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File 2012 Taxes

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File 2012 Taxes

File 2012 taxes Index Symbols 529 program (see Qualified tuition program (QTP)) A Academic period American opportunity credit, Academic period. File 2012 taxes Lifetime learning credit, Academic period. File 2012 taxes Student loan interest deduction, Academic period. File 2012 taxes Tuition and fees deduction, Academic period. File 2012 taxes Accountable plans, Accountable Plans, Allocating your reimbursements for meals. File 2012 taxes Additional tax Coverdell ESA On excess contributions, Additional Tax on Excess Contributions, Figuring and reporting the additional tax. File 2012 taxes On taxable distributions, Additional Tax on Taxable Distributions IRA distributions, education exception, Education Exception to Additional Tax on Early IRA Distributions Qualified tuition program (QTP), on taxable distributions, Additional Tax on Taxable Distributions Adjusted qualified education expenses (see Qualified education expenses) American opportunity credit Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Claiming dependent's expenses, Who Can Claim a Dependent's Expenses, Tuition reduction. File 2012 taxes Tuition reduction, Tuition reduction. File 2012 taxes Claiming the credit, Can You Claim the Credit, Who Cannot Claim the Credit, Claiming the Credit Qualifying to claim (Figure 2-1), Coordination with Coverdell ESA distributions, Figuring the Taxable Portion of a Distribution Coordination with qualified tuition program (QTP) distributions, Coordination With American Opportunity and Lifetime Learning Credits Eligible educational institution, Eligible educational institution. File 2012 taxes Eligible student, Who Is an Eligible Student Requirements (Figure 2-2), Expenses qualifying for, What Expenses Qualify, Adjustments to Qualified Education Expenses Figuring the credit, Figuring the Credit Income level, effect on amount of credit, Effect of the Amount of Your Income on the Amount of Your Credit, Phaseout. File 2012 taxes Income limits, Effect of the Amount of Your Income on the Amount of Your Credit, Phaseout. File 2012 taxes Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). File 2012 taxes Worksheet 2-1, Claiming the Credit Overview of American opportunity credit (Table 2-1), Introduction Phaseout, Phaseout. File 2012 taxes Qualified education expenses, Qualified Education Expenses Tax benefit of, What is the tax benefit of the American opportunity credit. File 2012 taxes Armed Forces Health Professions Scholarship and Financial Assistance Program, Exceptions. File 2012 taxes Assistance (see Tax help) Athletic scholarships, Athletic Scholarships B Bar review course, Bar or CPA Review Course Bonds, education savings (see Education savings bond program) Business deduction for work-related education, Business Deduction for Work-Related Education, Illustrated Example Accountable plans, Accountable Plans, Allocating your reimbursements for meals. File 2012 taxes Adjustments to qualifying work-related education expenses, Adjustments to Qualifying Work-Related Education Expenses Allocating meal reimbursements, Allocating your reimbursements for meals. File 2012 taxes Deductible education expenses, What Expenses Can Be Deducted, Adjustments to Qualifying Work-Related Education Expenses Deducting business expenses, Deducting Business Expenses, Impairment-Related Work Expenses Double benefit not allowed, No Double Benefit Allowed Education required by employer or by law, Education Required by Employer or by Law Education to maintain or improve skills, Education To Maintain or Improve Skills Education to meet minimum requirements, Education To Meet Minimum Requirements, Certification in a new state. File 2012 taxes Education to qualify for new trade or business, Education That Qualifies You for a New Trade or Business, Teaching and Related Duties Excess expenses, accountable plan, Excess expenses. File 2012 taxes , Allocating your reimbursements for meals. File 2012 taxes Indefinite absence, Education during indefinite absence. File 2012 taxes Maintaining skills vs. File 2012 taxes qualifying for new job, Maintaining skills vs. File 2012 taxes qualifying for new job. File 2012 taxes Nonaccountable plans, Nonaccountable Plans Nondeductible expenses, Nondeductible expenses. File 2012 taxes Qualified education expenses, What Expenses Can Be Deducted, Adjustments to Qualifying Work-Related Education Expenses Recordkeeping requirements, Recordkeeping, Examples of records to keep. File 2012 taxes Reimbursements, treatment of, How To Treat Reimbursements, Reimbursements for nondeductible expenses. File 2012 taxes Tax benefit of, What is the tax benefit of taking a business deduction for work-related education. File 2012 taxes Tax-free educational assistance, Tax-free educational assistance. File 2012 taxes Teachers, Requirements for Teachers, Teaching and Related Duties Temporary absence to acquire education, Education during temporary absence. File 2012 taxes Transportation expenses, Transportation Expenses, Using your car. File 2012 taxes Travel expenses, Travel Expenses C Cancellation of student loan (see Student loan cancellation) Candidate for a degree Scholarships and fellowships, Candidate for a degree. File 2012 taxes Change of designated beneficiary Coverdell ESA, Changing the Designated Beneficiary Qualified tuition program, Changing the Designated Beneficiary Collapsed loans, Interest on refinanced student loans. File 2012 taxes Comprehensive or bundled fees American opportunity credit, Comprehensive or bundled fees. File 2012 taxes Lifetime learning credit, Comprehensive or bundled fees. File 2012 taxes Tuition and fees deduction, Comprehensive or bundled fees. File 2012 taxes Consolidated loans used to refinance student loans, Interest on refinanced student loans. File 2012 taxes Conventions outside U. File 2012 taxes S. File 2012 taxes , Cruises and conventions. File 2012 taxes Coverdell education savings account (ESA), Coverdell Education Savings Account (ESA), Figuring the Taxable Portion of a Distribution, Coordination With American Opportunity and Lifetime Learning Credits, Worksheet 7-3. File 2012 taxes Coverdell ESA—Taxable Distributions and Basis Additional tax On excess contributions, Additional Tax on Excess Contributions, Figuring and reporting the additional tax. File 2012 taxes On taxable distributions, Additional Tax on Taxable Distributions Assets to be distributed at age 30 or death of