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H&r Block 2011 Tax Software

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H&r Block 2011 Tax Software

H&r block 2011 tax software 16. H&r block 2011 tax software   Reporting Gains and Losses Table of Contents What's New Introduction Useful Items - You may want to see: Reporting Capital Gains and Losses Exception 1. H&r block 2011 tax software Exception 2. H&r block 2011 tax software File Form 1099-B or Form 1099-S with the IRS. H&r block 2011 tax software Capital Losses Capital Gain Tax Rates What's New Maximum capital gain rates. H&r block 2011 tax software . H&r block 2011 tax software  For 2013, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. H&r block 2011 tax software Introduction This chapter discusses how to report capital gains and losses from sales, exchanges, and other dispositions of investment property on Form 8949 and Schedule D (Form 1040). H&r block 2011 tax software The discussion includes the following topics. H&r block 2011 tax software How to report short-term gains and losses. H&r block 2011 tax software How to report long-term gains and losses. H&r block 2011 tax software How to figure capital loss carryovers. H&r block 2011 tax software How to figure your tax on a net capital gain. H&r block 2011 tax software If you sell or otherwise dispose of property used in a trade or business or for the production of income, see Publication 544, Sales and Other Dispositions of Assets, before completing Schedule D (Form 1040). H&r block 2011 tax software Useful Items - You may want to see: Publication 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses Form (and Instructions) 4797 Sales of Business Property 6252 Installment Sale Income 8582 Passive Activity Loss Limitations 8949 Sales and Other Dispositions of Capital Assets Schedule D (Form 1040) Capital Gains and Losses Reporting Capital Gains and Losses Generally, report capital gains and losses on Form 8949. H&r block 2011 tax software Complete Form 8949 before you complete line 1b, 2, 3, 8b, 9, or 10 of Schedule D (Form 1040). H&r block 2011 tax software Use Form 8949 to report: The sale or exchange of a capital asset not reported on another form or schedule; Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit; and Nonbusiness bad debts. H&r block 2011 tax software Use Schedule D (Form 1040): To figure the overall gain or loss from transactions reported on Form 8949; To report a gain from Form 6252 or Part I of Form 4797; To report a gain or loss from Form 4684, 6781, or 8824; To report capital gain distributions not reported directly on Form 1040 or Form 1040A; To report a capital loss carryover from the previous tax year to the current tax year; To report your share of a gain or (loss) from a partnership, S corporation, estate, or trust; To report transactions reported to you on a Form 1099-B (or substitute statement) showing basis was reported to the IRS and to which none of the Form 8949 adjustments or codes apply; and To report undistributed long-term capital gains from Form 2439. H&r block 2011 tax software On Form 8949, enter all sales and exchanges of capital assets, including stocks, bonds, etc. H&r block 2011 tax software , and real estate (if not reported on Form 4684, 4797, 6252, 6781, 8824, or line 1a or 8a of Schedule D). H&r block 2011 tax software Include these transactions even if you did not receive a Form 1099-B or 1099-S (or substitute statement) for the transaction. H&r block 2011 tax software Report short-term gains or losses in Part I. H&r block 2011 tax software Report long-term gains or losses in Part II. H&r block 2011 tax software Use as many Forms 8949 as you need. H&r block 2011 tax software Exceptions to filing Form 8949 and Schedule D (Form 1040). H&r block 2011 tax software   There are certain situations where you may not have to file Form 8949 and/or Schedule D (Form 1040). H&r block 2011 tax software Exception 1. H&r block 2011 tax software   You do not have to file Form 8949 or Schedule D (Form 1040) if you have no capital losses and your only capital gains are capital gain distributions from Form(s) 1099-DIV, box 2a (or substitute statements). H&r block 2011 tax software (If any Form(s) 1099-DIV (or substitute statements) you receive have an amount in box 2b (unrecaptured section 1250 gain), box 2c (section 1202 gain), or box 2d (collectibles (28%) gain), you do not qualify for this exception. H&r block 2011 tax software ) If you qualify for this exception, report your capital gain distributions directly on line 13 of Form 1040 (and check the box on line 13). H&r block 2011 tax software Also use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions to figure your tax. H&r block 2011 tax software You can report your capital gain distributions on line 10 of Form 1040A, instead of on Form 1040, if none of the Forms 1099-DIV (or substitute statements) you received have an amount in box 2b, 2c, or 2d, and you do not have to file Form 1040. H&r block 2011 tax software Exception 2. H&r block 2011 tax software   You must file Schedule D (Form 1040), but generally do not have to file Form 8949, if Exception 1 does not apply and your only capital gains and losses are: Capital gain distributions; A capital loss carryover; A gain from Form 2439 or 6252 or Part I of Form 4797; A gain or loss from Form 4684, 6781, or 8824; A gain or loss from a partnership, S corporation, estate, or trust; or Gains and losses from transactions for which you received a Form 1099-B (or substitute statement) that shows the basis was reported to the IRS and for which you do not need to make any adjustments in column (g) of Form 8949 or enter any codes in column (f) of Form 8949. H&r block 2011 tax software Installment sales. H&r block 2011 tax software   You cannot use the installment method to report a gain from the sale of stock or securities traded on an established securities market. H&r block 2011 tax software You must report the entire gain in the year of sale (the year in which the trade date occurs). H&r block 2011 tax software Passive activity gains and losses. H&r block 2011 tax software    If you have gains or losses from a passive activity, you may also have to report them on Form 8582. H&r block 2011 tax software In some cases, the loss may be limited under the passive activity rules. H&r block 2011 tax software Refer to Form 8582 and its instructions for more information about reporting capital gains and losses from a passive activity. H&r block 2011 tax software Form 1099-B transactions. H&r block 2011 tax software   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B or substitute statement from the broker. H&r block 2011 tax software Use the Form 1099-B or the substitute statement to complete Form 8949. H&r block 2011 tax software If you sold a covered security in 2013, your broker should send you a Form 1099-B (or substitute statement) that shows your basis. H&r block 2011 tax software This will help you complete Form 8949. H&r block 2011 tax software Generally, a covered security is a security you acquired after 2010. H&r block 2011 tax software   Report the gross proceeds shown in box 2a of Form 1099-B as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. H&r block 2011 tax software However, if the broker advises you, in box 2a of Form 1099-B, that gross proceeds (sales price) less commissions and option premiums were reported to the IRS, enter that net sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. H&r block 2011 tax software    Include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). H&r block 2011 tax software If you include an expense of sale in column (g), enter “E” in column (f). H&r block 2011 tax software Form 1099-CAP transactions. H&r block 2011 tax software   If a corporation in which you own stock has had a change in control or a substantial change in capital structure, you should receive Form 1099-CAP or a substitute statement from the corporation. H&r block 2011 tax software Use the Form 1099-CAP or substitute statement to fill in Form 8949. H&r block 2011 tax software If your computations show that you would have a loss because of the change, do not enter any amounts on Form 8949 or Schedule D (Form 1040). H&r block 2011 tax software You cannot claim a loss on Schedule D (Form 1040) as a result of this transaction. H&r block 2011 tax software   Report the aggregate amount received shown in box 2 of Form 1099-CAP as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. H&r block 