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I Didn T File My 2011 Taxes

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I Didn T File My 2011 Taxes

I didn t file my 2011 taxes 3. I didn t file my 2011 taxes   Personal Exemptions and Dependents Table of Contents What's New Introduction Useful Items - You may want to see: ExemptionsPersonal Exemptions Exemptions for Dependents Qualifying Child Qualifying Relative Phaseout of Exemptions Social Security Numbers for DependentsBorn and died in 2013. I didn t file my 2011 taxes Taxpayer identification numbers for aliens. I didn t file my 2011 taxes Taxpayer identification numbers for adoptees. I didn t file my 2011 taxes What's New Exemption amount. I didn t file my 2011 taxes  The amount you can deduct for each exemption has increased. I didn t file my 2011 taxes It was $3,800 for 2012. I didn t file my 2011 taxes It is $3,900 for 2013. I didn t file my 2011 taxes Exemption phaseout. I didn t file my 2011 taxes  You lose at least part of the benefit of your exemptions if your adjusted gross income is more than a certain amount. I didn t file my 2011 taxes For 2013, this amount is $150,000 for a married individual filing a separate return; $250,000 for a single individual; $275,000 for a head of household; and $300,000 for married individuals filing jointly or a qualifying widow(er). I didn t file my 2011 taxes See Phaseout of Exemptions , later. I didn t file my 2011 taxes Introduction This chapter discusses the following topics. I didn t file my 2011 taxes Personal exemptions — You generally can take one for yourself and, if you are married, one for your spouse. I didn t file my 2011 taxes Exemptions for dependents — You generally can take an exemption for each of your dependents. I didn t file my 2011 taxes A dependent is your qualifying child or qualifying relative. I didn t file my 2011 taxes If you are entitled to claim an exemption for a dependent, that dependent cannot claim a personal exemption on his or her own tax return. I didn t file my 2011 taxes Phaseout of exemptions — Your deduction is reduced if your adjusted gross income is more than a certain amount. I didn t file my 2011 taxes Social security number (SSN) requirement for dependents — You must list the SSN of any dependent for whom you claim an exemption. I didn t file my 2011 taxes Deduction. I didn t file my 2011 taxes   Exemptions reduce your taxable income. I didn t file my 2011 taxes You can deduct $3,900 for each exemption you claim in 2013. I didn t file my 2011 taxes But you may lose at least part of the dollar amount of your exemptions if your adjusted gross income is more than a certain amount. I didn t file my 2011 taxes See Phaseout of Exemptions , later. I didn t file my 2011 taxes How to claim exemptions. I didn t file my 2011 taxes    How you claim an exemption on your tax return depends on which form you file. I didn t file my 2011 taxes    If you file Form 1040EZ, the exemption amount is combined with the standard deduction amount and entered on line 5. I didn t file my 2011 taxes    If you file Form 1040A, complete lines 6a through 6d. I didn t file my 2011 taxes The total number of exemptions you can claim is the total in the box on line 6d. I didn t file my 2011 taxes Also complete line 26. I didn t file my 2011 taxes   If you file Form 1040, complete lines 6a through 6d. I didn t file my 2011 taxes The total number of exemptions you can claim is the total in the box on line 6d. I didn t file my 2011 taxes Also complete line 42. I didn t file my 2011 taxes Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information Form (and Instructions) 2120 Multiple Support Declaration 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent Exemptions There are two types of exemptions you may be able to take: Personal exemptions for yourself and your spouse, and Exemptions for dependents (dependency exemptions). I didn t file my 2011 taxes While each is worth the same amount ($3,900 for 2013), different rules apply to each type. I didn t file my 2011 taxes Personal Exemptions You are generally allowed one exemption for yourself. I didn t file my 2011 taxes If you are married, you may be allowed one exemption for your spouse. I didn t file my 2011 taxes These are called personal exemptions. I didn t file my 2011 taxes Your Own Exemption You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. I didn t file my 2011 taxes If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent. I didn t file my 2011 taxes Your Spouse's Exemption Your spouse is never considered your dependent. I didn t file my 2011 taxes Joint return. I didn t file my 2011 taxes   On a joint return you can claim one exemption for yourself and one for your spouse. I didn t file my 2011 taxes Separate return. I didn t file my 2011 taxes   If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. I didn t file my 2011 taxes This is true even if the other taxpayer does not actually claim your spouse as a dependent. I didn t file my 2011 taxes You can claim an exemption for your spouse even if he or she is a nonresident alien; in that case, your spouse must have no gross income for U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes tax purposes, must not be filing a return, and must not be the dependent of another taxpayer. I didn t file my 2011 taxes Death of spouse. I didn t file my 2011 taxes   If your spouse died during the year and you file a joint return for yourself and your deceased spouse, you generally can claim your spouse's exemption under the rules just explained in Joint return . I didn t file my 2011 taxes If you file a separate return for the year, you may be able to claim your spouse's exemption under the rules just described in Separate return . I didn t file my 2011 taxes   If you remarried during the year, you cannot take an exemption for your deceased spouse. I didn t file my 2011 taxes   If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed as an exemption on both the final separate return of your deceased spouse and the separate return of your new spouse for that year. I didn t file my 2011 taxes If you file a joint return with your new spouse, you can be claimed as an exemption only on that return. I didn t file my 2011 taxes Divorced or separated spouse. I didn t file my 2011 taxes   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. I didn t file my 2011 taxes This rule applies even if you provided all of your former spouse's support. I didn t file my 2011 taxes Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. I didn t file my 2011 taxes You can claim an exemption for a dependent even if your dependent files a return. I didn t file my 2011 taxes The term “dependent” means: A qualifying child, or A qualifying relative. I didn t file my 2011 taxes The terms “ qualifying child ” and “ qualifying relative ” are defined later. I didn t file my 2011 taxes You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met. I didn t file my 2011 taxes Dependent taxpayer test. I didn t file my 2011 taxes Joint return test. I didn t file my 2011 taxes Citizen or resident test. I didn t file my 2011 taxes These three tests are explained in detail later. I didn t file my 2011 taxes All the requirements for claiming an exemption for a dependent are summarized in Table 3-1. I didn t file my 2011 taxes Table 3-1. I didn t file my 2011 taxes Overview of the Rules for Claiming an Exemption for a Dependent Caution. I didn t file my 2011 taxes This table is only an overview of the rules. I didn t file my 2011 taxes For details, see the rest of this chapter. I didn t file my 2011 taxes You cannot claim any dependents if you (or your spouse, if filing jointly) could be claimed as a dependent by another taxpayer. I didn t file my 2011 taxes   You cannot claim a married person who files a joint return as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid. I didn t file my 2011 taxes   You cannot claim a person as a dependent unless that person is a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes resident alien, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national, or a resident of Canada or Mexico. I didn t file my 2011 taxes 1  You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. I didn t file my 2011 taxes   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. I didn t file my 2011 taxes   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse, if filing jointly), or (c) any age if permanently and totally disabled. I didn t file my 2011 taxes   The child must have lived with you for more than half of the year. I didn t file my 2011 taxes 2  The child must not have provided more than half of his or her own support for the year. I didn t file my 2011 taxes   The child is not filing a joint return for the year (unless that return is filed only to get a refund of income tax withheld or estimated tax paid). I didn t file my 2011 taxes  If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. I didn t file my 2011 taxes See the Special Rule for Qualifying Child of More Than One Person to find out which person is the person entitled to claim the child as a qualifying child. I didn t file my 2011 taxes   The person cannot be your qualifying child or the qualifying child of any other taxpayer. I didn t file my 2011 taxes   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you , or (b) must live with you all year as a member of your household2 (and your relationship must not