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Filing State Tax For Free

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Filing State Tax For Free

Filing state tax for free It is tax season again! Figuring out and filing your tax forms can be intimidating – but there is help. Filing state tax for free Here you will find answers, forms and more that will make your paperwork easier, faster and less stressful. Filing state tax for free The information below will help you determine your residency status, find the correct forms you need and give you other information you want to get started. Filing state tax for free
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Problem Alerts

Consumer Alerts

Please note that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

  • ‪If you get an unsolicited email that appears to be from the IRS or a specific IRS component, such as EFTPS, please report it by sending it to phishing@irs.gov. ‪
  • If you find a suspicious website that claims to be the IRS, please send the site’s URL by email to phishing@irs.gov, using the subject line: suspicious website.

For more information on phishing scams, please see Protect Your Personal Information and  Suspicious e-Mails and Identity Theft.

October 2012
Don't Fall for Phony IRS Websites

The IRS warns consumers about a new tax scam that uses a website that mimics the IRS e-Services online registration page.

‪The actual IRS e-Services page offers web-based products for tax preparers, not the general public. The phony web page looks almost identical to the real one.

The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity.

June 2012
Beware of Phony Email from DFAS

Taxpayers should be on the lookout for a new, email-based phishing scam circulating that targets Department of Defense military members, retirees and civilian employees. The email appears to come from Defense Finance and Accounting Services and displays a .mil email address. The email states that those receiving disability compensation from the Department of Veterans Affairs (VA) may be able to obtain additional funds from the IRS. Email recipients are then asked to send various VA and IRS documents containing their personal and financial information, such as copies of VA award letters or their income tax returns, to an address in Florida.

The information on these documents is then used by the scammers to commit identity theft. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards or apply for new loans, credit cards, services or benefits in the victim’s name.

For more information on phishing scams, please see Suspicious e-Mails and Identity Theft.

November 2011
The IRS Warns of Scam Emails

Update Nov. 10, 2011 — A suspected phishing email on the Employer Identification Number (EIN), claiming to come from the IRS Office of Professional Responsibility, is currently circulating. This email was not sent by the IRS. For more information, see Latest News from Office of Professional Responsibility (OPR).

The IRS does not send unsolicited e-mail to taxpayers either about their tax accounts or requesting sensitive personal and financial information.       

Nevertheless, taxpayers do receive e-mails claiming to come from the IRS, sometimes containing a real or made-up employee name, address and similar information to make an e-mail seem credible.    

These e-mails usually are scams whose purpose is to obtain personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — from taxpayers which can be used by the scammers to commit identity theft. Identity thieves use the data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns and more.

Typically, IRS-impersonation scam e-mails state that the IRS needs certain personal and financial information to process a tax return, tax payment or refund. They may claim the e-mail recipient is being audited. They may mention specific monetary amounts or genuine programs, such as the Electronic Federal Tax Payment System (EFTPS), to add credible detail to the scam. The e-mails often contain links or attachments to what appears to be the IRS web site or an IRS form. However genuine in appearance, these phonies are designed to elicit the information the scammers are looking for.

Alternatively, a link in a scam e-mail may download malicious software onto the taxpayer's computer when clicked. The software is often designed to search out and send back to the scammer personal and financial information contained on the taxpayer's computer or obtained through keystrokes that the scammer can use to commit identity theft.             

