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2011 Tax Amendment Form

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2011 Tax Amendment Form

2011 tax amendment form 8. 2011 tax amendment form   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. 2011 tax amendment form Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. 2011 tax amendment form It is similar to the straight line method of depreciation. 2011 tax amendment form The various amortizable costs covered in this chapter are included in the list below. 2011 tax amendment form However, this chapter does not discuss amortization of bond premium. 2011 tax amendment form For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. 2011 tax amendment form Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. 2011 tax amendment form How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. 2011 tax amendment form To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. 2011 tax amendment form For example, in 2012, you began to amortize a lease. 2011 tax amendment form In 2013, you began to amortize a second lease. 2011 tax amendment form Report amortization from the new lease on line 42 of your 2013 Form 4562. 2011 tax amendment form Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. 2011 tax amendment form If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). 2011 tax amendment form Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. 2011 tax amendment form Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. 2011 tax amendment form Generally, you recover costs for particular assets through depreciation deductions. 2011 tax amendment form However, you generally cannot recover other costs until you sell the business or otherwise go out of business. 2011 tax amendment form For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. 2011 tax amendment form For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. 2011 tax amendment form The costs that are not deducted currently can be amortized ratably over a 180-month period. 2011 tax amendment form The amortization period starts with the month you begin operating your active trade or business. 2011 tax amendment form You are not required to attach a statement to make this election. 2011 tax amendment form You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. 2011 tax amendment form Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. 2011 tax amendment form See Regulations sections 1. 2011 tax amendment form 195-1, 1. 2011 tax amendment form 248-1, and 1. 2011 tax amendment form 709-1. 2011 tax amendment form For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. 2011 tax amendment form Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. 2011 tax amendment form If the election is made, you must attach any statement required by Regulations sections 1. 2011 tax amendment form 195-1(b), 1. 2011 tax amendment form 248-1(c), and 1. 2011 tax amendment form 709-1(c), as in effect before September 9, 2008. 2011 tax amendment form Note. 2011 tax amendment form You can apply the provisions of Regulations sections 1. 2011 tax amendment form 195-1, 1. 2011 tax amendment form 248-1, and 1. 2011 tax amendment form 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. 2011 tax amendment form Otherwise, the provisions under Regulations sections 1. 2011 tax amendment form 195-1(b), 1. 2011 tax amendment form 248-1(c), and 1. 2011 tax amendment form 709-1(c), as in effect before September 9, 2008, will apply. 2011 tax amendment form For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. 2011 tax amendment form See How To Make the Election , later. 2011 tax amendment form The cost must qualify as one of the following. 2011 tax amendment form A business start-up cost. 2011 tax amendment form An organizational cost for a corporation. 2011 tax amendment form An organizational cost for a partnership. 2011 tax amendment form Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. 2011 tax amendment form Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. 2011 tax amendment form Qualifying costs. 2011 tax amendment form   A start-up cost is amortizable if it meets both of the following tests. 2011 tax amendment form It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). 2011 tax amendment form It is a cost you pay or incur before the day your active trade or business begins. 2011 tax amendment form   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. 2011 tax amendment form Advertisements for the opening of the business. 2011 tax amendment form Salaries and wages for employees who are being trained and their instructors. 2011 tax amendment form Travel and other necessary costs for securing prospective distributors, suppliers, or customers. 2011 tax amendment form Salaries and fees for executives and consultants, or for similar professional services. 2011 tax amendment form Nonqualifying costs. 2011 tax amendment form   Start-up costs do not include deductible interest, taxes, or research and experimental costs. 2011 tax amendment form See Research and Experimental Costs , later. 2011 tax amendment form Purchasing an active trade or business. 2011 tax amendment form   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. 2011 tax amendment form These are costs that help you decide whether to purchase a business. 2011 tax amendment form Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. 2011 tax amendment form Example. 2011 tax amendment form On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. 2011 tax amendment form They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. 2011 tax amendment form In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. 2011 tax amendment form The letter stated that a binding commitment would result only after a purchase agreement was signed. 2011 tax amendment form The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. 2011 tax amendment form On October 22nd, you signed a purchase agreement with XYZ, Inc. 2011 tax amendment form All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. 2011 tax amendment form Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. 2011 tax amendment form Disposition of business. 2011 tax amendment form   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. 2011 tax amendment form However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. 2011 tax amendment form Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. 2011 tax amendment form Qualifying costs. 2011 tax amendment form   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. 2011 tax amendment form   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. 2011 tax amendment form   Examples of organizational costs include: The cost of temporary directors. 2011 tax amendment form The cost of organizational meetings. 2011 tax amendment form State incorporation fees. 2011 tax amendment form The cost of legal services. 2011 tax amendment form Nonqualifying costs. 2011 tax amendment form   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. 2011 tax amendment form Costs associated with the transfer of assets to the corporation. 2011 tax amendment form Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. 2011 tax amendment form Qualifying costs. 2011 tax amendment form   A partnership can amortize an organizational cost only if it meets all the following tests. 2011 tax amendment form It is for the creation of the partnership and not for starting or operating the partnership trade or business. 2011 tax amendment form It is chargeable to a capital account (see chapter 1). 2011 tax amendment form It could be amortized over the life of the partnership if the partnership had a fixed life. 2011 tax amendment form It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. 2011 tax amendment form However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. 2011 tax amendment form It is for a type of item normally expected to benefit the partnership throughout its entire life. 2011 tax amendment form   Organizational costs include the following fees. 2011 tax amendment form Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. 2011 tax amendment form Accounting fees for services incident to the organization of the partnership. 2011 tax amendment form Filing fees. 2011 tax amendment form Nonqualifying costs. 2011 tax amendment form   The following costs cannot be amortized. 2011 tax amendment form The cost of acquiring assets for the partnership or transferring assets to the partnership. 2011 tax amendment form The cost of admitting or removing partners, other than at the time the partnership is first organized. 2011 tax amendment form The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. 2011 tax amendment form The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. 2011 tax amendment form These “syndication fees” are capital expenses that cannot be depreciated or amortized. 2011 tax amendment form Liquidation of partnership. 2011 tax amendment form   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. 2011 tax amendment form However, these costs can be deducted only to the extent they qualify as a loss from a business. 2011 tax amendment form How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). 2011 tax amendment form You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. 2011 tax amendment form Once you choose an amortization period, you cannot change it. 2011 tax amendment form To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. 2011 tax amendment form The result is the amount you can deduct for each month. 2011 tax amendment form Cash method partnership. 2011 tax amendment form   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. 2011 tax amendment form However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. 2011 tax amendment form How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. 2011 tax amendment form You may also be required to attach an accompanying statement (described later) to your return. 2011 tax amendment form For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. 2011 tax amendment form Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. 2011 tax amendment form 195-1, 1. 2011 tax amendment form 248-1, and 1. 2011 tax amendment form 709-1, you must also attach an accompanying statement to elect to amortize the costs. 2011 tax amendment form If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. 2011 tax amendment form See Starting a Business , earlier, for more information. 2011 tax amendment form Generally, you must file the return by the due date (including any extensions). 2011 tax amendment form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax amendment form For more information, see the instructions for Part VI of Form 4562. 2011 tax amendment form You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. 