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E File 2012 Tax Return

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E File 2012 Tax Return

E file 2012 tax return Index A Additional Medicare Tax, What's New for 2013, What's New, Employment Taxes, Additional Medicare Tax. E file 2012 tax return Advertising, Advertising expenses. E file 2012 tax return Amortization Anti-abuse rule, Anti-abuse rule. E file 2012 tax return Anti-churning rules, Anti-Churning Rules Atmospheric pollution control facilities, Pollution Control Facilities Corporate organization costs, Costs of Organizing a Corporation Dispositions of section 197 intangibles, Disposition of Section 197 Intangibles Experimental costs, Research and Experimental Costs Geological and geophysical costs, Geological and Geophysical Costs How to deduct, How To Deduct Amortization Incorrect amount deducted, Incorrect Amount of Amortization Deducted Partnership organization costs, Costs of Organizing a Partnership Pollution control facilities, Pollution Control Facilities Reforestation costs, Reforestation Costs Reforestation expenses, Reforestation Costs Related person, Related person. E file 2012 tax return Research costs, Research and Experimental Costs Section 197 intangibles defined, Section 197 Intangibles Defined Start-up costs, Business Start-Up Costs Starting a businesscosts, Starting a Business Anticipated liabilities, Anticipated liabilities. E file 2012 tax return Assessments, local, Taxes for local benefits. E file 2012 tax return Assistance (see Tax help) At-risk limits, At-risk limits. E file 2012 tax return Attorney fees, Legal and professional fees. E file 2012 tax return Awards, Achievement awards. E file 2012 tax return , Length-of-service award. E file 2012 tax return , Safety achievement award. E file 2012 tax return B Bad debts Defined, Definition of Business Bad Debt How to treat, How To Claim a Business Bad Debt Recovery, Recovery of a Bad Debt Types of, Types of Business Bad Debts When worthless, When a Debt Becomes Worthless Bonuses Employee, Bonuses Royalties, Bonuses and advanced royalties. E file 2012 tax return Bribes, Bribes and kickbacks. E file 2012 tax return Business Assets, Business Assets Books and records, Business books and records, etc. E file 2012 tax return Meal expenses, Meals and Entertainment Use of car, Business use of your car. E file 2012 tax return , Car and truck expenses. E file 2012 tax return Use of home, Business use of your home. E file 2012 tax return C Campaign contribution, Political contributions. E file 2012 tax return Capital expenses, Capital Expenses, Capital versus Deductible Expenses Capitalization of interest, Capitalization of Interest Car allowance, Car allowance. E file 2012 tax return Car and truck expenses, Car and truck expenses. E file 2012 tax return Carrying charges, Carrying Charges Charitable contributions, Charitable contributions. E file 2012 tax return Circulation costs, newspapers and periodicals, Circulation Costs Club dues, Club dues and membership fees. E file 2012 tax return Comments on publication, Comments and suggestions. E file 2012 tax return Commitment fees, Commitment fees or standby charges. E file 2012 tax return Computer software, Computer software. E file 2012 tax return Constant-yield method, OID, Constant-yield method. E file 2012 tax return Contested liability, Contested liability. E file 2012 tax return Contributions Charitable, Charitable contributions. E file 2012 tax return Political, Political contributions. E file 2012 tax return Copyrights, Patents, copyrights, etc. E file 2012 tax return Cost depletion, Cost Depletion Cost of getting lease, Cost of Getting a Lease, Getting a Lease Cost of goods sold, Cost of Goods Sold Cost recovery, Cost recovery. E file 2012 tax return Covenant not to compete, Covenant not to compete. E file 2012 tax return Credit card convenience fees, Credit card convenience fees. E file 2012 tax return D De minimis OID, De minimis OID. E file 2012 tax return Debt-financed distributions, Debt-financed distribution. E file 2012 tax return Definitions Business bad debt, Definition of Business Bad Debt Necessary expense, What Can I Deduct? Ordinary expense, What Can I Deduct? Section 197 intangibles, Section 197 Intangibles Defined Demolition expenses, Demolition expenses or losses. E file 2012 tax return Depletion Mineral property, Mineral Property Oil and gas wells, Oil and Gas Wells Percentage table, Mines and other natural deposits. E file 2012 tax return Timber, Timber Who can claim, Who Can Claim Depletion? Depreciation (see Cost recovery) Development costs, miners, Development Costs Disabled, improvements for, Barrier Removal Costs Drilling and development costs, Intangible Drilling Costs Dues, membership, Club dues and membership fees. E file 2012 tax return E Economic interest, Who Can Claim Depletion? Economic performance, Economic performance. E file 2012 tax return Education expenses, Education Expenses, Education expenses. E file 2012 tax return Elderly, improvements for, Barrier Removal Costs Employee benefit programs, Employee benefit programs. E file 2012 tax return Employment taxes, Employment Taxes Entertainment, Reimbursement of Travel, Meals, and Entertainment Excise taxes, Excise taxes. E file 2012 tax return Experimentation costs, Research and Experimental Costs, Research and Experimental Costs Exploration costs, Exploration Costs F Fees Commitment, Commitment fees or standby charges. E file 2012 tax return Legal and professional, Legal and professional fees. E file 2012 tax return Regulatory, Licenses and regulatory fees. E file 2012 tax return Tax return preparation, Tax preparation fees. E file 2012 tax return Fines, Penalties and fines. E file 2012 tax return Forgone, Forgone interest. E file 2012 tax return Forgone interest, Forgone interest. E file 2012 tax return Form 3115, Form 3115. E file 2012 tax return , Changing Your Accounting Method 4562, How To Deduct Amortization 5213, Using the presumption later. E file 2012 tax return 8826, Disabled access credit. E file 2012 tax return 8885, Health coverage tax credit. E file 2012 tax return T, Form T. E file 2012 tax return Franchise, Franchise, trademark, or trade name. E file 2012 tax return , Franchise, trademark, trade name. E file 2012 tax return Franchise taxes, Franchise taxes. E file 2012 tax return Free tax services, Free help with your tax return. E file 2012 tax return Fringe benefits, Fringe Benefits Fuel taxes, Fuel taxes. E file 2012 tax return G Gas wells, Natural Gas Wells Geological and geophysical costs Development, oil and gas, Geological and Geophysical Costs Exploration, oil and gas, Geological and Geophysical Costs Geothermal wells, Intangible Drilling Costs, Mines and Geothermal Deposits Gifts, nominal value, Gifts of nominal value. E file 2012 tax return Going into business, Going Into Business, Starting a Business Goodwill, Goodwill. E file 2012 tax return Gross