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2011 Tax Software

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2011 Tax Software

2011 tax software 14. 2011 tax software   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. 2011 tax software  If you are a U. 2011 tax software S. 2011 tax software citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. 2011 tax software S. 2011 tax software law. 2011 tax software This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. 2011 tax software Introduction This chapter discusses the tax consequences of selling or trading investment property. 2011 tax software It explains the following. 2011 tax software What a sale or trade is. 2011 tax software Figuring gain or loss. 2011 tax software Nontaxable trades. 2011 tax software Related party transactions. 2011 tax software Capital gains or losses. 2011 tax software Capital assets and noncapital assets. 2011 tax software Holding period. 2011 tax software Rollover of gain from publicly traded securities. 2011 tax software Other property transactions. 2011 tax software   Certain transfers of property are not discussed here. 2011 tax software They are discussed in other IRS publications. 2011 tax software These include the following. 2011 tax software Sales of a main home, covered in chapter 15. 2011 tax software Installment sales, covered in Publication 537, Installment Sales. 2011 tax software Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. 2011 tax software Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. 2011 tax software    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. 2011 tax software Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. 2011 tax software It also discusses investment-related expenses. 2011 tax software Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. 2011 tax software Generally, you should receive the statement by February 15 of the next year. 2011 tax software It will show the gross proceeds from the sale. 2011 tax software If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. 2011 tax software Generally, a covered security is a security you acquired after 2010, with certain exceptions. 2011 tax software See the Instructions for Form 8949. 2011 tax software The IRS will also get a copy of Form 1099-B from the broker. 2011 tax software Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. 2011 tax software What Is a Sale or Trade? This section explains what is a sale or trade. 2011 tax software It also explains certain transactions and events that are treated as sales or trades. 2011 tax software A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. 2011 tax software A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. 2011 tax software Sale and purchase. 2011 tax software   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. 2011 tax software The sale and purchase are two separate transactions. 2011 tax software But see Like-kind exchanges under Nontaxable Trades, later. 2011 tax software Redemption of stock. 2011 tax software   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. 2011 tax software Dividend versus sale or trade. 2011 tax software   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. 2011 tax software Both direct and indirect ownership of stock will be considered. 2011 tax software The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. 2011 tax software Redemption or retirement of bonds. 2011 tax software   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. 2011 tax software   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. 2011 tax software For details, see Regulations section 1. 2011 tax software 1001-3. 2011 tax software Surrender of stock. 2011 tax software   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. 2011 tax software The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. 2011 tax software Worthless securities. 2011 tax software    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. 2011 tax software This affects whether your capital loss is long term or short term. 2011 tax software See Holding Period , later. 2011 tax software   Worthless securities also include securities that you abandon after March 12, 2008. 2011 tax software To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. 2011 tax software All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. 2011 tax software    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. 2011 tax software Do not deduct them in the year the stock became worthless. 2011 tax software How to report loss. 2011 tax software    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. 2011 tax software In column (a), enter “Worthless. 2011 tax software ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. 2011 tax software See Form 8949 and the Instructions for Form 8949. 2011 tax software For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2011 tax software See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2011 tax software Filing a claim for refund. 2011 tax software   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. 2011 tax software You must use Form 1040X, Amended U. 2011 tax software S. 2011 tax software Individual Income Tax Return, to amend your return for the year the security became worthless. 2011 tax software You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. 2011 tax software For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. 2011 tax software How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. 2011 tax software Gain. 2011 tax software   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. 2011 tax software Loss. 2011 tax software   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. 2011 tax software Adjusted basis. 2011 tax software   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. 2011 tax software See chapter 13 for more information about determining the adjusted basis of property. 2011 tax software Amount realized. 2011 tax software   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). 2011 tax software Amount realized includes the money you receive plus the fair market value of any property or services you receive. 2011 tax software If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. 2011 tax software If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. 2011 tax software For more information, see Publication 537. 2011 tax software Fair market value. 2011 tax software   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. 2011 tax software Example. 2011 tax software You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. 2011 tax software Your gain is $3,000 ($10,000 − $7,000). 2011 tax software Debt paid off. 2011 tax software    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. 2011 tax software This is true even if neither you nor the buyer is personally liable for the debt. 2011 tax software For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. 2011 tax software Example. 2011 tax software You sell stock that you had pledged as security for a bank loan of $8,000. 2011 tax software Your basis in the stock is $6,000. 2011 tax software The buyer pays off your bank loan and pays you $20,000 in cash. 2011 tax software The amount realized is $28,000 ($20,000 + $8,000). 2011 tax software Your gain is $22,000 ($28,000 − $6,000). 2011 tax software Payment of cash. 2011 tax software   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. 2011 tax software Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. 2011 tax software If the result is a positive number, it is a gain. 2011 tax software If the result is a negative number, it is a loss. 2011 tax software No gain or loss. 2011 tax software   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. 2011 tax software In this case, you may have neither a gain nor a loss. 2011 tax software See Basis Other Than Cost in chapter 13. 2011 tax software Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. 2011 tax software For more information on nontaxable trades, see chapter 1 of Publication 544. 2011 tax software Like-kind exchanges. 2011 tax software   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. 2011 tax software To be nontaxable, a trade must meet all six of the following conditions. 2011 tax software The property must be business or investment property. 2011 tax software You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. 2011 tax software Neither property may be property used for personal purposes, such as your home or family car. 2011 tax software The property must not be held primarily for sale. 2011 tax software The property you trade and the property you receive must not be property you sell to customers, such as merchandise. 2011 tax software The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. 2011 tax software However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. 2011 tax software Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. 2011 tax software There must be a trade of like property. 2011 tax software The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. 2011 tax software The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. 2011 tax software The trade of a piece of machinery for a store building is not a trade of like property. 2011 tax software Real property located in the United States and real property located outside the United States are not like property. 2011 tax software Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. 2011 tax software The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. 2011 tax software The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. 2011 tax software    If you trade property with a related party in a like-kind exchange, a special rule may apply. 2011 tax software See Related Party Transactions , later in this chapter. 2011 tax software Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. 2011 tax software Partly nontaxable exchange. 2011 tax software   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. 2011 tax software You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. 2011 tax software You cannot deduct a loss. 2011 tax software Like property and unlike property transferred. 2011 tax software   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. 2011 tax software The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. 2011 tax software Like property and money transferred. 2011 tax software   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. 2011 tax software Basis of property received. 2011 tax software   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. 2011 tax software How to report. 2011 tax software   You must report the trade of like property on Form 8824. 2011 tax software If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. 2011 tax software See the instructions for Line 22 in the Instructions for Form 8824. 2011 tax software   For information on using Form 4797, see chapter 4 of Publication 544. 2011 tax software Corporate stocks. 2011 tax software   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. 2011 tax software Corporate reorganizations. 2011 tax software   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. 2011 tax software If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. 2011 tax software Stock for stock of the same corporation. 2011 tax software   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. 2011 tax software This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. 2011 tax software Convertible stocks and bonds. 2011 tax software   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. 2011 tax software Property for stock of a controlled corporation. 2011 tax software   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. 2011 tax software This rule applies both to individuals and to groups who transfer property to a corporation. 2011 tax software It does not apply if the corporation is an investment company. 2011 tax software   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. 2011 tax software   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. 2011 tax software For details, see Regulations section 1. 2011 tax software 351-3. 2011 tax software Additional information. 2011 tax software   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. 2011 tax software Insurance policies and annuities. 2011 tax software   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. 2011 tax software   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. 2011 tax software For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. 2011 tax software Revenue Ruling 2003-76 is available at www. 2011 tax software irs. 2011 tax software gov/irb/2003-33_IRB/ar11. 2011 tax software html. 2011 tax software Revenue Procedure 2008-24 is available at www. 2011 tax software irs. 2011 tax software gov/irb/2008-13_IRB/ar13. 2011 tax software html. 2011 tax software For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. 2011 tax software Revenue Procedure 2011-38 is available at www. 2011 tax software irs. 2011 tax software gov/irb/2011-30_IRB/ar09. 2011 tax software html. 2011 tax software   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. 2011 tax software A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. 2011 tax software The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. 2011 tax software   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. 2011 tax software Demutualization of life insurance companies. 2011 tax software   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. 2011 tax software See Demutualization of Life Insurance Companies in Publication 550. 2011 tax software U. 2011 tax software S. 2011 tax software Treasury notes or bonds. 