violate local law). I didn t file my 2011 taxes   The person's gross income for the year must be less than $3,900. I didn t file my 2011 taxes 3  You must provide more than half of the person's total support for the year. I didn t file my 2011 taxes 4  1There is an exception for certain adopted children. I didn t file my 2011 taxes 2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. I didn t file my 2011 taxes 3There is an exception if the person is disabled and has income from a sheltered workshop. I didn t file my 2011 taxes 4There are exceptions for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. I didn t file my 2011 taxes Dependent not allowed a personal exemption. I didn t file my 2011 taxes If you can claim an exemption for your dependent, the dependent cannot claim his or her own personal exemption on his or her own tax return. I didn t file my 2011 taxes This is true even if you do not claim the dependent's exemption on your return. I didn t file my 2011 taxes It is also true if the dependent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. I didn t file my 2011 taxes Housekeepers, maids, or servants. I didn t file my 2011 taxes   If these people work for you, you cannot claim exemptions for them. I didn t file my 2011 taxes Child tax credit. I didn t file my 2011 taxes   You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. I didn t file my 2011 taxes For more information, see chapter 34. I didn t file my 2011 taxes Dependent Taxpayer Test If you can be claimed as a dependent by another person, you cannot claim anyone else as a dependent. I didn t file my 2011 taxes Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent. I didn t file my 2011 taxes If you are filing a joint return and your spouse can be claimed as a dependent by someone else, you and your spouse cannot claim any dependents on your joint return. I didn t file my 2011 taxes Joint Return Test You generally cannot claim a married person as a dependent if he or she files a joint return. I didn t file my 2011 taxes Exception. I didn t file my 2011 taxes   You can claim an exemption for a person who files a joint return if that person and his or her spouse file the joint return only to claim a refund of income tax withheld or estimated tax paid. I didn t file my 2011 taxes Example 1—child files joint return. I didn t file my 2011 taxes You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. I didn t file my 2011 taxes He earned $25,000 for the year. I didn t file my 2011 taxes The couple files a joint return. I didn t file my 2011 taxes You cannot take an exemption for your daughter. I didn t file my 2011 taxes Example 2—child files joint return only as claim for refund of withheld tax. I didn t file my 2011 taxes Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. I didn t file my 2011 taxes Neither is required to file a tax return. I didn t file my 2011 taxes They do not have a child. I didn t file my 2011 taxes Taxes were taken out of their pay so they filed a joint return only to get a refund of the withheld taxes. I didn t file my 2011 taxes The exception to the joint return test applies, so you are not disqualified from claiming an exemption for each of them just because they file a joint return. I didn t file my 2011 taxes You can claim exemptions for each of them if all the other tests to do so are met. I didn t file my 2011 taxes Example 3—child files joint return to claim American opportunity credit. I didn t file my 2011 taxes The facts are the same as in Example 2 except no taxes were taken out of your son's pay. I didn t file my 2011 taxes He and his wife are not required to file a tax return. I didn t file my 2011 taxes However, they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. I didn t file my 2011 taxes Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. I didn t file my 2011 taxes The exception to the joint return test does not apply, so you cannot claim an exemption for either of them. I didn t file my 2011 taxes Citizen or Resident Test You cannot claim a person as a dependent unless that person is a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes resident alien, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national, or a resident of Canada or Mexico. I didn t file my 2011 taxes However, there is an exception for certain adopted children, as explained next. I didn t file my 2011 taxes Exception for adopted child. I didn t file my 2011 taxes   If you are a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen or U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national who has legally adopted a child who is not a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes resident alien, or U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national, this test is met if the child lived with you as a member of your household all year. I didn t file my 2011 taxes This exception also applies if the child was lawfully placed with you for legal adoption. I didn t file my 2011 taxes Child's place of residence. I didn t file my 2011 taxes   Children usually are citizens or residents of the country of their parents. I didn t file my 2011 taxes   If you were a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen when your child was born, the child may be a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen and meet this test even if the other parent was a nonresident alien and the child was born in a foreign country. I didn t file my 2011 taxes Foreign students' place of residence. I didn t file my 2011 taxes   Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes residents and do not meet this test. I didn t file my 2011 taxes You cannot claim an exemption for them. I didn t file my 2011 taxes However, if you provided a home for a foreign student, you may be able to take a charitable contribution deduction. I didn t file my 2011 taxes See Expenses Paid for Student Living With You in chapter 24. I didn t file my 2011 taxes U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national. I didn t file my 2011 taxes   A U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national is an individual who, although not a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen, owes his or her allegiance to the United States. I didn t file my 2011 taxes U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes nationals include American Samoans and Northern Mariana Islanders who chose to become U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes nationals instead of U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizens. I didn t file my 2011 taxes Qualifying Child Five tests must be met for a child to be your qualifying child. I didn t file my 2011 taxes The five tests are: Relationship, Age, Residency, Support, and Joint return. I didn t file my 2011 taxes These tests are explained next. I didn t file my 2011 taxes If a child meets the five tests to be the qualifying child of more than one person, a special rule applies to determine which person can actually treat the child as a qualifying child. I didn t file my 2011 taxes See Special Rule for Qualifying Child of More Than One Person, later. I didn t file my 2011 taxes Relationship Test To meet this test, a child must be: Your son, daughter, stepchild, foster child, or a descendant (for example, your grandchild) of any of them, or Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them. I didn t file my 2011 taxes Adopted child. I didn t file my 2011 taxes   An adopted child is always treated as your own child. I didn t file my 2011 taxes The term “adopted child” includes a child who was lawfully placed with you for legal adoption. I didn t file my 2011 taxes Foster child. I didn t file my 2011 taxes   A foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. I didn t file my 2011 taxes Age Test To meet this test, a child must be: Under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), A student under age 24 at the end of the year and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during the year, regardless of age. