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File 2010 Income Tax

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File 2010 Income Tax

File 2010 income tax Publication 538 - Main Content Table of Contents Accounting PeriodsCalendar Year Fiscal Year Short Tax Year Improper Tax Year Change in Tax Year Individuals Partnerships, S Corporations, and Personal Service Corporations (PSCs) Corporations (Other Than S Corporations and PSCs) Accounting MethodsSpecial methods. File 2010 income tax Hybrid method. File 2010 income tax Cash Method Accrual Method Inventories Change in Accounting Method How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). File 2010 income tax Accounting Periods You must use a tax year to figure your taxable income. File 2010 income tax A tax year is an annual accounting period for keeping records and reporting income and expenses. File 2010 income tax An annual accounting period does not include a short tax year (discussed later). File 2010 income tax You can use the following tax years: A calendar year; or A fiscal year (including a 52-53-week tax year). File 2010 income tax Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. File 2010 income tax A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. File 2010 income tax You cannot adopt a tax year by merely: Filing an application for an extension of time to file an income tax return; Filing an application for an employer identification number (Form SS-4); or Paying estimated taxes. File 2010 income tax This section discusses: A calendar year. File 2010 income tax A fiscal year (including a period of 52 or 53 weeks). File 2010 income tax A short tax year. File 2010 income tax An improper tax year. File 2010 income tax A change in tax year. File 2010 income tax Special situations that apply to individuals. File 2010 income tax Restrictions that apply to the accounting period of a partnership, S corporation, or personal service corporation. File 2010 income tax Special situations that apply to corporations. File 2010 income tax Calendar Year A calendar year is 12 consecutive months beginning on January 1st and ending on December 31st. File 2010 income tax If you adopt the calendar year, you must maintain your books and records and report your income and expenses from January 1st through December 31st of each year. File 2010 income tax If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you obtain approval from the IRS to change it, or are otherwise allowed to change it without IRS approval. File 2010 income tax See Change in Tax Year, later. File 2010 income tax Generally, anyone can adopt the calendar year. File 2010 income tax However, you must adopt the calendar year if: You keep no books or records; You have no annual accounting period; Your present tax year does not qualify as a fiscal year; or You are required to use a calendar year by a provision in the Internal Revenue Code or the Income Tax Regulations. File 2010 income tax Fiscal Year A fiscal year is 12 consecutive months ending on the last day of any month except December 31st. File 2010 income tax If you are allowed to adopt a fiscal year, you must consistently maintain your books and records and report your income and expenses using the time period adopted. File 2010 income tax 52-53-Week Tax Year You can elect to use a 52-53-week tax year if you keep your books and records and report your income and expenses on that basis. File 2010 income tax If you make this election, your 52-53-week tax year must always end on the same day of the week. File 2010 income tax Your 52-53-week tax year must always end on: Whatever date this same day of the week last occurs in a calendar month, or Whatever date this same day of the week falls that is nearest to the last day of the calendar month. File 2010 income tax For example, if you elect a tax year that always ends on the last Monday in March, your 2012 tax year will end on March 25, 2013. File 2010 income tax Election. File 2010 income tax   To make the election for the 52-53-week tax year, attach a statement with the following information to your tax return. File 2010 income tax The month in which the new 52-53-week tax year ends. File 2010 income tax The day of the week on which the tax year always ends. File 2010 income tax The date the tax year ends. File 2010 income tax It can be either of the following dates on which the chosen day: Last occurs in the month in (1), above, or Occurs nearest to the last day of the month in (1), above. File 2010 income tax   When you figure depreciation or amortization, a 52-53-week tax year is generally considered a year of 12 calendar months. File 2010 income tax   To determine an effective date (or apply provisions of any law) expressed in terms of tax years beginning, including, or ending on the first or last day of a specified calendar month, a 52-53-week tax year is considered to: Begin on the first day of the calendar month beginning nearest to the first day of the 52-53-week tax year, and End on the last day of the calendar month ending nearest to the last day of the 52-53-week tax year. File 2010 income tax Example. File 2010 income tax Assume a tax provision applies to tax years beginning on or after July 1, 2012, which happens to be a Sunday. File 2010 income tax For this purpose, a 52-53-week tax year that begins on the last Tuesday of June, which falls on June 26, 2012, is treated as beginning on July 1, 2012. File 2010 income tax Short Tax Year A short tax year is a tax year of less than 12 months. File 2010 income tax A short period tax return may be required when you (as a taxable entity): Are not in existence for an entire tax year, or Change your accounting period. File 2010 income tax Tax on a short period tax return is figured differently for each situation. File 2010 income tax Not in Existence Entire Year Even if a taxable entity was not in existence for the entire year, a tax return is required for the time it was in existence. File 2010 income tax Requirements for filing the return and figuring the tax are generally the same as the requirements for a return for a full tax year (12 months) ending on the last day of the short tax year. File 2010 income tax Example 1. File 2010 income tax XYZ Corporation was organized on July 1, 2012. File 2010 income tax It elected the calendar year as its tax year. File 2010 income tax Therefore, its first tax return was due March 15, 2013. File 2010 income tax This short period return will cover the period from July 1, 2012, through December 31, 2012. File 2010 income tax Example 2. File 2010 income tax A calendar year corporation dissolved on July 23, 2012. File 2010 income tax Its final return is due by October 15, 2012. File 2010 income tax It will cover the short period from January 1, 2012, through July 23, 2012. File 2010 income tax Death of individual. File 2010 income tax   When an individual dies, a tax return must be filed for the decedent by the 15th day of the 4th month after the close of the individual's regular tax year. File 2010 income tax The decedent's final return will be a short period tax return that begins on January 1st, and ends on the date of death. File 2010 income tax In the case of a decedent who dies on December 31st, the last day of the regular tax year, a full calendar-year tax return is required. File 2010 income tax Example. File 2010 income tax   Agnes Green was a single, calendar year taxpayer. File 2010 income tax She died on March 6, 2012. File 2010 income tax Her final income tax return must be filed by April 15, 2013. File 2010 income tax It will cover the short period from January 1, 2012, to March 6, 2012. File 2010 income tax Figuring Tax for Short Year If the IRS approves a change in your tax year or you are required to change your tax year, you must figure the tax and file your return for the short tax period. File 2010 income tax The short tax period begins on the first day after the close of your old tax year and ends on the day before the first day of your new tax year. File 2010 income tax Figure tax for a short year under the general rule, explained below. File 2010 income tax You may then be able to use a relief procedure, explained later, and claim a refund of part of the tax you paid. File 2010 income tax General rule. File 2010 income tax   Income tax for a short tax year must be annualized. File 2010 income tax However, self-employment tax is figured on the actual self-employment income for the short period. File 2010 income tax Individuals. File 2010 income tax   An individual must figure income tax for the short tax year as follows. File 2010 income tax Determine your adjusted gross income (AGI) for the short tax year and then subtract your actual itemized deductions for the short tax year. File 2010 income tax You must itemize deductions when you file a short period tax return. File 2010 income tax Multiply the dollar amount of your exemptions by the number of months in the short tax year and divide the result by 12. File 2010 income tax Subtract the amount in (2) from the amount in (1). File 2010 income tax The result is your modified taxable income. File 2010 income tax Multiply the modified taxable income in (3) by 12, then divide the result by the number of months in the short tax year. File 2010 income tax The result is your annualized income. File 2010 income tax Figure the total tax on your annualized income using the appropriate tax rate schedule. File 2010 income tax Multiply the total tax by the number of months in the short tax year and divide the result by 12. File 2010 income tax The result is your tax for the short tax year. File 2010 income tax Relief procedure. File 2010 income tax   Individuals and corporations can use a relief procedure to figure the tax for the short tax year. File 2010 income tax It may result in less tax. File 2010 income tax Under this procedure, the tax is figured by two separate methods. File 2010 income tax If the tax figured under both methods is less than the tax figured under the general rule, you can file a claim for a refund of part of the tax you paid. File 2010 income tax For more information, see section 443(b)(2) of the Internal Revenue Code. File 2010 income tax Alternative minimum tax. File 2010 income tax   To figure the alternative minimum tax (AMT) due for a short tax year: Figure the annualized alternative minimum taxable income (AMTI) for the short tax period by completing the following steps. File 2010 income tax Multiply the AMTI by 12. File 2010 income tax Divide the result by the number of months in the short tax year. File 2010 income tax Multiply the annualized AMTI by the appropriate rate of tax under section 55(b)(1) of the Internal Revenue Code. File 2010 income tax The result is the annualized AMT. File 2010 income tax Multiply the annualized AMT by the number of months in the short tax year and divide the result by 12. File 2010 income tax   For information on the AMT for individuals, see the Instructions for Form 6251, Alternative Minimum Tax–Individuals. File 2010 income