2011 tax software   You can trade certain issues of U. 2011 tax software S. 2011 tax software Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. 2011 tax software See Savings bonds traded in chapter 1 of Publication 550 for more information. 2011 tax software Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. 2011 tax software This nonrecognition rule does not apply in the following situations. 2011 tax software The recipient spouse or former spouse is a nonresident alien. 2011 tax software Property is transferred in trust and liability exceeds basis. 2011 tax software Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. 2011 tax software For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. 2011 tax software Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. 2011 tax software The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. 2011 tax software This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. 2011 tax software This rule applies for purposes of determining loss as well as gain. 2011 tax software Any gain recognized on a transfer in trust increases the basis. 2011 tax software A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. 2011 tax software Related Party Transactions Special rules apply to the sale or trade of property between related parties. 2011 tax software Gain on sale or trade of depreciable property. 2011 tax software   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. 2011 tax software See chapter 3 of Publication 544 for more information. 2011 tax software Like-kind exchanges. 2011 tax software   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. 2011 tax software See Like-kind exchanges , earlier, under Nontaxable Trades. 2011 tax software   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. 2011 tax software However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. 2011 tax software See Related Party Transactions in chapter 4 of Publication 550 for exceptions. 2011 tax software Losses on sales or trades of property. 2011 tax software   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. 2011 tax software Members of your family. 2011 tax software This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2011 tax software ), and lineal descendants (children, grandchildren, etc. 2011 tax software ). 2011 tax software A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2011 tax software A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2011 tax software (See Constructive ownership of stock , later. 2011 tax software ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2011 tax software   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. 2011 tax software A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. 2011 tax software Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. 2011 tax software A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. 2011 tax software A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. 2011 tax software Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 tax software Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2011 tax software An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). 2011 tax software Two corporations that are members of the same controlled group. 2011 tax software (Under certain conditions, however, these losses are not disallowed but must be deferred. 2011 tax software ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. 2011 tax software Multiple property sales or trades. 2011 tax software   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. 2011 tax software The gain on each item may be taxable. 2011 tax software However, you cannot deduct the loss on any item. 2011 tax software Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. 2011 tax software Indirect transactions. 2011 tax software   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. 2011 tax software This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. 2011 tax software Constructive ownership of stock. 2011 tax software   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. 2011 tax software Rule 1. 2011 tax software   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 software Rule 2. 2011 tax software   An individual is considered to own the stock directly or indirectly owned by or for his or her family. 2011 tax software Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. 2011 tax software Rule 3. 2011 tax software   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 software Rule 4. 2011 tax software   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. 2011 tax software But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. 2011 tax software Property received from a related party. 2011 tax software    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. 2011 tax software This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. 2011 tax software This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. 2011 tax software   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. 2011 tax software Example 1. 2011 tax software Your brother sells you stock for $7,600. 2011 tax software His cost basis is $10,000. 2011 tax software Your brother cannot deduct the loss of $2,400. 2011 tax software Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. 2011 tax software Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). 2011 tax software Example 2. 2011 tax software If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). 2011 tax software You cannot deduct the loss that was not allowed to your brother. 2011 tax software Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. 2011 tax software Character of gain or loss. 2011 tax software   You need to classify your gains and losses as either ordinary or capital gains or losses. 2011 tax software You then need to classify your capital gains and losses as either short term or long term. 2011 tax software If you have long-term gains and losses, you must identify your 28% rate gains and losses. 2011 tax software If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. 2011 tax software   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. 2011 tax software Reporting capital gains and losses is explained in chapter 16. 2011 tax software Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. 2011 tax software Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. 2011 tax software A sale or trade of a noncapital asset generally results in ordinary gain or loss. 2011 tax software Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. 2011 tax software In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. 2011 tax software Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. 2011 tax software Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. 2011 tax software Any property you own is a capital asset, except the following noncapital assets. 2011 tax software Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. 2011 tax software For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. 2011 tax software Depreciable property used in your trade or business, even if fully depreciated. 2011 tax software Real property used in your trade or business. 2011 tax software A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. 2011 tax software For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. 2011 tax software Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). 2011 tax software U. 2011 tax software S. 2011 tax software Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. 2011 tax software Certain commodities derivative financial instruments held by commodities derivatives dealers. 2011 tax software Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. 2011 tax software Supplies of a type you regularly use or consume in the ordinary course of your trade or business. 2011 tax software Investment Property Investment property is a capital asset. 2011 tax software Any gain or loss from its sale or trade is generally a capital gain or loss. 2011 tax software Gold, silver, stamps, coins, gems, etc. 2011 tax software   These are capital assets except when they are held for sale by a dealer. 2011 tax software Any gain or loss you have from their sale or trade generally is a capital gain or loss. 2011 tax software Stocks, stock rights, and bonds. 2011 tax software   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. 2011 tax software However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. 2011 tax software Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. 2011 tax software However, you cannot deduct a loss from selling personal use property. 2011 tax software Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. 2011 tax software You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. 2011 tax software You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. 2011 tax software You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. 2011 tax software For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2011 tax software See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2011 tax software You can revoke the election if you have IRS approval. 2011 tax software To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. 2011 tax software See, for example, Rev. 2011 tax software Proc. 2011 tax software 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. 2011 tax software Proc. 2011 tax software 2013–32, available at www. 2011 tax software irs. 2011 tax software gov/irb/2013-01_IRB/ar06. 2011 tax software html. 2011 tax software Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. 2011 tax software Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. 2011 tax software Short-term government obligations. 2011 tax software   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. 2011 tax software This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. 2011 tax software Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. 2011 tax software   However, do not treat these gains as income to the extent you previously included the discount in income. 2011 tax software See Discount on Short-Term Obligations in chapter 1 of Publication 550. 2011 tax software Short-term nongovernment obligations. 2011 tax software   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). 2011 tax software This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. 2011 tax software   However, to the extent you previously included the discount in income, you do not have to include it in income again. 2011 tax software See Discount on Short-Term Obligations in chapter 1 of Publication 550. 2011 tax software Tax-exempt state and local government bonds. 2011 tax software   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. 2011 tax software To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. 2011 tax software   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. 2011 tax software For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. 2011 tax software   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. 2011 tax software If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. 2011 tax software If you bought the bonds after April 30, 1993, the gain is ordinary income. 2011 tax software   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. 2011 tax software For more information, see Market Discount Bonds in chapter 1 of Publication 550. 2011 tax software    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. 2011 tax software Redeemed before maturity. 2011 tax software   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. 2011 tax software   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. 2011 tax software However, you must report the unearned part of OID as a capital gain. 2011 tax software Example. 2011 tax software On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. 2011 tax software The face amount of the bond was $1,000. 2011 tax software The $200 discount was OID. 2011 tax software At the time the bond was issued, the issuer had no intention of redeeming it before it matured. 2011 tax software The bond was callable at its face amount beginning 10 years after the issue date. 2011 tax software The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. 2011 tax software The OID earned during the time you held the bond, $73, is not taxable. 2011 tax software The $60 accrued annual interest also is not taxable. 2011 tax software However, you must report the unearned part of OID ($127) as a capital gain. 2011 tax software Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). 2011 tax software   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. 2011 tax software The rest of the gain is capital gain. 2011 tax software If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. 2011 tax software This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. 2011 tax software Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). 2011 tax software   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. 2011 tax software Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. 2011 tax software See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. 2011 tax software   If you sell or trade the debt instrument before maturity, your gain is a capital gain. 2011 tax software However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. 2011 tax software In this case, the rest of the gain is capital gain. 2011 tax software Market discount bonds. 2011 tax software   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. 2011 tax software If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. 2011 tax software The rest of the gain is capital gain. 2011 tax software See Market Discount Bonds in chapter 1 of Publication 550. 