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Filing Tax Amendment

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Filing Tax Amendment

Filing tax amendment 15. Filing tax amendment   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. Filing tax amendment More information. Filing tax amendment Special SituationsException for sales to related persons. Filing tax amendment Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. Filing tax amendment  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. Filing tax amendment See Mortgage ending early under Points in chapter 23. Filing tax amendment Introduction This chapter explains the tax rules that apply when you sell your main home. Filing tax amendment In most cases, your main home is the one in which you live most of the time. Filing tax amendment If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Filing tax amendment See Excluding the Gain , later. Filing tax amendment Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Filing tax amendment If you have gain that cannot be excluded, it is taxable. Filing tax amendment Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). Filing tax amendment You may also have to complete Form 4797, Sales of Business Property. Filing tax amendment See Reporting the Sale , later. Filing tax amendment If you have a loss on the sale, you generally cannot deduct it on your return. Filing tax amendment However, you may need to report it. Filing tax amendment See Reporting the Sale , later. Filing tax amendment The following are main topics in this chapter. Filing tax amendment Figuring gain or loss. Filing tax amendment Basis. Filing tax amendment Excluding the gain. Filing tax amendment Ownership and use tests. Filing tax amendment Reporting the sale. Filing tax amendment Other topics include the following. Filing tax amendment Business use or rental of home. Filing tax amendment Recapturing a federal mortgage subsidy. Filing tax amendment Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. Filing tax amendment ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Filing tax amendment To exclude gain under the rules of this chapter, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Filing tax amendment Land. Filing tax amendment   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Filing tax amendment However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. Filing tax amendment See Vacant land under Main Home in Publication 523 for more information. Filing tax amendment Example. Filing tax amendment You buy a piece of land and move your main home to it. Filing tax amendment Then you sell the land on which your main home was located. Filing tax amendment This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Filing tax amendment More than one home. Filing tax amendment   If you have more than one home, you can exclude gain only from the sale of your main home. Filing tax amendment You must include in income gain from the sale of any other home. Filing tax amendment If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. Filing tax amendment Example 1. Filing tax amendment You own two homes, one in New York and one in Florida. Filing tax amendment From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Filing tax amendment In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Filing tax amendment You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Filing tax amendment Example 2. Filing tax amendment You own a house, but you live in another house that you rent. Filing tax amendment The rented house is your main home. Filing tax amendment Example 3. Filing tax amendment You own two homes, one in Virginia and one in New Hampshire. Filing tax amendment In 2009 and 2010, you lived in the Virginia home. Filing tax amendment In 2011 and 2012, you lived in the New Hampshire home. Filing tax amendment In 2013, you lived again in the Virginia home. Filing tax amendment Your main home in 2009, 2010, and 2013 is the Virginia home. Filing tax amendment Your main home in 2011 and 2012 is the New Hampshire home. Filing tax amendment You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Filing tax amendment Property used partly as your main home. Filing tax amendment   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Filing tax amendment For details, see Business Use or Rental of Home , later. Filing tax amendment Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Filing tax amendment Subtract the adjusted basis from the amount realized to get your gain or loss. Filing tax amendment     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. Filing tax amendment It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Filing tax amendment Payment by employer. Filing tax amendment   You may have to sell your home because of a job transfer. Filing tax amendment If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Filing tax amendment Your employer will include it as wages in box 1 of your Form W-2, and you will include it in your income on Form 1040, line 7. Filing tax amendment Option to buy. Filing tax amendment   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Filing tax amendment If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Filing tax amendment Report this amount on Form 1040, line 21. Filing tax amendment Form 1099-S. Filing tax amendment   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. Filing tax amendment   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Filing tax amendment Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Filing tax amendment Amount Realized The amount realized is the selling price minus selling expenses. Filing tax amendment Selling expenses. Filing tax amendment   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Filing tax amendment ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Filing tax amendment This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Filing tax amendment For information on how to figure your home's adjusted basis, see Determining Basis , later. Filing tax amendment Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Filing tax amendment Gain on sale. Filing tax amendment   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. Filing tax amendment Loss on sale. Filing tax amendment   If the amount realized is less than the adjusted basis, the difference is a loss. Filing tax amendment A loss on the sale of your main home cannot be deducted. Filing tax amendment Jointly owned home. Filing tax amendment   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Filing tax amendment Separate returns. Filing tax