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Your son turned 19 on December 10. I didn t file my 2011 taxes Unless he was permanently and totally disabled or a student, he does not meet the age test because, at the end of the year, he was not under age 19. I didn t file my 2011 taxes Child must be younger than you or spouse. I didn t file my 2011 taxes   To be your qualifying child, a child who is not permanently and totally disabled must be younger than you. I didn t file my 2011 taxes However, if you are married filing jointly, the child must be younger than you or your spouse but does not have to be younger than both of you. I didn t file my 2011 taxes Example 1—child not younger than you or spouse. I didn t file my 2011 taxes Your 23-year-old brother, who is a student and unmarried, lives with you and your spouse. I didn t file my 2011 taxes He is not disabled. I didn t file my 2011 taxes Both you and your spouse are 21 years old, and you file a joint return. I didn t file my 2011 taxes Your brother is not your qualifying child because he is not younger than you or your spouse. I didn t file my 2011 taxes Example 2—child younger than your spouse but not younger than you. I didn t file my 2011 taxes The facts are the same as in Example 1 except your spouse is 25 years old. I didn t file my 2011 taxes Because your brother is younger than your spouse, and you and your spouse are filing a joint return, your brother is your qualifying child, even though he is not younger than you. I didn t file my 2011 taxes Student defined. I didn t file my 2011 taxes   To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year: A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency. I didn t file my 2011 taxes The 5 calendar months do not have to be consecutive. I didn t file my 2011 taxes Full-time student. I didn t file my 2011 taxes   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. I didn t file my 2011 taxes School defined. I didn t file my 2011 taxes   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. I didn t file my 2011 taxes However, an on-the-job training course, correspondence school, or school offering courses only through the Internet does not count as a school. I didn t file my 2011 taxes Vocational high school students. I didn t file my 2011 taxes   Students who work on “co-op” jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. I didn t file my 2011 taxes Permanently and totally disabled. I didn t file my 2011 taxes   Your child is permanently and totally disabled if both of the following apply. I didn t file my 2011 taxes He or she cannot engage in any substantial gainful activity because of a physical or mental condition. I didn t file my 2011 taxes A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. I didn t file my 2011 taxes Residency Test To meet this test, your child must have lived with you for more than half the year. I didn t file my 2011 taxes There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents. I didn t file my 2011 taxes Temporary absences. I didn t file my 2011 taxes   Your child is considered to have lived with you during periods of time when one of you, or both, are temporarily absent due to special circumstances such as: Illness, Education, Business, Vacation, or Military service. I didn t file my 2011 taxes Your child is also considered to have lived with you during any required hospital stay following birth, as long as the child would have lived with you during that time but for the hospitalization. I didn t file my 2011 taxes Death or birth of child. I didn t file my 2011 taxes   A child who was born or died during the year is treated as having lived with you more than half of the year if your home was the child's home more than half of the time he or she was alive during the year. I didn t file my 2011 taxes Child born alive. I didn t file my 2011 taxes   You may be able to claim an exemption for a child born alive during the year, even if the child lived only for a moment. I didn t file my 2011 taxes State or local law must treat the child as having been born alive. I didn t file my 2011 taxes There must be proof of a live birth shown by an official document, such as a birth certificate. I didn t file my 2011 taxes The child must be your qualifying child or qualifying relative, and all the other tests to claim an exemption for a dependent must be met. I didn t file my 2011 taxes Stillborn child. I didn t file my 2011 taxes   You cannot claim an exemption for a stillborn child. I didn t file my 2011 taxes Kidnapped child. I didn t file my 2011 taxes   You may be able to treat your child as meeting the residency test even if the child has been kidnapped. I didn t file my 2011 taxes See Publication 501 for details. I didn t file my 2011 taxes Children of divorced or separated parents (or parents who live apart). I didn t file my 2011 taxes   In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. I didn t file my 2011 taxes However, the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true. I didn t file my 2011 taxes The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. I didn t file my 2011 taxes The child received over half of his or her support for the year from the parents. I didn t file my 2011 taxes The child is in the custody of one or both parents for more than half of the year. I didn t file my 2011 taxes Either of the following statements is true. I didn t file my 2011 taxes The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. I didn t file my 2011 taxes (If the decree or agreement went into effect after 1984 and before 2009, see Post-1984 and pre-2009 divorce decree or separation agreement , later. I didn t file my 2011 taxes If the decree or agreement went into effect after 2008, see Post-2008 divorce decree or separation agreement , later. I didn t file my 2011 taxes ) A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during the year. I didn t file my 2011 taxes Custodial parent and noncustodial parent. I didn t file my 2011 taxes   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. I didn t file my 2011 taxes The other parent is the noncustodial parent. I didn t file my 2011 taxes   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. I didn t file my 2011 taxes   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). I didn t file my 2011 taxes Equal number of nights. I didn t file my 2011 taxes   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income (AGI). I didn t file my 2011 taxes December 31. I didn t file my 2011 taxes   The night of December 31 is treated as part of the year in which it begins. I didn t file my 2011 taxes For example, December 31, 2013, is treated as part of 2013. I didn t file my 2011 taxes Emancipated child. I didn t file my 2011 taxes   If a child is emancipated under state law, the child is treated as not living with either parent. I didn t file my 2011 taxes See Examples 5 and 6. I didn t file my 2011 taxes Absences. I didn t file my 2011 taxes   If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. I didn t file my 2011 taxes But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. I didn t file my 2011 taxes Parent works at night. I didn t file my 2011 taxes   If, due to a parent's nighttime work schedule, a child lives for a greater number of days, but not nights, with the parent who works at night, that parent is treated as the custodial parent. I didn t file my 2011 taxes On a school day, the child is treated as living at the primary residence registered with the school. I didn t file my 2011 taxes Example 1—child lived with one parent for a greater number of nights. I didn t file my 2011 taxes You and your child’s other parent are divorced. I didn t file my 2011 taxes In 2013, your child lived with you 210 nights and with the other parent 155 nights. I didn t file my 2011 taxes You are the custodial parent. I didn t file my 2011 taxes Example 2—child is away at camp. I didn t file my 2011 taxes In 2013, your daughter lives with each parent for alternate weeks. I didn t file my 2011 taxes In the summer, she spends 6 weeks at summer camp. I didn t file my 2011 taxes During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. I didn t file my 2011 taxes Example 3—child lived same number of nights with each parent. I didn t file my 2011 taxes Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. I didn t file my 2011 taxes Your AGI is $40,000. I didn t file my 2011 taxes Your ex-spouse's AGI is $25,000. I didn t file my 2011 taxes You are treated as your son's custodial parent because you have the higher AGI. I didn t file my 2011 taxes Example 4—child is at parent’s home but with other parent. I didn t file my 2011 taxes Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. I didn t file my 2011 taxes You become ill and are hospitalized. I didn t file my 2011 taxes The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. I didn t file my 2011 taxes Your son is treated as living with you during this 10-day period because he was living in your home. I didn t file my 2011 taxes Example 5—child emancipated in May. I didn t file my 2011 taxes When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. I didn t file my 2011 taxes As a result, he is not considered in the custody of his parents for more than half of the year. I didn t file my 2011 taxes The special rule for children of divorced or separated parents does not apply. I didn t file my 2011 taxes Example 6—child emancipated in August. I didn t file my 2011 taxes Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. I didn t file my 2011 taxes She turns 18 and is emancipated under state law on August 1, 2013. I didn t file my 2011 taxes Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. I didn t file my 2011 taxes You are the custodial parent. I didn t file my 2011 taxes Written declaration. I didn t file my 2011 taxes    The custodial parent may use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. I didn t file my 2011 taxes The noncustodial parent must attach a copy of the form or statement to his or her tax return. I didn t file my 2011 taxes   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. I didn t file my 2011 taxes Post-1984 and pre-2009 divorce decree or separation agreement. I didn t file my 2011 taxes   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. I didn t file my 2011 taxes The decree or agreement must state all three of the following. I didn t file my 2011 taxes The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. I didn t file my 2011 taxes The custodial parent will not claim the child as a dependent for the year. I didn t file my 2011 taxes The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. I didn t file my 2011 taxes   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her tax return. I didn t file my 2011 taxes The cover page (write the other parent's social