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Amended Tax Returns

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Amended Tax Returns

Amended tax returns 13. Amended tax returns   Basis of Property Table of Contents Introduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds Introduction This chapter discusses how to figure your basis in property. Amended tax returns It is divided into the following sections. Amended tax returns Cost basis. Amended tax returns Adjusted basis. Amended tax returns Basis other than cost. Amended tax returns Your basis is the amount of your investment in property for tax purposes. Amended tax returns Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Amended tax returns Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Amended tax returns If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Amended tax returns Only the basis allocated to the business or investment use of the property can be depreciated. Amended tax returns Your original basis in property is adjusted (increased or decreased) by certain events. Amended tax returns For example, if you make improvements to the property, increase your basis. Amended tax returns If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Amended tax returns Keep accurate records of all items that affect the basis of your property. Amended tax returns For more information on keeping records, see chapter 1. Amended tax returns Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 535 Business Expenses 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 551 Basis of Assets 946 How To Depreciate Property Cost Basis The basis of property you buy is usually its cost. Amended tax returns The cost is the amount you pay in cash, debt obligations, other property, or services. Amended tax returns Your cost also includes amounts you pay for the following items: Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if you assume liability for the seller). Amended tax returns In addition, the basis of real estate and business assets may include other items. Amended tax returns Loans with low or no interest. Amended tax returns    If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus any amount considered to be unstated interest. Amended tax returns You generally have unstated interest if your interest rate is less than the applicable federal rate. Amended tax returns   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Amended tax returns Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Amended tax returns If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Amended tax returns Lump sum purchase. Amended tax returns   If you buy buildings and the land on which they stand for a lump sum, allocate the cost basis among the land and the buildings. Amended tax returns Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Amended tax returns Figure the basis of each asset by multiplying the lump sum by a fraction. Amended tax returns The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Amended tax returns    If you are not certain of the FMVs of the land and buildings, you can allocate the basis according to their assessed values for real estate tax purposes. Amended tax returns Fair market value (FMV). Amended tax returns   FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Amended tax returns Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Amended tax returns Assumption of mortgage. Amended tax returns   If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Amended tax returns Settlement costs. Amended tax returns   Your basis includes the settlement fees and closing costs you paid for buying the property. Amended tax returns (A fee for buying property is a cost that must be paid even if you buy the property for cash. Amended tax returns ) Do not include fees and costs for getting a loan on the property in your basis. Amended tax returns   The following are some of the settlement fees or closing costs you can include in the basis of your property. Amended tax returns Abstract fees (abstract of title fees). Amended tax returns Charges for installing utility services. Amended tax returns Legal fees (including fees for the title search and preparation of the sales contract and deed). Amended tax returns Recording fees. Amended tax returns Survey fees. Amended tax returns Transfer taxes. Amended tax returns Owner's title insurance. Amended tax returns Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Amended tax returns   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Amended tax returns   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Amended tax returns Casualty insurance premiums. Amended tax returns Rent for occupancy of the property before closing. Amended tax returns Charges for utilities or other services related to occupancy of the property before closing. Amended tax returns Charges connected with getting a loan, such as points (discount points, loan origination fees), mortgage insurance premiums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. Amended tax returns Fees for refinancing a mortgage. Amended tax returns Real estate taxes. Amended tax returns   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Amended tax returns You cannot deduct them as an expense. Amended tax returns    If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Amended tax returns Do not include that amount in the basis of your property. Amended tax returns If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Amended tax returns Points. Amended tax returns   If you pay points to get a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Amended tax returns Generally, you deduct the points over the term of the loan. Amended tax returns For more information on how to deduct points, see chapter 23. Amended tax returns Points on home mortgage. Amended tax returns   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Amended tax returns If certain requirements are met, you can deduct the points in full for the year in which they are paid. Amended tax returns Reduce the basis of your home by any seller-paid points. Amended tax returns Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. Amended tax returns The result is the adjusted basis. Amended tax returns Increases to Basis Increase the basis of any property by all items properly added to a capital account. Amended tax returns Examples of items that increase basis are shown in Table 13-1. Amended tax returns These include the items discussed below. Amended tax returns Improvements. Amended tax returns   Add to your basis in property the cost of improvements having a useful life of