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Free Website To File State Taxes

Free website to file state taxes Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. Free website to file state taxes For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. Free website to file state taxes If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. Free website to file state taxes Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. Free website to file state taxes A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. Free website to file state taxes Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. Free website to file state taxes Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). Free website to file state taxes It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. Free website to file state taxes A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. Free website to file state taxes Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. Free website to file state taxes It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. Free website to file state taxes Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. Free website to file state taxes Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. Free website to file state taxes Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Free website to file state taxes Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Free website to file state taxes Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. Free website to file state taxes Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. Free website to file state taxes Listed property placed in service before 1987. Free website to file state taxes   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. Free website to file state taxes Listed property placed in service after 1986. Free website to file state taxes   For information on listed property placed in service after 1986, see Publication 946. Free website to file state taxes Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. Free website to file state taxes You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. Free website to file state taxes The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. Free website to file state taxes However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. Free website to file state taxes Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. Free website to file state taxes Example. Free website to file state taxes Sarah Bradley uses a home computer 50% of the time to manage her investments. Free website to file state taxes She also uses the computer 40% of the time in her part-time consumer research business. Free website to file state taxes Sarah's home computer is listed property because it is not used at a regular business establishment. Free website to file state taxes Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. Free website to file state taxes Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. Free website to file state taxes Her combined rate of business/investment use for determining her depreciation deduction is 90%. Free website to file state taxes Qualified Business Use A qualified business use is any use in your trade or business. Free website to file state taxes However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. Free website to file state taxes See Employees, later. Free website to file state taxes 5% owner. Free website to file state taxes   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. Free website to file state taxes   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Free website to file state taxes Related person. Free website to file state taxes   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. Free website to file state taxes Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. Free website to file state taxes See Publication 463. Free website to file state taxes Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. Free website to file state taxes Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. Free website to file state taxes Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. Free website to file state taxes Any payment to you for the use of the automobile is treated as a rent payment for 3). Free website to file state taxes Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. Free website to file state taxes Use for the employer's convenience. Free website to file state taxes   Whether the use of listed property is for the employer's convenience must be determined from all the facts. Free website to file state taxes The use is for the employer's convenience if it is for a substantial business reason of the employer. Free website to file state taxes The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. Free website to file state taxes Use required as a condition of employment. Free website to file state taxes   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. Free website to file state taxes The use of property must be required for the employee to perform duties properly. Free website to file state taxes The employer need not explicitly require the employee to use the property. Free website to file state taxes A mere statement by the employer that the use of the property is a condition of employment is not sufficient. Free website to file state taxes Example 1. Free website to file state taxes Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. Free website to file state taxes She owns and uses a motorcycle to deliver packages to downtown offices. Free website to file state taxes We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. Free website to file state taxes The company reimburses delivery persons for their costs. Free website to file state taxes Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Free website to file state taxes Example 2. Free website to file state taxes Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Free website to file state taxes He must travel to these sites on a regular basis. Free website to file state taxes Uplift does not furnish an automobile or explicitly require him to use his own automobile. Free website to file state taxes However, it reimburses him for any costs he incurs in traveling to the various sites. Free website to file state taxes The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Free website to file state taxes Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Free website to file state taxes You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. Free website to file state taxes For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. Free website to file state taxes For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. Free website to file state taxes Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. Free website to file state taxes First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. Free website to file state taxes Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. Free website to file state taxes It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Free website to file state taxes Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. Free website to file state taxes Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. Free website to file state taxes See Recapture of excess depreciation, next. Free website to file state taxes Recapture of excess depreciation. Free website to file state taxes   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. Free website to file state taxes Any excess depreciation must also be added to the adjusted basis of your property. Free website to file state taxes Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. Free website to file state taxes This means you figure your depreciation using the percentages fromTable 16 or 17. Free website to file state taxes For information on investment credit recapture, see the instructions for Form 4255. Free website to file state taxes Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. Free website to file state taxes In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. Free website to file state taxes To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. Free website to file state taxes See Car Used 50% or Less for Business in Publication 917. Free website to file state taxes Leased Property The limitations on cost recovery deductions apply to the rental of listed property. Free website to file state taxes The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). Free website to file state taxes SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. Free website to file state taxes Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Free website to file state taxes A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. Free website to file state taxes This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. Free