security number on this page). I didn t file my 2011 taxes The pages that include all of the information identified in items (1) through (3) above. I didn t file my 2011 taxes The signature page with the other parent's signature and the date of the agreement. I didn t file my 2011 taxes Post-2008 divorce decree or separation agreement. I didn t file my 2011 taxes   The noncustodial parent cannot attach pages from the decree or agreement instead of Form 8332 if the decree or agreement went into effect after 2008. I didn t file my 2011 taxes The custodial parent must sign either Form 8332 or a similar statement whose only purpose is to release the custodial parent's claim to an exemption for a child, and the noncustodial parent must attach a copy to his or her return. I didn t file my 2011 taxes The form or statement must release the custodial parent's claim to the child without any conditions. I didn t file my 2011 taxes For example, the release must not depend on the noncustodial parent paying support. I didn t file my 2011 taxes    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. I didn t file my 2011 taxes Revocation of release of claim to an exemption. I didn t file my 2011 taxes   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 (or a similar statement). I didn t file my 2011 taxes For the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. I didn t file my 2011 taxes The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. I didn t file my 2011 taxes Remarried parent. I didn t file my 2011 taxes   If you remarry, the support provided by your new spouse is treated as provided by you. I didn t file my 2011 taxes Parents who never married. I didn t file my 2011 taxes   This special rule for divorced or separated parents also applies to parents who never married, and who lived apart at all times during the last 6 months of the year. I didn t file my 2011 taxes Support Test (To Be a Qualifying Child) To meet this test, the child cannot have provided more than half of his or her own support for the year. I didn t file my 2011 taxes This test is different from the support test to be a qualifying relative, which is described later. I didn t file my 2011 taxes However, to see what is or is not support, see Support Test (To Be a Qualifying Relative) , later. I didn t file my 2011 taxes If you are not sure whether a child provided more than half of his or her own support, you may find Worksheet 3-1 helpful. I didn t file my 2011 taxes Worksheet 3-1. I didn t file my 2011 taxes Worksheet for Determining Support Funds Belonging to the Person You Supported       1. I didn t file my 2011 taxes Enter the total funds belonging to the person you supported, including income received (taxable and nontaxable) and amounts borrowed during the year, plus the amount in savings and other accounts at the beginning of the year. I didn t file my 2011 taxes Do not include funds provided by the state; include those amounts on line 23 instead 1. I didn t file my 2011 taxes     2. I didn t file my 2011 taxes Enter the amount on line 1 that was used for the person's support 2. I didn t file my 2011 taxes     3. I didn t file my 2011 taxes Enter the amount on line 1 that was used for other purposes 3. I didn t file my 2011 taxes     4. I didn t file my 2011 taxes Enter the total amount in the person's savings and other accounts at the end of the year 4. I didn t file my 2011 taxes     5. I didn t file my 2011 taxes Add lines 2 through 4. I didn t file my 2011 taxes (This amount should equal line 1. I didn t file my 2011 taxes ) 5. I didn t file my 2011 taxes     Expenses for Entire Household (where the person you supported lived)       6. I didn t file my 2011 taxes Lodging (complete line 6a or 6b):         a. I didn t file my 2011 taxes Enter the total rent paid 6a. I didn t file my 2011 taxes       b. I didn t file my 2011 taxes Enter the fair rental value of the home. I didn t file my 2011 taxes If the person you supported owned the home,  also include this amount in line 21 6b. I didn t file my 2011 taxes     7. I didn t file my 2011 taxes Enter the total food expenses 7. I didn t file my 2011 taxes     8. I didn t file my 2011 taxes Enter the total amount of utilities (heat, light, water, etc. I didn t file my 2011 taxes not included in line 6a or 6b) 8. I didn t file my 2011 taxes     9. I didn t file my 2011 taxes Enter the total amount of repairs (not included in line 6a or 6b) 9. I didn t file my 2011 taxes     10. I didn t file my 2011 taxes Enter the total of other expenses. I didn t file my 2011 taxes Do not include expenses of maintaining the home, such as mortgage interest, real estate taxes, and insurance 10. I didn t file my 2011 taxes     11. I didn t file my 2011 taxes Add lines 6a through 10. I didn t file my 2011 taxes These are the total household expenses 11. I didn t file my 2011 taxes     12. I didn t file my 2011 taxes Enter total number of persons who lived in the household 12. I didn t file my 2011 taxes     Expenses for the Person You Supported       13. I didn t file my 2011 taxes Divide line 11 by line 12. I didn t file my 2011 taxes This is the person's share of the household expenses 13. I didn t file my 2011 taxes     14. I didn t file my 2011 taxes Enter the person's total clothing expenses 14. I didn t file my 2011 taxes     15. I didn t file my 2011 taxes Enter the person's total education expenses 15. I didn t file my 2011 taxes     16. I didn t file my 2011 taxes Enter the person's total medical and dental expenses not paid for or reimbursed by insurance 16. I didn t file my 2011 taxes     17. I didn t file my 2011 taxes Enter the person's total travel and recreation expenses 17. I didn t file my 2011 taxes     18. I didn t file my 2011 taxes Enter the total of the person's other expenses 18. I didn t file my 2011 taxes     19. I didn t file my 2011 taxes Add lines 13 through 18. I didn t file my 2011 taxes This is the total cost of the person's support for the year 19. I didn t file my 2011 taxes     Did the Person Provide More Than Half of His or Her Own Support?       20. I didn t file my 2011 taxes Multiply line 19 by 50% (. I didn t file my 2011 taxes 50) 20. I didn t file my 2011 taxes     21. I didn t file my 2011 taxes Enter the amount from line 2, plus the amount from line 6b if the person you supported owned  the home. I didn t file my 2011 taxes This is the amount the person provided for his or her own support 21. I didn t file my 2011 taxes     22. I didn t file my 2011 taxes Is line 21 more than line 20?   No. I didn t file my 2011 taxes You meet the support test for this person to be your qualifying child. I didn t file my 2011 taxes If this person also meets the other tests to be a qualifying child, stop here; do not complete lines 23–26. I didn t file my 2011 taxes Otherwise, go to line 23 and fill out the rest of the worksheet to determine if this person is your qualifying relative. I didn t file my 2011 taxes    Yes. I didn t file my 2011 taxes You do not meet the support test for this person to be either your qualifying child or your qualifying relative. I didn t file my 2011 taxes Stop here. I didn t file my 2011 taxes        Did You Provide More Than Half?       23. I didn t file my 2011 taxes Enter the amount others provided for the person's support. I didn t file my 2011 taxes Include amounts provided by state, local, and other welfare societies or agencies. I didn t file my 2011 taxes Do not include any amounts included on line 1 23. I didn t file my 2011 taxes     24. I didn t file my 2011 taxes Add lines 21 and 23 24. I didn t file my 2011 taxes     25. I didn t file my 2011 taxes Subtract line 24 from line 19. I didn t file my 2011 taxes This is the amount you provided for the person's support 25. I didn t file my 2011 taxes     26. I didn t file my 2011 taxes Is line 25 more than line 20?   Yes. I didn t file my 2011 taxes You meet the support test for this person to be your qualifying relative. I didn t file my 2011 taxes    No. I didn t file my 2011 taxes You do not meet the support test for this person to be your qualifying relative. I didn t file my 2011 taxes You cannot claim an exemption for this person unless you can do so under a multiple support agreement, the support test for children of divorced or separated parents, or the special rule for kidnapped children. I didn t file my 2011 taxes See Multiple Support Agreement or Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) , or Kidnapped child under Qualifying Relative. I didn t file my 2011 taxes   Example. I didn t file my 2011 taxes You provided $4,000 toward your 16-year-old son's support for the year. I didn t file my 2011 taxes He has a part-time job and provided $6,000 to his own support. I didn t file my 2011 taxes He provided more than half of his own support for the year. I didn t file my 2011 taxes He is not your qualifying child. I didn t file my 2011 taxes Foster care payments and expenses. I didn t file my 2011 taxes   Payments you receive for the support of a foster child from a child placement agency are considered support provided by the agency. I didn t file my 2011 taxes Similarly, payments you receive for the support of a foster child from a state or county are considered support provided by the state or county. I didn t file my 2011 taxes   If you are not in the trade or business of providing foster care and your unreimbursed out-of-pocket expenses in caring for a foster child were