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How To Amend Taxes

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How To Amend Taxes

How to amend taxes 2. How to amend taxes   Ordinary or Capital Gain or Loss Table of Contents IntroductionSection 1231 transactions. How to amend taxes Topics - This chapter discusses: Useful Items - You may want to see: Capital Assets Noncapital AssetsCommodities derivative dealer. How to amend taxes Sales and Exchanges Between Related PersonsGain Is Ordinary Income Nondeductible Loss Other DispositionsSale of a Business Dispositions of Intangible Property Subdivision of Land Timber Precious Metals and Stones, Stamps, and Coins Coal and Iron Ore Conversion Transactions Introduction You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). How to amend taxes You must do this to figure your net capital gain or loss. How to amend taxes For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. How to amend taxes See Capital Gains Tax Rates in chapter 4. How to amend taxes Your deduction for a net capital loss may be limited. How to amend taxes See Treatment of Capital Losses in chapter 4. How to amend taxes Capital gain or loss. How to amend taxes   Generally, you will have a capital gain or loss if you sell or exchange a capital asset. How to amend taxes You also may have a capital gain if your section 1231 transactions result in a net gain. How to amend taxes Section 1231 transactions. How to amend taxes   Section 1231 transactions are sales and exchanges of property held longer than 1 year and either used in a trade or business or held for the production of rents or royalties. How to amend taxes They also include certain involuntary conversions of business or investment property, including capital assets. How to amend taxes See Section 1231 Gains and Losses in chapter 3 for more information. How to amend taxes Topics - This chapter discusses: Capital assets Noncapital assets Sales and exchanges between  related persons Other dispositions Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 4797 Sales of Business Property 8594 Asset Acquisition Statement Under Section 1060 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. How to amend taxes Capital Assets Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. How to amend taxes For exceptions, see Noncapital Assets, later. How to amend taxes The following items are examples of capital assets. How to amend taxes Stocks and bonds. How to amend taxes A home owned and occupied by you and your family. How to amend taxes Timber grown on your home property or investment property, even if you make casual sales of the timber. How to amend taxes Household furnishings. How to amend taxes A car used for pleasure or commuting. How to amend taxes Coin or stamp collections. How to amend taxes Gems and jewelry. How to amend taxes Gold, silver, and other metals. How to amend taxes Personal-use property. How to amend taxes   Generally, property held for personal use is a capital asset. How to amend taxes Gain from a sale or exchange of that property is a capital gain. How to amend taxes Loss from the sale or exchange of that property is not deductible. How to amend taxes You can deduct a loss relating to personal-use property only if it results from a casualty or theft. How to amend taxes Investment property. How to amend taxes   Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. How to amend taxes This treatment does not apply to property used to produce rental income. How to amend taxes See Business assets, later, under Noncapital Assets. How to amend taxes Release of restriction on land. How to amend taxes   Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset. How to amend taxes Noncapital Assets A noncapital asset is property that is not a capital asset. How to amend taxes The following kinds of property are not capital assets. How to amend taxes Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business. How to amend taxes Inventories are discussed in Publication 538, Accounting Periods and Methods. How to amend taxes But, see the Tip below. How to amend taxes Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of any properties described in (1), above. How to amend taxes Depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later), even if the property is fully depreciated (or amortized). How to amend taxes Sales of this type of property are discussed in chapter 3. How to amend taxes Real property used in your trade or business or as rental property, even if the property is fully depreciated. How to amend taxes A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs): Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced. How to amend taxes But, see the Tip below. How to amend taxes U. How to amend taxes S. How to amend taxes Government publications you got from the government for free or for less than the normal sales price or that you acquired under circumstances entitling you to the basis of someone who got the publications for free or for less than the normal sales price. How to amend taxes Any commodities derivative financial instrument (discussed later) held by a commodities derivatives dealer unless it meets both of the following requirements. How to amend taxes It is established to the satisfaction of the IRS that the instrument has no connection to the activities of the dealer as a dealer. How to amend taxes The instrument is clearly identified in the dealer's records as meeting (a) by the end of the day on which it was acquired, originated, or entered into. How to amend taxes Any hedging transaction (defined later) that is clearly identified as a hedging transaction by the end of the day on which it was acquired, originated, or entered into. How to amend taxes Supplies of a type you regularly use or consume in the ordinary course of your trade or business. How to amend taxes You can elect to treat as capital assets certain self-created musical compositions or copyrights you sold or exchanged. How to amend taxes See chapter 4 of Publication 550 for details. How to amend taxes Property held mainly for sale to customers. How to amend taxes   Stock in trade, inventory, and other property you hold mainly for sale to customers in your trade or business are not capital assets. How to amend taxes Inventories are discussed in Publication 538. How to amend taxes Business assets. How to amend