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File Free State Income Tax

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File Free State Income Tax

File free state income tax 2. File free state income tax   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. File free state income tax Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. File free state income tax Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). File free state income tax You must do this to figure your net capital gain or loss. File free state income tax For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. File free state income tax See Capital Gains Tax Rates in chapter 4. File free state income tax Your deduction for a net capital loss may be limited. File free state income tax See Treatment of Capital Losses in chapter 4. File free state income tax Capital gain or loss. File free state income tax   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. File free state income tax You also may have a capital gain if your section 1231 transactions result in a net gain. File free state income tax Section 1231 transactions. File free state income tax   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. File free state income tax They also include certain involuntary conversions of business or investment property, including capital assets. File free state income tax See Section 1231 Gains and Losses in chapter 3 for more information. File free state income tax Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. File free state income tax Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. File free state income tax For exceptions, see Noncapital Assets, later. File free state income tax The following items are examples of capital assets. File free state income tax Stocks and bonds. File free state income tax A home owned and occupied by you and your family. File free state income tax Timber grown on your home property or investment property, even if you make casual sales of the timber. File free state income tax Household furnishings. File free state income tax A car used for pleasure or commuting. File free state income tax Coin or stamp collections. File free state income tax Gems and jewelry. File free state income tax Gold, silver, and other metals. File free state income tax Personal-use property. File free state income tax   Generally, property held for personal use is a capital asset. File free state income tax Gain from a sale or exchange of that property is a capital gain. File free state income tax Loss from the sale or exchange of that property is not deductible. File free state income tax You can deduct a loss relating to personal-use property only if it results from a casualty or theft. File free state income tax Investment property. File free state income tax   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. File free state income tax This treatment does not apply to property used to produce rental income. File free state income tax See Business assets, later, under Noncapital Assets. File free state income tax Release of restriction on land. File free state income tax   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. File free state income tax Noncapital Assets A noncapital asset is property that is not a capital asset. File free state income tax The following kinds of property are not capital assets. File free state income tax Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. File free state income tax Inventories are discussed in Publication 538, Accounting Periods and Methods. File free state income tax But, see the Tip below. File free state income tax Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. File free state income tax Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). File free state income tax Sales of this type of property are discussed in chapter 3. File free state income tax Real property used in your trade or business or as rental property, even if the property is fully depreciated. File free state income tax A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. File free state income tax But, see the Tip below. File free state income tax U. File free state income tax S. File free state income tax Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. File free state income tax Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. File free state income tax It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. File free state income tax The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. File free state income tax Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. File free state income tax Supplies of a type you regularly use or consume in the ordinary course of your trade or business. File free state income tax You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. File free state income tax See chapter 4 of Publication 550 for details. File free state income tax Property held mainly for sale to customers. File free state income tax   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. File free state income tax Inventories are discussed in Publication 538. File free state income tax Business assets. File free state income tax   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. File free state income tax The sale or disposition of business property is discussed in chapter 3. File free state income tax Letters and memoranda. File free state income tax   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. File free state income tax Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. File free state income tax For this purpose, letters and memoranda addressed to you are considered prepared for you. File free state income tax If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. File free state income tax Commodities derivative financial instrument. File free state income tax   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). File free state income tax Commodities derivative dealer. File free state income tax   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. File free state income tax Hedging transaction. File free state income tax   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. File free state income tax Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. File free state income tax Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. File free state income tax Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. File free state income tax If these rules apply, gains may be treated as ordinary income and losses may not be deductible. File free state income tax See Transfers to Spouse in chapter 1 for rules that apply to spouses. File free state income tax Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. File free state income tax It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. File free state income tax Depreciable property transaction. File free state income tax   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. File free state income tax A person and the person's controlled entity or entities. File free state income tax A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. File free state income tax An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). File free state income tax An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). File free state income tax Controlled entity. File free state income tax   A person's controlled entity is either of the following. File free state income tax A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. File free state income tax An entity whose relationship with that person is one of the following. File free state income tax A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. File free state income tax Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. File free state income tax Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. File free state income tax Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. File free state income tax Controlled partnership