mainly to benefit an organization qualified to receive deductible charitable contributions, the expenses are deductible as charitable contributions but are not considered support you provided. I didn t file my 2011 taxes For more information about the deduction for charitable contributions, see chapter 24. I didn t file my 2011 taxes If your unreimbursed expenses are not deductible as charitable contributions, they may qualify as support you provided. I didn t file my 2011 taxes   If you are in the trade or business of providing foster care, your unreimbursed expenses are not considered support provided by you. I didn t file my 2011 taxes Example 1. I didn t file my 2011 taxes Lauren, a foster child, lived with Mr. I didn t file my 2011 taxes and Mrs. I didn t file my 2011 taxes Smith for the last 3 months of the year. I didn t file my 2011 taxes The Smiths cared for Lauren because they wanted to adopt her (although she had not been placed with them for adoption). I didn t file my 2011 taxes They did not care for her as a trade or business or to benefit the agency that placed her in their home. I didn t file my 2011 taxes The Smiths' unreimbursed expenses are not deductible as charitable contributions but are considered support they provided for Lauren. I didn t file my 2011 taxes Example 2. I didn t file my 2011 taxes You provided $3,000 toward your 10-year-old foster child's support for the year. I didn t file my 2011 taxes The state government provided $4,000, which is considered support provided by the state, not by the child. I didn t file my 2011 taxes See Support provided by the state (welfare, food stamps, housing, etc. I didn t file my 2011 taxes ) , later. I didn t file my 2011 taxes Your foster child did not provide more than half of her own support for the year. I didn t file my 2011 taxes Scholarships. I didn t file my 2011 taxes   A scholarship received by a child who is a student is not taken into account in determining whether the child provided more than half of his or her own support. I didn t file my 2011 taxes Joint Return Test (To Be a Qualifying Child) To meet this test, the child cannot file a joint return for the year. I didn t file my 2011 taxes Exception. I didn t file my 2011 taxes   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. I didn t file my 2011 taxes Example 1—child files joint return. I didn t file my 2011 taxes You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. I didn t file my 2011 taxes He earned $25,000 for the year. I didn t file my 2011 taxes The couple files a joint return. I didn t file my 2011 taxes Because your daughter and her husband file a joint return, she is not your qualifying child. I didn t file my 2011 taxes Example 2—child files joint return only as a claim for refund of withheld tax. I didn t file my 2011 taxes Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. I didn t file my 2011 taxes Neither is required to file a tax return. I didn t file my 2011 taxes They do not have a child. I didn t file my 2011 taxes Taxes were taken out of their pay so they filed a joint return only to get a refund of the withheld taxes. I didn t file my 2011 taxes The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. I didn t file my 2011 taxes Example 3—child files joint return to claim American opportunity credit. I didn t file my 2011 taxes The facts are the same as in Example 2 except no taxes were taken out of your son's pay. I didn t file my 2011 taxes He and his wife were not required to file a tax return. I didn t file my 2011 taxes However, they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. I didn t file my 2011 taxes Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. I didn t file my 2011 taxes The exception to the joint return test does not apply, so your son is not your qualifying child. I didn t file my 2011 taxes Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. I didn t file my 2011 taxes This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. I didn t file my 2011 taxes If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents (or parents who live apart) described earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. I didn t file my 2011 taxes Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. I didn t file my 2011 taxes Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). I didn t file my 2011 taxes The exemption for the child. I didn t file my 2011 taxes The child tax credit. I didn t file my 2011 taxes Head of household filing status. I didn t file my 2011 taxes The credit for child and dependent care expenses. I didn t file my 2011 taxes The exclusion from income for dependent care benefits. I didn t file my 2011 taxes The earned income credit. I didn t file my 2011 taxes The other person cannot take any of these benefits based on this qualifying child. I didn t file my 2011 taxes In other words, you and the other person cannot agree to divide these benefits between you. I didn t file my 2011 taxes The other person cannot take any of these tax benefits for a child unless he or she has a different qualifying child. I didn t file my 2011 taxes Tiebreaker rules. I didn t file my 2011 taxes   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. I didn t file my 2011 taxes If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. I didn t file my 2011 taxes If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. I didn t file my 2011 taxes If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. I didn t file my 2011 taxes If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. I didn t file my 2011 taxes If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. I didn t file my 2011 taxes If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. I didn t file my 2011 taxes If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' combined AGI equally between the parents. I didn t file my 2011 taxes See Example 6 . I didn t file my 2011 taxes   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. I didn t file my 2011 taxes Example 1—child lived with parent and grandparent. I didn t file my 2011 taxes You and your 3-year-old daughter Jane lived with your mother all year. I didn t file my 2011 taxes You are 25 years old, unmarried, and your AGI is $9,000. I didn t file my 2011 taxes Your mother's AGI is $15,000. I didn t file my 2011 taxes Jane's father did not live with you or your daughter. I didn t file my 2011 taxes You have not signed Form 8332 (or a similar statement) to release the child's exemption to the noncustodial parent. I didn t file my 2011 taxes Jane is a qualifying child of both you and your mother because she meets the relationship, age, residency, support, and joint return tests for both you and your mother. I didn t file my 2011 taxes However, only one of you can claim her. I didn t file my 2011 taxes Jane is not a qualifying child of anyone else, including her father. I didn t file my 2011 taxes You agree to let your mother claim Jane. I didn t file my 2011 taxes This means your mother can claim Jane as a qualifying child for all of the six tax benefits listed earlier, if she qualifies (and if you do not claim Jane as a qualifying child for any of those tax benefits). I didn t file my 2011 taxes Example 2—parent has higher AGI than grandparent. I didn t file my 2011 taxes The facts are the same as in Example 1 except your AGI is $18,000. I didn t file my 2011 taxes Because your mother's AGI is not higher than yours, she cannot claim Jane. I didn t file my 2011 taxes Only you can claim Jane. I didn t file my 2011 taxes Example 3—two persons claim same child. I didn t file my 2011 taxes The facts are the same as in Example 1 except that you and your mother both claim Jane as a qualifying child. I didn t file my 2011 taxes In this case, you, as the child's parent, will be the only one allowed to claim Jane as a qualifying child. I didn t file my 2011 taxes The IRS will disallow your mother's claim to the six tax benefits listed earlier unless she has another qualifying child. I didn t file my 2011 taxes Example 4—qualifying children split between two persons. I didn t file my 2011 taxes The facts are the same as in Example 1 except you also have two other young children who are qualifying children of both you and your mother. I didn t file my 2011 taxes Only one of you can claim each child. I didn t file my 2011 taxes However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. I didn t file my 2011 taxes For example, if you claim one child, your mother can claim the other two. I didn t file my 2011 taxes Example 5—taxpayer who is a qualifying child. I didn t file my 2011 taxes The facts are the same as in Example 1 except you are only 18 years old and did not provide more than half of your own support for the year. I didn t file my 2011 taxes This means you are your mother's qualifying child. I didn t file my 2011 taxes If she can claim you as a dependent, then you cannot claim your daughter as a dependent because of the Dependent Taxpayer Test explained earlier. I didn t file my 2011 taxes Example 6—child lived with both parents and grandparent. I didn t file my 2011 taxes The facts are the same as in Example 1 except you are married to your daughter's father. I didn t file my 2011 taxes The two of you live together with your daughter and your mother, and have an AGI of $20,000 on a joint return. I didn t file my 2011 taxes If you and your husband do not claim your daughter as a qualifying