2011 tax amendment form Note. 2011 tax amendment form The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. 2011 tax amendment form If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. 2011 tax amendment form A shareholder or partner cannot make this election. 2011 tax amendment form You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. 2011 tax amendment form Only the corporation or partnership can amortize these costs. 2011 tax amendment form However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. 2011 tax amendment form These costs qualify as business start-up costs if you acquire the partnership interest. 2011 tax amendment form Start-up costs election statement. 2011 tax amendment form   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. 2011 tax amendment form A description of the business to which the start-up costs relate. 2011 tax amendment form A description of each start-up cost incurred. 2011 tax amendment form The month your active business began (or was acquired). 2011 tax amendment form The number of months in your amortization period (which is generally 180 months). 2011 tax amendment form Filing the statement early. 2011 tax amendment form   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. 2011 tax amendment form If you file the statement early, the election becomes effective in the month of the tax year your active business begins. 2011 tax amendment form Revised statement. 2011 tax amendment form   You can file a revised statement to include any start-up costs not included in your original statement. 2011 tax amendment form However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. 2011 tax amendment form You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. 2011 tax amendment form Organizational costs election statement. 2011 tax amendment form   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. 2011 tax amendment form A description of each cost. 2011 tax amendment form The amount of each cost. 2011 tax amendment form The date each cost was incurred. 2011 tax amendment form The month your corporation or partnership began active business (or acquired the business). 2011 tax amendment form The number of months in your amortization period (which is generally 180 months). 2011 tax amendment form Partnerships. 2011 tax amendment form   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. 2011 tax amendment form   You do not need to separately list any partnership organizational cost that is less than $10. 2011 tax amendment form Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. 2011 tax amendment form   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. 2011 tax amendment form Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. 2011 tax amendment form The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). 2011 tax amendment form However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). 2011 tax amendment form For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. 2011 tax amendment form How to amortize. 2011 tax amendment form   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. 2011 tax amendment form Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. 2011 tax amendment form You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. 2011 tax amendment form You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. 2011 tax amendment form See Anti-Churning Rules, later. 2011 tax amendment form Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). 2011 tax amendment form The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. 2011 tax amendment form You cannot deduct amortization for the month you dispose of the intangible. 2011 tax amendment form If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. 2011 tax amendment form You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. 2011 tax amendment form Tax-exempt use property subject to a lease. 2011 tax amendment form   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. 2011 tax amendment form Cost attributable to other property. 2011 tax amendment form   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. 2011 tax amendment form For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. 2011 tax amendment form Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. 2011 tax amendment form Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. 2011 tax amendment form You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. 2011 tax amendment form Goodwill. 2011 tax amendment form   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. 2011 tax amendment form Going concern value. 2011 tax amendment form   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. 2011 tax amendment form It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). 2011 tax amendment form It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. 2011 tax amendment form Workforce in place, etc. 2011 tax amendment form   This includes the composition of a workforce (for example, its experience, education, or training). 2011 tax amendment form It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. 2011 tax amendment form   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. 2011 tax amendment form Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. 2011 tax amendment form Business books and records, etc. 2011 tax amendment form   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. 2011 tax amendment form It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. 2011 tax amendment form Patents, copyrights, etc. 2011 tax amendment form   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . 2011 tax amendment form Customer-based intangible. 2011 tax amendment form   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. 2011 tax amendment form For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. 2011 tax amendment form A customer base. 2011 tax amendment form A circulation base. 2011 tax amendment form An undeveloped market or market growth. 2011 tax amendment form Insurance in force. 2011 tax amendment form A mortgage servicing contract. 2011 tax amendment form An investment management contract. 2011 tax amendment form Any other relationship with customers involving the future provision of goods or services. 2011 tax amendment form   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. 2011 tax amendment form Supplier-based intangible. 2011 tax amendment form   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. 2011 tax amendment form The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. 2011 tax amendment form Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. 2011 tax amendment form Also, see Assets That Are Not Section 197 Intangibles below. 2011 tax amendment form Government-granted license, permit, etc. 2011 tax amendment form   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. 2011 tax amendment form For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. 2011 tax amendment form Covenant not to compete. 2011 tax amendment form   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. 2011 tax amendment form An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. 2011 tax amendment form   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. 2011 tax amendment form Franchise, trademark, or trade name. 2011 tax amendment form   A franchise, trademark, or trade name is a section 197 intangible. 2011 tax amendment form You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. 2011 tax amendment form For information on currently deductible contingent payments, see chapter 11. 2011 tax amendment form Professional sports franchise. 2011 tax amendment form   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. 2011 tax amendment form Contract for the use of, or a term interest in, a section 197 intangible. 2011 tax amendment form   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. 2011 tax amendment form It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. 2011 tax amendment form Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. 2011 tax amendment form Any interest in a corporation, partnership, trust, or estate. 2011 tax amendment form Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. 2011 tax amendment form Any interest in land. 2011 tax amendment form Most computer software. 2011 tax amendment form (See Computer software , later. 2011 tax amendment form ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. 2011 tax amendment form An interest in a film, sound recording, video tape, book, or similar property. 2011 tax amendment form A right to receive tangible property or services under a contract or from a governmental agency. 2011 tax amendment form An interest in a patent or copyright. 2011 tax amendment form Certain rights that have a fixed duration or amount. 2011 tax amendment form (See Rights of fixed duration or amount , later. 2011 tax amendment form ) An interest under either of the following. 2011 tax amendment form An existing lease or sublease of tangible property. 2011 tax amendment form A debt that was in existence when the interest was acquired. 2011 tax amendment form A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. 2011 tax amendment form Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. 2011 tax amendment form Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. 2011 tax amendment form You generally must use the straight line method over its useful life. 2011 tax amendment form For certain intangibles, the depreciation period is specified in the law and regulations. 2011 tax amendment form For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. 2011 tax amendment form For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. 2011 tax amendment form Computer software. 2011 tax amendment form   Section 197 intangibles do not include the following types of computer software. 2011 tax amendment form Software that meets all the following requirements. 2011 tax amendment form It is, or has been, readily available for purchase by the general public. 2011 tax amendment form It is subject to a nonexclusive license. 2011 tax amendment form It has not been substantially modified. 2011 tax amendment form This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. 2011 tax amendment form Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. 2011 tax amendment form Computer software defined. 2011 tax amendment form   Computer software includes all programs designed to cause a computer to perform a desired function. 2011 tax amendment form It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. 2011 tax amendment form Rights of fixed duration or amount. 2011 tax amendment form   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. 2011 tax amendment form However, this does not apply to the following intangibles. 2011 tax amendment form Goodwill. 