income, not-for-profit activity, Gross Income H Health insurance, deduction for self-employed, Self-Employed Health Insurance Deduction Heating equipment, Heating equipment. E file 2012 tax return Help (see Tax help) Home, business use of, Business use of your home. E file 2012 tax return I Impairment-related expenses, Impairment-related expenses. E file 2012 tax return Improvements, Improvements By lessee, Improvements by Lessee For disabled and elderly, Barrier Removal Costs Income taxes, Income Taxes Incorrect amount of amortization deducted, Incorrect Amount of Amortization Deducted Insurance Capitalized premiums, Capitalized Premiums Deductible premiums, Deductible Premiums Nondeductible premiums, Nondeductible Premiums Self-employed individuals, Self-Employed Health Insurance Deduction Intangible drilling costs, Intangible Drilling Costs Intangibles, amortization, Section 197 Intangibles Interest, Forgone interest. E file 2012 tax return Allocation of, Allocation of Interest Below-market, Below-Market Loans Business expense for, Interest Capitalized, Capitalized interest. E file 2012 tax return , Capitalization of Interest Carrying charge, Carrying Charges Deductible, Interest You Can Deduct Life insurance policies, Interest on loans with respect to life insurance policies. E file 2012 tax return Not deductible, Interest You Cannot Deduct Refunds of, Refunds of interest. E file 2012 tax return When to deduct, When To Deduct Interest Internet-related expenses, Internet-related expenses. E file 2012 tax return Interview expenses, Interview expense allowances. E file 2012 tax return K Key person, Who is a key person? Kickbacks, Bribes and kickbacks. E file 2012 tax return L Leases Canceling, Canceling a lease. E file 2012 tax return Cost of getting, Cost of Getting a Lease, Getting a Lease Improvements by lessee, Improvements by Lessee Leveraged, Leveraged leases. E file 2012 tax return Mineral, Bonuses and advanced royalties. E file 2012 tax return Oil and gas, Bonuses and advanced royalties. E file 2012 tax return Sales distinguished, Lease or purchase. E file 2012 tax return Taxes on, Taxes on Leased Property Legal and professional fees, Legal and professional fees. E file 2012 tax return Licenses, Government-granted license, permit, etc. E file 2012 tax return , Licenses and regulatory fees. E file 2012 tax return Life insurance coverage, Life insurance coverage. E file 2012 tax return Limit on deductions, Not-for-Profit Activities Line of credit, Line of credit (continuous borrowings). E file 2012 tax return Loans Below-market interestrate, Below-Market Loans Discounted, Discounted loan. E file 2012 tax return Loans or Advances, Loans or Advances Lobbying expenses, Lobbying expenses. E file 2012 tax return Long-term care insurance, Qualified long-term care insurance. E file 2012 tax return Losses, Limits on losses. E file 2012 tax return , Not-for-Profit Activities At-risk limits, At-risk limits. E file 2012 tax return Net operating, Net operating loss. E file 2012 tax return Passive activities, Passive activities. E file 2012 tax return M Machinery parts, Machinery parts. E file 2012 tax return Meals, Reimbursement of Travel, Meals, and Entertainment Meals and entertainment, Meals and Entertainment Meals and lodging, Meals and lodging. E file 2012 tax return Methods of accounting, When Can I Deduct an Expense? Mining Depletion, Mines and Geothermal Deposits Development costs, Development Costs Exploration costs, Exploration Costs Mortgage, Mortgage. E file 2012 tax return , Expenses paid to obtain a mortgage. E file 2012 tax return Moving expenses, machinery, Moving machinery. E file 2012 tax return N Natural gas, Natural Gas Wells Nonqualifying intangibles, Assets That Are Not Section 197 Intangibles Not-for-profit activities, Not-for-Profit Activities Not-for-profit activity, gross income, Gross Income O Office in home, Business use of your home. E file 2012 tax return Oil and gas wells Depletion, Oil and Gas Wells Drilling costs, Intangible Drilling Costs Partnerships, Partnerships and S Corporations S corporations, Partnerships and S Corporations Optional safe harbor method, Optional safe harbor method. E file 2012 tax return Optional write-off method Circulation costs, Optional Write-off of Certain Tax Preferences Experimental costs, Optional Write-off of Certain Tax Preferences Intangible drilling and development costs, Optional Write-off of Certain Tax Preferences Mining exploration and development costs, Optional Write-off of Certain Tax Preferences Research costs, Optional Write-off of Certain Tax Preferences Organization costs Corporate, Costs of Organizing a Corporation Partnership, Costs of Organizing a Partnership Organizational costs, Business Start-Up and Organizational Costs Original issue discount, Original issue discount (OID). E file 2012 tax return Outplacement services, Outplacement services. E file 2012 tax return P Passive activities, Passive activities. E file 2012 tax return Payments in kind, Payments in kind. E file 2012 tax return Penalties, Prepayment penalty. E file 2012 tax return Deductible, Penalties and fines. E file 2012 tax return Nondeductible, Penalties and fines. E file 2012 tax return Prepayment, Prepayment penalty. E file 2012 tax return Per diem and car allowances, Per Diem and Car Allowances Percentage depletion, Percentage Depletion Personal property tax, Personal property tax. E file 2012 tax return Political contributions, Political contributions. E file 2012 tax return Pollution control facilities, Pollution Control Facilities Prepaid expense, Prepayment. E file 2012 tax return Extends useful life, Prepayment. E file 2012 tax return Interest, Prepaid interest. E file 2012 tax return , Prepaid interest. E file 2012 tax return Rent, Rent paid in advance. E file 2012 tax return Prepayment penalty, Prepayment penalty. E file 2012 tax return Presumption of profit, Not-for-Profit Activities Publications (see Tax help) R Real estate taxes, Real Estate Taxes Recapture Exploration expenses, Recapture of exploration expenses. E file 2012 tax return Timber property, Recapture. E file 2012 tax return Recordkeeping, Partnerships and S Corporations Recovery of amount deducted, Recovery of amount deducted (tax benefit rule). E file 2012 tax return Refiners who cannot claim percentage depletion, Refiners who cannot claim percentage depletion. E file 2012 tax return Reforestation costs, Reforestation Costs, Reforestation Costs Regulatory fees, Licenses and regulatory fees. E file 2012 tax return Reimbursements, Reimbursements Business expenses, Reimbursements for Business Expenses Mileage, Per Diem and Car Allowances Nonaccountable plan, Nonaccountable Plans Per diem , Per Diem and Car Allowances Related persons Anti-churning rules, Related person. E file 2012 tax return Coal or iron ore, Disposal to related person. E file 2012 tax return Payments to, Related person. E file 2012 tax return , Related person. E file 2012 tax