transaction. File free state income tax   A gain recognized in a controlled partnership transaction may be ordinary income. File free state income tax The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. File free state income tax   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. File free state income tax A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. File free state income tax Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. File free state income tax Determining ownership. File free state income tax   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. File free state income tax Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. File free state income tax (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. File free state income tax ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. File free state income tax Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. File free state income tax For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. File free state income tax But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. File free state income tax Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. File free state income tax This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. File free state income tax For the list of related persons, see Related persons next. File free state income tax If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. File free state income tax The gain on each item is taxable. File free state income tax The loss on any item is nondeductible. File free state income tax Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. File free state income tax Related persons. File free state income tax   The following is a list of related persons. File free state income tax Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. File free state income tax ), and lineal descendants (children, grandchildren, etc. File free state income tax ). File free state income tax An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. File free state income tax Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. File free state income tax A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. File free state income tax A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. File free state income tax Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. File free state income tax A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. File free state income tax A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. File free state income tax Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. File free state income tax Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. File free state income tax An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. File free state income tax Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. File free state income tax A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. File free state income tax Partnership interests. File free state income tax   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. File free state income tax Controlled groups. File free state income tax   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. File free state income tax   For more information, see section 267(f) of the Internal Revenue Code. File free state income tax Ownership of stock or partnership interests. File free state income tax   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. File free state income tax Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. File free state income tax (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. File free state income tax ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. File free state income tax Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. File free state income tax An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. File free state income tax For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. File free state income tax But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. File free state income tax Indirect transactions. File free state income tax   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. File free state income tax This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. File free state income tax Property received from a related person. File free state income tax   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. File free state income tax This rule applies only to the original transferee. File free state income tax Example 1. File free state income tax Your brother sold stock to you for $7,600. File free state income tax His cost basis was $10,000. File free state income tax His loss of $2,400 was not deductible. File free state income tax You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). File free state income tax Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. File free state income tax Example 2. File free state income tax Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. File free state income tax Your recognized loss is only $700 ($7,600 − $6,900). File free state income tax You cannot deduct the loss not allowed to your brother. File free state income tax Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. File free state income tax Sale of a Business The sale of a business usually is not a sale of one asset. File free state income tax Instead, all the assets of the business are sold. File free state income tax Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. File free state income tax A business usually has many assets. File free state income tax When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. File free state income tax The gain or loss on each asset is figured separately. File free state income tax The sale of capital assets results in capital gain or loss. File free state income tax The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). File free state income tax The sale of inventory results in ordinary income or loss. File free state income tax Partnership interests. File free state income tax   An interest in a partnership or joint venture is treated as a capital asset when sold. File free state income tax The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. File free state income tax For more information, see Disposition of Partner's Interest in Publication 541. File free state income tax Corporation interests. File free state income tax   Your interest in a corporation is represented by stock certificates. File free state income tax When you sell these certificates, you usually realize capital gain or loss. File free state income tax For information on the sale of stock, see chapter 4 in Publication 550. File free state income tax Corporate liquidations. File free state income tax   Corporate liquidations of property generally are treated as a sale or exchange. File free state income tax Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. File free state income tax Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. File free state income tax   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. File free state income tax For more information, see section 332 of the Internal Revenue Code and the related regulations. File free state income tax Allocation of consideration paid for a business. File free state income tax   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. File free state income tax Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. File free state income tax This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. File free state income tax It also determines the buyer's basis in the business assets. File free state income tax Consideration. File free state income tax   The buyer's consideration is the cost of the assets acquired. File free state income tax The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. File free state income tax Residual method. File free state income tax   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. File