more than 1 year, that increase the value of the property, lengthen its life, or adapt it to a different use. Amended tax returns For example, improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. Amended tax returns Assessments for local improvements. Amended tax returns   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Amended tax returns Do not deduct them as taxes. Amended tax returns However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Amended tax returns Example. Amended tax returns Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected property owners for the cost of the conversion. Amended tax returns Add the assessment to your property's basis. Amended tax returns In this example, the assessment is a depreciable asset. Amended tax returns Decreases to Basis Decrease the basis of any property by all items that represent a return of capital for the period during which you held the property. Amended tax returns Examples of items that decrease basis are shown in Table 13-1. Amended tax returns These include the items discussed below. Amended tax returns Table 13-1. Amended tax returns Examples of Adjustments to Basis Increases to Basis Decreases to Basis • Capital improvements: • Exclusion from income of   Putting an addition on your home subsidies for energy conservation   Replacing an entire roof measures   Paving your driveway     Installing central air conditioning • Casualty or theft loss deductions   Rewiring your home and insurance reimbursements       • Assessments for local improvements:     Water connections     Extending utility service lines to the property • Postponed gain from the sale of a home   Sidewalks • Alternative motor vehicle credit  (Form 8910)   Roads       • Alternative fuel vehicle refueling     property credit (Form 8911)           • Residential energy credits (Form 5695)       • Casualty losses: • Depreciation and section 179 deduction   Restoring damaged property     • Nontaxable corporate distributions • Legal fees:     Cost of defending and perfecting a title • Certain canceled debt excluded from   Fees for getting a reduction of an assessment income     • Zoning costs • Easements           • Adoption tax benefits Casualty and theft losses. Amended tax returns   If you have a casualty or theft loss, decrease the basis in your property by any insurance proceeds or other reimbursement and by any deductible loss not covered by insurance. Amended tax returns    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Amended tax returns   For more information on casualty and theft losses, see chapter 25. Amended tax returns Depreciation and section 179 deduction. Amended tax returns   Decrease the basis of your qualifying business property by any section 179 deduction you take and the depreciation you deducted, or could have deducted (including any special depreciation allowance), on your tax returns under the method of depreciation you selected. Amended tax returns   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Amended tax returns Example. Amended tax returns You owned a duplex used as rental property that cost you $40,000, of which $35,000 was allocated to the building and $5,000 to the land. Amended tax returns You added an improvement to the duplex that cost $10,000. Amended tax returns In February last year, the duplex was damaged by fire. Amended tax returns Up to that time, you had been allowed depreciation of $23,000. Amended tax returns You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Amended tax returns You deducted a casualty loss of $1,000 on your income tax return for last year. Amended tax returns You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Amended tax returns You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Amended tax returns Figure the adjusted basis of the duplex as follows: Original cost of duplex $35,000 Addition to duplex 10,000 Total cost of duplex $45,000 Minus: Depreciation 23,000 Adjusted basis before casualty $22,000 Minus: Insurance proceeds $19,700     Deducted casualty loss 1,000     Salvage proceeds 1,300 22,000 Adjusted basis after casualty $-0- Add: Cost of restoring duplex 19,000 Adjusted basis after restoration $19,000 Note. Amended tax returns Your basis in the land is its original cost of $5,000. Amended tax returns Easements. Amended tax returns   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Amended tax returns It reduces the basis of the affected part of the property. Amended tax returns If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Amended tax returns   If the gain is on a capital asset, see chapter 16 for information about how to report it. Amended tax returns If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Amended tax returns Exclusion of subsidies for energy conservation measures. Amended tax returns   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Amended tax returns Reduce the basis of the property for which you received the subsidy by the excluded amount. Amended tax returns For more information about this subsidy, see chapter 12. Amended tax returns Postponed gain from sale of home. Amended tax returns    If you postponed gain from the sale of your main home under rules in effect before May 7, 1997, you must reduce the basis of the home you acquired as a replacement by the amount of the postponed gain. Amended tax returns For more information on the rules for the sale of a home, see chapter 15. Amended tax returns Basis Other Than Cost There are many times when you cannot use cost as basis. Amended tax returns In these cases, the fair market value or the adjusted basis of the property can be used. Amended tax returns Fair market value (FMV) and adjusted basis were discussed earlier. Amended tax returns Property Received for Services If you receive property for your services, include the FMV of the property in income. Amended tax returns The amount you include in income becomes your basis. Amended tax returns If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Amended tax returns Restricted property. Amended tax returns   If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested. Amended tax returns However, this rule does not apply if you make an election to include in income the FMV of the property at the time it is transferred to you, less any amount you paid for it. Amended tax returns Property is substantially vested when it is transferable or when it is not subject to a substantial risk of forfeiture (you do not have a good chance of losing it). Amended tax returns For more information, see Restricted Property in Publication 525. Amended tax returns Bargain