beneficiary, When Assets Must Be Distributed Contribution limits, Contribution Limits, Figuring the limit. File 2012 taxes Figuring the limit (Worksheet 6-2), Figuring the limit. File 2012 taxes Contributions to, Contributions, Figuring and reporting the additional tax. File 2012 taxes Table 7-2, Contributions Coordination with American opportunity and lifetime learning credits, Coordination With American Opportunity and Lifetime Learning Credits Coordination with qualified tuition program (QTP), Coordination With Qualified Tuition Program (QTP) Distributions Defined, What Is a Coverdell ESA Distributions, Distributions, How To Figure the Taxable Earnings Overview (Table 7-3), Distributions Divorce, transfer due to, Transfer Because of Divorce Eligible educational institution, Eligible Educational Institution Figuring taxable portion of distribution, Figuring the Taxable Portion of a Distribution Worksheet 7-3, Worksheet 7-3. File 2012 taxes Coverdell ESA—Taxable Distributions and Basis Figuring the taxable earnings in required distribution, How To Figure the Taxable Earnings Losses, Losses on Coverdell ESA Investments Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). File 2012 taxes , MAGI when using Form 1040NR-EZ. File 2012 taxes Worksheet 6-1, Worksheet 7-1. File 2012 taxes MAGI for a Coverdell ESA Overview (Table 6-1), Coverdell Education Savings Account (ESA) Qualified education expenses, Qualified Education Expenses, Qualified Elementary and Secondary Education Expenses Rollovers, Rollovers Tax benefit of, What is the tax benefit of the Coverdell ESA. File 2012 taxes Tax-free distributions, Tax-Free Distributions Taxable distributions, Taxable Distributions, Figuring the additional tax. File 2012 taxes Worksheet 7-3 to figure, Worksheet 7-3. File 2012 taxes Coverdell ESA—Taxable Distributions and Basis Transfers, Rollovers CPA review course, Bar or CPA Review Course Credits American opportunity (see American opportunity credit) Lifetime learning (see Lifetime learning credit) Cruises, educational, Cruises and conventions. File 2012 taxes D Deductions (see Business deduction for work-related education) Designated beneficiary Coverdell ESA, What Is a Coverdell ESA, Changing the Designated Beneficiary Qualified tuition program (QTP), Designated beneficiary. File 2012 taxes , Changing the Designated Beneficiary Disabilities, persons with Impairment-related work expenses, Impairment-Related Work Expenses Distributions (see specific benefit ) Divorce Coverdell ESA transfer due to, Transfer Because of Divorce Expenses paid under decree American opportunity credit, Expenses paid by dependent. File 2012 taxes Lifetime learning credit, Expenses paid by dependent. File 2012 taxes Tuition and fees deduction, Expenses paid under divorce decree. File 2012 taxes Double benefit not allowed American opportunity credit, No Double Benefit Allowed Lifetime learning credit, No Double Benefit Allowed Student loan interest deduction, No Double Benefit Allowed Tuition and fees deduction, No Double Benefit Allowed Work-related education, No Double Benefit Allowed E Early distributions from IRAs, Education Exception to Additional Tax on Early IRA Distributions, Reporting Early Distributions Eligible educational institution, Eligible educational institution. File 2012 taxes Figuring amount not subject to 10% tax, Figuring the Amount Not Subject to the 10% Tax Qualified education expenses, Qualified education expenses. File 2012 taxes Reporting, Reporting Early Distributions Education IRA (see Coverdell education savings account (ESA)) Education loans (see Student loan interest deduction) Education savings account (see Coverdell education savings account (ESA)) Education savings bond program Cashing in bonds tax free, Who Can Cash In Bonds Tax Free, MAGI when using Form 1040. File 2012 taxes Claiming dependent's exemption, Dependent for whom you claim an exemption. File 2012 taxes Claiming exclusion, Claiming the Exclusion Eligible educational institution, Eligible educational institution. File 2012 taxes Figuring tax-free amount, Figuring the Tax-Free Amount Income level, effect on amount of exclusion, Effect of the Amount of Your Income on the Amount of Your Exclusion Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). File 2012 taxes , MAGI when using Form 1040. File 2012 taxes Phaseout, Effect of the Amount of Your Income on the Amount of Your Exclusion Qualified education expenses, Qualified education expenses. File 2012 taxes Educational assistance, employer-provided (see Employer-provided educational assistance) Eligible educational institution American opportunity credit, Eligible educational institution. File 2012 taxes Cancellation of student loan, Eligible educational institution. File 2012 taxes Coverdell ESA, Eligible Educational Institution Early distributions from IRAs, Eligible educational institution. File 2012 taxes Education savings bond program, Eligible educational institution. File 2012 taxes Lifetime learning credit, Eligible educational institution. File 2012 taxes Qualified tuition program (QTP), Eligible educational institution. File 2012 taxes Qualified tuition reduction, Qualified Tuition Reduction Scholarships and fellowships, Eligible educational institution. File 2012 taxes , Eligible educational institution. File 2012 taxes Student loan cancellation, Eligible educational institution. File 2012 taxes Student loan interest deduction, Eligible educational institution. File 2012 taxes Tuition and fees deduction, Eligible educational institution. File 2012 taxes Eligible elementary or secondary school Coverdell ESA, Eligible elementary or secondary school. File 2012 taxes Eligible student American opportunity credit, Who Is an Eligible Student Lifetime learning credit, Who Is an Eligible Student Student loan interest deduction, Eligible student. File 2012 taxes Tuition and fees deduction, Who Is an Eligible Student Employees Deducting work-related education expenses, Employees Employer-provided educational assistance, Employer-Provided Educational Assistance, Working condition fringe benefit. File 2012 taxes ESAs (see Coverdell education savings account (ESA)) Estimated tax, Reminders Excess contributions Coverdell ESA, Additional Tax on Excess Contributions, Figuring and reporting the additional tax. File 2012 taxes Excess expenses, accountable plan, Excess expenses. File 2012 taxes , Allocating your reimbursements for meals. File 2012 taxes Expenses (see specific benefit ) F Family members, beneficiary Coverdell ESA, Members of the beneficiary's