taxes   Real property and depreciable property used in your trade or business or as rental property (including section 197 intangibles defined later under Dispositions of Intangible Property) are not capital assets. How to amend taxes The sale or disposition of business property is discussed in chapter 3. How to amend taxes Letters and memoranda. How to amend taxes   Letters, memoranda, and similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs) are not treated as capital assets (as discussed earlier) if your personal efforts created them or if they were prepared or produced for you. How to amend taxes Nor is this property a capital asset if your basis in it is determined by reference to the person who created it or the person for whom it was prepared. How to amend taxes For this purpose, letters and memoranda addressed to you are considered prepared for you. How to amend taxes If letters or memoranda are prepared by persons under your administrative control, they are considered prepared for you whether or not you review them. How to amend taxes Commodities derivative financial instrument. How to amend taxes   A commodities derivative financial instrument is a commodities contract or other financial instrument for commodities (other than a share of corporate stock, a beneficial interest in a partnership or trust, a note, bond, debenture, or other evidence of indebtedness, or a section 1256 contract) the value or settlement price of which is calculated or determined by reference to a specified index (as defined in section 1221(b) of the Internal Revenue Code). How to amend taxes Commodities derivative dealer. How to amend taxes   A commodities derivative dealer is a person who regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. How to amend taxes Hedging transaction. How to amend taxes   A hedging transaction is any transaction you enter into in the normal course of your trade or business primarily to manage any of the following. How to amend taxes Risk of price changes or currency fluctuations involving ordinary property you hold or will hold. How to amend taxes Risk of interest rate or price changes or currency fluctuations for borrowings you make or will make, or ordinary obligations you incur or will incur. How to amend taxes Sales and Exchanges Between Related Persons This section discusses the rules that may apply to the sale or exchange of property between related persons. How to amend taxes If these rules apply, gains may be treated as ordinary income and losses may not be deductible. How to amend taxes See Transfers to Spouse in chapter 1 for rules that apply to spouses. How to amend taxes Gain Is Ordinary Income If a gain is recognized on the sale or exchange of property to a related person, the gain may be ordinary income even if the property is a capital asset. How to amend taxes It is ordinary income if the sale or exchange is a depreciable property transaction or a controlled partnership transaction. How to amend taxes Depreciable property transaction. How to amend taxes   Gain on the sale or exchange of property, including a leasehold or a patent application, that is depreciable property in the hands of the person who receives it is ordinary income if the transaction is either directly or indirectly between any of the following pairs of entities. How to amend taxes A person and the person's controlled entity or entities. How to amend taxes A taxpayer and any trust in which the taxpayer (or his or her spouse) is a beneficiary unless the beneficiary's interest in the trust is a remote contingent interest; that is, the value of the interest computed actuarially is 5% or less of the value of the trust property. How to amend taxes An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest (a bequest for a sum of money). How to amend taxes An employer (or any person related to the employer under rules (1), (2), or (3)) and a welfare benefit fund (within the meaning of section 419(e) of the Internal Revenue Code) that is controlled directly or indirectly by the employer (or any person related to the employer). How to amend taxes Controlled entity. How to amend taxes   A person's controlled entity is either of the following. How to amend taxes A corporation in which more than 50% of the value of all outstanding stock, or a partnership in which more than 50% of the capital interest or profits interest, is directly or indirectly owned by or for that person. How to amend taxes An entity whose relationship with that person is one of the following. How to amend taxes A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. How to amend taxes Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 50%” is substituted for “at least 80%” in that definition. How to amend taxes Two S corporations, if the same persons own more than 50% in value of the outstanding stock of each corporation. How to amend taxes Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. How to amend taxes Controlled partnership transaction. How to amend taxes   A gain recognized in a controlled partnership transaction may be ordinary income. How to amend taxes The gain is ordinary income if it results from the sale or exchange of property that, in the hands of the party who receives it, is a noncapital asset such as trade accounts receivable, inventory, stock in trade, or depreciable or real property used in a trade or business. How to amend taxes   A controlled partnership transaction is a transaction directly or indirectly between either of the following pairs of entities. How to amend taxes A partnership and a person who directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. How to amend taxes Two partnerships, if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. How to amend taxes Determining ownership. How to amend taxes   In the transactions under Depreciable property transaction and Controlled partnership transaction, earlier, use the following rules to determine the ownership of stock or a partnership interest. How to amend taxes Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. How to amend taxes (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. How to amend taxes ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. How to amend taxes Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. How to amend taxes For purposes of applying (1) or (2), above, stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. How