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Filing Past Tax Returns

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Filing Past Tax Returns

Filing past tax returns Publication 537 - Main Content Table of Contents What Is an Installment Sale?Special rule. Filing past tax returns General RulesFiguring Installment Sale Income Reporting Installment Sale Income Other RulesElecting Out of the Installment Method Payments Received or Considered Received Escrow Account Depreciation Recapture Income Sale to a Related Person Like-Kind Exchange Contingent Payment Sale Single Sale of Several Assets Sale of a Business Unstated Interest and Original Issue Discount (OID) Disposition of an Installment Obligation Repossession Interest on Deferred Tax Reporting an Installment SaleRelated person. Filing past tax returns Several assets. Filing past tax returns Special situations. Filing past tax returns Schedule D (Form 1040). Filing past tax returns Form 4797. Filing past tax returns How To Get Tax Help What Is an Installment Sale? An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. Filing past tax returns The rules for installment sales do not apply if you elect not to use the installment method (see Electing Out of the Installment Method under Other Rules, later) or the transaction is one for which the installment method may not apply. Filing past tax returns The installment sales method cannot be used for the following. Filing past tax returns Sale of inventory. Filing past tax returns   The regular sale of inventory of personal property does not qualify as an installment sale even if you receive a payment after the year of sale. Filing past tax returns See Sale of a Business under Other Rules, later. Filing past tax returns Dealer sales. Filing past tax returns   Sales of personal property by a person who regularly sells or otherwise disposes of the same type of personal property on the installment plan are not installment sales. Filing past tax returns This rule also applies to real property held for sale to customers in the ordinary course of a trade or business. Filing past tax returns However, the rule does not apply to an installment sale of property used or produced in farming. Filing past tax returns Special rule. Filing past tax returns   Dealers of time-shares and residential lots can treat certain sales as installment sales and report them under the installment method if they elect to pay a special interest charge. Filing past tax returns For more information, see section 453(l). Filing past tax returns Stock or securities. Filing past tax returns   You cannot use the installment method to report gain from the sale of stock or securities traded on an established securities market. Filing past tax returns You must report the entire gain on the sale in the year in which the trade date falls. Filing past tax returns Installment obligation. Filing past tax returns   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. Filing past tax returns General Rules If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. Filing past tax returns See Electing Out of the Installment Method under Other Rules, later, for information on recognizing the entire gain in the year of sale. Filing past tax returns Sale at a loss. Filing past tax returns   If your sale results in a loss, you cannot use the installment method. Filing past tax returns If the loss is on an installment sale of business or investment property, you can deduct it only in the tax year of sale. Filing past tax returns Unstated interest. Filing past tax returns   If your sale calls for payments in a later year and the sales contract provides for little or no interest, you may have to figure unstated interest, even if you have a loss. Filing past tax returns See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. Filing past tax returns Figuring Installment Sale Income You can use the following discussions or Form 6252 to help you determine gross profit, contract price, gross profit percentage, and installment sale income. Filing past tax returns Each payment on an installment sale usually consists of the following three parts. Filing past tax returns Interest income. Filing past tax returns Return of your adjusted basis in the property. Filing past tax returns Gain on the sale. Filing past tax returns In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. Filing past tax returns You do not include in income the part that is the return of your basis in the property. Filing past tax returns Basis is the amount of your investment in the property for installment sale purposes. Filing past tax returns Interest Income You must report interest as ordinary income. Filing past tax returns Interest is generally not included in a down payment. Filing past tax returns However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. Filing past tax returns Interest provided in the agreement is called stated interest. Filing past tax returns If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. Filing past tax returns See Unstated Interest and Original Issue Discount (OID) under Other Rules, later. Filing past tax returns Adjusted Basis and Installment Sale Income (Gain on Sale) After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. Filing past tax returns A tax-free return of your adjusted basis in the property, and Your gain (referred to as installment sale income on Form 6252). Filing past tax returns Figuring adjusted basis for installment sale purposes. Filing past tax returns   You can use Worksheet A to figure your adjusted basis in the property for installment sale purposes. Filing past tax returns When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. Filing past tax returns Worksheet A. Filing past tax returns Figuring Adjusted Basis and Gross Profit Percentage 1. Filing past tax returns Enter the selling price for the property   2. Filing past tax returns Enter your adjusted basis for the property     3. Filing past tax returns Enter your selling expenses     4. Filing past tax returns Enter any depreciation recapture     5. Filing past tax returns Add lines 2, 3, and 4. Filing past tax returns  This is your adjusted basis for installment sale purposes   6. Filing past tax returns Subtract line 5 from line 1. Filing past tax returns If zero or less, enter -0-. Filing past tax returns  This is your gross profit     If the amount entered on line 6 is zero, stop here. Filing past tax returns You cannot use the installment method. Filing past tax returns   7. Filing past tax returns Enter the contract price for the property   8. Filing past tax returns Divide line 6 by line 7. Filing past tax returns This is your gross profit percentage   Selling price. Filing past tax returns   The selling price is the total cost of the property to the buyer and includes any of the following. Filing past tax returns Any money you are to receive. Filing past tax returns The fair market value (FMV) of any property you are to receive (FMV is discussed in Property Used As a Payment under Other Rules, later). Filing past tax returns Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). Filing past tax returns Any of your selling expenses the buyer pays. Filing past tax returns   Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. Filing past tax returns Adjusted basis for installment sale purposes. Filing past tax returns   Your adjusted basis is the total of the following three items. Filing past tax returns Adjusted basis. Filing past tax returns Selling expenses. Filing past tax returns Depreciation recapture. Filing past tax returns Adjusted basis. Filing past tax returns   Basis is your investment in the property for installment sale purposes. Filing past tax returns The way you figure basis depends on how you acquire the property. Filing past tax returns The basis of property you buy is generally its cost. Filing past tax returns The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. Filing past tax returns   While you own property, various events may change your original basis. Filing past tax returns Some events, such as adding rooms or making permanent improvements, increase basis. Filing past tax returns Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. Filing past tax returns The result is adjusted basis. Filing past tax returns   For more information on how to figure basis and adjusted basis, see Publication 551. Filing past tax returns For more information regarding your basis in property you inherited from someone who died in 2010 and whose executor filed Form 8939, Allocation of Increase In Basis for Property Acquired From a Decedent, see Publication 4895. Filing past tax returns Selling expenses. Filing past tax returns   Selling expenses relate to the sale of the property. Filing past tax returns They include commissions, attorney fees, and any other expenses paid on the sale. Filing past tax returns Selling expenses are added to the basis of the sold property. Filing past tax returns Depreciation recapture. Filing past tax returns   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. Filing past tax returns See Depreciation Recapture Income under Other Rules, later. Filing past tax returns Gross profit. Filing past tax returns   Gross profit is the total gain you report on the installment method. Filing past tax returns   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. Filing past tax returns If the property you sold was your home, subtract from the gross profit any gain you can exclude. Filing past tax returns See Sale of Your Home , later, under Reporting Installment Sale Income. Filing past tax returns Contract price. Filing past tax returns   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. Filing past tax returns Gross profit percentage. Filing past tax returns   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. Filing past tax returns This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. Filing past tax returns   The gross profit percentage generally remains the same for each payment you receive. Filing past tax returns However, see the Example under Selling Price Reduced, later, for a situation where the gross profit percentage changes. Filing past tax returns Example. Filing past tax returns You sell property at a contract price of $6,000 and your gross profit is $1,500. Filing past tax returns Your gross profit percentage is 25% ($1,500 ÷ $6,000). Filing past tax returns After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. Filing past tax returns The remainder (balance) of each payment is the tax-free return of your adjusted basis. Filing past tax returns Amount to report as installment sale income. Filing past tax returns   Multiply the payments you receive each year (less