child, your mother can claim her instead. I didn t file my 2011 taxes Even though the AGI on your joint return, $20,000, is more than your mother's AGI of $15,000, for this purpose each parent's AGI can be treated as $10,000, so your mother's $15,000 AGI is treated as higher than the highest AGI of any of the child's parents who can claim the child. I didn t file my 2011 taxes Example 7—separated parents. I didn t file my 2011 taxes You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. I didn t file my 2011 taxes In August and September, your son lived with you. I didn t file my 2011 taxes For the rest of the year, your son lived with your husband, the boy's father. I didn t file my 2011 taxes Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. I didn t file my 2011 taxes At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the rule for children of divorced or separated parents (or parents who live apart) does not apply. I didn t file my 2011 taxes You and your husband will file separate returns. I didn t file my 2011 taxes Your husband agrees to let you treat your son as a qualifying child. I didn t file my 2011 taxes This means, if your husband does not claim your son as a qualifying child, you can claim your son as a qualifying child for the dependency exemption, child tax credit, and exclusion for dependent care benefits (if you qualify for each of those tax benefits). I didn t file my 2011 taxes However, you cannot claim head of household filing status because you and your husband did not live apart for the last 6 months of the year. I didn t file my 2011 taxes As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses. I didn t file my 2011 taxes Example 8—separated parents claim same child. I didn t file my 2011 taxes The facts are the same as in Example 7 except that you and your husband both claim your son as a qualifying child. I didn t file my 2011 taxes In this case, only your husband will be allowed to treat your son as a qualifying child. I didn t file my 2011 taxes This is because, during 2013, the boy lived with him longer than with you. I didn t file my 2011 taxes If you claimed an exemption or the child tax credit for your son, the IRS will disallow your claim to both these tax benefits. I didn t file my 2011 taxes If you do not have another qualifying child or dependent, the IRS will also disallow your claim to the exclusion for dependent care benefits. I didn t file my 2011 taxes In addition, because you and your husband did not live apart for the last 6 months of the year, your husband cannot claim head of household filing status. I didn t file my 2011 taxes As a result, his filing status is married filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses. I didn t file my 2011 taxes Example 9—unmarried parents. I didn t file my 2011 taxes You, your 5-year-old son, and your son's father lived together all year. I didn t file my 2011 taxes You and your son's father are not married. I didn t file my 2011 taxes Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, support, and joint return tests for both you and his father. I didn t file my 2011 taxes Your AGI is $12,000 and your son's father's AGI is $14,000. I didn t file my 2011 taxes Your son's father agrees to let you claim the child as a qualifying child. I didn t file my 2011 taxes This means you can claim him as a qualifying child for the dependency exemption, child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion for dependent care benefits, and the earned income credit, if you qualify for each of those tax benefits (and if your son's father does not, in fact, claim your son as a qualifying child for any of those tax benefits). I didn t file my 2011 taxes Example 10—unmarried parents claim same child. I didn t file my 2011 taxes The facts are the same as in Example 9 except that you and your son's father both claim your son as a qualifying child. I didn t file my 2011 taxes In this case, only your son's father will be allowed to treat your son as a qualifying child. I didn t file my 2011 taxes This is because his AGI, $14,000, is more than your AGI, $12,000. I didn t file my 2011 taxes If you claimed an exemption or the child tax credit for your son, the IRS will disallow your claim to both these tax benefits. I didn t file my 2011 taxes If you do not have another qualifying child or dependent, the IRS will also disallow your claim to the earned income credit, head of household filing status, the credit for child and dependent care expenses, and the exclusion for dependent care benefits. I didn t file my 2011 taxes Example 11—child did not live with a parent. I didn t file my 2011 taxes You and your 7-year-old niece, your sister's child, lived with your mother all year. I didn t file my 2011 taxes You are 25 years old, and your AGI is $9,300. I didn t file my 2011 taxes Your mother's AGI is $15,000. I didn t file my 2011 taxes Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. I didn t file my 2011 taxes Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, support, and joint return tests for both you and your mother. I didn t file my 2011 taxes However, only your mother can treat her as a qualifying child. I didn t file my 2011 taxes This is because your mother's AGI, $15,000, is more than your AGI, $9,300. I didn t file my 2011 taxes Applying this special rule to divorced or separated parents (or parents who live apart). I didn t file my 2011 taxes   If a child is treated as the qualifying child of the noncustodial parent under the rules described earlier for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. I didn t file my 2011 taxes However, the custodial parent, if eligible, or other eligible person can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. I didn t file my 2011 taxes If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules just explained determine which person can treat the child as a qualifying child. I didn t file my 2011 taxes Example 1. I didn t file my 2011 taxes You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. I didn t file my 2011 taxes Your AGI is $10,000. I didn t file my 2011 taxes Your mother's AGI is $25,000. I didn t file my 2011 taxes Your son's father did not live with you or your son. I didn t file my 2011 taxes Under the rules explained earlier for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for him. I didn t file my 2011 taxes Because of this, you cannot claim an exemption or the child tax credit for your son. I didn t file my 2011 taxes However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. I didn t file my 2011 taxes You and your mother did not have any child care expenses or dependent care benefits, so neither of you can claim the credit for child and dependent care expenses or the exclusion for dependent care benefits. I didn t file my 2011 taxes But the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. I didn t file my 2011 taxes (Note: The support test does not apply for the earned income credit. I didn t file my 2011 taxes ) However, you agree to let your mother claim your son. I didn t file my 2011 taxes This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. I didn t file my 2011 taxes (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. I didn t file my 2011 taxes ) Example 2. I didn t file my 2011 taxes The facts are the same as in Example 1 except your AGI is $25,000 and your mother's AGI is $21,000. I didn t file my 2011 taxes Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. I didn t file my 2011 taxes Example 3. I didn t file my 2011 taxes The facts are the same as in Example 1 except you and your mother both claim your son as a qualifying child for the earned income credit. I didn t file my 2011 taxes Your mother also claims him as a qualifying child for head of household filing status. I didn t file my 2011 taxes You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. I didn t file my 2011 taxes The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. I didn t file my 2011 taxes Qualifying Relative Four tests must be met for a person to be your qualifying relative. I didn t file my 2011 taxes The four tests are: Not a qualifying child test, Member of household or relationship test, Gross income test, and Support test. I didn t file my 2011 taxes Age. I didn t file my 2011 taxes   Unlike a qualifying child, a qualifying relative can be any age. I didn t file my 2011 taxes There is no age test for a qualifying relative. I didn t file my 2011 taxes Kidnapped child. I didn t file my 2011 taxes   You may be able to treat a child as your qualifying relative even if the child has been kidnapped. I didn t file my 2011 taxes See Publication 501 for details. I didn t file my 2011 taxes Not a Qualifying Child Test A child is not your qualifying relative if the child is your qualifying child or the qualifying child of any other taxpayer. I didn t file my 2011 taxes Example 1. I didn t file my 2011 taxes Your 22-year-old daughter, who is a student, lives with you and meets all the tests to be your qualifying child. I didn t file my 2011 taxes She is not your qualifying relative. I didn t file my 2011 taxes Example 2. I didn t file my 2011 taxes Your 2-year-old son lives with your parents and meets all the tests to be their qualifying child. I didn t file my 2011 taxes He is not your qualifying relative. I didn t file my 2011 taxes Example 3. I didn t file my 2011 taxes Your son lives with you but is not your qualifying child because