tax For information on the AMT for corporations, see the Instructions to Form 4626, Alternative Minimum Tax–Corporations. File 2010 income tax Tax withheld from wages. File 2010 income tax   You can claim a credit against your income tax liability for federal income tax withheld from your wages. File 2010 income tax Federal income tax is withheld on a calendar year basis. File 2010 income tax The amount withheld in any calendar year is allowed as a credit for the tax year beginning in the calendar year. File 2010 income tax Improper Tax Year Taxpayers that have adopted an improper tax year must change to a proper tax year. File 2010 income tax For example, if a taxpayer began business on March 15 and adopted a tax year ending on March 14 (a period of exactly 12 months), this would be an improper tax year. File 2010 income tax See Accounting Periods, earlier, for a description of permissible tax years. File 2010 income tax To change to a proper tax year, you must do one of the following. File 2010 income tax If you are requesting a change to a calendar tax year, file an amended income tax return based on a calendar tax year that corrects the most recently filed tax return that was filed on the basis of an improper tax year. File 2010 income tax Attach a completed Form 1128 to the amended tax return. File 2010 income tax Write “FILED UNDER REV. File 2010 income tax PROC. File 2010 income tax 85-15” at the top of Form 1128 and file the forms with the Internal Revenue Service Center where you filed your original return. File 2010 income tax If you are requesting a change to a fiscal tax year, file Form 1128 in accordance with the form instructions to request IRS approval for the change. File 2010 income tax Change in Tax Year Generally, you must file Form 1128 to request IRS approval to change your tax year. File 2010 income tax See the Instructions for Form 1128 for exceptions. File 2010 income tax If you qualify for an automatic approval request, a user fee is not required. File 2010 income tax Individuals Generally, individuals must adopt the calendar year as their tax year. File 2010 income tax An individual can adopt a fiscal year provided that the individual maintains his or her books and records on the basis of the adopted fiscal year. File 2010 income tax Partnerships, S Corporations, and Personal Service Corporations (PSCs) Generally, partnerships, S corporations (including electing S corporations), and PSCs must use a required tax year. File 2010 income tax A required tax year is a tax year that is required under the Internal Revenue Code and Income Tax Regulations. File 2010 income tax The entity does not have to use the required tax year if it receives IRS approval to use another permitted tax year or makes an election under section 444 of the Internal Revenue Code (discussed later). File 2010 income tax The following discussions provide the rules for partnerships, S corporations, and PSCs. File 2010 income tax Partnership A partnership must conform its tax year to its partners' tax years unless any of the following apply. File 2010 income tax The partnership makes an election under section 444 of the Internal Revenue Code to have a tax year other than a required tax year by filing Form 8716. File 2010 income tax The partnership elects to use a 52-53-week tax year that ends with reference to either its required tax year or a tax year elected under section 444. File 2010 income tax The partnership can establish a business purpose for a different tax year. File 2010 income tax The rules for the required tax year for partnerships are as follows. File 2010 income tax If one or more partners having the same tax year own a majority interest (more than 50%) in partnership profits and capital, the partnership must use the tax year of those partners. File 2010 income tax If there is no majority interest tax year, the partnership must use the tax year of all its principal partners. File 2010 income tax A principal partner is one who has a 5% or more interest in the profits or capital of the partnership. File 2010 income tax If there is no majority interest tax year and the principal partners do not have the same tax year, the partnership generally must use a tax year that results in the least aggregate deferral of income to the partners. File 2010 income tax If a partnership changes to a required tax year because of these rules, it can get automatic approval by filing Form 1128. File 2010 income tax Least aggregate deferral of income. File 2010 income tax   The tax year that results in the least aggregate deferral of income is determined as follows. File 2010 income tax Figure the number of months of deferral for each partner using one partner's tax year. File 2010 income tax Find the months of deferral by counting the months from the end of that tax year forward to the end of each other partner's tax year. File 2010 income tax Multiply each partner's months of deferral figured in step (1) by that partner's share of interest in the partnership profits for the year used in step (1). File 2010 income tax Add the amounts in step (2) to get the aggregate (total) deferral for the tax year used in step (1). File 2010 income tax Repeat steps (1) through (3) for each partner's tax year that is different from the other partners' years. File 2010 income tax   The partner's tax year that results in the lowest aggregate (total) number is the tax year that must be used by the partnership. File 2010 income tax If the calculation results in more than one tax year qualifying as the tax year with the least aggregate deferral, the partnership can choose any one of those tax years as its tax year. File 2010 income tax However, if one of the tax years that qualifies is the partnership's existing tax year, the partnership must retain that tax year. File 2010 income tax Example. File 2010 income tax A and B each have a 50% interest in partnership P, which uses a fiscal year ending June 30. File 2010 income tax A uses the calendar year and B uses a fiscal year ending November 30. File 2010 income tax P must change its tax year to a fiscal year ending November 30 because this results in the least aggregate deferral of income to the partners, as shown in the following table. File 2010 income tax Year End 12/31: Year End Profits Interest Months of Deferral Interest × Deferral A 12/31 0. File 2010 income tax 5 -0- -0- B 11/30 0. File 2010 income tax 5 11 5. File 2010 income tax 5 Total Deferral 5. File 2010 income tax 5 Year End 11/30: Year End Profits Interest Months of Deferral Interest × Deferral A 12/31 0. File 2010 income tax 5 1 0. File 2010 income tax 5 B 11/30 0. File 2010 income tax 5 -0- -0- Total Deferral 0. File 2010 income tax 5 When determination is made. File 2010 income tax   The determination of the tax year under the least aggregate deferral rules must generally be made at the beginning of the partnership's current tax year. File 2010 income tax However, the IRS can require the partnership to use another day or period that will more accurately reflect the ownership of the partnership. File 2010 income tax This could occur, for example, if a partnership interest was transferred for the purpose of qualifying for a particular tax year. File 2010 income tax Short period return. File 2010 income tax   When a partnership changes its tax year, a short period return must be filed. File 2010 income tax The short period return covers the months between the end of the partnership's prior tax year and the beginning of its new tax year. File 2010 income tax   If a partnership changes to the tax year resulting in the least aggregate deferral, it must file a Form 1128 with the short period return showing the computations used to determine that tax year. File 2010 income tax The short period return must indicate at the top of page 1, “FILED UNDER SECTION 1. File 2010 income tax 706-1. File 2010 income tax ” More information. File 2010 income tax   For more information about changing a partnership's tax year, and information about ruling requests, see the Instructions for Form 1128. File 2010 income tax S Corporation All S corporations, regardless of when they became an S corporation, must use a permitted tax year. File 2010 income tax A permitted tax year is any of the following. File 2010 income tax The calendar year. File 2010 income tax A tax year elected under section 444 of the Internal Revenue Code. File 2010 income tax See Section 444 Election, below for details. File 2010 income tax A 52-53-week tax year ending with reference to the calendar year or a tax year elected under section 444. File 2010 income tax Any other tax year for which the corporation establishes a business purpose. File 2010 income tax If an electing S corporation wishes to adopt a tax year other than a calendar year, it must request IRS approval using Form 2553, instead of filing Form 1128. File 2010 income tax For information about changing an S corporation's tax year and information about ruling requests, see the Instructions for Form 1128. File 2010 income tax Personal Service Corporation (PSC) A PSC must use a calendar tax year unless any of the following apply. File 2010 income tax The corporation makes an election under section 444 of the Internal Revenue Code. File 2010 income tax See Section 444 Election, below for details. File 2010 income tax The corporation elects to use a 52-53-week tax year ending with reference to the calendar year or a tax year elected under section 444. File 2010 income tax The corporation establishes a business purpose for a fiscal year. File 2010 income tax See the Instructions for Form 1120 for general information about PSCs. File 2010 income tax For information on adopting or changing tax years for PSCs and information about ruling requests, see the Instructions for Form 1128. File 2010 income tax Section 444 Election A partnership, S corporation, electing S corporation, or PSC can elect under section 444 of the Internal Revenue Code to use a tax year other than its required tax year. File 2010 income tax Certain restrictions apply to the election. File 2010 income tax A partnership or an S corporation that makes a section 444 election must make certain required payments and a PSC must make certain distributions (discussed later). File 2010 income tax The section 444 election does not apply to any partnership, S corporation, or PSC that establishes a business purpose for a different period, explained later. File 2010 income tax A partnership, S corporation, or PSC can make a section 444 election if it meets all the following requirements. File 2010 income tax It is not a member of a tiered structure (defined in section 1. File 2010 income tax 444-2T of the regulations). File 2010 income tax It has not previously had a section 444 election in effect. File 2010 income tax It elects a year that meets the deferral period requirement. File 2010 income tax Deferral period. File 2010 income tax   The determination of the deferral period depends on whether the partnership, S corporation, or PSC is retaining