2011 tax software   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. 2011 tax software See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. 2011 tax software Retirement of debt instrument. 2011 tax software   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. 2011 tax software Notes of individuals. 2011 tax software   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. 2011 tax software An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. 2011 tax software The lender is not in the business of lending money. 2011 tax software The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. 2011 tax software Avoiding federal tax is not one of the principal purposes of the loan. 2011 tax software   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. 2011 tax software When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. 2011 tax software The rest of the gain, if any, is capital gain. 2011 tax software Any loss on the sale or redemption is capital loss. 2011 tax software Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. 2011 tax software Ordinary loss. 2011 tax software Casualty loss. 2011 tax software Nonbusiness bad debt (short-term capital loss). 2011 tax software  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. 2011 tax software Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. 2011 tax software Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. 2011 tax software Report the loss on Form 4797, line 10. 2011 tax software Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. 2011 tax software Report the gain on Form 8949. 2011 tax software See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. 2011 tax software For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2011 tax software See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2011 tax software Holding Period If you sold or traded investment property, you must determine your holding period for the property. 2011 tax software Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. 2011 tax software Long-term or short-term. 2011 tax software   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. 2011 tax software If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. 2011 tax software   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. 2011 tax software The day you disposed of the property is part of your holding period. 2011 tax software Example. 2011 tax software If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. 2011 tax software If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. 2011 tax software Securities traded on established market. 2011 tax software   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. 2011 tax software    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. 2011 tax software Example. 2011 tax software You are a cash method, calendar year taxpayer. 2011 tax software You sold stock at a gain on December 30, 2013. 2011 tax software According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. 2011 tax software You received payment of the sales price on that same day. 2011 tax software Report your gain on your 2013 return, even though you received the payment in 2014. 2011 tax software The gain is long term or short term depending on whether you held the stock more than 1 year. 2011 tax software Your holding period ended on December 30. 2011 tax software If you had sold the stock at a loss, you would also report it on your 2013 return. 2011 tax software U. 2011 tax software S. 2011 tax software Treasury notes and bonds. 2011 tax software   The holding period of U. 2011 tax software S. 2011 tax software Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. 2011 tax software The holding period of U. 2011 tax software S. 2011 tax software Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. 2011 tax software Automatic investment service. 2011 tax software   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. 2011 tax software Your holding period starts on the day after the bank's purchase date. 2011 tax software If a share was bought over more than one purchase date, your holding period for that share is a split holding period. 2011 tax software A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. 2011 tax software Nontaxable trades. 2011 tax software   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. 2011 tax software Property received as a gift. 2011 tax software   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. 2011 tax software   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. 2011 tax software Inherited property. 2011 tax software   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. 2011 tax software This is true regardless of how long you actually held the property. 2011 tax software However, if you inherited property from someone who died in 2010, see the information below. 2011 tax software Inherited property from someone who died in 2010. 2011 tax software   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. 2011 tax software Real property bought. 2011 tax software   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. 2011 tax software However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. 2011 tax software The holding period cannot start until there is an actual contract of sale. 2011 tax software The holding period of the seller cannot end before that time. 2011 tax software Real property repossessed. 2011 tax software   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. 2011 tax software Your holding period does not include the time between the original sale and the repossession. 2011 tax software That is, it does not include the period during which the first buyer held the property. 2011 tax software Stock dividends. 2011 tax software   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. 2011 tax software   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. 2011 tax software This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. 2011 tax software Nontaxable stock rights. 2011 tax software   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. 2011 tax software The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. 2011 tax software Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. 2011 tax software You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. 2011 tax software Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. 2011 tax software To be deductible, nonbusiness bad debts must be totally worthless. 2011 tax software You cannot deduct a partly worthless nonbusiness debt. 2011 tax software Genuine debt required. 2011 tax software   A debt must be genuine for you to deduct a loss. 2011 tax software A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. 2011 tax software Basis in bad debt required. 2011 tax software    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. 2011 tax software For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. 2011 tax software If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. 2011 tax software When deductible. 2011 tax software   You can take a bad debt deduction only in the year the debt becomes worthless. 2011 tax software You do not have to wait until a debt is due to determine whether it is worthless. 2011 tax software A debt becomes worthless when there is no longer any chance that the amount owed will be paid. 2011 tax software   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. 2011 tax software You must only show that you have taken reasonable steps to collect the debt. 2011 tax software Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. 2011 tax software How to report bad debts. 2011 tax software    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. 2011 tax software    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. 2011 tax software    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. 2011 tax software See also Schedule D (Form 1040), Form 8949, and their separate instructions. 2011 tax software   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. 2011 tax software For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. 2011 tax software Filing a claim for refund. 2011 tax software    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. 2011 tax software To do this, use Form 1040X to amend your return for the year the debt became worthless. 2011 tax software You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. 2011 tax software For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. 2011 tax software Additional information. 2011 tax software   For more information, see Nonbusiness Bad Debts in Publication 550. 2011 tax software For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. 2011 tax software Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. 2011 tax software A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. 2011 tax software If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). 2011 tax software The result is your basis in the new stock or securities. 2011 tax software This adjustment postpones the loss deduction until the disposition of the new stock or securities. 2011 tax software Your holding period for the new stock or securities includes the holding period of the stock or securities sold. 2011 tax software For more information, see Wash Sales, in chapter 4 of Publication 550. 2011 tax software Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. 2011 tax software This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. 2011 tax software You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. 2011 tax software This postpones your gain until the year you dispose of the replacement property. 2011 tax software You qualify to make this choice if you meet all the following tests. 2011 tax software You sell publicly traded securities at a gain. 2011 tax software Publicly traded securities are securities traded on an established securities market. 2011 tax software Your gain from the sale is a capital gain. 2011 tax software During the 60-day period beginning on the date of the sale, you buy replacement property. 2011 tax software This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). 2011 tax software This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. 2011 tax software Amount of gain recognized. 2011 tax software   If you make the choice described in this section, you must recognize gain only up to the following amount. 2011 tax software The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). 2011 tax software  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. 2011 tax software If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. 2011 tax software Limit on gain postponed. 2011 tax software   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. 2011 tax software Basis of replacement property. 2011 tax software   You must subtract the amount of postponed gain from the basis of your replacement property. 2011 tax software How to report and postpone gain. 2011 tax software    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 2011 tax software Prev  Up  Next   Home   More Online Publications
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2011 tax software Publication 536 - Main Content Table of Contents NOL Steps How To Figure an NOLNonbusiness deductions (line 6). 2011 tax software Nonbusiness income (line 7). 2011 tax software Nonbusiness capital losses. 2011 tax software Business capital losses. 2011 tax software Illustrated Form 1045, Schedule A When To Use an NOLExceptions to 2-Year Carryback Rule Waiving the Carryback Period How To Carry an NOL Back or Forward How To Claim an NOL DeductionDeducting a Carryback Deducting a Carryforward Change in Marital Status Change in Filing Status Illustrated Form 1045 How To Figure an NOL CarryoverIllustrated Form 1045, Schedule B NOL Carryover From 2013 to 2014Worksheet Instructions How To Get Tax HelpLow Income Taxpayer Clinics NOL Steps Follow Steps 1 through 5 to figure and use your NOL. 2011 tax software Step 1. 2011 tax software   Complete your tax return for the year. 2011 tax software You may have an NOL if a negative figure appears on the line below: Individuals — Form 1040, line 41, or Form 1040NR, line 39. 2011 tax software Estates and trusts — Form 1041, line 22. 2011 tax software   If the amount on that line is not negative, stop here — you do not have an NOL. 2011 tax software Step 2. 2011 tax software   Determine whether you have an NOL and its amount. 2011 tax software See How To Figure an NOL , later. 2011 tax software If you do not have an NOL, stop here. 2011 tax software Step 3. 2011 tax software   Decide whether to carry the NOL back to a past year or to waive the carryback period and instead carry the NOL forward to a future year. 2011 tax software See When To Use an NOL , later. 2011 tax software Step 4. 2011 tax software   Deduct the NOL in the carryback or carryforward year. 2011 tax software See How To Claim an NOL Deduction , later. 2011 tax software If your NOL deduction is equal to or less than your taxable income without the deduction, stop here — you have used up your NOL. 2011 tax software Step 5. 2011 tax software   Determine the amount of your unused NOL. 2011 tax software See How To Figure an NOL Carryover , later. 2011 tax software Carry over the unused NOL to the next carryback or carryforward year and begin again at Step 4. 2011 tax software Note. 2011 tax software   If your NOL deduction includes more than one NOL amount, apply Step 5 separately to each NOL amount, starting with the amount from the earliest year. 2011 tax software How To Figure an NOL If your deductions for the year are more than your income for the year, you may have an NOL. 2011 tax software There are rules that limit what you can deduct when figuring an NOL. 2011 tax software In general, the following items are not allowed when figuring an NOL. 2011 tax software Any deduction for personal exemptions. 