the property on the date of the contribution. 2011 1040ez Multiply this value by the appropriate factor. 2011 1040ez Publications 1457 and 1458 contain these factors. 2011 1040ez You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). 2011 1040ez You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. 2011 1040ez See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. 2011 1040ez You can download Publication 1459 from www. 2011 1040ez irs. 2011 1040ez gov. 2011 1040ez For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. 2011 1040ez If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. 2011 1040ez This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. 2011 1040ez Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. 2011 1040ez For more information, see section 1. 2011 1040ez 170A-12 of the Income Tax Regulations. 2011 1040ez Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. 2011 1040ez It must extend over the entire term of your interest in the property. 2011 1040ez For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. 2011 1040ez You can claim a deduction for the contribution if you do not have any other interest in the property. 2011 1040ez To figure the value of a contribution involving a partial interest, see Publication 1457. 2011 1040ez If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. 2011 1040ez Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. 2011 1040ez Qualified organization. 2011 1040ez   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. 2011 1040ez , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. 2011 1040ez The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. 2011 1040ez Conservation purposes. 2011 1040ez   Your contribution must be made only for one of the following conservation purposes. 2011 1040ez Preserving land areas for outdoor recreation by, or for the education of, the general public. 2011 1040ez Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. 2011 1040ez Preserving open space, including farmland and forest land, if it yields a significant public benefit. 2011 1040ez It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. 2011 1040ez Preserving a historically important land area or a certified historic structure. 2011 1040ez There must be some visual public access to the property. 2011 1040ez Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. 2011 1040ez Building in registered historic district. 2011 1040ez   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. 2011 1040ez The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. 2011 1040ez You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. 2011 1040ez If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. 2011 1040ez   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. 2011 1040ez See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. 2011 1040ez Qualified real property interest. 2011 1040ez   This is any of the following interests in real property. 2011 1040ez Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). 2011 1040ez A remainder interest. 2011 1040ez A restriction (granted in perpetuity) on the use that may be made of the real property. 2011 1040ez Valuation. 2011 1040ez   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. 2011 1040ez If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. 2011 1040ez If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. 2011 1040ez   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. 2011 1040ez If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. 2011 1040ez   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. 2011 1040ez If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. 2011 1040ez   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. 2011 1040ez You should also consider any zoning, conservation, or historical preservation laws that would restrict development. 2011 1040ez Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. 2011 1040ez Example. 2011 1040ez   You own 10 acres of farmland. 2011 1040ez Similar land in the area has an FMV of $2,000 an acre. 2011 1040ez However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. 2011 1040ez Your county wants to preserve open space and prevent further development in your area. 2011 1040ez   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. 2011 1040ez The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. 2011 1040ez More information. 2011 1040ez   For more information about qualified conservation contributions, see Publication 526. 2011 1040ez Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. 2011 1040ez (There is one exception, described next, for certain clothing and household items. 2011 1040ez ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. 2011 1040ez There are exceptions. 2011 1040ez See Deductions of More Than $5,000, later. 2011 1040ez The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. 2011 1040ez An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. 2011 1040ez The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. 2011 1040ez The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. 2011 1040ez The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. 2011 1040ez All facts associated with the donation must be considered. 2011 1040ez Deduction over $500 for certain clothing or household items. 2011 1040ez   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. 2011 1040ez See Household Goods and Used Clothing, earlier. 2011 1040ez Cost of appraisals. 2011 1040ez   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. 2011 1040ez However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. 2011 1040ez Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. 2011 1040ez There are exceptions, discussed later. 2011 1040ez You should keep the appraiser's report with your written records. 2011 1040ez Records are discussed in Publication 526. 2011 1040ez The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. 2011 1040ez For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. 2011 1040ez You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. 2011 1040ez Exceptions. 2011 1040ez   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. 2011 1040ez   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. 2011 1040ez Publicly traded securities. 2011 1040ez   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. 