its tax year or adopting or changing its tax year with a section 444 election. File 2010 income tax Retaining tax year. File 2010 income tax   Generally, a partnership, S corporation, or PSC can make a section 444 election to retain its tax year only if the deferral period of the new tax year is 3 months or less. File 2010 income tax This deferral period is the number of months between the beginning of the retained year and the close of the first required tax year. File 2010 income tax Adopting or changing tax year. File 2010 income tax   If the partnership, S corporation, or PSC is adopting or changing to a tax year other than its required year, the deferral period is the number of months from the end of the new tax year to the end of the required tax year. File 2010 income tax The IRS will allow a section 444 election only if the deferral period of the new tax year is less than the shorter of: Three months, or The deferral period of the tax year being changed. File 2010 income tax This is the tax year immediately preceding the year for which the partnership, S corporation, or PSC wishes to make the section 444 election. File 2010 income tax If the partnership, S corporation, or PSC's tax year is the same as its required tax year, the deferral period is zero. File 2010 income tax Example 1. File 2010 income tax BD Partnership uses a calendar year, which is also its required tax year. File 2010 income tax BD cannot make a section 444 election because the deferral period is zero. File 2010 income tax Example 2. File 2010 income tax E, a newly formed partnership, began operations on December 1. File 2010 income tax E is owned by calendar year partners. File 2010 income tax E wants to make a section 444 election to adopt a September 30 tax year. File 2010 income tax E's deferral period for the tax year beginning December 1 is 3 months, the number of months between September 30 and December 31. File 2010 income tax Making the election. File 2010 income tax   Make a section 444 election by filing Form 8716 with the Internal Revenue Service Center where the entity will file its tax return. File 2010 income tax Form 8716 must be filed by the earlier of: The due date (not including extensions) of the income tax return for the tax year resulting from the section 444 election, or The 15th day of the 6th month of the tax year for which the election will be effective. File 2010 income tax For this purpose, count the month in which the tax year begins, even if it begins after the first day of that month. File 2010 income tax Note. File 2010 income tax If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. File 2010 income tax   Attach a copy of Form 8716 to Form 1065, Form 1120S, or Form 1120 for the first tax year for which the election is made. File 2010 income tax Example 1. File 2010 income tax AB, a partnership, begins operations on September 13, 2012, and is qualified to make a section 444 election to use a September 30 tax year for its tax year beginning September 13, 2012. File 2010 income tax AB must file Form 8716 by January 15, 2013, which is the due date of the partnership's tax return for the period from September 13, 2012, to September 30, 2012. File 2010 income tax Example 2. File 2010 income tax The facts are the same as in Example 1 except that AB begins operations on October 21, 2012. File 2010 income tax AB must file Form 8716 by March 17, 2013. File 2010 income tax Example 3. File 2010 income tax B is a corporation that first becomes a PSC for its tax year beginning September 1, 2012. File 2010 income tax B qualifies to make a section 444 election to use a September 30 tax year for its tax year beginning September 1, 2012. File 2010 income tax B must file Form 8716 by December 17, 2012, the due date of the income tax return for the short period from September 1, 2012, to September 30, 2012. File 2010 income tax Note. File 2010 income tax The due dates in Examples 2 and 3 are adjusted because the dates fall on a Saturday, Sunday or legal holiday. File 2010 income tax Extension of time for filing. File 2010 income tax   There is an automatic extension of 12 months to make this election. File 2010 income tax See the Form 8716 instructions for more information. File 2010 income tax Terminating the election. File 2010 income tax   The section 444 election remains in effect until it is terminated. File 2010 income tax If the election is terminated, another section 444 election cannot be made for any tax year. File 2010 income tax   The election ends when any of the following applies to the partnership, S corporation, or PSC. File 2010 income tax The entity changes to its required tax year. File 2010 income tax The entity liquidates. File 2010 income tax The entity becomes a member of a tiered structure. File 2010 income tax The IRS determines that the entity willfully failed to comply with the required payments or distributions. File 2010 income tax   The election will also end if either of the following events occur. File 2010 income tax An S corporation's S election is terminated. File 2010 income tax However, if the S corporation immediately becomes a PSC, the PSC can continue the section 444 election of the S corporation. File 2010 income tax A PSC ceases to be a PSC. File 2010 income tax If the PSC elects to be an S corporation, the S corporation can continue the election of the PSC. File 2010 income tax Required payment for partnership or S corporation. File 2010 income tax   A partnership or an S corporation must make a required payment for any tax year: The section 444 election is in effect. File 2010 income tax The required payment for that year (or any preceding tax year) is more than $500. File 2010 income tax    This payment represents the value of the tax deferral the owners receive by using a tax year different from the required tax year. File 2010 income tax   Form 8752, Required Payment or Refund Under Section 7519, must be filed each year the section 444 election is in effect, even if no payment is due. File 2010 income tax If the required payment is more than $500 (or the required payment for any prior year was more than $500), the payment must be made when Form 8752 is filed. File 2010 income tax If the required payment is $500 or less and no payment was required in a prior year, Form 8752 must be filed showing a zero amount. File 2010 income tax Applicable election year. File 2010 income tax   Any tax year a section 444 election is in effect, including the first year, is called an applicable election year. File 2010 income tax Form 8752 must be filed and the required payment made (or zero amount reported) by May 15th of the calendar year following the calendar year in which the applicable election year begins. File 2010 income tax Required distribution for PSC. File 2010 income tax   A PSC with a section 444 election in effect must distribute certain amounts to employee-owners by December 31 of each applicable year. File 2010 income tax If it fails to make these distributions, it may be required to defer certain deductions for amounts paid to owner-employees. File 2010 income tax The amount deferred is treated as paid or incurred in the following tax year. File 2010 income tax   For information on the minimum distribution, see the instructions for Part I of Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC). File 2010 income tax Back-up election. File 2010 income tax   A partnership, S corporation, or PSC can file a back-up section 444 election if it requests (or plans to request) permission to use a business purpose tax year, discussed later. File 2010 income tax If the request is denied, the back-up section 444 election must be activated (if the partnership, S corporation, or PSC otherwise qualifies). File 2010 income tax Making back-up election. File 2010 income tax   The general rules for making a section 444 election, as discussed earlier, apply. File 2010 income tax When filing Form 8716, type or print “BACK-UP ELECTION” at the top of the form. File 2010 income tax However, if Form 8716 is filed on or after the date Form 1128 (or Form 2553) is filed, type or print “FORM 1128 (or FORM 2553) BACK-UP ELECTION” at the top of Form 8716. File 2010 income tax Activating election. File 2010 income tax   A partnership or S corporation activates its back-up election by filing the return required and making the required payment with Form 8752. File 2010 income tax The due date for filing Form 8752 and making the payment is the later of the following dates. File 2010 income tax May 15 of the calendar year following the calendar year in which the applicable election year begins. File 2010 income tax 60 days after the partnership or S corporation has been notified by the IRS that the business year request has been denied. File 2010 income tax   A PSC activates its back-up election by filing Form 8716 with its original or amended income tax return for the tax year in which the election is first effective and printing on the top of the income tax return, “ACTIVATING BACK-UP ELECTION. File 2010 income tax ” 52-53-Week Tax Year A partnership, S corporation, or PSC can use a tax year other than its required tax year if it elects a 52-53-week tax year (discussed earlier) that ends with reference to either its required tax year or a tax year elected under section 444 (discussed earlier). File 2010 income tax A newly formed partnership, S corporation, or PSC can adopt a 52-53-week tax year ending with reference to either its required tax year or a tax year elected under section 444 without IRS approval. File 2010 income tax However, if the entity wishes to change to a 52-53-week tax year or change from a 52-53-week tax year that references a particular month to a non-52-53-week tax year that ends on the last day of that month, it must request IRS approval by filing Form 1128. File 2010 income tax Business Purpose Tax Year A partnership, S corporation, or PSC establishes the business purpose for a tax year by filing Form 1128. File 2010 income tax See the Instructions for Form 1128 for details. File 2010 income tax Corporations (Other Than S Corporations and PSCs) A new corporation establishes its tax year when it files its first tax return. File 2010 income tax A newly reactivated corporation that has been inactive for a number of years is treated as a new taxpayer for the purpose of adopting a tax year. File 2010 income tax An S corporation or a PSC must use the required tax year rules, discussed earlier, to establish a tax year. File 2010 income tax Generally, a corporation that wants to change its tax year must obtain approval from the IRS under either the: (a) automatic approval procedures; or (b) ruling request procedures. File 2010 income tax See the Instructions for Form 1128 for details. File 2010 income tax Accounting Methods An accounting method is a set of rules used to determine when income and expenses are reported on your tax return. File 2010 income tax Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. File 2010 income tax You choose an accounting