family. File 2012 taxes Qualified tuition program (QTP), Members of the beneficiary's family. File 2012 taxes Fee-basis officials, work-related education deduction, Performing Artists and Fee-Basis Officials Fellowships (see Scholarships and fellowships) Figures (see Tables and figures) Financial aid (see Scholarships and fellowships) Form 1098-E Student loan interest deduction, Loan origination fee. File 2012 taxes , Form 1098-E. File 2012 taxes Form 1098-T, Reminders American opportunity credit, Form 1098-T. File 2012 taxes Lifetime learning credit, Form 1098-T. File 2012 taxes Tuition and fees deduction, Form 1098-T. File 2012 taxes Form 1099-Q Coverdell ESA, Exceptions. File 2012 taxes , Earnings and basis. File 2012 taxes Qualified tuition program (QTP), Earnings and return of investment. File 2012 taxes Form 1099-R Early distributions from IRAs, Reporting Early Distributions Form 2106, 50% limit on meals. File 2012 taxes , Form 2106 or 2106-EZ. File 2012 taxes Form 2106-EZ, 50% limit on meals. File 2012 taxes , Form 2106 or 2106-EZ. File 2012 taxes , Using Form 2106-EZ. File 2012 taxes Filled-in example, Form 5329 Coverdell ESA, Figuring the additional tax. File 2012 taxes Early distributions from IRAs, Reporting Early Distributions Qualified tuition program (QTP), Figuring the additional tax. File 2012 taxes Form 8815, MAGI when using Form 1040. File 2012 taxes , Claiming the Exclusion Form 8863 Filled-in examples, Form 8917 Filled-in examples, Form W-9S, Form 1098-T. File 2012 taxes , Form 1098-T. File 2012 taxes , Form 1098-E. File 2012 taxes , Form 1098-T. File 2012 taxes Free tax services, Free help with your tax return. File 2012 taxes Fulbright grants, Fulbright Grants G Glossary, Glossary. File 2012 taxes , Glossary, Transfer: Graduate education tuition reduction, Graduate Education Grants Fulbright, Fulbright Grants Pell, Pell Grants and Other Title IV Need-Based Education Grants Title IV need-based education, Pell Grants and Other Title IV Need-Based Education Grants H Half-time student American opportunity credit, Enrolled at least half-time. File 2012 taxes Coverdell ESA, Half-time student. File 2012 taxes Early distributions from IRAs, Half-time student. File 2012 taxes Student loan interest deduction, Enrolled at least half-time. File 2012 taxes Help (see Tax help) I Illustrated example of education credits (Appendix A), Appendix A. File 2012 taxes Illustrated Example of Education Credits, Impairment-related work expenses Work-related education deduction, Impairment-Related Work Expenses Individual retirement arrangements (IRAs), Coverdell Education Savings Account (ESA) Early distributions (see Early distributions from IRAs) L Lifetime learning credit, Differences between the American opportunity and lifetime learning credits. File 2012 taxes Academic period, Academic period. File 2012 taxes Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Claiming dependent's expenses, Who Can Claim a Dependent's Expenses Tuition reduction, Tuition reduction. File 2012 taxes Claiming the credit, Can You Claim the Credit, Who Cannot Claim the Credit, Claiming the Credit Qualifying to claim (Figure 3-1), Coordination with Coverdell ESA distributions, Figuring the Taxable Portion of a Distribution, Coordination With American Opportunity and Lifetime Learning Credits Coordination with qualified tuition program (QTP) distributions, Coordination With American Opportunity and Lifetime Learning Credits Eligible educational institution, Eligible educational institution. File 2012 taxes Eligible student, Who Is an Eligible Student Expenses qualifying for, What Expenses Qualify, Amounts that do not reduce qualified education expenses. File 2012 taxes Figuring the credit, Figuring the Credit, Claiming the Credit Income level, effect on amount of credit, Effect of the Amount of Your Income on the Amount of Your Credit Income limits, Effect of the Amount of Your Income on the Amount of Your Credit Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). File 2012 taxes Worksheet 3-1, MAGI when using Form 1040. File 2012 taxes Overview (Table 3-1), Table 3-1. File 2012 taxes Overview of the Lifetime Learning Credit Phaseout, Phaseout. File 2012 taxes Qualified education expenses, Qualified Education Expenses, Amounts that do not reduce qualified education expenses. File 2012 taxes Qualifying to claim (Figure 3-1), Tax benefit of, What is the tax benefit of the lifetime learning credit. File 2012 taxes Loans Cancellation (see Student loan cancellation) Capitalized interest on student loan, Capitalized interest. File 2012 taxes Origination fees on student loan, Loan origination fee. File 2012 taxes Qualified education expenses paid with American opportunity credit, Academic period. File 2012 taxes Lifetime learning credit, Paid with borrowed funds. File 2012 taxes Student loan repayment assistance, Student Loan Repayment Assistance Losses, deducting Coverdell ESA, Losses on Coverdell ESA Investments Qualified tuition program (QTP), Losses on QTP Investments Luxury water transportation, Cruises and conventions. File 2012 taxes M Mileage deduction for work-related education, What's New, Using your car. File 2012 taxes Military academy cadets, Payment to Service Academy Cadets Missing children, photographs of, Reminders Modified adjusted gross income (MAGI) American opportunity credit Worksheet 2-1, Claiming the Credit Coverdell ESA, Modified adjusted gross income (MAGI). File 2012 taxes , MAGI when using Form 1040NR-EZ. File 2012 taxes Worksheet 6-1, Worksheet 7-1. File 2012 taxes MAGI for a Coverdell ESA Education savings bond program, Modified adjusted gross income (MAGI). File 2012 taxes , MAGI when using Form 1040. File 2012 taxes Lifetime learning credit, Modified adjusted gross income (MAGI). File 2012 taxes Worksheet 3-1, MAGI when using Form 1040. File 2012 taxes Student loan interest deduction, Modified adjusted gross income (MAGI). File 2012 taxes Table 4-2, Table 4-2. File 2012 taxes Effect of MAGI on Student Loan Interest Deduction Tuition and fees deduction, Modified adjusted gross income (MAGI). File 2012 taxes Table 6-2, Table 6-2. File 2012 taxes Effect of MAGI on Maximum Tuition and Fees Deduction Worksheet 6-1, Worksheet 6-1. File 2012 taxes MAGI for the Tuition and Fees Deduction N National Health Service Corps Scholarship Program, Exceptions. File 2012 taxes , Exceptions. File 2012 taxes Nonaccountable plans Work-related education, Nonaccountable Plans P Pell grants, Pell Grants and Other Title IV Need-Based Education Grants, Coordination