2011 1040ez Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. 2011 1040ez   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. 2011 1040ez   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. 2011 1040ez A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. 2011 1040ez   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. 2011 1040ez Bid and asked quotations are not taken into account. 2011 1040ez   The computation period is weekly during October through December and monthly during January through September. 2011 1040ez The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. 2011 1040ez Nonpublicly traded stock. 2011 1040ez   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. 2011 1040ez However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. 2011 1040ez Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. 2011 1040ez This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. 2011 1040ez If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. 2011 1040ez Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. 2011 1040ez You must also complete Form 8283, Section B, and attach it to your tax return. 2011 1040ez See Deductions of More Than $5,000, earlier. 2011 1040ez A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. 2011 1040ez 170A-13(c)(3) and Notice 2006-96, 2006-46 I. 2011 1040ez R. 2011 1040ez B. 2011 1040ez 902 (available at www. 2011 1040ez irs. 2011 1040ez gov/irb/2006-46_IRB/ar13. 2011 1040ez html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). 2011 1040ez You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. 2011 1040ez If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. 2011 1040ez Form 8283, Section B, must be attached to your tax return. 2011 1040ez Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. 2011 1040ez There are four exceptions. 2011 1040ez If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. 2011 1040ez See Paintings, Antiques, and Other Objects of Art, earlier. 2011 1040ez If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. 2011 1040ez See Deductions of More Than $500,000, earlier. 2011 1040ez If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. 2011 1040ez See Deduction over $500 for certain clothing or household items, earlier. 2011 1040ez If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. 2011 1040ez See Building in registered historic district, earlier. 2011 1040ez Prohibited appraisal fee. 2011 1040ez   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. 2011 1040ez If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. 2011 1040ez However, appraisals are not disqualified when an otherwise prohi
Print - Click this link to Print this page

CP 297 - Notice of Intent to Levy and Notice of Your Right to a Hearing

Details About This Notice:
Sample Content: Page 1, Page 2
Purpose:   We send CP 297 to notify the recipient of our intent to levy and of the their right to a hearing.
Reason for Issuance:   There is a balance due on the recipient's account we've previously asked them to pay. We're sending the notice to inform them the account is still unpaid and to notify them of our intent to levy and of their right to receive appeals consideration.
Account Balance:   Balance due
Possible Enclosures:  

Frequently Asked Questions About This Notice

Page Last Reviewed or Updated: 20-May-2013

The 2011 1040ez

2011 1040ez Publication 575 - Main Content Table of Contents General InformationPension. 2011 1040ez Annuity. 2011 1040ez Qualified employee plan. 2011 1040ez Qualified employee annuity. 2011 1040ez Designated Roth account. 2011 1040ez Tax-sheltered annuity plan. 2011 1040ez Fixed-period annuities. 2011 1040ez Annuities for a single life. 2011 1040ez Joint and survivor annuities. 2011 1040ez Variable annuities. 2011 1040ez Disability pensions. 2011 1040ez Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. 2011 1040ez Taxation of Periodic PaymentsPeriod of participation. 2011 1040ez Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. 2011 1040ez No tax withheld. 2011 1040ez Partial rollovers. 2011 1040ez Frozen deposits. 2011 1040ez Reasonable period of time. 2011 1040ez 20% Mandatory withholding. 2011 1040ez How to report. 2011 1040ez How to report. 2011 1040ez Special rule for Roth IRAs and designated Roth accounts. 2011 1040ez Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. 2011 1040ez How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. 2011 1040ez   Some of the terms used in this publication are defined in the following paragraphs. 2011 1040ez Pension. 2011 1040ez   A pension is generally a series of definitely determinable payments made to you after you retire from work. 2011 1040ez Pension payments are made regularly and are based on such factors as years of service and prior compensation. 2011 1040ez Annuity. 2011 1040ez   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. 2011 1040ez They can be either fixed (under which you receive a definite amount) or variable (not fixed). 2011 1040ez You can buy the contract alone or with the help of your employer. 2011 1040ez Qualified employee plan. 2011 1040ez   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 and that meets Internal Revenue Code requirements. 2011 1040ez It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). 2011 1040ez To determine whether your plan is a qualified plan, check with your employer or the plan administrator. 2011 1040ez Qualified employee annuity. 2011 1040ez   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. 2011 1040ez Designated Roth account. 2011 1040ez   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. 2011 1040ez Elective deferrals that are designated as Roth contributions are included in your income. 2011 1040ez However, qualified distributions (explained later) are not included in your income. 2011 1040ez You should check with your plan administrator to determine if your plan will accept designated Roth contributions. 2011 1040ez Tax-sheltered annuity plan. 2011 1040ez   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. 2011 1040ez Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. 2011 1040ez Types of pensions and annuities. 2011 1040ez   Pensions and annuities include the following types. 2011 1040ez Fixed-period annuities. 