method when you file your first tax return. File 2010 income tax If you later want to change your accounting method, you must get IRS approval. File 2010 income tax See Change in Accounting Method, later. File 2010 income tax No single accounting method is required of all taxpayers. File 2010 income tax You must use a system that clearly reflects your income and expenses and you must maintain records that will enable you to file a correct return. File 2010 income tax In addition to your permanent accounting books, you must keep any other records necessary to support the entries on your books and tax returns. File 2010 income tax You must use the same accounting method from year to year. File 2010 income tax An accounting method clearly reflects income only if all items of gross income and expenses are treated the same from year to year. File 2010 income tax If you do not regularly use an accounting method that clearly reflects your income, your income will be refigured under the method that, in the opinion of the IRS, does clearly reflect income. File 2010 income tax Methods you can use. File 2010 income tax   In general, you can compute your taxable income under any of the following accounting methods. File 2010 income tax Cash method. File 2010 income tax Accrual method. File 2010 income tax Special methods of accounting for certain items of income and expenses. File 2010 income tax A hybrid method which combines elements of two or more of the above accounting methods. File 2010 income tax The cash and accrual methods of accounting are explained later. File 2010 income tax Special methods. File 2010 income tax   This publication does not discuss special methods of accounting for certain items of income or expenses. File 2010 income tax For information on reporting income using one of the long-term contract methods, see section 460 of the Internal Revenue Code and the related regulations. File 2010 income tax The following publications also discuss special methods of reporting income or expenses. File 2010 income tax Publication 225, Farmer's Tax Guide. File 2010 income tax Publication 535, Business Expenses. File 2010 income tax Publication 537, Installment Sales. File 2010 income tax Publication 946, How To Depreciate Property. File 2010 income tax Hybrid method. File 2010 income tax   Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly reflects your income and you use it consistently. File 2010 income tax However, the following restrictions apply. File 2010 income tax If an inventory is necessary to account for your income, you must use an accrual method for purchases and sales. File 2010 income tax See Exceptions under Inventories, later. File 2010 income tax Generally, you can use the cash method for all other items of income and expenses. File 2010 income tax See Inventories, later. File 2010 income tax If you use the cash method for reporting your income, you must use the cash method for reporting your expenses. File 2010 income tax If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. File 2010 income tax Any combination that includes the cash method is treated as the cash method for purposes of section 448 of the Internal Revenue Code. File 2010 income tax Business and personal items. File 2010 income tax   You can account for business and personal items using different accounting methods. File 2010 income tax For example, you can determine your business income and expenses under an accrual method, even if you use the cash method to figure personal items. File 2010 income tax Two or more businesses. File 2010 income tax   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. File 2010 income tax No business is separate and distinct, unless a complete and separate set of books and records is maintained for each business. File 2010 income tax Note. File 2010 income tax If you use different accounting methods to create or shift profits or losses between businesses (for example, through inventory adjustments, sales, purchases, or expenses) so that income is not clearly reflected, the businesses will not be considered separate and distinct. File 2010 income tax Cash Method Most individuals and many small businesses use the cash method of accounting. File 2010 income tax Generally, if you produce, purchase, or sell merchandise, you must keep an inventory and use an accrual method for sales and purchases of merchandise. File 2010 income tax See Inventories, later, for exceptions to this rule. File 2010 income tax Income Under the cash method, you include in your gross income all items of income you actually or constructively receive during the tax year. File 2010 income tax If you receive property and services, you must include their fair market value (FMV) in income. File 2010 income tax Constructive receipt. File 2010 income tax   Income is constructively received when an amount is credited to your account or made available to you without restriction. File 2010 income tax You need not have possession of it. File 2010 income tax If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. File 2010 income tax Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations. File 2010 income tax Example. File 2010 income tax You are a calendar year taxpayer. File 2010 income tax Your bank credited, and made available, interest to your bank account in December 2012. File 2010 income tax You did not withdraw it or enter it into your books until 2013. File 2010 income tax You must include the amount in gross income for 2012, the year you constructively received it. File 2010 income tax You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. File 2010 income tax You must report the income in the year the property is received or made available to you without restriction. File 2010 income tax Expenses Under the cash method, generally, you deduct expenses in the tax year in which you actually pay them. File 2010 income tax This includes business expenses for which you contest liability. File 2010 income tax However, you may not be able to deduct an expense paid in advance. File 2010 income tax Instead, you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. File 2010 income tax Expense paid in advance. File 2010 income tax   An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. File 2010 income tax   Under the 12-month rule, a taxpayer is not required to capitalize amounts paid to create certain rights or benefits for the taxpayer that do not extend beyond the earlier of the following. File 2010 income tax 12 months after the right or benefit begins, or The end of the tax year after the tax year in which payment is made. File 2010 income tax   If you have not been applying the general rule (an expense paid in advance is deductible only in the year to which it applies) and/or the 12-month rule to the expenses you paid in advance, you must obtain approval from the IRS before using the general rule and/or the 12-month rule. File 2010 income tax See Change in Accounting Method, later. File 2010 income tax Example 1. File 2010 income tax You are a calendar year taxpayer and pay $3,000 in 2012 for a business insurance policy that is effective for three years (36 months), beginning on July 1, 2012. File 2010 income tax The general rule that an expense paid in advance is deductible only in the year to which it applies is applicable to this payment because the payment does not qualify for the 12-month rule. File 2010 income tax Therefore, only $500 (6/36 x $3,000) is deductible in 2012, $1,000 (12/36 x $3,000) is deductible in 2013, $1,000 (12/36 x $3,000) is deductible in 2014, and the remaining $500 is deductible in 2015. File 2010 income tax Example 2. File 2010 income tax You are a calendar year taxpayer and pay $10,000 on July 1, 2012, for a business insurance policy that is effective for only one year beginning on July 1, 2012. File 2010 income tax The 12-month rule applies. File 2010 income tax Therefore, the full $10,000 is deductible in 2012. File 2010 income tax Excluded Entities The following entities cannot use the cash method, including any combination of methods that includes the cash method. File 2010 income tax (See Special rules for farming businesses, later. File 2010 income tax ) A corporation (other than an S corporation) with average annual gross receipts exceeding $5 million. File 2010 income tax See Gross receipts test, below. File 2010 income tax A partnership with a corporation (other than an S corporation) as a partner, and with the partnership having average annual gross receipts exceeding $5 million. File 2010 income tax See Gross receipts test, below. File 2010 income tax A tax shelter. File 2010 income tax Exceptions The following entities are not prohibited from using the cash method of accounting. File 2010 income tax Any corporation or partnership, other than a tax shelter, that meets the gross receipts test for all tax years after 1985. File 2010 income tax A qualified personal service corporation (PSC). File 2010 income tax Gross receipts test. File 2010 income tax   A corporation or partnership, other than a tax shelter, that meets the gross receipts test can generally use the cash method. File 2010 income tax A corporation or a partnership meets the test if, for each prior tax year beginning after 1985, its average annual gross receipts are $5 million or less. File 2010 income tax    An entity's average annual gross receipts for a prior tax year is determined by: Adding the gross receipts for that tax year and the 2 preceding tax years; and Dividing the total by 3. File 2010 income tax See Gross receipts test for qualifying taxpayers, for more information. File 2010 income tax Generally, a partnership applies the test at the partnership level. File 2010 income tax Gross receipts for a short tax year are annualized. File 2010 income tax Aggregation rules. File 2010 income tax   Organizations that are members of an affiliated service group or a controlled group of corporations treated as a single employer for tax purposes are required to aggregate their gross receipts to determine whether the gross receipts test is met. File 2010 income tax Change to accrual method. File 2010 income tax   A corporation or partnership that fails to meet the gross receipts test for any tax year is prohibited from using the cash method and must change to an accrual method of accounting, effective for the tax year in which the entity fails to meet this test. File 2010 income tax Special rules for farming businesses. File 2010 income tax   Generally, a taxpayer engaged in the trade or business of farming is allowed to use the cash method for its farming business. File 2010 income tax However, certain corporations (other than S corporations) and partnerships that have a partner that is a corporation must use an accrual method for their farming business. File 2010 income tax For this purpose, farming does not include the operation of a nursery or sod farm or the raising or harvesting of trees (other than fruit and nut trees). File 2010 income tax   There is an exception to the