amendment   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Filing tax amendment Your ownership interest is generally determined by state law. Filing tax amendment Joint owners not married. Filing tax amendment   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Filing tax amendment Each of you applies the rules discussed in this chapter on an individual basis. Filing tax amendment Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Filing tax amendment Foreclosure or repossession. Filing tax amendment   If your home was foreclosed on or repossessed, you have a disposition. Filing tax amendment See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. Filing tax amendment Abandonment. Filing tax amendment   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Filing tax amendment Trading (exchanging) homes. Filing tax amendment   If you trade your old home for another home, treat the trade as a sale and a purchase. Filing tax amendment Example. Filing tax amendment You owned and lived in a home with an adjusted basis of $41,000. Filing tax amendment A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Filing tax amendment This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). Filing tax amendment If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Filing tax amendment Transfer to spouse. Filing tax amendment   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss. Filing tax amendment This is true even if you receive cash or other consideration for the home. Filing tax amendment As a result, the rules in this chapter do not apply. Filing tax amendment More information. Filing tax amendment   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. Filing tax amendment Involuntary conversion. Filing tax amendment   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Filing tax amendment This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations . Filing tax amendment Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Filing tax amendment Your basis in your home is determined by how you got the home. Filing tax amendment Generally, your basis is its cost if you bought it or built it. Filing tax amendment If you got it in some other way (inheritance, gift, etc. Filing tax amendment ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Filing tax amendment While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Filing tax amendment The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Filing tax amendment See Adjusted Basis , later. Filing tax amendment You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. Filing tax amendment Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Filing tax amendment Purchase. Filing tax amendment   If you bought your home, your basis is its cost to you. Filing tax amendment This includes the purchase price and certain settlement or closing costs. Filing tax amendment In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Filing tax amendment If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. Filing tax amendment Settlement fees or closing costs. Filing tax amendment   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Filing tax amendment You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Filing tax amendment A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Filing tax amendment    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. Filing tax amendment It also lists some settlement costs that cannot be included in basis. Filing tax amendment   Also see Publication 523 for additional items and a discussion of basis other than cost. Filing tax amendment Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Filing tax amendment To figure your adjusted basis, you can use Worksheet 1 in Publication 523. Filing tax amendment Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. Filing tax amendment Increases to basis. Filing tax amendment   These include the following. Filing tax amendment Additions and other improvements that have a useful life of more than 1 year. Filing tax amendment Special assessments for local improvements. Filing tax amendment Amounts you spent after a casualty to restore damaged property. Filing tax amendment Improvements. Filing tax amendment   These add to the value of your home, prolong its useful life, or adapt it to new uses. Filing tax amendment You add the cost of additions and other improvements to the basis of your property. Filing tax amendment   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. Filing tax amendment An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. Filing tax amendment Repairs. Filing tax amendment   These maintain your home in good condition but do not add to its value or prolong its life. Filing tax amendment You do not add their cost to the basis of your property. Filing tax amendment   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. Filing tax amendment Decreases to basis. Filing tax amendment   These include the following. Filing tax amendment Discharge of qualified principal residence indebtedness that was excluded from income. Filing tax amendment Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Filing tax amendment For details, see Publication 4681. Filing tax amendment Gain you postponed from the sale of a previous home before May 7, 1997. Filing tax amendment Deductible casualty losses. Filing tax amendment Insurance payments you received or expect to receive for casualty losses. Filing tax amendment Payments you received for granting an easement or right-of-way. Filing tax amendment Depreciation allowed or allowable if you used your home for business or rental purposes. Filing tax amendment Energy-related credits allowed for expenditures made on the residence. Filing tax amendment (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Filing tax amendment ) Adoption credit you claimed for improvements added to the basis of your home. Filing tax amendment Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Filing tax amendment Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Filing tax amendment An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Filing tax amendment District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). Filing tax amendment General sales taxes (allowed beginning 2004 and ending before 2014) claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Filing tax amendment Discharges of qualified principal residence indebtedness. Filing tax amendment   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Filing tax amendment This exclusion applies to discharges made after 2006 and before 2014. Filing tax amendment