2011 tax amendment form Going concern value. 2011 tax amendment form A covenant not to compete. 2011 tax amendment form A franchise, trademark, or trade name. 2011 tax amendment form A customer-related information base, customer-based intangible, or similar item. 2011 tax amendment form Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. 2011 tax amendment form You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. 2011 tax amendment form If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. 2011 tax amendment form Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. 2011 tax amendment form Amortize these costs using the rules of Revenue Procedure 2004-36. 2011 tax amendment form For more information, see Revenue Procedure 2004-36, 2004-24 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 1063, available at  www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2004-24_IRB/ar16. 2011 tax amendment form html. 2011 tax amendment form A change in the treatment of creative property costs is a change in method of accounting. 2011 tax amendment form Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. 2011 tax amendment form These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. 2011 tax amendment form Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. 2011 tax amendment form You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. 2011 tax amendment form You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. 2011 tax amendment form You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). 2011 tax amendment form This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. 2011 tax amendment form See Related person , later, for more information. 2011 tax amendment form Exceptions. 2011 tax amendment form   The anti-churning rules do not apply in the following situations. 2011 tax amendment form You acquired the intangible from a decedent and its basis was stepped up to its fair market value. 2011 tax amendment form The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. 2011 tax amendment form This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. 2011 tax amendment form The gain-recognition exception, discussed later, applies. 2011 tax amendment form Related person. 2011 tax amendment form   For purposes of the anti-churning rules, the following are related persons. 2011 tax amendment form An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 2011 tax amendment form ), and lineal descendants (children, grandchildren, etc. 2011 tax amendment form ). 2011 tax amendment form A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. 2011 tax amendment form Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. 2011 tax amendment form (For an exception, see section 1. 2011 tax amendment form 197-2(h)(6)(iv) of the regulations. 2011 tax amendment form ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. 2011 tax amendment form The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 2011 tax amendment form The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. 2011 tax amendment form The executor and beneficiary of an estate. 2011 tax amendment form A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). 2011 tax amendment form A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. 2011 tax amendment form Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. 2011 tax amendment form Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. 2011 tax amendment form A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. 2011 tax amendment form Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). 2011 tax amendment form When to determine relationship. 2011 tax amendment form   Persons are treated as related if the relationship existed at the following time. 2011 tax amendment form In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. 2011 tax amendment form In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. 2011 tax amendment form Ownership of stock. 2011 tax amendment form   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. 2011 tax amendment form Rule 1. 2011 tax amendment form   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2011 tax amendment form Rule 2. 2011 tax amendment form   An individual is considered to own the stock directly or indirectly owned by or for his or her family. 2011 tax amendment form Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. 2011 tax amendment form Rule 3. 2011 tax amendment form   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 2011 tax amendment form Rule 4. 2011 tax amendment form   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. 2011 tax amendment form Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. 2011 tax amendment form Gain-recognition exception. 2011 tax amendment form   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. 2011 tax amendment form That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. 2011 tax amendment form That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. 2011 tax amendment form See chapter 2 in Publication 544 for information on making this choice. 2011 tax amendment form   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. 2011 tax amendment form Notification. 2011 tax amendment form   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. 2011 tax amendment form Anti-abuse rule. 2011 tax amendment form   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. 2011 tax amendment form To avoid the requirement that the intangible be acquired after August 10, 1993. 2011 tax amendment form To avoid any of the anti-churning rules. 2011 tax amendment form More information. 2011 tax amendment form   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. 2011 tax amendment form 197-2(h). 2011 tax amendment form Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. 2011 tax amendment form See Amended Return , next. 2011 tax amendment form If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. 2011 tax amendment form See Changing Your Accounting Method , later. 2011 tax amendment form Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. 2011 tax amendment form A mathematical error made in any year. 2011 tax amendment form A posting error made in any year. 2011 tax amendment form An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. 2011 tax amendment form When to file. 2011 tax amendment form   If an amended return is allowed, you must file it by the later of the following dates. 2011 tax amendment form 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. 2011 tax amendment form (A return filed early is considered filed on the due date. 2011 tax amendment form ) 2 years from the time you paid your tax for that year. 2011 tax amendment form Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. 2011 tax amendment form File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. 2011 tax amendment form The following are examples of a change in method of accounting for amortization. 2011 tax amendment form A change in the amortization method, period of recovery, or convention of an amortizable asset. 2011 tax amendment form A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. 2011 tax amendment form A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. 2011 tax amendment form Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. 2011 tax amendment form An adjustment in the useful life of an amortizable asset. 2011 tax amendment form Generally, the making of a late amortization election or the revocation of a timely valid amortization election. 2011 tax amendment form Any change in the placed-in-service date of an amortizable asset. 2011 tax amendment form See Regulations section 1. 2011 tax amendment form 446-1(e)(2)(ii)(a) for more information and examples. 2011 tax amendment form Automatic approval. 2011 tax amendment form   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. 2011 tax amendment form For a list of automatic accounting method changes, see the Instructions for Form 3115. 2011 tax amendment form Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. 2011 tax amendment form For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. 2011 tax amendment form See Revenue Procedure 2006-12, 2006-3 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 310, available at  www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2006-03_IRB/ar14. 2011 tax amendment form html. 2011 tax amendment form  See Revenue Procedure 2006-37, 2006-38 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 499, available at  www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2006-38_IRB/ar10. 2011 tax amendment form html. 2011 tax amendment form  See Revenue Procedure 2008-52, 2008-36 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 587, available at www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2008-36_IRB/ar09. 2011 tax amendment form html. 2011 tax amendment form  See Revenue Procedure 2009-39, 2009-38 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 371, available at  www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2009-38_IRB/ar08. 2011 tax amendment form html. 2011 tax amendment form  See Revenue Procedure 2011-14, 2011-4 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 330, available at  www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2011-04_IRB/ar08. 2011 tax amendment form html. 2011 tax amendment form  See Revenue Procedure 2011-22, 2011-18 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 737, available at  www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2011-18_IRB/ar08. 2011 tax amendment form html. 2011 tax amendment form Also, see Revenue Procedure 2012-39, 2012-41 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 470 available at www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2012-41_IRB/index. 2011 tax amendment form html. 2011 tax amendment form Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. 2011 tax amendment form If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). 2011 tax amendment form If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. 2011 tax amendment form Any remaining gain, or any loss, is a section 1231 gain or loss. 2011 tax amendment form If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. 2011 tax amendment form For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. 2011 tax amendment form Nondeductible loss. 2011 tax amendment form   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. 2011 tax amendment form Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. 2011 tax amendment form Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. 2011 tax amendment form The numerator is the adjusted basis of each remaining intangible on the date of the disposition. 2011 tax amendment form The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. 2011 tax amendment form Covenant not to compete. 