2011 1040ez   You receive definite amounts at regular intervals for a specified length of time. 2011 1040ez Annuities for a single life. 2011 1040ez   You receive definite amounts at regular intervals for life. 2011 1040ez The payments end at death. 2011 1040ez Joint and survivor annuities. 2011 1040ez   The first annuitant receives a definite amount at regular intervals for life. 2011 1040ez After he or she dies, a second annuitant receives a definite amount at regular intervals for life. 2011 1040ez The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. 2011 1040ez Variable annuities. 2011 1040ez   You receive payments that may vary in amount for a specified length of time or for life. 2011 1040ez The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. 2011 1040ez Disability pensions. 2011 1040ez   You receive disability payments because you retired on disability and have not reached minimum retirement age. 2011 1040ez More than one program. 2011 1040ez   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. 2011 1040ez If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. 2011 1040ez Also, you may be considered to have received more than one pension or annuity. 2011 1040ez Your former employer or the plan administrator should be able to tell you if you have more than one contract. 2011 1040ez Example. 2011 1040ez Your employer set up a noncontributory profit-sharing plan for its employees. 2011 1040ez The plan provides that the amount held in the account of each participant will be paid when that participant retires. 2011 1040ez Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. 2011 1040ez The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. 2011 1040ez Under the pension plan, however, a formula determines the amount of the pension benefits. 2011 1040ez The amount of contributions is the amount necessary to provide that pension. 2011 1040ez Each plan is a separate program and a separate contract. 2011 1040ez If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. 2011 1040ez Distributions from a designated Roth account are treated separately from other distributions from the plan. 2011 1040ez Qualified domestic relations order (QDRO). 2011 1040ez   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. 2011 1040ez The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. 2011 1040ez A QDRO may not award an amount or form of benefit that is not available under the plan. 2011 1040ez   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. 2011 1040ez The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. 2011 1040ez The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. 2011 1040ez The denominator is the present value of all benefits payable to the participant. 2011 1040ez   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. 2011 1040ez Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. 2011 1040ez For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. 2011 1040ez Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. 2011 1040ez The earnings are not taxed until distributed either in a withdrawal or in annuity payments. 2011 1040ez The taxable part of a distribution is treated as ordinary income. 2011 1040ez Net investment income tax. 2011 1040ez   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). 2011 1040ez For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. 2011 1040ez For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. 2011 1040ez Withdrawals. 2011 1040ez   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. 2011 1040ez The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. 2011 1040ez   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). 2011 1040ez However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. 2011 1040ez To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). 2011 1040ez   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. 2011 1040ez   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. 2011 1040ez The rest is taxable. 2011 1040ez   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. 2011 1040ez If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. 2011 1040ez Annuity payments. 2011 1040ez   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. 2011 1040ez For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. 2011 1040ez For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. 2011 1040ez For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. 2011 1040ez Death benefits. 2011 1040ez    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. 2011 1040ez If you choose to receive an annuity, the payments are subject to tax as described above. 2011 1040ez If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. 2011 1040ez See Survivors and Beneficiaries , later. 2011 1040ez Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. 2011 1040ez If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. 2011 1040ez You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. 2011 1040ez You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. 2011 1040ez Your 457(b) plan may have a designated Roth account option. 2011 1040ez If so, you may be able to roll over amounts to the designated Roth account or make contributions. 2011 1040ez Elective deferrals to a designated Roth account are included in your income. 2011 1040ez Qualified distributions (explained later) are not included in your income. 2011 1040ez See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. 2011 1040ez This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. 2011 1040ez For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. 2011 1040ez Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. 2011 1040ez Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. 2011 1040ez Nonelective deferred compensation plans for nonemployees (independent contractors). 2011 1040ez Deferred compensation plans maintained by churches. 2011 1040ez Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. 2011 1040ez An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. 2011 1040ez Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. 2011 1040ez You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. 2011 1040ez Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2011 1040ez You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 2011 1040ez For information on this credit, see Publication 524. 2011 1040ez Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2011 1040ez Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. 