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File 2005 Tax Return

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File 2005 Tax Return

File 2005 tax return Publication 334 - Introductory Material Table of Contents IntroductionOrdering forms and publications. File 2005 tax return Tax questions. File 2005 tax return Future Developments What's New for 2013 What's New for 2014 Reminders Photographs of Missing Children Introduction The purpose of this publication is to provide general information about the federal tax laws that apply to small business owners who are sole proprietors and to statutory employees. File 2005 tax return This publication has information on business income, expenses, and tax credits that may help you file your income tax return. File 2005 tax return Are you self-employed?   You are self-employed if you carry on a trade or business as a sole proprietor or an independent contractor. File 2005 tax return Sole proprietor. File 2005 tax return   A sole proprietor is someone who owns an unincorporated business by himself or herself. File 2005 tax return However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. File 2005 tax return Trade or business. File 2005 tax return    A trade or business is generally an activity carried on to make a profit. File 2005 tax return The facts and circumstances of each case determine whether or not an activity is a trade or business. File 2005 tax return You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. File 2005 tax return You do need to make ongoing efforts to further the interests of your business. File 2005 tax return   You do not have to carry on regular full-time business activities to be self-employed. File 2005 tax return Having a part-time business in addition to your regular job or business may be self-employment. File 2005 tax return Independent contractor. File 2005 tax return    People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. File 2005 tax return However, whether they are independent contractors or employees depends on the facts in each case. File 2005 tax return The general rule is that an individual is an independent contractor if the payer has the right to control or to direct only the result of the work and not how it will be done. File 2005 tax return The earnings of a person who is working as an independent contractor are subject to self-employment tax. File 2005 tax return For more information on determining whether you are an employee or independent contractor, see Publication 15-A, Employer's Supplemental Tax Guide. File 2005 tax return Statutory employee. File 2005 tax return   A statutory employee has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. File 2005 tax return Statutory employees use Schedule C or C-EZ to report their wages and expenses. File 2005 tax return Limited liability company (LLC). File 2005 tax return   A limited liability company (LLC) is an entity formed under state law by filing articles of organization. File 2005 tax return Generally, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. File 2005 tax return An owner who is an individual may use Schedule C or C-EZ. File 2005 tax return Business owned and operated by spouses. File 2005 tax return   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. File 2005 tax return Do not use Schedule C or C-EZ. File 2005 tax return Instead, file Form 1065, U. File 2005 tax return S. File 2005 tax return Return of Partnership Income. File 2005 tax return For more information, see Publication 541, Partnerships. File 2005 tax return    Exception—Community income. File 2005 tax return If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. File 2005 tax return S. File 2005 tax return possession, you can treat the business either as a sole proprietorship or a partnership. File 2005 tax return The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. File 2005 tax return A change in your reporting position will be treated as a conversion of the entity. File 2005 tax return    Exception—Qualified joint venture. File 2005 tax return If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. File 2005 tax return Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. File 2005 tax return For an explanation of "material participation," see the Instructions for Schedule C, line G. File 2005 tax return   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. File 2005 tax return Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. File 2005 tax return For more information, see Qualified Joint Ventures in the Instructions for Schedule SE. File 2005 tax return This publication does not cover the topics listed in the following table. File 2005 tax return    IF you need information about: THEN you should see: Corporations Publication 542 Farming Publication 225 Fishermen (Capital Construction Fund)  Publication 595 Partnerships Publication 541 Passive activities Publication 925 Recordkeeping Publication 583 Rental Publication 527 S corporations Instructions for Form 1120S What you need to know. File 2005 tax return   Table A provides a list of questions you need to answer to help you meet your federal tax obligations. File 2005 tax return After each question is the location in this publication where you will find the related discussion. File 2005 tax return Table A. File 2005 tax return What You Need To Know About Federal Taxes (Note. File 2005 tax return The following is a list of questions you may need to answer so you can fill out your federal income tax return. File 2005 tax return Chapters are given to help you find the related discussion in this publication. File 2005 tax return ) What must I know   Where to find the answer   What kinds of federal taxes do I have to pay? How do I pay them?   See chapter 1. File 2005 tax return What forms must I file?   See chapter 1. File 2005 tax return What must I do if I have employees?   See Employment Taxes in chapter 1. File 2005 tax return Do I have to start my tax year in January, or can I start it in any other month?   See Accounting Periods in chapter 2. File 2005 tax return What method can I use to account for my income and expenses?   See Accounting Methods in chapter 2. File 2005 tax return What kinds of business income do I have to report on my tax return?   See chapter 5. File 2005 tax return What kinds of business expenses can I deduct on my tax return?   See Business Expenses in chapter 8. File 2005 tax return What kinds of expenses are not deductible as business expenses?   See Expenses You Cannot Deduct in chapter 8. File 2005 tax return What happens if I have a business loss? Can I deduct it?   See chapter 9. File 2005 tax return What must I do if I disposed of business property during the year?   See chapter 3. File 2005 tax return What are my rights as a taxpayer?   See chapter 11. File 2005 tax return Where do I go if I need help with federal tax matters?   