website to file state taxes Occasional or incidental leasing activity is insufficient. Free website to file state taxes For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. Free website to file state taxes An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Free website to file state taxes Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. Free website to file state taxes Inclusion amount for property leased before 1987. Free website to file state taxes   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. Free website to file state taxes You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. Free website to file state taxes   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. Free website to file state taxes For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. Free website to file state taxes You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. Free website to file state taxes Special rules. Free website to file state taxes   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. Free website to file state taxes The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. Free website to file state taxes   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. Free website to file state taxes Maximum inclusion amount. Free website to file state taxes   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. Free website to file state taxes What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. Free website to file state taxes How long to keep records. Free website to file state taxes   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). Free website to file state taxes Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Free website to file state taxes It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. Free website to file state taxes However, your records should back up your receipts in an orderly manner. Free website to file state taxes Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. Free website to file state taxes Written documents of your expenditure or use are generally better evidence than oral statements alone. Free website to file state taxes A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. Free website to file state taxes A daily log is not required. Free website to file state taxes However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. Free website to file state taxes Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. Free website to file state taxes An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. Free website to file state taxes For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. Free website to file state taxes Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. Free website to file state taxes However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. Free website to file state taxes A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Free website to file state taxes For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Free website to file state taxes Business Use Supported An adequate record contains enough information on each element of every business or investment use. Free website to file state taxes The amount of detail required to support the use depends on the facts and circumstances. Free website to file state taxes For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Free website to file state taxes Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. Free website to file state taxes Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. Free website to file state taxes However, repeated uses can be combined as a single item. Free website to file state taxes Each expenditure is recorded as a separate item and not combined with other expenditures. Free website to file state taxes If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. Free website to file state taxes If these expenses are combined, you do not need to support the business purpose of each expense. Free website to file state taxes Instead, you can divide the expenses based on the total business use of the listed property. Free website to file state taxes Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. Free website to file state taxes For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. Free website to file state taxes Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. Free website to file state taxes Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Free website to file state taxes Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. Free website to file state taxes It must be kept elsewhere and made available as support to the district director on request. Free website to file state taxes Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. Free website to file state taxes If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. Free website to file state taxes If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Free website to file state taxes If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Free website to file state taxes Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. Free website to file state taxes Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Free website to file state taxes Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. Free website to file state taxes If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. Free website to file state taxes Employees. Free website to file state taxes   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. Free website to file state taxes Employees claiming the standard mileage rate may be able to use Form 2106–EZ. Free website to file state taxes Employer who provides vehicles to employees. Free website to file state taxes   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. Free website to file state taxes   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. Free website to file state taxes Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. Free website to file state taxes   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. Free website to file state taxes See the instructions for Form 4562. Free website to file state taxes Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. Free website to file state taxes In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. Free website to file state taxes In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. Free website to file state taxes For more information about deductions after the recovery period for automobiles, see Publication 917. Free website to file state taxes Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. Free website to file state taxes Table 1. Free website to file state taxes 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. Free website to file state taxes Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications
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Diploma Mills

If you're ever tempted by an e-mail or ad claiming you can "earn a degree based on life experience," don't fall for it. Any company that offers degrees for a flat fee and requires little course work is a diploma mill. If your school is not recognized as an accredited institution by the Secretary of Education, you may not be able to receive financial aid and employers won't recognize it. You can check on a school's accreditation by contacting the Department of Education or search the Council for Higher Education Accreditation's database.

Beware: Scholarship and Financial Aid Scams

Scholarships and financial aid do not require upfront fees. While there are legitimate companies who will help guide you through the financial aid and college application process for a fee, disreputable companies may ask you for money up-front and provide nothing in return. Red flags to watch out for include the following:

  • A "money-back guarantee" to secure a scholarship. Don't believe it. Unscrupulous companies attach conditions that make it impossible to get the refund.
  • "Secret scholarships." If a company claims to have inside knowledge of scholarship money, they're lying. Information on scholarships is available freely to the public. Ask you librarian or school counselor.
  • Telling students they've been selected as "finalists" for awards. If they ask for an up-front fee, head for the nearest exit.
  • Asking for a student's checking account to "confirm eligibility." If they want bank account information or your credit card number to confirm or reserve a scholarship, it's a scam.
  • Quoting a relatively small "monthly" or "weekly" fee. Then asking for authorization to debit your checking account for an unspecified length of time. Ongoing fees are a sure sign of a scam.
  • Unsolicited offers. Whether it's an e-mail, phone call, or it arrived in your mailbox, if you didn't request the information, ignore the offer.

