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Filing For Tax Extension

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Filing For Tax Extension

Filing for tax extension 3. Filing for tax extension   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. Filing for tax extension Deductible contribution. Filing for tax extension Nondeductible contribution. Filing for tax extension You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). Filing for tax extension Some adjustments to income follow. Filing for tax extension Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. Filing for tax extension Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. Filing for tax extension See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. Filing for tax extension Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Filing for tax extension For more details, see Publication 535, Business Expenses. Filing for tax extension Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). Filing for tax extension For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. Filing for tax extension Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). Filing for tax extension Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. Filing for tax extension Alimony payments (Form 1040, line 31a). Filing for tax extension For more information, see Publication 504, Divorced or Separated Individuals. Filing for tax extension There are other items you can claim as adjustments to income. Filing for tax extension These adjustments are discussed in your tax return instructions. Filing for tax extension Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. Filing for tax extension A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Filing for tax extension Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . Filing for tax extension For more detailed information, see Publication 590. Filing for tax extension Contributions. Filing for tax extension   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. Filing for tax extension Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. Filing for tax extension    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. Filing for tax extension Do not report this interest on your tax return as tax-exempt interest. Filing for tax extension General limit. Filing for tax extension   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. Filing for tax extension Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). Filing for tax extension Contributions to Kay Bailey Hutchison Spousal IRAs. Filing for tax extension   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. Filing for tax extension For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. Filing for tax extension Deductible contribution. Filing for tax extension   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. Filing for tax extension However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Filing for tax extension Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. Filing for tax extension For more information, see Limit if Covered by Employer Plan in Publication 590. Filing for tax extension Nondeductible contribution. Filing for tax extension   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Filing for tax extension You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. Filing for tax extension    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). Filing for tax extension Prev  Up  Next   Home   More Online Publications
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The Filing For Tax Extension

Filing for tax extension 8. Filing for tax extension   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Filing for tax extension Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Filing for tax extension It is similar to the straight line method of depreciation. Filing for tax extension The various amortizable costs covered in this chapter are included in the list below. Filing for tax extension However, this chapter does not discuss amortization of bond premium. Filing for tax extension For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Filing for tax extension Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Filing for tax extension How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Filing for tax extension To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Filing for tax extension For example, in 2012, you began to amortize a lease. Filing for tax extension In 2013, you began to amortize a second lease. Filing for tax extension Report amortization from the new lease on line 42 of your 2013 Form 4562. Filing for tax extension Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Filing for tax extension If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Filing for tax extension Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Filing for tax extension Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Filing for tax extension Generally, you recover costs for particular assets through depreciation deductions. Filing for tax extension However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Filing for tax extension For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Filing for tax extension For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Filing for tax extension The costs that are not deducted currently can be amortized ratably over a 180-month period. Filing for tax extension The amortization period starts with the month you begin operating your active trade or business. Filing for tax extension You are not required to attach a statement to make this election. Filing for tax extension You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Filing for tax extension Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Filing for tax extension See Regulations sections 1. Filing for tax extension 195-1, 1. Filing for tax extension 248-1, and 1. Filing for tax extension 709-1. Filing for tax extension For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Filing for tax extension Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Filing for tax extension If the election is made, you must attach any statement required by Regulations sections 1. Filing for tax extension 195-1(b), 1. Filing for tax extension 248-1(c), and 1. Filing for tax extension 709-1(c), as in effect before September 9, 2008. Filing for tax extension Note. Filing for tax extension You can apply the provisions of Regulations sections 1. Filing for tax extension 195-1, 1. Filing for tax extension 248-1, and 1. Filing for tax extension 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Filing for tax extension Otherwise, the provisions under Regulations sections 1. Filing for tax extension 195-1(b), 1. Filing for tax extension 248-1(c), and 1. Filing for tax extension 709-1(c), as in effect before September 9, 2008, will apply. Filing for tax extension For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Filing for tax extension See How To Make the Election , later. Filing for tax extension The cost must qualify as one of the following. Filing for tax extension A business start-up cost. Filing for tax extension An organizational cost for a corporation. Filing for tax extension An organizational cost for a partnership. Filing for tax extension Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Filing for tax extension Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Filing for tax extension Qualifying costs. Filing for tax extension   A start-up cost is amortizable if it meets both of the following tests. Filing for tax extension It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Filing for tax extension It is a cost you pay or incur before