2011 tax software Capital losses in excess of capital gains. 2011 tax software The section 1202 exclusion of the gain from the sale or exchange of qualified small business stock. 2011 tax software Nonbusiness deductions in excess of nonbusiness income. 2011 tax software The net operating loss deduction. 2011 tax software The domestic production activities deduction. 2011 tax software Form 1045, Schedule A. 2011 tax software   Use Form 1045, Schedule A, to figure an NOL. 2011 tax software The following discussion explains Schedule A and includes an illustrated example. 2011 tax software   First, complete Form 1045, Schedule A, line 1, using amounts from your return. 2011 tax software If line 1 is a negative amount, you may have an NOL. 2011 tax software   Next, complete the rest of Form 1045, Schedule A, to figure your NOL. 2011 tax software Nonbusiness deductions (line 6). 2011 tax software   Enter on line 6 deductions that are not connected to your trade or business or your employment. 2011 tax software Examples of deductions not related to your trade or business are: Alimony paid, Deductions for contributions to an IRA or a self-employed retirement plan, Health savings account deduction, Archer medical savings account deduction, Most itemized deductions (except for casualty and theft losses, state income tax on trade and business income, and any employee business expenses), and The standard deduction. 2011 tax software   Do not include on line 6 the deduction for personal exemptions for you, your spouse, or your dependents. 2011 tax software   Do not enter business deductions on line 6. 2011 tax software These are deductions that are connected to your trade or business. 2011 tax software They include the following. 2011 tax software State income tax on income attributable to trade or business (including wages, salary, and unemployment compensation). 2011 tax software Moving expenses. 2011 tax software Educator expenses. 2011 tax software The deduction for the deductible part of self-employed health insurance. 2011 tax software Domestic production activities deduction. 2011 tax software Rental losses. 2011 tax software Loss on the sale or exchange of business real estate or depreciable property. 2011 tax software Your share of a business loss from a partnership or an S corporation. 2011 tax software Ordinary loss on the sale or exchange of stock in a small business corporation or a small business investment company. 2011 tax software If you itemize your deductions, casualty and theft losses (even if they involve nonbusiness property) and employee business expenses (such as union dues, uniforms, tools, education expenses, and travel and transportation expenses). 2011 tax software Loss on the sale of accounts receivable (if you use an accrual method of accounting). 2011 tax software Interest and litigation expenses on state and federal income taxes related to your business. 2011 tax software Unrecovered investment in a pension or annuity claimed on a decedent's final return. 2011 tax software Payment by a federal employee to buy back sick leave used in an earlier year. 2011 tax software Nonbusiness income (line 7). 2011 tax software   Enter on line 7 only income that is not related to your trade or business or your employment. 2011 tax software For example, enter your annuity income, dividends, and interest on investments. 2011 tax software Also, include your share of nonbusiness income from partnerships and S corporations. 2011 tax software   Do not include on line 7 the income you receive from your trade or business or your employment. 2011 tax software This includes salaries and wages, self-employment income, unemployment compensation included in your gross income, and your share of business income from partnerships and S corporations. 2011 tax software Also, do not include rental income or ordinary gain from the sale or other disposition of business real estate or depreciable business property. 2011 tax software Adjustment for section 1202 exclusion (line 17). 2011 tax software   Enter on line 17 any gain you excluded under section 1202 on the sale or exchange of qualified small business stock. 2011 tax software Adjustments for capital losses (lines 19–22). 2011 tax software   The amount deductible for capital losses is limited based on whether the losses are business capital losses or nonbusiness capital losses. 2011 tax software Nonbusiness capital losses. 2011 tax software   You can deduct your nonbusiness capital losses (line 2) only up to the amount of your nonbusiness capital gains without regard to any section 1202 exclusion (line 3). 2011 tax software If your nonbusiness capital losses are more than your nonbusiness capital gains without regard to any section 1202 exclusion, you cannot deduct the excess. 2011 tax software Business capital losses. 2011 tax software   You can deduct your business capital losses (line 11) only up to the total of: Your nonbusiness capital gains that are more than the total of your nonbusiness capital losses and excess nonbusiness deductions (line 10), and Your total business capital gains without regard to any section 1202 exclusion (line 12). 2011 tax software Domestic production activities deduction (line 23). 2011 tax software   You cannot take the domestic production activities deduction when figuring your NOL. 2011 tax software Enter on line 23 any domestic production activities deduction claimed on your return. 2011 tax software NOLs from other years (line 24). 2011 tax software   You cannot deduct any NOL carryovers or carrybacks from other years. 2011 tax software Enter the total amount of your NOL deduction for losses from other years. 2011 tax software Illustrated Form 1045, Schedule A The following example illustrates how to figure an NOL. 2011 tax software It includes filled-in pages 1 and 2 of Form 1040 and Form 1045, Schedule A. 2011 tax software Example. 2011 tax software Glenn Johnson is in the retail record business. 2011 tax software He is single and has the following income and deductions on his Form 1040 for 2013. 2011 tax software See the illustrated Form 1040 , later. 2011 tax software INCOME   Wages from part-time job $1,225 Interest on savings 425 Net long-term capital gain on sale of real estate used in business 2,000 Glenn's total income $3,650 DEDUCTIONS   Net loss from business (gross income of $67,000 minus expenses of $72,000) $5,000 Net short-term capital loss on sale of stock 1,000 Standard deduction 6,100 Personal exemption 3,900 Glenn's total deductions $16,000 Glenn's deductions exceed his income by $12,350 ($16,000 − $3,650). 2011 tax software However, to figure whether he has an NOL, certain deductions are not allowed. 2011 tax software He uses Form 1045, Schedule A, to figure his NOL. 2011 tax software See the Illustrated Form 1045, Schedule A , later. 2011 tax software The following items are not allowed on Form 1045, Schedule A. 2011 tax software Nonbusiness net short-term capital loss $1,000 Nonbusiness deductions (standard deduction, $6,100) minus nonbusiness income (interest, $425) 5,675 Deduction for personal exemption 3,900 Total adjustments to net loss $10,575     Therefore, Glenn's NOL for 2013 is figured as follows: Glenn's total 2013 income $3,650 Less:     Glenn's original 2013 total deductions $16,000   Reduced by the disallowed items − 10,575 − 5,425 Glenn's NOL for 2013 $1,775 This image is too large to be displayed in the current screen. 2011 tax software Please click the link to view the image. 2011 tax software Form 1040, page 1 This image is too large to be displayed in the current screen. 2011 tax software Please click the link to view the image. 2011 tax software Form 1040, page 2 This image is too large to be displayed in the current screen. 2011 tax software Please click the link to view the image. 2011 tax software Form 1045, page 2 When To Use an NOL Generally, if you have an NOL for a tax year ending in 2013, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). 2011 tax software You can, however, choose not to carry back an NOL and only carry it forward. 2011 tax software See Waiving the Carryback Period , later. 2011 tax software You cannot deduct any part of the NOL remaining after the 20-year carryforward period. 2011 tax software NOL year. 2011 tax software   This is the year in which the NOL occurred. 2011 tax software Exceptions to 2-Year Carryback Rule Eligible losses, farming losses, qualified disaster losses, and specified liability losses, all defined next, qualify for longer carryback periods. 2011 tax software Eligible loss. 2011 tax software   The carryback period for eligible losses is 3 years. 2011 tax software Only the eligible loss portion of the NOL can be carried back 3 years. 2011 tax software An eligible loss is any part of an NOL that: Is from a casualty or theft, or Is attributable to a federally declared disaster for a qualified small business or certain qualified farming businesses. 2011 tax software Qualified small business. 2011 tax software   A qualified small business is a sole proprietorship or a partnership that has average annual gross receipts (reduced by returns and allowances) of $5 million or less during the 3-year period ending with the tax year of the NOL. 2011 tax software If the business did not exist for this entire 3-year period, use the period the business was in existence. 2011 tax software   An eligible loss does not include a farming loss or a qualified disaster loss. 2011 tax software Farming loss. 2011 tax software   The carryback period for a farming loss is 5 years. 2011 tax software Only the farming loss portion of the NOL can be carried back 5 years. 2011 tax software A farming loss is the smaller of: The amount that would be the NOL for the tax year if only income and deductions attributable to farming businesses were taken into account, or The NOL for the tax year. 2011 tax software Farming business. 2011 tax software   A farming business is a trade or business involving cultivation of land or the raising or harvesting of any agricultural or horticultural commodity. 2011 tax software A farming business can include operating a nursery or sod farm or raising or harvesting most ornamental trees or trees bearing fruit, nuts, or other crops. 2011 tax software The raising, shearing, feeding, caring for, training, and management of animals is also considered a farming business. 2011 tax software   A farming business does not include contract harvesting of an agricultural or horticultural commodity grown or raised by someone else. 2011 tax software It also does not include a business in which you merely buy or sell plants or animals grown or raised entirely by someone else. 2011 tax software Waiving the 5-year carryback. 2011 tax software   You can choose to figure the carryback period for a farming loss without regard to the special 5-year carryback rule. 2011 tax software To make this choice for 2013, attach to your 2013 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2013 farming losses without regard to the special 5-year carryback rule. 2011 tax software If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). 2011 tax software Attach an election statement to your amended return, and write “Filed pursuant to section 301. 2011 tax software 9100-2” at the top of the statement. 2011 tax software Once made, this choice is irrevocable. 2011 tax software Qualified disaster loss. 2011 tax software   The carryback period for a qualified disaster loss is 5 years. 2011 tax software Only the qualified disaster loss portion of the NOL can be carried back 5 years. 2011 tax software A qualified disaster loss is the smaller of: The sum of: Any losses attributable to a federally declared disaster and occurring before January 1, 2010, in the disaster area, plus Any allowable qualified disaster expenses (even if you did not choose to treat those expenses as deductions in the current year), or The NOL for the tax year. 2011 tax software Qualified disaster expenses. 2011 tax software   A qualified disaster expense is any capital expense paid or incurred in connection with a trade or business or with business-related property which is: For the abatement or control of hazardous substances that were released as a result of a federally declared disaster occurring before January 1, 2010, For the removal of debris from, or the demolition of structures on, real property which is business-related property damaged or destroyed as a result of a federally declared disaster occurring before January 1, 2010, or For the repair of business-related property damaged as a result of a federally declared disaster occurring before January 1, 2010. 2011 tax software Business-related property is property held for use in a trade or business, property held for the production of income, or inventory property. 2011 tax software Note. 2011 tax software Section 198A allows taxpayers to treat certain capital expenses (qualified disaster expenses) as deductions in the year the expenses were paid or incurred. 2011 tax software Excluded losses. 2011 tax software   A qualified disaster loss does not include any losses from property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store for which the principal business is the sale of alcoholic beverages for consumption off premises. 2011 tax software   A qualified disaster loss also does not include any losses from any gambling or animal racing property. 