2011 1040ez Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. 2011 1040ez For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. 2011 1040ez Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. 2011 1040ez The premiums can be for coverage for you, your spouse, or dependents. 2011 1040ez The distribution must be made directly from the plan to the insurance provider. 2011 1040ez You can exclude from income the smaller of the amount of the insurance premiums or $3,000. 2011 1040ez You can only make this election for amounts that would otherwise be included in your income. 2011 1040ez The amount excluded from your income cannot be used to claim a medical expense deduction. 2011 1040ez An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. 2011 1040ez If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. 2011 1040ez The amount shown in box 2a of Form 1099-R does not reflect this exclusion. 2011 1040ez Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 2011 1040ez Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. 2011 1040ez Enter “PSO” next to the appropriate line on which you report the taxable amount. 2011 1040ez If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. 2011 1040ez Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. 2011 1040ez These categories are treated differently for income tax purposes. 2011 1040ez The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. 2011 1040ez This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. 2011 1040ez If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. 2011 1040ez S. 2011 1040ez Railroad Retirement Board (RRB). 2011 1040ez For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. 2011 1040ez The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). 2011 1040ez It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. 2011 1040ez Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. 2011 1040ez This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. 2011 1040ez (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. 2011 1040ez ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. 2011 1040ez See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. 2011 1040ez Form RRB-1099-R is used for U. 2011 1040ez S. 2011 1040ez citizens, resident aliens, and nonresident aliens. 2011 1040ez Nonresident aliens. 2011 1040ez   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. 2011 1040ez Nonresident aliens are subject to mandatory U. 2011 1040ez S. 2011 1040ez tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. 2011 1040ez A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. 2011 1040ez See Tax withholding next for more information. 2011 1040ez   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. 2011 1040ez To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. 2011 1040ez For information on filing requirements for aliens, see Publication 519, U. 2011 1040ez S. 2011 1040ez Tax Guide for Aliens. 2011 1040ez For information on tax treaties between the United States and other countries that may reduce or eliminate U. 2011 1040ez S. 2011 1040ez tax on your benefits, see Publication 901, U. 2011 1040ez S. 2011 1040ez Tax Treaties. 2011 1040ez Tax withholding. 2011 1040ez   To request or change your income tax withholding from SSEB payments, U. 2011 1040ez S. 2011 1040ez citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. 2011 1040ez To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. 2011 1040ez If you are a nonresident alien or a U. 2011 1040ez S. 2011 1040ez citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. 2011 1040ez S. 2011 1040ez tax withholding. 2011 1040ez Nonresident U. 2011 1040ez S. 2011 1040ez citizens cannot elect to be exempt from withholding on payments delivered outside of the U. 2011 1040ez S. 2011 1040ez Help from the RRB. 2011 1040ez   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. 2011 1040ez S. 2011 1040ez consulate/Embassy if you reside outside the United States. 2011 1040ez You can visit the RRB on the Internet at www. 2011 1040ez rrb. 2011 1040ez gov. 2011 1040ez Form RRB-1099-R. 2011 1040ez   The following discussion explains the items shown on Form RRB-1099-R. 2011 1040ez The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. 2011 1040ez   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. 2011 1040ez   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. 2011 1040ez To determine if any of these rules apply to your benefits, see the discussions about them later. 2011 1040ez   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. 2011 1040ez Use distribution code “7” if you are asked for a distribution code. 2011 1040ez Distribution codes are not shown on Form RRB-1099-R. 2011 1040ez   There are three copies of this form. 2011 1040ez Copy B is to be included with your income tax return if federal income tax is withheld. 2011 1040ez Copy C is for your own records. 2011 1040ez Copy 2 is filed with your state, city, or local income tax return, when required. 2011 1040ez See the illustrated Copy B (Form RRB-1099-R) above. 2011 1040ez       Each beneficiary will receive his or her own Form RRB-1099-R. 2011 1040ez If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. 2011 1040ez So that you get your form timely, make sure the RRB always has your current mailing address. 2011 1040ez Please click here for the text description of the image. 2011 1040ez Form RRB-1099-R Box 1—Claim Number and Payee Code. 2011 1040ez   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. 2011 1040ez This is the number under which the RRB paid your benefits. 2011 1040ez Your payee code follows your claim number and is the last number in this box. 2011 1040ez It is used by the RRB to identify you under your claim number. 2011 1040ez In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. 2011 1040ez Box 2—Recipient's Identification Number. 2011 1040ez   This is the recipient's U. 2011 1040ez S. 2011 1040ez taxpayer identification number. 2011 1040ez It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. 2011 1040ez If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. 2011 1040ez The Instructions for Form W-7 explain how and when to apply. 2011 1040ez Box 3—Employee Contributions. 2011 1040ez   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. 