See chapter 12. File 2005 tax return IRS mission. File 2005 tax return   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. File 2005 tax return Comments and suggestions. File 2005 tax return   We welcome your comments about this publication and your suggestions for future editions. File 2005 tax return   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. File 2005 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File 2005 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File 2005 tax return   You can send your comments from www. File 2005 tax return irs. File 2005 tax return gov/formspubs/. File 2005 tax return Click on “More Information” then on “Comment on Tax Forms and Publications. File 2005 tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. File 2005 tax return Ordering forms and publications. File 2005 tax return   Visit  www. File 2005 tax return irs. File 2005 tax return gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. File 2005 tax return  Internal Revenue Service 1201 N. File 2005 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. File 2005 tax return   If you have a tax question, check the information available on IRS. File 2005 tax return gov or call 1-800-829-1040. File 2005 tax return We cannot answer tax questions sent to either of the above addresses. File 2005 tax return Future Developments For the latest information about developments related to Publication 334, such as legislation enacted after it was published, go to www. File 2005 tax return irs. File 2005 tax return gov/pub334. File 2005 tax return What's New for 2013 The following are some of the tax changes for 2013. File 2005 tax return For information on other changes, go to IRS. File 2005 tax return gov. File 2005 tax return Tax rates. File 2005 tax return . File 2005 tax return  For tax years beginning in 2013, the social security part of the self-employment tax increases to 12. File 2005 tax return 4%. File 2005 tax return The Medicare part of the tax remains at 2. File 2005 tax return 9%. File 2005 tax return As a result, the self-employment tax is 15. File 2005 tax return 3%. File 2005 tax return Maximum net earnings. File 2005 tax return  The maximum net self-employment earnings subject to the social security part of the self-employment tax increases to $113,700 for 2013. File 2005 tax return There is no maximum limit on earnings subject to the Medicare part. File 2005 tax return Standard mileage rate. File 2005 tax return  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. File 2005 tax return 5 cents per mile. File 2005 tax return For more information, see Car and Truck Expenses in chapter 8. File 2005 tax return Simplified method for business use of home deduction. File 2005 tax return . File 2005 tax return  The IRS now provides a simplified method to determine your expenses for business use of your home. File 2005 tax return For more information, see Business Use of Your Home in chapter 8. File 2005 tax return What's New for 2014 The following are some of the tax changes for 2014. File 2005 tax return For information on other changes, go to IRS. File 2005 tax return gov. File 2005 tax return Standard mileage rate. File 2005 tax return  For 2014, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56 cents per mile. File 2005 tax return Self-employment tax. File 2005 tax return  The maximum net self-employment earnings subject to the social security part of the self-employment tax is $117,000 for 2014. File 2005 tax return Reminders Accounting methods. File 2005 tax return  Certain small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required to account for inventories. File 2005 tax return For more information, see Inventories in chapter 2. File 2005 tax return Reportable transactions. File 2005 tax return  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. File 2005 tax return You may have to pay a penalty if you are required to file Form 8886 but do not do so. File 2005 tax return You may also have to pay interest and penalties on any reportable transaction understatements. File 2005 tax return Reportable transactions include: Transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, Transactions offered to you under conditions of confidentiality for which you paid an advisor a minimum fee, Transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits, Transactions that result in losses of at least $2 million in any single tax year ($50,000 if from certain foreign currency transactions) or $4 million in any combination of tax years, and Transactions the same or substantially similar to one of the types of transactions the IRS has identified as a transaction of interest. File 2005 tax return For more information, see the Instructions for Form 8886. File 2005 tax return Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. File 2005 tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. File 2005 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. File 2005 tax return Prev  Up  Next   Home   More Online Publications
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The File 2005 Tax Return

File 2005 tax return 7. File 2005 tax return   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. File 2005 tax return Costs not included. File 2005 tax return Intangible Drilling Costs Exploration CostsPartnerships and S corporations. File 2005 tax return Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. File 2005 tax return Film and Television Production Costs What's New Film and television productions costs. File 2005 tax return  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. File 2005 tax return See Film and Television Production Costs , later. File 2005 tax return Introduction This chapter discusses costs you can elect to deduct or capitalize. File 2005 tax return You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. File 2005 tax return If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. File 2005 tax return When you capitalize a cost, you add it to the basis of property to which it relates. File 2005 tax return A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. File 2005 tax return Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. File 2005 tax return You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. File 2005 tax return For more information on the alternative minimum tax, see the instructions for the following forms. File 2005 tax return Form 6251, Alternative Minimum Tax—Individuals. File 2005 tax return Form 4626, Alternative Minimum Tax—Corporations. File 2005 tax return Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. File 2005 tax return Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. File 2005 tax return Certain carrying charges must be capitalized under the uniform capitalization rules. File 2005 tax return (For information on capitalization of interest, see chapter 4 . File 2005 tax return ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. File 2005 tax return You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. File 