with Pell grants and other scholarships. File 2012 taxes , Coordination with Pell grants and other scholarships. File 2012 taxes Performing artists, work-related education deduction, Performing Artists and Fee-Basis Officials Phaseout American opportunity credit, Phaseout. File 2012 taxes Education savings bond program, Effect of the Amount of Your Income on the Amount of Your Exclusion Lifetime learning credit, Phaseout. File 2012 taxes Student loan interest deduction, Phaseout. File 2012 taxes , Effect of the Amount of Your Income on the Amount of Your Deduction Publications (see Tax help) Q Qualified education expenses Adjustments to American opportunity credit, Adjustments to Qualified Education Expenses Coverdell ESA, Adjusted qualified education expenses. File 2012 taxes Education savings bond program, Adjusted qualified education expenses. File 2012 taxes Lifetime learning credit, Adjustments to Qualified Education Expenses Qualified tuition program (QTP), Adjusted qualified education expenses. File 2012 taxes Student loan interest deduction, Adjustments to Qualified Education Expenses Tuition and fees deduction, Adjustments to Qualified Education Expenses Work-related education, Adjustments to Qualifying Work-Related Education Expenses American opportunity credit, Qualified Education Expenses, Adjustments to Qualified Education Expenses Coverdell ESA, Qualified Education Expenses, Qualified Elementary and Secondary Education Expenses Early distributions from IRAs, Qualified education expenses. File 2012 taxes Education savings bond program, Qualified education expenses. File 2012 taxes Expenses not qualified American opportunity credit, Expenses That Do Not Qualify, Comprehensive or bundled fees. File 2012 taxes Lifetime learning credit, Expenses That Do Not Qualify Tuition and fees deduction, Expenses That Do Not Qualify Lifetime learning credit, Qualified Education Expenses, Amounts that do not reduce qualified education expenses. File 2012 taxes Qualified tuition program (QTP), Qualified education expenses. File 2012 taxes Scholarships and fellowships, Qualified education expenses. File 2012 taxes Student loan interest deduction, Qualified Education Expenses Tuition and fees deduction, What Expenses Qualify, Adjustments to Qualified Education Expenses Work-related education, What Expenses Can Be Deducted, Adjustments to Qualifying Work-Related Education Expenses Qualified elementary and secondary education expenses Coverdell ESAs, Qualified Elementary and Secondary Education Expenses Qualified employer plans Student loan interest deduction not allowed, Qualified employer plan. File 2012 taxes Qualified student loans, Qualified Student Loan, Qualified employer plan. File 2012 taxes Qualified tuition program (QTP), Qualified Tuition Program (QTP), Changing the Designated Beneficiary Additional tax on taxable distributions, Additional Tax on Taxable Distributions Change of designated beneficiary, Changing the Designated Beneficiary Contributions to, How Much Can You Contribute Coordination with American opportunity and lifetime learning credits, Coordination With American Opportunity and Lifetime Learning Credits Coordination with Coverdell ESA distributions, Coordination With Coverdell ESA Distributions Defined, What Is a Qualified Tuition Program Eligible educational institution, Eligible educational institution. File 2012 taxes Figuring taxable portion of distribution, Figuring the Taxable Portion of a Distribution, Losses on QTP Investments Losses, Losses on QTP Investments Qualified education expenses, Qualified education expenses. File 2012 taxes Rollovers, Rollovers and Other Transfers, Changing the Designated Beneficiary Tax benefit of, What is the tax benefit of a QTP. File 2012 taxes Taxability of distributions, Are Distributions Taxable, Figuring the additional tax. File 2012 taxes Taxable earnings, Taxable earnings. File 2012 taxes Transfers, Rollovers and Other Transfers, Changing the Designated Beneficiary Qualified tuition reduction, Qualified Tuition Reduction, How To Report Qualified U. File 2012 taxes S. File 2012 taxes savings bonds, Qualified U. File 2012 taxes S. File 2012 taxes savings bonds. File 2012 taxes Qualifying work-related education, Qualifying Work-Related Education, Teaching and Related Duties Determining if qualified (Figure 11-1), R Recapture American opportunity credit, Credit recapture. File 2012 taxes Lifetime learning credit, Credit recapture. File 2012 taxes Tuition and fees deduction, Credit recapture. File 2012 taxes Recordkeeping requirements Work-related education, Recordkeeping, Examples of records to keep. File 2012 taxes Refinanced student loans, Interest on refinanced student loans. File 2012 taxes , Refinanced Loan Reimbursements Nondeductible expenses, Reimbursements for nondeductible expenses. File 2012 taxes Work-related education, How To Treat Reimbursements, Reimbursements for nondeductible expenses. File 2012 taxes Related persons Coverdell ESA, Members of the beneficiary's family. File 2012 taxes Qualified tuition program (QTP), Members of the beneficiary's family. File 2012 taxes Student loan interest deduction, Related person. File 2012 taxes Repayment programs (see Student loan repayment assistance) Reporting American opportunity credit, Claiming the Credit Coverdell ESA, Exceptions. File 2012 taxes , Figuring and reporting the additional tax. File 2012 taxes , Figuring the Taxable Portion of a Distribution, Figuring the additional tax. File 2012 taxes Early distributions from IRAs, Reporting Early Distributions Education savings bond program, Claiming the Exclusion Lifetime learning credit, Claiming the Credit Qualified tuition program (QTP), Taxable earnings. File 2012 taxes , Losses on QTP Investments, Rollovers Scholarships and fellowships, taxable, Reporting Scholarships and Fellowships Student loan interest deduction, Claiming the Deduction Tuition and fees deduction, Claiming the Deduction Tuition reduction, taxable, How To Report Work-related education expenses, Deducting Business Expenses, Impairment-Related Work Expenses Revolving lines of credit, interest on, Interest on revolving lines of credit. File 2012 taxes Rollovers Coverdell ESA, Rollovers Qualified tuition program (QTP), Rollovers and Other Transfers, Changing the Designated Beneficiary S Scholarships and fellowships, Scholarships and Fellowships, Form 1040NR-EZ. File 2012 taxes , Coordination with Pell grants and other scholarships. File 2012 taxes , Coordination with Pell grants and other scholarships. File 