to amend taxes But stock or a partnership interest constructively owned by an individual under (2) is not treated as owned by the individual for reapplying (2) to make another person the constructive owner of that stock or partnership interest. How to amend taxes Nondeductible Loss A loss on the sale or exchange of property between related persons is not deductible. How to amend taxes This applies to both direct and indirect transactions, but not to distributions of property from a corporation in a complete liquidation. How to amend taxes For the list of related persons, see Related persons next. How to amend taxes If a sale or exchange is between any of these related persons and involves the lump-sum sale of a number of blocks of stock or pieces of property, the gain or loss must be figured separately for each block of stock or piece of property. How to amend taxes The gain on each item is taxable. How to amend taxes The loss on any item is nondeductible. How to amend taxes Gains from the sales of any of these items may not be offset by losses on the sales of any of the other items. How to amend taxes Related persons. How to amend taxes   The following is a list of related persons. How to amend taxes Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. How to amend taxes ), and lineal descendants (children, grandchildren, etc. How to amend taxes ). How to amend taxes An individual and a corporation if the individual directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. How to amend taxes Two corporations that are members of the same controlled group as defined in section 267(f) of the Internal Revenue Code. How to amend taxes A trust fiduciary and a corporation if the trust or the grantor of the trust directly or indirectly owns more than 50% in value of the outstanding stock of the corporation. How to amend taxes A grantor and fiduciary, and the fiduciary and beneficiary, of any trust. How to amend taxes Fiduciaries of two different trusts, and the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. How to amend taxes A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization, or a member of that person's family. How to amend taxes A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest or profits interest in the partnership. How to amend taxes Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. How to amend taxes Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. How to amend taxes An executor and a beneficiary of an estate unless the sale or exchange is in satisfaction of a pecuniary bequest. How to amend taxes Two partnerships if the same persons directly or indirectly own more than 50% of the capital interests or profits interests in both partnerships. How to amend taxes A person and a partnership if the person directly or indirectly owns more than 50% of the capital interest or profits interest in the partnership. How to amend taxes Partnership interests. How to amend taxes   The nondeductible loss rule does not apply to a sale or exchange of an interest in the partnership between the related persons described in (12) or (13) above. How to amend taxes Controlled groups. How to amend taxes   Losses on transactions between members of the same controlled group described in (3) earlier are deferred rather than denied. How to amend taxes   For more information, see section 267(f) of the Internal Revenue Code. How to amend taxes Ownership of stock or partnership interests. How to amend taxes   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership for a loss on a sale or exchange, the following rules apply. How to amend taxes Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. How to amend taxes (However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more in value of the stock of the corporation. How to amend taxes ) An individual is considered as owning the stock or partnership interest directly or indirectly owned by or for his or her family. How to amend taxes Family includes only brothers, sisters, half-brothers, half-sisters, spouse, ancestors, and lineal descendants. How to amend taxes An individual owning (other than by applying (2)) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. How to amend taxes For purposes of applying (1), (2), or (3), stock or a partnership interest constructively owned by a person under (1) is treated as actually owned by that person. How to amend taxes But stock or a partnership interest constructively owned by an individual under (2) or (3) is not treated as owned by the individual for reapplying either (2) or (3) to make another person the constructive owner of that stock or partnership interest. How to amend taxes Indirect transactions. How to amend taxes   You cannot deduct your loss on the sale of stock through your broker if under a prearranged plan a related person or entity buys the same stock you had owned. How to amend taxes This does not apply to a cross-trade between related parties through an exchange that is purely coincidental and is not prearranged. How to amend taxes Property received from a related person. How to amend taxes   If, in a purchase or exchange, you received property from a related person who had a loss that was not allowable and you later sell or exchange the property at a gain, you recognize the gain only to the extent it is more than the loss previously disallowed to the related person. How to amend taxes This rule applies only to the original transferee. How to amend taxes Example 1. How to amend taxes Your brother sold stock to you for $7,600. How to amend taxes His cost basis was $10,000. How to amend taxes His loss of $2,400 was not deductible. How to amend taxes You later sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900 ($10,500 − $7,600). How to amend taxes Your recognized gain is only $500, the gain that is more than the $2,400 loss not allowed to your brother. How to amend taxes Example 2. How to amend taxes Assume the same facts as in Example 1, except that you sell the stock for $6,900 instead of $10,500. How to amend taxes Your recognized loss is only $700 ($7,600 − $6,900). How to amend taxes You cannot deduct the loss not allowed to your brother. How to amend taxes Other Dispositions This section discusses rules for determining the treatment of gain or loss from various dispositions of property. How to amend taxes Sale of a Business The sale