return Refiners, Related person. E file 2012 tax return Unreasonable rent, Unreasonable rent. E file 2012 tax return Removal, Retired Asset Removal Costs, Barrier Removal Costs Rent expense, capitalizing, Capitalizing Rent Expenses Repairs, Repairs. E file 2012 tax return Repayments (claim of right), Repayments. E file 2012 tax return Research costs, Research and Experimental Costs, Research and Experimental Costs Retiree drug subsidy, What's New for 2013, What's New S Sales taxes, Sales tax. E file 2012 tax return Section 179 expense deduction (see Cost recovery) Self-employed health insurance deduction, Self-Employed Health Insurance Deduction Self-employment tax, Self-employment tax. E file 2012 tax return Self-insurance, reserve for, Nondeductible Premiums Sick pay, Sick and Vacation Pay Standard meal allowance, Standard meal allowance. E file 2012 tax return Standard mileage rate, Car allowance. E file 2012 tax return (see Business use of your car) Standby charges, Commitment fees or standby charges. E file 2012 tax return Start-up costs, Business Start-Up and Organizational Costs, Business Start-Up Costs Subscriptions, Subscriptions. E file 2012 tax return Suggestions for publication, Comments and suggestions. E file 2012 tax return Supplies and materials, Supplies and materials. E file 2012 tax return T Tax help, How To Get Tax Help Tax preparation fees, Tax preparation fees. E file 2012 tax return Taxes, Taxes on Leased Property Carrying charge, Carrying Charges Employment, Employment Taxes Excise, Excise taxes. E file 2012 tax return Franchise, Franchise taxes. E file 2012 tax return Fuel, Fuel taxes. E file 2012 tax return Income, Income Taxes Leased property, Taxes on Leased Property Personal property, Personal property tax. E file 2012 tax return Real estate, Real Estate Taxes Sales, Sales tax. E file 2012 tax return Unemployment fund, Unemployment fund taxes. E file 2012 tax return Telephone, Telephone. E file 2012 tax return Timber, Reforestation Costs, Timber Tools, Tools. E file 2012 tax return Trademark, trade name, Franchise, trademark, or trade name. E file 2012 tax return , Franchise, trademark, trade name. E file 2012 tax return Travel, Reimbursement of Travel, Meals, and Entertainment TTY/TDD information, How To Get Tax Help U Unemployment fund taxes, Unemployment fund taxes. E file 2012 tax return Unpaid expenses, related person, Related person. E file 2012 tax return Utilities, Utilities. E file 2012 tax return V Vacation pay, Sick and Vacation Pay W Wages Property, Property Tests for deducting pay, Tests for Deducting Pay Welfare benefit funds, Welfare benefit funds. E file 2012 tax return Prev  Up     Home   More Online Publications
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The E File 2012 Tax Return

E file 2012 tax return 14. E file 2012 tax return   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. E file 2012 tax return  If you are a U. E file 2012 tax return S. E file 2012 tax return 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. E file 2012 tax return S. E file 2012 tax return law. E file 2012 tax return This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. E file 2012 tax return Introduction This chapter discusses the tax consequences of selling or trading investment property. E file 2012 tax return It explains the following. E file 2012 tax return What a sale or trade is. E file 2012 tax return Figuring gain or loss. E file 2012 tax return Nontaxable trades. E file 2012 tax return Related party transactions. E file 2012 tax return Capital gains or losses. E file 2012 tax return Capital assets and noncapital assets. E file 2012 tax return Holding period. E file 2012 tax return Rollover of gain from publicly traded securities. E file 2012 tax return Other property transactions. E file 2012 tax return   Certain transfers of property are not discussed here. E file 2012 tax return They are discussed in other IRS publications. E file 2012 tax return These include the following. E file 2012 tax return Sales of a main home, covered in chapter 15. E file 2012 tax return Installment sales, covered in Publication 537, Installment Sales. E file 2012 tax return Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. E file 2012 tax return Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. E file 2012 tax return    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. E file 2012 tax return 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. E file 2012 tax return It also discusses investment-related expenses. E file 2012 tax return 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. E file 2012 tax return Generally, you should receive the statement by February 15 of the next year. E file 2012 tax return It will show the gross proceeds from the sale. E file 2012 tax return If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. E file 2012 tax return Generally, a covered security is a security you acquired after 2010, with certain exceptions. E file 2012 tax return See the Instructions for Form 8949. E file 2012 tax return The IRS will also get a copy of Form 1099-B from the broker. E file 2012 tax return Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. E file 2012 tax return What Is a Sale or Trade? This section explains what is a sale or trade. E file 2012 tax return It also explains certain transactions and events that are treated as sales or trades. E file 2012 tax return A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. E file 2012 tax return A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. E file 2012 tax return Sale and purchase. E file 2012 tax return   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. E file 2012 tax return The sale and purchase are two separate transactions. E file 2012 tax return But see Like-kind exchanges under Nontaxable Trades, later. E file 2012 tax return Redemption of stock. E file 2012 tax return   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. E file 2012 tax return Dividend versus sale or trade. E file 2012 tax return   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. E file 2012 tax return Both direct and indirect ownership of stock will be considered. E file 2012 tax return 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. E file 2012 tax return Redemption or retirement of bonds. E file 2012 tax return   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. E file 2012 tax return   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. E file 2012 tax return For details, see Regulations section 1. E file 2012 tax return 1001-3. E file 2012 tax return Surrender of stock. E file 2012 tax return   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. E file 2012 tax return The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. E file 2012 tax return Worthless securities. E file 2012 tax return    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. E file 2012 tax return This affects whether your capital loss is