2012 taxes Athletic scholarships, Athletic Scholarships Eligible educational institution, Eligible educational institution. File 2012 taxes , Eligible educational institution. File 2012 taxes Figuring tax-free and taxable parts (Worksheet 1-1), Worksheet 1-1. File 2012 taxes Qualified education expenses, Qualified education expenses. File 2012 taxes Reporting, Reporting Scholarships and Fellowships Scholarship, defined, Scholarships and Fellowships Tax treatment of (Table 1-1), Tax-Free Scholarships and Fellowships Tax-free, Tax-Free Scholarships and Fellowships, Athletic Scholarships Taxable, Taxable Scholarships and Fellowships Section 501(c)(3) organizations (see Student loan cancellation) Section 529 program (see Qualified tuition program (QTP)) Self-employed persons Deducting work-related education expenses, Self-Employed Persons Service academy cadets, Payment to Service Academy Cadets Sports, games, hobbies, and noncredit courses American opportunity credit, Sports, games, hobbies, and noncredit courses. File 2012 taxes Education savings bond program, Qualified education expenses. File 2012 taxes Lifetime learning credit, Sports, games, hobbies, and noncredit courses. File 2012 taxes Tuition and fees deduction, Sports, games, hobbies, and noncredit courses. File 2012 taxes Standard mileage rate Work-related education, What's New, Using your car. File 2012 taxes State prepaid education accounts (see Qualified tuition program (QTP)) Student loan cancellation, Student Loan Cancellation Eligible educational institution, Eligible educational institution. File 2012 taxes Section 501(c)(3) organizations, Section 501(c)(3) organization. File 2012 taxes Student loan interest deduction Academic period, Academic period. File 2012 taxes Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Allocation between interest and principal, Allocating Payments Between Interest and Principal Claiming the deduction, Claiming the Deduction Eligible educational institution, Eligible educational institution. File 2012 taxes Eligible student, Eligible student. File 2012 taxes Figuring the deduction, Figuring the Deduction, Which Worksheet To Use Include as interest, Include As Interest Income level, effect on amount of deduction, Effect of the Amount of Your Income on the Amount of Your Deduction Loan repayment assistance, Do Not Include As Interest Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). File 2012 taxes , Which Worksheet To Use Table 4-2, Table 4-2. File 2012 taxes Effect of MAGI on Student Loan Interest Deduction Not included as interest, Do Not Include As Interest Phaseout, Phaseout. File 2012 taxes , Effect of the Amount of Your Income on the Amount of Your Deduction Qualified education expenses, Qualified Education Expenses Qualified employer plans, Qualified employer plan. File 2012 taxes Qualified student loans, Qualified Student Loan, Qualified employer plan. File 2012 taxes Reasonable period of time, Reasonable period of time. File 2012 taxes Related persons, Related person. File 2012 taxes Student loan interest, defined, Student Loan Interest Defined, When Must Interest Be Paid Third party interest payments, Interest paid by others. File 2012 taxes When interest must be paid, When Must Interest Be Paid Worksheet 4-1, Worksheet 4-1. File 2012 taxes Student Loan Interest Deduction Worksheet Student loan repayment assistance, Student Loan Repayment Assistance Surviving spouse Coverdell ESA transfer to, Exception for Transfer to Surviving Spouse or Family Member T Tables and figures American opportunity credit Eligible student requirements (Figure 2-2), Overview (Table 2-1), Introduction Qualifying to claim (Figure 2-1), Comparison of education tax benefits (Appendix B), Coverdell ESAs Contributions to (Table 7-2), Contribution Limits Distributions (Table 7-3), Distributions Overview (Table 6-1), Coverdell Education Savings Account (ESA) Education credits Overview of American opportunity credit (Table 2-1), Introduction Overview of lifetime learning credit (Table 3-1), Table 3-1. File 2012 taxes Overview of the Lifetime Learning Credit Lifetime learning credit Overview (Table 3-1), Table 3-1. File 2012 taxes Overview of the Lifetime Learning Credit Qualifying to claim (Figure 3-1), Scholarships and fellowships, taxability of (Table 1-1), Tax-Free Scholarships and Fellowships Student loan interest deduction MAGI, effect of (Table 4-2), Table 4-2. File 2012 taxes Effect of MAGI on Student Loan Interest Deduction Overview (Table 4-1), Table 4-1. File 2012 taxes Student Loan Interest Deduction at a Glance Summary chart of differences between education tax benefits (Appendix B), Tuition and fees deduction MAGI, effect of (Table 6-2), Table 6-2. File 2012 taxes Effect of MAGI on Maximum Tuition and Fees Deduction Overview (Table 6-1), Table 6-1. File 2012 taxes Tuition and Fees Deduction at a Glance Work-related education, qualifying (Figure 112-1), Tax help, How To Get Tax Help Tax-free educational assistance American opportunity credit, Tax-free educational assistance. File 2012 taxes Coverdell ESA, Adjusted qualified education expenses. File 2012 taxes Early distributions from IRAs, Figuring the Amount Not Subject to the 10% Tax Education savings bond program, Adjusted qualified education expenses. File 2012 taxes Lifetime learning credit, Tax-free educational assistance. File 2012 taxes Qualified tuition program (QTP), Adjusted qualified education expenses. File 2012 taxes Tuition and fees deduction, Tax-free educational assistance. File 2012 taxes Work-related education, Tax-free educational assistance. File 2012 taxes Taxable scholarships and fellowships, Taxable Scholarships and Fellowships Teachers, Requirements for Teachers, Teaching and Related Duties Temporary-basis student, transportation expenses of, Temporary basis. File 2012 taxes Title IV need-based education grants, Pell Grants and Other Title IV Need-Based Education Grants Transfers Coverdell ESA, Rollovers Qualified tuition program (QTP), Rollovers and Other Transfers, Changing the Designated Beneficiary Transportation expenses Work-related education, Transportation Expenses, Using your car. File 2012 taxes Travel expenses 50% limit on meals, 50% limit on meals. File 2012 taxes Not deductible as form of education, Travel as Education Work-related education, Travel Expenses TTY/TDD information, How To Get Tax Help Tuition and fees deduction, Tuition and Fees Deduction, Illustrated Example Academic period, Academic period. File 2012 taxes Adjustments to qualified education expenses, Adjustments