If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. Filing tax amendment   File Form 982 with your tax return. Filing tax amendment See the form's instructions for detailed information. Filing tax amendment Recordkeeping. Filing tax amendment You should keep records to prove your home's adjusted basis. Filing tax amendment Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Filing tax amendment But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Filing tax amendment Keep records proving the basis of both homes as long as they are needed for tax purposes. Filing tax amendment The records you should keep include: Proof of the home's purchase price and purchase expenses, Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis, Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain, Any Form 982 you filed to report any discharge of qualified principal residence indebtedness, Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997, and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Filing tax amendment Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Filing tax amendment This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Filing tax amendment To qualify, you must meet the ownership and use tests described later. Filing tax amendment You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Filing tax amendment You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. Filing tax amendment If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Filing tax amendment See Publication 505, Tax Withholding and Estimated Tax. Filing tax amendment Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Filing tax amendment You meet the ownership test. Filing tax amendment You meet the use test. Filing tax amendment During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Filing tax amendment For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. Filing tax amendment You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Filing tax amendment Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Filing tax amendment This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Filing tax amendment Exception. Filing tax amendment   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Filing tax amendment However, the maximum amount you may be able to exclude will be reduced. Filing tax amendment See Reduced Maximum Exclusion , later. Filing tax amendment Example 1—home owned and occupied for at least 2 years. Filing tax amendment Mya bought and moved into her main home in September 2011. Filing tax amendment She sold the home at a gain in October 2013. Filing tax amendment During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Filing tax amendment She meets the ownership and use tests. Filing tax amendment Example 2—ownership test met but use test not met. Filing tax amendment Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Filing tax amendment He later sold the home for a gain. Filing tax amendment He owned the home during the entire 5-year period ending on the date of sale. Filing tax amendment He meets the ownership test but not the use test. Filing tax amendment He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Filing tax amendment Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Filing tax amendment You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Filing tax amendment Temporary absence. Filing tax amendment   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Filing tax amendment The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Filing tax amendment Example 1. Filing tax amendment David Johnson, who is single, bought and moved into his home on February 1, 2011. Filing tax amendment Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Filing tax amendment David sold the house on March 1, 2013. Filing tax amendment Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. Filing tax amendment The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Filing tax amendment Example 2. Filing tax amendment Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. Filing tax amendment He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. Filing tax amendment On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. Filing tax amendment Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Filing tax amendment He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. Filing tax amendment Ownership and use tests met at different times. Filing tax amendment   You can meet the ownership and use tests during different 2-year periods. Filing tax amendment However, you must meet both tests during the 5-year period ending on the date of the sale. Filing tax amendment Example. Filing tax amendment Beginning in 2002, Helen Jones lived in a rented apartment. Filing tax amendment The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Filing tax amendment In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Filing tax amendment On July 12, 2013, while still living in her daughter's home, she sold her condominium. Filing tax amendment Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Filing tax amendment She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Filing tax amendment She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Filing tax amendment The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Filing tax amendment Cooperative apartment. Filing tax amendment   If you sold stock as a tenant-stockholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitles you to occupy as your main home for at least 2 years. Filing tax amendment Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Filing tax amendment Exception for individuals with a disability. Filing tax amendment   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Filing tax amendment Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Filing tax amendment If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Filing tax amendment Previous home destroyed or condemned. Filing tax amendment   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Filing tax amendment This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home. Filing tax amendment Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Filing tax amendment Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Filing tax amendment   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on “qualified official extended duty” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Filing tax amendment You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on "qualified official extended duty" or as an enrolled volunteer or volunteer leader of the Peace Corps. Filing tax amendment