2011 1040ez This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). 2011 1040ez (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. 2011 1040ez ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. 2011 1040ez It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. 2011 1040ez If this amount has changed, the change is retroactive. 2011 1040ez You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. 2011 1040ez If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. 2011 1040ez    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. 2011 1040ez Box 4—Contributory Amount Paid. 2011 1040ez   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. 2011 1040ez (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. 2011 1040ez ) This amount is the total contributory pension paid in 2013. 2011 1040ez It may be partly taxable and partly tax free or fully taxable. 2011 1040ez If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. 2011 1040ez Box 5—Vested Dual Benefit. 2011 1040ez   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. 2011 1040ez It is fully taxable. 2011 1040ez VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. 2011 1040ez Note. 2011 1040ez The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. 2011 1040ez Box 6—Supplemental Annuity. 2011 1040ez   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. 2011 1040ez It is fully taxable. 2011 1040ez Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. 2011 1040ez Box 7—Total Gross Paid. 2011 1040ez   This is the sum of boxes 4, 5, and 6. 2011 1040ez The amount represents the total pension paid in 2013. 2011 1040ez Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 2011 1040ez Box 8—Repayments. 2011 1040ez   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. 2011 1040ez The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. 2011 1040ez It only includes repayments of benefits that were taxable to you. 2011 1040ez This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. 2011 1040ez If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. 2011 1040ez For more information about repayments, see Repayment of benefits received in an earlier year , later. 2011 1040ez    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. 2011 1040ez Box 9—Federal Income Tax Withheld. 2011 1040ez   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. 2011 1040ez Include this on your income tax return as tax withheld. 2011 1040ez If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. 2011 1040ez Determine the total amount of U. 2011 1040ez S. 2011 1040ez federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. 2011 1040ez Box 10—Rate of Tax. 2011 1040ez   If you are taxed as a U. 2011 1040ez S. 2011 1040ez citizen or resident alien, this box does not apply to you. 2011 1040ez If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. 2011 1040ez If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. 2011 1040ez Box 11—Country. 2011 1040ez   If you are taxed as a U. 2011 1040ez S. 2011 1040ez citizen or resident alien, this box does not apply to you. 2011 1040ez If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. 2011 1040ez If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. 2011 1040ez Box 12—Medicare Premium Total. 2011 1040ez   This is for information purposes only. 2011 1040ez The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. 2011 1040ez Medicare premium refunds are not included in the Medicare total. 2011 1040ez The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). 2011 1040ez However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. 2011 1040ez If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. 2011 1040ez Repayment of benefits received in an earlier year. 2011 1040ez   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. 2011 1040ez   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. 2011 1040ez The 2%-of-adjusted-gross-income limit applies to this deduction. 2011 1040ez You cannot take this deduction if you file Form 1040A. 2011 1040ez    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. 2011 1040ez For more information, see Repayments in Publication 525. 2011 1040ez Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. 2011 1040ez However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. 2011 1040ez (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. 2011 1040ez ) If you choose not to have tax withheld or if you do not have enough tax withheld, you may have to make estimated tax payments. 2011 1040ez See Estimated tax , later. 2011 1040ez The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. 2011 1040ez For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. 2011 1040ez There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. 2011 1040ez Choosing no withholding. 2011 1040ez   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. 2011 1040ez You can make this choice on Form W-4P for periodic and nonperiodic payments. 2011 1040ez This choice generally remains in effect until you revoke it. 2011 1040ez   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. 2011 1040ez   To choose not to have tax withheld, a U. 2011 1040ez S. 2011 1040ez citizen or resident alien must give the payer a home address in the United States or its possessions. 2011 1040ez Without that address, the payer must withhold tax. 2011 1040ez For example, the payer has to withhold tax if the recipient has provided a U. 2011 1040ez S. 2011 1040ez address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. 2011 1040ez S. 2011 1040ez home address. 2011 1040ez   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. 2011 1040ez S. 2011 1040ez citizen, a U. 2011 1040ez S. 2011 1040ez resident alien, or someone who left the country to avoid tax. 2011 1040ez But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. 2011 1040ez This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. 2011 1040ez For details, get Publication 519. 2011 1040ez Periodic payments. 2011 1040ez   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. 2011 1040ez 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). 2011 1040ez You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). 2011 1040ez If you do not, tax will be withheld as if you were married and claiming three withholding allowances. 2011 1040ez   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. 