of a business usually is not a sale of one asset. How to amend taxes Instead, all the assets of the business are sold. How to amend taxes Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss. How to amend taxes A business usually has many assets. How to amend taxes When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. How to amend taxes The gain or loss on each asset is figured separately. How to amend taxes The sale of capital assets results in capital gain or loss. How to amend taxes The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction (discussed in chapter 3). How to amend taxes The sale of inventory results in ordinary income or loss. How to amend taxes Partnership interests. How to amend taxes   An interest in a partnership or joint venture is treated as a capital asset when sold. How to amend taxes The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. How to amend taxes For more information, see Disposition of Partner's Interest in Publication 541. How to amend taxes Corporation interests. How to amend taxes   Your interest in a corporation is represented by stock certificates. How to amend taxes When you sell these certificates, you usually realize capital gain or loss. How to amend taxes For information on the sale of stock, see chapter 4 in Publication 550. How to amend taxes Corporate liquidations. How to amend taxes   Corporate liquidations of property generally are treated as a sale or exchange. How to amend taxes Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. How to amend taxes Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value. How to amend taxes   In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. How to amend taxes For more information, see section 332 of the Internal Revenue Code and the related regulations. How to amend taxes Allocation of consideration paid for a business. How to amend taxes   The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. How to amend taxes Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method (explained later) to allocate the consideration to each business asset transferred. How to amend taxes This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. How to amend taxes It also determines the buyer's basis in the business assets. How to amend taxes Consideration. How to amend taxes   The buyer's consideration is the cost of the assets acquired. How to amend taxes The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets. How to amend taxes Residual method. How to amend taxes   The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. How to amend taxes This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. How to amend taxes Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code. How to amend taxes   A group of assets constitutes a trade or business if either of the following applies. How to amend taxes Goodwill or going concern value could, under any circumstances, attach to them. How to amend taxes The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code. How to amend taxes   The residual method provides for the consideration to be reduced first by the amount of Class I assets (defined below). How to amend taxes The consideration remaining after this reduction must be allocated among the various business assets in a certain order. How to amend taxes See Classes of assets next for the complete order. How to amend taxes Classes of assets. How to amend taxes   The following definitions are the classifications for deemed or actual asset acquisitions. How to amend taxes Allocate the consideration among the assets in the following order. How to amend taxes The amount allocated to an asset, other than a Class VII asset, cannot exceed its fair market value on the purchase date. How to amend taxes The amount you can allocate to an asset also is subject to any applicable limits under the Internal Revenue Code or general principles of tax law. How to amend taxes Class I assets are cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposit). How to amend taxes Class II assets are certificates of deposit, U. How to amend taxes S. How to amend taxes Government securities, foreign currency, and actively traded personal property, including stock and securities. How to amend taxes Class III assets are accounts receivable, other debt instruments, and assets that you mark to market at least annually for federal income tax purposes. How to amend taxes However, see section 1. How to amend taxes 338-6(b)(2)(iii) of the regulations for exceptions that apply to debt instruments issued by persons related to a target corporation, contingent debt instruments, and debt instruments convertible into stock or other property. How to amend taxes Class IV assets are property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held by the taxpayer primarily for sale to customers in the ordinary course of business. How to amend taxes Class V assets are all assets other than Class I, II, III, IV, VI, and VII assets. How to amend taxes    Note. How to amend taxes Furniture and fixtures, buildings, land, vehicles, and equipment, which constitute all or part of a trade or business are generally Class V assets. How to amend taxes Class VI assets are section 197 intangibles (other than goodwill and going concern value). How to amend taxes Class VII assets are goodwill and going concern value (whether the goodwill or going concern value qualifies as a section 197 intangible). How to amend taxes   If an asset described in one of the classifications described above can be included in more than one class, include it in the lower numbered class. How to amend taxes For example, if an asset is described in both Class II and Class IV, choose Class II. How to amend taxes Example. How to amend taxes The total paid in the sale of the assets of Company SKB is $21,000. How to amend taxes No cash or deposit accounts or similar accounts were sold. How to amend taxes The company's U. How to amend taxes S. How to amend taxes Government securities sold had a fair market value of $3,200. How to amend taxes The only other asset transferred (other than goodwill and going concern value) was inventory with a fair market value of $15,000. How to amend taxes Of the $21,000 paid for the assets of Company SKB, $3,200 is allocated to U. How to amend taxes S. How to amend taxes Government securities, $15,000 to inventory assets, and the remaining $2,800 