interest) by the gross profit percentage. Filing past tax returns The result is your installment sale income for the tax year. Filing past tax returns In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. Filing past tax returns A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. Filing past tax returns For a detailed discussion, see Payments Received or Considered Received under Other Rules, later. Filing past tax returns Selling Price Reduced If the selling price is reduced at a later date, the gross profit on the sale also will change. Filing past tax returns You then must refigure the gross profit percentage for the remaining payments. Filing past tax returns Refigure your gross profit using Worksheet B. Filing past tax returns You will spread any remaining gain over future installments. Filing past tax returns Worksheet B. Filing past tax returns New Gross Profit Percentage — Selling Price Reduced 1. Filing past tax returns Enter the reduced selling  price for the property   2. Filing past tax returns Enter your adjusted  basis for the  property     3. Filing past tax returns Enter your selling  expenses     4. Filing past tax returns Enter any depreciation  recapture     5. Filing past tax returns Add lines 2, 3, and 4. Filing past tax returns   6. Filing past tax returns Subtract line 5 from line 1. Filing past tax returns  This is your adjusted  gross profit   7. Filing past tax returns Enter any installment sale  income reported in  prior year(s)   8. Filing past tax returns Subtract line 7 from line 6   9. Filing past tax returns Future installments   10. Filing past tax returns Divide line 8 by line 9. Filing past tax returns  This is your new gross profit percentage*   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Filing past tax returns Example. Filing past tax returns In 2011, you sold land with a basis of $40,000 for $100,000. Filing past tax returns Your gross profit was $60,000. Filing past tax returns You received a $20,000 down payment and the buyer's note for $80,000. Filing past tax returns The note provides for four annual payments of $20,000 each, plus 8% interest, beginning in 2012. Filing past tax returns Your gross profit percentage is 60%. Filing past tax returns You reported a gain of $12,000 on each payment received in 2011 and 2012. Filing past tax returns In 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $15,000 for each year. Filing past tax returns The new gross profit percentage, 46. Filing past tax returns 67%, is figured on Example—Worksheet B. Filing past tax returns You will report a gain of $7,000 (46. Filing past tax returns 67% of $15,000) on each of the $15,000 installments due in 2013, 2014, and 2015. Filing past tax returns Example — Worksheet B. Filing past tax returns New Gross Profit Percentage — Selling Price Reduced 1. Filing past tax returns Enter the reduced selling  price for the property 85,000 2. Filing past tax returns Enter your adjusted  basis for the  property 40,000   3. Filing past tax returns Enter your selling  expenses -0-   4. Filing past tax returns Enter any depreciation  recapture -0-   5. Filing past tax returns Add lines 2, 3, and 4. Filing past tax returns 40,000 6. Filing past tax returns Subtract line 5 from line 1. Filing past tax returns  This is your adjusted  gross profit 45,000 7. Filing past tax returns Enter any installment sale  income reported in  prior year(s) 24,000 8. Filing past tax returns Subtract line 7 from line 6 21,000 9. Filing past tax returns Future installments 45,000 10. Filing past tax returns Divide line 8 by line 9. Filing past tax returns  This is your new gross profit percentage* 46. Filing past tax returns 67% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. Filing past tax returns Reporting Installment Sale Income Generally, you will use Form 6252 to report installment sale income from casual sales of real or personal property during the tax year. Filing past tax returns You also will have to report the installment sale income on Schedule D (Form 1040), Capital Gains and Losses, or Form 4797, or both. Filing past tax returns See Schedule D (Form 1040) and Form 4797 , later. Filing past tax returns If the property was your main home, you may be able to exclude part or all of the gain. Filing past tax returns See Sale of Your Home , later. Filing past tax returns Form 6252 Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. Filing past tax returns Attach it to your tax return for each year. Filing past tax returns Form 6252 will help you determine the gross profit, contract price, gross profit percentage, and installment sale income. Filing past tax returns Which parts to complete. Filing past tax returns   Which part to complete depends on whether you are filing the form for the year of sale or a later year. Filing past tax returns Year of sale. Filing past tax returns   Complete lines 1 through 4, Part I, and Part II. Filing past tax returns If you sold property to a related party during the year, also complete Part III. Filing past tax returns Later years. Filing past tax returns   Complete lines 1 through 4 and Part II for any year in which you receive a payment from an installment sale. Filing past tax returns   If you sold a marketable security to a related party after May 14, 1980, and before January 1, 1987, complete Form 6252 for each year of the installment agreement, even if you did not receive a payment. Filing past tax returns (After December 31, 1986, the installment method is not available for the sale of marketable securities. Filing past tax returns ) Complete lines 1 through 4 and Part II for any year in which you receive a payment from the sale. Filing past tax returns Complete Part III unless you received the final payment during the tax year. Filing past tax returns   If you sold property other than a marketable security to a related party after May 14, 1980, complete Form 6252 for the year of sale and for 2 years after the year of sale, even if you did not receive a payment. Filing past tax returns Complete lines 1 through 4 and Part II for any year during this 2-year period in which you receive a payment from the sale. Filing past tax returns Complete Part III for the 2 years after the year of sale unless you received the final payment during the tax year. Filing past tax returns Schedule D (Form 1040) Enter the gain figured on Form 6252 (line 26) for personal-use property (capital assets) on Schedule D (Form 1040), as a short-term gain (line 4) or long-term gain (line 11). Filing past tax returns If your gain from the installment sale qualifies for long-term capital gain treatment in the year of sale, it will continue to qualify in later tax years. Filing past tax returns Your gain is long-term if you owned the property for more than 1 year when you sold it. Filing past tax returns Form 4797 An installment sale of property used in your business or that earns rent or royalty income may result in a capital gain, an ordinary gain, or both. Filing past tax returns All or part of any gain from the disposition of the property may be ordinary gain from depreciation recapture. Filing past tax returns For trade or business property held for more than 1 year, enter the amount from line 26 of Form 6252 on Form 4797, line 4. Filing past tax returns If the property was held 1 year or less or you have an ordinary gain from the sale of a noncapital asset (even if the holding period is more than 1 year), enter this amount on Form 4797, line 10, and write “From Form 6252. Filing past tax returns ” Sale of Your Home If you sell your home, you may be able to exclude all or part of the gain on the sale. Filing past tax returns See Publication 523 for information about excluding the gain. Filing past tax returns If the sale is an installment sale, any gain you exclude is not included in gross profit when figuring your gross profit percentage. Filing past tax returns Seller-financed mortgage. Filing past tax returns   If you finance the sale of your home to an individual, both you and the buyer may have to follow special reporting procedures. Filing past tax returns   When you report interest income received from a buyer who uses the property as a personal residence, write the buyer's name, address, and social security number (SSN) on line 1 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Filing past tax returns   When deducting the mortgage interest, the buyer must write your name, address, and SSN on line 11 of Schedule A (Form 1040), Itemized Deductions. Filing past tax returns   If either person fails to include the other person's SSN, a $50 penalty will be assessed. Filing past tax returns Other Rules The rules discussed in this part of the publication apply only in certain circumstances or to certain types of property. Filing past tax returns The following topics are discussed. Filing past tax returns Electing out of the installment method. Filing past tax returns Payments received or considered received. Filing past tax returns Escrow account. Filing past tax returns Depreciation recapture income. Filing past tax returns Sale to a related person. Filing past tax returns Like-kind exchange. Filing past tax returns Contingent payment sale. Filing past tax returns Single sale of several assets. Filing past tax returns Sale of a business. Filing past tax returns Unstated interest and original issue discount. Filing past tax returns Disposition of an installment obligation. Filing past tax returns Repossession. Filing past tax returns Interest on deferred tax. Filing past tax returns Electing Out of the Installment Method If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. Filing past tax returns To figure the amount of gain to report, use the fair market value (FMV) of the buyer's installment obligation that represents the buyer's debt to you. Filing past tax returns Notes, mortgages, and land contracts are examples of obligations that are included at FMV. Filing past tax returns You must figure the FMV of the buyer's installment obligation, whether or not you would actually be able to sell it. Filing past tax returns If you use the cash method of accounting, the FMV of the obligation will never be considered to be less than the FMV of the property sold (minus any other consideration received). Filing past tax returns Example. Filing past tax returns You sold a parcel of land for $50,000. Filing past tax returns You received a $10,000 down payment and will receive the balance over the next 10 years at $4,000 a year, plus 8% interest. Filing past tax returns The buyer gave you a note for $40,000. Filing past tax returns The note had an FMV of $40,000. Filing past tax returns You paid a commission of 6%, or $3,000, to a broker for negotiating the sale. Filing past