The Free Website To File State Taxes

Free website to file state taxes 3. Free website to file state taxes   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. Free website to file state taxes Form 4797. Free website to file state taxes 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. Free website to file state taxes Granting the right to remove deposits. Free website to file state taxes 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. Free website to file state taxes You must report the income from all the different sources on your tax return, unless it is excluded by law. Free website to file state taxes Where you report the income on your tax return depends on its source. Free website to file state taxes This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Free website to file state taxes For information on where to report other income, see the Instructions for Form 1040, U. Free website to file state taxes S. Free website to file state taxes Individual Income Tax Return. Free website to file state taxes Accounting method. Free website to file state taxes   The rules discussed in this chapter assume you use the cash method of accounting. Free website to file state taxes Under the cash method, you generally include an item of income in gross income in the year you receive it. Free website to file state taxes See Cash Method in chapter 2. Free website to file state taxes   If you use an accrual method of accounting, different rules may apply to your situation. Free website to file state taxes See Accrual Method in chapter 2. Free website to file state taxes 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. Free website to file state taxes Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Free website to file state taxes Use this schedule to figure the net profit or loss from regular farming operations. Free website to file state taxes 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. Free website to file state taxes This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Free website to file state taxes It also includes income from the sale of crop shares if you materially participate in producing the crop. Free website to file state taxes See Rents (Including Crop Shares) , later. Free website to file state taxes Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Free website to file state taxes Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Free website to file state taxes Land. Free website to file state taxes Depreciable farm equipment. Free website to file state taxes Buildings and structures. Free website to file state taxes Livestock held for draft, breeding, sport, or dairy purposes. Free website to file state taxes Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Free website to file state taxes Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Free website to file state taxes Sales of Farm Products Where to report. Free website to file state taxes    Table 3-1 shows where to report the sale of farm products on your tax return. Free website to file state taxes Schedule F. Free website to file state taxes   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. Free website to file state taxes This includes money and the fair market value of any property or services you receive. Free website to file state taxes 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). Free website to file state taxes See chapter 6 for information on the basis of assets. Free website to file state taxes You generally report these amounts on Schedule F for the year you receive payment. Free website to file state taxes Example. Free website to file state taxes In 2012, you bought 20 feeder calves for $11,000 for resale. Free website to file state taxes You sold them in 2013 for $21,000. Free website to file state taxes 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. Free website to file state taxes Form 4797. Free website to file state taxes   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Free website to file state taxes In either case, you should always report these sales on Form 4797 instead of Schedule F. Free website to file state taxes See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Free website to file state taxes Animals you do not hold primarily for sale are considered business assets of your farm. Free website to file state taxes Table 3-1. Free website to file state taxes 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. Free website to file state taxes   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. Free website to file state taxes This applies even if your agent pays you in a later year. Free website to file state taxes For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Free website to file state taxes 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. Free website to file state taxes You must meet all the following conditions to qualify. Free website to file state taxes Your principal trade or business is farming. Free website to file state taxes You use the cash method of accounting. Free website to file state taxes 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. Free website to file state taxes The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Free website to file state taxes 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. Free website to file state taxes The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Free website to file state taxes A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Free website to file state taxes See Other Involuntary Conversions in chapter 11. Free website to file state taxes Usual business practice. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Free website to file state taxes Connection with affected area. Free website to file state taxes   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Free website to file state taxes However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Free website to file state taxes 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. Free website to file state taxes Classes of livestock. Free website to file state taxes   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Free website to file state taxes Do not separate animals into classes based on age, sex, or breed. Free website to file state taxes Amount to be postponed. Free website to file state taxes   Follow these steps to figure the amount of gain to be postponed for each class of animals. Free website to file state taxes 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. Free website to file state taxes For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Free website to file state taxes Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Free website to file state taxes Example. Free website to file state taxes You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Free website to file state taxes As a result of drought, you sold 135 head during 2012. Free website to file state taxes You realized $70,200 from the sale. Free website to file state taxes On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Free website to file state taxes The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Free website to file state taxes How to postpone gain. Free website to file state taxes   To postpone gain, attach a statement to your tax return for the year of the sale. Free website to file state taxes The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Free website to file state taxes A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Free website to file state taxes 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. Free website to file state taxes A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Free website to file state taxes The number of animals sold in each of the 3 preceding years. Free website to file state taxes 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. Free website to file state taxes The total number of animals sold and the number sold because of weather-related conditions during the tax year. Free website to file state taxes A computation, as described above, of the income to be postponed for each class of livestock. Free website to file state taxes   Generally, you must file the statement and the return by the due date of the return, including extensions. Free website to file state taxes 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. Free website to file state taxes 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). Free website to file state taxes Attach the statement to the amended return and write “Filed pursuant to section 301. Free website to file state taxes 9100-2” at the top of the amended return. Free website to file state taxes File the amended return at the same address you filed the original return. Free website to file state taxes Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Free website to file state taxes Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Free website to file state taxes However, if you materially participate in farming operations on the land, the rent is farm income. Free website to file state taxes See Landlord Participation in Farming in chapter 12. Free website to file state taxes Pasture income and rental. Free website to file state taxes   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Free website to file state taxes You must enter it as Other income on Schedule F. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes It does not matter whether you use the cash method of accounting or an accrual method of accounting. Free website to file state taxes 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. Free website to file state taxes See Landlord Participation in Farming in chapter 12. Free website to file state taxes Report the rental income on Schedule F. Free website to file state taxes 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). Free website to file state taxes The income is not included in self-employment income. Free website to file state taxes Crop shares you use to feed livestock. Free website to file state taxes   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Free website to file state taxes You must include the fair market value of the crop shares in income at that time. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes See  chapter 12. Free website to file state taxes Crop shares you give to others (gift). Free website to file state taxes   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Free website to file state taxes You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Free website to file state taxes Example. Free website to file state taxes A tenant farmed part of your land under a crop-share arrangement. Free website to file state taxes The tenant harvested and delivered the crop in your name to an elevator company. Free website to file state taxes 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. Free website to file state taxes They sell their crop shares in the following year and the elevator company makes payments directly to your children. Free website to file state taxes In this situation, you are considered to have received rental income and then made a gift of that income. Free website to file state taxes 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. Free website to file state taxes Crop share loss. Free website to file state taxes   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. Free website to file state taxes See Publication 925 for information on these rules. Free website to file state taxes 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. Free website to file state taxes However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Free website to file state taxes See Cost-Sharing Exclusion (Improvements) , later. Free website to file state taxes Report the agricultural program payment on the appropriate line of Schedule F, Part I. Free website to file state taxes 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. Free website to file state taxes However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Free website to file state taxes Claim the deduction on Schedule F for the year of repayment or reduction. Free website to file state taxes Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Free website to file state taxes 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. Free website to file state taxes You do not need approval from the IRS to adopt this method of reporting CCC loans. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Free website to file state taxes Revenue Procedure 2008-52, 2008-36 I. Free website to file state taxes R. Free website to file state taxes B. Free website to file state taxes 587, is available at  www. Free website to file state taxes irs. Free website to file state taxes gov/irb/2008-36_IRB/ar09. Free website to file state taxes html. Free website to file state taxes You can request income tax withholding from CCC loan payments you receive. Free website to file state taxes Use Form W-4V, Voluntary Withholding Request. Free website to file state taxes See chapter 16 for information about ordering the form. Free website to file state taxes 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. Free website to file state taxes Attach a statement to your return showing the details of the loan. Free website to file state taxes You must file the statement and the return by the due date of the return, including extensions. Free website to file state taxes 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). Free website to file state taxes Attach the statement to the amended return and write “Filed pursuant to section 301. Free website to file state taxes 9100-2” at the top of the return. Free website to file state taxes File the amended return at the same address you filed the original return. Free website to file state taxes When you make this election, the amount you report as income becomes your basis in the commodity. Free website to file state taxes See chapter 6 for information on the basis of assets. Free website to file state taxes 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. Free website to file state taxes If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes Form 1099-A. Free website to file state taxes   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. Free website to file state taxes “CCC” should be shown in box 6. Free website to file state taxes The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Free website to file state taxes Market gain should be reported as follows. Free website to file state taxes If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Free website to file state taxes However, adjust the basis of the commodity for the amount of the market gain. Free website to file state taxes If you did not include the CCC loan in income in the year received, include the market gain in your income. Free website to file state taxes The following examples show how to report market gain. Free website to file state taxes Example 1. Free website to file state taxes Mike Green is a cotton farmer. Free website to file state taxes He uses the cash method of accounting and files his tax return on a calendar year basis. Free website to file state taxes He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Free website to file state taxes In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Free website to file state taxes 00 per pound). Free website to file state taxes In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Free website to file state taxes 50 per pound (lower than the loan amount). Free website to file state taxes Later in 2013, he sold the cotton for $2,500. Free website to file state taxes The market gain on the redemption was $. Free website to file state taxes 50 ($2. Free website to file state taxes 00 – $1. Free website to file state taxes 50) per pound. Free website to file state taxes Mike realized total market gain of $500 ($. Free website to file state taxes 50 x 1,000 pounds). Free website to file state taxes 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. Free website to file state taxes Included CCC loan. Free website to file state taxes   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. Free website to file state taxes The $500 market gain is not recognized on the redemption. Free website to file state taxes 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. Free website to file state taxes   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Free website to file state taxes His gain from the sale is $1,000 ($2,500 – $1,500). Free website to file state taxes He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Free website to file state taxes Excluded CCC loan. Free website to file state taxes   Mike has income of $500 from market gain in 2013. Free website to file state taxes He reports it on Schedule F, lines 4a and 4b. Free website to file state taxes His basis in the cotton is zero, so his gain from its sale is $2,500. Free website to file state taxes He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Free website to file state taxes Example 2. Free website to file state taxes 