purchases. Amended tax returns   A bargain purchase is a purchase of an item for less than its FMV. Amended tax returns If, as compensation for services, you buy goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Amended tax returns Your basis in the property is its FMV (your purchase price plus the amount you include in income). Amended tax returns   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Amended tax returns However, your basis in the property is still its FMV. Amended tax returns See Employee Discounts in Publication 15-B. Amended tax returns Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Amended tax returns A taxable gain or deductible loss also is known as a recognized gain or loss. Amended tax returns If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Amended tax returns Involuntary Conversions If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property. Amended tax returns Similar or related property. Amended tax returns   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the same as the converted property's basis on the date of the conversion, with the following adjustments. Amended tax returns Decrease the basis by the following. Amended tax returns Any loss you recognize on the involuntary conversion. Amended tax returns Any money you receive that you do not spend on similar property. Amended tax returns Increase the basis by the following. Amended tax returns Any gain you recognize on the involuntary conversion. Amended tax returns Any cost of acquiring the replacement property. Amended tax returns Money or property not similar or related. Amended tax returns    If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the conversion. Amended tax returns Example. Amended tax returns The state condemned your property. Amended tax returns The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Amended tax returns You realized a gain of $5,000 ($31,000 − $26,000). Amended tax returns You bought replacement property similar in use to the converted property for $29,000. Amended tax returns You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Amended tax returns Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Amended tax returns The basis of the replacement property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of replacement property $26,000 Allocating the basis. Amended tax returns   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Amended tax returns Basis for depreciation. Amended tax returns   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Amended tax returns For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Amended tax returns Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Amended tax returns If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Amended tax returns See Nontaxable Trades in chapter 14. Amended tax returns Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Amended tax returns To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Amended tax returns Qualifying property. Amended tax returns Like-kind property. Amended tax returns The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Amended tax returns If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid. Amended tax returns Qualifying property. Amended tax returns   In a like-kind exchange, you must hold for investment or for productive use in your trade or business both the property you give up and the property you receive. Amended tax returns Like-kind property. Amended tax returns   There must be an exchange of like-kind property. Amended tax returns Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Amended tax returns The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Amended tax returns Example. Amended tax returns You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Amended tax returns The dealer allows you $2,000 on the old truck, and you pay $4,800. Amended tax returns This is a like-kind exchange. Amended tax returns The basis of the new truck is $6,500 (the adjusted basis of the old one, $1,700, plus the amount you paid, $4,800). Amended tax returns If you sell your old truck to a third party for $2,000 instead of trading it in and then buy a new one from the dealer, you have a taxable gain of $300 on the sale (the $2,000 sale price minus the $1,700 adjusted basis). Amended tax returns The basis of the new truck is the price you pay the dealer. Amended tax returns Partially nontaxable exchanges. Amended tax returns   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Amended tax returns The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Amended tax returns Decrease the basis by the following amounts. Amended tax returns Any money you receive. Amended tax returns Any loss you recognize on the exchange. Amended tax returns Increase the basis by the following amounts. Amended tax returns Any additional costs you incur. Amended tax returns Any gain you recognize on the exchange. Amended tax returns If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Amended tax returns Allocation of basis. Amended tax returns   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Amended tax returns The rest is the basis of the like-kind property. Amended tax returns More information. Amended tax returns   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Amended tax returns Basis for depreciation. Amended tax returns   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Amended tax returns For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Amended tax returns Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Amended tax returns The same rule applies to a transfer by your former spouse that is incident to divorce. Amended tax returns However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Amended tax returns If the property transferred to you is a series E, series EE, or series I U. Amended tax returns S. Amended tax returns savings bond, the transferor must include in income the interest accrued to the date of transfer. Amended tax returns Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Amended tax returns For more information on these bonds, see chapter 7. Amended tax returns At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Amended tax returns For more information about the transfer of property from a spouse, see chapter 14. Amended tax returns Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Amended tax returns FMV less than donor's adjusted basis. Amended tax returns   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Amended tax returns Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Amended tax returns Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Amended