2011 tax amendment form   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. 2011 tax amendment form Nonrecognition transfers. 2011 tax amendment form   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. 2011 tax amendment form You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. 2011 tax amendment form Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. 2011 tax amendment form   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. 2011 tax amendment form Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. 2011 tax amendment form Example. 2011 tax amendment form You own a section 197 intangible you have amortized for 4 full years. 2011 tax amendment form It has a remaining unamortized basis of $30,000. 2011 tax amendment form You exchange the asset plus $10,000 for a like-kind section 197 intangible. 2011 tax amendment form The nonrecognition provisions of like-kind exchanges apply. 2011 tax amendment form You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. 2011 tax amendment form You amortize the other $10,000 of adjusted basis over a new 15-year period. 2011 tax amendment form For more information, see Regulations section 1. 2011 tax amendment form 197-2(g). 2011 tax amendment form Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. 2011 tax amendment form See Reforestation Costs in chapter 7. 2011 tax amendment form You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. 2011 tax amendment form There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. 2011 tax amendment form The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. 2011 tax amendment form A partner, shareholder, or beneficiary cannot make that election. 2011 tax amendment form A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. 2011 tax amendment form , of a partnership or S corporation. 2011 tax amendment form The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. 2011 tax amendment form Qualifying costs. 2011 tax amendment form   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. 2011 tax amendment form Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. 2011 tax amendment form They include costs for the following items. 2011 tax amendment form Site preparation. 2011 tax amendment form Seeds or seedlings. 2011 tax amendment form Labor. 2011 tax amendment form Tools. 2011 tax amendment form Depreciation on equipment used in planting and seeding. 2011 tax amendment form Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. 2011 tax amendment form Qualified timber property. 2011 tax amendment form   Qualified timber property is property that contains trees in significant commercial quantities. 2011 tax amendment form It can be a woodlot or other site that you own or lease. 2011 tax amendment form The property qualifies only if it meets all of the following requirements. 2011 tax amendment form It is located in the United States. 2011 tax amendment form It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. 2011 tax amendment form It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. 2011 tax amendment form Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. 2011 tax amendment form Amortization period. 2011 tax amendment form   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. 2011 tax amendment form You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. 2011 tax amendment form Life tenant and remainderman. 2011 tax amendment form   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. 2011 tax amendment form Any remainder interest in the property is ignored for amortization purposes. 2011 tax amendment form Recapture. 2011 tax amendment form   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. 2011 tax amendment form See chapter 3 of Publication 544 for more information. 2011 tax amendment form How to make the election. 2011 tax amendment form   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. 2011 tax amendment form A description of the costs and the dates you incurred them. 2011 tax amendment form A description of the type of timber being grown and the purpose for which it is grown. 2011 tax amendment form Attach a separate statement for each property for which you amortize reforestation costs. 2011 tax amendment form   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. 2011 tax amendment form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax amendment form Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. 2011 tax amendment form 9100-2” on Form 4562. 2011 tax amendment form File the amended return at the same address you filed the original return. 2011 tax amendment form Revoking the election. 2011 tax amendment form   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. 2011 tax amendment form Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. 2011 tax amendment form Please provide your daytime telephone number (optional), in case we need to contact you. 2011 tax amendment form You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. 2011 tax amendment form    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. 2011 tax amendment form NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. 2011 tax amendment form These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. 2011 tax amendment form For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). 2011 tax amendment form If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. 2011 tax amendment form Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. 2011 tax amendment form However, see Atmospheric pollution control facilities for an exception. 2011 tax amendment form The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. 2011 tax amendment form Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. 2011 tax amendment form You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. 2011 tax amendment form See chapter 3 of Publication 946. 2011 tax amendment form A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. 2011 tax amendment form The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. 2011 tax amendment form The facility must be certified by state and federal certifying authorities. 2011 tax amendment form The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. 2011 tax amendment form Also, it must not significantly change the nature of the manufacturing or production process or facility. 2011 tax amendment form The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). 2011 tax amendment form The federal certifying authority will describe the nature of the potential cost recovery. 2011 tax amendment form You must then reduce the amortizable basis of the facility by this potential recovery. 2011 tax amendment form New identifiable treatment facility. 2011 tax amendment form   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. 2011 tax amendment form It does not include a building and its structural components unless the building is exclusively a treatment facility. 2011 tax amendment form Atmospheric pollution control facilities. 2011 tax amendment form   Certain atmospheric pollution control facilities can be amortized over 84 months. 2011 tax amendment form To qualify, the following must apply. 2011 tax amendment form The facility must be acquired and placed in service after April 11, 2005. 2011 tax amendment form If acquired, the original use must begin with you after April 11, 2005. 2011 tax amendment form The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. 2011 tax amendment form If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. 2011 tax amendment form Basis reduction for corporations. 2011 tax amendment form   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. 2011 tax amendment form More information. 2011 tax amendment form   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. 2011 tax amendment form Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). 2011 tax amendment form If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. 2011 tax amendment form The amortization period begins the month you first receive an economic benefit from the costs. 2011 tax amendment form For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. 2011 tax amendment form Optional write-off method. 2011 tax amendment form   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. 2011 tax amendment form For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. 2011 tax amendment form Costs you can amortize. 2011 tax amendment form   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. 2011 tax amendment form You paid or incurred the costs in your trade or business. 2011 tax amendment form You are not deducting the costs currently. 2011 tax amendment form How to make the election. 2011 tax amendment form   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. 2011 tax amendment form Generally, you must file the return by the due date (including extensions). 2011 tax amendment form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax amendment form Attach Form 4562 to the amended return and write “Filed pursuant to section 301. 2011 tax amendment form 9100-2” on Form 4562. 2011 tax amendment form File the amended return at the same address you filed the original return. 2011 tax amendment form   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. 2011 tax amendment form Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. 2011 tax amendment form If you make this election, there is no AMT adjustment. 2011 tax amendment form The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. 2011 tax amendment form How to make the election. 2011 tax amendment form   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. 2011 tax amendment form   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. 2011 tax amendment form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 tax amendment form Attach Form 4562 to the amended return and write “Filed pursuant to section 301. 2011 tax amendment form 9100-2” on Form 4562. 2011 tax amendment form File the amended return at the same address you filed the original return. 2011 tax amendment form Revoking the election. 2011 tax amendment form   You must obtain consent from the IRS to revoke your election. 2011 tax amendment form Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. 2011 tax amendment form The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. 2011 tax amendment form If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. 2011 tax amendment form Prev  Up  Next   Home   More Online Publications
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Staying Healthy as a Senior

Your mental and physical health is important in this stage of life. Staying healthy means eating nutritious foods, exercising, and getting regular medical check-ups. Prevention and early detection are the best defense against illness and disease.