the day your active trade or business begins. Filing for tax extension   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Filing for tax extension Advertisements for the opening of the business. Filing for tax extension Salaries and wages for employees who are being trained and their instructors. Filing for tax extension Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Filing for tax extension Salaries and fees for executives and consultants, or for similar professional services. Filing for tax extension Nonqualifying costs. Filing for tax extension   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Filing for tax extension See Research and Experimental Costs , later. Filing for tax extension Purchasing an active trade or business. Filing for tax extension   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Filing for tax extension These are costs that help you decide whether to purchase a business. Filing for tax extension Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Filing for tax extension Example. Filing for tax extension On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Filing for tax extension They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Filing for tax extension In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Filing for tax extension The letter stated that a binding commitment would result only after a purchase agreement was signed. Filing for tax extension The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Filing for tax extension On October 22nd, you signed a purchase agreement with XYZ, Inc. Filing for tax extension All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Filing for tax extension Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Filing for tax extension Disposition of business. Filing for tax extension   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Filing for tax extension However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Filing for tax extension Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Filing for tax extension Qualifying costs. Filing for tax extension   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Filing for tax extension   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Filing for tax extension   Examples of organizational costs include: The cost of temporary directors. Filing for tax extension The cost of organizational meetings. Filing for tax extension State incorporation fees. Filing for tax extension The cost of legal services. Filing for tax extension Nonqualifying costs. Filing for tax extension   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Filing for tax extension Costs associated with the transfer of assets to the corporation. Filing for tax extension Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Filing for tax extension Qualifying costs. Filing for tax extension   A partnership can amortize an organizational cost only if it meets all the following tests. Filing for tax extension It is for the creation of the partnership and not for starting or operating the partnership trade or business. Filing for tax extension It is chargeable to a capital account (see chapter 1). Filing for tax extension It could be amortized over the life of the partnership if the partnership had a fixed life. Filing for tax extension It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Filing for tax extension However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Filing for tax extension It is for a type of item normally expected to benefit the partnership throughout its entire life. Filing for tax extension   Organizational costs include the following fees. Filing for tax extension Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Filing for tax extension Accounting fees for services incident to the organization of the partnership. Filing for tax extension Filing fees. Filing for tax extension Nonqualifying costs. Filing for tax extension   The following costs cannot be amortized. Filing for tax extension The cost of acquiring assets for the partnership or transferring assets to the partnership. Filing for tax extension The cost of admitting or removing partners, other than at the time the partnership is first organized. Filing for tax extension The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Filing for tax extension The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Filing for tax extension These “syndication fees” are capital expenses that cannot be depreciated or amortized. Filing for tax extension Liquidation of partnership. Filing for tax extension   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Filing for tax extension However, these costs can be deducted only to the extent they qualify as a loss from a business. Filing for tax extension How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Filing for tax extension You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Filing for tax extension Once you choose an amortization period, you cannot change it. Filing for tax extension To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Filing for tax extension The result is the amount you can deduct for each month. Filing for tax extension Cash method partnership. Filing for tax extension   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Filing for tax extension However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Filing for tax extension How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Filing for tax extension You may also be required to attach an accompanying statement (described later) to your return. Filing for tax extension For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Filing for tax extension Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Filing for tax extension 195-1, 1. Filing for tax extension 248-1, and 1. Filing for tax extension 709-1, you must also attach an accompanying statement to elect to amortize the costs. Filing for tax extension If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Filing for tax extension See Starting a Business , earlier, for more information. Filing for tax extension Generally, you must file the return by the due date (including any extensions). Filing for tax extension However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing for tax extension For more information, see the instructions for Part VI of Form 4562. Filing for tax extension You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Filing for tax extension Note. Filing for tax extension The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Filing for tax extension If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Filing for tax extension A shareholder or partner cannot make this election. Filing for tax extension You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Filing for tax extension Only the corporation or partnership can amortize these costs. Filing for tax extension However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Filing for tax extension These costs qualify as business start-up costs if you acquire the partnership interest. Filing for tax extension Start-up costs election statement. Filing for tax extension   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Filing for tax extension A description of the business to which the start-up costs relate. Filing for tax extension A description of each start-up cost incurred. Filing for tax extension The month your active business began (or was acquired). Filing for tax extension The number of months in your amortization period (which is generally 180 months). Filing for tax extension Filing the statement early. Filing for tax extension   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Filing