tax returns The land cost $25,000, and you owned it for more than one year. Filing past tax returns You decide to elect out of the installment method and report the entire gain in the year of sale. Filing past tax returns Gain realized:     Selling price $50,000 Minus: Property's adj. Filing past tax returns basis $25,000     Commission 3,000 28,000 Gain realized $22,000 Gain recognized in year of sale:   Cash $10,000 Market value of note 40,000 Total realized in year of sale $50,000 Minus: Property's adj. Filing past tax returns basis $25,000     Commission 3,000 28,000 Gain recognized $22,000 The recognized gain of $22,000 is long-term capital gain. Filing past tax returns You include the entire gain in income in the year of sale, so you do not include in income any principal payments you receive in later tax years. Filing past tax returns The interest on the note is ordinary income and is reported as interest income each year. Filing past tax returns How to elect out. Filing past tax returns   To make this election, do not report your sale on Form 6252. Filing past tax returns Instead, report it on Form 8949, Sales and Other Dispositions of Capital Assets, Form 4797, or both. Filing past tax returns When to elect out. Filing past tax returns   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. Filing past tax returns Automatic six-month extension. Filing past tax returns   If you timely file your tax return without making the election, you still can make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Filing past tax returns Write “Filed pursuant to section 301. Filing past tax returns 9100-2” at the top of the amended return and file it where the original return was filed. Filing past tax returns Revoking the election. Filing past tax returns   Once made, the election can be revoked only with IRS approval. Filing past tax returns A revocation is retroactive. Filing past tax returns You will not be allowed to revoke the election if either of the following applies. Filing past tax returns One of the purposes is to avoid federal income tax. Filing past tax returns The tax year in which any payment was received has closed. Filing past tax returns Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. Filing past tax returns In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. Filing past tax returns These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. Filing past tax returns However, as discussed later, the buyer's assumption of your debt is treated as a recovery of your basis rather than as a payment in many cases. Filing past tax returns Buyer Pays Seller's Expenses If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. Filing past tax returns Include these expenses in the selling and contract prices when figuring the gross profit percentage. Filing past tax returns Buyer Assumes Mortgage If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. Filing past tax returns Mortgage not more than basis. Filing past tax returns   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. Filing past tax returns It is considered a recovery of your basis. Filing past tax returns The contract price is the selling price minus the mortgage. Filing past tax returns Example. Filing past tax returns You sell property with an adjusted basis of $19,000. Filing past tax returns You have selling expenses of $1,000. Filing past tax returns The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 12% interest) in each of the next 4 years). Filing past tax returns The selling price is $25,000 ($15,000 + $10,000). Filing past tax returns Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). Filing past tax returns The contract price is $10,000 ($25,000 − $15,000 mortgage). Filing past tax returns Your gross profit percentage is 50% ($5,000 ÷ $10,000). Filing past tax returns You report half of each $2,000 payment received as gain from the sale. Filing past tax returns You also report all interest you receive as ordinary income. Filing past tax returns Mortgage more than basis. Filing past tax returns   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. Filing past tax returns The part of the mortgage greater than your basis is treated as a payment received in the year of sale. Filing past tax returns   To figure the contract price, subtract the mortgage from the selling price. Filing past tax returns This is the total amount (other than interest) you will receive directly from the buyer. Filing past tax returns Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). Filing past tax returns The contract price is then the same as your gross profit from the sale. Filing past tax returns    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. Filing past tax returns Example. Filing past tax returns The selling price for your property is $9,000. Filing past tax returns The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. Filing past tax returns Your adjusted basis in the property is $4,400. Filing past tax returns You have selling expenses of $600, for a total installment sale basis of $5,000. Filing past tax returns The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). Filing past tax returns This amount is included in the contract price and treated as a payment received in the year of sale. Filing past tax returns The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000       Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000 Your gross profit percentage is 100%. Filing past tax returns Report 100% of each payment (less interest) as gain from the sale. Filing past tax returns Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. Filing past tax returns Mortgage Canceled If the buyer of your property is the person who holds the mortgage on it, your debt is canceled, not assumed. Filing past tax returns You are considered to receive a payment equal to the outstanding canceled debt. Filing past tax returns Example. Filing past tax returns Mary Jones loaned you $45,000 in 2009 in exchange for a note and a mortgage in a tract of land you owned. Filing past tax returns On April 4, 2013, she bought the land for $70,000. Filing past tax returns At that time, $30,000 of her loan to you was outstanding. Filing past tax returns She agreed to forgive this $30,000 debt and to pay you $20,000 (plus interest) on August 1, 2013, and $20,000 on August 1, 2014. Filing past tax returns She did not assume an existing mortgage. Filing past tax returns She canceled the $30,000 debt you owed her. Filing past tax returns You are considered to have received a $30,000 payment at the time of the sale. Filing past tax returns Buyer Assumes Other Debts If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. Filing past tax returns If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. Filing past tax returns Compare the debt to your installment sale basis in the property being sold. Filing past tax returns If the debt is less than your installment sale basis, none of it is treated as a payment. Filing past tax returns If it is more, only the difference is treated as a payment. Filing past tax returns If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. Filing past tax returns These rules are the same as the rules discussed earlier under Buyer Assumes Mortgage . Filing past tax returns However, they apply only to the following types of debt the buyer assumes. Filing past tax returns Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. Filing past tax returns Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. Filing past tax returns If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. Filing past tax returns The value of the assumed debt is then considered a payment to you in the year of sale. Filing past tax returns Property Used As a Payment If you receive property other than money from the buyer, it is still considered a payment in the year received. Filing past tax returns However, see Like-Kind Exchange , later. Filing past tax returns Generally, the amount of the payment is the property's FMV on the date you receive it. Filing past tax returns Exception. Filing past tax returns   If the property the buyer gives you is payable on demand or readily tradable, the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use the accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. Filing past tax returns See Unstated Interest and Original Issue Discount (OID) , later. Filing past tax returns Debt not payable on demand. Filing past tax returns   Any evidence of debt you receive from the buyer not payable on demand is not considered a payment. Filing past tax returns This is true even if the debt is guaranteed by a third party, including a government agency. Filing past tax returns Fair market value (FMV). Filing past tax returns   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. Filing past tax returns Third-party note. Filing past tax returns   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. Filing past tax returns Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. Filing past tax returns The excess of the note's face value over its FMV is interest. Filing past tax returns Exclude this interest in determining the selling price of the property. Filing past tax returns However, see Exception under Property Used As a Payment, earlier. Filing past tax returns Example. Filing past tax returns You sold real estate in an installment sale. Filing past tax returns As part of the down payment, the buyer assigned to you a $50,000, 8% interest third-party note. Filing past tax returns The FMV of the third-party note at the time of the sale was $30,000. Filing past tax returns This amount, not $50,000, is a payment to you in the year of sale. Filing past tax returns The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. Filing past tax returns The remaining 40% is interest taxed as ordinary income. Filing past tax returns Bond. Filing past tax returns   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. Filing past tax returns For more information on the amount you should treat as a payment, see Exception under Property Used As a Payment, earlier. Filing past tax returns    If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. Filing past tax returns However, see Exception under Property Used As a Payment, earlier. Filing past tax returns Buyer's note. Filing past tax returns   The buyer's note (unless payable on demand) is not considered payment on the sale. Filing past tax returns However, its full face value is included when figuring the selling price and the contract price. Filing past tax returns Payments you receive on the note are used to figure your gain in the year received. Filing past tax returns Installment Obligation Used as Security (Pledge Rule) If you use an installment