long term or short term. E file 2012 tax return See Holding Period , later. E file 2012 tax return   Worthless securities also include securities that you abandon after March 12, 2008. E file 2012 tax return To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. E file 2012 tax return 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. E file 2012 tax return    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. E file 2012 tax return Do not deduct them in the year the stock became worthless. E file 2012 tax return How to report loss. E file 2012 tax return    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. E file 2012 tax return In column (a), enter “Worthless. E file 2012 tax return ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. E file 2012 tax return See Form 8949 and the Instructions for Form 8949. E file 2012 tax return For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. E file 2012 tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. E file 2012 tax return Filing a claim for refund. E file 2012 tax return   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. E file 2012 tax return You must use Form 1040X, Amended U. E file 2012 tax return S. E file 2012 tax return Individual Income Tax Return, to amend your return for the year the security became worthless. E file 2012 tax return 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. E file 2012 tax return For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. E file 2012 tax return 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. E file 2012 tax return Gain. E file 2012 tax return   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. E file 2012 tax return Loss. E file 2012 tax return   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. E file 2012 tax return Adjusted basis. E file 2012 tax return   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. E file 2012 tax return See chapter 13 for more information about determining the adjusted basis of property. E file 2012 tax return Amount realized. E file 2012 tax return   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). E file 2012 tax return Amount realized includes the money you receive plus the fair market value of any property or services you receive. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return For more information, see Publication 537. E file 2012 tax return Fair market value. E file 2012 tax return   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. E file 2012 tax return Example. E file 2012 tax return 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. E file 2012 tax return Your gain is $3,000 ($10,000 − $7,000). E file 2012 tax return Debt paid off. E file 2012 tax return    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. E file 2012 tax return This is true even if neither you nor the buyer is personally liable for the debt. E file 2012 tax return 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. E file 2012 tax return Example. E file 2012 tax return You sell stock that you had pledged as security for a bank loan of $8,000. E file 2012 tax return Your basis in the stock is $6,000. E file 2012 tax return The buyer pays off your bank loan and pays you $20,000 in cash. E file 2012 tax return The amount realized is $28,000 ($20,000 + $8,000). E file 2012 tax return Your gain is $22,000 ($28,000 − $6,000). E file 2012 tax return Payment of cash. E file 2012 tax return   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. E file 2012 tax return 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. E file 2012 tax return If the result is a positive number, it is a gain. E file 2012 tax return If the result is a negative number, it is a loss. E file 2012 tax return No gain or loss. E file 2012 tax return   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. E file 2012 tax return In this case, you may have neither a gain nor a loss. E file 2012 tax return See Basis Other Than Cost in chapter 13. E file 2012 tax return Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. E file 2012 tax return For more information on nontaxable trades, see chapter 1 of Publication 544. E file 2012 tax return Like-kind exchanges. E file 2012 tax return   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. E file 2012 tax return To be nontaxable, a trade must meet all six of the following conditions. E file 2012 tax return The property must be business or investment property. E file 2012 tax return You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. E file 2012 tax return Neither property may be property used for personal purposes, such as your home or family car. E file 2012 tax return The property must not be held primarily for sale. E file 2012 tax return The property you trade and the property you receive must not be property you sell to customers, such as merchandise. E file 2012 tax return 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. E file 2012 tax return However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. E file 2012 tax return Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. E file 2012 tax return There must be a trade of like property. E file 2012 tax return The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. E file 2012 tax return The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. E file 2012 tax return The trade of a piece of machinery for a store building is not a trade of like property. E file 2012 tax return Real property located in the United States and real property located outside the United States are not like property. E file 2012 tax return Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return    If you trade property with a related party in a like-kind exchange, a special rule may apply. E file 2012 tax return See Related Party Transactions , later in this chapter. E file 2012 tax return 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. E file 2012 tax return Partly nontaxable exchange. E file 2012 tax return   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. E file 2012 tax return 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. E file 2012 tax return You cannot deduct a loss. E file 2012 tax return Like property and unlike property transferred. E file 2012 tax return   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. E file 2012 tax return The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. E file 2012 tax return Like property and money transferred. E file 2012 tax return   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. E file 2012 tax return Basis of property received. E file 2012 tax return   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. E file 2012 tax return How to report. E file 2012 tax return   You must report the trade of like property on Form 8824. E file 2012 tax return 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. E file 2012 tax return See the instructions for Line 22 in the Instructions for Form 8824. E file 2012 tax return   