for tax extension If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Filing for tax extension Revised statement. Filing for tax extension   You can file a revised statement to include any start-up costs not included in your original statement. Filing for tax extension However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Filing for tax extension You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Filing for tax extension Organizational costs election statement. Filing for tax extension   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Filing for tax extension A description of each cost. Filing for tax extension The amount of each cost. Filing for tax extension The date each cost was incurred. Filing for tax extension The month your corporation or partnership began active business (or acquired the business). Filing for tax extension The number of months in your amortization period (which is generally 180 months). Filing for tax extension Partnerships. Filing for tax extension   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Filing for tax extension   You do not need to separately list any partnership organizational cost that is less than $10. Filing for tax extension Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Filing for tax extension   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Filing for tax extension Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Filing for tax extension The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Filing for tax extension However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Filing for tax extension For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Filing for tax extension How to amortize. Filing for tax extension   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Filing for tax extension Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Filing for tax extension You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Filing for tax extension You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Filing for tax extension See Anti-Churning Rules, later. Filing for tax extension Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Filing for tax extension The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Filing for tax extension You cannot deduct amortization for the month you dispose of the intangible. Filing for tax extension If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Filing for tax extension You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Filing for tax extension Tax-exempt use property subject to a lease. Filing for tax extension   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Filing for tax extension Cost attributable to other property. Filing for tax extension   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Filing for tax extension For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Filing for tax extension Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Filing for tax extension Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Filing for tax extension You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Filing for tax extension Goodwill. Filing for tax extension   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Filing for tax extension Going concern value. Filing for tax extension   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Filing for tax extension It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Filing for tax extension It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Filing for tax extension Workforce in place, etc. Filing for tax extension   This includes the composition of a workforce (for example, its experience, education, or training). Filing for tax extension It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Filing for tax extension   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Filing for tax extension Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Filing for tax extension Business books and records, etc. Filing for tax extension   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Filing for tax extension It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Filing for tax extension Patents, copyrights, etc. Filing for tax extension   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Filing for tax extension Customer-based intangible. Filing for tax extension   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Filing for tax extension For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Filing for tax extension A customer base. Filing for tax extension A circulation base. Filing for tax extension An undeveloped market or market growth. Filing for tax extension Insurance in force. Filing for tax extension A mortgage servicing contract. Filing for tax extension An investment management contract. Filing for tax extension Any other relationship with customers involving the future provision of goods or services. Filing for tax extension   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Filing for tax extension Supplier-based intangible. Filing for tax extension   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Filing for tax extension The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Filing for tax extension Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Filing for tax extension Also, see Assets That Are Not Section 197 Intangibles below. Filing for tax extension Government-granted license, permit, etc. Filing for tax extension   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Filing for tax extension For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Filing for tax extension Covenant not to compete. Filing for tax extension   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Filing for tax extension An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Filing for tax extension   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Filing for tax extension Franchise, trademark, or trade name. Filing for tax extension   A franchise, trademark, or trade name is a section 197 intangible. Filing for tax extension You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Filing for tax extension For information on currently deductible contingent payments, see chapter 11. Filing for tax extension Professional sports franchise. Filing for tax extension   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Filing for tax extension Contract for the use of, or a term interest in, a section 197 intangible. Filing for tax extension   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Filing for tax extension It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Filing for tax extension Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Filing for tax extension Any interest in a corporation, partnership, trust, or estate. Filing for tax extension Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Filing for tax extension Any interest in land. Filing for tax extension Most computer software. Filing for tax extension (See Computer software , later. Filing for tax extension ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Filing for tax extension An interest in a film, sound recording, video tape, book, or similar property. Filing for tax extension A right to receive tangible property or services under a contract or from a governmental agency. Filing for tax extension An interest in a patent or copyright. Filing for tax extension Certain rights that have a fixed duration or amount. Filing for tax extension (See Rights of fixed duration or amount , later. Filing for tax extension ) An interest under either of the following. Filing for tax extension An existing lease or sublease of tangible property. Filing for tax extension