to Qualified Education Expenses Can you claim the deduction, Can You Claim the Deduction Claiming dependent's expenses, Who Can Claim a Dependent's Expenses Claiming the deduction, Claiming the Deduction Double benefit not allowed, No Double Benefit Allowed Eligible educational institution, Eligible educational institution. File 2012 taxes Eligible student, Who Is an Eligible Student Expenses not qualifying for, Expenses That Do Not Qualify Expenses qualifying for, What Expenses Qualify, Adjustments to Qualified Education Expenses Figuring the deduction, Figuring the Deduction, MAGI when using Form 1040. File 2012 taxes Income level, effect on amount of deduction, Effect of the Amount of Your Income on the Amount of Your Deduction Loan used to pay tuition and fees, Paid with borrowed funds. File 2012 taxes Modified adjusted gross income (MAGI), Modified adjusted gross income (MAGI). File 2012 taxes Table 6-2, Table 6-2. File 2012 taxes Effect of MAGI on Maximum Tuition and Fees Deduction Worksheet 6-1, Worksheet 6-1. File 2012 taxes MAGI for the Tuition and Fees Deduction Overview (Table 4-1), Table 4-1. File 2012 taxes Student Loan Interest Deduction at a Glance Overview (Table 6-1), Table 6-1. File 2012 taxes Tuition and Fees Deduction at a Glance Qualified education expenses, What Expenses Qualify, Adjustments to Qualified Education Expenses Qualifying for deduction, Can You Claim the Deduction Tax benefit of, What is the tax benefit of the tuition and fees deduction. File 2012 taxes Tax-free educational assistance, Tax-free educational assistance. File 2012 taxes Tuition reduction American opportunity credit, Tuition reduction. File 2012 taxes Lifetime learning credit, Tuition reduction. File 2012 taxes Qualified, Qualified Tuition Reduction, How To Report Tuition and fees deduction, Tuition reduction. File 2012 taxes U U. File 2012 taxes S. File 2012 taxes savings bonds, Qualified U. File 2012 taxes S. File 2012 taxes savings bonds. File 2012 taxes Unclaimed reimbursement Work-related education, Unclaimed reimbursement. File 2012 taxes V Veterans' benefits, Veterans' Benefits Voluntary interest payments, Voluntary interest payments. File 2012 taxes W Withholding, Analyzing your tax withholding. File 2012 taxes Work-related education (see Business deduction for work-related education) Working condition fringe benefit, Working condition fringe benefit. File 2012 taxes Worksheets Coverdell ESA Contribution limit (Worksheet 6-2), Figuring the limit. File 2012 taxes MAGI, calculation of (Worksheet 6-1), Worksheet 7-1. File 2012 taxes MAGI for a Coverdell ESA Taxable distributions and basis (Worksheet 6-3), Worksheet 7-3. File 2012 taxes Coverdell ESA—Taxable Distributions and Basis Taxable distributions and basis (Worksheet 7-3), Worksheet 7-3. File 2012 taxes Coverdell ESA—Taxable Distributions and Basis Lifetime learning credit MAGI calculation (Worksheet 3-1), MAGI when using Form 1040. File 2012 taxes Scholarships and fellowships, taxable income (Worksheet 1-1), Worksheet 1-1. File 2012 taxes Student loan interest deduction (Worksheet 4-1), Worksheet 4-1. File 2012 taxes Student Loan Interest Deduction Worksheet Tuition and fees deduction, MAGI calculation (Worksheet 6-1), Worksheet 6-1. File 2012 taxes MAGI for the Tuition and Fees Deduction Prev  Up     Home   More Online Publications
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Understanding Your CP237A Notice

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Notice CP237A, Page 1

 

Page Last Reviewed or Updated: 07-Aug-2013

Printable samples of this notice (PDF)

 

 

How to get help

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The File 2012 Taxes

File 2012 taxes 9. File 2012 taxes   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. File 2012 taxes Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. File 2012 taxes Amount to report as ordinary income. File 2012 taxes Applicable percentage. File 2012 taxes Amount to report as ordinary income. File 2012 taxes Applicable percentage. File 2012 taxes Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. File 2012 taxes When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. File 2012 taxes Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. File 2012 taxes Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. File 2012 taxes Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. File 2012 taxes Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. File 2012 taxes Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). File 2012 taxes Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. File 2012 taxes Table 9-1. File 2012 taxes Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. File 2012 taxes Held 24 mos. File 2012 taxes  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. File 2012 taxes Held 12 mos. File 2012 taxes   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). File 2012 taxes Do not take that gain into account as section 1231 gain. File 2012 taxes Section 1231 transactions. File 2012 taxes   Gain or loss on the following transactions is subject to section 1231 treatment. File 2012 taxes Sale or exchange of cattle and horses. File 2012 taxes The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. File 2012 taxes Sale or exchange of other livestock. File 2012 taxes This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. File 2012 taxes Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. File 2012 taxes Other livestock does not include poultry. File 2012 taxes Sale or exchange of depreciable personal property. File 2012 taxes This property must be used in your business and held longer than 1 year. File 2012 taxes Generally, property held for the production of rents or royalties is considered to be used in a trade or business. File 2012 taxes Examples of depreciable personal property include farm machinery and trucks. File 2012 taxes It also includes amortizable section 197 intangibles. File 2012 taxes Sale or exchange of real estate. File 2012 taxes This property must be used in your business and held longer than 1 year. File 2012 taxes Examples are your farm or ranch (including barns and sheds). File 2012 taxes Sale or exchange of unharvested crops. File 2012 taxes The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. File 2012 taxes You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). File 2012 taxes Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. File 2012 taxes Distributive share of partnership gains and losses. File 2012 taxes Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). File 