 



 

Page Last Reviewed or Updated: 27-Sep-2013

The Filing State Tax For Free

Filing state tax for free 3. Filing state tax for free   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Filing state tax for free Form 4797. Filing state tax for free Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Filing state tax for free Granting the right to remove deposits. Filing state tax for free Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Filing state tax for free You must report the income from all the different sources on your tax return, unless it is excluded by law. Filing state tax for free Where you report the income on your tax return depends on its source. Filing state tax for free This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Filing state tax for free For information on where to report other income, see the Instructions for Form 1040, U. Filing state tax for free S. Filing state tax for free Individual Income Tax Return. Filing state tax for free Accounting method. Filing state tax for free   The rules discussed in this chapter assume you use the cash method of accounting. Filing state tax for free Under the cash method, you generally include an item of income in gross income in the year you receive it. Filing state tax for free See Cash Method in chapter 2. Filing state tax for free   If you use an accrual method of accounting, different rules may apply to your situation. Filing state tax for free See Accrual Method in chapter 2. Filing state tax for free Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Filing state tax for free Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Filing state tax for free Use this schedule to figure the net profit or loss from regular farming operations. Filing state tax for free Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Filing state tax for free This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Filing state tax for free It also includes income from the sale of crop shares if you materially participate in producing the crop. Filing state tax for free See Rents (Including Crop Shares) , later. Filing state tax for free Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Filing state tax for free Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Filing state tax for free Land. Filing state tax for free Depreciable farm equipment. Filing state tax for free Buildings and structures. Filing state tax for free Livestock held for draft, breeding, sport, or dairy purposes. Filing state tax for free Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Filing state tax for free Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Filing state tax for free Sales of Farm Products Where to report. Filing state tax for free    Table 3-1 shows where to report the sale of farm products on your tax return. Filing state tax for free Schedule F. Filing state tax for free   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Filing state tax for free This includes money and the fair market value of any property or services you receive. Filing state tax for free When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Filing state tax for free See chapter 6 for information on the basis of assets. Filing state tax for free You generally report these amounts on Schedule F for the year you receive payment. Filing state tax for free Example. Filing state tax for free In 2012, you bought 20 feeder calves for $11,000 for resale. Filing state tax for free You sold them in 2013 for $21,000. Filing state tax for free You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Filing state tax for free Form 4797. Filing state tax for free   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Filing state tax for free In either case, you should always report these sales on Form 4797 instead of Schedule F. Filing state tax for free See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Filing state tax for free Animals you do not hold primarily for sale are considered business assets of your farm. Filing state tax for free Table 3-1. Filing state tax for free Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Filing state tax for free   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Filing state tax for free This applies even if your agent pays you in a later year. Filing state tax for free For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Filing state tax for free Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Filing state tax for free You must meet all the following conditions to qualify. Filing state tax for free Your principal trade or business is farming. Filing state tax for free You use the cash method of accounting. Filing state tax for free You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Filing state tax for free The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Filing state tax for free Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Filing state tax for free The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Filing state tax for free A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Filing state tax for free See Other Involuntary Conversions in chapter 11. Filing state tax for free Usual business practice. Filing state tax for free   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Filing state tax for free Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Filing state tax for free If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Filing state tax for free Connection with affected area. Filing state tax for free   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Filing state tax for free However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Filing state tax for free This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Filing state tax for free Classes of livestock. Filing state tax for free   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Filing state tax for free Do not separate animals into classes based on age, sex, or breed. Filing state tax for free Amount to be postponed. Filing state tax for free   Follow these steps to figure the amount of gain to be postponed for each class of animals. Filing state tax for free Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Filing state tax for free For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Filing state tax for free Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Filing state tax for free Example. Filing state tax for free You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Filing state tax for free As a result of drought, you sold 135 head during 2012. Filing state tax for free You realized $70,200 from the sale. Filing state tax for free On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Filing state tax for free The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Filing state tax for free How to postpone gain. Filing state tax for free   To postpone gain, attach a statement to your tax return for the year of the sale. Filing state tax for free The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Filing state tax for free A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Filing state tax for free Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Filing state tax