to goodwill and going concern value. How to amend taxes Agreement. How to amend taxes   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value of any of the assets. How to amend taxes This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. How to amend taxes Reporting requirement. How to amend taxes   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. How to amend taxes Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. How to amend taxes Generally, the buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. How to amend taxes See the Instructions for Form 8594. How to amend taxes Dispositions of Intangible Property Intangible property is any personal property that has value but cannot be seen or touched. How to amend taxes It includes such items as patents, copyrights, and the goodwill value of a business. How to amend taxes Gain or loss on the sale or exchange of amortizable or depreciable intangible property held longer than 1 year (other than an amount recaptured as ordinary income) is a section 1231 gain or loss. How to amend taxes The treatment of section 1231 gain or loss and the recapture of amortization and depreciation as ordinary income are explained in chapter 3. How to amend taxes See chapter 8 of Publication 535, Business Expenses, for information on amortizable intangible property and chapter 1 of Publication 946, How To Depreciate Property, for information on intangible property that can and cannot be depreciated. How to amend taxes Gain or loss on dispositions of other intangible property is ordinary or capital depending on whether the property is a capital asset or a noncapital asset. How to amend taxes The following discussions explain special rules that apply to certain dispositions of intangible property. How to amend taxes Section 197 Intangibles Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (after July 25, 1991, if chosen), and held in connection with the conduct of a trade or business or an activity entered into for profit whose costs are amortized over 15 years. How to amend taxes They include the following assets. How to amend taxes Goodwill. How to amend taxes Going concern value. How to amend taxes Workforce in place. How to amend taxes Business books and records, operating systems, and other information bases. How to amend taxes Patents, copyrights, formulas, processes, designs, patterns, know how, formats, and similar items. How to amend taxes Customer-based intangibles. How to amend taxes Supplier-based intangibles. How to amend taxes Licenses, permits, and other rights granted by a governmental unit. How to amend taxes Covenants not to compete entered into in connection with the acquisition of a business. How to amend taxes Franchises, trademarks, and trade names. How to amend taxes See chapter 8 of Publication 535 for a description of each intangible. How to amend taxes Dispositions. How to amend taxes   You cannot deduct a loss from the disposition or worthlessness of a section 197 intangible you acquired in the same transaction (or series of related transactions) as another section 197 intangible you still hold. How to amend taxes Instead, you must increase the adjusted basis of your retained section 197 intangible by the nondeductible loss. How to amend taxes If you retain more than one section 197 intangible, increase each intangible's adjusted basis. How to amend taxes Figure the increase by multiplying the nondeductible loss by a fraction, the numerator (top number) of which is the retained intangible's adjusted basis on the date of the loss and the denominator (bottom number) of which is the total adjusted basis of all retained intangibles on the date of the loss. How to amend taxes   In applying this rule, members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity. How to amend taxes For example, a corporation cannot deduct a loss on the sale of a section 197 intangible if, after the sale, a member of the same controlled group retains other section 197 intangibles acquired in the same transaction as the intangible sold. How to amend taxes Covenant not to compete. How to amend taxes   A covenant not to compete (or similar arrangement) that is a section 197 intangible cannot be treated as disposed of or worthless before you have disposed of your entire interest in the trade or business for which the covenant was entered into. How to amend taxes Members of the same controlled group of corporations and commonly controlled businesses are treated as a single entity in determining whether a member has disposed of its entire interest in a trade or business. How to amend taxes Anti-churning rules. How to amend taxes   Anti-churning rules prevent a taxpayer from converting section 197 intangibles that do not qualify for amortization into property that would qualify for amortization. How to amend taxes However, these rules do not apply to part of the basis of property acquired by certain related persons if the transferor elects to do both the following. How to amend taxes Recognize gain on the transfer of the property. How to amend taxes Pay income tax on the gain at the highest tax rate. How to amend taxes   If the transferor is a partnership or S corporation, the partnership or S corporation (not the partners or shareholders) can make the election. How to amend taxes But each partner or shareholder must pay the tax on his or her share of gain. How to amend taxes   To make the election, you, as the transferor, must attach a statement containing certain information to your income tax return for the year of the transfer. How to amend taxes You must file the tax return by the due date (including extensions). How to amend taxes You must also notify the transferee of the election in writing by the due date of the return. How to amend taxes   If you timely filed your return without making the election, you can make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). How to amend taxes Attach the statement to the amended return and write “Filed pursuant to section 301. How to amend taxes 9100-2” at the top of the statement. How to amend taxes File the amended return at the same address the original return was filed. How to amend taxes For more information about making the election, see Regulations section 1. How to amend taxes 197-2(h)(9). How to amend taxes For information about reporting the tax on your income tax return, see the Instructions