The 2011 Tax Amendment Form

2011 tax amendment form 25. 2011 tax amendment form   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. 2011 tax amendment form Progressive deterioration. 2011 tax amendment form Damage from corrosive drywall. 2011 tax amendment form Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. 2011 tax amendment form  Section C of Form 4684 is new for 2013. 2011 tax amendment form You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. 2011 tax amendment form Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 2011 tax amendment form You do not need to complete Appendix A. 2011 tax amendment form For details, see Losses from Ponzi-type investment schemes , in this chapter. 2011 tax amendment form Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. 2011 tax amendment form The chapter also explains the following  topics. 2011 tax amendment form How to figure the amount of your loss. 2011 tax amendment form How to treat insurance and other reimbursements you receive. 2011 tax amendment form The deduction limits. 2011 tax amendment form When and how to report a casualty or theft. 2011 tax amendment form Forms to file. 2011 tax amendment form    When you have a casualty or theft, you have to file Form 4684. 2011 tax amendment form You will also have to file one or more of the following forms. 2011 tax amendment form Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. 2011 tax amendment form   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. 2011 tax amendment form Workbook for casualties and thefts. 2011 tax amendment form    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. 2011 tax amendment form It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. 2011 tax amendment form Business or investment-related losses. 2011 tax amendment form   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. 2011 tax amendment form Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 2011 tax amendment form A sudden event is one that is swift, not gradual or progressive. 2011 tax amendment form An unexpected event is one that is ordinarily unanticipated and unintended. 2011 tax amendment form An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. 2011 tax amendment form Deductible losses. 2011 tax amendment form   Deductible casualty losses can result from a number of different causes, including the following. 2011 tax amendment form Car accidents (but see Nondeductible losses , next, for exceptions). 2011 tax amendment form Earthquakes. 2011 tax amendment form Fires (but see Nondeductible losses , next, for exceptions). 2011 tax amendment form Floods. 2011 tax amendment form Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. 2011 tax amendment form Mine cave-ins. 2011 tax amendment form Shipwrecks. 2011 tax amendment form Sonic booms. 2011 tax amendment form Storms, including hurricanes and tornadoes. 2011 tax amendment form Terrorist attacks. 2011 tax amendment form Vandalism. 2011 tax amendment form Volcanic eruptions. 2011 tax amendment form Nondeductible losses. 2011 tax amendment form   A casualty loss is not deductible if the damage or destruction is caused by the following. 2011 tax amendment form Accidentally breaking articles such as glassware or china under normal conditions. 2011 tax amendment form A family pet (explained below). 2011 tax amendment form A fire if you willfully set it or pay someone else to set it. 2011 tax amendment form A car accident if your willful negligence or willful act caused it. 2011 tax amendment form The same is true if the willful act or willful negligence of someone acting for you caused the accident. 2011 tax amendment form Progressive deterioration (explained later). 2011 tax amendment form Family pet. 2011 tax amendment form   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. 2011 tax amendment form Example. 2011 tax amendment form Your antique oriental rug was damaged by your new puppy before it was housebroken. 2011 tax amendment form Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. 2011 tax amendment form Progressive deterioration. 2011 tax amendment form    Loss of property due to progressive deterioration is not deductible as a casualty loss. 2011 tax amendment form This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. 2011 tax amendment form The following are examples of damage due to progressive deterioration. 2011 tax amendment form The steady weakening of a building due to normal wind and weather conditions. 2011 tax amendment form The deterioration and damage to a water heater that bursts. 2011 tax amendment form However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. 2011 tax amendment form Most losses of property caused by droughts. 2011 tax amendment form To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. 2011 tax amendment form Termite or moth damage. 2011 tax amendment form The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. 2011 tax amendment form However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. 2011 tax amendment form Damage from corrosive drywall. 2011 tax amendment form   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. 2011 tax amendment form For details, see Publication 547. 2011 tax amendment form Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. 2011 tax amendment form The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. 2011 tax amendment form You do not need to show a conviction for theft. 2011 tax amendment form Theft includes the taking of money or property by the following means. 2011 tax amendment form Blackmail. 2011 tax amendment form Burglary. 2011 tax amendment form Embezzlement. 2011 tax amendment form Extortion. 2011 tax amendment form Kidnapping for ransom. 2011 tax amendment form Larceny. 2011 tax amendment form Robbery. 2011 tax amendment form The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 2011 tax amendment form Decline in market value of stock. 2011 tax amendment form   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. 2011 tax amendment form However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. 2011 tax amendment form You report a capital loss on Schedule D (Form 1040). 2011 tax amendment form For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. 2011 tax amendment form Mislaid or lost property. 2011 tax amendment form   The simple disappearance of money or property is not a theft. 2011 tax amendment form However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 2011 tax amendment form Sudden, unexpected, and unusual events are defined earlier. 2011 tax amendment form Example. 2011 tax amendment form A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 2011 tax amendment form The diamond falls from the ring and is never found. 2011 tax amendment form The loss of the diamond is a casualty. 2011 tax amendment form Losses from Ponzi-type investment schemes. 2011 tax amendment form   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 735 (available at www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2009-14_IRB/ar07. 2011 tax amendment form html). 2011 tax amendment form Revenue Procedure 2009-20, 2009-14 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 749 (available at www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2009-14_IRB/ar11. 2011 tax amendment form html). 2011 tax amendment form Revenue Procedure 2011-58, 2011-50 I. 2011 tax amendment form R. 2011 tax amendment form B. 2011 tax amendment form 849 (available at www. 2011 tax amendment form irs. 2011 tax amendment form gov/irb/2011-50_IRB/ar11. 2011 tax amendment form html). 2011 tax amendment form If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. 2011 tax amendment form Skip lines 19 to 27. 2011 tax amendment form Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 2011 tax amendment form You do not need to complete Appendix A. 2011 tax amendment form For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. 2011 tax amendment form   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. 2011 tax amendment form Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. 2011 tax amendment form If you incurred this type of loss, you can choose one of the following ways to deduct the loss. 2011 tax amendment form As a casualty loss. 2011 tax amendment form As an ordinary loss. 2011 tax amendment form As a nonbusiness bad debt. 2011 tax amendment form Casualty loss or ordinary loss. 2011 tax amendment form   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. 2011 tax amendment form The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. 2011 tax amendment form If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. 2011 tax amendment form However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. 2011 tax amendment form Once you make this choice, you cannot change it without permission from the Internal Revenue Service. 2011 tax amendment form   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 2011 tax amendment form The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. 2011 tax amendment form Your loss is subject to the 2%-of-adjusted-gross-income limit. 2011 tax amendment form You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. 2011 tax amendment form Nonbusiness bad debt. 2011 tax amendment form   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. 2011 tax amendment form How to report. 2011 tax amendment form   The kind of deduction you choose for your loss on deposits determines how you report your loss. 2011 tax amendment form If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). 2011 tax amendment form Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. 2011 tax amendment form Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). 2011 tax amendment form More information. 2011 tax amendment form   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. 2011 tax amendment form Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. 2011 tax amendment form You also must be able to support the amount you take as a deduction. 