obligation to secure any debt, the net proceeds from the debt may be treated as a payment on the installment obligation. Filing past tax returns This is known as the pledge rule, and it applies if the selling price of the property is over $150,000. Filing past tax returns It does not apply to the following dispositions. Filing past tax returns Sales of property used or produced in farming. Filing past tax returns Sales of personal-use property. Filing past tax returns Qualifying sales of time-shares and residential lots. Filing past tax returns The net debt proceeds are the gross debt minus the direct expenses of getting the debt. Filing past tax returns The amount treated as a payment is considered received on the later of the following dates. Filing past tax returns The date the debt becomes secured. Filing past tax returns The date you receive the debt proceeds. Filing past tax returns A debt is secured by an installment obligation to the extent that payment of principal or interest on the debt is directly secured (under the terms of the loan or any underlying arrangement) by any interest in the installment obligation. Filing past tax returns For sales after December 16, 1999, payment on a debt is treated as directly secured by an interest in an installment obligation to the extent an arrangement allows you to satisfy all or part of the debt with the installment obligation. Filing past tax returns Limit. Filing past tax returns   The net debt proceeds treated as a payment on the pledged installment obligation cannot be more than the excess of item (1) over item (2), below. Filing past tax returns The total contract price on the installment sale. Filing past tax returns Any payments received on the installment obligation before the date the net debt proceeds are treated as a payment. Filing past tax returns Installment payments. Filing past tax returns   The pledge rule accelerates the reporting of the installment obligation payments. Filing past tax returns Do not report payments received on the obligation after it has been pledged until the payments received exceed the amount reported under the pledge rule. Filing past tax returns Exception. Filing past tax returns   The pledge rule does not apply to pledges made after December 17, 1987, to refinance a debt under the following circumstances. Filing past tax returns The debt was outstanding on December 17, 1987. Filing past tax returns The debt was secured by that installment sale obligation on that date and at all times thereafter until the refinancing occurred. Filing past tax returns   A refinancing as a result of the creditor's calling of the debt is treated as a continuation of the original debt so long as a person other than the creditor or a person related to the creditor provides the refinancing. Filing past tax returns   This exception applies only to refinancing that does not exceed the principal of the original debt immediately before the refinancing. Filing past tax returns Any excess is treated as a payment on the installment obligation. Filing past tax returns Escrow Account In some cases, the sales agreement or a later agreement may call for the buyer to establish an irrevocable escrow account from which the remaining installment payments (including interest) are to be made. Filing past tax returns These sales cannot be reported on the installment method. Filing past tax returns The buyer's obligation is paid in full when the balance of the purchase price is deposited into the escrow account. Filing past tax returns When an escrow account is established, you no longer rely on the buyer for the rest of the payments, but on the escrow arrangement. Filing past tax returns Example. Filing past tax returns You sell property for $100,000. Filing past tax returns The sales agreement calls for a down payment of $10,000 and payment of $15,000 in each of the next 6 years to be made from an irrevocable escrow account containing the balance of the purchase price plus interest. Filing past tax returns You cannot report the sale on the installment method because the full purchase price is considered received in the year of sale. Filing past tax returns You report the entire gain in the year of sale. Filing past tax returns Escrow established in a later year. Filing past tax returns   If you make an installment sale and in a later year an irrevocable escrow account is established to pay the remaining installments plus interest, the amount placed in the escrow account represents payment of the balance of the installment obligation. Filing past tax returns Substantial restriction. Filing past tax returns   If an escrow arrangement imposes a substantial restriction on your right to receive the sale proceeds, the sale can be reported on the installment method, provided it otherwise qualifies. Filing past tax returns For an escrow arrangement to impose a substantial restriction, it must serve a bona fide purpose of the buyer, that is, a real and definite restriction placed on the seller or a specific economic benefit conferred on the buyer. Filing past tax returns Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. Filing past tax returns Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Filing past tax returns Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. Filing past tax returns The recapture income is also included in Part I of Form 6252. Filing past tax returns However, the gain equal to the recapture income is reported in full in the year of the sale. Filing past tax returns Only the gain greater than the recapture income is reported on the installment method. Filing past tax returns For more information on depreciation recapture, see chapter 3 in Publication 544. Filing past tax returns The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. Filing past tax returns Determining gross profit is discussed under General Rules , earlier. Filing past tax returns Sale to a Related Person If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. Filing past tax returns If you sell property to a related person and the related person disposes of the property before you receive all payments with respect to the sale, you may have to treat the amount realized by the related person as received by you when the related person disposes of the property. Filing past tax returns These rules are explained under Sale of Depreciable Property and under Sale and Later Disposition , later. Filing past tax returns Sale of Depreciable Property If you sell depreciable property to certain related persons, you generally cannot report the sale using the installment method. Filing past tax returns Instead, all payments to be received are considered received in the year of sale. Filing past tax returns However, see Exception , below. Filing past tax returns Depreciable property for this rule is any property the purchaser can depreciate. Filing past tax returns Payments to be received include the total of all noncontingent payments and the FMV of any payments contingent as to amount. Filing past tax returns In the case of contingent payments for which the FMV cannot be reasonably determined, your basis in the property is recovered proportionately. Filing past tax returns The purchaser cannot increase the basis of the property acquired in the sale before the seller includes a like amount in income. Filing past tax returns Exception. Filing past tax returns   You can use the installment method to report a sale of depreciable property to a related person if no significant tax deferral benefit will be derived from the sale. Filing past tax returns You must show to the satisfaction of the IRS that avoidance of federal income tax was not one of the principal purposes of the sale. Filing past tax returns Related person. Filing past tax returns   Related persons include the following. Filing past tax returns A person and all controlled entities with respect to that person. Filing past tax returns A taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless that beneficiary's interest in the trust is a remote contingent interest. Filing past tax returns Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of that estate. Filing past tax returns Two or more partnerships in which the same person owns, directly or indirectly, more than 50% of the capital interests or the profits interests. Filing past tax returns   For information about which entities are controlled entities, see section 1239(c). Filing past tax returns Sale and Later Disposition Generally, a special rule applies if you sell or exchange property to a related person on the installment method (first disposition) who then sells, exchanges, or gives away the property (second disposition) under the following circumstances. Filing past tax returns The related person makes the second disposition before making all payments on the first disposition. Filing past tax returns The related person disposes of the property within 2 years of the first disposition. Filing past tax returns This rule does not apply if the property involved is marketable securities. Filing past tax returns Under this rule, you treat part or all of the amount the related person realizes (or the FMV if the disposed property is not sold or exchanged) from the second disposition as if you received it at the time of the second disposition. Filing past tax returns See Exception , later. Filing past tax returns Related person. Filing past tax returns   Related persons include the following. Filing past tax returns Members of a family, including only brothers and sisters (either whole or half), husband and wife, ancestors, and lineal descendants. Filing past tax returns A partnership or estate and a partner or beneficiary. Filing past tax returns A trust (other than a section 401(a) employees trust) and a beneficiary. Filing past tax returns A trust and an owner of the trust. Filing past tax returns Two corporations that are members of the same controlled group as defined in section 267(f). Filing past tax returns The fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Filing past tax returns A tax-exempt educational or charitable organization and a person (if an individual, including members of the individual's family) who directly or indirectly controls such an organization. Filing past tax returns An individual and a corporation when the individual owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Filing past tax returns A fiduciary of a trust and a corporation when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Filing past tax returns The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Filing past tax returns Any two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Filing past tax returns An S corporation and a corporation that