free state income tax This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. File free state income tax Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. File free state income tax   A group of assets constitutes a trade or business if either of the following applies. File free state income tax Goodwill or going concern value could, under any circumstances, attach to them. File free state income tax The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. File free state income tax   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). File free state income tax The consideration remaining after this reduction must be allocated among the various business assets in a certain order. File free state income tax See Classes of assets next for the complete order. File free state income tax Classes of assets. File free state income tax   The following definitions are the classifications for deemed or actual asset acquisitions. File free state income tax Allocate the consideration among the assets in the following order. File free state income tax The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. File free state income tax The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. File free state income tax Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). File free state income tax Class II assets are certificates of deposit, U. File free state income tax S. File free state income tax Government securities, foreign currency, and actively traded personal property, including stock and securities. File free state income tax Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. File free state income tax However, see section 1. File free state income tax 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. File free state income tax Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. File free state income tax Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. File free state income tax    Note. File free state income tax Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. File free state income tax Class VI assets are section 197 intangibles (other than goodwill and going concern value). File free state income tax Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). File free state income tax   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. File free state income tax For example, if an asset is described in both Class II and Class IV, choose Class II. File free state income tax Example. File free state income tax The total paid in the sale of the assets of Company SKB is $21,000. File free state income tax No cash or deposit accounts or similar accounts were sold. File free state income tax The company's U. File free state income tax S. File free state income tax Government securities sold had a fair market value of $3,200. File free state income tax The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. File free state income tax Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. File free state income tax S. File free state income tax Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. File free state income tax Agreement. File free state income tax   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. File free state income tax This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. File free state income tax Reporting requirement. File free state income tax   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. File free state income tax Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. File free state income tax Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. File free state income tax See the Instructions for Form 8594. File free state income tax Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. File free state income tax It includes such items as patents, copyrights, and the goodwill value of a business. File free state income tax Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. File free state income tax The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. File free state income tax See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. File free state income tax Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. File free state income tax The following discussions explain special rules that apply to certain dispositions of intangible property. File free state income tax Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. File free state income tax They include the following assets. File free state income tax Goodwill. File free state income tax Going concern value. File free state income tax Workforce in place. File free state income tax Business books and records, operating systems, and other information bases. File free state income tax Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. File free state income tax Customer-based intangibles. File free state income tax Supplier-based intangibles. File free state income tax Licenses, permits, and other rights granted by a governmental unit. File free state income tax Covenants not to compete entered into in connection with the acquisition of a business. File free state income tax Franchises, trademarks, and trade names. File free state income tax See chapter 8 of Publication 535 for a description of each intangible. File free state income tax Dispositions. File free state income tax   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. File free state income tax Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. File free state income tax If you retain more than one section 197 intangible, increase each intangible's adjusted basis. File free state income tax Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. File free state income tax   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. File free state income tax For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. File free state income tax Covenant not to compete. File free state income tax   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. File free state income tax Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. File free state income tax Anti-churning rules. File free state income tax   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. File free state income tax However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. File free state income tax Recognize gain on the transfer of the property. File free state income tax Pay income tax on the gain at the highest tax rate. File free state income tax   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. File free state income tax But each partner or shareholder must pay the tax on his or her share of gain. File free state income tax   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. File free state income tax You must file the tax return by the due date (including extensions). File free state income tax You must also notify the transferee of the election in writing by the due date of the return. File free state income tax   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). File free state income tax Attach the statement to the amended return and write “Filed pursuant to section 301. File free state income tax 9100-2” at the top of the statement. File free state income tax File the amended return at the same address the original return was filed. File free state income tax For more information about making the election, see Regulations section 1. File free state income tax 197-2(h)(9). File free state income tax For information about reporting the tax on your income tax return, see the Instructions for Form 4797. File free state income tax Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. File free state income tax This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. File free state income tax For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. File free state income tax This treatment applies to your transfer of a patent if you meet all the following conditions. File free state income tax You are the holder of the patent. File free state income