A debt that was in existence when the interest was acquired. Filing for tax extension A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Filing for tax extension Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Filing for tax extension Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Filing for tax extension You generally must use the straight line method over its useful life. Filing for tax extension For certain intangibles, the depreciation period is specified in the law and regulations. Filing for tax extension For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Filing for tax extension For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Filing for tax extension Computer software. Filing for tax extension   Section 197 intangibles do not include the following types of computer software. Filing for tax extension Software that meets all the following requirements. Filing for tax extension It is, or has been, readily available for purchase by the general public. Filing for tax extension It is subject to a nonexclusive license. Filing for tax extension It has not been substantially modified. Filing for tax extension This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Filing for tax extension Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Filing for tax extension Computer software defined. Filing for tax extension   Computer software includes all programs designed to cause a computer to perform a desired function. Filing for tax extension It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Filing for tax extension Rights of fixed duration or amount. Filing for tax extension   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Filing for tax extension However, this does not apply to the following intangibles. Filing for tax extension Goodwill. Filing for tax extension Going concern value. Filing for tax extension A covenant not to compete. Filing for tax extension A franchise, trademark, or trade name. Filing for tax extension A customer-related information base, customer-based intangible, or similar item. Filing for tax extension Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Filing for tax extension You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Filing for tax extension If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Filing for tax extension Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Filing for tax extension Amortize these costs using the rules of Revenue Procedure 2004-36. Filing for tax extension For more information, see Revenue Procedure 2004-36, 2004-24 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 1063, available at  www. Filing for tax extension irs. Filing for tax extension gov/irb/2004-24_IRB/ar16. Filing for tax extension html. Filing for tax extension A change in the treatment of creative property costs is a change in method of accounting. Filing for tax extension Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Filing for tax extension These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Filing for tax extension Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Filing for tax extension You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Filing for tax extension You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Filing for tax extension You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Filing for tax extension This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Filing for tax extension See Related person , later, for more information. Filing for tax extension Exceptions. Filing for tax extension   The anti-churning rules do not apply in the following situations. Filing for tax extension You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Filing for tax extension The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Filing for tax extension This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Filing for tax extension The gain-recognition exception, discussed later, applies. Filing for tax extension Related person. Filing for tax extension   For purposes of the anti-churning rules, the following are related persons. Filing for tax extension An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Filing for tax extension ), and lineal descendants (children, grandchildren, etc. Filing for tax extension ). Filing for tax extension A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Filing for tax extension 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 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Filing for tax extension (For an exception, see section 1. Filing for tax extension 197-2(h)(6)(iv) of the regulations. Filing for tax extension ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Filing for tax extension The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Filing for tax extension The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Filing for tax extension The executor and beneficiary of an estate. Filing for tax extension A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Filing for tax extension A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Filing for tax extension Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Filing for tax extension Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Filing for tax extension A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Filing for tax extension Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Filing for tax extension When to determine relationship. Filing for tax extension   Persons are treated as related if the relationship existed at the following time. Filing for tax extension In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Filing for tax extension In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Filing for tax extension Ownership of stock. Filing for tax extension   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Filing for tax extension Rule 1. Filing for tax extension   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Filing for tax extension Rule 2. Filing for tax extension   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Filing for tax extension Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Filing for tax extension Rule 3. Filing for tax extension   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Filing for tax extension Rule 4. Filing for tax extension   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Filing for tax extension Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Filing for tax extension Gain-recognition exception. Filing for tax extension   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Filing for tax extension That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Filing for tax extension That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Filing for tax extension See chapter 2 in Publication 544 for information on making this choice. Filing for tax extension   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Filing for tax extension Notification. Filing for tax extension   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Filing for tax extension Anti-abuse rule. Filing for tax extension   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Filing for tax extension To avoid the requirement that the intangible be acquired after August 10, 1993. Filing for tax extension To avoid any of the anti-churning rules. Filing for tax extension More information. Filing for tax extension   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Filing for tax extension 197-2(h). Filing for tax extension Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Filing for tax extension See Amended Return , next. Filing for tax extension If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Filing