2005 tax return For unimproved and unproductive real property, your election is good for only 1 year. File 2005 tax return You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. File 2005 tax return For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. File 2005 tax return For personal property, your election is effective until the date you install or first use it, whichever is later. File 2005 tax return How to make the election. File 2005 tax return   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. File 2005 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2005 tax return Attach the statement to the amended return and write “Filed pursuant to section 301. File 2005 tax return 9100-2” on the statement. File 2005 tax return File the amended return at the same address you filed the original return. File 2005 tax return Research and Experimental Costs The costs of research and experimentation are generally capital expenses. File 2005 tax return However, you can elect to deduct these costs as a current business expense. File 2005 tax return Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. File 2005 tax return If you meet certain requirements, you may elect to defer and amortize research and experimental costs. File 2005 tax return For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. File 2005 tax return Research and experimental costs defined. File 2005 tax return   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. File 2005 tax return Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. File 2005 tax return Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. File 2005 tax return      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. File 2005 tax return However, costs paid or incurred to obtain another's patent are not research and experimental costs. File 2005 tax return Product. File 2005 tax return   The term “product” includes any of the following items. File 2005 tax return Formula. File 2005 tax return Invention. File 2005 tax return Patent. File 2005 tax return Pilot model. File 2005 tax return Process. File 2005 tax return Technique. File 2005 tax return Property similar to the items listed above. File 2005 tax return It also includes products used by you in your trade or business or held for sale, lease, or license. File 2005 tax return Costs not included. File 2005 tax return   Research and experimental costs do not include expenses for any of the following activities. File 2005 tax return Advertising or promotions. File 2005 tax return Consumer surveys. File 2005 tax return Efficiency surveys. File 2005 tax return Management studies. File 2005 tax return Quality control testing. File 2005 tax return Research in connection with literary, historical, or similar projects. File 2005 tax return The acquisition of another's patent, model, production, or process. File 2005 tax return When and how to elect. File 2005 tax return   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. File 2005 tax return If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. File 2005 tax return Deducting or Amortizing Research and Experimentation Costs IF you . File 2005 tax return . File 2005 tax return . File 2005 tax return THEN . File 2005 tax return . File 2005 tax return . File 2005 tax return Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. File 2005 tax return Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. File 2005 tax return See Research and Experimental Costs in chapter 8. File 2005 tax return Research credit. File 2005 tax return   If you pay or incur qualified research expenses, you may be able to take the research credit. File 2005 tax return For more information see Form 6765, Credit for Increasing Research Activities and its instructions. File 2005 tax return Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. File 2005 tax return You can usually recover them through depreciation or depletion. File 2005 tax return However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. File 2005 tax return These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. File 2005 tax return You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. File 2005 tax return You can elect to deduct only the costs of items with no salvage value. File 2005 tax return These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. File 2005 tax return Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. File 2005 tax return However, see Amounts paid to contractor that must be capitalized , later. File 2005 tax return You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. File 2005 tax return It does not matter whether there is any intent to produce hydrocarbons. File 2005 tax return If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. File 2005 tax return Amounts paid to contractor that must be capitalized. File 2005 tax return   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. File 2005 tax return How to make the election. File 2005 tax return   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. File 2005 tax return No formal statement is required. File 2005 tax return If you file Schedule C (Form 1040), enter these costs under “Other expenses. File 2005 tax return ”   For oil and gas wells, your election is binding for the year it is made and for all later years. File 2005 tax return For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. File 2005 tax return You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. File 2005 tax return Energy credit for costs of geothermal wells. File 2005 tax return   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. File 2005 tax return See the Instructions for Form 3468 for more information. File 2005 tax return Nonproductive well. File 2005 tax return   If you capitalize your IDCs, you have another option if the well is nonproductive. File 2005 tax return You can deduct the IDCs of the nonproductive well as an ordinary loss. File 2005 tax return You must indicate and clearly state your election on your tax return for the year the well is completed. File 2005 tax return Once made, the election for oil and gas wells is binding for all later years. File 2005 tax return You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. File 2005 tax return Costs incurred outside the United States. File 2005 tax return   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. File 2005 tax return However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. File 2005 tax return If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. File 2005 tax return These rules do not apply to a nonproductive well. File 2005 tax return Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. File 2005 tax return You recover these costs through depletion as the mineral is removed from the ground. File 2005 tax return However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). File 2005 tax return How to make the election. File 2005 tax return   