tax You transfer the patent other than by gift, inheritance, or devise. File free state income tax You transfer all substantial rights to the patent or an undivided interest in all such rights. File free state income tax You do not transfer the patent to a related person. File free state income tax Holder. File free state income tax   You are the holder of a patent if you are either of the following. File free state income tax The individual whose effort created the patent property and who qualifies as the original and first inventor. File free state income tax The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. File free state income tax All substantial rights. File free state income tax   All substantial rights to patent property are all rights that have value when they are transferred. File free state income tax A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. File free state income tax   All substantial rights to a patent are not transferred if any of the following apply to the transfer. File free state income tax The rights are limited geographically within a country. File free state income tax The rights are limited to a period less than the remaining life of the patent. File free state income tax The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. File free state income tax The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. File free state income tax Related persons. File free state income tax   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. File free state income tax Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. File free state income tax Substitute “25% or more” ownership for “more than 50%. File free state income tax ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. File free state income tax For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. File free state income tax The brother-sister exception does not apply because the trust relationship is independent of family status. File free state income tax Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. File free state income tax A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. File free state income tax Significant power, right, or continuing interest. File free state income tax   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. File free state income tax   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. File free state income tax A right to disapprove any assignment of the interest, or any part of it. File free state income tax A right to end the agreement at will. File free state income tax A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. File free state income tax A right to make the recipient sell or advertise only your products or services. File free state income tax A right to make the recipient buy most supplies and equipment from you. File free state income tax A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. File free state income tax Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. File free state income tax However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. File free state income tax See section 1237 of the Internal Revenue Code. File free state income tax Timber Standing timber held as investment property is a capital asset. File free state income tax Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. File free state income tax If you held the timber primarily for sale to customers, it is not a capital asset. File free state income tax Gain or loss on its sale is ordinary business income or loss. File free state income tax It is reported in the gross receipts or sales and cost of goods sold items of your return. File free state income tax Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. File free state income tax These sales constitute a very minor part of their farm businesses. File free state income tax In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. File free state income tax , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. File free state income tax Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. File free state income tax Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. File free state income tax This is true whether the timber is cut under contract or whether you cut it yourself. File free state income tax Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. File free state income tax See chapter 3. File free state income tax Gain or loss is reported on Form 4797. File free state income tax Christmas trees. File free state income tax   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. File free state income tax They qualify for both rules discussed below. File free state income tax Election to treat cutting as a sale or exchange. File free state income tax   Under the general rule, the cutting of timber results in no gain or loss. File free state income tax It is not until a sale or exchange occurs that gain or loss is realized. File free state income tax But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. File free state income tax Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. File free state income tax Any later sale results in ordinary business income or loss. File free state income tax See Example, later. File free state income tax   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. File free state income tax Making the election. File free state income tax   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. File free state income tax You do not have to make the election in the first year you cut timber. File free state income tax You can make it in any year to which the election would apply. File free state income tax If the timber is partnership property, the election is made on the partnership return. File free state income tax This election cannot be made on an amended return. File free state income tax   Once you have made the election, it remains in effect for all later years unless you cancel it. File free state income tax   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. File free state income tax The prior election (and revocation) is disregarded for purposes of making a subsequent election. File free state income tax See Form T (Timber), Forest Activities Schedule, for more information. File free state income tax Gain or loss. File free state income tax   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. File free state income tax   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. File free state income tax Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. File free state income tax   Timber depletion is discussed in chapter 9 of Publication 535. File free state income tax Example. File free state income tax In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. File free state income tax It had an adjusted basis for depletion of $40 per MBF. File free state income tax You are a calendar year taxpayer. File free state income tax On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. File free state income tax It was cut in April for sale. File free state income tax On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. File free state income tax You report the difference between the fair market value and your adjusted basis for depletion as a gain. File free state income tax This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. File free state income tax You figure your gain as follows. File free state income tax FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. File free state income tax Outright sales of timber. File free state income tax   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). File free state income tax However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). File free state income tax Cutting contract. File free state income tax   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. File free state income tax You are the owner of the timber. File free state income tax You held the timber longer than 1 year before its