for tax extension See Changing Your Accounting Method , later. Filing for tax extension Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Filing for tax extension A mathematical error made in any year. Filing for tax extension A posting error made in any year. Filing for tax extension An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Filing for tax extension When to file. Filing for tax extension   If an amended return is allowed, you must file it by the later of the following dates. Filing for tax extension 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Filing for tax extension (A return filed early is considered filed on the due date. Filing for tax extension ) 2 years from the time you paid your tax for that year. Filing for tax extension Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Filing for tax extension File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Filing for tax extension The following are examples of a change in method of accounting for amortization. Filing for tax extension A change in the amortization method, period of recovery, or convention of an amortizable asset. Filing for tax extension A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Filing for tax extension A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Filing for tax extension Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Filing for tax extension An adjustment in the useful life of an amortizable asset. Filing for tax extension Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Filing for tax extension Any change in the placed-in-service date of an amortizable asset. Filing for tax extension See Regulations section 1. Filing for tax extension 446-1(e)(2)(ii)(a) for more information and examples. Filing for tax extension Automatic approval. Filing for tax extension   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Filing for tax extension For a list of automatic accounting method changes, see the Instructions for Form 3115. Filing for tax extension Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Filing for tax extension For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Filing for tax extension See Revenue Procedure 2006-12, 2006-3 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 310, available at  www. Filing for tax extension irs. Filing for tax extension gov/irb/2006-03_IRB/ar14. Filing for tax extension html. Filing for tax extension  See Revenue Procedure 2006-37, 2006-38 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 499, available at  www. Filing for tax extension irs. Filing for tax extension gov/irb/2006-38_IRB/ar10. Filing for tax extension html. Filing for tax extension  See Revenue Procedure 2008-52, 2008-36 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 587, available at www. Filing for tax extension irs. Filing for tax extension gov/irb/2008-36_IRB/ar09. Filing for tax extension html. Filing for tax extension  See Revenue Procedure 2009-39, 2009-38 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 371, available at  www. Filing for tax extension irs. Filing for tax extension gov/irb/2009-38_IRB/ar08. Filing for tax extension html. Filing for tax extension  See Revenue Procedure 2011-14, 2011-4 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 330, available at  www. Filing for tax extension irs. Filing for tax extension gov/irb/2011-04_IRB/ar08. Filing for tax extension html. Filing for tax extension  See Revenue Procedure 2011-22, 2011-18 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 737, available at  www. Filing for tax extension irs. Filing for tax extension gov/irb/2011-18_IRB/ar08. Filing for tax extension html. Filing for tax extension Also, see Revenue Procedure 2012-39, 2012-41 I. Filing for tax extension R. Filing for tax extension B. Filing for tax extension 470 available at www. Filing for tax extension irs. Filing for tax extension gov/irb/2012-41_IRB/index. Filing for tax extension html. Filing for tax extension Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Filing for tax extension If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Filing for tax extension If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Filing for tax extension Any remaining gain, or any loss, is a section 1231 gain or loss. Filing for tax extension If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Filing for tax extension For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Filing for tax extension Nondeductible loss. Filing for tax extension   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Filing for tax extension Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Filing for tax extension Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Filing for tax extension The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Filing for tax extension The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Filing for tax extension Covenant not to compete. Filing for tax extension   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Filing for tax extension Nonrecognition transfers. Filing for tax extension   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Filing for tax extension You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Filing for tax extension Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Filing for tax extension   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Filing for tax extension Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Filing for tax extension Example. Filing for tax extension You own a section 197 intangible you have amortized for 4 full years. Filing for tax extension It has a remaining unamortized basis of $30,000. Filing for tax extension You exchange the asset plus $10,000 for a like-kind section 197 intangible. Filing for tax extension The nonrecognition provisions of like-kind exchanges apply. Filing for tax extension You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Filing for tax extension You amortize the other $10,000 of adjusted basis over a new 15-year period. Filing for tax extension For more information, see Regulations section 1. Filing for tax extension 197-2(g). Filing for tax extension Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Filing for tax extension See Reforestation Costs in chapter 7. Filing for tax extension You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Filing for tax extension There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Filing for tax extension The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Filing for tax extension A partner, shareholder, or beneficiary cannot make that election. Filing for tax extension A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Filing for tax extension , of a partnership or S corporation. Filing for tax extension The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Filing for tax extension Qualifying costs. Filing for tax extension   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Filing for tax extension Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Filing for tax extension They include costs for the following items. Filing for tax extension Site preparation. Filing for tax extension Seeds or seedlings. Filing for tax extension Labor. Filing for tax extension Tools. Filing for tax extension Depreciation on equipment used in planting and seeding. Filing for tax extension Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Filing for tax extension Qualified timber property. Filing for tax extension   Qualified timber property is property that contains trees in significant commercial quantities. Filing for tax extension It can be a woodlot or other site that you own or lease. Filing for tax extension The