2012 taxes Cutting or disposal of timber. File 2012 taxes Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . File 2012 taxes Condemnation. File 2012 taxes The condemned property (defined in chapter 11) must have been held longer than 1 year. File 2012 taxes It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. File 2012 taxes It cannot be property held for personal use. File 2012 taxes Casualty or theft. File 2012 taxes The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). File 2012 taxes You must have held the property longer than 1 year. File 2012 taxes However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. File 2012 taxes Section 1231 does not apply to personal casualty gains and losses. File 2012 taxes See chapter 11 for information on how to treat those gains and losses. File 2012 taxes If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. File 2012 taxes See Table 9-1. File 2012 taxes Property for sale to customers. File 2012 taxes   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. File 2012 taxes If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. File 2012 taxes Treatment as ordinary or capital. File 2012 taxes   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. File 2012 taxes If you have a net section 1231 loss, it is an ordinary loss. File 2012 taxes If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. File 2012 taxes The rest, if any, is long-term capital gain. File 2012 taxes Nonrecaptured section 1231 losses. File 2012 taxes   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. File 2012 taxes These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. File 2012 taxes Example. File 2012 taxes In 2013, Ben has a $2,000 net section 1231 gain. File 2012 taxes To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. File 2012 taxes From 2008 through 2012 he had the following section 1231 gains and losses. File 2012 taxes Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. File 2012 taxes 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. File 2012 taxes Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. File 2012 taxes To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. File 2012 taxes For more information, see chapter 3 of Publication 544. File 2012 taxes Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. File 2012 taxes Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. File 2012 taxes See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. File 2012 taxes Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. File 2012 taxes Personal property (either tangible or intangible). File 2012 taxes Other tangible property (except buildings and their structural components) used as any of the following. File 2012 taxes See Buildings and structural components below. File 2012 taxes An integral part of manufacturing, production, or extraction, or of furnishing certain services. File 2012 taxes A research facility in any of the activities in (a). File 2012 taxes A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). File 2012 taxes That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. File 2012 taxes Amortization of certified pollution control facilities. File 2012 taxes The section 179 expense deduction. File 2012 taxes Deduction for clean-fuel vehicles and certain refueling property. File 2012 taxes Expenditures to remove architectural and transportation barriers to the handicapped and elderly. File 2012 taxes Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. File 2012 taxes Single purpose agricultural (livestock) or horticultural structures. File 2012 taxes Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. File 2012 taxes Buildings and structural components. File 2012 taxes   Section 1245 property does not include buildings and structural components. File 2012 taxes The term building includes a house, barn, warehouse, or garage. File 2012 taxes The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. File 2012 taxes   Do not treat a structure that is essentially machinery or equipment as a building or structural component. File 2012 taxes Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. File 2012 taxes   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. File 2012 taxes Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. File 2012 taxes Facility for bulk storage of fungible commodities. File 2012 taxes   This is a facility used mainly for the bulk storage of fungible commodities. File 2012 taxes Bulk storage means storage of a commodity in a large mass before it is used. File 2012 taxes For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. File 2012 taxes To be fungible, a commodity must be such that one part may be used in place of another. File 2012 taxes Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. File 2012 taxes The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. File 2012 taxes The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). File 2012 taxes For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. File 2012 taxes For details, see chapter 3 of Publication 544. File 2012 taxes Use Part III of Form 4797 to figure the ordinary income part of the gain. File 2012 taxes Depreciation claimed on other property or claimed by other taxpayers. File 2012 taxes   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. File 2012 taxes Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. File 2012 taxes For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. File 2012 taxes Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). File 2012 taxes Example. File 2012 taxes Jeff Free paid $120,000 for a tractor in 2012. File 2012 taxes On February 23, 2013, he traded it for a chopper and paid an additional $30,000. File 2012 taxes To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. File 2012 taxes Jeff can also depreciate the additional $30,000 for the chopper. File 2012 taxes Depreciation and amortization. File 2012 taxes   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. File 2012 taxes See Depreciation Recapture in chapter 3 of Publication 544 for more details. File 2012 taxes Ordinary depreciation deductions. File 2012 taxes Section 179 deduction (see chapter 7). File 2012 taxes Any special depreciation allowance. File 2012 taxes Amortization deductions for all the following costs. File 2012 taxes Acquiring a lease. File 2012 taxes Lessee improvements. File 2012 taxes Pollution control facilities. File 2012 taxes Reforestation expenses. File 2012 taxes Section 197 intangibles. File 2012 taxes Qualified