For information on using Form 4797, see chapter 4 of Publication 544. E file 2012 tax return Corporate stocks. E file 2012 tax return   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. E file 2012 tax return Corporate reorganizations. E file 2012 tax return   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. E file 2012 tax return 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. E file 2012 tax return Stock for stock of the same corporation. E file 2012 tax return   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. E file 2012 tax return This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. E file 2012 tax return Convertible stocks and bonds. E file 2012 tax return   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. E file 2012 tax return Property for stock of a controlled corporation. E file 2012 tax return   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. E file 2012 tax return This rule applies both to individuals and to groups who transfer property to a corporation. E file 2012 tax return It does not apply if the corporation is an investment company. E file 2012 tax return   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. E file 2012 tax return   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. E file 2012 tax return For details, see Regulations section 1. E file 2012 tax return 351-3. E file 2012 tax return Additional information. E file 2012 tax return   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. E file 2012 tax return Insurance policies and annuities. E file 2012 tax return   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. E file 2012 tax return   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. E file 2012 tax return 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. E file 2012 tax return Revenue Ruling 2003-76 is available at www. E file 2012 tax return irs. E file 2012 tax return gov/irb/2003-33_IRB/ar11. E file 2012 tax return html. E file 2012 tax return Revenue Procedure 2008-24 is available at www. E file 2012 tax return irs. E file 2012 tax return gov/irb/2008-13_IRB/ar13. E file 2012 tax return html. E file 2012 tax return 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. E file 2012 tax return Revenue Procedure 2011-38 is available at www. E file 2012 tax return irs. E file 2012 tax return gov/irb/2011-30_IRB/ar09. E file 2012 tax return html. E file 2012 tax return   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. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return   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. E file 2012 tax return Demutualization of life insurance companies. E file 2012 tax return   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. E file 2012 tax return See Demutualization of Life Insurance Companies in Publication 550. E file 2012 tax return U. E file 2012 tax return S. E file 2012 tax return Treasury notes or bonds. E file 2012 tax return   You can trade certain issues of U. E file 2012 tax return S. E file 2012 tax return Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. E file 2012 tax return See Savings bonds traded in chapter 1 of Publication 550 for more information. E file 2012 tax return 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. E file 2012 tax return This nonrecognition rule does not apply in the following situations. E file 2012 tax return The recipient spouse or former spouse is a nonresident alien. E file 2012 tax return Property is transferred in trust and liability exceeds basis. E file 2012 tax return 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. E file 2012 tax return For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. E file 2012 tax return 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. E file 2012 tax return The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. E file 2012 tax return 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. E file 2012 tax return This rule applies for purposes of determining loss as well as gain. E file 2012 tax return Any gain recognized on a transfer in trust increases the basis. E file 2012 tax return 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. E file 2012 tax return Related Party Transactions Special rules apply to the sale or trade of property between related parties. E file 2012 tax return Gain on sale or trade of depreciable property. E file 2012 tax return   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. E file 2012 tax return See chapter 3 of Publication 544 for more information. E file 2012 tax return Like-kind exchanges. E file 2012 tax return   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. E file 2012 tax return See Like-kind exchanges , earlier, under Nontaxable Trades. E file 2012 tax return   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. E file 2012 tax return 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. E file 2012 tax return See Related Party Transactions in chapter 4 of Publication 550 for exceptions. E file 2012 tax return Losses on sales or trades of property. E file 2012 tax return   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. E file 2012 tax return Members of your family. E file 2012 tax return This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. E file 2012 tax return ), and lineal descendants (children, grandchildren, etc. E file 2012 tax return ). E file 2012 tax return A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. E file 2012 tax return A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. E file 2012 tax return (See Constructive ownership of stock , later. E file 2012 tax return ) 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. E file 2012 tax return   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. E file 2012 tax return A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. E file 2012 tax return Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. E file 2012 tax return 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. E file 2012 tax return An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). E file 2012 tax return Two corporations that are members of the same controlled group. E file 2012 tax return (Under certain conditions, however, these losses are not disallowed but must be deferred. E file 2012 tax return ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. E file 2012 tax return Multiple property sales or trades. E file 2012 tax return   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. E file 2012 tax return The gain on each item may be taxable. E file 2012 tax return However, you cannot deduct the loss on any item. E file 2012 tax return Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. E file 2012 tax return Indirect transactions. E file 2012 tax return   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. E file 2012 tax return This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. E file 2012 tax return Constructive ownership of stock. E file 2012 