2011 1040ez   You must file a new withholding certificate to change the amount of withholding. 2011 1040ez Nonperiodic distributions. 2011 1040ez    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. 2011 1040ez You can also ask the payer to withhold an additional amount using Form W-4P. 2011 1040ez The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. 2011 1040ez Eligible rollover distribution. 2011 1040ez    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. 2011 1040ez You cannot choose not to have tax withheld from an eligible rollover distribution. 2011 1040ez However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. 2011 1040ez For more information about eligible rollover distributions, see Rollovers , later. 2011 1040ez Estimated tax. 2011 1040ez   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. 2011 1040ez Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. 2011 1040ez If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. 2011 1040ez For more information, get Publication 505, Tax Withholding and Estimated Tax. 2011 1040ez In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. 2011 1040ez See Publication 915. 2011 1040ez You can choose to have income tax withheld from those benefits. 2011 1040ez Use Form W-4V to make this choice. 2011 1040ez Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). 2011 1040ez If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. 2011 1040ez Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. 2011 1040ez In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). 2011 1040ez To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. 2011 1040ez This includes the amounts your employer contributed that were taxable to you when paid. 2011 1040ez (However, see Foreign employment contributions , later. 2011 1040ez ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). 2011 1040ez It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). 2011 1040ez From this total cost you must subtract the following amounts. 2011 1040ez Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. 2011 1040ez Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). 2011 1040ez If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. 2011 1040ez (See Simplified Method , later, for information on its required use. 2011 1040ez ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. 2011 1040ez (See General Rule , later, for information on its use. 2011 1040ez ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. 2011 1040ez For more information, see Publication 939. 2011 1040ez The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . 2011 1040ez Form 1099-R. 2011 1040ez If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. 2011 1040ez Annuity starting date defined. 2011 1040ez   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. 2011 1040ez Example. 2011 1040ez 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. 2011 1040ez The annuity starting date is July 1. 2011 1040ez This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. 2011 1040ez Designated Roth accounts. 2011 1040ez   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. 2011 1040ez Your cost will also include any in-plan Roth rollovers you included in income. 2011 1040ez Foreign employment contributions. 2011 1040ez   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. 2011 1040ez 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 (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. 2011 1040ez Foreign employment contributions while a nonresident alien. 2011 1040ez   In determining your cost, special rules apply if you are a U. 2011 1040ez S. 2011 1040ez citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. 2011 1040ez Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was 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 paid as cash compensation when the services were performed. 2011 1040ez Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. 2011 1040ez 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). 2011 1040ez These payments are also known as amounts received as an annuity. 2011 1040ez If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. 2011 1040ez In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. 2011 1040ez The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). 2011 1040ez Designated Roth accounts. 2011 1040ez   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. 2011 1040ez This applies to both your cost in the account and income earned on that account. 2011 1040ez A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. 2011 1040ez   If the distribution is not a qualified distribution, the rules discussed in this section apply. 2011 1040ez The designated Roth account is treated as a separate contract. 2011 1040ez Period of participation. 2011 1040ez   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. 2011 1040ez Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. 2011 1040ez   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. 2011 1040ez   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. 2011 1040ez This is known as an in-plan Roth rollover. 2011 1040ez For more details, see In-plan Roth rollovers , later. 2011 1040ez Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). 2011 1040ez You did not pay anything or are not considered to have paid anything for your pension or annuity. 2011 1040ez Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. 2011 1040ez Your employer did not withhold contributions from your salary. 2011 1040ez You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). 2011 1040ez Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. 2011 1040ez You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 2011 1040ez Deductible voluntary employee contributions. 2011 1040ez   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. 2011 1040ez Accumulated deductible voluntary employee contributions include net earnings on the contributions. 2011 1040ez If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. 2011 1040ez Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. 2011 1040ez This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. 2011 1040ez The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). 2011 1040ez You figure the tax-free part of the payment using one of the following methods. 2011 1040ez Simplified Method. 2011 1040ez You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). 