requirement to use an accrual method for corporations with gross receipts of $1 million or less for each prior tax year after 1975. File 2010 income tax For family corporations engaged in farming, the exception applies if gross receipts were $25 million or less for each prior tax year after 1985. File 2010 income tax See chapter 2 of Publication 225, Farmer's Tax Guide, for more information. File 2010 income tax Qualified PSC. File 2010 income tax   A PSC that meets the following function and ownership tests can use the cash method. File 2010 income tax Function test. File 2010 income tax   A corporation meets the function test if at least 95% of its activities are in the performance of services in the fields of health, veterinary services, law, engineering (including surveying and mapping), architecture, accounting, actuarial science, performing arts, or consulting. File 2010 income tax Ownership test. File 2010 income tax   A corporation meets the ownership test if at least 95% of its stock is owned, directly or indirectly, at all times during the year by one or more of the following. File 2010 income tax Employees performing services for the corporation in a field qualifying under the function test. File 2010 income tax Retired employees who had performed services in those fields. File 2010 income tax The estate of an employee described in (1) or (2). File 2010 income tax Any other person who acquired the stock by reason of the death of an employee referred to in (1) or (2), but only for the 2-year period beginning on the date of death. File 2010 income tax   Indirect ownership is generally taken into account if the stock is owned indirectly through one or more partnerships, S corporations, or qualified PSCs. File 2010 income tax Stock owned by one of these entities is considered owned by the entity's owners in proportion to their ownership interest in that entity. File 2010 income tax Other forms of indirect stock ownership, such as stock owned by family members, are generally not considered when determining if the ownership test is met. File 2010 income tax   For purposes of the ownership test, a person is not considered an employee of a corporation unless that person performs more than minimal services for the corporation. File 2010 income tax Change to accrual method. File 2010 income tax   A corporation that fails to meet the function test for any tax year; or fails to meet the ownership test at any time during any tax year must change to an accrual method of accounting, effective for the year in which the corporation fails to meet either test. File 2010 income tax A corporation that fails to meet the function test or the ownership test is not treated as a qualified PSC for any part of that tax year. File 2010 income tax Accrual Method Under the accrual method of accounting, generally you report income in the year it is earned and deduct or capitalize expenses in the year incurred. File 2010 income tax The purpose of an accrual method of accounting is to match income and expenses in the correct year. File 2010 income tax Income Generally, you include an amount in gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. File 2010 income tax Under this rule, you report an amount in your gross income on the earliest of the following dates. File 2010 income tax When you receive payment. File 2010 income tax When the income amount is due to you. File 2010 income tax When you earn the income. File 2010 income tax When title has passed. File 2010 income tax Estimated income. File 2010 income tax   If you include a reasonably estimated amount in gross income and later determine the exact amount is different, take the difference into account in the tax year you make that determination. File 2010 income tax Change in payment schedule. File 2010 income tax   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a reduced rate. File 2010 income tax Continue this procedure until you complete the services, then account for the difference. File 2010 income tax Advance Payment for Services Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. File 2010 income tax However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. File 2010 income tax However, you cannot postpone including any payment beyond that tax year. File 2010 income tax Service agreement. File 2010 income tax   You can postpone reporting income from an advance payment you receive for a service agreement on property you sell, lease, build, install, or construct. File 2010 income tax This includes an agreement providing for incidental replacement of parts or materials. File 2010 income tax However, this applies only if you offer the property without a service agreement in the normal course of business. File 2010 income tax Postponement not allowed. File 2010 income tax   Generally, one cannot postpone including an advance payment in income for services if either of the following applies. File 2010 income tax You are to perform any part of the service after the end of the tax year immediately following the year you receive the advance payment. File 2010 income tax You are to perform any part of the service at any unspecified future date that may be after the end of the tax year immediately following the year you receive the advance payment. File 2010 income tax Examples. File 2010 income tax   In each of the following examples, assume the tax year is a calendar year and that the accrual method of accounting is used. File 2010 income tax Example 1. File 2010 income tax You manufacture, sell, and service computers. File 2010 income tax You received payment in 2012 for a one-year contingent service contract on a computer you sold. File 2010 income tax You can postpone including in income the part of the payment you did not earn in 2012 if, in the normal course of your business, you offer computers for sale without a contingent service contract. File 2010 income tax Example 2. File 2010 income tax You are in the television repair business. File 2010 income tax You received payments in 2012 for one-year contracts under which you agree to repair or replace certain parts that fail to function properly in television sets manufactured and sold by unrelated parties. File 2010 income tax You include the payments in gross income as you earn them. File 2010 income tax Example 3. File 2010 income tax You own a dance studio. File 2010 income tax On October 1, 2012, you receive payment for a one-year contract for 48 one-hour lessons beginning on that date. File 2010 income tax You give eight lessons in 2012. File 2010 income tax Under this method of including advance payments, you must include one-sixth (8/48) of the payment in income for 2012, and five-sixths (40/48) of the payment in 2013, even if you do not give all the lessons by the end of 2013. File 2010 income tax Example 4. File 2010 income tax Assume the same facts as in Example 3, except the payment is for a two-year contract for 96 lessons. File 2010 income tax You must include the entire payment in income in 2012 since part of the services may be performed after the following year. File 2010 income tax Guarantee or warranty. File 2010 income tax   Generally, you cannot postpone reporting income you receive under a guarantee or warranty contract. File 2010 income tax Prepaid rent. File 2010 income tax   You cannot postpone reporting income from prepaid rent. File 2010 income tax Prepaid rent does not include payment for the use of a room or other space when significant service is also provided for the occupant. File 2010 income tax You provide significant service when you supply space in a hotel, boarding house, tourist home, motor court, motel, or apartment house that furnishes hotel services. File 2010 income tax Books and records. File 2010 income tax   Any advance payment you include in gross receipts on your tax return for the year you receive payment must not be less than the payment you include in income for financial reports under the method of accounting used for those reports. File 2010 income tax Financial reports include reports to shareholders, partners, beneficiaries, and other proprietors for credit purposes and consolidated financial statements. File 2010 income tax IRS approval. File 2010 income tax   You must file Form 3115 to obtain IRS approval to change your method of accounting for advance payment for services. File 2010 income tax Advance Payment for Sales Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods held primarily for sale to customers in the ordinary course of your trade or business. File 2010 income tax However, the rules do not apply to a payment (or part of a payment) for services that are not an integral part of the main activities covered under the agreement. File 2010 income tax An agreement includes a gift certificate that can be redeemed for goods. File 2010 income tax Amounts due and payable are considered received. File 2010 income tax How to report payments. File 2010 income tax   Generally, include an advance payment in income in the year in which you receive it. File 2010 income tax However, you can use the alternative method, discussed next. File 2010 income tax Alternative method of reporting. File 2010 income tax   Under the alternative method, generally include an advance payment in income in the earlier tax year in which you: Include advance payments in gross receipts under the method of accounting you use for tax purposes, or Include any part of advance payments in income for financial reports under the method of accounting used for those reports. File 2010 income tax Financial reports include reports to shareholders, partners, beneficiaries, and other proprietors for credit purposes and consolidated financial statements. File 2010 income tax Example 1. File 2010 income tax You are a retailer. File 2010 income tax You use an accrual method of accounting and account for the sale of goods when you ship the goods. File 2010 income tax You use this method for both tax and financial reporting purposes. File 2010 income tax You can include advance payments in gross receipts for tax purposes in either: (a) the tax year in which you receive the payments; or (b) the tax year in which you ship the goods. File 2010 income tax However, see Exception for inventory goods, later. File 2010 income tax Example 2. File 2010 income tax You are a calendar year taxpayer. File 2010 income tax You manufacture household furniture and use an accrual method of accounting. File 2010 income tax Under this method, you accrue income for your financial reports when you ship the furniture. File 2010 income tax For tax purposes, you do not accrue income until the furniture has been delivered and accepted. File 2010 income tax In 2012, you received an advance payment of $8,000 for an order of furniture to be manufactured for a total price of $20,000. File 2010 income tax You shipped the furniture to the customer in December 2012, but it was not delivered and accepted until January 2013. File 2010 income tax For tax purposes, you include the $8,000 advance payment in