2011 tax amendment form Casualty loss proof. 2011 tax amendment form   For a casualty loss, your records should show all the following. 2011 tax amendment form The type of casualty (car accident, fire, storm, etc. 2011 tax amendment form ) and when it occurred. 2011 tax amendment form That the loss was a direct result of the casualty. 2011 tax amendment form That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. 2011 tax amendment form Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 2011 tax amendment form Theft loss proof. 2011 tax amendment form   For a theft loss, your records should show all the following. 2011 tax amendment form When you discovered that your property was missing. 2011 tax amendment form That your property was stolen. 2011 tax amendment form That you were the owner of the property. 2011 tax amendment form Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 2011 tax amendment form It is important that you have records that will prove your deduction. 2011 tax amendment form If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. 2011 tax amendment form Figuring a Loss Figure the amount of your loss using the following steps. 2011 tax amendment form Determine your adjusted basis in the property before the casualty or theft. 2011 tax amendment form Determine the decrease in fair market value of the property as a result of the casualty or theft. 2011 tax amendment form From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. 2011 tax amendment form For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. 2011 tax amendment form Gain from reimbursement. 2011 tax amendment form   If your reimbursement is more than your adjusted basis in the property, you have a gain. 2011 tax amendment form This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. 2011 tax amendment form If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. 2011 tax amendment form See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. 2011 tax amendment form Leased property. 2011 tax amendment form   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. 2011 tax amendment form Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. 2011 tax amendment form The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. 2011 tax amendment form FMV of stolen property. 2011 tax amendment form   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. 2011 tax amendment form Example. 2011 tax amendment form Several years ago, you purchased silver dollars at face value for $150. 2011 tax amendment form This is your adjusted basis in the property. 2011 tax amendment form Your silver dollars were stolen this year. 2011 tax amendment form The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. 2011 tax amendment form Your theft loss is $150. 2011 tax amendment form Recovered stolen property. 2011 tax amendment form   Recovered stolen property is your property that was stolen and later returned to you. 2011 tax amendment form If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. 2011 tax amendment form Use this amount to refigure your total loss for the year in which the loss was deducted. 2011 tax amendment form   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. 2011 tax amendment form But report the difference only up to the amount of the loss that reduced your tax. 2011 tax amendment form For more information on the amount to report, see Recoveries in chapter 12. 2011 tax amendment form Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. 2011 tax amendment form However, other measures can also be used to establish certain decreases. 2011 tax amendment form Appraisal. 2011 tax amendment form   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. 2011 tax amendment form The appraiser must recognize the effects of any general market decline that may occur along with the casualty. 2011 tax amendment form This information is needed to limit any deduction to the actual loss resulting from damage to the property. 2011 tax amendment form   Several factors are important in evaluating the accuracy of an appraisal, including the following. 2011 tax amendment form The appraiser's familiarity with your property before and after the casualty or theft. 2011 tax amendment form The appraiser's knowledge of sales of comparable property in the area. 2011 tax amendment form The appraiser's knowledge of conditions in the area of the casualty. 2011 tax amendment form The appraiser's method of appraisal. 2011 tax amendment form    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. 2011 tax amendment form For more information on disasters, see Disaster Area Losses, in Pub. 2011 tax amendment form 547. 2011 tax amendment form Cost of cleaning up or making repairs. 2011 tax amendment form   The cost of repairing damaged property is not part of a casualty loss. 2011 tax amendment form Neither is the cost of cleaning up after a casualty. 2011 tax amendment form But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. 2011 tax amendment form The repairs are actually made. 2011 tax amendment form The repairs are necessary to bring the property back to its condition before the casualty. 2011 tax amendment form The amount spent for repairs is not excessive. 2011 tax amendment form The repairs take care of the damage only. 2011 tax amendment form The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. 2011 tax amendment form Landscaping. 2011 tax amendment form   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. 2011 tax amendment form You may be able to measure your loss by what you spend on the following. 2011 tax amendment form Removing destroyed or damaged trees and shrubs minus any salvage you receive. 2011 tax amendment form Pruning and other measures taken to preserve damaged trees and shrubs. 2011 tax amendment form Replanting necessary to restore the property to its approximate value before the casualty. 2011 tax amendment form Car value. 2011 tax amendment form    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. 2011 tax amendment form You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. 2011 tax amendment form The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. 2011 tax amendment form If your car is not listed in the books, determine its value from other sources. 2011 tax amendment form A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. 2011 tax amendment form Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. 2011 tax amendment form Cost of protection. 2011 tax amendment form   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. 2011 tax amendment form The amount you spend on insurance or to board up your house against a storm is not part of your loss. 2011 tax amendment form   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. 2011 tax amendment form An example would be the cost of a dike to prevent flooding. 2011 tax amendment form Exception. 2011 tax amendment form   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. 2011 tax amendment form See Disaster Area Losses in Publication 547. 2011 tax amendment form Incidental expenses. 2011 tax amendment form   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. 2011 tax amendment form Replacement cost. 2011 tax amendment form   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. 2011 tax amendment form Sentimental value. 2011 tax amendment form   Do not consider sentimental value when determining your loss. 2011 tax amendment form If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. 2011 tax amendment form Decline in market value of property in or near casualty area. 2011 tax amendment form   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. 2011 tax amendment form You have a loss only for actual casualty damage to your property. 2011 tax amendment form However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. 2011 tax amendment form Costs of photographs and appraisals. 2011 tax amendment form    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. 2011 tax amendment form Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. 2011 tax amendment form    Appraisals are used to figure the decrease in FMV because of a casualty or theft. 2011 tax amendment form See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. 2011 tax amendment form   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. 2011 tax amendment form You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). 2011 tax amendment form For information about miscellaneous deductions, see chapter 28. 2011 tax amendment form Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. 2011 tax amendment form For more information, see chapter 13. 2011 tax amendment form Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. 2011 tax amendment form You do not have a casualty or theft loss to the extent you are reimbursed. 2011 tax amendment form If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. 2011 tax amendment form You must reduce your loss even if you do not receive payment until a later tax year. 2011 tax amendment form See Reimbursement Received After Deducting Loss , later. 2011 tax amendment form Failure to file a claim for reimbursement. 2011 tax amendment form   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. 2011 tax amendment form Otherwise, you cannot deduct this loss as a casualty or theft loss. 2011 tax amendment form However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). 2011 tax amendment form Example. 2011 tax amendment form You have a car insurance policy with a $1,000 deductible. 2011 tax amendment form Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). 2011 tax amendment form This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. 2011 tax amendment form Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. 2011 tax amendment form Other types of reimbursements are discussed next. 2011 tax amendment form Also see the Instructions for Form 4684. 