2011 tax software Form 1099-S transactions. H&r block 2011 tax software   If you sold or traded reportable real estate, you generally should receive from the real estate reporting person a Form 1099-S showing the gross proceeds. H&r block 2011 tax software    “Reportable real estate” is defined as any present or future ownership interest in any of the following: Improved or unimproved land, including air space; Inherently permanent structures, including any residential, commercial, or industrial building; A condominium unit and its accessory fixtures and common elements, including land; and Stock in a cooperative housing corporation (as defined in section 216 of the Internal Revenue Code). H&r block 2011 tax software   A “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. H&r block 2011 tax software   Your Form 1099-S will show the gross proceeds from the sale or exchange in box 2. H&r block 2011 tax software See the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040) for how to report these transactions and include them in Part I or Part II of Form 8949 as appropriate. H&r block 2011 tax software However, report like-kind exchanges on Form 8824 instead. H&r block 2011 tax software   It is unlawful for any real estate reporting person to separately charge you for complying with the requirement to file Form 1099-S. H&r block 2011 tax software Nominees. H&r block 2011 tax software   If you receive gross proceeds as a nominee (that is, the gross proceeds are in your name but actually belong to someone else), see the Instructions for Form 8949 for how to report these amounts on Form 8949. H&r block 2011 tax software File Form 1099-B or Form 1099-S with the IRS. H&r block 2011 tax software   If you received gross proceeds as a nominee in 2013, you must file a Form 1099-B or Form 1099-S for those proceeds with the IRS. H&r block 2011 tax software Send the Form 1099-B or Form 1099-S with a Form 1096, Annual Summary and Transmittal of U. H&r block 2011 tax software S. H&r block 2011 tax software Information Returns, to your Internal Revenue Service Center by February 28, 2014 (March 31, 2014, if you file Form 1099-B or Form 1099-S electronically). H&r block 2011 tax software Give the actual owner of the proceeds Copy B of the Form 1099-B or Form 1099-S by February 18, 2014. H&r block 2011 tax software On Form 1099-B, you should be listed as the “Payer. H&r block 2011 tax software ” The other owner should be listed as the “Recipient. H&r block 2011 tax software ” On Form 1099-S, you should be listed as the “Filer. H&r block 2011 tax software ” The other owner should be listed as the “Transferor. H&r block 2011 tax software ” You do not have to file a Form 1099-B or Form 1099-S to show proceeds for your spouse. H&r block 2011 tax software For more information about the reporting requirements and the penalties for failure to file (or furnish) certain information returns, see the General Instructions for Certain Information Returns. H&r block 2011 tax software If you are filing electronically see Publication 1220. H&r block 2011 tax software Sale of property bought at various times. H&r block 2011 tax software   If you sell a block of stock or other property that you bought at various times, report the short-term gain or loss from the sale on one row in Part I of Form 8949, and the long-term gain or loss on one row in Part II of Form 8949. H&r block 2011 tax software Write “Various” in column (b) for the “Date acquired. H&r block 2011 tax software ” Sale expenses. H&r block 2011 tax software    On Form 8949, include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). H&r block 2011 tax software If you include an expense of sale in column (g), enter “E” in column (f). H&r block 2011 tax software   For more information about adjustments to basis, see chapter 13. H&r block 2011 tax software Short-term gains and losses. H&r block 2011 tax software   Capital gain or loss on the sale or trade of investment property held 1 year or less is a short-term capital gain or loss. H&r block 2011 tax software You report it in Part I of Form 8949. H&r block 2011 tax software   You combine your share of short-term capital gain or loss from partnerships, S corporations, estates, and trusts, and any short-term capital loss carryover, with your other short-term capital gains and losses to figure your net short-term capital gain or loss on line 7 of Schedule D (Form 1040). H&r block 2011 tax software Long-term gains and losses. H&r block 2011 tax software    A capital gain or loss on the sale or trade of investment property held more than 1 year is a long-term capital gain or loss. H&r block 2011 tax software You report it in Part II of Form 8949. H&r block 2011 tax software   You report the following in Part II of Schedule D (Form 1040): Undistributed long-term capital gains from a mutual fund (or other regulated investment company) or real estate investment trust (REIT); Your share of long-term capital gains or losses from partnerships, S corporations, estates, and trusts; All capital gain distributions from mutual funds and REITs not reported directly on line 10 of Form 1040A or line 13 of Form 1040; and Long-term capital loss carryovers. H&r block 2011 tax software    The result after combining these items with your other long-term capital gains and losses is your net long-term capital gain or loss (Schedule D (Form 1040), line 15). H&r block 2011 tax software Total net gain or loss. H&r block 2011 tax software   To figure your total net gain or loss, combine your net short-term capital gain or loss (Schedule D (Form 1040), line 7) with your net long-term capital gain or loss (Schedule D (Form 1040), line 15). H&r block 2011 tax software Enter the result on Schedule D (Form 1040), Part III, line 16. H&r block 2011 tax software If your losses are more than your gains, see Capital Losses , next. H&r block 2011 tax software If both lines 15 and 16 of your Schedule D (Form 1040) are gains and your taxable income on your Form 1040 is more than zero, see Capital Gain Tax Rates , later. H&r block 2011 tax software Capital Losses If your capital losses are more than your capital gains, you can claim a capital loss deduction. H&r block 2011 tax software Report the amount of the deduction on line 13 of Form 1040, in parentheses. H&r block 2011 tax software Limit on deduction. H&r block 2011 tax software   Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of: $3,000 ($1,500 if you are married and file a separate return); or Your total net loss as shown on line 16 of Schedule D (Form 1040). H&r block 2011 tax software   You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit. H&r block 2011 tax software Capital loss carryover. H&r block 2011 tax software   If you have a total net loss on line 16 of Schedule D (Form 1040) that is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year. H&r block 2011 tax software If part of the loss is still unused, you can carry it over to later years until it is completely used up. H&r block 2011 tax software   When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year. H&r block 2011 tax software   When you carry over a loss, it remains long term or short term. H&r block 2011 tax software A long-term capital loss you carry over to the next tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains. H&r block 2011 tax software Figuring your carryover. H&r block 2011 tax software   The amount of your capital loss carryover is the amount of your total net loss that is more than the lesser of: Your allowable capital loss deduction for the year; or Your taxable income increased by your allowable capital loss deduction for the year and your deduction for personal exemptions. H&r block 2011 tax software   If your deductions are more than your gross income for the tax year, use your negative taxable income in computing the amount in item (2). H&r block 2011 tax software    Complete the Capital Loss Carryover Worksheet in the Instructions for Schedule D or Publication 550 to determine the part of your capital loss that you can carry over. H&r block 2011 tax software Example. H&r block 2011 tax software Bob and Gloria sold securities in 2013. H&r block 2011 tax software The sales resulted in a capital loss of $7,000. H&r block 2011 tax software They had no other capital transactions. H&r block 2011 tax software Their taxable income was $26,000. H&r block 2011 tax software On their joint 2013 return, they can deduct $3,000. H&r block 2011 tax software The unused part