gross income for 2012; and include the remaining $12,000 of the contract price in gross income for 2013. File 2010 income tax Information schedule. File 2010 income tax   If you use the alternative method of reporting advance payments, you must attach a statement with the following information to your tax return each year. File 2010 income tax Total advance payments received in the current tax year. File 2010 income tax Total advance payments received in earlier tax years and not included in income before the current tax year. File 2010 income tax Total payments received in earlier tax years included in income for the current tax year. File 2010 income tax Exception for inventory goods. File 2010 income tax   If you have an agreement to sell goods properly included in inventory, you can postpone including the advance payment in income until the end of the second tax year following the year you receive an advance payment if, on the last day of the tax year, you meet the following requirements. File 2010 income tax You account for the advance payment under the alternative method (discussed earlier). File 2010 income tax You have received a substantial advance payment on the agreement (discussed next). File 2010 income tax You have enough substantially similar goods on hand, or available through your normal source of supply, to satisfy the agreement. File 2010 income tax These rules also apply to an agreement, such as a gift certificate, that can be satisfied with goods that cannot be identified in the tax year you receive an advance payment. File 2010 income tax   If you meet these conditions, all advance payments you receive by the end of the second tax year, including payments received in prior years but not reported, must be included in income by the second tax year following the tax year of receipt of substantial advance payments. File 2010 income tax You must also deduct in that second year all actual or estimated costs for the goods required to satisfy the agreement. File 2010 income tax If you estimated the cost, you must take into account any difference between the estimate and the actual cost when the goods are delivered. File 2010 income tax Note. File 2010 income tax You must report any advance payments you receive after the second year in the year received. File 2010 income tax No further deferral is allowed. File 2010 income tax Substantial advance payments. File 2010 income tax   Under an agreement for a future sale, you have substantial advance payments if, by the end of the tax year, the total advance payments received during that year and preceding tax years are equal to or more than the total costs reasonably estimated to be includible in inventory because of the agreement. File 2010 income tax Example. File 2010 income tax You are a calendar year, accrual method taxpayer who accounts for advance payments under the alternative method. File 2010 income tax In 2008, you entered into a contract for the sale of goods properly includible in your inventory. File 2010 income tax The total contract price is $50,000 and you estimate that your total inventoriable costs for the goods will be $25,000. File 2010 income tax You receive the following advance payments under the contract. File 2010 income tax 2009 $17,500 2010 10,000 2011 7,500 2012 5,000 2013 5,000 2014 5,000 Total contract price $50,000   Your customer asked you to deliver the goods in 2015. File 2010 income tax In your 2010 closing inventory, you had on hand enough of the type of goods specified in the contract to satisfy the contract. File 2010 income tax Since the advance payments you had received by the end of 2010 were more than the costs you estimated, the payments are substantial advance payments. File 2010 income tax   For 2012, include in income all payments you received by the end of 2012, the second tax year following the tax year in which you received substantial advance payments. File 2010 income tax You must include $40,000 in sales for 2012 (the total amounts received from 2009 through 2012) and include in inventory the cost of the goods (or similar goods) on hand. File 2010 income tax If no such goods are on hand, then estimate the cost necessary to satisfy the contract. File 2010 income tax   No further deferral is allowed. File 2010 income tax You must include in gross income the advance payment you receive each remaining year of the contract. File 2010 income tax Take into account the difference between any estimated cost of goods sold and the actual cost when you deliver the goods in 2015. File 2010 income tax IRS approval. File 2010 income tax   You must file Form 3115 to obtain IRS approval to change your method of accounting for advance payments for sales. File 2010 income tax Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. File 2010 income tax The all-events test has been met. File 2010 income tax The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. File 2010 income tax Economic performance has occurred. File 2010 income tax Economic Performance Generally, you cannot deduct or capitalize a business expense until economic performance occurs. File 2010 income tax If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or the property is used. File 2010 income tax If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. File 2010 income tax Example. File 2010 income tax You are a calendar year taxpayer. File 2010 income tax You buy office supplies in December 2012. File 2010 income tax You receive the supplies and the bill in December, but you pay the bill in January 2013. File 2010 income tax You can deduct the expense in 2012 because all events have occurred to fix the liability, the amount of the liability can be determined, and economic performance occurred in 2012. File 2010 income tax Your office supplies may qualify as a recurring item, discussed later. File 2010 income tax If so, you can deduct them in 2012, even if the supplies are not delivered until 2013 (when economic performance occurs). File 2010 income tax Workers' compensation and tort liability. File 2010 income tax   If you are required to make payments under workers' compensation laws or in satisfaction of any tort liability, economic performance occurs as you make the payments. File 2010 income tax If you are required to make payments to a special designated settlement fund established by court order for a tort liability, economic performance occurs as you make the payments. File 2010 income tax Taxes. File 2010 income tax   Economic performance generally occurs as estimated income tax, property taxes, employment taxes, etc. File 2010 income tax are paid. File 2010 income tax However, you can elect to treat taxes as a recurring item, discussed later. File 2010 income tax You can also elect to ratably accrue real estate taxes. File 2010 income tax See chapter 5 of Publication 535 for information about real estate taxes. File 2010 income tax Other liabilities. File 2010 income tax   Other liabilities for which economic performance occurs as you make payments include liabilities for breach of contract (to the extent of incidental, consequential, and liquidated damages), violation of law, rebates and refunds, awards, prizes, jackpots, insurance, and warranty and service contracts. File 2010 income tax Interest. File 2010 income tax   Economic performance occurs with the passage of time (as the borrower uses, and the lender forgoes use of, the lender's money) rather than as payments are made. File 2010 income tax Compensation for services. File 2010 income tax   Generally, economic performance occurs as an employee renders service to the employer. File 2010 income tax However, deductions for compensation or other benefits paid to an employee in a year subsequent to economic performance are subject to the rules governing deferred compensation, deferred benefits, and funded welfare benefit plans. File 2010 income tax For information on employee benefit programs, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. File 2010 income tax Vacation pay. File 2010 income tax   You can take a current deduction for vacation pay earned by your employees if you pay it during the year or, if the amount is vested, within 2½ months after the end of the year. File 2010 income tax If you pay it later than this, you must deduct it in the year actually paid. File 2010 income tax An amount is vested if your right to it cannot be nullified or cancelled. File 2010 income tax Exception for recurring items. File 2010 income tax   An exception to the economic performance rule allows certain recurring items to be treated as incurred during the tax year even though economic performance has not occurred. File 2010 income tax The exception applies if all the following requirements are met. File 2010 income tax The all-events test, discussed earlier, is met. File 2010 income tax Economic performance occurs by the earlier of the following dates. File 2010 income tax 8½ months after the close of the year. File 2010 income tax The date you file a timely return (including extensions) for the year. File 2010 income tax The item is recurring in nature and you consistently treat similar items as incurred in the tax year in which the all-events test is met. File 2010 income tax Either: The item is not material, or Accruing the item in the year in which the all-events test is met results in a better match against income than accruing the item in the year of economic performance. File 2010 income tax This exception does not apply to workers' compensation or tort liabilities. File 2010 income tax Amended return. File 2010 income tax   You may be able to file an amended return and treat a liability as incurred under the recurring item exception. File 2010 income tax You can do so if economic performance for the liability occurs after you file your tax return for the year, but within 8½ months after the close of the tax year. File 2010 income tax Recurrence and consistency. File 2010 income tax   To determine whether an item is recurring and consistently reported, consider the frequency with which the item and similar items are incurred (or expected to be incurred) and how you report these items for tax purposes. File 2010 income tax A new expense or an expense not incurred every year can be treated as recurring if it is reasonable to expect that it will be incurred regularly in the future. File 2010 income tax Materiality. File 2010 income tax   Factors to consider in determining the materiality of a recurring item include the size of the item (both in absolute terms and in relation to your income and other expenses) and the treatment of the item on your financial statements. File 2010 income tax   An item considered material for financial statement purposes is also considered material for tax purposes. File 2010 income tax However, in certain situations an immaterial item for financial accounting purposes is treated as material for purposes of economic performance. File 2010 income tax Matching expenses with income. File 2010 income tax   Costs directly