for free A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Filing state tax for free The number of animals sold in each of the 3 preceding years. Filing state tax for free The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Filing state tax for free The total number of animals sold and the number sold because of weather-related conditions during the tax year. Filing state tax for free A computation, as described above, of the income to be postponed for each class of livestock. Filing state tax for free   Generally, you must file the statement and the return by the due date of the return, including extensions. Filing state tax for free However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Filing state tax for free For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing state tax for free Attach the statement to the amended return and write “Filed pursuant to section 301. Filing state tax for free 9100-2” at the top of the amended return. Filing state tax for free File the amended return at the same address you filed the original return. Filing state tax for free Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Filing state tax for free Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Filing state tax for free However, if you materially participate in farming operations on the land, the rent is farm income. Filing state tax for free See Landlord Participation in Farming in chapter 12. Filing state tax for free Pasture income and rental. Filing state tax for free   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Filing state tax for free You must enter it as Other income on Schedule F. Filing state tax for free If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Filing state tax for free Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Filing state tax for free It does not matter whether you use the cash method of accounting or an accrual method of accounting. Filing state tax for free If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Filing state tax for free See Landlord Participation in Farming in chapter 12. Filing state tax for free Report the rental income on Schedule F. Filing state tax for free If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Filing state tax for free The income is not included in self-employment income. Filing state tax for free Crop shares you use to feed livestock. Filing state tax for free   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Filing state tax for free You must include the fair market value of the crop shares in income at that time. Filing state tax for free You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Filing state tax for free Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Filing state tax for free See  chapter 12. Filing state tax for free Crop shares you give to others (gift). Filing state tax for free   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Filing state tax for free You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Filing state tax for free Example. Filing state tax for free A tenant farmed part of your land under a crop-share arrangement. Filing state tax for free The tenant harvested and delivered the crop in your name to an elevator company. Filing state tax for free Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Filing state tax for free They sell their crop shares in the following year and the elevator company makes payments directly to your children. Filing state tax for free In this situation, you are considered to have received rental income and then made a gift of that income. Filing state tax for free You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Filing state tax for free Crop share loss. Filing state tax for free   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Filing state tax for free See Publication 925 for information on these rules. Filing state tax for free Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Filing state tax for free However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Filing state tax for free See Cost-Sharing Exclusion (Improvements) , later. Filing state tax for free Report the agricultural program payment on the appropriate line of Schedule F, Part I. Filing state tax for free Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Filing state tax for free However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Filing state tax for free Claim the deduction on Schedule F for the year of repayment or reduction. Filing state tax for free Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Filing state tax for free However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Filing state tax for free You do not need approval from the IRS to adopt this method of reporting CCC loans. Filing state tax for free Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Filing state tax for free However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Filing state tax for free For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Filing state tax for free Revenue Procedure 2008-52, 2008-36 I. Filing state tax for free R. Filing state tax for free B. Filing state tax for free 587, is available at  www. Filing state tax for free irs. Filing state tax for free gov/irb/2008-36_IRB/ar09. Filing state tax for free html. Filing state tax for free You can request income tax withholding from CCC loan payments you receive. Filing state tax for free Use Form W-4V, Voluntary Withholding Request. Filing state tax for free See chapter 16 for information about ordering the form. Filing state tax for free To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Filing state tax for free Attach a statement to your return showing the details of the loan. Filing state tax for free You must file the statement and the return by the due date of the return, including extensions. Filing state tax for free If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing state tax for free Attach the statement to the amended return and write “Filed pursuant to section 301. Filing state tax for free 9100-2” at the top of the return. Filing state tax for free File the amended return at the same address you filed the original return. Filing state tax for free When you make this election, the amount you report as income becomes your basis in the commodity. Filing state tax for free See chapter 6 for information on the basis of assets. Filing state tax for free If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Filing state tax for free If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Filing state tax for free If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Filing state tax for free If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Filing state tax for free Form 1099-A. Filing state tax for free   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Filing state tax for free “CCC” should be shown in box 6. Filing state tax for free The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Filing state tax for free Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Filing state tax for free If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Filing state tax for free Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Filing