This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Filing tax amendment   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Filing tax amendment For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. Filing tax amendment Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Filing tax amendment (But see Special rules for joint returns , next. Filing tax amendment ) Special rules for joint returns. Filing tax amendment   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Filing tax amendment You are married and file a joint return for the year. Filing tax amendment Either you or your spouse meets the ownership test. Filing tax amendment Both you and your spouse meet the use test. Filing tax amendment During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Filing tax amendment If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Filing tax amendment For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Filing tax amendment Example 1—one spouse sells a home. Filing tax amendment Emily sells her home in June 2013 for a gain of $300,000. Filing tax amendment She marries Jamie later in the year. Filing tax amendment She meets the ownership and use tests, but Jamie does not. Filing tax amendment Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Filing tax amendment The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Filing tax amendment Example 2—each spouse sells a home. Filing tax amendment The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Filing tax amendment He meets the ownership and use tests on his home, but Emily does not. Filing tax amendment Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Filing tax amendment However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Filing tax amendment Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Filing tax amendment The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Filing tax amendment Sale of main home by surviving spouse. Filing tax amendment   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Filing tax amendment   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Filing tax amendment The sale or exchange took place after 2008. Filing tax amendment The sale or exchange took place no more than 2 years after the date of death of your spouse. Filing tax amendment You have not remarried. Filing tax amendment You and your spouse met the use test at the time of your spouse's death. Filing tax amendment You or your spouse met the ownership test at the time of your spouse's death. Filing tax amendment Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Filing tax amendment Example. Filing tax amendment   Harry owned and used a house as his main home since 2009. Filing tax amendment Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. Filing tax amendment Harry died on August 15, 2013, and Wilma inherited the property. Filing tax amendment Wilma sold the property on September 3, 2013, at which time she had not remarried. Filing tax amendment Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Filing tax amendment Home transferred from spouse. Filing tax amendment   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Filing tax amendment Use of home after divorce. Filing tax amendment   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Filing tax amendment Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Filing tax amendment This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Filing tax amendment In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Filing tax amendment A change in place of employment. Filing tax amendment Health. Filing tax amendment Unforeseen circumstances. Filing tax amendment Unforeseen circumstances. Filing tax amendment   The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. Filing tax amendment   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. Filing tax amendment Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income. Filing tax amendment But you must meet the ownership and use tests. Filing tax amendment Periods of nonqualified use. Filing tax amendment   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. Filing tax amendment Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. Filing tax amendment Exceptions. Filing tax amendment   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Filing tax amendment The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. Filing tax amendment Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. Filing tax amendment Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. Filing tax amendment Calculation. Filing tax amendment   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:   Total nonqualified use during the period of ownership after 2008      Total period of ownership     This calculation can be found in Worksheet 2, line 10, in Publication 523. Filing tax amendment Example 1. Filing tax amendment On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Filing tax amendment She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Filing tax amendment The house was rented from June 1, 2009, to March 31, 2011. Filing tax amendment Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Filing tax amendment Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Filing tax amendment During the 5-year period ending on the date of the sale (January 31, 2008-January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Filing tax amendment Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 1/31/13 22 months         38 months 22 months During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Filing tax amendment Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. Filing tax amendment 321. Filing tax amendment To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. Filing tax amendment 321. Filing tax amendment Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. Filing tax amendment Example 2. Filing tax amendment William owned and used a house as his main home from 2007 through 2010. Filing tax amendment On January 1, 2011, he moved to another state. Filing tax amendment He rented his house from that date until April 30, 2013, when he sold it. Filing tax amendment During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Filing tax amendment He must report the sale on Form 4797 because it was rental property at the time of sale. Filing tax amendment Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Filing tax amendment Because he met the ownership and use tests, he can exclude gain up to $250,000. Filing tax amendment However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Filing tax amendment Depreciation after