for Form 4797. How to amend taxes Patents The transfer of a patent by an individual is treated as a sale or exchange of a capital asset held longer than 1 year. How to amend taxes This applies even if the payments for the patent are made periodically during the transferee's use or are contingent on the productivity, use, or disposition of the patent. How to amend taxes For information on the treatment of gain or loss on the transfer of capital assets, see chapter 4. How to amend taxes This treatment applies to your transfer of a patent if you meet all the following conditions. How to amend taxes You are the holder of the patent. How to amend taxes You transfer the patent other than by gift, inheritance, or devise. How to amend taxes You transfer all substantial rights to the patent or an undivided interest in all such rights. How to amend taxes You do not transfer the patent to a related person. How to amend taxes Holder. How to amend taxes   You are the holder of a patent if you are either of the following. How to amend taxes The individual whose effort created the patent property and who qualifies as the original and first inventor. How to amend taxes The individual who bought an interest in the patent from the inventor before the invention was tested and operated successfully under operating conditions and who is neither related to, nor the employer of, the inventor. How to amend taxes All substantial rights. How to amend taxes   All substantial rights to patent property are all rights that have value when they are transferred. How to amend taxes A security interest (such as a lien), or a reservation calling for forfeiture for nonperformance, is not treated as a substantial right for these rules and may be kept by you as the holder of the patent. How to amend taxes   All substantial rights to a patent are not transferred if any of the following apply to the transfer. How to amend taxes The rights are limited geographically within a country. How to amend taxes The rights are limited to a period less than the remaining life of the patent. How to amend taxes The rights are limited to fields of use within trades or industries and are less than all the rights that exist and have value at the time of the transfer. How to amend taxes The rights are less than all the claims or inventions covered by the patent that exist and have value at the time of the transfer. How to amend taxes Related persons. How to amend taxes   This tax treatment does not apply if the transfer is directly or indirectly between you and a related person as defined earlier in the list under Nondeductible Loss, with the following changes. How to amend taxes Members of your family include your spouse, ancestors, and lineal descendants, but not your brothers, sisters, half-brothers, or half-sisters. How to amend taxes Substitute “25% or more” ownership for “more than 50%. How to amend taxes ”   If you fit within the definition of a related person independent of family status, the brother-sister exception in (1), earlier, does not apply. How to amend taxes For example, a transfer between a brother and a sister as beneficiary and fiduciary of the same trust is a transfer between related persons. How to amend taxes The brother-sister exception does not apply because the trust relationship is independent of family status. How to amend taxes Franchise, Trademark, or Trade Name If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset. How to amend taxes A franchise includes an agreement that gives one of the parties the right to distribute, sell, or provide goods, services, or facilities within a specified area. How to amend taxes Significant power, right, or continuing interest. How to amend taxes   If you keep any significant power, right, or continuing interest in the subject matter of a franchise, trademark, or trade name that you transfer or renew, the amount you receive is ordinary royalty income rather than an amount realized from a sale or exchange. How to amend taxes   A significant power, right, or continuing interest in a franchise, trademark, or trade name includes, but is not limited to, the following rights in the transferred interest. How to amend taxes A right to disapprove any assignment of the interest, or any part of it. How to amend taxes A right to end the agreement at will. How to amend taxes A right to set standards of quality for products used or sold, or for services provided, and for the equipment and facilities used to promote such products or services. How to amend taxes A right to make the recipient sell or advertise only your products or services. How to amend taxes A right to make the recipient buy most supplies and equipment from you. How to amend taxes A right to receive payments based on the productivity, use, or disposition of the transferred item of interest if those payments are a substantial part of the transfer agreement. How to amend taxes Subdivision of Land If you own a tract of land and, to sell or exchange it, you subdivide it into individual lots or parcels, the gain normally is ordinary income. How to amend taxes However, you may receive capital gain treatment on at least part of the proceeds provided you meet certain requirements. How to amend taxes See section 1237 of the Internal Revenue Code. How to amend taxes Timber Standing timber held as investment property is a capital asset. How to amend taxes Gain or loss from its sale is reported as a capital gain or loss on Form 8949, and Schedule D (Form 1040), as applicable. How to amend taxes If you held the timber primarily for sale to customers, it is not a capital asset. How to amend taxes Gain or loss on its sale is ordinary business income or loss. How to amend taxes It is reported in the gross receipts or sales and cost of goods sold items of your return. How to amend taxes Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. How to amend taxes These sales constitute a very minor part of their farm businesses. How to amend taxes In these cases, amounts realized from such sales, and the expenses of cutting, hauling, etc. How to amend taxes , are ordinary farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming. How to amend taxes Different rules apply if you owned the timber longer than 1 year and elect to either: Treat timber cutting as a sale or exchange, or Enter into a cutting contract. How to amend