state tax for free Market gain should be reported as follows. Filing state tax for free If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Filing state tax for free However, adjust the basis of the commodity for the amount of the market gain. Filing state tax for free If you did not include the CCC loan in income in the year received, include the market gain in your income. Filing state tax for free The following examples show how to report market gain. Filing state tax for free Example 1. Filing state tax for free Mike Green is a cotton farmer. Filing state tax for free He uses the cash method of accounting and files his tax return on a calendar year basis. Filing state tax for free He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Filing state tax for free In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Filing state tax for free 00 per pound). Filing state tax for free In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Filing state tax for free 50 per pound (lower than the loan amount). Filing state tax for free Later in 2013, he sold the cotton for $2,500. Filing state tax for free The market gain on the redemption was $. Filing state tax for free 50 ($2. Filing state tax for free 00 – $1. Filing state tax for free 50) per pound. Filing state tax for free Mike realized total market gain of $500 ($. Filing state tax for free 50 x 1,000 pounds). Filing state tax for free How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Filing state tax for free Included CCC loan. Filing state tax for free   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Filing state tax for free The $500 market gain is not recognized on the redemption. Filing state tax for free He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Filing state tax for free   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Filing state tax for free His gain from the sale is $1,000 ($2,500 – $1,500). Filing state tax for free He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Filing state tax for free Excluded CCC loan. Filing state tax for free   Mike has income of $500 from market gain in 2013. Filing state tax for free He reports it on Schedule F, lines 4a and 4b. Filing state tax for free His basis in the cotton is zero, so his gain from its sale is $2,500. Filing state tax for free He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Filing state tax for free Example 2. Filing state tax for free The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Filing state tax for free Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Filing state tax for free In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Filing state tax for free How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Filing state tax for free Included CCC loan. Filing state tax for free   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Filing state tax for free The $500 market gain is not recognized on the redemption. Filing state tax for free Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Filing state tax for free   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Filing state tax for free Mike has no gain or loss on its sale to the cotton buyer for that amount. Filing state tax for free Excluded CCC loan. Filing state tax for free   As in Example 1, Mike has income of $500 from market gain in 2013. Filing state tax for free He reports it on Schedule F, lines 4a and 4b. Filing state tax for free His basis in the cotton is zero, so his gain from its sale is $1,500. Filing state tax for free He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Filing state tax for free Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Filing state tax for free You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Filing state tax for free Cost-share payments you receive may qualify for the cost-sharing exclusion. Filing state tax for free See Cost-Sharing Exclusion (Improvements) , later. Filing state tax for free CRP payments are reported to you on Form 1099-G. Filing state tax for free Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Filing state tax for free See the instructions for Schedule SE (Form 1040). Filing state tax for free Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Filing state tax for free You generally include them in the year you receive them. Filing state tax for free Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Filing state tax for free You can request income tax withholding from crop disaster payments you receive from the federal government. Filing state tax for free Use Form W-4V, Voluntary Withholding Request. Filing state tax for free See chapter 16 for information about ordering the form. Filing state tax for free Election to postpone reporting until the following year. Filing state tax for free   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Filing state tax for free You use the cash method of accounting. Filing state tax for free You receive the crop insurance proceeds in the same tax year the crops are damaged. Filing state tax for free You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Filing state tax for free   Deferral is not permitted for proceeds received from revenue insurance policies. Filing state tax for free   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Filing state tax for free Check the box on line 8c and attach a statement to your tax return. Filing state tax for free The statement must include your name and address and contain the following information. Filing state tax for free A statement that you are making an election under IRC section 451(d) and Regulations section 1. Filing state tax for free 451-6. Filing state tax for free The specific crop or crops physically destroyed or damaged. Filing state tax for free A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Filing state tax for free The cause of the physical destruction or damage and the date or dates it occurred. Filing state tax for free The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Filing state tax for free The name of each insurance carrier from whom you received payments. Filing state tax for free   One election covers all crops representing a single trade or business. Filing state tax for free If you have more than one farming business, make a separate election for each one. Filing state tax for free For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Filing state tax for free   An election is binding for the year unless the IRS approves your request to change it. Filing state tax for free To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Filing state tax for free Ogden Submission Processing Center P. Filing state tax for free O. Filing state tax for free Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Filing state tax for free These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Filing state tax for free They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Filing state tax for free Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Filing state tax for free You must include these benefits in income in the year you receive them. Filing state tax for free You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Filing state tax for