of the loss, $4,000 ($7,000 − $3,000), can be carried over to 2014. H&r block 2011 tax software If their capital loss had been $2,000, their capital loss deduction would have been $2,000. H&r block 2011 tax software They would have no carryover. H&r block 2011 tax software Use short-term losses first. H&r block 2011 tax software   When you figure your capital loss carryover, use your short-term capital losses first, even if you incurred them after a long-term capital loss. H&r block 2011 tax software If you have not reached the limit on the capital loss deduction after using the short-term capital losses, use the long-term capital losses until you reach the limit. H&r block 2011 tax software Decedent's capital loss. H&r block 2011 tax software    A capital loss sustained by a decedent during his or her last tax year (or carried over to that year from an earlier year) can be deducted only on the final income tax return filed for the decedent. H&r block 2011 tax software The capital loss limits discussed earlier still apply in this situation. H&r block 2011 tax software The decedent's estate cannot deduct any of the loss or carry it over to following years. H&r block 2011 tax software Joint and separate returns. H&r block 2011 tax software   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. H&r block 2011 tax software However, if you and your spouse once filed a joint return and are now filing separate returns, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. H&r block 2011 tax software Capital Gain Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. H&r block 2011 tax software These lower rates are called the maximum capital gain rates. H&r block 2011 tax software The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. H&r block 2011 tax software For 2013, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. H&r block 2011 tax software See Table 16-1 for details. H&r block 2011 tax software If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular tax computation applies. H&r block 2011 tax software Example. H&r block 2011 tax software All of your net capital gain is from selling collectibles, so the capital gain rate would be 28%. H&r block 2011 tax software If you are otherwise subject to a rate lower than 28%, the 28% rate does not apply. H&r block 2011 tax software Investment interest deducted. H&r block 2011 tax software   If you claim a deduction for investment interest, you may have to reduce the amount of your net capital gain that is eligible for the capital gain tax rates. H&r block 2011 tax software Reduce it by the amount of the net capital gain you choose to include in investment income when figuring the limit on your investment interest deduction. H&r block 2011 tax software This is done on the Schedule D Tax Worksheet or the Qualified Dividends and Capital Gain Tax Worksheet. H&r block 2011 tax software For more information about the limit on investment interest, see Interest Expenses in chapter 3 of Publication 550. H&r block 2011 tax software Table 16-1. H&r block 2011 tax software What Is Your Maximum Capital Gain Rate? IF your net capital gain is from . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software THEN your  maximum capital gain rate is . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software a collectibles gain 28% an eligible gain on qualified small business stock minus the section 1202 exclusion 28% an unrecaptured section 1250 gain 25% other gain1 and the regular tax rate that would apply is 39. H&r block 2011 tax software 6% 20% other gain1 and the regular tax rate that would apply is 25%, 28%, 33%, or 35% 15% other gain1 and the regular tax rate that would apply is 10% or 15% 0% 1 Other gain means any gain that is not collectibles gain, gain on qualified small business stock, or unrecaptured section 1250 gain. H&r block 2011 tax software     Collectibles gain or loss. H&r block 2011 tax software   This is gain or loss from the sale or trade of a work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage held more than 1 year. H&r block 2011 tax software   Collectibles gain includes gain from sale of an interest in a partnership, S corporation, or trust due to unrealized appreciation of collectibles. H&r block 2011 tax software Gain on qualified small business stock. H&r block 2011 tax software    If you realized a gain from qualified small business stock that you held more than 5 years, you generally can exclude some or all of your gain under section 1202. H&r block 2011 tax software The eligible gain minus your section 1202 exclusion is a 28% rate gain. H&r block 2011 tax software See Gains on Qualified Small Business Stock in chapter 4 of Publication 550. H&r block 2011 tax software Unrecaptured section 1250 gain. H&r block 2011 tax software    Generally, this is any part of your capital gain from selling section 1250 property (real property) that is due to depreciation (but not more than your net section 1231 gain), reduced by any net loss in the 28% group. H&r block 2011 tax software Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D (Form 1040) instructions to figure your unrecaptured section 1250 gain. H&r block 2011 tax software For more information about section 1250 property and section 1231 gain, see chapter 3 of Publication 544. H&r block 2011 tax software Tax computation using maximum capital gain rates. H&r block 2011 tax software   Use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet (whichever applies) to figure your tax if you have qualified dividends or net capital gain. H&r block 2011 tax software You have net capital gain if Schedule D (Form 1040), lines 15 and 16, are both gains. H&r block 2011 tax software Schedule D Tax Worksheet. H&r block 2011 tax software   Use the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions to figure your tax if: You have to file Schedule D (Form 1040); and Schedule D (Form 1040), line 18 (28% rate gain) or line 19 (unrecaptured section 1250 gain), is more than zero. H&r block 2011 tax software Qualified Dividends and Capital Gain Tax Worksheet. H&r block 2011 tax software   If you do not have to use the Schedule D Tax Worksheet (as explained above) and any of the following apply, use the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040 or Form 1040A (whichever you file) to figure your tax. H&r block 2011 tax software You received qualified dividends. H&r block 2011 tax software (See Qualified Dividends in chapter 8. H&r block 2011 tax software ) You do not have to file Schedule D (Form 1040) and you received capital gain distributions. H&r block 2011 tax software (See Exceptions to filing Form 8949 and Schedule D (Form 1040) , earlier. H&r block 2011 tax software ) Schedule D (Form 1040), lines 15 and 16, are both more than zero. H&r block 2011 tax software Alternative minimum tax. H&r block 2011 tax software   These capital gain rates are also used in figuring alternative minimum tax. H&r block 2011 tax software Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - International Individual Tax Statistics

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Here you will find links to the Statistics of Income studies relating to individual taxpayers in an international context. For each of these areas, there are text articles and/or statistical tables that include both recent and historical data.

International Business Tax Statistics

Overview of U.S. Taxes on International Income

Foreign Recipients of U.S. Income Provides data on income paid to nonresident aliens and the amount of tax withheld by the U.S. Government.  Data are taken from Form 1042-S.
Foreign Recipients of U.S. Partnership Income Provides data on the taxable income allocated by U.S. partnerships to foreign partners and the U.S. tax withheld on this income. This study is conducted anually. Data are taken from Forms 8805.
Foreign Trusts Provides data on foreign trusts that have U.S. "persons" as grantors, transferors, or beneficiaries.  This study is conducted every 4 years.  Data are taken from Forms 3520 and 3520-A.
Individual Foreign Earned Income/Foreign Tax Credit Provides data on foreign-source income, deductions, taxes, and foreign tax credit reported on individual income tax returns.  This study is conducted every 5 years.  Data are taken from Forms 2555 and 1116.
International Boycotts Provides data on the business operations of U.S. entities that participate in international economic boycotts not sanctioned by the U.S. Government.  Data are taken from Form 5713.