tax returns See Adjusted Basis , earlier. Amended tax returns Example. Amended tax returns You received an acre of land as a gift. Amended tax returns At the time of the gift, the land had an FMV of $8,000. Amended tax returns The donor's adjusted basis was $10,000. Amended tax returns After you received the property, no events occurred to increase or decrease your basis. Amended tax returns If you later sell the property for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain. Amended tax returns If you sell the property for $7,000, you will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss. Amended tax returns If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Amended tax returns Business property. Amended tax returns   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Amended tax returns FMV equal to or greater than donor's adjusted basis. Amended tax returns   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Amended tax returns Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Amended tax returns   Also, for figuring gain or loss from a sale or other disposition or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Amended tax returns See Adjusted Basis , earlier. Amended tax returns   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Amended tax returns Figure the increase by multiplying the gift tax paid by a fraction. Amended tax returns The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Amended tax returns   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Amended tax returns The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Amended tax returns Example. Amended tax returns In 2013, you received a gift of property from your mother that had an FMV of $50,000. Amended tax returns Her adjusted basis was $20,000. Amended tax returns The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Amended tax returns She paid a gift tax of $7,320 on the property. Amended tax returns Your basis is $26,076, figured as follows: Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000     Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Amended tax returns 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Amended tax returns If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Amended tax returns However, your basis cannot exceed the FMV of the gift at the time it was given to you. Amended tax returns Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Amended tax returns The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Amended tax returns The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. Amended tax returns The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Amended tax returns If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Amended tax returns For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Amended tax returns Property inherited from a decedent who died in 2010. Amended tax returns   If you inherited property from a decedent who died in 2010, special rules may apply. Amended tax returns For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Amended tax returns Community property. Amended tax returns   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Amended tax returns When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Amended tax returns For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Amended tax returns Example. Amended tax returns You and your spouse owned community property that had a basis of $80,000. Amended tax returns When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Amended tax returns The FMV of the community interest was $100,000. Amended tax returns The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Amended tax returns The basis of the other half to your spouse's heirs is also $50,000. Amended tax returns For more information about community property, see Publication 555, Community Property. Amended tax returns Property Changed From Personal to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you can begin to depreciate the property at the time of the change. Amended tax returns To do so, you must figure its basis for depreciation at the time of the change. Amended tax returns An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Amended tax returns Basis for depreciation. Amended tax returns   The basis for depreciation is the lesser of the following amounts. Amended tax returns The FMV of the property on the date of the change. Amended tax returns Your adjusted basis on the date of the change. Amended tax returns Example. Amended tax returns Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Amended tax returns You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Amended tax returns Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Amended tax returns Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Amended tax returns On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Amended tax returns The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it is less than your adjusted basis ($178,000). Amended tax returns Sale of property. Amended tax returns   If you later sell or dispose of property changed to business or rental use, the basis you use will depend on whether you are figuring gain or loss. Amended tax returns Gain. Amended tax returns   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Amended tax returns Example. Amended tax returns Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Amended tax returns Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Amended tax returns Loss. Amended tax returns   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Amended tax returns Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Amended tax returns Example. Amended tax returns Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Amended tax returns In this case, you would start with the FMV on the date of the change to rental use ($180,000), because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. Amended tax returns Reduce that amount ($180,000) by the depreciation deductions ($37,500). Amended tax returns The basis for loss is $142,500 ($180,000 − $37,500). Amended tax returns Stocks and Bonds The basis of stocks or bonds you buy generally is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Amended tax returns If you get stocks or bonds other than by purchase, your basis is usually determined by the FMV or the previous owner's adjusted basis, as discussed earlier. Amended tax returns You must adjust the basis of stocks for certain events that occur after purchase. Amended tax returns For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. Amended