associated with the revenue of a period are properly allocable to that period. File 2010 income tax To determine whether the accrual of an expense in a particular year results in a better match with the income to which it relates, generally accepted accounting principles (GAAP; visit www. File 2010 income tax fasab. File 2010 income tax gov/accepted. File 2010 income tax html) are an important factor. File 2010 income tax   For example, if you report sales income in the year of sale, but you do not ship the goods until the following year, the shipping costs are more properly matched to income in the year of sale than the year the goods are shipped. File 2010 income tax Expenses that cannot be practically associated with income of a particular period, such as advertising costs, should be assigned to the period the costs are incurred. File 2010 income tax However, the matching requirement is considered met for certain types of expenses. File 2010 income tax These expenses include taxes, payments under insurance, warranty, and service contracts, rebates, refunds, awards, prizes, and jackpots. File 2010 income tax Expenses Paid in Advance An expense you pay in advance is deductible only in the year to which it applies, unless the expense qualifies for the 12-month rule. File 2010 income tax Under the 12-month rule, a taxpayer is not required to capitalize amounts paid to create certain rights or benefits for the taxpayer that do not extend beyond the earlier of the following. File 2010 income tax 12 months after the right or benefit begins, or The end of the tax year after the tax year in which payment is made. File 2010 income tax If you have not been applying the general rule (an expense paid in advance is deductible only in the year to which it applies) and/or the 12-month rule to the expenses you paid in advance, you must get IRS approval before using the general rule and/or the 12-month rule. File 2010 income tax See Change in Accounting Method, later, for information on how to get IRS approval. File 2010 income tax See Expense paid in advance under Cash Method, earlier, for examples illustrating the application of the general and 12-month rules. File 2010 income tax Related Persons Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. File 2010 income tax Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. File 2010 income tax See section 267 of the Internal Revenue Code and Publication 542, Corporations, for the definition of related person. File 2010 income tax Inventories An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. File 2010 income tax If you must account for an inventory in your business, you must use an accrual method of accounting for your purchases and sales. File 2010 income tax However, see Exceptions, next. File 2010 income tax See also Accrual Method, earlier. File 2010 income tax To figure taxable income, you must value your inventory at the beginning and end of each tax year. File 2010 income tax To determine the value, you need a method for identifying the items in your inventory and a method for valuing these items. File 2010 income tax See Identifying Cost and Valuing Inventory, later. File 2010 income tax The rules for valuing inventory are not the same for all businesses. File 2010 income tax The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. File 2010 income tax Your inventory practices must be consistent from year to year. File 2010 income tax The rules discussed here apply only if they do not conflict with the uniform capitalization rules of section 263A and the mark-to-market rules of section 475. File 2010 income tax Exceptions The following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. File 2010 income tax These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). File 2010 income tax A qualifying taxpayer under Revenue Procedure 2001-10 on page 272 of Internal Revenue Bulletin 2001-2, available at www. File 2010 income tax irs. File 2010 income tax gov/pub/irs-irbs/irb01–02. File 2010 income tax pdf. File 2010 income tax A qualifying small business taxpayer under Revenue Procedure 2002-28, on page 815 of Internal Revenue Bulletin 2002-18, available at www. File 2010 income tax irs. File 2010 income tax gov/pub/irs-irbs/irb02–18. File 2010 income tax pdf. File 2010 income tax In addition to the information provided in this publication, you should see the revenue procedures referenced in the list, above, and the instructions for Form 3115 for information you will need to adopt or change to these accounting methods (see Changing methods, later). File 2010 income tax Qualifying taxpayer. File 2010 income tax   You are a qualifying taxpayer under Revenue Procedure 2001-10 only if: You satisfy the gross receipts test for each prior tax year ending on or after December 17, 1998 (see Gross receipts test for qualifying taxpayers, next). File 2010 income tax Your average annual gross receipts for each test year (explained in Step 1, listed next) must be $1 million or less. File 2010 income tax You are not a tax shelter as defined under section 448(d)(3) of the Internal Revenue Code. File 2010 income tax Gross receipts test for qualifying taxpayers. File 2010 income tax   To determine if you meet the gross receipts test for qualifying taxpayers, use the following steps: Step 1. File 2010 income tax List each of the test years. File 2010 income tax For qualifying taxpayers under Revenue Procedure 2001-10, the test years are each prior tax year ending on or after December 17, 1998. File 2010 income tax Step 2. File 2010 income tax Determine your average annual gross receipts for each test year listed in Step 1. File 2010 income tax Your average annual gross receipts for a tax year is determined by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. File 2010 income tax Step 3. File 2010 income tax You meet the gross receipts test for qualifying taxpayers if your average annual gross receipts for each test year listed in Step 1 is $1 million or less. File 2010 income tax Qualifying small business taxpayer. File 2010 income tax   You are a qualifying small business taxpayer under Revenue Procedure 2002-28 only if: You satisfy the gross receipts test for each prior tax year ending on or after December 31, 2000 (see Gross receipts test for qualifying small business taxpayers, next). File 2010 income tax Your average annual gross receipts for each test year (explained in Step 1, listed next) must be $10 million or less. File 2010 income tax You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. File 2010 income tax Your principle business activity is an eligible business. File 2010 income tax See Eligible business, later. File 2010 income tax You have not changed (or have not been required to change) from the cash method because you became ineligible to use the cash method under Revenue Procedure 2002-28. File 2010 income tax Note. File 2010 income tax Revenue Procedure 2002-28 does not apply to a farming business of a qualifying small business taxpayer. File 2010 income tax A taxpayer engaged in the trade or business of farming generally is allowed to use the cash method for any farming business. File 2010 income tax See Special rules for farming businesses under Cash Method, earlier. File 2010 income tax Gross receipts test for qualifying small business taxpayers. File 2010 income tax   To determine if you meet the gross receipts test for qualifying small business taxpayers, use the following steps: Step 1. File 2010 income tax List each of the test years. File 2010 income tax For qualifying small business taxpayers under Revenue Procedure 2002-28, the test years are each prior tax year ending on or after December 31, 2000. File 2010 income tax Step 2. File 2010 income tax Determine your average annual gross receipts for each test year listed in Step 1. File 2010 income tax Your average annual gross receipts for a tax year is determined by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. File 2010 income tax Step 3. File 2010 income tax You meet the gross receipts test for qualifying small business taxpayers if your average annual gross receipts for each test year listed in Step 1 is $10 million or less. File 2010 income tax Eligible business. File 2010 income tax   An eligible business is any business for which a qualified small business taxpayer can use the cash method and choose to not keep an inventory. File 2010 income tax You have an eligible business if you meet any of the following requirements. File 2010 income tax Your principal business activity is described in a North American Industry Classification System (NAICS) code other than any of the following NAICS subsector codes: NAICS codes 211 and 212 (mining activities). File 2010 income tax NAICS codes 31-33 (manufacturing). File 2010 income tax NAICS code 42 (wholesale trade). File 2010 income tax NAICS codes 44-45 (retail trade). File 2010 income tax NAICS codes 5111 and 5122 (information industries). File 2010 income tax Your principal business activity is the provision of services, including the provision of property incident to those services. File 2010 income tax Your principal business activity is the fabrication or modification of tangible personal property upon demand in accordance with customer design or specifications. File 2010 income tax   Information about the NAICS codes can be found at http://www. File 2010 income tax census. File 2010 income tax gov/naics or in the instructions for your federal income tax return. File 2010 income tax Gross receipts. File 2010 income tax   In general, gross receipts must include all receipts from all your trades or businesses that must be recognized under the method of accounting you used for that tax year for federal income tax purposes. File 2010 income tax See the definit
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The File 2010 Income Tax