free Report the benefits on Schedule F, Part I, as agricultural program payments. Filing state tax for free You can usually take a current deduction for the same amount as a feed expense. Filing state tax for free Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Filing state tax for free A payment is any economic benefit you get as a result of an improvement. Filing state tax for free However, this exclusion applies only to that part of a payment that meets all three of the following tests. Filing state tax for free It was for a capital expense. Filing state tax for free You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Filing state tax for free You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Filing state tax for free See chapter 5 for information on deducting soil and water conservation expenses. Filing state tax for free It does not substantially increase your annual income from the property for which it is made. Filing state tax for free An increase in annual income is substantial if it is more than the greater of the following amounts. Filing state tax for free 10% of the average annual income derived from the affected property before receiving the improvement. Filing state tax for free $2. Filing state tax for free 50 times the number of affected acres. Filing state tax for free The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Filing state tax for free Qualifying programs. Filing state tax for free   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Filing state tax for free The rural clean water program authorized by the Federal Water Pollution Control Act. Filing state tax for free The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Filing state tax for free The water bank program authorized by the Water Bank Act. Filing state tax for free The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Filing state tax for free The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Filing state tax for free The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Filing state tax for free The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Filing state tax for free Certain small watershed programs, listed later. Filing state tax for free Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Filing state tax for free Several state programs have been approved. Filing state tax for free For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Filing state tax for free Small watershed programs. Filing state tax for free   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Filing state tax for free The programs under the Watershed Protection and Flood Prevention Act. Filing state tax for free The flood prevention projects under the Flood Control Act of 1944. Filing state tax for free The Emergency Watershed Protection Program under the Flood Control Act of 1950. Filing state tax for free Certain programs under the Colorado River Basin Salinity Control Act. Filing state tax for free The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Filing state tax for free The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Filing state tax for free The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Filing state tax for free The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Filing state tax for free The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Filing state tax for free The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Filing state tax for free The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Filing state tax for free The Conservation Security Program authorized by the Food Security Act of 1985. Filing state tax for free The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Filing state tax for free Income realized. Filing state tax for free   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Filing state tax for free Value of the improvement. Filing state tax for free   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Filing state tax for free The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Filing state tax for free Any government payments under a program not listed earlier. Filing state tax for free Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Filing state tax for free Any government payment to you for rent or for your services. Filing state tax for free The denominator of the fraction is the total cost of the improvement. Filing state tax for free Excludable portion. Filing state tax for free   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Filing state tax for free 10% of the prior average annual income from the affected acreage. Filing state tax for free The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Filing state tax for free $2. Filing state tax for free 50 times the number of affected acres. Filing state tax for free The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Filing state tax for free You may need to consult your tax advisor for assistance. Filing state tax for free Example. Filing state tax for free One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Filing state tax for free The total cost of the improvement was $500,000. Filing state tax for free The USDA paid $490,000. Filing state tax for free You paid $10,000. Filing state tax for free The value of the cost-sharing improvement is $15,000. Filing state tax for free The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Filing state tax for free The excludable portion is the greater amount, $1,550. Filing state tax for free You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Filing state tax for free   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Filing state tax for free Any payment excluded from income is not part of your basis. Filing state tax for free In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Filing state tax for free   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Filing state tax for free How to report the exclusion. Filing state tax for free   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Filing state tax for free The statement must include the following information. Filing state tax for free The dollar amount of the cost funded by the government payment. Filing state tax for free The value of the improvement. Filing state tax for free The amount you are excluding. Filing state tax for free   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Filing state tax for free Recapture. Filing state tax for free   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Filing state tax for free In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Filing state tax for free You must report the recapture on Form 4797. Filing state tax for free See Section 1255 property under Other Gains in chapter 9. Filing state tax for free Electing not to exclude payments. Filing state tax for free   You can elect not to exclude all or part of any payments you receive under these programs. Filing state tax for free If you make this election for all of these payments, none of the above restrictions and rules apply. Filing state tax for free You must make this election by the due date, including extensions, for filing your return. Filing state tax for free In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Filing