tax returns This rule applies only when the additional stock received is identical to the stock held. Amended tax returns Also reduce your basis when you receive nontaxable distributions. Amended tax returns They are a return of capital. Amended tax returns Example. Amended tax returns In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Amended tax returns In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Amended tax returns In 2013 XYZ declared a 2-for-1 stock split. Amended tax returns You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Amended tax returns Other basis. Amended tax returns   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Amended tax returns For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Amended tax returns Identifying stocks or bonds sold. Amended tax returns   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stocks or bonds. Amended tax returns If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Amended tax returns For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Amended tax returns Mutual fund shares. Amended tax returns   If you sell mutual fund shares you acquired at various times and prices and left on deposit in an account kept by a custodian or agent, you can elect to use an average basis. Amended tax returns For more information, see Publication 550. Amended tax returns Bond premium. Amended tax returns   If you buy a taxable bond at a premium and elect to amortize the premium, reduce the basis of the bond by the amortized premium you deduct each year. Amended tax returns See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Amended tax returns Although you cannot deduct the premium on a tax-exempt bond, you must amortize the premium each year and reduce your basis in the bond by the amortized amount. Amended tax returns Original issue discount (OID) on debt instruments. Amended tax returns   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Amended tax returns See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Amended tax returns Tax-exempt obligations. Amended tax returns    OID on tax-exempt obligations is generally not taxable. Amended tax returns However, when you dispose of a tax-exempt obligation issued after September 3, 1982, and acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Amended tax returns The accrued OID is added to the basis of the obligation to determine your gain or loss. Amended tax returns See chapter 4 of Publication 550. Amended tax returns Prev  Up  Next   Home   More Online Publications
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2008 Changes to Form 1065 – Frequently Asked Questions

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The Amended Tax Returns

Amended tax returns 4. Amended tax returns   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. Amended tax returns Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. Amended tax returns Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. Amended tax returns However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Amended tax returns Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Amended tax returns Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. Amended tax returns This information is also provided to the IRS. Amended tax returns Form 1099-B. Amended tax returns   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. Amended tax returns Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. Amended tax returns Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. Amended tax returns on Form 8949 and/or Schedule D, as applicable. Amended tax returns For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. Amended tax returns For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Amended tax returns Form 1099-S. Amended tax returns   An information return must be provided on certain real estate transactions. Amended tax returns Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. Amended tax returns Land (improved or unimproved), including air space. Amended tax returns An inherently permanent structure, including any residential, commercial, or industrial building. Amended tax returns A condominium unit and its related fixtures and common elements (including land). Amended tax returns Stock in a cooperative housing corporation. Amended tax returns If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. Amended tax returns The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. Amended tax returns   For more information see chapter 4 in Publication 550. Amended tax returns Also, see the Instructions for Form 8949. Amended tax returns Schedule D and Form 8949 Form 8949. Amended tax returns   Individuals, corporations, and partnerships, use Form 8949 to report the following. Amended tax returns    Sales or exchanges of capital assets, including stocks, bonds, etc. Amended tax returns , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). Amended tax returns Include these transactions even if you did not receive a Form 1099-B or 1099-S. Amended tax returns Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. Amended tax returns Nonbusiness bad debts. Amended tax returns   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. Amended tax returns You and your spouse may list your transactions on separate forms or you may combine them. Amended tax returns However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. Amended tax returns    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. Amended tax returns   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. Amended tax returns See the Instructions for Form 8949. Amended tax returns Schedule D. Amended tax returns    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. Amended tax returns Before completing Schedule D, you may have to complete other forms as shown below. Amended tax returns    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. Amended tax returns Enter on Schedule D the combined totals from all your Forms 8949. Amended tax returns For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). Amended tax returns For a like-kind exchange, complete Form 8824. Amended tax returns See Reporting the exchange under Like-Kind Exchanges in chapter 1. Amended tax returns For an installment sale, complete Form 6252. Amended tax returns See Publication 537. Amended tax returns For an involuntary conversion due to casualty or theft, complete Form 4684. Amended tax returns See Publication 547, Casualties, Disasters, and Thefts. Amended tax returns For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. Amended tax returns See Publication 925, Passive Activity