Nonresident Alien Estate Tax Returns Provides data on estate tax returns filed for non-U.S. citizens residing abroad who owned at least $60,000 worth of property within the U.S. at time of death. This study is conducted every 2 years.  Data are taken from Form 706-NA.
Page Last Reviewed or Updated: 10-Feb-2014

The H&r Block 2011 Tax Software

H&r block 2011 tax software 4. H&r block 2011 tax software   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. H&r block 2011 tax software Resident aliens are generally taxed in the same way as U. H&r block 2011 tax software S. H&r block 2011 tax software citizens. H&r block 2011 tax software Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business and how it is taxed. H&r block 2011 tax software Topics - This chapter discusses: Income that is effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software Income that is not effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software Interrupted period of residence. H&r block 2011 tax software Expatriation tax. H&r block 2011 tax software Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. H&r block 2011 tax software Resident Aliens Resident aliens are generally taxed in the same way as U. H&r block 2011 tax software S. H&r block 2011 tax software citizens. H&r block 2011 tax software This means that their worldwide income is subject to U. H&r block 2011 tax software S. H&r block 2011 tax software tax and must be reported on their U. H&r block 2011 tax software S. H&r block 2011 tax software tax return. H&r block 2011 tax software Income of resident aliens is subject to the graduated tax rates that apply to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens. H&r block 2011 tax software Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens. H&r block 2011 tax software Nonresident Aliens A nonresident alien's income that is subject to U. H&r block 2011 tax software S. H&r block 2011 tax software income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). H&r block 2011 tax software The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. H&r block 2011 tax software These are the same rates that apply to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens and residents. H&r block 2011 tax software Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. H&r block 2011 tax software If you were formerly a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen or resident alien, these rules may not apply. H&r block 2011 tax software See Expatriation Tax, later, in this chapter. H&r block 2011 tax software Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. H&r block 2011 tax software Whether you are engaged in a trade or business in the United States depends on the nature of your activities. H&r block 2011 tax software The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. H&r block 2011 tax software Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. H&r block 2011 tax software Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. H&r block 2011 tax software For more information, see Services Performed for Foreign Employer in chapter 3. H&r block 2011 tax software Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. H&r block 2011 tax software Students and trainees. H&r block 2011 tax software   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. H&r block 2011 tax software A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. H&r block 2011 tax software The taxable part of any scholarship or fellowship grant that is U. H&r block 2011 tax software S. H&r block 2011 tax software source income is treated as effectively connected with a trade or business in the United States. H&r block 2011 tax software Business operations. H&r block 2011 tax software   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. H&r block 2011 tax software Partnerships. H&r block 2011 tax software   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. H&r block 2011 tax software Beneficiary of an estate or trust. H&r block 2011 tax software   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. H&r block 2011 tax software Trading in stocks, securities, and commodities. H&r block 2011 tax software   If your only U. H&r block 2011 tax software S. H&r block 2011 tax software business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. H&r block 2011 tax software S. H&r block 2011 tax software resident broker or other agent, you are not engaged in a trade or business in the United States. H&r block 2011 tax software   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. H&r block 2011 tax software   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. H&r block 2011 tax software   This discussion does not apply if you have a U. H&r block 2011 tax software S. H&r block 2011 tax software office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. H&r block 2011 tax software Trading for a nonresident alien's own account. H&r block 2011 tax software   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. H&r block 2011 tax software S. H&r block 2011 tax software business activity. H&r block 2011 tax software This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. H&r block 2011 tax software   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. H&r block 2011 tax software This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. H&r block 2011 tax software Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . H&r block 2011 tax software Effectively Connected Income If you are engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. H&r block 2011 tax software This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. H&r block 2011 tax software Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. H&r block 2011 tax software In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. H&r block 2011 tax software For a discussion of these rules, see Foreign Income , later. H&r block 2011 tax software Investment Income Investment income from U. H&r block 2011 tax software S. H&r block 2011 tax software sources that may or may not be treated as effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business generally falls into the following three categories. H&r block 2011 tax software Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. H&r block 2011 tax software ). H&r block 2011 tax software Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. H&r block 2011 tax software Timber, coal, or domestic iron ore with a retained economic interest. H&r block 2011 tax software Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. H&r block 2011 tax software Patents transferred before October 5, 1966. H&r block 2011 tax software Original issue discount obligations. H&r block 2011 tax software Capital gains (and losses). H&r block 2011 tax software Use the two tests, described next, to determine whether an item of U. H&r block 2011 tax software S. H&r block 2011 tax software source income falling in one of the three categories above and received during the tax year is effectively connected with your U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. H&r block 2011 tax software If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. H&r block 2011 tax software Asset-use test. H&r block 2011 tax software   This test usually applies to income that is not directly produced by trade or business activities. H&r block 2011 tax software Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. H&r block 2011 tax software   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. H&r block 2011 tax software Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. H&r block 2011 tax software Business-activities test. H&r block 2011 tax software   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. H&r block 2011 tax software The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. H&r block 2011 tax software Under this test, if the conduct of the U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business was a material factor in producing the income, the income is considered effectively connected. H&r block 2011 tax software Personal Service Income You usually are engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business when you perform personal services in the United States. H&r block 2011 tax software Personal service income you receive in a tax year in which you are engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business is effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. H&r block 2011 tax software Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. H&r block 2011 tax software The income may be paid to you in the form of cash, services, or property. H&r block 2011 tax software If you are engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. H&r block 2011 tax software However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. H&r block 2011 tax software Pensions. H&r block 2011 tax software   If you were a nonresident alien engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. H&r block 2011 tax software This is true whether or not you are engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business in the year you receive the retirement pay. H&r block 2011 tax software Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. H&r block 2011 tax software You had a fixed place of business in the United States involved in earning the income. H&r block 2011 tax software At least 90% of your U. H&r block 2011 tax software S. H&r block 2011 tax software source transportation income is attributable to regularly scheduled transportation. H&r block 2011 tax software “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. H&r block 2011 tax software “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. H&r block 2011 tax software This definition applies to both scheduled and chartered air transportation. H&r block 2011 tax software If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. H&r block 2011 tax software See Transportation Tax, later, in this chapter. H&r block 2011 tax software Business Profits and Losses and Sales Transactions All profits or losses from U. H&r block 2011 tax software S. H&r block 2011 tax software sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. H&r block 2011 tax software For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. H&r block 2011 tax software A share of U. H&r block 2011 tax software S. H&r block 2011 tax software source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. H&r block 2011 tax software Real Property Gain or Loss Gains and losses from the sale