2011 tax software Gambling or animal racing property is any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and the portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. 2011 tax software Specified liability loss. 2011 tax software   The carryback period for a specified liability loss is 10 years. 2011 tax software Only the specified liability loss portion of the NOL can be carried back 10 years. 2011 tax software Generally, a specified liability loss is a loss arising from: Product liability and expenses incurred in the investigation or settlement of, or opposition to, product liability claims, or An act (or failure to act) that occurred at least 3 years before the beginning of the loss year and resulted in a liability under a federal or state law requiring: Reclamation of land, Dismantling of a drilling platform, Remediation of environmental contamination, or Payment under any workers compensation act. 2011 tax software   Any loss from a liability arising from (1) through (4) above can be taken into account as a specified liability loss only if you used an accrual method of accounting throughout the period in which the act (or failure to act) occurred. 2011 tax software For details, see section 172(f). 2011 tax software Waiving the 10-year carryback. 2011 tax software   You can choose to figure the carryback period for a specified liability loss without regard to the special 10-year carryback rule. 2011 tax software To make this choice for 2013 attach to your 2013 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2013 specified liability losses without regard to the special 10-year carryback rule. 2011 tax software If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). 2011 tax software Attach a statement to your amended return and write “Filed pursuant to section 301. 2011 tax software 9100-2” at the top of the statement. 2011 tax software Once made, this choice is irrevocable. 2011 tax software Waiving the Carryback Period You can choose not to carry back your NOL. 2011 tax software If you make this choice, then you can use your NOL only in the 20-year carryforward period. 2011 tax software (This choice means you also choose not to carry back any alternative tax NOL. 2011 tax software ) To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. 2011 tax software This statement must show that you are choosing to waive the carryback period under section 172(b)(3). 2011 tax software If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months of the due date of the return (excluding extensions). 2011 tax software Attach a statement to your amended return, and write “Filed pursuant to section 301. 2011 tax software 9100-2” at the top of the statement. 2011 tax software Once you choose to waive the carryback period, it generally is irrevocable. 2011 tax software If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year. 2011 tax software If you do not file this statement on time, you cannot waive the carryback period. 2011 tax software How To Carry an NOL Back or Forward If you choose to carry back the NOL, you must first carry the entire NOL to the earliest carryback year. 2011 tax software If your NOL is not used up, you can carry the rest to the next earliest carryback year, and so on. 2011 tax software If you waive the carryback period or do not use up the NOL in the carryback period, carry forward what remains of the NOL to the 20 tax years following the NOL year. 2011 tax software Start by carrying it to the first tax year after the NOL year. 2011 tax software If you do not use it up, carry the unused part to the next year. 2011 tax software Continue to carry any unused part of the NOL forward until the NOL is used up or you complete the 20-year carryforward period. 2011 tax software Example 1. 2011 tax software You started your business as a sole proprietor in 2013 and had a $42,000 NOL for the year. 2011 tax software No part of the NOL qualifies for the 3-year, 5-year, or 10-year carryback. 2011 tax software You begin using your NOL in 2011, the second year before the NOL year, as shown in the following chart. 2011 tax software Year   Carryback/  Carryover Unused  Loss 2011 $42,000 $40,000 2012 40,000 37,000 2013 (NOL year)     2014 37,000 31,500 2015 31,500 22,500 2016 22,500 12,700 2017 12,700 4,000 2018 4,000 -0- If your loss were larger, you could carry it forward until the year 2033. 2011 tax software If you still had an unused 2013 carryforward after the year 2033, you would not be allowed to deduct it. 2011 tax software Example 2. 2011 tax software Assume the same facts as in Example 1 , except that $4,000 of the NOL is attributable to a casualty loss and this loss qualifies for a 3-year carryback period. 2011 tax software You begin using the $4,000 in 2010. 2011 tax software As shown in the following chart, $3,000 of this NOL is used in 2010. 2011 tax software The remaining $1,000 is carried to 2011 with the $38,000 NOL that you must begin using in 2011. 2011 tax software Year   Carryback/  Carryover Unused  Loss 2010 $4,000 $1,000 2011 39,000 37,000 2012 37,000 34,000 2013 (NOL year)     2014 34,000 28,500 2015 28,500 19,500 2016 19,500 9,700 2017 9,700 1,000 2018 1,000 -0- How To Claim an NOL Deduction If you have not already carried the NOL to an earlier year, your NOL deduction is the total NOL. 2011 tax software If you carried the NOL to an earlier year, your NOL deduction is the carried over NOL minus the NOL amount you used in the earlier year or years. 2011 tax software If you carry more than one NOL to the same year, your NOL deduction is the total of these carrybacks and carryovers. 2011 tax software NOL resulting in no taxable income. 2011 tax software   If your NOL is more than the taxable income of the year you carry it to (figured before deducting the NOL), you generally will have an NOL carryover to the next year. 2011 tax software See How To Figure an NOL Carryover , later, to determine how much NOL you have used and how much you carry to the next year. 2011 tax software Deducting a Carryback If you carry back your NOL, you can use either Form 1045 or Form 1040X. 2011 tax software You can get your refund faster by using Form 1045, but you have a shorter time to file it. 2011 tax software You can use Form 1045 to apply an NOL to all carryback years. 2011 tax software If you use Form 1040X, you must use a separate Form 1040X for each carryback year to which you apply the NOL. 2011 tax software Estates and trusts that do not file Form 1045 must file an amended Form 1041 (instead of Form 1040X) for each carryback year to which NOLs are applied. 2011 tax software Use a copy of the appropriate year's Form 1041, check the “Amended return” box, and follow the Form 1041 instructions for amended returns. 2011 tax software Include the NOL deduction with other deductions not subject to the 2% limit (line 15a). 2011 tax software Also, see the special procedures for filing an amended return due to an NOL carryback, explained under Form 1040X , later. 2011 tax software Form 1045. 2011 tax software   You can apply for a quick refund by filing Form 1045. 2011 tax software This form results in a tentative adjustment of tax in the carryback year. 2011 tax software See the Illustrated Form 1045 . 2011 tax software at the end of this discussion. 2011 tax software   If the IRS refunds or credits an amount to you from Form 1045 and later determines that the refund or credit is too much, the IRS may assess and collect the excess immediately. 2011 tax software   Generally, you must file Form 1045 on or after the date you file your tax return for the NOL year, but not later than one year after the end of the NOL year. 2011 tax software If the last day of the NOL year falls on a Saturday, Sunday, or holiday, the form will be considered timely if postmarked on the next business day. 2011 tax software For example, if you are a calendar year taxpayer with a carryback from 2013 to 2011, you must file Form 1045 on or after the date you file your tax return for 2013, but no later than December 31, 2014. 2011 tax software Form 1040X. 2011 tax software   If you do not file Form 1045, you can file Form 1040X to get a refund of tax because of an NOL carryback. 2011 tax software File Form 1040X within 3 years after the due date, including extensions, for filing the return for the NOL year. 2011 tax software For example, if you are a calendar year taxpayer and filed your 2011 return by the April 15, 2012, due date, you must file a claim for refund of 2008 tax because of an NOL carryback from 2011 by April 15, 2015. 2011 tax software   Attach a computation of your NOL using Form 1045, Schedule A, and, if it applies, your NOL carryover using Form 1045, Schedule B, discussed later . 2011 tax software Refiguring your tax. 2011 tax software   To refigure your total tax liability for a carryback year, first refigure your adjusted gross income for that year. 2011 tax software (On Form 1045, use lines 10 and 11 and the “After carryback” column for the applicable carryback year. 2011 tax software ) Use your adjusted gross income after applying the NOL deduction to refigure income or deduction items that are based on, or limited to, a percentage of your adjusted gross income. 2011 tax software Refigure the following items. 2011 tax software The special allowance for passive activity losses from rental real estate activities. 2011 tax software Taxable social security and tier 1 railroad retirement benefits. 2011 tax software IRA deductions. 2011 tax software Excludable savings bond interest. 2011 tax software Excludable employer-provided adoption benefits. 2011 tax software The student loan interest deduction. 2011 tax software The tuition and fees deduction. 2011 tax software   If more than one of these items apply, refigure them in the order listed above, using your adjusted gross income after applying the NOL deduction and any previous item. 2011 tax software (Enter your NOL deduction on Form 1045, line 10. 2011 tax software On line 11, using the “After carryback” column, enter your adjusted gross income refigured after applying the NOL deduction and after refiguring any above items. 2011 tax software )   Next, refigure your taxable income. 2011 tax software (On Form 1045, use lines 12 through 15 and the “After carryback” column. 2011 tax software ) Use your refigured adjusted gross income (Form 1045, line 11, using the “After carryback” column) to refigure certain deductions and other items that are based on or limited to a percentage of your adjusted gross income. 2011 tax software Refigure the following items. 2011 tax software The itemized deduction for medical expenses. 2011 tax software The itemized deduction for qualified mortgage insurance premiums. 2011 tax software The itemized deduction for casualty losses. 2011 tax software Miscellaneous itemized deductions subject to the 2% limit. 2011 tax software The overall limit on itemized deductions (do not apply to carryback years beginning after December 31, 2009). 2011 tax software The phaseout of the deduction for exemptions (do not apply to carryback years beginning after December 31, 2009). 2011 tax software Qualified motor vehicle tax (do not apply to carryback years beginning after December 31, 2009). 2011 tax software    Do not refigure the itemized deduction for charitable contributions. 2011 tax software   Finally, use your refigured taxable income (Form 1045, line 15, using the “After carryback” column) to refigure your total tax liability. 2011 tax software Refigure your income tax, your alternative minimum tax, and any credits that are based on or limited by your adjusted gross income (AGI), modified adjusted gross income (MAGI), or tax liability. 2011 tax software (On Form 1045, use lines 16 through 25, and the “After carryback” column. 2011 tax software ) The earned income credit, for example, may be affected by changes to adjusted gross income or the amount of tax (or both) and, therefore, must be recomputed. 2011 tax software If you become eligible for a credit because of the carryback, complete the form for that specific credit (such as the EIC Worksheet) for that year. 2011 tax software   While it is necessary to refigure your income tax, alternative minimum tax, and credits, do not refigure your self-employment tax. 2011 tax software Deducting a Carryforward If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the “Other income” line of Form 1040 or Form 1040NR (line 21 for 2013). 2011 tax software Estates and trusts include an NOL deduction on Form 1041 with other deductions not subject to the 2% limit (line 15a for 2013). 2011 tax software You must attach a statement that shows all the important facts about the NOL. 2011 tax software Your statement should include a computation showing how you figured the NOL deduction. 2011 tax software If you deduct more than one NOL in the same year, your statement must cover each of them. 2011 tax software Change in Marital Status If you and your spouse were not married to each other in all years involved in figuring NOL carrybacks and carryovers, only the spouse who had the loss can take the NOL deduction. 2011 tax software If you file a joint return, the NOL deduction is limited to the income of that spouse. 2011 tax software For example, if your marital status changes because of death or divorce, and in a later year you have an NOL, you can carry back that loss only to the part of the income reported on the joint return (filed with your former spouse) that was related to your taxable income. 2011 tax software After you deduct the NOL in the carryback year, the joint rates apply to the resulting taxable income. 