and At-Risk Rules. Amended tax returns For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. Amended tax returns See Publication 925. Amended tax returns For gains and losses from section 1256 contracts and straddles, complete Form 6781. Amended tax returns See Publication 550. Amended tax returns Personal-use property. Amended tax returns   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. Amended tax returns Loss from the sale or exchange of property held for personal use is not deductible. Amended tax returns But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. Amended tax returns See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. Amended tax returns Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Amended tax returns The time you own an asset before disposing of it is the holding period. Amended tax returns If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. Amended tax returns If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. Amended tax returns Report it in Part I of Form 8949 and/or Schedule D, as applicable. Amended tax returns If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. Amended tax returns Report it in Part II of Form 8949 and/or Schedule D, as applicable. Amended tax returns   Table 4-1. Amended tax returns Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. Amended tax returns . Amended tax returns . Amended tax returns  THEN you have a. Amended tax returns . Amended tax returns . Amended tax returns 1 year or less, Short-term capital gain or  loss. Amended tax returns More than 1 year, Long-term capital gain or  loss. Amended tax returns These distinctions are essential to correctly arrive at your net capital gain or loss. Amended tax returns Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. Amended tax returns See Capital Gains Tax Rates, later. Amended tax returns Holding period. Amended tax returns   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. Amended tax returns The day you disposed of the property is part of your holding period. Amended tax returns Example. Amended tax returns If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Amended tax returns If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Amended tax returns Patent property. Amended tax returns   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. Amended tax returns For more information, see Patents in chapter 2. Amended tax returns Inherited property. Amended tax returns   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Amended tax returns Installment sale. Amended tax returns   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. Amended tax returns If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. Amended tax returns    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. Amended tax returns Nontaxable exchange. Amended tax returns   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Amended tax returns That is, it begins on the same day as your holding period for the old property. Amended tax returns Example. Amended tax returns You bought machinery on December 4, 2012. Amended tax returns On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. Amended tax returns On December 5, 2013, you sold the machinery you got in the exchange. Amended tax returns Your holding period for this machinery began on December 5, 2012. Amended tax returns Therefore, you held it longer than 1 year. Amended tax returns Corporate liquidation. Amended tax returns   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. Amended tax returns Profit-sharing plan. Amended tax returns   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. Amended tax returns Gift. Amended tax returns   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Amended tax returns For more information on basis, see Publication 551, Basis of Assets. Amended tax returns Real property. Amended tax returns   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. Amended tax returns   However, taking possession of real property under an option agreement is not enough to start the holding period. Amended tax returns The holding period cannot start until there is an actual contract of sale. Amended tax returns The holding period of the seller cannot end before that time. Amended tax returns Repossession. Amended tax returns   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. Amended tax returns Your holding period does not include the time between the original sale and the repossession. Amended tax returns That is, it does not include the period during which the first buyer held the property. Amended tax returns Nonbusiness bad debts. Amended tax returns   Nonbusiness bad debts are short-term capital losses. Amended tax returns For information on nonbusiness bad debts, see chapter 4 of Publication 550. Amended tax returns    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Amended tax returns Net short-term capital gain or loss. Amended tax returns   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. Amended tax returns Do this by adding all your short-term capital gains. Amended tax returns Then add all your short-term capital losses. Amended tax returns Subtract the lesser total from the other. Amended tax returns The result is your net short-term capital gain or loss. Amended tax returns Net long-term capital gain or loss. Amended tax returns   Follow the same steps to combine your long-term capital gains and losses. Amended tax returns Include the following items. Amended tax returns Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. Amended tax returns Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. Amended tax returns Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. Amended tax returns Any long-term capital loss carryover. Amended tax returns The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. Amended tax returns Net gain. Amended tax returns   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Amended tax returns Different tax rates may apply to the part that is a net capital gain. Amended tax returns See Capital Gains Tax Rates, later. Amended tax returns Net loss. Amended tax returns   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Amended tax returns But there are limits on how much loss you can deduct and when you can deduct it. Amended tax returns See Treatment of Capital Losses, next. Amended tax returns    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. Amended tax returns The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Amended tax returns Table 4-2. Amended tax returns Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. Amended tax returns