property qualifies only if it meets all of the following requirements. Filing for tax extension It is located in the United States. Filing for tax extension It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Filing for tax extension It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Filing for tax extension Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Filing for tax extension Amortization period. Filing for tax extension   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Filing for tax extension You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Filing for tax extension Life tenant and remainderman. Filing for tax extension   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Filing for tax extension Any remainder interest in the property is ignored for amortization purposes. Filing for tax extension Recapture. Filing for tax extension   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Filing for tax extension See chapter 3 of Publication 544 for more information. Filing for tax extension How to make the election. Filing for tax extension   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Filing for tax extension A description of the costs and the dates you incurred them. Filing for tax extension A description of the type of timber being grown and the purpose for which it is grown. Filing for tax extension Attach a separate statement for each property for which you amortize reforestation costs. Filing for tax extension   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Filing for tax extension However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing for tax extension Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Filing for tax extension 9100-2” on Form 4562. Filing for tax extension File the amended return at the same address you filed the original return. Filing for tax extension Revoking the election. Filing for tax extension   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Filing for tax extension Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Filing for tax extension Please provide your daytime telephone number (optional), in case we need to contact you. Filing for tax extension You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Filing for tax extension    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Filing for tax extension NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Filing for tax extension These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Filing for tax extension For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Filing for tax extension If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Filing for tax extension Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Filing for tax extension However, see Atmospheric pollution control facilities for an exception. Filing for tax extension The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Filing for tax extension Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Filing for tax extension You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Filing for tax extension See chapter 3 of Publication 946. Filing for tax extension A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Filing for tax extension The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Filing for tax extension The facility must be certified by state and federal certifying authorities. Filing for tax extension The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Filing for tax extension Also, it must not significantly change the nature of the manufacturing or production process or facility. Filing for tax extension The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Filing for tax extension The federal certifying authority will describe the nature of the potential cost recovery. Filing for tax extension You must then reduce the amortizable basis of the facility by this potential recovery. Filing for tax extension New identifiable treatment facility. Filing for tax extension   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Filing for tax extension It does not include a building and its structural components unless the building is exclusively a treatment facility. Filing for tax extension Atmospheric pollution control facilities. Filing for tax extension   Certain atmospheric pollution control facilities can be amortized over 84 months. Filing for tax extension To qualify, the following must apply. Filing for tax extension The facility must be acquired and placed in service after April 11, 2005. Filing for tax extension If acquired, the original use must begin with you after April 11, 2005. Filing for tax extension The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Filing for tax extension If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Filing for tax extension Basis reduction for corporations. Filing for tax extension   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Filing for tax extension More information. Filing for tax extension   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Filing for tax extension Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Filing for tax extension If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Filing for tax extension The amortization period begins the month you first receive an economic benefit from the costs. Filing for tax extension For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Filing for tax extension Optional write-off method. Filing for tax extension   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Filing for tax extension For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Filing for tax extension Costs you can amortize. Filing for tax extension   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Filing for tax extension You paid or incurred the costs in your trade or business. Filing for tax extension You are not deducting the costs currently. Filing for tax extension How to make the election. Filing for tax extension   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Filing for tax extension Generally, you must file the return by the due date (including extensions). Filing for tax extension However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing for tax extension Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Filing for tax extension 9100-2” on Form 4562. Filing for tax extension File the amended return at the same address you filed the original return. Filing for tax extension   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Filing for tax extension Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Filing for tax extension If you make this election, there is no AMT adjustment. Filing for tax extension The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Filing for tax extension How to make the election. Filing for tax extension   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Filing for tax extension   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Filing for tax extension However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing for tax extension Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Filing for tax extension 9100-2” on Form 4562. Filing for tax extension File the amended return at the same address you filed the original return. Filing for tax extension Revoking the election. Filing for tax extension   You must obtain consent from the IRS to revoke your election. Filing for tax extension Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Filing for tax extension The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Filing for tax extension If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Filing for tax extension Prev  Up  Next   Home   More Online Publications