is not an S corporation if the same persons own more than 50% in value of the outstanding stock of each corporation. Filing past tax returns 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 or profits interest in the partnership. Filing past tax returns An executor and a beneficiary of an estate unless the sale is in satisfaction of a pecuniary bequest. Filing past tax returns Example 1. Filing past tax returns In 2012, Harvey Green sold farm land to his son Bob for $500,000, which was to be paid in five equal payments over 5 years, plus adequate stated interest on the balance due. Filing past tax returns His installment sale basis for the farm land was $250,000 and the property was not subject to any outstanding liens or mortgages. Filing past tax returns His gross profit percentage is 50% (gross profit of $250,000 ÷ contract price of $500,000). Filing past tax returns He received $100,000 in 2012 and included $50,000 in income for that year ($100,000 × 0. Filing past tax returns 50). Filing past tax returns Bob made no improvements to the property and sold it to Alfalfa Inc. Filing past tax returns , in 2013 for $600,000 after making the payment for that year. Filing past tax returns The amount realized from the second disposition is $600,000. Filing past tax returns Harvey figures his installment sale income for 2013 as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $500,000 Subtract: Sum of payments from Bob in 2012 and 2013 - 200,000 Amount treated as received because of second disposition $300,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $400,000 Multiply by gross profit % × . Filing past tax returns 50 Installment sale income for 2013 $200,000 Harvey will not include in his installment sale income any principal payments he receives on the installment obligation for 2014, 2015, and 2016 because he has already reported the total payments of $500,000 from the first disposition ($100,000 in 2012 and $400,000 in 2013). Filing past tax returns Example 2. Filing past tax returns Assume the facts are the same as Example 1 except that Bob sells the property for only $400,000. Filing past tax returns The gain for 2013 is figured as follows: Lesser of: 1) Amount realized on second disposition, or 2) Contract price on first disposition $400,000 Subtract: Sum of payments from Bob in 2012 and 2013 − 200,000 Amount treated as received because of second disposition $200,000 Add: Payment from Bob in 2013 + 100,000 Total payments received and treated as received for 2013 $300,000 Multiply by gross profit % × . Filing past tax returns 50 Installment sale income for 2013 $150,000     Harvey receives a $100,000 payment in 2014 and another in 2015. Filing past tax returns They are not taxed because he treated the $200,000 from the disposition in 2013 as a payment received and paid tax on the installment sale income. Filing past tax returns In 2016, he receives the final $100,000 payment. Filing past tax returns He figures the installment sale income he must recognize in 2016 as follows: Total payments from the first disposition received by the end of 2016 $500,000 Minus the sum of:     Payment from 2012 $100,000   Payment from 2013 100,000   Amount treated as received in 2013 200,000   Total on which gain was previously recognized  − 400,000 Payment on which gain is recognized for 2016  $100,000 Multiply by gross profit % × . Filing past tax returns 50 Installment sale income for 2016 $ 50,000 Exception. Filing past tax returns   This rule does not apply to a second disposition, and any later transfer, if you can show to the satisfaction of the IRS that neither the first disposition (to the related person) nor the second disposition had as one of its principal purposes the avoidance of federal income tax. Filing past tax returns Generally, an involuntary second disposition will qualify under the nontax avoidance exception, such as when a creditor of the related person forecloses on the property or the related person declares bankruptcy. Filing past tax returns   The nontax avoidance exception also applies to a second disposition that is also an installment sale if the terms of payment under the installment resale are substantially equal to or longer than those for the first installment sale. Filing past tax returns However, the exception does not apply if the resale terms permit significant deferral of recognition of gain from the first sale. Filing past tax returns   In addition, any sale or exchange of stock to the issuing corporation is not treated as a first disposition. Filing past tax returns An involuntary conversion is not treated as a second disposition if the first disposition occurred before the threat of conversion. Filing past tax returns A transfer after the death of the person making the first disposition or the related person's death, whichever is earlier, is not treated as a second disposition. Filing past tax returns Like-Kind Exchange If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. Filing past tax returns These trades are known as like-kind exchanges. Filing past tax returns The property you receive in a like-kind exchange is treated as if it were a continuation of the property you gave up. Filing past tax returns You do not have to report any part of your gain if you receive only like-kind property. Filing past tax returns However, if you also receive money or other property (boot) in the exchange, you must report your gain to the extent of the money and the FMV of the other property received. Filing past tax returns For more information on like-kind exchanges, see Like-Kind Exchanges in chapter 1 of Publication 544. Filing past tax returns Installment payments. Filing past tax returns   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine the installment sale income each year. Filing past tax returns The contract price is reduced by the FMV of the like-kind property received in the trade. Filing past tax returns The gross profit is reduced by any gain on the trade that can be postponed. Filing past tax returns Like-kind property received in the trade is not considered payment on the installment obligation. Filing past tax returns Example. Filing past tax returns In 2013, George Brown trades personal property with an installment sale basis of $400,000 for like-kind property having an FMV of $200,000. Filing past tax returns He also receives an installment note for $800,000 in the trade. Filing past tax returns Under the terms of the note, he is to receive $100,000 (plus interest) in 2014 and the balance of $700,000 (plus interest) in 2015. Filing past tax returns George's selling price is $1,000,000 ($800,000 installment note + $200,000 FMV of like-kind property received). Filing past tax returns His gross profit is $600,000 ($1,000,000 − $400,000 installment sale basis). Filing past tax returns The contract price is $800,000 ($1,000,000 − $200,000). Filing past tax returns The gross profit percentage is 75% ($600,000 ÷ $800,000). Filing past tax returns He reports no gain in 2013 because the like-kind property he receives is not treated as a payment for figuring gain. Filing past tax returns He reports $75,000 gain for 2014 (75% of $100,000 payment received) and $525,000 gain for 2015 (75% of $700,000 payment received). Filing past tax returns Deferred exchanges. Filing past tax returns   A deferred exchange is one in which you transfer property you use in business or hold for investment and receive like-kind property later that you will use in business or hold for investment. Filing past tax returns Under this type of exchange, the person receiving your property may be required to place funds in an escrow account or trust. Filing past tax returns If certain rules are met, these funds will not be considered a payment until you have the right to receive the funds or, if earlier, the end of the exchange period. Filing past tax returns See Regulations section 1. Filing past tax returns 1031(k)-1(j)(2) for these rules. Filing past tax returns Contingent Payment Sale A contingent payment sale is one in which the total selling price cannot be determined by the end of the tax year of sale. Filing past tax returns This happens, for example, if you sell your business and the selling price includes a percentage of its profits in future years. Filing past tax returns If the selling price cannot be determined by the end of the tax year, you must use different rules to figure the contract price and the gross profit percentage than those you use for an installment sale with a fixed selling price. Filing past tax returns For rules on using the installment method for a contingent payment sale, see Regulations section 15a. Filing past tax returns 453-1(c). Filing past tax returns Single Sale of Several Assets If you sell different types of assets in a single sale, you must identify each asset to determine whether you can use the installment method to report the sale of that asset. Filing past tax returns You also have to allocate part of the selling price to each asset. Filing past tax returns If you sell assets that constitute a trade or business, see Sale of a Business , later. Filing past tax returns Unless an allocation of the selling price has been agreed to by both parties in an arm's-length transaction, you must allocate the selling price to an asset based on its FMV. Filing past tax returns If the buyer assumes a debt, or takes the property subject to a debt, you must reduce the FMV of the property by the debt. Filing past tax returns This becomes the net FMV. Filing past tax returns A sale of separate and unrelated assets of the same type under a single contract is reported as one transaction for the installment method. Filing past tax returns However, if an asset is sold at a loss, its disposition cannot be reported on the installment method. Filing past tax returns It must be reported separately. Filing past tax returns The remaining assets sold at a gain are reported together. Filing past tax returns Example. Filing past tax returns You sold three separate and unrelated parcels of real property (A, B, and C) under a single contract calling for a total selling price of $130,000. Filing past tax returns The total selling price consisted of a cash payment of $20,000, the buyer's assumption of a $30,000 mortgage on parcel B, and an installment obligation of $80,000 payable in eight annual installments, plus interest at 8% a year. Filing past tax returns Your installment sale basis for each parcel was $15,000. Filing past tax returns Your net gain was $85,000 ($130,000 − $45,000). Filing past tax returns You report the gain on the installment method. Filing past tax returns The sales contract did not allocate the selling price or the cash payment received in the year of