File 2010 income tax Internal Revenue Bulletin:  2010-9  March 1, 2010  Rev. File 2010 income tax Proc. File 2010 income tax 2010-18 Table of Contents SECTION 1. File 2010 income tax PURPOSE SECTION 2. File 2010 income tax BACKGROUND SECTION 3. File 2010 income tax SCOPE SECTION 4. File 2010 income tax APPLICATION SECTION 5. File 2010 income tax EFFECTIVE DATE SECTION 6. File 2010 income tax DRAFTING INFORMATION SECTION 1. File 2010 income tax PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2010, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2010, including a separate table of inclusion amounts for lessees of trucks and vans. File 2010 income tax The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. File 2010 income tax SECTION 2. File 2010 income tax BACKGROUND . File 2010 income tax 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. File 2010 income tax Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. File 2010 income tax The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. File 2010 income tax This change reflects the higher rate of price inflation for trucks and vans since 1988. File 2010 income tax . File 2010 income tax 02 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. File 2010 income tax The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. File 2010 income tax Under § 1. File 2010 income tax 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. File 2010 income tax One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. File 2010 income tax Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. File 2010 income tax SECTION 3. File 2010 income tax SCOPE . File 2010 income tax 01 The limitations on depreciation deductions in section 4. File 2010 income tax 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2010, and continue to apply for each taxable year that the passenger automobile remains in service. File 2010 income tax . File 2010 income tax 02 The tables in section 4. File 2010 income tax 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2010. File 2010 income tax Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. File 2010 income tax See Rev. File 2010 income tax Proc. File 2010 income tax 2005-13, 2005-1 C. File 2010 income tax B. File 2010 income tax 759, for passenger automobiles first leased before calendar year 2006; Rev. File 2010 income tax Proc. File 2010 income tax 2006-18, 2006-1 C. File 2010 income tax B. File 2010 income tax 645, for passenger automobiles first leased during calendar year 2006; Rev. File 2010 income tax Proc. File 2010 income tax 2007-30, 2007-1 C. File 2010 income tax B. File 2010 income tax 1104, for passenger automobiles first leased during calendar year 2007; Rev. File 2010 income tax Proc. File 2010 income tax 2008-22, 2008-12 I. File 2010 income tax R. File 2010 income tax B. File 2010 income tax 658, for passenger automobiles first leased during calendar year 2008; and Rev. File 2010 income tax Proc. File 2010 income tax 2009-24, 2009-17 I. File 2010 income tax R. File 2010 income tax B. File 2010 income tax 885, for passenger automobiles first leased during calendar year 2009. File 2010 income tax SECTION 4. File 2010 income tax APPLICATION . File 2010 income tax 01 Limitations on Depreciation Deductions for Certain Automobiles. File 2010 income tax (1) Amount of the inflation adjustment. File 2010 income tax (a) Passenger automobiles (other than trucks or vans). File 2010 income tax Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. File 2010 income tax The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. File 2010 income tax The new car component of the CPI was 115. File 2010 income tax 2 for October 1987 and 137. File 2010 income tax 851 for October 2009. File 2010 income tax The October 2009 index exceeded the October 1987 index by 22. File 2010 income tax 651. File 2010 income tax Therefore, the automobile price inflation adjustment for 2010 for passenger automobiles (other than trucks and vans) is 19. File 2010 income tax 66 percent (22. File 2010 income tax 651/115. File 2010 income tax 2 x 100%). File 2010 income tax The dollar limitations in § 280F(a) are multiplied by a factor of 0. File 2010 income tax 1966, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2010. File 2010 income tax This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2010. File 2010 income tax (b) Trucks and vans. File 2010 income tax To determine the dollar limitations for trucks and vans first placed in service during calendar year 2010, the new truck component of the CPI is used instead of the new car component. File 2010 income tax The new truck component of the CPI was 112. File 2010 income tax 4 for October 1987 and 140. File 2010 income tax 897 for October 2009. File 2010 income tax The October 2009 index exceeded the October 1987 index by 28. File 2010 income tax 497. File 2010 income tax Therefore, the automobile price inflation adjustment for 2010 for trucks and vans is 25. File 2010 income tax 35 percent (28. File 2010 income tax 497/112. File 2010 income tax 4 x 100%). File 2010 income tax The dollar limitations in § 280F(a) are multiplied by a factor of 0. File 2010 income tax 2535, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. File 2010 income tax This adjustment applies to all trucks and vans that are first placed in service in calendar year 2010. File 2010 income tax (2) Amount of the limitation. File 2010 income tax Tables 1 and 2 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2010. File 2010 income tax Use Table 1 for a passenger automobile (other than a truck or van) and Table 2 for a truck or van placed in service in calendar year 2010. File 2010 income tax REV. File 2010 income tax PROC. File 2010 income tax 2010-18 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. File 2010 income tax PROC. File 2010 income tax 2010-18 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 . File 2010 income tax 02 Inclusions in Income of Lessees of Passenger Automobiles. File 2010 income tax A taxpayer must follow the procedures in § 1. File 2010 income tax 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2010. File 2010 income tax In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 3 of this revenue procedure, while lessees of trucks and vans should use Table 4 of this revenue procedure. File 2010 income tax REV. File 2010 income tax PROC. File 2010 income tax 2010-18 TABLE 3 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $16,700 $17,000 3 7 10 11 14 17,000 17,500 4 8 13 15 16 17,500 18,000 5 10 16 19 21 18,000 18,500 6 13 18 23 26 18,500 19,000 7 15 22 26 31 19,000 19,500 8 17 25 30 35 19,500 20,000 9 19 29 34 39 20,000 20,500 10 21 32 38 44 20,500 21,000 11 23 35 42 48 21,000 21,500 12 26 38 45 53 21,500 22,000 13 28 41 50 57 22,000 23,000 14 31 46 56 63 23,000 24,000 16 36 52 63 73 24,000 25,000 18 40 59 71 81 25,000 26,000 20 44 66 78 90 26,000 27,000 22 49 71 86 100 27,000 28,000 24 53 78 94 108 28,000 29,000 26 57 85 101 118 29,000 30,000 28 61 92 109 126 30,000 31,000 30 66 97 117 135 31,000 32,000 32 70 104 125 144 32,000 33,000 34 74 111 132 153 33,000 34,000 36 79 117 140 161 34,000 35,000 38 83 123 148 171 35,000 36,000 40 87 130 156 179 36,000 37,000 42 92 136 163 188 37,000 38,000 44 96 143 170 198 38,000 39,000 46 100 149 179 206 39,000 40,000 48 105 155 186 215 40,000 41,000 50 109 162 194 224 41,000 42,000 52 113 169 201 233 42,000 43,000 54 118 174 210 241 43,000 44,000 56 122 181 217 251 44,000 45,000 58 126 188 225 259 45,000 46,000 60 131 194 232 269 46,000 47,000 61 135 201 240 277 47,000 48,000 63 140 207 248 286 48,000 49,000 65 144 213 256 295 49,000 50,000 67 148 220 263 304 50,000 51,000 69 153 226 271 313 51,000 52,000 71 157 232 279 322 52,000 53,000 73 161 239 287 331 53,000 54,000 75 166 245 294 340 54,000 55,000 77 170 252 302 348 55,000 56,000 79 174 258 310 358 56,000 57,000 81 178 265 318 366 57,000 58,000 83 183 271 325 375 58,000 59,000 85 187 278 333 384 59,000 60,000 87 191 284 341 393 60,000 62,000 90 198 294 352 406 62,000 64,000 94 207 306 368 424 64,000 66,000 98 215 320 382 443 66,000 68,000 102 224 332 398 460 68,000 70,000 106 232 346 413 478 70,000 72,000 110 241 358 429 496 72,000 74,000 114 250 371 444 513 74,000 76,000 118 258 384 460 531 76,000 78,000 122 267 396 476 549 78,000 80,000 126 276 409 491 566 80,000 85,000 132 291 432 518 598 85,000 90,000 142 313 464 556 643 90,000 95,000 152 334 497 594 687 95,000 100,000 162 356 528 634 731 100,000 110,000 177 388 577 691 798 110,000 120,000 196 432 641 768 887 120,000 130,000 216 475 705 846 976 130,000 140,000 236 518 770 922 1,065 140,000 150,000 256 561 834 1,000 1,154 150,000 160,000 275 605 898 1,077 1,243 160,000 170,000 295 648 963 1,153 1,333 170,000 180,000 315 691 1,027 1,231 1,421 180,000 190,000 334 735 1,091 1,308 1,510 190,000 200,000 354 778 1,155 1,386 1,599 200,000 210,000 374 821 1,220 1,462 1,688 210,000 220,000 393 865 1,284 1,539 1,777 220,000 230,000 413 908 1,348 1,617 1,866 230,000 240,000 433 951 1,413 1,693 1,956 240,000 and up 453 995 1,476 1,771 2,044 REV. File 2010 income tax PROC. File 2010 income tax 2010-18 TABLE 4 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later 17,000 17,500 3 6 9 10 11 17,500 18,000 4 8 12 14 16 18,000 18,500 5 10 15 18 21 18,500 19,000 6 12 19 22 24 19,000 19,500 7 15 21 26 29 19,500 20,000 8 17 25 29 34 20,000 20,500 9 19 28 33 38 20,500 21,000 10 21 31 37 43 21,000 21,500 11 23 35 41 47 21,500 22,000 12 25 38 45 51 22,000 23,000 13 29 42 51 58 23,000 24,000 15 33 49 58 67 24,000 25,000 17 37 56 66 76 25,000 26,000 19 42 62 73 85 26,000 27,000 21 46 68 82 93 27,000 28,000 23 50 75 89 103 28,000 29,000 25 55 81 97 111 29,000 30,000 27 59 88 104 121 30,000 31,000 29 63 94 113 129 31,000 32,000 31 68 100 120 138 32,000 33,000 33 72 107 127 148 33,000 34,000 35 76 114 135 156 34,000 35,000 37 81 119 143 165 35,000 36,000 39 85 126 151 174 36,000 37,000 41 89 133 158 183 37,000 38,000 43 94 139 166 191 38,000 39,000 45 98 145 174 201 39,000 40,000 47 102 152 182 209 40,000 41,000 49 106 159 189 218 41,000 42,000 51 111 164 198 227 42,000 43,000 53 115 171 205 236 43,000 44,000 55 119 178 213 245 44,000 45,000 57 124 184 220 254 45,000 46,000 59 128 190 228 263 46,000 47,000 60 133 197 235 272 47,000 48,000 62 137 203 244 280 48,000 49,000 64 142 209 251 290 49,000 50,000 66 146 216 259 298 50,000 51,000 68 150 223 266 308 51,000 52,000 70 154 229 275 316 52,000 53,000 72 159 235 282 325 53,000 54,000 74 163 242 290 334 54,000 55,000 76 167 249 297 343 55,000 56,000 78 172 254 305 352 56,000 57,000 80 176 261 313 361 57,000 58,000 82 180 268 320 370 58,000 59,000 84 185 274 328 378 59,000 60,000 86 189 280 336 388 60,000 62,000 89 195 291 347 401 62,000 64,000 93 204 303 363 418 64,000 66,000 97 213 315 379 436 66,000 68,000 101 221 329 394 454 68,000 70,000 105 230 341 410 472 70,000 72,000 109 239 354 424 490 72,000 74,000 113 247 367 440 508 74,000 76,000 117 256 380 455 526 76,000 78,000 121 264 393 471 543 78,000 80,000 125 273 406 486 561 80,000 85,000 131 289 428 513 592 85,000 90,000 141 310 461 552 636 90,000 95,000 151 332 492 591 681 95,000 100,000 161 353 525 629 726 100,000 110,000 176 386 573 686 793 110,000 120,000 195 430 637 763 882 120,000 130,000 215 473 701 841 971 130,000 140,000 235 516 766 918 1,059 140,000 150,000 255 559 830 995 1,149 150,000 160,000 274 603 894 1,072 1,238 160,000 170,000 294 646 958 1,150 1,326 170,000 180,000 314 689 1,023 1,226 1,416 180,000 190,000 333 733 1,087 1,303 1,505 190,000 200,000 353 776 1,151 1,381 1,594 200,000 210,000 373 819 1,216 1,457 1,683 210,000 220,000 392 863 1,280 1,534 1,772 220,000 230,000 412 906 1,344 1,612 1,861 230,000 240,000 432 949 1,409 1,689 1,949 240,000 and up 452 992 1,473 1,766 2,039 SECTION 5. File 2010 income tax EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. File 2010 income tax SECTION 6. File 2010 income tax DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. File 2010 income tax Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). File 2010 income tax For further information regarding this revenue procedure, contact Mr. File 2010 income tax Harvey at (202) 622-4930 (not a toll-free call). File 2010 income tax Prev  Up  Next   Home   More Internal Revenue Bulletins