or exchange of U. H&r block 2011 tax software S. H&r block 2011 tax software real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. H&r block 2011 tax software You must treat the gain or loss as effectively connected with that trade or business. H&r block 2011 tax software U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest. H&r block 2011 tax software   This is any interest in real property located in the United States or the U. H&r block 2011 tax software S. H&r block 2011 tax software Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. H&r block 2011 tax software S. H&r block 2011 tax software real property holding corporation. H&r block 2011 tax software Real property includes the following. H&r block 2011 tax software Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. H&r block 2011 tax software Improvements on land, including buildings, other permanent structures, and their structural components. H&r block 2011 tax software Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. H&r block 2011 tax software U. H&r block 2011 tax software S. H&r block 2011 tax software real property holding corporation. H&r block 2011 tax software   A corporation is a U. H&r block 2011 tax software S. H&r block 2011 tax software real property holding corporation if the fair market value of the corporation's U. H&r block 2011 tax software S. H&r block 2011 tax software real property interests are at least 50% of the total fair market value of: The corporation's U. H&r block 2011 tax software S. H&r block 2011 tax software real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. H&r block 2011 tax software   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business unless you establish that the corporation is not a U. H&r block 2011 tax software S. H&r block 2011 tax software real property holding corporation. H&r block 2011 tax software   A U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. H&r block 2011 tax software An interest in a foreign corporation owning U. H&r block 2011 tax software S. H&r block 2011 tax software real property generally is not a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest unless the corporation chooses to be treated as a domestic corporation. H&r block 2011 tax software Qualified investment entities. H&r block 2011 tax software   Special rules apply to qualified investment entities (QIEs). H&r block 2011 tax software A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. H&r block 2011 tax software S. H&r block 2011 tax software real property holding corporation. H&r block 2011 tax software    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest is treated as a U. H&r block 2011 tax software S. H&r block 2011 tax software real property gain by the shareholder receiving the distribution. H&r block 2011 tax software A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. H&r block 2011 tax software A distribution that you do not treat as gain from the sale or exchange of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest is included in your gross income as a regular dividend. H&r block 2011 tax software Note. H&r block 2011 tax software Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. H&r block 2011 tax software S. H&r block 2011 tax software real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. H&r block 2011 tax software Domestically controlled QIE. H&r block 2011 tax software   The sale of an interest in a domestically controlled QIE is not the sale of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest. H&r block 2011 tax software The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. H&r block 2011 tax software The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. H&r block 2011 tax software Wash sale. H&r block 2011 tax software    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. H&r block 2011 tax software An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. H&r block 2011 tax software If this occurs, you are treated as having gain from the sale or exchange of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. H&r block 2011 tax software This also applies to any substitute dividend payment. H&r block 2011 tax software   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. H&r block 2011 tax software Alternative minimum tax. H&r block 2011 tax software   There may be a minimum tax on your net gain from the disposition of U. H&r block 2011 tax software S. H&r block 2011 tax software real property interests. H&r block 2011 tax software Figure the amount of this tax, if any, on Form 6251. H&r block 2011 tax software Withholding of tax. H&r block 2011 tax software   If you dispose of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest, the buyer may have to withhold tax. H&r block 2011 tax software See the discussion of Tax Withheld on Real Property Sales in chapter 8. H&r block 2011 tax software Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. H&r block 2011 tax software An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. H&r block 2011 tax software The three kinds of foreign source income are listed below. H&r block 2011 tax software Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. H&r block 2011 tax software Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. H&r block 2011 tax software Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. H&r block 2011 tax software A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. H&r block 2011 tax software Income, gain, or loss from the sale outside the United States, through the U. H&r block 2011 tax software S. H&r block 2011 tax software office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. H&r block 2011 tax software Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. H&r block 2011 tax software Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software For example, foreign source interest and dividend equivalents are treated as U. H&r block 2011 tax software S. H&r block 2011 tax software effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. H&r block 2011 tax software Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens and residents. H&r block 2011 tax software Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. H&r block 2011 tax software However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. H&r block 2011 tax software Example. H&r block 2011 tax software Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. H&r block 2011 tax software S. H&r block 2011 tax software office of his overseas employer. H&r block 2011 tax software He worked in the U. H&r block 2011 tax software S. H&r block 2011 tax software office until December 25, 2012, but did not leave this country until January 11, 2013. H&r block 2011 tax software On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. H&r block 2011 tax software All of Ted's income during his stay here is U. H&r block 2011 tax software S. H&r block 2011 tax software source income. H&r block 2011 tax software During 2012, Ted was engaged in the trade or business of performing personal services in the United States. H&r block 2011 tax software Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. H&r block 2011 tax software The salary payment Ted received in January 2013 is U. H&r block 2011 tax software S. H&r block 2011 tax software source income to him in 2013. H&r block 2011 tax software It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. H&r block 2011 tax software Real property income. H&r block 2011 tax software   You may be able to choose to treat all income from real property as effectively connected. H&r block 2011 tax software See Income From Real Property , later, in this chapter. H&r block 2011 tax software The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. H&r block 2011 tax software S. H&r block 2011 tax software sources but only if the items are not effectively connected with your U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. H&r block 2011 tax software S. H&r block 2011 tax software source fixed or determinable annual or periodic gains, profits, or income. H&r block 2011 tax software Income is fixed when it is paid in amounts known ahead of time. H&r block 2011 tax software Income is determinable whenever there is a basis for figuring the amount to be paid. H&r block 2011 tax software Income can be periodic if it is paid from time to time. H&r block 2011 tax software It does not have to be paid annually or at regular intervals. H&r block 2011 tax software Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. H&r block 2011 tax software Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. H&r block 2011 tax software A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. H&r block 2011 tax software Other items of income, such as royalties, also may be subject to the 30% tax. H&r block 2011 tax software Some fixed or determinable income may be exempt from U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software See chapter 3 if you are not sure whether the income is taxable. H&r block 2011 tax software Original issue discount (OID). H&r block 2011 tax software   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. H&r block 2011 tax software The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. H&r block 2011 tax software The 30% tax applies in the following circumstances. H&r block 2011 tax software You received a payment on a debt instrument. H&r block 2011 tax software In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. H&r block 2011 tax software But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. H&r block 2011 tax software You sold or exchanged the debt instrument. H&r block 2011 tax software The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. H&r block 2011 tax software   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. H&r block 2011 tax software S. H&r block 2011 tax software Source Income Subject to Withholding, if you bought the debt instrument at original issue. H&r block 2011 tax software However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. H&r block 2011 tax software You bought the debt instrument at a premium or paid an acquisition premium. H&r block 2011 tax software The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. H&r block 2011 tax software S. H&r block 2011 tax software Treasury securities). H&r block 2011 tax software The debt instrument is a contingent payment or inflation-indexed debt instrument. H&r block 2011 tax software For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. H&r block 2011 tax