sale among the individual parcels. Filing past tax returns The FMV of parcels A, B, and C were $60,000, $60,000, and $10,000, respectively. Filing past tax returns The installment sale basis for parcel C was more than its FMV, so it was sold at a loss and must be treated separately. Filing past tax returns You must allocate the total selling price and the amounts received in the year of sale between parcel C and the remaining parcels. Filing past tax returns Of the total $130,000 selling price, you must allocate $120,000 to parcels A and B together and $10,000 to parcel C. Filing past tax returns You should allocate the cash payment of $20,000 received in the year of sale and the note receivable on the basis of their proportionate net FMV. Filing past tax returns The allocation is figured as follows:   Parcels   A and B Parcel C FMV $120,000 $10,000 Minus: Mortgage assumed 30,000 -0- Net FMV $ 90,000 $10,000 Proportionate net FMV:     Percentage of total 90% 10% Payments in year of sale:     $20,000 × 90% $18,000   $20,000 × 10%   $2,000 Excess of parcel B mortgage over installment sale basis 15,000 -0- Allocation of payments  received (or considered  received) in year of sale $ 33,000 $ 2,000 You cannot report the sale of parcel C on the installment method because the sale results in a loss. Filing past tax returns You report this loss of $5,000 ($10,000 selling price − $15,000 installment sale basis) in the year of sale. Filing past tax returns However, if parcel C was held for personal use, the loss is not deductible. Filing past tax returns You allocate the installment obligation of $80,000 to the properties sold based on their proportionate net FMVs (90% to parcels A and B, 10% to parcel C). Filing past tax returns Sale of a Business The installment sale of an entire business for one overall price under a single contract is not the sale of a single asset. Filing past tax returns Allocation of Selling Price To determine whether any of the gain on the sale of the business can be reported on the installment method, you must allocate the total selling price and the payments received in the year of sale between each of the following classes of assets. Filing past tax returns Assets sold at a loss. Filing past tax returns Real and personal property eligible for the installment method. Filing past tax returns Real and personal property ineligible for the installment method, including: Inventory, Dealer property, and Stocks and securities. Filing past tax returns Inventory. Filing past tax returns   The sale of inventories of personal property cannot be reported on the installment method. Filing past tax returns All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. Filing past tax returns   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. Filing past tax returns If you do not, each payment must be allocated between the inventory and the other assets sold. Filing past tax returns   Report the amount you receive (or will receive) on the sale of inventory items as ordinary business income. Filing past tax returns Use your basis in the inventory to figure the cost of goods sold. Filing past tax returns Deduct the part of the selling expenses allocated to inventory as an ordinary business expense. Filing past tax returns Residual method. Filing past tax returns   Except for assets exchanged under the like-kind exchange rules, both the buyer and seller of a business must use the residual method to allocate the sale price to each business asset sold. Filing past tax returns This method determines gain or loss from the transfer of each asset and the buyer's basis in the assets. Filing past tax returns   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. Filing past tax returns 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). Filing past tax returns   A group of assets constitutes a trade or business if goodwill or going concern value could, under any circumstances, attach to the assets or if the use of the assets would constitute an active trade or business under section 355. Filing past tax returns   The residual method provides for the consideration to be reduced first by cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). Filing past tax returns The consideration remaining after this reduction must be allocated among the various business assets in a certain order. Filing past tax returns   For asset acquisitions occurring after March 15, 2001, make the allocation among the following assets in proportion to (but not more than) their fair market value on the purchase date in the following order. Filing past tax returns Certificates of deposit, U. Filing past tax returns S. Filing past tax returns Government securities, foreign currency, and actively traded personal property, including stock and securities. Filing past tax returns Accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. Filing past tax returns However, see Regulations section 1. Filing past tax returns 338-6(b)(2)(iii) 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. Filing past tax returns 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. Filing past tax returns All other assets except section 197 intangibles. Filing past tax returns Section 197 intangibles except goodwill and going concern value. Filing past tax returns Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Filing past tax returns   If an asset described in (1) through (6) is includible in more than one category, include it in the lower number category. Filing past tax returns For example, if an asset is described in both (4) and (6), include it in (4). Filing past tax returns Agreement. Filing past tax returns   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. Filing past tax returns This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Filing past tax returns Reporting requirement. Filing past tax returns   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. Filing past tax returns Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. Filing past tax returns The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Filing past tax returns Sale of Partnership Interest A partner who sells a partnership interest at a gain may be able to report the sale on the installment method. Filing past tax returns The sale of a partnership interest is treated as the sale of a single capital asset. Filing past tax returns The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary income. Filing past tax returns (The term “unrealized receivables” includes depreciation recapture income, discussed earlier. Filing past tax returns ) The gain allocated to the unrealized receivables and the inventory cannot be reported under the installment method. Filing past tax returns The gain allocated to the other assets can be reported under the installment method. Filing past tax returns For more information on the treatment of unrealized receivables and inventory, see Publication 541. Filing past tax returns Example — Sale of a Business On June 4, 2013, you sold the machine shop you had operated since 2005. Filing past tax returns You received a $100,000 down payment and the buyer's note for $120,000. Filing past tax returns The note payments are $15,000 each, plus 10% interest, due every July 1 and January 1, beginning in 2014. Filing past tax returns The total selling price is $220,000. Filing past tax returns Your selling expenses are $11,000. Filing past tax returns The selling expenses are divided among all the assets sold, including inventory. Filing past tax returns Your selling expense for each asset is 5% of the asset's selling price ($11,000 selling expense ÷ $220,000 total selling price). Filing past tax returns The FMV, adjusted basis, and depreciation claimed on each asset sold are as follows:     Depre- ciation Adj. Filing past tax returns Asset FMV Claimed Basis Inventory $ 10,000 -0- $ 8,000 Land 42,000 -0- 15,000 Building 48,000 $9,000 36,000 Machine A 71,000 27,200 63,800 Machine B 24,000 12,960 22,040 Truck 6,500 18,624 5,376   $201,500 $67,784 $150,216         Under the residual method, you allocate the selling price to each of the assets based on their FMV ($201,500). Filing past tax returns The remaining $18,500 ($220,000 - $201,500) is allocated to your section 197 intangible, goodwill. Filing past tax returns The assets included in the sale, their selling prices based on their FMVs, the selling expense allocated to each asset, the adjusted basis, and the gain for each asset are shown in the following chart. Filing past tax returns   Sale  Price Sale   Exp. Filing past tax returns Adj. Filing past tax returns   Basis Gain Inventory $ 10,000 $ 500 $ 8,000 $ 1,500 Land 42,000 2,100 15,000 24,900 Building 48,000 2,400 36,000 9,600 Mch. Filing past tax returns A 71,000 3,550 63,800 3,650 Mch. Filing past tax returns B 24,000 1,200 22,040 760 Truck 6,500 325 5,376 799 Goodwill 18,500 925 -0- 17,575   $220,000 $11,000 $150,216 $58,784 The building was acquired in 2005, the year the business began, and it is section 1250 property. Filing past tax returns There is no depreciation recapture income because the building was depreciated using the straight line method. Filing past tax returns All gain on the truck, machine A, and machine B is depreciation recapture income since it is the lesser of the depreciation claimed or the gain on the sale. Filing past tax returns Figure depreciation recapture in Part III of Form 4797. Filing past tax returns The total depreciation recapture income reported in Part II of Form 4797 is $5,209. Filing past tax returns This consists of $3,650 on machine A, $799 on the truck, and $760 on machine B (the gain on each item because it was less than the depreciation claimed). Filing past tax returns These gains are reported in full in the year of sale and are not included in the installment sale computation. Filing past tax returns Of the $220,000 total selling price, the $10,000 for inventory assets cannot be reported using the installment method. Filing past tax returns The selling prices of the truck and machines are also removed from the total selling price because gain on these items is reported in full in the year of sale. Filing past tax returns The selling price equals the contract price for the installment sale ($108,500). Filing past tax returns The assets included in the installment sale, their selling price, and their installment sale bases are shown in the following chart. Filing past tax returns   Selling  Price Install- ment  Sale  Basis Gross  Profit Land $ 42,000 $17,100 $24,900 Building 48,000 38,400 9,600 Goodwill 18,500 925 17,575 Total $108,500 $56,425 $52,075         The gross profit percentage (gross profit ÷ contract price) for the installment sale is 48% ($52,075 ÷ $108,500). Filing past tax