2011 1040ez You cannot use this method if your annuity is paid under a nonqualified plan. 2011 1040ez General Rule. 2011 1040ez You must use this method if your annuity is paid under a nonqualified plan. 2011 1040ez You generally cannot use this method if your annuity is paid under a qualified plan. 2011 1040ez You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. 2011 1040ez If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. 2011 1040ez Qualified plan annuity starting before November 19, 1996. 2011 1040ez   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. 2011 1040ez If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. 2011 1040ez If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. 2011 1040ez Exclusion limit. 2011 1040ez   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. 2011 1040ez Once your annuity starting date is determined, it does not change. 2011 1040ez If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. 2011 1040ez That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. 2011 1040ez Exclusion limited to cost. 2011 1040ez   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. 2011 1040ez Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2011 1040ez This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2011 1040ez Example 1. 2011 1040ez Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. 2011 1040ez The total cost of your annuity is $12,000. 2011 1040ez Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). 2011 1040ez After that, your annuity payments are generally fully taxable. 2011 1040ez Example 2. 2011 1040ez The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. 2011 1040ez You have recovered tax free only $9,600 (8 × $1,200) of your cost. 2011 1040ez An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. 2011 1040ez Exclusion not limited to cost. 2011 1040ez   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 2011 1040ez If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. 2011 1040ez The total exclusion may be more than your cost. 2011 1040ez Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. 2011 1040ez For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. 2011 1040ez For any other annuity, this number is the number of monthly annuity payments under the contract. 2011 1040ez Who must use the Simplified Method. 2011 1040ez   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. 2011 1040ez You receive your pension or annuity payments from any of the following plans. 2011 1040ez A qualified employee plan. 2011 1040ez A qualified employee annuity. 2011 1040ez A tax-sheltered annuity plan (403(b) plan). 2011 1040ez On your annuity starting date, at least one of the following conditions applies to you. 2011 1040ez You are under age 75. 2011 1040ez You are entitled to less than 5 years of guaranteed payments. 2011 1040ez Guaranteed payments. 2011 1040ez   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. 2011 1040ez If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. 2011 1040ez Annuity starting before November 19, 1996. 2011 1040ez   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. 2011 1040ez You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . 2011 1040ez Who cannot use the Simplified Method. 2011 1040ez   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. 2011 1040ez See General Rule , later. 2011 1040ez How to use the Simplified Method. 2011 1040ez    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. 2011 1040ez Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. 2011 1040ez   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. 2011 1040ez How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. 2011 1040ez For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. 2011 1040ez    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. 2011 1040ez Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. 2011 1040ez Single-life annuity. 2011 1040ez   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. 2011 1040ez Enter on line 3 the number shown for your age on your annuity starting date. 2011 1040ez This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. 2011 1040ez Multiple-lives annuity. 2011 1040ez   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. 2011 1040ez Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. 2011 1040ez For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. 2011 1040ez For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. 2011 1040ez Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. 2011 1040ez   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 2011 1040ez Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. 2011 1040ez This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. 2011 1040ez Fixed-period annuity. 2011 1040ez   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. 2011 1040ez Line 6. 2011 1040ez   The amount on line 6 should include all amounts that could have been recovered in prior years. 2011 1040ez If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. 2011 1040ez Example. 2011 1040ez Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. 2011 1040ez Bill's annuity starting date is January 1, 2013. 2011 1040ez The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. 2011 1040ez Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 2011 1040ez Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. 2011 1040ez Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. 2011 1040ez Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. 2011 1040ez His completed worksheet is shown later. 2011 1040ez Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. 2011 1040ez Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. 2011 1040ez The full amount of any annuity payments received after 310 payments are paid must be included in gross income. 2011 1040ez If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. 2011 1040ez This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2011 1040ez Worksheet A. 2011 1040ez Simplified Method Worksheet for Bill Smith 1. 2011 1040ez Enter the total pension or annuity payments received this year. 2011 1040ez Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. 2011 1040ez $14,400 2. 2011 1040ez Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. 2011 1040ez * See Cost (Investment in the Contract) , earlier 2. 