May 6, 1997. Filing tax amendment   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Filing tax amendment If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Filing tax amendment See Publication 544 for more information. Filing tax amendment Property used partly for business or rental. Filing tax amendment   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. Filing tax amendment Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. Filing tax amendment If any of these conditions apply, report the entire gain or loss. Filing tax amendment For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. Filing tax amendment If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). Filing tax amendment See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. Filing tax amendment Installment sale. Filing tax amendment    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. Filing tax amendment These sales are called “installment sales. Filing tax amendment ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. Filing tax amendment You may be able to report the part of the gain you cannot exclude on the installment basis. Filing tax amendment    Use Form 6252, Installment Sale Income, to report the sale. Filing tax amendment Enter your exclusion on line 15 of Form 6252. Filing tax amendment Seller-financed mortgage. Filing tax amendment   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. Filing tax amendment You must separately report as interest income the interest you receive as part of each payment. Filing tax amendment If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). Filing tax amendment The buyer must give you his or her SSN, and you must give the buyer your SSN. Filing tax amendment Failure to meet these requirements may result in a $50 penalty for each failure. Filing tax amendment If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. Filing tax amendment More information. Filing tax amendment   For more information on installment sales, see Publication 537, Installment Sales. Filing tax amendment Special Situations The situations that follow may affect your exclusion. Filing tax amendment Sale of home acquired in a like-kind exchange. Filing tax amendment   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. Filing tax amendment Gain from a like-kind exchange is not taxable at the time of the exchange. Filing tax amendment This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. Filing tax amendment To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. Filing tax amendment For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. Filing tax amendment Home relinquished in a like-kind exchange. Filing tax amendment   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. Filing tax amendment Expatriates. Filing tax amendment   You cannot claim the exclusion if the expatriation tax applies to you. Filing tax amendment The expatriation tax applies to certain U. Filing tax amendment S. Filing tax amendment citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). Filing tax amendment For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. Filing tax amendment S. Filing tax amendment Tax Guide for Aliens. Filing tax amendment Home destroyed or condemned. Filing tax amendment   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. Filing tax amendment   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. Filing tax amendment Sale of remainder interest. Filing tax amendment   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. Filing tax amendment If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. Filing tax amendment Exception for sales to related persons. Filing tax amendment   You cannot exclude gain from the sale of a remainder interest in your home to a related person. Filing tax amendment Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Filing tax amendment ), and lineal descendants (children, grandchildren, etc. Filing tax amendment ). Filing tax amendment Related persons also include certain corporations, partnerships, trusts, and exempt organizations. Filing tax amendment Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Filing tax amendment You recapture the benefit by increasing your federal income tax for the year of the sale. Filing tax amendment You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. Filing tax amendment Loans subject to recapture rules. Filing tax amendment   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. Filing tax amendment The recapture also applies to assumptions of these loans. Filing tax amendment When recapture applies. Filing tax amendment   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. Filing tax amendment You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. Filing tax amendment Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). Filing tax amendment When recapture does not apply. Filing tax amendment   Recapture does not apply in any of the following situations. Filing tax amendment Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. Filing tax amendment Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. Filing tax amendment For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. Filing tax amendment Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Filing tax amendment The home is disposed of as a result of your death. Filing tax amendment You dispose of the home more than 9 years after the date you closed your mortgage loan. Filing tax amendment You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. Filing tax amendment You dispose of the home at a loss. Filing tax amendment Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. Filing tax amendment The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. Filing tax amendment For more information, see Replacement Period in Publication 547. Filing tax amendment You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). Filing tax amendment Notice of amounts. Filing tax amendment   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. Filing tax amendment How to figure and report the recapture. Filing tax amendment    The recapture tax is figured on Form 8828. Filing tax amendment If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. Filing tax amendment Attach Form 8828 to your Form 1040. Filing tax amendment For more information, see Form 8828 and its instructions. Filing tax amendment Prev  Up  Next   Home   More Online Publications
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Native American and Tribal Legal Resources

Find legal topics and resources on the Indian Trust program, NEPA, tax status, and more.