software   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. H&r block 2011 tax software See chapter 12. H&r block 2011 tax software Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business and is not exempted by treaty. H&r block 2011 tax software However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. H&r block 2011 tax software Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software Social Security Benefits A nonresident alien must include 85% of any U. H&r block 2011 tax software S. H&r block 2011 tax software social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. H&r block 2011 tax software S. H&r block 2011 tax software source fixed or determinable annual or periodic income. H&r block 2011 tax software Social security benefits include monthly retirement, survivor, and disability benefits. H&r block 2011 tax software This income is exempt under some tax treaties. H&r block 2011 tax software See Table 1 in Publication 901, U. H&r block 2011 tax software S. H&r block 2011 tax software Tax Treaties, for a list of tax treaties that exempt U. H&r block 2011 tax software S. H&r block 2011 tax software social security benefits from U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. H&r block 2011 tax software They apply even if you are engaged in a trade or business in the United States. H&r block 2011 tax software These rules do not apply to the sale or exchange of a U. H&r block 2011 tax software S. H&r block 2011 tax software real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. H&r block 2011 tax software See Real Property Gain or Loss , earlier, under Effectively Connected Income. H&r block 2011 tax software A capital asset is everything you own except: Inventory. H&r block 2011 tax software Business accounts or notes receivable. H&r block 2011 tax software Depreciable property used in a trade or business. H&r block 2011 tax software Real property used in a trade or business. H&r block 2011 tax software Supplies regularly used in a trade or business. H&r block 2011 tax software Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. H&r block 2011 tax software Certain U. H&r block 2011 tax software S. H&r block 2011 tax software government publications. H&r block 2011 tax software Certain commodities derivative financial instruments held by a commodities derivatives dealer. H&r block 2011 tax software Hedging transactions. H&r block 2011 tax software A capital gain is a gain on the sale or exchange of a capital asset. H&r block 2011 tax software A capital loss is a loss on the sale or exchange of a capital asset. H&r block 2011 tax software If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. H&r block 2011 tax software S. H&r block 2011 tax software currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. H&r block 2011 tax software You may want to read Publication 544. H&r block 2011 tax software However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. H&r block 2011 tax software Specific tax treatment that applies to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens or residents generally does not apply to you. H&r block 2011 tax software The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. H&r block 2011 tax software Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. H&r block 2011 tax software Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. H&r block 2011 tax software Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. H&r block 2011 tax software Gains on the sale or exchange of original issue discount obligations. H&r block 2011 tax software Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software See Income From Real Property , later. H&r block 2011 tax software 183-day rule. H&r block 2011 tax software   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. H&r block 2011 tax software For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. H&r block 2011 tax software S. H&r block 2011 tax software sources over your capital losses from U. H&r block 2011 tax software S. H&r block 2011 tax software sources. H&r block 2011 tax software This rule applies even if any of the transactions occurred while you were not in the United States. H&r block 2011 tax software   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. H&r block 2011 tax software   In arriving at your net gain, do not take the following into consideration. H&r block 2011 tax software The four types of gains listed earlier. H&r block 2011 tax software The deduction for a capital loss carryover. H&r block 2011 tax software Capital losses in excess of capital gains. H&r block 2011 tax software Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). H&r block 2011 tax software Losses from the sale or exchange of property held for personal use. H&r block 2011 tax software However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). H&r block 2011 tax software See Itemized Deductions in chapter 5. H&r block 2011 tax software   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. H&r block 2011 tax software Also, you must file your tax return on a calendar-year basis. H&r block 2011 tax software   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. H&r block 2011 tax software Reporting. H&r block 2011 tax software   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. H&r block 2011 tax software Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. H&r block 2011 tax software Attach them to Form 1040NR. H&r block 2011 tax software Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. H&r block 2011 tax software The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. H&r block 2011 tax software This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. H&r block 2011 tax software It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. H&r block 2011 tax software You can make this choice only for real property income that is not otherwise effectively connected with your U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. H&r block 2011 tax software This choice does not treat a nonresident alien, who is not otherwise engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business, as being engaged in a trade or business in the United States during the year. H&r block 2011 tax software Example. H&r block 2011 tax software You are a nonresident alien and are not engaged in a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software You own a single-family house in the United States that you rent out. H&r block 2011 tax software Your rental income for the year is $10,000. H&r block 2011 tax software This is your only U. H&r block 2011 tax software S. H&r block 2011 tax software source income. H&r block 2011 tax software As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. H&r block 2011 tax software You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. H&r block 2011 tax software You do not have to file a U. H&r block 2011 tax software S. H&r block 2011 tax software tax return (Form 1040NR) because your U. H&r block 2011 tax software S. H&r block 2011 tax software tax liability is satisfied by the withholding of tax. H&r block 2011 tax software If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. H&r block 2011 tax software (See Publication 527, Residential Rental Property, for information on rental expenses. H&r block 2011 tax software ) Any resulting net income is taxed at graduated rates. H&r block 2011 tax software If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. H&r block 2011 tax software For the first year you make the choice, also attach the statement discussed next. H&r block 2011 tax software Making the choice. H&r block 2011 tax software   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. H&r block 2011 tax software Include the following in your statement. H&r block 2011 tax software That you are making the choice. H&r block 2011 tax software Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. H&r block 2011 tax software A complete list of all your real property, or any interest in real property, located in the United States. H&r block 2011 tax software Give the legal identification of U. H&r block 2011 tax software S. H&r block 2011 tax software timber, coal, or iron ore in which you have an interest. H&r block 2011 tax software The extent of your ownership in the property. H&r block 2011 tax software The location of the property. H&r block 2011 tax software A description of any major improvements to the property. H&r block 2011 tax software The dates you owned the property. H&r block 2011 tax software Your income from the property. H&r block 2011 tax software Details of any previous choices and revocations of the real property income choice. H&r block 2011 tax software   This choice stays in effect for all later tax years unless you revoke it. H&r block 2011 tax software Revoking the choice. H&r block 2011 tax software   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. H&r block 2011 tax software S. H&r block 2011 tax software Individual Income Tax Return, for the year you made the choice and for later tax years. H&r block 2011 tax software You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. H&r block 2011 tax software If this time period has expired for the year of choice, you cannot revoke the choice for that year. H&r block 2011 tax software However, you may revoke the choice for later tax years only if you have IRS approval. H&r block 2011 tax software For information on how to get IRS approval, see Regulation section 1. H&r block 2011 tax software 871-10(d)(2). H&r block 2011 tax software Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . H&r block 2011 tax software If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. H&r block 2011 tax software Attach a statement to your return that includes the following information (if applicable). H&r block 2011 tax software Your name, taxpayer identification number, and tax year. H&r block 2011 tax software A description of the types of services performed (whether on or off board). H&r block 2011 tax software Names of vessels or registration numbers of aircraft on which you performed the services. H&r block 2011 tax software Amount of U. H&r block 2011 tax software S. H&r block 2011 tax software source transportation income derived from each type of service for each vessel or aircraft for the calendar year. H&r block 2011 tax software Total amount of U. H&r block 2011 tax software S. H&r block 2011 tax software source transportation income derived from all types of services for the calendar