returns The gross profit percentage for each asset is figured as follows: Percentage Land— $24,900 ÷ $108,500 22. Filing past tax returns 95 Building— $9,600 ÷ $108,500 8. Filing past tax returns 85 Goodwill— $17,575 ÷ $108,500 16. Filing past tax returns 20 Total 48. Filing past tax returns 00 The sale includes assets sold on the installment method and assets for which the gain is reported in full in the year of sale, so payments must be allocated between the installment part of the sale and the part reported in the year of sale. Filing past tax returns The selling price for the installment sale is $108,500. Filing past tax returns This is 49. Filing past tax returns 3% of the total selling price of $220,000 ($108,500 ÷ $220,000). Filing past tax returns The selling price of assets not reported on the installment method is $111,500. Filing past tax returns This is 50. Filing past tax returns 7% ($111,500 ÷ $220,000) of the total selling price. Filing past tax returns Multiply principal payments by 49. Filing past tax returns 3% to determine the part of the payment for the installment sale. Filing past tax returns The balance, 50. Filing past tax returns 7%, is for the part reported in the year of the sale. Filing past tax returns The gain on the sale of the inventory, machines, and truck is reported in full in the year of sale. Filing past tax returns When you receive principal payments in later years, no part of the payment for the sale of these assets is included in gross income. Filing past tax returns Only the part for the installment sale (49. Filing past tax returns 3%) is used in the installment sale computation. Filing past tax returns The only payment received in 2013 is the down payment of $100,000. Filing past tax returns The part of the payment for the installment sale is $49,300 ($100,000 × 49. Filing past tax returns 3%). Filing past tax returns This amount is used in the installment sale computation. Filing past tax returns Installment income for 2013. Filing past tax returns   Your installment income for each asset is the gross profit percentage for that asset times $49,300, the installment income received in 2013. Filing past tax returns Income Land—22. Filing past tax returns 95% of $49,300 $11,314 Building—8. Filing past tax returns 85% of $49,300 4,363 Goodwill—16. Filing past tax returns 2% of $49,300 7,987 Total installment income for 2013 $23,664 Installment income after 2013. Filing past tax returns   You figure installment income for years after 2013 by applying the same gross profit percentages to 49. Filing past tax returns 3% of the total payments you receive on the buyer's note during the year. Filing past tax returns Unstated Interest and Original Issue Discount (OID) An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. Filing past tax returns Interest provided in the contract is called stated interest. Filing past tax returns If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. Filing past tax returns If section 483 applies to the contract, this interest is called unstated interest. Filing past tax returns If section 1274 applies to the contract, this interest is called original issue discount (OID). Filing past tax returns An installment sale contract does not provide for adequate stated interest if the stated interest rate is lower than the test rate (defined later). Filing past tax returns Treatment of unstated interest and OID. Filing past tax returns   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. Filing past tax returns As a result, the buyer cannot deduct the unstated interest. Filing past tax returns The seller must report the unstated interest as income. Filing past tax returns   Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. Filing past tax returns   If the debt is subject to the section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan, or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. Filing past tax returns Rules for the seller. Filing past tax returns   If either section 1274 or section 483 applies to the installment sale contract, you must treat part of the installment sale price as interest, even though interest is not called for in the sales agreement. Filing past tax returns If either section applies, you must reduce the stated selling price of the property and increase your interest income by this unstated interest. Filing past tax returns   Include the unstated interest in income based on your regular method of accounting. Filing past tax returns Include OID in income over the term of the contract. Filing past tax returns   The OID includible in income each year is based on the constant yield method described in section 1272. Filing past tax returns (In some cases, the OID on an installment sale contract also may include all or part of the stated interest, especially if the stated interest is not paid at least annually. Filing past tax returns )   If you do not use the installment method to report the sale, report the entire gain under your method of accounting in the year of sale. Filing past tax returns Reduce the selling price by any stated principal treated as interest to determine the gain. Filing past tax returns   Report unstated interest or OID on your tax return, in addition to stated interest. Filing past tax returns Rules for the buyer. Filing past tax returns   Any part of the stated selling price of an installment sale contract treated by the buyer as interest reduces the buyer's basis in the property and increases the buyer's interest expense. Filing past tax returns These rules do not apply to personal-use property (for example, property not used in a trade or business). Filing past tax returns Adequate stated interest. Filing past tax returns   An installment sale contract generally provides for adequate stated interest if the contract's stated principal amount is at least equal to the sum of the present values of all principal and interest payments called for under the contract. Filing past tax returns The present value of a payment is determined based on the test rate of interest, defined next. Filing past tax returns (If section 483 applies to the contract, payments due within six months after the sale are taken into account at face value. Filing past tax returns ) In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the test rate of interest. Filing past tax returns Test rate of interest. Filing past tax returns   The test rate of interest for a contract is the 3-month rate. Filing past tax returns The 3-month rate is the lower of the following applicable federal rates (AFRs). Filing past tax returns The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the first month in which there is a binding written contract that substantially provides the terms under which the sale or exchange is ultimately completed. Filing past tax returns The lowest AFR (based on the appropriate compounding period) in effect during the 3-month period ending with the month in which the sale or exchange occurs. Filing past tax returns Applicable federal rate (AFR). Filing past tax returns   The AFR depends on the month the binding
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The Filing Past Tax Returns

Filing past tax returns 34. Filing past tax returns   Crédito Tributario por Hijos Table of Contents Introduction Useful Items - You may want to see: Hijo Calificado Cantidad de CréditoLímites del Crédito Cómo Reclamar el Crédito Crédito Tributario Adicional por Hijos Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040)Parte I Partes II a IV Introduction El crédito tributario por hijos es un crédito que puede reducir su impuesto hasta $1,000 por cada uno de sus hijos calificados. Filing past tax returns El crédito tributario adicional por hijos es un crédito que podría tomar en el caso de que no pueda reclamar la cantidad completa del crédito tributario por hijos. Filing past tax returns Este capítulo le explica lo siguiente: Quién es un hijo calificado. Filing past tax returns La cantidad del crédito. Filing past tax returns Cómo se puede reclamar el crédito. Filing past tax returns El crédito tributario por hijos y el crédito tributario adicional por hijos no deben confundirse con el crédito por gastos del cuidado de menores y dependientes, el cual se explica en el capítulo 32. Filing past tax returns Si no está sujeto al pago de impuestos. Filing past tax returns   Algunos créditos, tales como el crédito tributario por hijos o el crédito por gastos del cuidado de menores y dependientes, se usan para reducir el impuesto. Filing past tax returns Si la cantidad del impuesto en la línea 46 del Formulario 1040 o en la línea 28 del Formulario 1040A es cero, no calcule el crédito tributario por hijos ya que no hay impuesto que se pueda reducir. Filing past tax returns Sin embargo, podría reunir los requisitos para el crédito tributario adicional por hijos en la línea 65 (Formulario 1040) o en la línea 39 (Formulario 1040A). Filing past tax returns Useful Items - You may want to see: Publicación 972 Child Tax Credit (Crédito tributario por hijos), en inglés Formulario (e Instrucciones) Anexo 8812   (Formulario 1040A o 1040) Child Tax Credit (Crédito tributario por hijos), en inglés W-4(SP) Certificado de Exención de Retenciones del Empleado W-4 Employee's Withholding Allowance Certificate (Certificado de exención de retenciones del empleado), en inglés Hijo Calificado Un hijo calificado, para propósitos del crédito tributario por hijos, es aquél que: Es su hijo o hija, hijastro o hijastra, hijo de crianza, hermano o hermana, hermanastro o hermanastra o descendiente de cualquiera de ellos (por ejemplo, su nieto, nieta, sobrina o sobrino), Tenía menos de 17 años de edad al finalizar el año 2013, No proveyó más de la mitad de su propia manutención durante el año 2013, Vivió con usted durante más de la mitad del año 2013 (vea Excepciones al tiempo vivido con usted , más adelante), Fue reclamado como dependiente en la declaración de usted, No presenta una declaración conjunta para el año (o la presenta solamente para reclamar un reembolso), y Era ciudadano, nacional o residente de los Estados Unidos. Filing past tax returns Si el hijo fue adoptado, vea Hijo adoptivo , más adelante. Filing past tax returns Para cada hijo calificado, tiene que marcar el recuadro que aparece en la línea 6c del Formulario 1040 o del Formulario 1040A. Filing past tax returns Ejemplo 1. Filing past tax returns Su hijo cumplió 17 años de edad el día 30 de diciembre del año 2013. Filing past tax returns Él es ciudadano de los Estados Unidos y usted lo declara como dependiente en la declaración de impuestos. Filing past tax returns Su hijo no es hijo calificado para el crédito tributario por hijos porque no tenía menos de 17 años de edad