2011 tax amendment form Employer's emergency disaster fund. 2011 tax amendment form   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. 2011 tax amendment form Take into consideration only the amount you used to replace your destroyed or damaged property. 2011 tax amendment form Example. 2011 tax amendment form Your home was extensively damaged by a tornado. 2011 tax amendment form Your loss after reimbursement from your insurance company was $10,000. 2011 tax amendment form Your employer set up a disaster relief fund for its employees. 2011 tax amendment form Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. 2011 tax amendment form You received $4,000 from the fund and spent the entire amount on repairs to your home. 2011 tax amendment form In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. 2011 tax amendment form Your casualty loss before applying the deduction limits discussed later is $6,000. 2011 tax amendment form Cash gifts. 2011 tax amendment form   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. 2011 tax amendment form This applies even if you use the money to pay for repairs to property damaged in the disaster. 2011 tax amendment form Example. 2011 tax amendment form Your home was damaged by a hurricane. 2011 tax amendment form Relatives and neighbors made cash gifts to you that were excludable from your income. 2011 tax amendment form You used part of the cash gifts to pay for repairs to your home. 2011 tax amendment form There were no limits or restrictions on how you could use the cash gifts. 2011 tax amendment form Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. 2011 tax amendment form Insurance payments for living expenses. 2011 tax amendment form   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. 2011 tax amendment form You lose the use of your main home because of a casualty. 2011 tax amendment form Government authorities do not allow you access to your main home because of a casualty or threat of one. 2011 tax amendment form Inclusion in income. 2011 tax amendment form   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. 2011 tax amendment form Report this amount on Form 1040, line 21. 2011 tax amendment form However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. 2011 tax amendment form See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. 2011 tax amendment form   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. 2011 tax amendment form Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. 2011 tax amendment form Generally, these expenses include the amounts you pay for the following. 2011 tax amendment form Rent for suitable housing. 2011 tax amendment form Transportation. 2011 tax amendment form Food. 2011 tax amendment form Utilities. 2011 tax amendment form Miscellaneous services. 2011 tax amendment form Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. 2011 tax amendment form Example. 2011 tax amendment form As a result of a fire, you vacated your apartment for a month and moved to a motel. 2011 tax amendment form You normally pay $525 a month for rent. 2011 tax amendment form None was charged for the month the apartment was vacated. 2011 tax amendment form Your motel rent for this month was $1,200. 2011 tax amendment form You normally pay $200 a month for food. 2011 tax amendment form Your food expenses for the month you lived in the motel were $400. 2011 tax amendment form You received $1,100 from your insurance company to cover your living expenses. 2011 tax amendment form You determine the payment you must include in income as follows. 2011 tax amendment form 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. 2011 tax amendment form   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. 2011 tax amendment form Example. 2011 tax amendment form Your main home was destroyed by a tornado in August 2011. 2011 tax amendment form You regained use of your home in November 2012. 2011 tax amendment form The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. 2011 tax amendment form You include this amount in income on your 2012 Form 1040. 2011 tax amendment form If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. 2011 tax amendment form Disaster relief. 2011 tax amendment form   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. 2011 tax amendment form Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. 2011 tax amendment form For more information, see Disaster Area Losses in Publication 547. 2011 tax amendment form Disaster unemployment assistance payments are unemployment benefits that are taxable. 2011 tax amendment form Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. 2011 tax amendment form Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. 2011 tax amendment form See Disaster Area Losses in Publication 547. 2011 tax amendment form Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. 2011 tax amendment form This section explains the adjustment you may have to make. 2011 tax amendment form Actual reimbursement less than expected. 2011 tax amendment form   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. 2011 tax amendment form Example. 2011 tax amendment form Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. 2011 tax amendment form The accident was due to the negligence of the other driver. 2011 tax amendment form At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. 2011 tax amendment form You did not have a deductible loss in 2012. 2011 tax amendment form In January 2013, the court awarded you a judgment of $2,000. 2011 tax amendment form However, in July it became apparent that you will be unable to collect any amount from the other driver. 2011 tax amendment form You can deduct the loss in 2013 subject to the limits discussed later. 2011 tax amendment form Actual reimbursement more than expected. 2011 tax amendment form   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. 2011 tax amendment form However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. 2011 tax amendment form You do not refigure your tax for the year you claimed the deduction. 2011 tax amendment form For more information, see Recoveries in chapter 12. 2011 tax amendment form If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. 2011 tax amendment form If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. 2011 tax amendment form Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. 2011 tax amendment form See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. 2011 tax amendment form Actual reimbursement same as expected. 2011 tax amendment form   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. 2011 tax amendment form Example. 2011 tax amendment form In December 2013, you had a collision while driving your personal car. 2011 tax amendment form Repairs to the car cost $950. 2011 tax amendment form You had $100 deductible collision insurance. 2011 tax amendment form Your insurance company agreed to reimburse you for the rest of the damage. 2011 tax amendment form Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. 2011 tax amendment form Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. 2011 tax amendment form When you receive the $850 from the insurance company in 2014, do not report it as income. 2011 tax amendment form Single Casualty on Multiple Properties Personal property. 2011 tax amendment form   Personal property is any property that is not real property. 2011 tax amendment form If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. 2011 tax amendment form Then combine these separate losses to figure the total loss from that casualty or theft. 2011 tax amendment form Example. 2011 tax amendment form A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. 2011 tax amendment form You did not have fire insurance to cover your loss. 2011 tax amendment form (This was the only casualty or theft you had during the year. 2011 tax amendment form ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. 2011 tax amendment form The rug cost $3,000 and had an FMV of $2,500 just before the fire. 2011 tax amendment form You bought the table at an auction for $100 before discovering it was an antique. 2011 tax amendment form It had been appraised at $900 before the fire. 2011 tax amendment form You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. 2011 tax amendment form   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. 2011 tax amendment form Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. 2011 tax amendment form Example. 2011 tax amendment form You bought your home a few years ago. 2011 tax amendment form You paid $160,000 ($20,000 for the land and $140,000 for the house). 2011 tax amendment form You also spent $2,000 for landscaping. 2011 tax amendment form This year a fire destroyed your home. 2011 tax amendment form The fire also damaged the shrubbery and trees in your yard. 2011 tax amendment form The fire was your only casualty or theft loss this year. 2011 tax amendment form Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. 2011 tax amendment form (The loss to your household furnishings is not shown in this example. 2011 tax amendment form It would be figured separately on each item, as explained earlier under Personal property . 2011 tax amendment form ) Shortly after the fire, the insurance company paid you $155,000 for the loss. 2011 tax amendment form You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. 2011 tax amendment form If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. 2011 tax amendment form You must reduce each casualty or theft loss by $100 ($100 rule). 2011 tax amendment form You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). 2011 tax amendment form You make these reductions on Form 4684. 2011 tax amendment form These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. 2011 tax amendment form For more detailed explanations and examples, see Publication 547. 2011 tax amendment form Table 25-1. 2011 tax amendment form How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. 