year. H&r block 2011 tax software This 4% tax applies to your U. H&r block 2011 tax software S. H&r block 2011 tax software source gross transportation income. H&r block 2011 tax software This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. H&r block 2011 tax software For transportation income from personal services, the transportation must be between the United States and a U. H&r block 2011 tax software S. H&r block 2011 tax software possession. H&r block 2011 tax software For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. H&r block 2011 tax software Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. H&r block 2011 tax software S. H&r block 2011 tax software residence with a period of nonresidence. H&r block 2011 tax software The special rule applies if you meet all of the following conditions. H&r block 2011 tax software You were a U. H&r block 2011 tax software S. H&r block 2011 tax software resident for a period that includes at least 3 consecutive calendar years. H&r block 2011 tax software You were a U. H&r block 2011 tax software S. H&r block 2011 tax software resident for at least 183 days in each of those years. H&r block 2011 tax software You ceased to be treated as a U. H&r block 2011 tax software S. H&r block 2011 tax software resident. H&r block 2011 tax software You then again became a U. H&r block 2011 tax software S. H&r block 2011 tax software resident before the end of the third calendar year after the end of the period described in (1) above. H&r block 2011 tax software Under this special rule, you are subject to tax on your U. H&r block 2011 tax software S. H&r block 2011 tax software source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. H&r block 2011 tax software Example. H&r block 2011 tax software John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. H&r block 2011 tax software On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. H&r block 2011 tax software During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). H&r block 2011 tax software He returned to the United States on October 5, 2013, as a lawful permanent resident. H&r block 2011 tax software He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). H&r block 2011 tax software Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. H&r block 2011 tax software Reporting requirements. H&r block 2011 tax software   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. H&r block 2011 tax software The return is due by the due date (including extensions) for filing your U. H&r block 2011 tax software S. H&r block 2011 tax software income tax return for the year that you again become a U. H&r block 2011 tax software S. H&r block 2011 tax software resident. H&r block 2011 tax software If you already filed returns for that period, you must file amended returns. H&r block 2011 tax software You must attach a statement to your return that identifies the source of all of your U. H&r block 2011 tax software S. H&r block 2011 tax software and foreign gross income and the items of income subject to this special rule. H&r block 2011 tax software Expatriation Tax The expatriation tax provisions apply to U. H&r block 2011 tax software S. H&r block 2011 tax software citizens who have renounced their citizenship and long-term residents who have ended their residency. H&r block 2011 tax software The rules that apply are based on the dates of expatriation, which are described in the following sections. H&r block 2011 tax software Expatriation Before June 4, 2004. H&r block 2011 tax software Expatriation After June 3, 2004, and Before June 17, 2008. H&r block 2011 tax software Expatriation After June 16, 2008. H&r block 2011 tax software Long-term resident defined. H&r block 2011 tax software   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. H&r block 2011 tax software In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. H&r block 2011 tax software Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. H&r block 2011 tax software S. H&r block 2011 tax software taxes. H&r block 2011 tax software Unless you received a ruling from the IRS that you did not expatriate to avoid U. H&r block 2011 tax software S. H&r block 2011 tax software taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. H&r block 2011 tax software The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). H&r block 2011 tax software Table 4-1. H&r block 2011 tax software Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software   THEN the rules outlined on this page apply if . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software     Your 5-year average annual net income tax was more than . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software OR Your net worth equaled or exceeded . H&r block 2011 tax software . H&r block 2011 tax software . H&r block 2011 tax software 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. H&r block 2011 tax software Reporting requirements. H&r block 2011 tax software   If you lost your U. H&r block 2011 tax software S. H&r block 2011 tax software citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. H&r block 2011 tax software If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. H&r block 2011 tax software   Your U. H&r block 2011 tax software S. H&r block 2011 tax software residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. H&r block 2011 tax software Penalties. H&r block 2011 tax software   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. H&r block 2011 tax software The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. H&r block 2011 tax software The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. H&r block 2011 tax software Expatriation tax. H&r block 2011 tax software   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. H&r block 2011 tax software It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. H&r block 2011 tax software See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. H&r block 2011 tax software Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. H&r block 2011 tax software Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. H&r block 2011 tax software $127,000 if you expatriated or terminated residency in 2005. H&r block 2011 tax software $131,000 if you expatriated or terminated residency in 2006. H&r block 2011 tax software $136,000 if you expatriated or terminated residency in 2007. H&r block 2011 tax software $139,000 if you expatriated or terminated residency in 2008. H&r block 2011 tax software Your net worth is $2 million or more on the date of your expatriation or termination of residency. H&r block 2011 tax software You fail to certify on Form 8854 that you have complied with all U. H&r block 2011 tax software S. H&r block 2011 tax software federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. H&r block 2011 tax software Exception for dual-citizens and certain minors. H&r block 2011 tax software   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. H&r block 2011 tax software However, they still must provide the certification required in (3). H&r block 2011 tax software Certain dual-citizens. H&r block 2011 tax software   You may qualify for the exception described above if all of the following apply. H&r block 2011 tax software You became at birth a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen and a citizen of another country and you continue to be a citizen of that other country. H&r block 2011 tax software You were never a resident alien of the United States (as defined in chapter 1). H&r block 2011 tax software You never held a U. H&r block 2011 tax software S. H&r block 2011 tax software passport. H&r block 2011 tax software You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. H&r block 2011 tax software S. H&r block 2011 tax software citizenship. H&r block 2011 tax software Certain minors. H&r block 2011 tax software   You may qualify for the exception described above if you meet all of the following requirements. H&r block 2011 tax software You became a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen at birth. H&r block 2011 tax software Neither of your parents was a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen at the time of your birth. H&r block 2011 tax software You expatriated before you were 18½. H&r block 2011 tax software You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. H&r block 2011 tax software Tax consequences of presence in the United States. H&r block 2011 tax software   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. H&r block 2011 tax software   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. H&r block 2011 tax software Instead, you are treated as a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen or resident and taxed on your worldwide income for that tax year. H&r block 2011 tax software You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. H&r block 2011 tax software   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. H&r block 2011 tax software However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. H&r block 2011 tax software You have ties with other countries. H&r block 2011 tax software You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. H&r block 2011 tax software You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. H&r block 2011 tax software Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. H&r block 2011 tax software See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. H&r block 2011 tax software Related employer. H&r block 2011 tax software   If your employer in the United States is any of the following, then your employer is related to you. H&r block 2011 tax software You must count any days you performed services in the United States for that employer as days of presence in the United States. H&r block 2011 tax software Members of your family. H&r block 2011 tax software This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. H&r block 2011 tax software ), and lineal descendants (children, grandchildren, etc. H&r block 2011 tax software ). H&r block 2011 tax software A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. H&r block 2011 tax software A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. H&r block 2011 tax software (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. H&r block 2011 tax software ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. H&r block 2011 tax software Date of tax expatriation. H&r block 2011 tax software   For purposes of U. H&r block 2011 tax software S. H&r