state tax for free If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing state tax for free Write “Filed pursuant to section 301. Filing state tax for free 9100-2” at the top of the amended return and file it at the same address you filed the original return. Filing state tax for free Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Filing state tax for free You must include these payments on Schedule F, lines 4a and 4b. Filing state tax for free The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Filing state tax for free You must include these payments on Schedule F, lines 6a and 6b. Filing state tax for free The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Filing state tax for free Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Filing state tax for free As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Filing state tax for free If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Filing state tax for free If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Filing state tax for free Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Filing state tax for free Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Filing state tax for free The gain or loss is capital or ordinary depending on how you used the quota. Filing state tax for free See Capital or ordinary gain or loss , later. Filing state tax for free Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Filing state tax for free Adjusted basis. Filing state tax for free   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Filing state tax for free The basis of a quota derived from an original grant by the federal government is zero. Filing state tax for free The basis of a purchased quota is the purchase price. Filing state tax for free The basis of a quota received as a gift is generally the same as the donor's basis. Filing state tax for free However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Filing state tax for free If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Filing state tax for free The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Filing state tax for free Reduction of basis. Filing state tax for free   You are required to reduce the basis of your tobacco quota by the following amounts. Filing state tax for free Deductions you took for amortization, depletion, or depreciation. Filing state tax for free Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Filing state tax for free The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Filing state tax for free Amount treated as interest. Filing state tax for free   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Filing state tax for free The interest is reportable as ordinary income. Filing state tax for free If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Filing state tax for free   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Filing state tax for free You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Filing state tax for free For more information, see Notice 2005-57, 2005-32 I. Filing state tax for free R. Filing state tax for free B. Filing state tax for free 267, available at www. Filing state tax for free irs. Filing state tax for free gov/irb/2005-32_IRB/ar13. Filing state tax for free html. Filing state tax for free Installment method. Filing state tax for free   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Filing state tax for free Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Filing state tax for free See chapter 10 for more information. Filing state tax for free Capital or ordinary gain or loss. Filing state tax for free   Whether your gain or loss is ordinary or capital depends on how you used the quota. Filing state tax for free Quota used in the trade or business of farming. Filing state tax for free   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Filing state tax for free See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Filing state tax for free Quota held for investment. Filing state tax for free   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Filing state tax for free The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Filing state tax for free Gain treated as ordinary income. Filing state tax for free   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Filing state tax for free Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Filing state tax for free The cost of acquiring a quota. Filing state tax for free Amounts for amortization, depletion, or depreciation. Filing state tax for free Amounts to reflect a reduction in the quota pounds. Filing state tax for free   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Filing state tax for free Self-employment income. Filing state tax for free   The tobacco quota buyout payments are not self-employment income. Filing state tax for free Income averaging for farmers. Filing state tax for free   The gain or loss resulting from the quota payments does not qualify for income averaging. Filing state tax for free A tobacco quota is considered an interest in land. Filing state tax for free Income averaging is not available for gain or loss arising from the sale or other disposition of land. Filing state tax for free Involuntary conversion. Filing state tax for free   The buyout of the tobacco quota is not an involuntary conversion. Filing state tax for free Form 1099-S. Filing state tax for free   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Filing state tax for free The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Filing state tax for free Like-kind exchange of quota. Filing state tax for free   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Filing state tax for free See Notice 2005-57 for more information. Filing state tax for free Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Filing state tax for free Taxation of payments to tobacco growers. Filing state tax for free   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Filing state tax for free Individuals will generally report the payments as an Agricultural program payment on Schedule F. Filing state tax for free If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Filing state tax for free Self-employment income. Filing state tax for free   Payments to growers generally represent self-employment income. Filing state tax for free If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Filing state tax for free Income averaging for farmers. Filing state tax for free   Payments to growers who are individuals qualify for farm income averaging. Filing state tax for free Form 1099-G. Filing state tax for free   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Filing state tax for free Other Payments You must include most other government program payments in income. Filing state tax for free Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Filing state tax for free How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Filing state tax for free Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Filing state tax for free You must also capitalize the full cost of the improvement. Filing state tax for free Since you have included the payments in income, they do not reduce your