Ends on trading date you sold security. Amended tax returns U. Amended tax returns S. Amended tax returns Treasury notes and bonds If bought at auction, day after notification of bid acceptance. Amended tax returns If bought through subscription, day after subscription was submitted. Amended tax returns Nontaxable exchanges Day after date you acquired old property. Amended tax returns Gift If your basis is giver's adjusted basis, same day as giver's holding period began. Amended tax returns If your basis is FMV, day after date of gift. Amended tax returns Real property bought Generally, day after date you received title to the property. Amended tax returns Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. Amended tax returns Capital loss carryover. Amended tax returns   Generally, you have a capital loss carryover if either of the following situations applies to you. Amended tax returns Your net loss is more than the yearly limit. Amended tax returns Your taxable income without your deduction for exemptions is less than zero. Amended tax returns If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. Amended tax returns Example. Amended tax returns Bob and Gloria Sampson sold property in 2013. Amended tax returns The sale resulted in a capital loss of $7,000. Amended tax returns The Sampsons had no other capital transactions. Amended tax returns On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. Amended tax returns They had taxable income of $2,000. Amended tax returns The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. Amended tax returns If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. Amended tax returns Their capital loss deduction would have been $2,000. Amended tax returns They would have no carryover to 2014. Amended tax returns Short-term and long-term losses. Amended tax returns   When you carry over a loss, it retains its original character as either long term or short term. Amended tax returns A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. Amended tax returns A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. Amended tax returns A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. Amended tax returns   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. Amended tax returns If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. Amended tax returns To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). Amended tax returns Joint and separate returns. Amended tax returns   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. Amended tax returns If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. Amended tax returns Neither you nor your spouse can deduct any part of the other's loss. Amended tax returns   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. Amended tax returns However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. Amended tax returns Death of taxpayer. Amended tax returns   Capital losses cannot be carried over after a taxpayer's death. Amended tax returns They are deductible only on the final income tax return filed on the decedent's behalf. Amended tax returns The yearly limit discussed earlier still applies in this situation. Amended tax returns Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. Amended tax returns Corporations. Amended tax returns   A corporation can deduct capital losses only up to the amount of its capital gains. Amended tax returns In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. Amended tax returns It must be carried to other tax years and deducted from capital gains occurring in those years. Amended tax returns For more information, see Publication 542. Amended tax returns Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Amended tax returns These lower rates are called the maximum capital gains rates. Amended tax returns The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Amended tax returns For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. Amended tax returns Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. Amended tax returns For more information, see chapter 4 of Publication 550. Amended tax returns Also see the Instructions for Schedule D (Form 1040). Amended tax returns Unrecaptured section 1250 gain. Amended tax returns   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. Amended tax returns Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. Amended tax returns Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. Amended tax returns For more information about section 1250 property and net section 1231 gain, see chapter 3. Amended tax returns Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. Amended tax returns The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Amended tax returns The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). Amended tax returns The disposition of capital assets not reported on Schedule D. Amended tax returns The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. Amended tax returns The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. Amended tax returns Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). Amended tax returns You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. Amended tax returns Section 1231 gains and losses. Amended tax returns   Show any section 1231 gains and losses in Part I. Amended tax returns Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. Amended tax returns Carry a net loss to Part II of Form 4797 as an ordinary loss. Amended tax returns   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. Amended tax returns Report any remaining gain on Schedule D (Form 1040). Amended tax returns See Section 1231 Gains and Losses in chapter 3. Amended tax returns Ordinary gains and losses. Amended tax returns   Show any ordinary gains and losses in Part II. Amended tax returns This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. Amended tax returns It also includes ordinary gain figured in Part III. Amended tax returns Mark-to-market election. Amended tax returns   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). Amended tax returns See the Instructions for Form 4797. Amended tax returns Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. Amended tax returns Ordinary income from depreciation. Amended tax returns   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. Amended tax returns Carry the ordinary income to Part II of Form 4797 as an ordinary gain. Amended tax returns Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. Amended tax returns Carry any remaining gain from a casualty or theft to Form 4684. Amended tax returns Prev  Up  Next   Home   More Online Publications