block 2011 tax software tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. H&r block 2011 tax software You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. H&r block 2011 tax software You file Form 8854 in accordance with the form instructions. H&r block 2011 tax software Annual return. H&r block 2011 tax software   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. H&r block 2011 tax software You must file this form even if you owe no U. H&r block 2011 tax software S. H&r block 2011 tax software tax. H&r block 2011 tax software Penalty. H&r block 2011 tax software   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. H&r block 2011 tax software You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. H&r block 2011 tax software How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. H&r block 2011 tax software S. H&r block 2011 tax software source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. H&r block 2011 tax software S. H&r block 2011 tax software trade or business. H&r block 2011 tax software For this purpose, U. H&r block 2011 tax software S. H&r block 2011 tax software source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. H&r block 2011 tax software S. H&r block 2011 tax software domestic corporation, and Debt obligations of U. H&r block 2011 tax software S. H&r block 2011 tax software persons or of the United States, a state or political subdivision thereof, or the District of Columbia. H&r block 2011 tax software U. H&r block 2011 tax software S. H&r block 2011 tax software source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. H&r block 2011 tax software The income or gain is considered U. H&r block 2011 tax software S. H&r block 2011 tax software source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. H&r block 2011 tax software Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. H&r block 2011 tax software S. H&r block 2011 tax software source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. H&r block 2011 tax software Other information. H&r block 2011 tax software   For more information on the expatriation tax provisions, including exceptions to the tax and special U. H&r block 2011 tax software S. H&r block 2011 tax software source rules, see section 877 of the Internal Revenue Code. H&r block 2011 tax software Expatriation Tax Return If you expatriated or terminated your U. H&r block 2011 tax software S. H&r block 2011 tax software residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. H&r block 2011 tax software Attach it to Form 1040NR if you are required to file that form. H&r block 2011 tax software If you are present in the United States following your expatriation and are subject to tax as a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen or resident, file Form 8854 with Form 1040. H&r block 2011 tax software Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. H&r block 2011 tax software Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. H&r block 2011 tax software $145,000 if you expatriated or terminated residency in 2009 or 2010. H&r block 2011 tax software $147,000 if you expatriated or terminated residency in 2011. H&r block 2011 tax software $151,000 if you expatriated or terminated residency in 2012. H&r block 2011 tax software $155,000 if you expatriated or terminated residency in 2013. H&r block 2011 tax software Your net worth is $2 million or more on the date of your expatriation or termination of residency. H&r block 2011 tax software You fail to certify on Form 8854 that you have complied with all U. H&r block 2011 tax software S. H&r block 2011 tax software federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. H&r block 2011 tax software Exception for dual-citizens and certain minors. H&r block 2011 tax software   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. H&r block 2011 tax software However, they still must provide the certification required in (3) above. H&r block 2011 tax software Certain dual-citizens. H&r block 2011 tax software   You may qualify for the exception described above if both of the following apply. H&r block 2011 tax software You became at birth a U. H&r block 2011 tax software S. H&r block 2011 tax software citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. H&r block 2011 tax software You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. H&r block 2011 tax software For the purpose of determining U. H&r block 2011 tax software S. H&r block 2011 tax software residency, use the substantial presence test described in chapter 1. H&r block 2011 tax software Certain minors. H&r block 2011 tax software   You may qualify for the exception described earlier if you meet both of the following requirements. H&r block 2011 tax software You expatriated before you were 18½. H&r block 2011 tax software You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. H&r block 2011 tax software For the purpose of determining U. H&r block 2011 tax software S. H&r block 2011 tax software residency, use the substantial presence test described in chapter 1. H&r block 2011 tax software Expatriation date. H&r block 2011 tax software   Your expatriation date is the date you relinquish U. H&r block 2011 tax software S. H&r block 2011 tax software citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. H&r block 2011 tax software S. H&r block 2011 tax software resident). H&r block 2011 tax software Former U. H&r block 2011 tax software S. H&r block 2011 tax software citizen. H&r block 2011 tax software   You are considered to have relinquished your U. H&r block 2011 tax software S. H&r block 2011 tax software citizenship on the earliest of the following dates. H&r block 2011 tax software The date you renounced U. H&r block 2011 tax software S. H&r block 2011 tax software citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). H&r block 2011 tax software The date you furnished to the State Department a signed statement of voluntary relinquishment of U. H&r block 2011 tax software S. H&r block 2011 tax software nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). H&r block 2011 tax software The date the State Department issued a certificate of loss of nationality. H&r block 2011 tax software The date that a U. H&r block 2011 tax software S. H&r block 2011 tax software court canceled your certificate of naturalization. H&r block 2011 tax software Former long-term resident. H&r block 2011 tax software   You are considered to have terminated your long-term residency on the earliest of the following dates. H&r block 2011 tax software The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. H&r block 2011 tax software S. H&r block 2011 tax software consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. H&r block 2011 tax software The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. H&r block 2011 tax software If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. H&r block 2011 tax software See Effect of Tax Treaties in chapter 1 for more information about dual residents. H&r block 2011 tax software How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). H&r block 2011 tax software This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. H&r block 2011 tax software But see Exceptions , later. H&r block 2011 tax software Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. H&r block 2011 tax software S. H&r block 2011 tax software internal revenue laws. H&r block 2011 tax software Losses from deemed sales must be taken into account to the extent otherwise provided under U. H&r block 2011 tax software S. H&r block 2011 tax software internal revenue laws. H&r block 2011 tax software However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. H&r block 2011 tax software The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. H&r block 2011 tax software $626,000 if you expatriated or terminated residency in 2009. H&r block 2011 tax software $627,000 if you expatriated or terminated residency in 2010. H&r block 2011 tax software $636,000 if you expatriated or terminated residency in 2011. H&r block 2011 tax software $651,000 if you expatriated or terminated residency in 2012. H&r block 2011 tax software $668,000 if you expatriated or terminated residency in 2013. H&r block 2011 tax software Exceptions. H&r block 2011 tax software   The mark-to-market tax does not apply to the following. H&r block 2011 tax software Eligible deferred compensation items. H&r block 2011 tax software Ineligible deferred compensation items. H&r block 2011 tax software Interests in nongrantor trusts. H&r block 2011 tax software Specified tax deferred accounts. H&r block 2011 tax software Instead, items (1) and (3) may be subject to withholding at source. H&r block 2011 tax software In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. H&r block 2011 tax software In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. H&r block 2011 tax software See paragraphs (d), (e), and (f) of section 877A for more information. H&r block 2011 tax software Expatriation Tax Return If you expatriated or terminated your U. H&r block 2011 tax software S. H&r block 2011 tax software residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. H&r block 2011 tax software Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. H&r block 2011 tax software Deferral of payment of mark-to-market tax. H&r block 2011 tax software   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. H&r block 2011 tax software If you make this election, the following rules apply. H&r block 2011 tax software You can make the election on a property-by-property basis. H&r block 2011 tax software The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. H&r block 2011 tax software Interest is charged for the period the tax is deferred. H&r block 2011 tax software The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. H&r block 2011 tax software The due date of the return required for the year of death. H&r block 2011 tax software The time that the security provided for the property fails to be adequate. H&r block 2011 tax software See item (6) below. H&r block 2011 tax software You make the election on Form 8854. H&r block 2011 tax software You must provide adequate security (such as a bond). H&r block 2011 tax software You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. H&r block 2011 tax software   For more information about the deferral of payment, see the Instructions for Form 8854. H&r block 2011 tax software Prev  Up  Next   Home   More Online Publications