tax return   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. E file 2012 tax return Rule 1. E file 2012 tax return   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. E file 2012 tax return Rule 2. E file 2012 tax return   An individual is considered to own the stock directly or indirectly owned by or for his or her family. E file 2012 tax return Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. E file 2012 tax return Rule 3. E file 2012 tax return   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. E file 2012 tax return Rule 4. E file 2012 tax return   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. E file 2012 tax return 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. E file 2012 tax return Property received from a related party. E file 2012 tax return    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. E file 2012 tax return This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. E file 2012 tax return 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. E file 2012 tax return   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. E file 2012 tax return Example 1. E file 2012 tax return Your brother sells you stock for $7,600. E file 2012 tax return His cost basis is $10,000. E file 2012 tax return Your brother cannot deduct the loss of $2,400. E file 2012 tax return Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. E file 2012 tax return Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). E file 2012 tax return Example 2. E file 2012 tax return 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). E file 2012 tax return You cannot deduct the loss that was not allowed to your brother. E file 2012 tax return Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. E file 2012 tax return Character of gain or loss. E file 2012 tax return   You need to classify your gains and losses as either ordinary or capital gains or losses. E file 2012 tax return You then need to classify your capital gains and losses as either short term or long term. E file 2012 tax return If you have long-term gains and losses, you must identify your 28% rate gains and losses. E file 2012 tax return If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. E file 2012 tax return   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. E file 2012 tax return Reporting capital gains and losses is explained in chapter 16. E file 2012 tax return 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. E file 2012 tax return Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. E file 2012 tax return A sale or trade of a noncapital asset generally results in ordinary gain or loss. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. E file 2012 tax return 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. E file 2012 tax return Any property you own is a capital asset, except the following noncapital assets. E file 2012 tax return Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. E file 2012 tax return For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. E file 2012 tax return Depreciable property used in your trade or business, even if fully depreciated. E file 2012 tax return Real property used in your trade or business. E file 2012 tax return 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. E file 2012 tax return For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. E file 2012 tax return 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). E file 2012 tax return U. E file 2012 tax return S. E file 2012 tax return 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. E file 2012 tax return Certain commodities derivative financial instruments held by commodities derivatives dealers. E file 2012 tax return 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. E file 2012 tax return Supplies of a type you regularly use or consume in the ordinary course of your trade or business. E file 2012 tax return Investment Property Investment property is a capital asset. E file 2012 tax return Any gain or loss from its sale or trade is generally a capital gain or loss. E file 2012 tax return Gold, silver, stamps, coins, gems, etc. E file 2012 tax return   These are capital assets except when they are held for sale by a dealer. E file 2012 tax return Any gain or loss you have from their sale or trade generally is a capital gain or loss. E file 2012 tax return Stocks, stock rights, and bonds. E file 2012 tax return   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return However, you cannot deduct a loss from selling personal use property. E file 2012 tax return 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. E file 2012 tax return You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. E file 2012 tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. E file 2012 tax return You can revoke the election if you have IRS approval. E file 2012 tax return To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. E file 2012 tax return See, for example, Rev. E file 2012 tax return Proc. E file 2012 tax return 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. E file 2012 tax return Proc. E file 2012 tax return 2013–32, available at www. E file 2012 tax return irs. E file 2012 tax return gov/irb/2013-01_IRB/ar06. E file 2012 tax return html. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return Short-term government obligations. E file 2012 tax return   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. E file 2012 tax return This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. E file 2012 tax return Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. E file 2012 tax return   However, do not treat these gains as income to the extent you previously included the discount in income. E file 2012 tax return See Discount on Short-Term Obligations in chapter 1 of Publication 550. E file 2012 tax return Short-term nongovernment obligations. E file 2012 tax return   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). E file 2012 tax return This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. E file 2012 tax return   However, to the extent you previously included the discount in income, you do not have to include it in income again. E file 2012 tax return See Discount on Short-Term Obligations in chapter 1 of Publication 550. E file 2012 tax return Tax-exempt state and local government bonds. E file 2012 tax return   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. E file 2012 tax return To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. E file 2012 tax return   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. E file 2012 tax return For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. E file 2012 tax return   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. E file 2012 tax return If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. E file 2012 tax return If you bought the bonds after April 30, 1993, the gain is ordinary income. E file 2012 tax return   