basis. Filing state tax for free However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Filing state tax for free National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Filing state tax for free You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Filing state tax for free If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Filing state tax for free If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Filing state tax for free Payment to More Than One Person The USDA reports program payments to the IRS. Filing state tax for free It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Filing state tax for free If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Filing state tax for free You should file Form 1099-G to report the identity of the actual recipient to the IRS. Filing state tax for free You should also give this information to the recipient. Filing state tax for free You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Filing state tax for free Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Filing state tax for free However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Filing state tax for free See chapter 16 for information about ordering Form 1099-G. Filing state tax for free Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Filing state tax for free If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Filing state tax for free Form 1099-PATR. Filing state tax for free   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Filing state tax for free Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Filing state tax for free For information on the alternative minimum tax, see the Instructions for Form 6251. Filing state tax for free Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Filing state tax for free They include the following items. Filing state tax for free Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Filing state tax for free The stated dollar value of qualified written notices of allocation. Filing state tax for free The fair market value of other property. Filing state tax for free Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Filing state tax for free You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Filing state tax for free Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Filing state tax for free If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Filing state tax for free Qualified written notice of allocation. Filing state tax for free   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Filing state tax for free A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Filing state tax for free The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Filing state tax for free You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Filing state tax for free Signing and giving a written agreement to the cooperative. Filing state tax for free Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Filing state tax for free The cooperative must notify you in writing of this bylaw and give you a copy. Filing state tax for free Endorsing and cashing a qualified check paid as part of the same patronage dividend. Filing state tax for free You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Filing state tax for free Qualified check. Filing state tax for free   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Filing state tax for free It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Filing state tax for free It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Filing state tax for free Loss on redemption. Filing state tax for free   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Filing state tax for free The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Filing state tax for free Nonqualified notice of allocation. Filing state tax for free   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Filing state tax for free Your basis in the notice is zero. Filing state tax for free You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Filing state tax for free Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Filing state tax for free However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Filing state tax for free   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Filing state tax for free For example, if it represents interest income, report it on your return as interest. Filing state tax for free Buying or selling capital assets or depreciable property. Filing state tax for free   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Filing state tax for free You must, however, reduce the basis of these assets by the dividends. Filing state tax for free This reduction is taken into account as of the first day of the tax year in which the dividends are received. Filing state tax for free If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Filing state tax for free   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Filing state tax for free Example. Filing state tax for free On July 1, 2012, Mr. Filing state tax for free Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Filing state tax for free The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Filing state tax for free Mr. Filing state tax for free Brown files his return on a calendar year basis. Filing state tax for free For 2012, he claimed a depreciation deduction of $311, using the 10. Filing state tax for free 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Filing state tax for free On July 2, 2013, the cooperative association paid Mr. Filing state tax for free Brown a $300 cash patronage dividend for buying the machine. Filing state tax for free Mr. Filing state tax for free Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Filing state tax for free Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Filing state tax for free 38% × 1. Filing state tax for free 5 = 23. Filing state tax for free 07% Depreciation deduction for 2013 ($2,289 × 23. Filing state tax for free 07%) $528 Exceptions. Filing state tax for free   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Filing state tax for free If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Filing state tax for free If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Filing state tax for free   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Filing state tax for free Personal purchases. Filing state tax for free   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Filing state tax for free This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Filing state tax for free Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Filing state tax for free A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Filing state tax for free These allocations can be paid in money, other property, or qualified certificates. Filing state tax for free Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Filing state tax for free Qualified certificates. Filing state tax for free   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Filing state tax for free The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Filing state tax for free If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Filing state tax for free Nonqualified certificates. Filing