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. File 2005 tax return Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. File 2005 tax return The election applies to the tax year you make this election and all later tax years. File 2005 tax return Partnerships and S corporations. File 2005 tax return   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. File 2005 tax return Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. File 2005 tax return Reduced corporate deductions for exploration costs. File 2005 tax return   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. File 2005 tax return It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. File 2005 tax return A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. File 2005 tax return For more information on this method of amortization, see Internal Revenue Code section 59(e). File 2005 tax return   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. File 2005 tax return However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. File 2005 tax return See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. File 2005 tax return   These rules also apply to the deduction of development costs by corporations. File 2005 tax return See Development Costs , later. File 2005 tax return Recapture of exploration expenses. File 2005 tax return   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. File 2005 tax return Use either of the following methods. File 2005 tax return Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. File 2005 tax return Your election must be clearly indicated on the return. File 2005 tax return Increase your adjusted basis in the mine by the amount included in income. File 2005 tax return Generally, you must elect this recapture method by the due date (including extensions) of your return. File 2005 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2005 tax return Make the election on your amended return and write “Filed pursuant to section 301. File 2005 tax return 9100-2” on the form where you are including the income. File 2005 tax return File the amended return at the same address you filed the original return. File 2005 tax return Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. File 2005 tax return   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. File 2005 tax return Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. File 2005 tax return   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. File 2005 tax return Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. File 2005 tax return If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. File 2005 tax return Foreign exploration costs. File 2005 tax return   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. File 2005 tax return You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. File 2005 tax return (Cost depletion is discussed in chapter 9 . File 2005 tax return ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. File 2005 tax return These rules also apply to foreign development costs. File 2005 tax return Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. File 2005 tax return These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. File 2005 tax return Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. File 2005 tax return Development costs do not include the costs for the acquisition or improvement of depreciable property. File 2005 tax return Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. File 2005 tax return This election applies each tax year to expenses paid or incurred in that year. File 2005 tax return Once made, the election is binding for the year and cannot be revoked for any reason. File 2005 tax return How to make the election. File 2005 tax return   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. File 2005 tax return Generally, you must make the election by the due date of the return (including extensions). File 2005 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2005 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2005 tax return 9100-2. File 2005 tax return ” File the amended return at the same address you filed the original return. File 2005 tax return Foreign development costs. File 2005 tax return   The rules discussed earlier for foreign exploration costs apply to foreign development costs. File 2005 tax return Reduced corporate deductions for development costs. File 2005 tax return   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. File 2005 tax return Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. File 2005 tax return For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. File 2005 tax return Circulation costs are deductible even if they normally would be capitalized. File 2005 tax return This rule does not apply to the following costs that must be capitalized. File 2005 tax return The purchase of land or depreciable property. File 2005 tax return The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. File 2005 tax return Other treatment of circulation costs. File 2005 tax return   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. File 2005 tax return Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). File 2005 tax return Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. File 2005 tax return How to make the election. File 2005 tax return   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. File 2005 tax return Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. File 2005 tax return Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. File 2005 tax return However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. File 2005 tax return The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. File 2005 tax return Any remaining costs must be amortized. File 2005 tax return For information about amortizing start-up and organizational costs, see chapter 8 . File 2005 tax return Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. File 2005 tax return Organizational costs include the costs of creating a corporation. File 2005 tax return For more information on start-up and organizational costs, see chapter 8 . File 2005 tax return How to make the election. File 2005 tax return   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. File 2005 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2005 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2005 tax return 9100-2. File 2005 tax return ” File the amended return at the same address you filed the original return. File 2005 tax return The election applies when computing taxable income for the current tax year and all subsequent years. File 2005 tax return Reforestation Costs Reforestation costs are generally capital expenditures. File 2005 tax return However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. File 2005 tax return The remaining costs can be amortized over an 84-month period. File 2005 tax return For information about amortizing reforestation costs, see chapter 8 . File 2005 tax return Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. File 2005 tax return Qualified timber property is property that contains trees in significant commercial quantities. File 2005 tax return See chapter 8 for more information on qualifying reforestation costs and qualified timber property. File 2005 tax return If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. File 2005 tax return Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. File 2005 tax return How to make the election. File 2005 tax return   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. File 2005 tax return If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. File 2005 tax return If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. File 2005 tax return The unique stand identification numbers. File 2005 tax return The total number of acres reforested during the tax year. File 2005 tax return The nature of the reforestation treatments. File 2005 tax return The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. File 2005 tax return   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2005 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2005 tax return 9100-2. File 2005 tax return ” File the amended return at the same address you filed the original return. File 2005 tax return The election applies when computing taxable income for the current tax year and all subsequent years. File 2005 tax return   For additional information on reforestation costs, see chapter 8 . File 2005 tax return Recapture. File 2005 tax return   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. File 2005 tax return For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. File 2005 tax return Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. File 2005 tax return However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. File 2005 tax return Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. File 2005 tax return However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. File 2005 tax return You must own or lease the facility or vehicle for use in connection with your trade or business. File 2005 tax return A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. File 2005 tax return A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). File 2005 tax return You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. File 2005 tax return Deduction limit. File 2005 tax return   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. File 2005 tax return However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. File 2005 tax return Partners and partnerships. File 2005 tax return   The $15,000 limit applies to a partnership and also to each partner in the partnership. File 2005 tax return A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. File 2005 tax return If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. File 2005 tax return   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). File 2005 tax return If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. File 2005 tax return Example. File 2005 tax return Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. File 2005 tax return Emilio had $12,000 of similar expenses in his sole proprietorship. File 2005 tax return He elected to deduct $7,000 of them. File 2005 tax return Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. File 2005 tax return Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. File 2005 tax return Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. File 2005 tax return Qualification standards. File 2005 tax return   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. File 2005 tax return You can view the Americans with Disabilities Act at www. File 2005 tax return ada. File 2005 tax return gov/pubs/ada. File 2005 tax return htm. File 2005 tax return   The following is a list of some architectural barrier removal costs that can be deducted. File 2005 tax return Ground and floor surfaces. File 2005 tax return Walks. File 2005 tax return Parking lots. File 2005 tax return Ramps. File 2005 tax return Entrances. File 2005 tax return Doors and doorways. File 2005 tax return Stairs. File 2005 tax return Floors. File 2005 tax return Toilet rooms. File 2005 tax return Water fountains. File 2005 tax return Public telephones. File 2005 tax return Elevators. File 2005 tax return Controls. File 2005 tax return Signage. File 2005 tax return Alarms. File 2005 tax return Protruding objects. File 2005 tax return Symbols of accessibility. File 2005 tax return You can find the ADA guidelines and requirements for architectural barrier removal at www. File 2005 tax return usdoj. File 2005 tax return gov/crt/ada/reg3a. File 2005 tax return html. File 2005 tax return   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. File 2005 tax return You can find the guidelines and requirements for transportation barrier removal at www. File 2005 tax return fta. File 2005 tax return dot. File 2005 tax return gov. File 2005 tax return   Also, you can access the ADA website at www. File 2005 tax return ada. File 2005 tax return gov for additional information. File 2005 tax return Other barrier removals. File 2005 tax return   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. File 2005 tax return The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. File 2005 tax return The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). File 2005 tax return The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. File 2005 tax return How to make the election. File 2005 tax return   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. File 2005 tax return Identify the deduction as a separate item. File 2005 tax return The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. File 2005 tax return If you make this election, you must maintain adequate records to support your deduction. File 2005 tax return   For your election to be valid, you generally must file your return by its due date, including extensions. File 2005 tax return However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 2005 tax return Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2005 tax return 9100-2. File 2005 tax return ” File the amended return at the same address you filed the original return. File 2005 tax return Your election is irrevocable after the due date, including extensions, of your return. File 2005 tax return Disabled access credit. File 2005 tax return   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. File 2005 tax return If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. File 2005 tax return   For more information, see Form 8826, Disabled Access Credit. File 2005 tax return Film and Television Production Costs Film and television production costs are generally capital expenses. File 2005 tax return However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. File 2005 tax return For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. File 2005 tax return Prev  Up  Next   Home   More Online Publications