2011 tax software Refund limit. 2011 tax software   If you are not married in the NOL year (or are married to a different spouse), and in the carryback year you were married and filed a joint return, your refund for the overpaid joint tax may be limited. 2011 tax software You can claim a refund for the difference between your share of the refigured tax and your contribution toward the tax paid on the joint return. 2011 tax software The refund cannot be more than the joint overpayment. 2011 tax software Attach a statement showing how you figured your refund. 2011 tax software Figuring your share of a joint tax liability. 2011 tax software   There are five steps for figuring your share of the refigured joint tax liability. 2011 tax software Figure your total tax as though you had filed as married filing separately. 2011 tax software Figure your spouse's total tax as though your spouse had also filed as married filing separately. 2011 tax software Add the amounts in (1) and (2). 2011 tax software Divide the amount in (1) by the amount in (3). 2011 tax software Multiply the refigured tax on your joint return by the amount figured in (4). 2011 tax software This is your share of the joint tax liability. 2011 tax software Figuring your contribution toward tax paid. 2011 tax software   Unless you have an agreement or clear evidence of each spouse's contributions toward the payment of the joint tax liability, figure your contribution by adding the tax withheld on your wages and your share of joint estimated tax payments or tax paid with the return. 2011 tax software If the original return for the carryback year resulted in an overpayment, reduce your contribution by your share of the tax refund. 2011 tax software Figure your share of a joint payment or refund by the same method used in figuring your share of the joint tax liability. 2011 tax software Use your taxable income as originally reported on the joint return in steps (1) and (2) above, and substitute the joint payment or refund for the refigured joint tax in step (5). 2011 tax software Change in Filing Status If you and your spouse were married and filed a joint return for each year involved in figuring NOL carrybacks and carryovers, figure the NOL deduction on a joint return as you would for an individual. 2011 tax software However, treat the NOL deduction as a joint NOL. 2011 tax software If you and your spouse were married and filed separate returns for each year involved in figuring NOL carrybacks and carryovers, the spouse who sustained the loss may take the NOL deduction on a separate return. 2011 tax software Special rules apply for figuring the NOL carrybacks and carryovers of married people whose filing status changes for any tax year involved in figuring an NOL carryback or carryover. 2011 tax software Separate to joint return. 2011 tax software   If you and your spouse file a joint return for a carryback or carryforward year, and were married but filed separate returns for any of the tax years involved in figuring the NOL carryback or carryover, treat the separate carryback or carryover as a joint carryback or carryover. 2011 tax software Joint to separate returns. 2011 tax software   If you and your spouse file separate returns for a carryback or carryforward year, but filed a joint return for any or all of the tax years involved in figuring the NOL carryover, figure each of your carryovers separately. 2011 tax software Joint return in NOL year. 2011 tax software   Figure each spouse's share of the joint NOL through the following steps. 2011 tax software Figure each spouse's NOL as if he or she filed a separate return. 2011 tax software See How To Figure an NOL , earlier. 2011 tax software If only one spouse has an NOL, stop here. 2011 tax software All of the joint NOL is that spouse's NOL. 2011 tax software If both spouses have an NOL, multiply the joint NOL by a fraction, the numerator of which is spouse A's NOL figured in (1) and the denominator of which is the total of the spouses' NOLs figured in (1). 2011 tax software The result is spouse A's share of the joint NOL. 2011 tax software The rest of the joint NOL is spouse B's share. 2011 tax software Example 1. 2011 tax software Mark and Nancy are married and file a joint return for 2013. 2011 tax software They have an NOL of $5,000. 2011 tax software They carry the NOL back to 2011, a year in which Mark and Nancy filed separate returns. 2011 tax software Figured separately, Nancy's 2013 deductions were more than her income, and Mark's income was more than his deductions. 2011 tax software Mark does not have any NOL to carry back. 2011 tax software Nancy can carry back the entire $5,000 NOL to her 2011 separate return. 2011 tax software Example 2. 2011 tax software Assume the same facts as in Example 1 , except that both Mark and Nancy had deductions in 2013 that were more than their income. 2011 tax software Figured separately, his NOL is $1,800 and her NOL is $3,000. 2011 tax software The sum of their separate NOLs ($4,800) is less than their $5,000 joint NOL because his deductions included a $200 net capital loss that is not allowed in figuring his separate NOL. 2011 tax software The loss is allowed in figuring their joint NOL because it was offset by Nancy's capital gains. 2011 tax software Mark's share of their $5,000 joint NOL is $1,875 ($5,000 × $1,800/$4,800) and Nancy's is $3,125 ($5,000 − $1,875). 2011 tax software Joint return in previous carryback or carryforward year. 2011 tax software   If only one spouse had an NOL deduction on the previous year's joint return, all of the joint carryover is that spouse's carryover. 2011 tax software If both spouses had an NOL deduction (including separate carryovers of a joint NOL, figured as explained in the previous discussion ), figure each spouse's share of the joint carryover through the following steps. 2011 tax software Figure each spouse's modified taxable income as if he or she filed a separate return. 2011 tax software See Modified taxable income under How To Figure an NOL Carryover , later. 2011 tax software Multiply the joint modified taxable income you used to figure the joint carryover by a fraction, the numerator of which is spouse A's modified taxable income figured in (1) and the denominator of which is the total of the spouses' modified taxable incomes figured in (1). 2011 tax software This is spouse A's share of the joint modified taxable income. 2011 tax software Subtract the amount figured in (2) from the joint modified taxable income. 2011 tax software This is spouse B's share of the joint modified taxable income. 2011 tax software Reduce the amount figured in (3), but not below zero, by spouse B's NOL deduction. 2011 tax software Add the amounts figured in (2) and (4). 2011 tax software Subtract the amount figured in (5) from spouse A's NOL deduction. 2011 tax software This is spouse A's share of the joint carryover. 2011 tax software The rest of the joint carryover is spouse B's share. 2011 tax software Example. 2011 tax software Sam and Wanda filed a joint return for 2011 and separate returns for 2012 and 2013. 2011 tax software In 2013, Sam had an NOL of $18,000 and Wanda had an NOL of $2,000. 2011 tax software They choose to carry back both NOLs 2 years to their 2011 joint return and claim a $20,000 NOL deduction. 2011 tax software Their joint modified taxable income (MTI) for 2011 is $15,000, and their joint NOL carryover to 2012 is $5,000 ($20,000 – $15,000). 2011 tax software Sam and Wanda each figure their separate MTI for 2011 as if they had filed separate returns. 2011 tax software Then they figure their shares of the $5,000 carryover as follows. 2011 tax software Step 1. 2011 tax software   Sam's separate MTI $9,000 Wanda's separate MTI + 3,000 Total MTI $12,000 Step 2. 2011 tax software   Joint MTI $15,000 Sam's MTI ÷ total MTI ($9,000 ÷ $12,000) × . 2011 tax software 75 Sam's share of joint MTI $11,250 Step 3. 2011 tax software   Joint MTI $15,000 Sam's share of joint MTI − 11,250 Wanda's share of joint MTI $3,750 Step 4. 2011 tax software   Wanda's share of joint MTI $3,750 Wanda's NOL deduction − 2,000 Wanda's remaining share $1,750 Step 5. 2011 tax software   Sam's share of joint MTI $11,250 Wanda's remaining share + 1,750 Joint MTI to be offset $13,000 Step 6. 2011 tax software   Sam's NOL deduction $18,000 Joint MTI to be offset − 13,000 Sam's carryover to 2012 $5,000 Joint carryover to 2012 $5,000 Sam's carryover − 5,000 Wanda's carryover to 2012 $-0- Wanda's $2,000 NOL deduction offsets $2,000 of her $3,750 share of the joint modified taxable income and is completely used up. 2011 tax software She has no carryover to 2012. 2011 tax software Sam's $18,000 NOL deduction offsets all of his $11,250 share of joint modified taxable income and the remaining $1,750 of Wanda's share. 2011 tax software His carryover to 2012 is $5,000. 2011 tax software Illustrated Form 1045 The following example illustrates how to use Form 1045 to claim an NOL deduction in a carryback year. 2011 tax software It includes a filled-in page 1 of Form 1045. 2011 tax software Example. 2011 tax software Martha Sanders is a self-employed contractor. 2011 tax software Martha's 2013 deductions are more than her 2013 income because of a business loss. 2011 tax software She uses Form 1045 to carry back her NOL 2 years and claim an NOL deduction in 2011. 2011 tax software Her filing status in both years was single. 2011 tax software See the filled-in Form 1045 later. 2011 tax software Martha figures her 2013 NOL on Form 1045, Schedule A (not shown). 2011 tax software (For an example using Form 1045, Schedule A, see Illustrated Form 1045, Schedule A under How To Figure an NOL , earlier. 2011 tax software ) She enters the $10,000 NOL from Form 1045, Schedule A, line 25, on Form 1045, line 1a. 2011 tax software Martha completes lines 10 through 25, using the “Before carryback” column under the column for the second preceding tax year ended 12/31/11 on page 1 of Form 1045 using the following amounts from her 2011 return. 2011 tax software 2011 Adjusted gross income $50,000 Itemized deductions:     Medical expenses [$6,000 − ($50,000 × 7. 2011 tax software 5%)] $2,250   State income tax + 2,000   Real estate tax + 4,000   Home mortgage interest + 5,000   Total itemized deductions $13,250 Exemption $3,700 Income tax $4,550 Self-employment tax $6,120   Martha refigures her taxable income for 2011 after carrying back her 2013 NOL as follows: 2011 Adjusted gross income $50,000 Less:     NOL from 2013 −10,000 2011 Adjusted gross income after carryback $40,000 Less:     Itemized deductions:     Medical expenses [$6,000 − ($40,000 × 7. 2011 tax software 5%)] $3,000   State income tax + 2,000   Real estate tax + 4,000   Home mortgage interest + 5,000   Total itemized deductions −14,000 Less:     Exemption − 3,700 2011 Taxable income after carryback $22,300 Martha then completes lines 10 through 25, using the “After carryback” column under the column for the second preceding tax year ended 12/31/11. 2011 tax software On line 10, Martha enters her $10,000 NOL deduction. 2011 tax software Her new adjusted gross income on line 11 is $40,000 ($50,000 − $10,000). 2011 tax software To complete line 12, she must refigure her medical expense deduction using her new adjusted gross income. 2011 tax software Her refigured medical expense deduction is $3,000 [$6,000 − ($40,000 × 7. 2011 tax software 5%)]. 2011 tax software This increases her total itemized deductions to $14,000 [$13,250 + ($3,000 − $2,250)]. 2011 tax software Martha uses her refigured taxable income ($22,300) from line 15, and the tax tables in her 2011 Form 1040 instructions to find her income tax. 2011 tax software She enters the new amount, $2,924, on line 16, and her new total tax liability, $9,044, on line 25. 2011 tax software Martha used up her $10,000 NOL in 2011 so she does not complete a column for the first preceding tax year ended 12/31/2012. 2011 tax software The decrease in tax because of her NOL deduction (line 27) is $1,612. 2011 tax software Martha files Form 1045 after filing her 2013 return, but no later than December 31, 2014. 2011 tax software She mails it to the Internal Revenue Service Center for the place where she lives as shown in the 2013 instructions for Form 1040 and attaches a copy of her 2013 return (including the applicable forms and schedules). 2011 tax software This image is too large to be displayed in the current screen. 2011 tax software Please click the link to view the image. 2011 tax software Form 1045, page 1 How To Figure an NOL Carryover If your NOL is more than your taxable income for the year to which you carry it (figured before deducting the NOL), you may have an NOL carryover. 2011 tax software You must make certain modifications to your taxable income to determine how much NOL you will use up in that year and how much you can carry over to the next tax year. 2011 tax software Your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year. 2011 tax software If your NOL deduction includes more than one NOL, apply the NOLs against your modified taxable income in the same order in which you incurred them, starting with the earliest. 2011 tax software Modified taxable income. 2011 tax software   Your modified taxable income is your taxable income figured with the following changes. 2011 tax software You cannot claim an NOL deduction for the NOL carryover you are figuring or for any later NOL. 2011 tax software You cannot claim a deduction for capital losses in excess of your capital gains. 