disposal. File free state income tax You kept an economic interest in the timber. File free state income tax   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. File free state income tax   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. File free state income tax Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. File free state income tax Date of disposal. File free state income tax   The date of disposal is the date the timber is cut. File free state income tax However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. File free state income tax   This election applies only to figure the holding period of the timber. File free state income tax It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). File free state income tax   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. File free state income tax The statement must identify the advance payments subject to the election and the contract under which they were made. File free state income tax   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). File free state income tax Attach the statement to the amended return and write “Filed pursuant to section 301. File free state income tax 9100-2” at the top of the statement. File free state income tax File the amended return at the same address the original return was filed. File free state income tax Owner. File free state income tax   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. File free state income tax You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. File free state income tax Tree stumps. File free state income tax   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. File free state income tax Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. File free state income tax However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. File free state income tax Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. File free state income tax   See Form T (Timber) and its separate instructions for more information about dispositions of timber. File free state income tax Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. File free state income tax , are capital assets except when they are held for sale by a dealer. File free state income tax Any gain or loss from their sale or exchange generally is a capital gain or loss. File free state income tax If you are a dealer, the amount received from the sale is ordinary business income. File free state income tax Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. File free state income tax You owned the coal or iron ore longer than 1 year before its disposal. File free state income tax You kept an economic interest in the coal or iron ore. File free state income tax For this rule, the date the coal or iron ore is mined is considered the date of its disposal. File free state income tax Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). File free state income tax This amount is included on Form 4797 along with your other section 1231 gains and losses. File free state income tax You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. File free state income tax If you own only an option to buy the coal in place, you do not qualify as an owner. File free state income tax In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. File free state income tax The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. File free state income tax Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. File free state income tax If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. File free state income tax Special rule. File free state income tax   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. File free state income tax A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). File free state income tax An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. File free state income tax Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. File free state income tax This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. File free state income tax An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). File free state income tax A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. File free state income tax Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. File free state income tax For more information, see chapter 4 of Publication 550. File free state income tax Prev  Up  Next   Home   More Online Publications
 
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How to Make an Offshore Voluntary Disclosure
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Page Last Reviewed or Updated: 31-Mar-2014

The File Free State Income Tax

File free state income tax Index A Additional Medicare Tax, What's New Allocated tips, Allocated Tips Assistance (see Tax help) C Cash tips, How to keep a daily tip record. File free state income tax Credit card charge tips, How to keep a daily tip record. File free state income tax D Daily tip record, Keeping a Daily Tip Record E Electronic tip record, Electronic tip record. File free state income tax Electronic tip statement, Electronic tip statement. File free state income tax Employers Giving money to, for taxes, Giving your employer money for taxes. File free state income tax Reporting tips to, Reporting Tips to Your Employer EmTRAC program, Tip Rate Determination and Education Program F Figures Form 4070A, sample filled-in, Form 1040 Schedule C, Self-employed persons. File free state income tax Unreported tips, Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. File free state income tax Form 4070, What tips to report. File free state income tax Sample filled-in, Form 4070A, How to keep a daily tip record. File free state income tax Form 4137, Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. File free state income tax Form 8027, How to request an approved lower rate. File free state income tax Form W-2 Uncollected taxes, Giving your employer money for taxes. File free state income tax , Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. File free state income tax Free tax services, Free help with your tax return. File free state income tax G Gaming Industry Tip Compliance Agreement Program, Tip Rate Determination and Education Program H Help (see Tax help) M Missing children, photographs of, Reminder N Noncash tips, How to keep a daily tip record. File free state income tax P Penalties Failure to report tips to employer, Penalty for not reporting tips. File free state income tax Underpayment of estimated taxes, Giving your employer money for taxes. File free state income tax Publications (see Tax help) R Recordkeeping requirements Daily tip record, Keeping a Daily Tip Record Reporting Employee to report tips to employer, Reporting Tips to Your Employer Tip income, Introduction S Self-employed persons, Self-employed persons. File free state income tax Service charge paid as wages, Service charges. File free state income tax Social security and Medicare taxes Allocated tips, How to report allocated tips. File free state income tax Reporting of earnings to Social Security Administration, Why report tips to your employer. File free state income tax Tips not reported to employer, Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. File free state income tax Uncollected taxes on tips, Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. File free state income tax T Tax help, How To Get Tax Help Tax returns, Reporting Tips on Your Tax Return Tip pools, How to keep a daily tip record. File free state income tax Tip Rate Determination and Education Program, Tip Rate Determination and Education Program Tip splitting, How to keep a daily tip record. File free state income tax TTY/TDD information, How To Get Tax Help U Uncollected taxes, Giving your employer money for taxes. File free state income tax , Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. File free state income tax W Withholding, Why report tips to your employer. File free state income tax Prev  Up     Home   More Online Publications