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. E file 2012 tax return For more information, see Market Discount Bonds in chapter 1 of Publication 550. E file 2012 tax return    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. E file 2012 tax return Redeemed before maturity. E file 2012 tax return   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. E file 2012 tax return   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. E file 2012 tax return However, you must report the unearned part of OID as a capital gain. E file 2012 tax return Example. E file 2012 tax return On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. E file 2012 tax return The face amount of the bond was $1,000. E file 2012 tax return The $200 discount was OID. E file 2012 tax return At the time the bond was issued, the issuer had no intention of redeeming it before it matured. E file 2012 tax return The bond was callable at its face amount beginning 10 years after the issue date. E file 2012 tax return 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. E file 2012 tax return The OID earned during the time you held the bond, $73, is not taxable. E file 2012 tax return The $60 accrued annual interest also is not taxable. E file 2012 tax return However, you must report the unearned part of OID ($127) as a capital gain. E file 2012 tax return Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). E file 2012 tax return   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. E file 2012 tax return The rest of the gain is capital gain. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). E file 2012 tax return   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. E file 2012 tax return Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. E file 2012 tax return See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. E file 2012 tax return   If you sell or trade the debt instrument before maturity, your gain is a capital gain. E file 2012 tax return 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. E file 2012 tax return In this case, the rest of the gain is capital gain. E file 2012 tax return Market discount bonds. E file 2012 tax return   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. E file 2012 tax return 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. E file 2012 tax return The rest of the gain is capital gain. E file 2012 tax return See Market Discount Bonds in chapter 1 of Publication 550. E file 2012 tax return   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. E file 2012 tax return See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. E file 2012 tax return Retirement of debt instrument. E file 2012 tax return   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. E file 2012 tax return Notes of individuals. E file 2012 tax return   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. E file 2012 tax return An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. E file 2012 tax return The lender is not in the business of lending money. E file 2012 tax return The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. E file 2012 tax return Avoiding federal tax is not one of the principal purposes of the loan. E file 2012 tax return   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. E file 2012 tax return 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. E file 2012 tax return The rest of the gain, if any, is capital gain. E file 2012 tax return Any loss on the sale or redemption is capital loss. E file 2012 tax return 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. E file 2012 tax return Ordinary loss. E file 2012 tax return Casualty loss. E file 2012 tax return Nonbusiness bad debt (short-term capital loss). E file 2012 tax return  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return Report the loss on Form 4797, line 10. E file 2012 tax return Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. E file 2012 tax return Report the gain on Form 8949. E file 2012 tax return See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. E file 2012 tax return For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. E file 2012 tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. E file 2012 tax return Holding Period If you sold or traded investment property, you must determine your holding period for the property. E file 2012 tax return Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. E file 2012 tax return Long-term or short-term. E file 2012 tax return   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. E file 2012 tax return If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. E file 2012 tax return   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. E file 2012 tax return The day you disposed of the property is part of your holding period. E file 2012 tax return Example. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return Securities traded on established market. E file 2012 tax return   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. E file 2012 tax return    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. E file 2012 tax return Example. E file 2012 tax return You are a cash method, calendar year taxpayer. E file 2012 tax return You sold stock at a gain on December 30, 2013. E file 2012 tax return 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. E file 2012 tax return You received payment of the sales price on that same day. E file 2012 tax return Report your gain on your 2013 return, even though you received the payment in 2014. E file 2012 tax return The gain is long term or short term depending on whether you held the stock more than 1 year. E file 2012 tax return Your holding period ended on December 30. E file 2012 tax return If you had sold the stock at a loss, you would also report it on your 2013 return. E file 2012 tax return U. E file 2012 tax return S. E file 2012 tax return Treasury notes and bonds. E file 2012 tax return   The holding period of U. E file 2012 tax return S. E file 2012 tax return 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. E file 2012 tax return The holding period of U. E file 2012 tax return S. E file 2012 tax return Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. E file 2012 tax return Automatic investment service. E file 2012 tax return   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. E file 2012 tax return Your holding period starts on the day after the bank's purchase date. E file 2012 tax return If a share was bought over more than one purchase date, your holding period for that share is a split holding period. E file 2012 tax return 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. E file 2012 tax return Nontaxable trades. E file 2012 tax return   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. E file 2012 tax return Property received as a gift. E file 2012 tax return   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. E file 2012 tax return   