2011 tax software Also, you must increase your taxable income by the amount of any section 1202 exclusion. 2011 tax software You cannot claim the domestic production activities deduction. 2011 tax software You cannot claim a deduction for your exemptions for yourself, your spouse, or dependents. 2011 tax software You must figure any item affected by the amount of your adjusted gross income after making the changes in (1), (2), and (3), above, and certain other changes to your adjusted gross income that result from (1), (2), and (3). 2011 tax software This includes income and deduction items used to figure adjusted gross income (for example, IRA deductions), as well as certain itemized deductions. 2011 tax software To figure a charitable contribution deduction, do not include deductions for NOL carrybacks in the change in (1) but do include deductions for NOL carryforwards from tax years before the NOL year. 2011 tax software   Your taxable income as modified cannot be less than zero. 2011 tax software Form 1045, Schedule B. 2011 tax software   You can use Form 1045, Schedule B, to figure your modified taxable income for carryback years and your carryover from each of those years. 2011 tax software Do not use Form 1045, Schedule B, for a carryforward year. 2011 tax software If your 2013 return includes an NOL deduction from an NOL year before 2013 that reduced your taxable income to zero (to less than zero, if an estate or trust), see NOL Carryover From 2013 to 2014 , later. 2011 tax software Illustrated Form 1045, Schedule B The following example illustrates how to figure an NOL carryover from a carryback year. 2011 tax software It includes a filled-in Form 1045, Schedule B. 2011 tax software Example. 2011 tax software Ida Brown runs a small clothing shop. 2011 tax software In 2013, she has an NOL of $36,000 that she carries back to 2011. 2011 tax software She has no other carrybacks or carryforwards to 2011. 2011 tax software Ida's adjusted gross income in 2011 was $35,000, consisting of her salary of $36,000 minus a $1,000 capital loss deduction. 2011 tax software She is single and claimed only one personal exemption of $3,700. 2011 tax software During that year, she gave $1,450 in charitable contributions. 2011 tax software Her medical expenses were $3,000. 2011 tax software She also deducted $1,650 in taxes and $3,125 in home mortgage interest. 2011 tax software Her deduction for charitable contributions was not limited because her contributions, $1,450, were less than 50% of her adjusted gross income. 2011 tax software The deduction for medical expenses was limited to expenses over 7. 2011 tax software 5% of adjusted gross income (. 2011 tax software 075 × $35,000 = $2,625; $3,000 − $2,625 = $375). 2011 tax software The deductions for taxes and home mortgage interest were not subject to any limits. 2011 tax software She was able to claim $6,600 ($1,450 + $375 + $1,650 + $3,125) in itemized deductions and a personal exemption deduction of $3,700 for 2011. 2011 tax software She had no other deductions in 2011 (except the NOL deduction). 2011 tax software Her taxable income (figured without the NOL deduction) for the year was $24,700. 2011 tax software Ida's adjusted gross income in 2012 was $9,325, consisting of net business income from the clothing shop of $12,325 and a net capital loss of $3,000. 2011 tax software She did not itemize her deductions in 2012. 2011 tax software She deducted the standard deduction of $5,950 and the personal exemption deduction of $3,800. 2011 tax software She had no other deductions in 2012 (other than the NOL deduction). 2011 tax software Her taxable income, therefore, was ($425). 2011 tax software Ida's $36,000 carryback will result in her having 2011 taxable income of zero. 2011 tax software She then completes the column for the second preceding tax year ended 12/31/11 on Form 1045, Schedule B, to figure how much of her NOL she uses up in 2011 and how much she can carry over to 2012. 2011 tax software She completes the column for the first preceding tax year ended 12/31/12. 2011 tax software See the illustrated Form 1045, Schedule B , shown later. 2011 tax software Column 1, line 1. 2011 tax software Ida enters $36,000, her 2013 net operating loss, on line 1. 2011 tax software Column 1, line 2. 2011 tax software She enters $24,700, her 2011 taxable income (figured without the NOL deduction), on line 2. 2011 tax software Column 1, line 3. 2011 tax software Ida enters her net capital loss deduction of $1,000 on line 3. 2011 tax software Column 1, lines 4 and 5. 2011 tax software Ida had no section 1202 exclusion or domestic production activities deduction in 2011. 2011 tax software She enters zero on lines 4 and 5. 2011 tax software Column 1, line 6. 2011 tax software Although Ida's entry on line 3 modifies her adjusted gross income, that does not affect any other items included in her adjusted gross income. 2011 tax software Ida enters zero on line 6. 2011 tax software Column 1, line 7. 2011 tax software Ida had itemized deductions and entered $1,000 on line 3, so she completes lines 11 through 38 to figure her adjustment to itemized deductions. 2011 tax software On line 7, she enters the total adjustment from line 38. 2011 tax software Column 1, line 8. 2011 tax software Ida enters the deduction for her personal exemption of $3,700 for 2011. 2011 tax software Column 1, line 9. 2011 tax software After combining lines 2 through 8, Ida's modified taxable income is $29,475. 2011 tax software Column 1, line 10. 2011 tax software Ida figures her carryover to 2012 by subtracting her modified taxable income (line 9) from her NOL deduction (line 1). 2011 tax software She enters the $6,525 carryover on line 10. 2011 tax software She also enters the $6,525 as her NOL deduction for 2012 on Form 1045, page 1, line 10, in the “After carryback” column under the column for the first preceding tax year ended 12/31/12. 2011 tax software (For an illustrated example of page 1 of Form 1045, see Illustrated Form 1045 under How To Claim an NOL Deduction , earlier. 2011 tax software ) Next, Ida completes column 2 for the first preceding tax year ended 12/31/12. 2011 tax software Column 1, line 11. 2011 tax software Ida's adjusted gross income for 2011 was $35,000. 2011 tax software Column 1, line 12. 2011 tax software She adds lines 3 through 6 and enters $1,000 on line 12. 2011 tax software (This is her net capital loss deduction added back, which modifies her adjusted gross income. 2011 tax software ) Column 1, line 13. 2011 tax software Her modified adjusted gross income for 2011 is now $36,000. 2011 tax software Column 1, line 14. 2011 tax software On her 2011 tax return, she deducted $375 as medical expenses. 2011 tax software Column 1, line 15. 2011 tax software Her actual medical expenses were $3,000. 2011 tax software Column 1, line 16. 2011 tax software She multiplies her modified adjusted gross income, $36,000, by . 2011 tax software 075. 2011 tax software She enters $2,700 on line 16. 2011 tax software Column 1, line 17. 2011 tax software She substracts $2,700 from her actual medical expenses, $3,000. 2011 tax software She enters $300 on line 17. 2011 tax software This is her modified medical deduction. 2011 tax software Column 1, line 18. 2011 tax software The difference between her medical deduction and her modified medical deduction is $75. 2011 tax software She enters this on line 18. 2011 tax software Column 1, lines 19 through 21. 2011 tax software Ida had no deduction for qualified mortgage insurance premiums in 2011. 2011 tax software She skips lines 19 and 20 and enters zero on line 21. 2011 tax software Column 1, line 22. 2011 tax software She enters her modified adjusted gross income of $36,000 on line 22. 2011 tax software Column 1, line 23. 2011 tax software She had no other carrybacks to 2011 and enters zero on line 23. 2011 tax software Column 1, line 24. 2011 tax software Her modified adjusted gross income remains $36,000. 2011 tax software Column 1, line 25. 2011 tax software Her actual contributions for 2011 were $1,450, which she enters on line 25. 2011 tax software Column 1, line 26. 2011 tax software She now refigures her charitable contributions based on her modified adjusted gross income. 2011 tax software Her contributions are well below the 50% limit, so she enters $1,450 on line 26. 2011 tax software Column 1, line 27. 2011 tax software The difference is zero. 2011 tax software Column 1, lines 28 through 37. 2011 tax software Ida had no casualty losses or deductions for miscellaneous items in 2011. 2011 tax software She skips lines 28 through 31 and lines 33 through 36. 2011 tax software Ida enters zero on lines 32 and 37. 2011 tax software Column 1, line 38. 2011 tax software She combines lines 18, 21, 27, 32, and 37 and enters $75 on line 38. 2011 tax software She carries this figure to line 7. 2011 tax software Column 2, line 1. 2011 tax software Ida enters $6,525, the carryback of her 2013 NOL to 2012, from column 1, line 10, on line 1. 2011 tax software Column 2, line 2. 2011 tax software She enters ($425), her 2012 taxable income, on line 2. 2011 tax software Column 2, line 3. 2011 tax software Ida enters her net capital loss deduction of $3,000 on line 3. 2011 tax software Column 2, lines 4 and 5. 2011 tax software Ida had no section 1202 exclusion or domestic production activities deduction in 2012. 2011 tax software She enters zero on lines 4 and 5. 2011 tax software Column 2, line 6. 2011 tax software Although Ida's entry on line 3 modifies her adjusted gross income, that does not affect any other items included in her adjusted gross income. 2011 tax software Ida enters zero on line 6. 2011 tax software Column 2, line 7. 2011 tax software Because Ida did not itemize deductions on her 2012 tax return, she enters zero on line 7. 2011 tax software Column 2, line 8. 2011 tax software Ida enters the deduction for her personal exemption of $3,800 for 2012. 2011 tax software Column 2, line 9. 2011 tax software After combining lines 2 through 8, Ida's modified taxable income is $6,375. 2011 tax software Column 2, line 10. 2011 tax software Ida figures her carryforward to 2014 by subtracting her modified taxable income (line 9) from her NOL deduction (line 1). 2011 tax software She enters the $150 carryover on line 10. 2011 tax software This image is too large to be displayed in the current screen. 2011 tax software Please click the link to view the image. 2011 tax software Form 1045, page 3 This image is too large to be displayed in the current screen. 2011 tax software Please click the link to view the image. 2011 tax software Form 1045, page 4 NOL Carryover From 2013 to 2014 If you had an NOL deduction carried forward from a year prior to 2013 that resulted in your having taxable income on your 2013 return of zero (of less than zero, if an estate or trust), complete Table 1 , Worksheet for NOL Carryover From 2013 to 2014, on the following pages. 2011 tax software It will help you figure your NOL to carry to 2014. 2011 tax software Keep the worksheet for your records. 2011 tax software Worksheet Instructions At the top of the worksheet, enter the NOL year for which you are figuring the carryover. 2011 tax software More than one NOL. 2011 tax software   If your 2013 NOL deduction includes amounts for more than one loss year, complete this worksheet only for one loss year. 2011 tax software To determine which year, start with your earliest NOL and subtract each NOL separately from your taxable income figured without the NOL deduction. 2011 tax software Complete this worksheet for the earliest NOL that results in your having taxable income below zero. 2011 tax software Your NOL carryover to 2014 is the total of the amount on line 10 of the worksheet and all later NOL amounts. 2011 tax software Example. 2011 tax software Your taxable income for 2013 is $5,000 without your $9,000 NOL deduction. 2011 tax software Your NOL deduction includes a $2,000 carryover from 2011 and a $7,000 carryover from 2012. 2011 tax software Subtract your 2011 NOL of $2,000 from $5,000. 2011 tax software This gives you taxable income of $3,000. 2011 tax software Your 2011 NOL is now completely used up. 2011 tax software Subtract your $7,000 2012 NOL from $3,000. 2011 tax software This gives you taxable income of ($4,000). 2011 tax software You now complete the worksheet for your 2012 NOL. 2011 tax software Your NOL carryover to 2014 is the unused part of your 2012 NOL from line 10 of the worksheet. 2011 tax software Line 2. 2011 tax software   Treat your NOL deduction for the NOL year entered at the top of the worksheet and later years as a positive amount. 2011 tax software Add it to your negative taxable income (figured without the NOL deduction). 2011 tax software Enter the result on line 2. 2011 tax software Line 6. 2011 tax software   You must refigure the following income and deductions based on adjusted gross income. 2011 tax software The special allowance for passive activity losses from rental real estate activities. 2011 tax software Taxable social security and tier 1 railroad retirement benefits. 2011 tax software IRA deductions. 2011 tax software Excludable savings bond interest. 2011 tax software Excludable employer-provided adoption benefits. 2011 tax software The student loan interest deduction. 2011 tax software The tuition and fees deduction. 2011 tax software   If none of these items apply to you, enter zero on line 6. 2011 tax software Otherwise, increase your adjusted gross income by the total of lines 3 through 5 and your NOL deduction for the NOL year entered at the top of the worksheet and later years. 