state tax for free   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Filing state tax for free Your basis in the certificate is zero. Filing state tax for free You must include in income any amount you receive from its sale, redemption, or other disposition. Filing state tax for free Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Filing state tax for free Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Filing state tax for free For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Filing state tax for free General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Filing state tax for free Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Filing state tax for free It is excluded from taxable income (see Exclusions , later). Filing state tax for free Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Filing state tax for free If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Filing state tax for free Election to defer income from discharge of indebtedness. Filing state tax for free   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Filing state tax for free Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Filing state tax for free See IRC section 108(i) and Publication 4681 for details. Filing state tax for free Form 1099-C. Filing state tax for free   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Filing state tax for free The amount of debt canceled is shown in box 2. Filing state tax for free Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Filing state tax for free These exceptions apply before the exclusions discussed below. Filing state tax for free Price reduced after purchase. Filing state tax for free   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Filing state tax for free Reduce your basis in the property by the amount of the reduction in the debt. Filing state tax for free The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Filing state tax for free Deductible debt. Filing state tax for free   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Filing state tax for free This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Filing state tax for free Example. Filing state tax for free You get accounting services for your farm on credit. Filing state tax for free Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Filing state tax for free Your accountant forgives part of the amount you owe for the accounting services. Filing state tax for free How you treat the canceled debt depends on your method of accounting. Filing state tax for free Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Filing state tax for free Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Filing state tax for free Exclusions Do not include canceled debt in income in the following situations. Filing state tax for free The cancellation takes place in a bankruptcy case under title 11 of the U. Filing state tax for free S. Filing state tax for free Code. Filing state tax for free The cancellation takes place when you are insolvent. Filing state tax for free The canceled debt is a qualified farm debt. Filing state tax for free The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Filing state tax for free See Publication 334, Tax Guide for Small Business, chapter 5. Filing state tax for free The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Filing state tax for free The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Filing state tax for free If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Filing state tax for free If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Filing state tax for free See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Filing state tax for free Debt. Filing state tax for free   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Filing state tax for free Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Filing state tax for free Bankruptcy. Filing state tax for free   A bankruptcy case is a case under title 11 of the U. Filing state tax for free S. Filing state tax for free Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Filing state tax for free   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Filing state tax for free Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Filing state tax for free Insolvency. Filing state tax for free   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Filing state tax for free   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Filing state tax for free If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Filing state tax for free Otherwise, you include the difference in gross income. Filing state tax for free Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Filing state tax for free You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Filing state tax for free Example. Filing state tax for free You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Filing state tax for free Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Filing state tax for free Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Filing state tax for free You can exclude this amount from income. Filing state tax for free The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Filing state tax for free If not, you must include it in income. Filing state tax for free Reduction of tax attributes. Filing state tax for free   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Filing state tax for free Order of reduction. Filing state tax for free   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Filing state tax for free Net operating loss (NOL). Filing state tax for free Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Filing state tax for free Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Filing state tax for free General business credit carryover. Filing state tax for free Reduce the credit carryover to or from the tax year of the debt cancellation. Filing state tax for free Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Filing state tax for free Minimum tax credit. Filing state tax for free Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Filing state tax for free Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Filing state tax for free Capital loss. Filing state tax for free Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Filing state tax for free Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Filing state tax for free Basis. Filing state tax for free Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Filing state tax for free Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Filing state tax for free Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Filing state tax for free Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Filing state tax for free Inventory and accounts and notes receivable. Filing state tax for free Other property. Filing state tax for free Reduce the basis one dollar for each dollar of excluded canceled debt. Filing state tax for free However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Filing state tax for free For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Filing state tax for free 1017-1(b)(2). Filing state tax for free Also see Electing to reduce the basis of depreciable property