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. E file 2012 tax return Inherited property. E file 2012 tax return   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. E file 2012 tax return This is true regardless of how long you actually held the property. E file 2012 tax return However, if you inherited property from someone who died in 2010, see the information below. E file 2012 tax return Inherited property from someone who died in 2010. E file 2012 tax return   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. E file 2012 tax return Real property bought. E file 2012 tax return   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. E file 2012 tax return However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. E file 2012 tax return The holding period cannot start until there is an actual contract of sale. E file 2012 tax return The holding period of the seller cannot end before that time. E file 2012 tax return Real property repossessed. E file 2012 tax return   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. E file 2012 tax return Your holding period does not include the time between the original sale and the repossession. E file 2012 tax return That is, it does not include the period during which the first buyer held the property. E file 2012 tax return Stock dividends. E file 2012 tax return   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. E file 2012 tax return   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. E file 2012 tax return This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. E file 2012 tax return Nontaxable stock rights. E file 2012 tax return   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. E file 2012 tax return The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. E file 2012 tax return Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. E file 2012 tax return You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. E file 2012 tax return 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. E file 2012 tax return To be deductible, nonbusiness bad debts must be totally worthless. E file 2012 tax return You cannot deduct a partly worthless nonbusiness debt. E file 2012 tax return Genuine debt required. E file 2012 tax return   A debt must be genuine for you to deduct a loss. E file 2012 tax return 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. E file 2012 tax return Basis in bad debt required. E file 2012 tax return    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. E file 2012 tax return For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. E file 2012 tax return 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. E file 2012 tax return When deductible. E file 2012 tax return   You can take a bad debt deduction only in the year the debt becomes worthless. E file 2012 tax return You do not have to wait until a debt is due to determine whether it is worthless. E file 2012 tax return A debt becomes worthless when there is no longer any chance that the amount owed will be paid. E file 2012 tax return   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. E file 2012 tax return You must only show that you have taken reasonable steps to collect the debt. E file 2012 tax return Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. E file 2012 tax return How to report bad debts. E file 2012 tax return    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. E file 2012 tax return    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. E file 2012 tax return    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. E file 2012 tax return See also Schedule D (Form 1040), Form 8949, and their separate instructions. E file 2012 tax return   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. E file 2012 tax return 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. E file 2012 tax return Filing a claim for refund. E file 2012 tax return    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. E file 2012 tax return To do this, use Form 1040X to amend your return for the year the debt became worthless. E file 2012 tax return 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. E file 2012 tax return For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. E file 2012 tax return Additional information. E file 2012 tax return   For more information, see Nonbusiness Bad Debts in Publication 550. E file 2012 tax return For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. E file 2012 tax return Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. E file 2012 tax return 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. E file 2012 tax return 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). E file 2012 tax return The result is your basis in the new stock or securities. E file 2012 tax return This adjustment postpones the loss deduction until the disposition of the new stock or securities. E file 2012 tax return Your holding period for the new stock or securities includes the holding period of the stock or securities sold. E file 2012 tax return For more information, see Wash Sales, in chapter 4 of Publication 550. E file 2012 tax return 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. E file 2012 tax return 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. E file 2012 tax return You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. E file 2012 tax return This postpones your gain until the year you dispose of the replacement property. E file 2012 tax return You qualify to make this choice if you meet all the following tests. E file 2012 tax return You sell publicly traded securities at a gain. E file 2012 tax return Publicly traded securities are securities traded on an established securities market. E file 2012 tax return Your gain from the sale is a capital gain. E file 2012 tax return During the 60-day period beginning on the date of the sale, you buy replacement property. E file 2012 tax return This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). E file 2012 tax return 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. E file 2012 tax return Amount of gain recognized. E file 2012 tax return   If you make the choice described in this section, you must recognize gain only up to the following amount. E file 2012 tax return 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). E file 2012 tax return  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. E file 2012 tax return If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. E file 2012 tax return Limit on gain postponed. E file 2012 tax return   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. E file 2012 tax return Basis of replacement property. E file 2012 tax return   You must subtract the amount of postponed gain from the basis of your replacement property. E file 2012 tax return How to report and postpone gain. E file 2012 tax return    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. E file 2012 tax return Prev  Up  Next   Home   More Online Publications