2011 tax software Using this increased adjusted gross income, refigure the items that apply, in the order listed above. 2011 tax software Your adjustment for each item is the difference between the refigured amount and the amount included on your return. 2011 tax software Combine the adjustments for previous items with your adjusted gross income before refiguring the next item. 2011 tax software Keep a record of your computations. 2011 tax software   Enter your total adjustments for the above items on line 6. 2011 tax software Line 7. 2011 tax software   Enter zero if you claimed the standard deduction or the amounts on lines 3 through 5 are zero. 2011 tax software Otherwise, use lines 11 through 33 of the worksheet to figure the amount to enter on this line. 2011 tax software Complete only those sections that apply to you. 2011 tax software Estates and trusts. 2011 tax software   Enter zero on line 7 if you did not claim any miscellaneous deductions on Form 1041, line 15c, or a casualty or theft loss. 2011 tax software Otherwise, refigure these deductions by substituting modified adjusted gross income (see below ) for adjusted gross income. 2011 tax software Subtract the recomputed deductions from those claimed on the return. 2011 tax software Enter the result on line 7. 2011 tax software Modified adjusted gross income. 2011 tax software   To refigure miscellaneous itemized deductions of an estate or trust (Form 1041, line 15c), modified adjusted gross income is the total of the following amounts. 2011 tax software The adjusted gross income on the return. 2011 tax software The amounts from lines 3 through 5 of the worksheet. 2011 tax software The exemption amount from Form 1041, line 20. 2011 tax software The NOL deduction for the NOL year entered at the top of the worksheet and for later years. 2011 tax software   To refigure the casualty and theft loss deduction of an estate or trust, modified adjusted gross income is the total of the following amounts. 2011 tax software The adjusted gross income amount you used to figure the deduction claimed on the return. 2011 tax software The amounts from lines 3 through 5 of the worksheet. 2011 tax software The NOL deduction for the NOL year entered at the top of the worksheet and for later years. 2011 tax software Line 11. 2011 tax software   Treat your NOL deduction for the NOL year entered at the top of the worksheet and for later years as a positive amount. 2011 tax software Add it to your adjusted gross income. 2011 tax software Enter the result on line 11. 2011 tax software Line 20. 2011 tax software   Is your modified adjusted gross income from line 13 of this worksheet more than $100,000 ($50,000 if married filing separately)?   □ Yes. 2011 tax software Your deduction is limited. 2011 tax software Refigure your deduction using the Mortgage Insurance Premiums Deduction Worksheet in the 2013 Instructions for Form 1045. 2011 tax software On line 2 of the Mortgage Insurance Premiums Deduction Worksheet, enter the amount from line 13 of this worksheet. 2011 tax software   □ No. 2011 tax software Your deduction is not limited. 2011 tax software Enter the amount from line 19 on line 20 and enter -0- on line 21. 2011 tax software Line 23. 2011 tax software   If you had a contributions carryover from 2012 to 2013 and your NOL deduction includes an amount from an NOL year before 2012, you may have to reduce your contributions carryover. 2011 tax software Reduce the contributions carryover by the amount of any adjustment you made to your 2012 charitable contributions deduction when figuring your NOL carryover to 2013. 2011 tax software Use the reduced contributions carryover to figure the amount to enter on line 23. 2011 tax software Please click here for the text description of the image. 2011 tax software Worksheet for NOL Carryover Worksheet for NOL Carryover (Continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 2011 tax software Free help with your tax return. 2011 tax software   You can get free help preparing your return nationwide from IRS-certified volunteers. 2011 tax software The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 2011 tax software The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2011 tax software Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2011 tax software In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 2011 tax software To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 2011 tax software gov, download the IRS2Go app, or call 1-800-906-9887. 2011 tax software   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2011 tax software To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2011 tax software aarp. 2011 tax software org/money/taxaide or call 1-888-227-7669. 2011 tax software For more information on these programs, go to IRS. 2011 tax software gov and enter “VITA” in the search box. 2011 tax software Internet. 2011 tax software    IRS. 2011 tax software gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 2011 tax software Download the free IRS2Go app from the iTunes app store or from Google Play. 2011 tax software Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 2011 tax software Check the status of your 2013 refund with the Where's My Refund? application on IRS. 2011 tax software gov or download the IRS2Go app and select the Refund Status option. 2011 tax software The IRS issues more than 9 out of 10 refunds in less than 21 days. 2011 tax software Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 2011 tax software You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2011 tax software The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2011 tax software Use the Interactive Tax Assistant (ITA) to research your tax questions. 2011 tax software No need to wait on the phone or stand in line. 2011 tax software The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 2011 tax software When you reach the response screen, you can print the entire interview and the final response for your records. 2011 tax software New subject areas are added on a regular basis. 2011 tax software  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 2011 tax software gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 2011 tax software You can use the IRS Tax Map to search publications and instructions by topic or keyword. 2011 tax software The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 2011 tax software When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 2011 tax software Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 2011 tax software You can also ask the IRS to mail a return or an account transcript to you. 2011 tax software Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 2011 tax software gov or by calling 1-800-908-9946. 2011 tax software Tax return and tax account transcripts are generally available for the current year and the past three years. 2011 tax software Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 2011 tax software Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 2011 tax software If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 2011 tax software Check the status of your amended return using Where's My Amended Return? Go to IRS. 2011 tax software gov and enter Where's My Amended Return? in the search box. 2011 tax software You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2011 tax software It can take up to 3 weeks from the date you mailed it to show up in our system. 2011 tax software Make a payment using one of several safe and convenient electronic payment options available on IRS. 2011 tax software gov. 2011 tax software Select the Payment tab on the front page of IRS. 2011 tax software gov for more information. 2011 tax software Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 2011 tax software Figure your income tax withholding with the IRS Withholding Calculator on IRS. 2011 tax software gov. 2011 tax software Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 2011 tax software Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 2011 tax software gov. 2011 tax software Request an Electronic Filing PIN by going to IRS. 2011 tax software gov and entering Electronic Filing PIN in the search box. 2011 tax software Download forms, instructions and publications, including accessible versions for people with disabilities. 2011 tax software Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 2011 tax software gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 2011 tax software An employee can answer questions about your tax account or help you set up a payment plan. 2011 tax software Before you visit, check the Office Locator on IRS. 2011 tax software gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 2011 tax software If you have a special need, such as a disability, you can request an appointment. 2011 tax software Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 2011 tax software Apply for an Employer Identification Number (EIN). 2011 tax software Go to IRS. 2011 tax software gov and enter Apply for an EIN in the search box. 2011 tax software Read the Internal Revenue Code, regulations, or other official guidance. 2011 tax software Read Internal Revenue Bulletins. 2011 tax software Sign up to receive local and national tax news and more by email. 2011 tax software Just click on “subscriptions” above the search box on IRS. 2011 tax software gov and choose from a variety of options. 2011 tax software Phone. 2011 tax software    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 2011 tax software Download the free IRS2Go app from the iTunes app store or from Google Play. 2011 tax software Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. 2011 tax software gov, or download the IRS2Go app. 2011 tax software Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 2011 tax software The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2011 tax software Most VITA and TCE sites offer free electronic filing. 2011 tax software Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 2011 tax software Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 2011 tax software Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. 2011 tax software If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 2011 tax software The IRS issues more than 9 out of 10 refunds in less than 21 days. 2011 tax software Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2011 tax software Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. 2011 tax software The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2011 tax software Note, the above information is for our automated hotline. 2011 tax software Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. 2011 tax software Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. 2011 tax software You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2011 tax software It can take up to 3 weeks from the date you mailed it to show up in our system. 2011 tax software Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). 2011 tax software You should receive your order within 10 business days. 2011 tax software Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. 2011 tax software If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. 2011 tax software Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 2011 tax software The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 2011 tax software These individuals can also contact the IRS through relay services such as the Federal Relay Service. 2011 tax software Walk-in. 2011 tax software   You can find a selection of forms, publications and services — in person. 2011 tax software Products. 2011 tax software You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 2011 tax software Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 2011 tax software Services. 2011 tax software You can walk in to your local TAC for face-to-face tax help. 2011 tax software An employee can answer questions about your tax account or help you set up a payment plan. 2011 tax software Before visiting, use the Office Locator tool on IRS. 2011 tax software gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. 2011 tax software Mail. 2011 tax software   You can send your order for forms, instructions, and publications to the address below. 2011 tax software You should receive a response within 10 business days after your request is received. 2011 tax software Internal Revenue Service 1201 N. 2011 tax software Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. 2011 tax software The Taxpayer Advocate Service (TAS) is your voice at the IRS. 2011 tax software Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 2011 tax software   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. 2011 tax software We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 2011 tax software You face (or your business is facing) an immediate threat of adverse action. 2011 tax software You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 2011 tax software   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 2011 tax software Here's why we can help: TAS is an independent organization within the IRS. 2011 tax software Our advocates know how to work with the IRS. 2011 tax software Our services are free and tailored to meet your needs. 2011 tax software We have offices in every state, the District of Columbia, and Puerto Rico. 2011 tax software   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. 2011 tax software   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 2011 tax software If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. 2011 tax software Low Income Taxpayer Clinics Low Income