The Filing Tax Amendment

Filing tax amendment 1. Filing tax amendment   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. Filing tax amendment This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. Filing tax amendment Tax records are not the only type of records you need to keep for your farming business. Filing tax amendment You should also keep records that measure your farm's financial performance. Filing tax amendment This publication only discusses tax records. Filing tax amendment The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. Filing tax amendment For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. Filing tax amendment ffsc. Filing tax amendment org. Filing tax amendment For more information, contact Countryside Marketing, Inc. Filing tax amendment in the following manner. Filing tax amendment Call 262-253-6902. Filing tax amendment Send a fax to 262-253-6903. Filing tax amendment Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. Filing tax amendment , #287 Menomonee Falls, WI 53051. Filing tax amendment Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. Filing tax amendment Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. Filing tax amendment Recordkeeping will help you do the following. Filing tax amendment Monitor the progress of your farming business. Filing tax amendment   You need records to monitor the progress of your farming business. Filing tax amendment Records can show whether your business is improving, which items are selling, or what changes you need to make. Filing tax amendment Records can help you make better decisions that may increase the likelihood of business success. Filing tax amendment Prepare your financial statements. Filing tax amendment   You need records to prepare accurate financial statements. Filing tax amendment These include income (profit and loss) statements and balance sheets. Filing tax amendment These statements can help you in dealing with your bank or creditors and help you to manage your farm business. Filing tax amendment Identify source of receipts. Filing tax amendment   You will receive money or property from many sources. Filing tax amendment Your records can identify the source of your receipts. Filing tax amendment You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. Filing tax amendment Keep track of deductible expenses. Filing tax amendment   You may forget expenses when you prepare your tax return unless you record them when they occur. Filing tax amendment Prepare your tax returns. Filing tax amendment   You need records to prepare your tax return. Filing tax amendment For example, your records must support the income, expenses, and credits you report. Filing tax amendment Generally, these are the same records you use to monitor your farming business and prepare your financial statements. Filing tax amendment Support items reported on tax returns. Filing tax amendment   You must keep your business records available at all times for inspection by the IRS. Filing tax amendment If the IRS examines any of your tax returns, you may be asked to explain the items reported. Filing tax amendment A complete set of records will speed up the examination. Filing tax amendment Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Filing tax amendment You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. Filing tax amendment You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Filing tax amendment See  chapter 2. Filing tax amendment If you are in more than one business, you should keep a complete and separate set of records for each business. Filing tax amendment A corporation should keep minutes of board of directors' meetings. Filing tax amendment Your recordkeeping system should include a summary of your business transactions. Filing tax amendment This summary is ordinarily made in accounting journals and ledgers. Filing tax amendment For example, they must show your gross income, as well as your deductions and credits. Filing tax amendment In addition, you must keep supporting documents. Filing tax amendment Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. Filing tax amendment These documents contain the information you need to record in your journals and ledgers. Filing tax amendment It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. Filing tax amendment Keep them in an orderly fashion and in a safe place. Filing tax amendment For instance, organize them by year and type of income or expense. Filing tax amendment Electronic records. Filing tax amendment   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Filing tax amendment When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Filing tax amendment An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Filing tax amendment The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Filing tax amendment All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Filing tax amendment Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Filing tax amendment The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Filing tax amendment You still have the responsibility of retaining any other books and records that are required to be retained. Filing tax amendment The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Filing tax amendment This test is not considered an examination and the results must be