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. Free website to file state taxes Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Free website to file state taxes In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Free website to file state taxes 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. Free website to file state taxes Included CCC loan. Free website to file state taxes   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. Free website to file state taxes The $500 market gain is not recognized on the redemption. Free website to file state taxes 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. Free website to file state taxes   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Free website to file state taxes Mike has no gain or loss on its sale to the cotton buyer for that amount. Free website to file state taxes Excluded CCC loan. Free website to file state taxes   As in Example 1, Mike has income of $500 from market gain in 2013. Free website to file state taxes He reports it on Schedule F, lines 4a and 4b. Free website to file state taxes His basis in the cotton is zero, so his gain from its sale is $1,500. Free website to file state taxes He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes Cost-share payments you receive may qualify for the cost-sharing exclusion. Free website to file state taxes See Cost-Sharing Exclusion (Improvements) , later. Free website to file state taxes CRP payments are reported to you on Form 1099-G. Free website to file state taxes Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Free website to file state taxes See the instructions for Schedule SE (Form 1040). Free website to file state taxes 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. Free website to file state taxes You generally include them in the year you receive them. Free website to file state taxes 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. Free website to file state taxes You can request income tax withholding from crop disaster payments you receive from the federal government. Free website to file state taxes Use Form W-4V, Voluntary Withholding Request. Free website to file state taxes See chapter 16 for information about ordering the form. Free website to file state taxes Election to postpone reporting until the following year. Free website to file state taxes   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. Free website to file state taxes You use the cash method of accounting. Free website to file state taxes You receive the crop insurance proceeds in the same tax year the crops are damaged. Free website to file state taxes 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. Free website to file state taxes   Deferral is not permitted for proceeds received from revenue insurance policies. Free website to file state taxes   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. Free website to file state taxes Check the box on line 8c and attach a statement to your tax return. Free website to file state taxes The statement must include your name and address and contain the following information. Free website to file state taxes A statement that you are making an election under IRC section 451(d) and Regulations section 1. Free website to file state taxes 451-6. Free website to file state taxes The specific crop or crops physically destroyed or damaged. Free website to file state taxes 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. Free website to file state taxes The cause of the physical destruction or damage and the date or dates it occurred. Free website to file state taxes The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Free website to file state taxes The name of each insurance carrier from whom you received payments. Free website to file state taxes   One election covers all crops representing a single trade or business. Free website to file state taxes If you have more than one farming business, make a separate election for each one. Free website to file state taxes 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. Free website to file state taxes   An election is binding for the year unless the IRS approves your request to change it. Free website to file state taxes 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. Free website to file state taxes Ogden Submission Processing Center P. Free website to file state taxes O. Free website to file state taxes 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. Free website to file state taxes These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Free website to file state taxes They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Free website to file state taxes 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. Free website to file state taxes You must include these benefits in income in the year you receive them. Free website to file state taxes You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Free website to file state taxes Report the benefits on Schedule F, Part I, as agricultural program payments. Free website to file state taxes You can usually take a current deduction for the same amount as a feed expense. Free website to file state taxes 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. Free website to file state taxes A payment is any economic benefit you get as a result of an improvement. Free website to file state taxes However, this exclusion applies only to that part of a payment that meets all three of the following tests. Free website to file state taxes It was for a capital expense. Free website to file state taxes You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Free website to file state taxes You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Free website to file state taxes See chapter 5 for information on deducting soil and water conservation expenses. Free website to file state taxes It does not substantially increase your annual income from the property for which it is made. Free website to file state taxes An increase in annual income is substantial if it is more than the greater of the following amounts. Free website to file state taxes 10% of the average annual income derived from the affected property before receiving the improvement. Free website to file state taxes $2. Free website to file state taxes 50 times the number of affected acres. Free website to file state taxes 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. Free website to file state taxes Qualifying programs. Free website to file state taxes   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Free website to file state taxes The rural clean water program authorized by the Federal Water Pollution Control Act. Free website to file state taxes The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Free website to file state taxes The water bank program authorized by the Water Bank Act. Free website to file state taxes The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Free website to file state taxes The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Free website to file state taxes The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Free website to file state taxes The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Free website to file state taxes Certain small watershed programs, listed later. Free website to file state taxes 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. Free website to file state taxes Several state programs have been approved. Free website to file state taxes 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). Free website to file state taxes Small watershed programs. Free website to file state taxes   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. Free website to file state taxes The programs under the Watershed Protection and Flood Prevention Act. Free website to file state taxes The flood prevention projects under the Flood Control Act of 1944. Free website to file state taxes The Emergency Watershed Protection Program under the Flood Control Act of 1950. Free website to file state taxes Certain programs under the Colorado River Basin Salinity Control Act. Free website to file state taxes 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. Free website to file state taxes The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Free website to file state taxes The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Free website to file state taxes The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Free website to file state taxes The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Free