2011 1040ez 31,000   Note. 2011 1040ez If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). 2011 1040ez Otherwise, go to line 3. 2011 1040ez     3. 2011 1040ez Enter the appropriate number from Table 1 below. 2011 1040ez But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. 2011 1040ez 310 4. 2011 1040ez Divide line 2 by the number on line 3 4. 2011 1040ez 100 5. 2011 1040ez Multiply line 4 by the number of months for which this year's payments were made. 2011 1040ez If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 2011 1040ez Otherwise, go to line 6 5. 2011 1040ez 1,200 6. 2011 1040ez Enter any amount previously recovered tax free in years after 1986. 2011 1040ez This is the amount shown on line 10 of your worksheet for last year 6. 2011 1040ez -0- 7. 2011 1040ez Subtract line 6 from line 2 7. 2011 1040ez 31,000 8. 2011 1040ez Enter the smaller of line 5 or line 7 8. 2011 1040ez 1,200 9. 2011 1040ez Taxable amount for year. 2011 1040ez Subtract line 8 from line 1. 2011 1040ez Enter the result, but not less than zero. 2011 1040ez Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. 2011 1040ez Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 2011 1040ez If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. 2011 1040ez $13,200 10. 2011 1040ez Was your annuity starting date before 1987? □ Yes. 2011 1040ez STOP. 2011 1040ez Do not complete the rest of this worksheet. 2011 1040ez  ☑ No. 2011 1040ez Add lines 6 and 8. 2011 1040ez This is the amount you have recovered tax free through 2013. 2011 1040ez You will need this number if you need to fill out this worksheet next year 10. 2011 1040ez 1,200 11. 2011 1040ez Balance of cost to be recovered. 2011 1040ez Subtract line 10 from line 2. 2011 1040ez If zero, you will not have to complete this worksheet next year. 2011 1040ez The payments you receive next year will generally be fully taxable 11. 2011 1040ez $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. 2011 1040ez           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. 2011 1040ez . 2011 1040ez . 2011 1040ez BEFORE November 19, 1996, enter on line 3. 2011 1040ez . 2011 1040ez . 2011 1040ez AFTER November 18, 1996, enter on line 3. 2011 1040ez . 2011 1040ez . 2011 1040ez     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. 2011 1040ez . 2011 1040ez . 2011 1040ez THEN enter on line 3. 2011 1040ez . 2011 1040ez . 2011 1040ez     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. 2011 1040ez   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. 2011 1040ez Figure your share by taking the following steps. 2011 1040ez Complete your worksheet through line 4 to figure the monthly tax-free amount. 2011 1040ez Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. 2011 1040ez Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. 2011 1040ez The result is your share of the monthly tax-free amount. 2011 1040ez   Replace the amount on line 4 of the worksheet with the result in (3) above. 2011 1040ez Enter that amount on line 4 of your worksheet each year. 2011 1040ez General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. 2011 1040ez Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. 2011 1040ez To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. 2011 1040ez Who must use the General Rule. 2011 1040ez   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. 2011 1040ez Annuity starting before November 19, 1996. 2011 1040ez   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. 2011 1040ez You also had to use it for any fixed-period annuity. 2011 1040ez If you did not have to use the General Rule, you could have chosen to use it. 2011 1040ez If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. 2011 1040ez   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. 2011 1040ez Who cannot use the General Rule. 2011 1040ez   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. 2011 1040ez See Simplified Method , earlier. 2011 1040ez More information. 2011 1040ez   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. 2011 1040ez Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. 2011 1040ez Nonperiodic distributions are also known as amounts not received as an annuity. 2011 1040ez They include all payments other than periodic payments and corrective distributions. 2011 1040ez For example, the following items are treated as nonperiodic distributions. 2011 1040ez Cash withdrawals. 2011 1040ez Distributions of current earnings (dividends) on your investment. 2011 1040ez However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. 2011 1040ez Certain loans. 2011 1040ez See Loans Treated as Distributions , later. 2011 1040ez The value of annuity contracts transferred without full and adequate consideration. 2011 1040ez See Transfers of Annuity Contracts , later. 2011 1040ez Corrective distributions of excess plan contributions. 2011 1040ez   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. 2011 1040ez To correct an excess, your plan may distribute it to you (along with any income earned on the excess). 2011 1040ez Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. 2011 1040ez It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 2011 1040ez    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. 2011 1040ez   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. 2011 1040ez Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. 2011 1040ez If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. 2011 1040ez If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. 2011 1040ez You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. 2011 1040ez See Rollovers, later. 2011 1040ez If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. 2011 1040ez See Lump-Sum Distributions, later. 2011 1040ez Annuity starting date. 2011 1040ez   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. 2011 1040ez Distributions of employer securities. 2011 1040ez    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. 2011 1040ez The NUA is the net increase in the securities' value while they were in the trust. 2011 1040ez This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. 2011 1040ez   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. 2011 1040ez    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. 2011 1040ez    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und