2011 tax amendment form Apply this rule after you have figured the amount of your loss. 2011 tax amendment form You must reduce your total casualty or theft loss by 10% of your adjusted gross income. 2011 tax amendment form Apply this rule after you reduce each loss by $100 (the $100 rule). 2011 tax amendment form Single Event Apply this rule only once, even if many pieces of property are affected. 2011 tax amendment form Apply this rule only once, even if many pieces of property are affected. 2011 tax amendment form More Than One Event Apply to the loss from each event. 2011 tax amendment form Apply to the total of all your losses from all events. 2011 tax amendment form More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. 2011 tax amendment form Apply separately to each person. 2011 tax amendment form Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. 2011 tax amendment form Apply as if you were one person. 2011 tax amendment form Filing Separately Apply separately to each spouse. 2011 tax amendment form Apply separately to each spouse. 2011 tax amendment form More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. 2011 tax amendment form Apply separately to each owner of jointly owned property. 2011 tax amendment form Property used partly for business and partly for personal purposes. 2011 tax amendment form   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. 2011 tax amendment form You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. 2011 tax amendment form $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. 2011 tax amendment form This reduction applies to each total casualty or theft loss. 2011 tax amendment form It does not matter how many pieces of property are involved in an event. 2011 tax amendment form Only a single $100 reduction applies. 2011 tax amendment form Example. 2011 tax amendment form A hailstorm damages your home and your car. 2011 tax amendment form Determine the amount of loss, as discussed earlier, for each of these items. 2011 tax amendment form Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. 2011 tax amendment form Single event. 2011 tax amendment form   Generally, events closely related in origin cause a single casualty. 2011 tax amendment form It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. 2011 tax amendment form 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. 2011 tax amendment form Apply this rule after you reduce each loss by $100. 2011 tax amendment form For more information, see the Form 4684 instructions. 2011 tax amendment form If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. 2011 tax amendment form Example 1. 2011 tax amendment form In June, you discovered that your house had been burglarized. 2011 tax amendment form Your loss after insurance reimbursement was $2,000. 2011 tax amendment form Your adjusted gross income for the year you discovered the theft is $29,500. 2011 tax amendment form You first apply the $100 rule and then the 10% rule. 2011 tax amendment form Figure your theft loss deduction as follows. 2011 tax amendment form 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). 2011 tax amendment form Example 2. 2011 tax amendment form In March, you had a car accident that totally destroyed your car. 2011 tax amendment form You did not have collision insurance on your car, so you did not receive any insurance reimbursement. 2011 tax amendment form Your loss on the car was $1,800. 2011 tax amendment form In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. 2011 tax amendment form Your loss on the basement items after reimbursement was $2,100. 2011 tax amendment form Your adjusted gross income for the year that the accident and fire occurred is $25,000. 2011 tax amendment form You figure your casualty loss deduction as follows. 2011 tax amendment form       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. 2011 tax amendment form   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. 2011 tax amendment form Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. 2011 tax amendment form Casualty or theft gains do not include gains you choose to postpone. 2011 tax amendment form See Publication 547 for information on the postponement of gain. 2011 tax amendment form Losses more than gains. 2011 tax amendment form   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. 2011 tax amendment form The rest, if any, is your deductible loss from personal-use property. 2011 tax amendment form Gains more than losses. 2011 tax amendment form   If your recognized gains are more than your losses, subtract your losses from your gains. 2011 tax amendment form The difference is treated as capital gain and must be reported on Schedule D (Form 1040). 2011 tax amendment form The 10% rule does not apply to your gains. 2011 tax amendment form When To Report Gains and Losses Gains. 2011 tax amendment form   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. 2011 tax amendment form You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. 2011 tax amendment form If you have a loss, see Table 25-2 . 2011 tax amendment form Table 25-2. 2011 tax amendment form When To Deduct a Loss IF you have a loss. 2011 tax amendment form . 2011 tax amendment form . 2011 tax amendment form THEN deduct it in the year. 2011 tax amendment form . 2011 tax amendment form . 2011 tax amendment form from a casualty, the loss occurred. 2011 tax amendment form in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. 2011 tax amendment form from a theft, the theft was discovered. 2011 tax amendment form on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. 2011 tax amendment form • bad debt, deposits are totally worthless. 2011 tax amendment form Losses. 2011 tax amendment form   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. 2011 tax amendment form This is true even if you do not repair or replace the damaged property until a later year. 2011 tax amendment form   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. 2011 tax amendment form   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. 2011 tax amendment form Loss on deposits. 2011 tax amendment form   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. 2011 tax amendment form Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. 2011 tax amendment form However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. 2011 tax amendment form The year the disaster occurred. 2011 tax amendment form The year immediately preceding the year the disaster occurred. 2011 tax amendment form Gains. 2011 tax amendment form    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. 2011 tax amendment form For those special rules, see Publication 547. 2011 tax amendment form Postponed tax deadlines. 2011 tax amendment form   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. 2011 tax amendment form The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. 2011 tax amendment form   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). 2011 tax amendment form Go to www. 2011 tax amendment form irs. 2011 tax amendment form gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. 2011 tax amendment form Who is eligible. 2011 tax amendment form   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. 2011 tax amendment form Any individual whose main home is located in a covered disaster area (defined next). 2011 tax amendment form Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. 2011 tax amendment form Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. 2011 tax amendment form Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 2011 tax amendment form The main home or principal place of business does not have to be located in the covered disaster area. 2011 tax amendment form Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 2011 tax amendment form The spouse on a joint return with a taxpayer who is eligible for postponements. 2011 tax amendment form Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. 2011 tax amendment form Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. 2011 tax amendment form Any other person determined by the IRS to be affected by a federally declared disaster. 2011 tax amendment form Covered disaster area. 2011 tax amendment form   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. 2011 tax amendment form Abatement of interest and penalties. 2011 tax amendment form   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. 2011 tax amendment form More information. 2011 tax amendment form   For more information, see Disaster Area Losses in Publication 547. 2011 tax amendment form How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. 2011 tax amendment form If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. 2011 tax amendment form Combine the gains and losses on one Form 4684. 2011 tax amendment form Follow the form instructions as to which lines to fill out. 2011 tax amendment form In addition, you must use the appropriate schedule to report a gain or loss. 2011 tax amendment form The schedule you use depends on whether you have a gain or loss. 2011 tax amendment form If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. 2011 tax amendment form   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. 2011 tax amendment form Amounts you spend to restore your property after a casualty increase your adjusted basis. 2011 tax amendment form See Adjusted Basis in chapter 13 for more information. 2011 tax amendment form Net operating loss (NOL). 2011 tax amendment form    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. 2011 tax amendment form You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. 2011 tax amendment form Or, you can use it to lower your tax in a later year. 2011 tax amendment form You do not have to be in business to have an NOL from a casualty or theft loss. 2011 tax amendment form For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. 2011 tax amendment form Prev  Up  Next   Home   More Online Publications