website to file state taxes The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Free website to file state taxes The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Free website to file state taxes The Conservation Security Program authorized by the Food Security Act of 1985. Free website to file state taxes The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Free website to file state taxes Income realized. Free website to file state taxes   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). Free website to file state taxes Value of the improvement. Free website to file state taxes   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Free website to file state taxes 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. Free website to file state taxes Any government payments under a program not listed earlier. Free website to file state taxes Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Free website to file state taxes Any government payment to you for rent or for your services. Free website to file state taxes The denominator of the fraction is the total cost of the improvement. Free website to file state taxes Excludable portion. Free website to file state taxes   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. Free website to file state taxes 10% of the prior average annual income from the affected acreage. Free website to file state taxes 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. Free website to file state taxes $2. Free website to file state taxes 50 times the number of affected acres. Free website to file state taxes The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Free website to file state taxes You may need to consult your tax advisor for assistance. Free website to file state taxes Example. Free website to file state taxes One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Free website to file state taxes The total cost of the improvement was $500,000. Free website to file state taxes The USDA paid $490,000. Free website to file state taxes You paid $10,000. Free website to file state taxes The value of the cost-sharing improvement is $15,000. Free website to file state taxes 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. Free website to file state taxes The excludable portion is the greater amount, $1,550. Free website to file state taxes 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. Free website to file state taxes   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. Free website to file state taxes Any payment excluded from income is not part of your basis. Free website to file state taxes In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Free website to file state taxes   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. Free website to file state taxes How to report the exclusion. Free website to file state taxes   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Free website to file state taxes The statement must include the following information. Free website to file state taxes The dollar amount of the cost funded by the government payment. Free website to file state taxes The value of the improvement. Free website to file state taxes The amount you are excluding. Free website to file state taxes   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Free website to file state taxes Recapture. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes You must report the recapture on Form 4797. Free website to file state taxes See Section 1255 property under Other Gains in chapter 9. Free website to file state taxes Electing not to exclude payments. Free website to file state taxes   You can elect not to exclude all or part of any payments you receive under these programs. Free website to file state taxes If you make this election for all of these payments, none of the above restrictions and rules apply. Free website to file state taxes You must make this election by the due date, including extensions, for filing your return. Free website to file state taxes In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Free website to file state taxes 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). Free website to file state taxes Write “Filed pursuant to section 301. Free website to file state taxes 9100-2” at the top of the amended return and file it at the same address you filed the original return. Free website to file state taxes 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. Free website to file state taxes You must include these payments on Schedule F, lines 4a and 4b. Free website to file state taxes 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. Free website to file state taxes You must include these payments on Schedule F, lines 6a and 6b. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes The gain or loss is capital or ordinary depending on how you used the quota. Free website to file state taxes See Capital or ordinary gain or loss , later. Free website to file state taxes 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. Free website to file state taxes Adjusted basis. Free website to file state taxes   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Free website to file state taxes The basis of a quota derived from an original grant by the federal government is zero. Free website to file state taxes The basis of a purchased quota is the purchase price. Free website to file state taxes The basis of a quota received as a gift is generally the same as the donor's basis. Free website to file state taxes However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Free website to file state taxes 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. Free website to file state taxes The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Free website to file state taxes Reduction of basis. Free website to file state taxes   You are required to reduce the basis of your tobacco quota by the following amounts. Free website to file state taxes Deductions you took for amortization, depletion, or depreciation. Free website to file state taxes Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Free website to file state taxes The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Free website to file state taxes Amount treated as interest. Free website to file state taxes   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Free website to file state taxes The interest is reportable as ordinary income. Free website to file state taxes 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. Free website to file state taxes   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Free website to file state taxes You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Free website to file state taxes For more information, see Notice 2005-57, 2005-32 I. Free website to file state taxes R. Free website to file state taxes B. Free website to file state taxes 267, available at www. Free website to file state taxes irs. Free website to file state taxes gov/irb/2005-32_IRB/ar13. Free website to file state taxes html. Free website to file state taxes Installment method. Free website to file state taxes   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Free website to file state taxes Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Free website to file state taxes See chapter 10 for more information. Free website to file state taxes Capital or ordinary gain or loss. Free website to file state taxes   Whether your gain or loss is ordinary or capital depends on how you used the quota. Free website to file state taxes Quota used in the trade or business of farming. Free website to file state taxes   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. Free website to file state taxes See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Free website to file state taxes Quota held for investment. Free website to file state taxes   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Free website to file state taxes The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Free website to file state taxes Gain treated as ordinary income. Free website to file state taxes   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Free website to file state taxes Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Free website to file state taxes The cost of acquiring a quota. Free website to file state taxes Amounts for amortization, depletion, or depreciation. Free website to file state taxes Amounts to reflect a reduction in the quota pounds. Free website to file state taxes   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. Free website to file state taxes Self-employment income. Free website to file state taxes   The tobacco quota buyout payments are not self-employment income. Free website to file state taxes Income averaging for farmers. Free website to file state taxes   The gain or loss resulting from the quota payments does not qualify for income averaging. Free website to file state taxes A tobacco quota is considered an interest in land. Free website to file state taxes Income averaging is not available for gain or loss arising from the sale or other disposition of land. Free website to file state taxes Involuntary conversion. Free website to file state taxes   The buyout of the tobacco quota is not an involuntary conversion. Free website to file state taxes Form 1099-S. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes Like-kind exchange of quota. Free website to file state taxes   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. Free website to file state taxes See Notice 2005-57 for more information. Free website to file state taxes 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. Free website to file state taxes Taxation of payments to tobacco growers. Free website to file state taxes   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Free website to file state taxes Individuals will generally report the payments as an Agricultural program payment on Schedule F. Free website to file state taxes 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. Free website to file state taxes Self-employment income. Free website to file state taxes   Payments to growers generally represent self-employment income. Free website to file state taxes 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. Free website to file state taxes Income averaging for farmers. Free website to file state taxes   Payments to growers who are individuals qualify for farm income averaging. Free website to file state taxes Form 1099-G. Free website to file state taxes   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. Free website to file state taxes Other Payments You must include most other government program payments in income. Free website to file state taxes Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Free website to file state taxes How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Free website to file state taxes Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Free website to file state taxes You must also capitalize the full cost of the improvement. Free website to file state taxes Since you have included the payments in income, they do not reduce your basis. Free website to file state taxes However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Free website to file state taxes 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. Free website to file state taxes You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Free website to file state taxes If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Free website to file state taxes 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. Free website to file state taxes Payment to More Than One Person The USDA reports program payments to the IRS. Free website to file state taxes 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). Free website to file state taxes 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. Free website to file state taxes You should file Form 1099-G to report the identity of the actual recipient to the IRS. Free website to file state taxes You should also give this information to the recipient. Free website to file state taxes You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Free website to file state taxes Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Free website to file state taxes However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Free website to file state taxes See chapter 16 for information about ordering Form 1099-G. Free website to file state taxes 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). Free website to file state taxes 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. Free website to file state taxes Form 1099-PATR. Free website to file state taxes   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Free website to file state taxes 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. Free website to file state taxes For information on the alternative minimum tax, see the Instructions for Form 6251. Free website to file state taxes Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Free website to file state taxes They include the following items. Free website to file state taxes Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Free website to file state taxes The stated dollar value of qualified written notices of allocation. Free website to file state taxes The fair market value of other property. Free website to file state taxes 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. Free website to file state taxes You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Free website to file state taxes Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Free website to file state taxes If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Free website to file state taxes Qualified written notice of allocation. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes Signing and giving a written agreement to the cooperative. Free website to file state taxes Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Free website to file state taxes The cooperative must notify you in writing of this bylaw and give you a copy. Free website to file state taxes Endorsing and cashing a qualified check paid as part of the same patronage dividend. Free website to file state taxes 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. Free website to file state taxes Qualified check. Free website to file state taxes   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Free website to file state taxes It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Free website to file state taxes 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. Free website to file state taxes Loss on redemption. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes Nonqualified notice of allocation. Free website to file state taxes   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Free website to file state taxes Your basis in the notice is zero. Free website to file state taxes You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Free website to file state taxes Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Free website to file state taxes 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. Free website to file state taxes   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. Free website to file state taxes For example, if it represents interest income, report it on your return as interest. Free website to file state taxes Buying or selling capital assets or depreciable property. Free website to file state taxes   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Free website to file state taxes You must, however, reduce the basis of these assets by the dividends. Free website to file state taxes This reduction is taken into account as of the first day of the tax year in which the dividends are received. Free website to file state taxes 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. Free website to file state taxes   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. Free website to file state taxes Example. Free website to file state taxes On July 1, 2012, Mr. Free website to file state taxes Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Free website to file state taxes 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). Free website to file state taxes Mr. Free website to file state taxes Brown files his return on a calendar year basis. Free website to file state taxes For 2012, he claimed a depreciation deduction of $311, using the 10. Free website to file state taxes 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Free website to file state taxes On July 2, 2013, the cooperative association paid Mr. Free website to file state taxes Brown a $300 cash patronage dividend for buying the machine. Free website to file state taxes Mr. Free website to file state taxes Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Free website to file state taxes 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. Free website to file state taxes 38% × 1. Free website to file state taxes 5 = 23. Free website to file state taxes 07% Depreciation deduction for 2013 ($2,289 × 23. Free website to file state taxes 07%) $528 Exceptions. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes 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). Free website to file state taxes   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. Free website to file state taxes Personal purchases. Free website to file state taxes   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). Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes These allocations can be paid in money, other property, or qualified certificates. Free website to file state taxes Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Free website to file state taxes Qualified certificates. Free website to file state taxes   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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes Nonqualified certificates. Free website to file state taxes   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Free website to file state taxes Your basis in the certificate is zero. Free website to file state taxes You must include in income any amount you receive from its sale, redemption, or other disposition. Free website to file state taxes Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Free website to file state taxes Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Free website to file state taxes For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Free website to file state taxes 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. Free website to file state taxes Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Free website to file state taxes It is excluded from taxable income (see Exclusions , later). Free website to file state taxes Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Free website to file state taxes If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Free website to file state taxes Election to defer income from discharge of indebtedness. Free website to file state taxes   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Free website to file state taxes 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. Free website to file state taxes See IRC section 108(i) and Publication 4681 for details. Free website to file state taxes Form 1099-C. Free website to file state taxes   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. Free website to file state taxes The amount of debt canceled is shown in box 2. Free website to file state taxes Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Free website to file state taxes These exceptions apply before the exclusions discussed below. Free website to file state taxes Price reduced after purchase. Free website to file state taxes   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. Free website to file state taxes Reduce your basis in the property by the amount of the reduction in the debt. Free website to file state taxes The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Free website to file state taxes Deductible debt. Free website to file state taxes   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Free website to file state taxes This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Free website to file state taxes Example. Free website to file state taxes You get accounting services for your farm on credit. Free website to file state taxes Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Free website to file state taxes Your accountant forgives part of the amount you owe for the accounting services. Free website to file state taxes How you treat the canceled debt depends on your method of accounting. Free website to file state taxes Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Free website to file state taxes Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Free website to file state taxes Exclusions Do not include canceled debt in income in the following situations. Free website to file state taxes The cancellation takes place in a bankruptcy case under title 11 of the U. Free website to file state taxes S. Free website to file state taxes Code. Free website to file state taxes The cancellation takes place when you are insolvent. Free website to file state taxes The canceled debt is a qualified farm debt. Free website to file state taxes The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Free website to file state taxes See Publication 334, Tax Guide for Small Business, chapter 5. Free website to file state taxes The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes 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. Free website to file state taxes See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Free website to file state taxes Debt. Free website to file state taxes   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Free website to file state taxes Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Free website to file state taxes Bankruptcy. Free website to file state taxes   A bankruptcy case is a case under title 11 of the U. Free website to file state taxes S. Free website to file state taxes 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. Free website to file state taxes   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Free website to file state taxes Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Free website to file state taxes Insolvency. Free website to file state taxes   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Free website to file state taxes   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Free website to file state taxes 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. Free website to file state taxes Otherwise, you include the difference in gross income. Free website to file state taxes Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Free website to file state taxes 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. Free website to file state taxes Example. Free website to file state taxes You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Free website to file state taxes Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Free website to file state taxes Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Free website to file state taxes You can exclude this amount from income. Free website to file state taxes The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Free website to file state taxes If not, you must include it in income. Free website to file state taxes Reduction of tax attributes. Free website to file state taxes   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. Free website to file state taxes Order of reduction. Free website to file state taxes   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. Free website to file state taxes Net operating loss (NOL). Free website to file state taxes Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Free website to file state taxes Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Free website to file state taxes General business credit carryover. Free website to file state taxes Reduce the credit carryover to or from the tax year of the debt cancellation. Free website to file state taxes Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Free website to file state taxes Minimum tax credit. Free website to file state taxes Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Free website to file state taxes Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Free website to file state taxes Capital loss. Free website to file state taxes Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Free website to file state taxes Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Free website to file state taxes Basis. Free website to file state taxes 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. Free website to file state taxes Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Free website to file state taxes Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Free website to file state taxes Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Free website to file state taxes Inventory and accounts and notes receivable. Free website to file state taxes Other property. Free website to file state taxes Reduce the basis one dollar for each dollar of excluded canceled debt. Free website to file state taxes 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. Free website to file state taxes For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Free website to file state taxes 1017-1(b)(2). Free website to file state taxes Also see Electing to reduce the basis of depreciable property