taxes Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. How to amend taxes This is true whether the timber is cut under contract or whether you cut it yourself. How to amend taxes Under the rules discussed below, disposition of the timber is treated as a section 1231 transaction. How to amend taxes See chapter 3. How to amend taxes Gain or loss is reported on Form 4797. How to amend taxes Christmas trees. How to amend taxes   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. How to amend taxes They qualify for both rules discussed below. How to amend taxes Election to treat cutting as a sale or exchange. How to amend taxes   Under the general rule, the cutting of timber results in no gain or loss. How to amend taxes It is not until a sale or exchange occurs that gain or loss is realized. How to amend taxes But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year the timber is cut. How to amend taxes Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. How to amend taxes Any later sale results in ordinary business income or loss. How to amend taxes See Example, later. How to amend taxes   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or for use in your trade or business. How to amend taxes Making the election. How to amend taxes   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of the gain or loss. How to amend taxes You do not have to make the election in the first year you cut timber. How to amend taxes You can make it in any year to which the election would apply. How to amend taxes If the timber is partnership property, the election is made on the partnership return. How to amend taxes This election cannot be made on an amended return. How to amend taxes   Once you have made the election, it remains in effect for all later years unless you cancel it. How to amend taxes   If you previously elected to treat the cutting of timber as a sale or exchange, you may revoke this election without the consent of the IRS. How to amend taxes The prior election (and revocation) is disregarded for purposes of making a subsequent election. How to amend taxes See Form T (Timber), Forest Activities Schedule, for more information. How to amend taxes Gain or loss. How to amend taxes   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its fair market value on the first day of your tax year in which it is cut. How to amend taxes   Your adjusted basis for depletion of cut timber is based on the number of units (feet board measure, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. How to amend taxes Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 of the Internal Revenue Code and the related regulations. How to amend taxes   Timber depletion is discussed in chapter 9 of Publication 535. How to amend taxes Example. How to amend taxes In April 2013, you had owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. How to amend taxes It had an adjusted basis for depletion of $40 per MBF. How to amend taxes You are a calendar year taxpayer. How to amend taxes On January 1, 2013, the timber had a fair market value (FMV) of $350 per MBF. How to amend taxes It was cut in April for sale. How to amend taxes On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. How to amend taxes You report the difference between the fair market value and your adjusted basis for depletion as a gain. How to amend taxes This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as capital gain or as ordinary gain. How to amend taxes You figure your gain as follows. How to amend taxes FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000 The fair market value becomes your basis in the cut timber and a later sale of the cut timber including any by-product or tree tops will result in ordinary business income or loss. How to amend taxes Outright sales of timber. How to amend taxes   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined below). How to amend taxes However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see below). How to amend taxes Cutting contract. How to amend taxes   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. How to amend taxes You are the owner of the timber. How to amend taxes You held the timber longer than 1 year before its disposal. How to amend taxes You kept an economic interest in the timber. How to amend taxes   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. How to amend taxes   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. How to amend taxes Include this amount on Form 4797 along with your other section 1231 gains or losses to figure whether it is treated as capital or ordinary gain or loss. How to amend taxes Date of disposal. How to amend taxes   The date of disposal is the date the timber is cut. How to amend taxes However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. How to amend taxes   This election applies only to figure the holding period of the timber. How to amend taxes It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). How to amend taxes   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. How to amend taxes The statement must identify the advance payments subject to the election and the contract under which they were made. How to amend taxes   If you timely filed your return for the year you received payment without making the election, you still can make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). How to amend taxes Attach the statement to the amended return and write “Filed pursuant to section 301. How to amend taxes 9100-2” at the top of the statement. How to amend taxes File the amended return at the same address the original return was filed. How to amend taxes Owner. How to amend taxes   The owner of timber is any person who owns an interest in it, including a sublessor and the holder of a contract to cut the timber. How to amend taxes You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. How to amend taxes Tree stumps. How to amend taxes   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. How to amend taxes Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. How to amend taxes However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. How to amend taxes Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. How to amend taxes   See Form T (Timber) and its separate instructions for more information about dispositions of timber. How to amend taxes Precious Metals and Stones, Stamps, and Coins