disaster expenses. File 2012 taxes Franchises, trademarks, and trade names acquired before August 11, 1993. File 2012 taxes Example. File 2012 taxes You file your returns on a calendar year basis. File 2012 taxes In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. File 2012 taxes You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. File 2012 taxes You did not claim the section 179 expense deduction for the truck. File 2012 taxes You sold it in May 2013 for $7,000. File 2012 taxes The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). File 2012 taxes Figure the gain treated as ordinary income as follows. File 2012 taxes 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. File 2012 taxes   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. File 2012 taxes If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. File 2012 taxes If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. File 2012 taxes This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. File 2012 taxes Disposition of plants and animals. File 2012 taxes   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. File 2012 taxes If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. File 2012 taxes For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. File 2012 taxes For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. File 2012 taxes You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. File 2012 taxes Example. File 2012 taxes Janet Maple sold her apple orchard in 2013 for $80,000. File 2012 taxes Her adjusted basis at the time of sale was $60,000. File 2012 taxes She bought the orchard in 2006, but the trees did not produce a crop until 2009. File 2012 taxes Her pre-productive expenses were $6,000. File 2012 taxes She elected not to use the uniform capitalization rules. File 2012 taxes Janet must treat $6,000 of the gain as ordinary income. File 2012 taxes Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. File 2012 taxes It includes buildings and structural components that are not section 1245 property (discussed earlier). File 2012 taxes It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. File 2012 taxes A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. File 2012 taxes Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. File 2012 taxes To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. File 2012 taxes You will not have additional depreciation if any of the following apply to the property disposed of. File 2012 taxes You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. File 2012 taxes You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. File 2012 taxes The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. File 2012 taxes These properties are depreciated using the straight line method. File 2012 taxes Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. File 2012 taxes This applies even if no payments are received in that year. File 2012 taxes If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. File 2012 taxes For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. File 2012 taxes If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. File 2012 taxes To do this, allocate the selling price and the payments you receive in the year of sale to each asset. File 2012 taxes Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. File 2012 taxes For more information on installment sales, see chapter 10. File 2012 taxes Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. File 2012 taxes By gift. File 2012 taxes At death. File 2012 taxes In like-kind exchanges. File 2012 taxes In involuntary conversions. File 2012 taxes Publication 544 also explains how to handle a single transaction involving multiple properties. File 2012 taxes Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. File 2012 taxes Deductions for soil and water conservation expenditures (section 1252 property). File 2012 taxes Exclusions from income for certain cost sharing payments (section 1255 property). File 2012 taxes Section 1252 property. File 2012 taxes   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. File 2012 taxes Exceptions. File 2012 taxes   Do not treat gain on the following transactions as gain on section 1252 property. File 2012 taxes Disposition of farmland by gift. File 2012 taxes Transfer of farm property at death (except for income in respect of a decedent). File 2012 taxes For more information, see Regulations section 1. File 2012 taxes 1252-2. File 2012 taxes Amount to report as ordinary income. File 2012 taxes   You report as ordinary income the lesser of the following amounts. File 2012 taxes Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). File 2012 taxes The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. File 2012 taxes Applicable percentage. File 2012 taxes   The applicable percentage is based on the length of time you held the land. File 2012 taxes If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. File 2012 taxes If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. File 2012 taxes If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. File 2012 taxes Example. File 2012 taxes You acquired farmland on January 19, 2005. File 2012 taxes On October 3, 2013, you sold the land at a $30,000 gain. File 2012 taxes Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. File 2012 taxes The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. File 2012 taxes You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. File 2012 taxes Section 1255 property. File 2012 taxes   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. File 2012 taxes If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. File 2012 taxes Amount to report as ordinary income. File 2012 taxes   You report as ordinary income the lesser of the following amounts. File 2012 taxes The applicable percentage of the total excluded cost-sharing payments. File 2012 taxes The gain on the disposition of the property. File 2012 taxes You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. File 2012 taxes However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. File 2012 taxes Applicable percentage. File 2012 taxes   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. File 2012 taxes If the property is held less than 10 years after you receive the payments, the percentage is 100%. File 2012 taxes After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. File 2012 taxes Form 4797, Part III. File 2012 taxes   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. File 2012 taxes Prev  Up  Next   Home   More Online Publications