shared with you. Filing tax amendment If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Filing tax amendment If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. Filing tax amendment For details on electronic storage system requirements, see Rev. Filing tax amendment Proc. Filing tax amendment 97-22. Filing tax amendment You can find Rev. Filing tax amendment Proc. Filing tax amendment 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. Filing tax amendment irs. Filing tax amendment gov/pub/irs-irbs/irb97-13. Filing tax amendment pdf. Filing tax amendment Travel, transportation, entertainment, and gift expenses. Filing tax amendment   Specific recordkeeping rules apply to these expenses. Filing tax amendment For more information, see Publication 463. Filing tax amendment Employment taxes. Filing tax amendment   There are specific employment tax records you must keep. Filing tax amendment For a list, see Publication 51 (Circular A). Filing tax amendment Excise taxes. Filing tax amendment   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. Filing tax amendment Assets. Filing tax amendment   Assets are the property, such as machinery and equipment, you own and use in your business. Filing tax amendment You must keep records to verify certain information about your business assets. Filing tax amendment You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. Filing tax amendment Your records should show all the following. Filing tax amendment When and how you acquired the asset. Filing tax amendment Purchase price. Filing tax amendment Cost of any improvements. Filing tax amendment Section 179 deduction taken. Filing tax amendment Deductions taken for depreciation. Filing tax amendment Deductions taken for casualty losses, such as losses resulting from fires or storms. Filing tax amendment How you used the asset. Filing tax amendment When and how you disposed of the asset. Filing tax amendment Selling price. Filing tax amendment Expenses of sale. Filing tax amendment   The following are examples of records that may show this information. Filing tax amendment Purchase and sales invoices. Filing tax amendment Real estate closing statements. Filing tax amendment Canceled checks. Filing tax amendment Bank statements. Filing tax amendment Financial account statements as proof of payment. Filing tax amendment   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Filing tax amendment These include account statements prepared for the financial institution by a third party. Filing tax amendment These account statements must be legible. Filing tax amendment The following table lists acceptable account statements. Filing tax amendment IF payment is by. Filing tax amendment . Filing tax amendment . Filing tax amendment THEN the statement must show the. Filing tax amendment . Filing tax amendment . Filing tax amendment Check Check number. Filing tax amendment Amount. Filing tax amendment Payee's name. Filing tax amendment Date the check amount was posted to the account by the financial institution. Filing tax amendment Electronic funds  transfer Amount transferred. Filing tax amendment Payee's name. Filing tax amendment Date the transfer was posted to the account by the financial institution. Filing tax amendment Credit card Amount charged. Filing tax amendment Payee's name. Filing tax amendment Transaction date. Filing tax amendment    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Filing tax amendment You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Filing tax amendment Tax returns. Filing tax amendment   Keep copies of your filed tax returns. Filing tax amendment They help in preparing future tax returns and making computations if you file an amended return. Filing tax amendment Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. Filing tax amendment How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Filing tax amendment Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. Filing tax amendment A period of limitations is the period of time after which no legal action can be brought. Filing tax amendment Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. Filing tax amendment However, certain records must be kept for a longer period of time, as discussed below. Filing tax amendment Employment taxes. Filing tax amendment   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Filing tax amendment Assets. Filing tax amendment   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Filing tax amendment You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. Filing tax amendment   You may need to keep records relating to the basis of property longer than the period of limitation. Filing tax amendment Keep those records as long as they are important in figuring the basis of the original or replacement property. Filing tax amendment Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Filing tax amendment For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Filing tax amendment For more information on basis, see chapter 6. Filing tax amendment Records for nontax purposes. Filing tax amendment   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Filing tax amendment For example, your insurance company or creditors may require you to keep them longer than the IRS does. Filing tax amendment Prev  Up  Next   Home   More Online Publications