Gold, silver, gems, stamps, coins, etc. How to amend taxes , are capital assets except when they are held for sale by a dealer. How to amend taxes Any gain or loss from their sale or exchange generally is a capital gain or loss. How to amend taxes If you are a dealer, the amount received from the sale is ordinary business income. How to amend taxes Coal and Iron Ore You must treat the disposal of coal (including lignite) or iron ore mined in the United States as a section 1231 transaction if both the following apply to you. How to amend taxes You owned the coal or iron ore longer than 1 year before its disposal. How to amend taxes You kept an economic interest in the coal or iron ore. How to amend taxes For this rule, the date the coal or iron ore is mined is considered the date of its disposal. How to amend taxes Your gain or loss is the difference between the amount realized from disposal of the coal or iron ore and the adjusted basis you use to figure cost depletion (increased by certain expenses not allowed as deductions for the tax year). How to amend taxes This amount is included on Form 4797 along with your other section 1231 gains and losses. How to amend taxes You are considered an owner if you own or sublet an economic interest in the coal or iron ore in place. How to amend taxes If you own only an option to buy the coal in place, you do not qualify as an owner. How to amend taxes In addition, this gain or loss treatment does not apply to income realized by an owner who is a co-adventurer, partner, or principal in the mining of coal or iron ore. How to amend taxes The expenses of making and administering the contract under which the coal or iron ore was disposed of and the expenses of preserving the economic interest kept under the contract are not allowed as deductions in figuring taxable income. How to amend taxes Rather, their total, along with the adjusted depletion basis, is deducted from the amount received to determine gain. How to amend taxes If the total of these expenses plus the adjusted depletion basis is more than the amount received, the result is a loss. How to amend taxes Special rule. How to amend taxes   The above treatment does not apply if you directly or indirectly dispose of the iron ore or coal to any of the following persons. How to amend taxes A related person whose relationship to you would result in the disallowance of a loss (see Nondeductible Loss under Sales and Exchanges Between Related Persons, earlier). How to amend taxes An individual, trust, estate, partnership, association, company, or corporation owned or controlled directly or indirectly by the same interests that own or control your business. How to amend taxes Conversion Transactions Recognized gain on the disposition or termination of any position held as part of certain conversion transactions is treated as ordinary income. How to amend taxes This applies if substantially all your expected return is attributable to the time value of your net investment (like interest on a loan) and the transaction is any of the following. How to amend taxes An applicable straddle (generally, any set of offsetting positions with respect to personal property, including stock). How to amend taxes A transaction in which you acquire property and, at or about the same time, you contract to sell the same or substantially identical property at a specified price. How to amend taxes Any other transaction that is marketed and sold as producing capital gain from a transaction in which substantially all of your expected return is due to the time value of your net investment. How to amend taxes For more information, see chapter 4 of Publication 550. How to amend taxes Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Montana

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

 City Street Address  Days/Hours of Service  Telephone* 
Billings  2900 4th Ave. N.
Billings, MT 59101 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(406) 247-7446 
Bozeman  1805 S. 22nd Ave.
Bozeman, MT 59718 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(406) 582-8671 
Great Falls  11 5th St. N.
Great Falls, MT 59401 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(406) 761-8095 
Helena  10 W. 15th St., Ste. 2300
Helena, MT 59626 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(406) 441-1039 
Kalispell  275 Corporate Ave.
Kalispell, MT 59901 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

Services Provided

(406) 752-6636 
Missoula  2681 Palmer St.
Missoula, MT 59808 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
 

Services Provided

(406) 728-9127 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call 406-444-8668 in the Helena area or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
10 W. 15th, STE 2300
 MS 6610-HLN
Helena, MT 59626

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The How To Amend Taxes

How to amend taxes 6. How to amend taxes   Estimated Tax Table of Contents Who Must Make Estimated Tax Payments Estimated tax is a method used to pay tax on income that is not subject to withholding. How to amend taxes This income includes self-employment income, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. How to amend taxes Income tax generally is withheld from pensions and annuity payments you receive. How to amend taxes However, if the tax withheld from your pension (or other) income is not enough, you may have to pay estimated tax. How to amend taxes If you do not pay enough tax through withholding, by making estimated tax payments, or both, you may be charged a penalty. How to amend taxes Who Must Make Estimated Tax Payments If you had a tax liability for 2013, you may have to pay estimated tax for 2014. How to amend taxes In most cases, you must pay estimated tax for 2014 if both of the following apply. How to amend taxes You expect to owe at least $1,000 in tax for 2014, after subtracting your withholding and refundable credits. How to amend taxes You expect your withholding and refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. How to amend taxes The 2013 tax return must cover all 12 months. How to amend taxes If all of your income will be subject to income tax withholding, you probably do not need to make estimated tax payments. How to amend taxes For more information on estimated tax, see Publication 505. How to amend taxes Prev  Up  Next   Home   More Online Publications