al finalizar el año 2013. Filing past tax returns Ejemplo 2. Filing past tax returns Su hija cumplió 8 años en el año 2013. Filing past tax returns Ella no es ciudadana de los Estados Unidos, tiene un ITIN y vivió en México durante todo el año 2013. Filing past tax returns Ella no es un hijo calificado para el crédito tributario por hijos debido a que no fue residente de los Estados Unidos en 2013. Filing past tax returns Contribuyentes que tienen determinados hijos dependientes con un número de identificación personal del contribuyente (ITIN, por sus siglas en inglés). Filing past tax returns   Si está reclamando un crédito tributario por hijos o un crédito tributario adicional por hijos basándose en un hijo que identificó en su declaración de impuestos con un número de identificación personal del contribuyente (ITIN, por sus siglas en inglés), en lugar de un número de Seguro Social (SSN, por sus siglas en inglés), tiene que completar la Parte I del Anexo 8812 (Formulario 1040A o 1040). Filing past tax returns   Aun si su hijo es dependiente suyo, sólo puede reclamar un crédito tributario por hijos o un crédito tributario adicional por hijos basándose en un dependiente que sea ciudadano, nacional o residente de los Estados Unidos. Filing past tax returns Para ser tratado como residente de los Estados Unidos, un hijo normalmente tiene que cumplir el requisito de presencia sustancial. Filing past tax returns Para más información sobre el requisito de presencia sustancial, vea la Publicación 519, U. Filing past tax returns S. Filing past tax returns Tax Guide for Aliens (Guía sobre los impuestos federales estadounidenses para extranjeros), en inglés. Filing past tax returns Hijo adoptivo. Filing past tax returns   A un hijo adoptivo siempre se le trata como si fuera su hijo. Filing past tax returns Un hijo adoptivo incluye un niño colocado en su hogar por una agencia autorizada, con la intención de que sea legalmente adoptado. Filing past tax returns   Si usted es ciudadano o nacional de los EE. Filing past tax returns UU. Filing past tax returns y su hijo adoptivo vivió con usted como integrante de su unidad familiar durante todo el año en 2013, dicho hijo cumple el requisito (7), anteriormente, para ser un hijo calificado para propósitos del crédito tributario por hijos. Filing past tax returns Excepciones al tiempo vivido con usted. Filing past tax returns   Se considera que un hijo vivió con usted más de la mitad del año 2013 si nació o murió en el año 2013, y su hogar (el de usted) fue el hogar del hijo más de la mitad del tiempo en el cual estuvo vivo. Filing past tax returns Las ausencias temporales por usted o su hijo debidas a circunstancias especiales, tales como las ausencias por educación, vacaciones, negocios, atención médica, servicio militar o estancia en un centro de detención para delincuentes juveniles cuentan como tiempo que el hijo vivió con usted. Filing past tax returns   También hay excepciones para hijos secuestrados e hijos de padres divorciados o separados. Filing past tax returns Para detalles, vea Requisito de Residencia , en el capítulo 3. Filing past tax returns Hijo calificado de más de una persona. Filing past tax returns   Se aplica una regla especial si su hijo calificado es el hijo calificado de más de una persona. Filing past tax returns Para detalles, vea Requisito Especial para el Hijo Calificado de Más de una Persona , en el capítulo 3. Filing past tax returns Cantidad de Crédito La cantidad máxima de crédito que puede reclamar es $1,000 por cada hijo calificado. Filing past tax returns Límites del Crédito Usted tiene que reducir su crédito tributario por hijos si la condición (1) o la condición (2) le corresponde: La cantidad de la línea 46 (Formulario 1040) o de la línea 28 (Formulario 1040A) es menor que el crédito. Filing past tax returns Si esta cantidad es cero, no puede reclamar este crédito porque no hay impuesto que se pueda reducir. Filing past tax returns Sin embargo, es posible que pueda tomar el crédito tributario adicional por hijos. Filing past tax returns Vea Crédito Tributario Adicional por Hijos , más adelante. Filing past tax returns Su ingreso bruto ajustado (AGI, por sus siglas en inglés) modificado es mayor que la cantidad que se indica a continuación para su estado civil para efectos de la declaración. Filing past tax returns Casados que presentan una declaración conjunta: $110,000. Filing past tax returns Soltero, cabeza de familia o viudo que reúne los requisitos: $75,000. Filing past tax returns Casados que presentan la declaración por separado: $55,000. Filing past tax returns Ingresos brutos ajustados modificados. Filing past tax returns   Para propósitos del crédito tributario por hijos, su ingreso bruto ajustado (AGI, por sus siglas en inglés) modificado es su ingreso bruto ajustado más las cantidades siguientes que puedan ser aplicables en su caso: Toda cantidad excluida del ingreso debido a la exclusión de ingresos de fuentes de  Puerto Rico. Filing past tax returns En la línea de puntos directamente al lado de la línea 38 del Formulario 1040, anote la cantidad excluida e indentifíquela como “ EPRI. Filing past tax returns ” Además, adjunte una copia de todo Formulario 499R-2/W-2PR a su declaración. Filing past tax returns Toda cantidad de las líneas 45 ó 50 del Formulario 2555, Foreign Earned Income (Ingreso devengado en el extranjero), en inglés. Filing past tax returns Toda cantidad de la línea 18 del Formulario 2555-EZ, Foreign Earned Income Exclusion (Exclusión de ingreso devengado en el extranjero), en inglés. Filing past tax returns Toda cantidad de la línea 15 del Formulario 4563, Exclusion of Income for Bona Fide Residents of American Samoa (Exclusión del ingreso para residentes bona fide de la Samoa Estadounidense), en inglés. Filing past tax returns   Si no tiene ninguna de las cantidades mencionadas anteriormente, su ingreso bruto ajustado modificado es igual a su ingreso bruto ajustado. Filing past tax returns Ingreso bruto ajustado. Filing past tax returns   El ingreso bruto ajustado (AGI, por sus siglas en inglés) es la cantidad de la línea 38 del Formulario 1040 o de la línea 22 del Formulario 1040A. Filing past tax returns Cómo Reclamar el Crédito Para reclamar el crédito tributario por hijos, tiene que presentar el Formulario 1040 o el Formulario 1040A. Filing past tax returns No puede reclamar el crédito tributario por hijos en el Formulario 1040EZ. Filing past tax returns Tiene que proveer el nombre y número de identificación (normalmente el número de Seguro Social) de cada hijo calificado en su declaración de impuestos. Filing past tax returns Si reclama el crédito tributario por hijos con un hijo identificado por un ITIN, usted también tiene que presentar el Anexo 8812. Filing past tax returns Para calcular el crédito, primero revise la Child Tax Credit Worksheet (Hoja de trabajo del crédito tributario por hijos), en las Instrucciones para el Formulario 1040 o el Formulario 1040A. Filing past tax returns Si se le indica que consulte la Publicación 972, Child Tax Credit (Crédito tributario por hijos), en inglés, no puede utilizar la Hoja de trabajo de las instrucciones en la declaración de impuestos; en su lugar, usted tiene que utilizar la Publicación 972, en inglés, para calcular el crédito. Filing past tax returns Si no se le indica que utilice la Publicación 972, puede usar la Hoja de trabajo del crédito tributario por hijos, que se encuentra en las Instrucciones para el Formulario 1040 o las Instrucciones para el Formulario 1040A o la Publicación 972, todas en inglés, para calcular el crédito. Filing past tax returns Crédito Tributario Adicional por Hijos Este crédito es para determinadas personas que reciban menos de la cantidad total del crédito tributario por hijos. Filing past tax returns El crédito tributario adicional por hijos puede darle un reembolso aunque no adeude ningún impuesto. Filing past tax returns Cómo se reclama el crédito tributario adicional por hijos. Filing past tax returns   Para reclamar el crédito tributario adicional por hijos, siga los pasos que aparecen a continuación: Asegúrese de haber calculado la cantidad, si existe, de su crédito tributario por hijos. Filing past tax returns Vea anteriormente el tema titulado Cómo Reclamar el Crédito . Filing past tax returns Use las Partes II a la IV del Anexo 8812 para determinar si puede reclamar el crédito tributario adicional por hijos si usted contestó “Yes” (Sí) en la línea 9 ó 10 de la Child Tax Credit Worksheet (Hoja de trabajo del crédito tributario por hijos) en las Instrucciones para el Formulario 1040 o en las Instrucciones para el Formulario 1040A, o en la línea 13 de la Child Tax Credit Worksheet (Hoja de trabajo del crédito tributario por hijos) en la Publicación 972, todas en inglés. Filing past tax returns Si tiene un crédito tributario adicional por hijos en la línea 13 del Anexo 8812, anótelo en la línea 65 del Formulario 1040 o en la línea 39 del Formulario 1040A. Filing past tax returns Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040) El Anexo 8812 tiene cuatro partes, pero se puede considerar como que consta de dos secciones. Filing past tax returns La Parte I es independiente de las Partes II a la IV. Filing past tax returns Si todos sus hijos tienen números de Seguro Social o números de identificación del contribuyente para adopción del IRS(ATIN, por sus siglas en inglés),y usted no reclama el crédito tributario adicional por hijos, no necesita completar ni adjuntar el Anexo 8812 a su declaración de impuestos. Filing past tax returns Parte I Usted sólo necesitará completar la Parte I si está reclamando el crédito tributario por hijos para un hijo que aparece identificado con un número de identificación personal del contribuyente del IRS (ITIN, por sus siglas en inglés). Filing past tax returns Si todos los hijos por los cuales usted marcó la casilla en la columna 4 de la línea 6c de su Formulario 1040 o Formulario 1040A tienen números de Seguro Social (SSN, por sus siglas en inglés) o números de identificación del contribuyente para adopción del IRS (ATIN, por sus siglas en inglés), no tiene que completar la Parte I del Anexo 8812. Filing past tax returns Partes II a IV Las Partes II a la IV le ayudan a calcular el crédito adicional por hijos que le corresponde a usted. Filing past tax returns Por lo general, deberá completar las Partes II a la IV únicamente si se le indica luego de que completa la Hoja de trabajo del crédito tributario por hijos que aparece en las instrucciones de su declaración de impuestos o en la Publicación 972. Filing past tax returns Vea Cómo se reclama el crédito tributario adicional por hijos , anteriormente. Filing past tax returns Prev  Up  Next   Home   More Online Publications