he is 30 years old and does not meet the age test. I didn t file my 2011 taxes He may be your qualifying relative if the gross income test and the support test are met. I didn t file my 2011 taxes Example 4. I didn t file my 2011 taxes Your 13-year-old grandson lived with his mother for 3 months, with his uncle for 4 months, and with you for 5 months during the year. I didn t file my 2011 taxes He is not your qualifying child because he does not meet the residency test. I didn t file my 2011 taxes He may be your qualifying relative if the gross income test and the support test are met. I didn t file my 2011 taxes Child of person not required to file a return. I didn t file my 2011 taxes   A child is not the qualifying child of any other taxpayer and so may qualify as your qualifying relative if the child's parent (or other person for whom the child is defined as a qualifying child) is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. I didn t file my 2011 taxes Example 1—return not required. I didn t file my 2011 taxes You support an unrelated friend and her 3-year-old child, who lived with you all year in your home. I didn t file my 2011 taxes Your friend has no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. I didn t file my 2011 taxes Both your friend and her child are your qualifying relatives if the support test is met. I didn t file my 2011 taxes Example 2—return filed to claim refund. I didn t file my 2011 taxes The facts are the same as in Example 1 except your friend had wages of $1,500 during the year and had income tax withheld from her wages. I didn t file my 2011 taxes She files a return only to get a refund of the income tax withheld and does not claim the earned income credit or any other tax credits or deductions. I didn t file my 2011 taxes Both your friend and her child are your qualifying relatives if the support test is met. I didn t file my 2011 taxes Example 3—earned income credit claimed. I didn t file my 2011 taxes The facts are the same as in Example 2 except your friend had wages of $8,000 during the year and claimed the earned income credit on her return. I didn t file my 2011 taxes Your friend's child is the qualifying child of another taxpayer (your friend), so you cannot claim your friend's child as your qualifying relative. I didn t file my 2011 taxes Child in Canada or Mexico. I didn t file my 2011 taxes   You may be able to claim your child as a dependent even if the child lives in Canada or Mexico. I didn t file my 2011 taxes If the child does not live with you, the child does not meet the residency test to be your qualifying child. I didn t file my 2011 taxes However, the child may still be your qualifying relative. I didn t file my 2011 taxes If the persons the child does live with are not U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizens and have no U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes gross income, those persons are not “taxpayers,” so the child is not the qualifying child of any other taxpayer. I didn t file my 2011 taxes If the child is not the qualifying child of any other taxpayer, the child is your qualifying relative as long as the gross income test and the support test are met. I didn t file my 2011 taxes   You cannot claim as a dependent a child who lives in a foreign country other than Canada or Mexico, unless the child is a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes resident alien, or U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes national. I didn t file my 2011 taxes There is an exception for certain adopted children who lived with you all year. I didn t file my 2011 taxes See Citizen or Resident Test , earlier. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You provide all the support of your children, ages 6, 8, and 12, who live in Mexico with your mother and have no income. I didn t file my 2011 taxes You are single and live in the United States. I didn t file my 2011 taxes Your mother is not a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes citizen and has no U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes income, so she is not a “taxpayer. I didn t file my 2011 taxes ” Your children are not your qualifying children because they do not meet the residency test. I didn t file my 2011 taxes But since they are not the qualifying children of any other taxpayer, they are your qualifying relatives and you can claim them as dependents. I didn t file my 2011 taxes You may also be able to claim your mother as a dependent if the gross income and support tests are met. I didn t file my 2011 taxes Member of Household or Relationship Test To meet this test, a person must either: Live with you all year as a member of your household, or Be related to you in one of the ways listed under Relatives who do not have to live with you . I didn t file my 2011 taxes If at any time during the year the person was your spouse, that person cannot be your qualifying relative. I didn t file my 2011 taxes However, see Personal Exemptions , earlier. I didn t file my 2011 taxes Relatives who do not have to live with you. I didn t file my 2011 taxes   A person related to you in any of the following ways does not have to live with you all year as a member of your household to meet this test. I didn t file my 2011 taxes Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). I didn t file my 2011 taxes (A legally adopted child is considered your child. I didn t file my 2011 taxes ) Your brother, sister, half brother, half sister, stepbrother, or stepsister. I didn t file my 2011 taxes Your father, mother, grandparent, or other direct ancestor, but not foster parent. I didn t file my 2011 taxes Your stepfather or stepmother. I didn t file my 2011 taxes A son or daughter of your brother or sister. I didn t file my 2011 taxes A son or daughter of your half brother or half sister. I didn t file my 2011 taxes A brother or sister of your father or mother. I didn t file my 2011 taxes Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. I didn t file my 2011 taxes Any of these relationships that were established by marriage are not ended by death or divorce. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You and your wife began supporting your wife's father, a widower, in 2006. I didn t file my 2011 taxes Your wife died in 2012. I didn t file my 2011 taxes Despite your wife's death, your father-in-law continues to meet this test, even if he does not live with you. I didn t file my 2011 taxes You can claim him as a dependent if all other tests are met, including the gross income test and support test. I didn t file my 2011 taxes Foster child. I didn t file my 2011 taxes   A foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. I didn t file my 2011 taxes Joint return. I didn t file my 2011 taxes   If you file a joint return, the person can be related to either you or your spouse. I didn t file my 2011 taxes Also, the person does not need to be related to the spouse who provides support. I didn t file my 2011 taxes   For example, your spouse's uncle who receives more than half of his support from you may be your qualifying relative, even though he does not live with you. I didn t file my 2011 taxes However, if you and your spouse file separate returns, your spouse's uncle can be your qualifying relative only if he lives with you all year as a member of your household. I didn t file my 2011 taxes Temporary absences. I didn t file my 2011 taxes   A person is considered to live with you as a member of your household during periods of time when one of you, or both, are temporarily absent due to special circumstances such as: Illness, Education, Business, Vacation, or Military service. I didn t file my 2011 taxes   If the person is placed in a nursing home for an indefinite period of time to receive constant medical care, the absence may be considered temporary. I didn t file my 2011 taxes Death or birth. I didn t file my 2011 taxes   A person who died during the year, but lived with you as a member of your household until death, will meet this test. I didn t file my 2011 taxes The same is true for a child who was born during the year and lived with you as a member of your household for the rest of the year. I didn t file my 2011 taxes The test is also met if a child lived with you as a member of your household except for any required hospital stay following birth. I didn t file my 2011 taxes   If your dependent died during the year and you otherwise qualify to claim an exemption for the dependent, you can still claim the exemption. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Your dependent mother died on January 15. I didn t file my 2011 taxes She met the tests to be your qualifying relative. I didn t file my 2011 taxes The other tests to claim an exemption for a dependent were also met. I didn t file my 2011 taxes You can claim an exemption for her on your return. I didn t file my 2011 taxes Local law violated. I didn t file my 2011 taxes   A person does not meet this test if at any time during the year the relationship between you and that person violates local law. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Your girlfriend lived with you as a member of your household all year. I didn t file my 2011 taxes However, your relationship with her violated the laws of the state where you live, because she was married to someone else. I didn t file my 2011 taxes Therefore, she does not meet this test and you cannot claim her as a dependent. I didn t file my 2011 taxes Adopted child. I didn t file my 2011 taxes   An adopted child is always treated as your own child. I didn t file my 2011 taxes The term “adopted child” includes a child who was lawfully placed with you for legal adoption. I didn t file my 2011 taxes Cousin. I didn t file my 2011 taxes   Your cousin meets this test only if he or she lives with you all year as a member of your household. I didn t file my 2011 taxes A cousin is a descendant of a brother or sister of your father or mother. I didn t file my 2011 taxes Gross Income Test To meet this test, a person's gross income for the year must be less than $3,900. I didn t file my 2011 taxes Gross income defined. I didn t file my 2011 taxes   Gross income is all income in the form of money, property, and services that is not exempt from tax. I didn t file my 2011 taxes   In a manufacturing, merchandising, or mining business, gross income is the total net sales minus the cost of goods sold, plus any miscellaneous income from the business. I didn t file my 2011 taxes   Gross receipts from rental property are gross income. I didn t file my 2011 taxes Do not deduct taxes, repairs, or other expenses, to determine the gross income from rental property. I didn t file my 2011 taxes   Gross income includes a partner's share of the gross (not a share of the net) partnership income. I didn t file my 2011 taxes    Gross income also includes all taxable unemployment compensation and certain scholarship and fellowship grants. I didn t file my 2011 taxes Scholarships received by degree candidates and used for tuition, fees, supplies, books, and equipment required for particular courses generally are not included in gross income. I didn t file my 2011 taxes For more information about scholarships, see chapter 12. I didn t file my 2011 taxes   Tax-exempt income, such as certain social security benefits, is not included in gross income. I didn t file my 2011 taxes Disabled dependent working at sheltered workshop. I didn t file my 2011 taxes   For purposes of the gross income test, the gross income of an individual who is permanently and totally disabled at any time during the year does not include income for services the individual performs at a sheltered workshop. I didn t file my 2011 taxes The availability of medical care at the workshop must be the main reason for the individual's presence there. I didn t file my 2011 taxes Also, the income must come solely from activities at the workshop that are incident to this medical care. I didn t file my 2011 taxes   A “sheltered workshop” is a school that: Provides special instruction or training designed to alleviate the disability of the individual, and Is operated by certain tax-exempt organizations, or by a state, a U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes possession, a political subdivision of a state or possession, the United States, or the District of Columbia. I didn t file my 2011 taxes “Permanently and totally disabled” has the same meaning here as under Qualifying Child, earlier. I didn t file my 2011 taxes Support Test (To Be a Qualifying Relative) To meet this test, you generally must provide more than half of a person's total support during the calendar year. I didn t file my 2011 taxes However, if two or more persons provide support, but no one person provides more than half of a person's total support, see Multiple Support Agreement , later. I didn t file my 2011 taxes How to determine if support test is met. I didn t file my 2011 taxes   You figure whether you have provided more than half of a person's total support by comparing the amount you contributed to that person's support with the entire amount of support that person received from all sources. I didn t file my 2011 taxes This includes support the person provided from his or her own funds. I didn t file my 2011 taxes   You may find Worksheet 3-1 helpful in figuring whether you provided more than half of a person's support. I didn t file my 2011 taxes Person's own funds not used for support. I didn t file my 2011 taxes   A person's own funds are not support unless they are actually spent for support. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Your mother received $2,400 in social security benefits and $300 in interest. I didn t file my 2011 taxes She paid $2,000 for lodging and $400 for recreation. I didn t file my 2011 taxes She put $300 in a savings account. I didn t file my 2011 taxes Even though your mother received a total of $2,700 ($2,400 + $300), she spent only $2,400 ($2,000 + $400) for her own support. I didn t file my 2011 taxes If you spent more than $2,400 for her support and no other support was received, you have provided more than half of her support. I didn t file my 2011 taxes Child's wages used for own support. I didn t file my 2011 taxes   You cannot include in your contribution to your child's support any support paid for by the child with the child's own wages, even if you paid the wages. I didn t file my 2011 taxes Year support is provided. I didn t file my 2011 taxes   The year you provide the support is the year you pay for it, even if you do so with borrowed money that you repay in a later year. I didn t file my 2011 taxes   If you use a fiscal year to report your income, you must provide more than half of the dependent's support for the calendar year in which your fiscal year begins. I didn t file my 2011 taxes Armed Forces dependency allotments. I didn t file my 2011 taxes   The part of the allotment contributed by the government and the part taken out of your military pay are both considered provided by you in figuring whether you provide more than half of the support. I didn t file my 2011 taxes If your allotment is used to support persons other than those you name, you can take the exemptions for them if they otherwise qualify. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You are in the Armed Forces. I didn t file my 2011 taxes You authorize an allotment for your widowed mother that she uses to support herself and her sister. I didn t file my 2011 taxes If the allotment provides more than half of each person's support, you can take an exemption for each of them, if they otherwise qualify, even though you authorize the allotment only for your mother. I didn t file my 2011 taxes Tax-exempt military quarters allowances. I didn t file my 2011 taxes   These allowances are treated the same way as dependency allotments in figuring support. I didn t file my 2011 taxes The allotment of pay and the tax-exempt basic allowance for quarters are both considered as provided by you for support. I didn t file my 2011 taxes Tax-exempt income. I didn t file my 2011 taxes   In figuring a person's total support, include tax-exempt income, savings, and borrowed amounts used to support that person. I didn t file my 2011 taxes Tax-exempt income includes certain social security benefits, welfare benefits, nontaxable life insurance proceeds, Armed Forces family allotments, nontaxable pensions, and tax-exempt interest. I didn t file my 2011 taxes Example 1. I didn t file my 2011 taxes You provide $4,000 toward your mother's support during the year. I didn t file my 2011 taxes She has earned income of $600, nontaxable social security benefits of $4,800, and tax-exempt interest of $200. I didn t file my 2011 taxes She uses all these for her support. I didn t file my 2011 taxes You cannot claim an exemption for your mother because the $4,000 you provide is not more than half of her total support of $9,600 ($4,000 + $600 + $4,800 + $200). I didn t file my 2011 taxes Example 2. I didn t file my 2011 taxes Your niece takes out a student loan of $2,500 a
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I didn t file my 2011 taxes Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). I didn t file my 2011 taxes Cost Basis The basis of property you buy is usually its cost. I didn t file my 2011 taxes The cost is the amount you pay in cash, debt obligations, other property, or services. I didn t file my 2011 taxes Your cost also includes amounts you pay for the following items. I didn t file my 2011 taxes Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if assumed for the seller). I didn t file my 2011 taxes  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. I didn t file my 2011 taxes Loans with low or no interest. I didn t file my 2011 taxes   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. I didn t file my 2011 taxes You generally have unstated interest if your interest rate is less than the applicable federal rate. I didn t file my 2011 taxes For more information, see Unstated Interest and Original Issue Discount in Publication 537. I didn t file my 2011 taxes Purchase of a business. I didn t file my 2011 taxes   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. I didn t file my 2011 taxes Allocate the price among the various assets, including any section 197 intangibles. I didn t file my 2011 taxes See Allocating the Basis, later. I didn t file my 2011 taxes Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. I didn t file my 2011 taxes If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. I didn t file my 2011 taxes You must adjust the basis of stocks for certain events that occur after purchase. I didn t file my 2011 taxes See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. I didn t file my 2011 taxes Identifying stock or bonds sold. I didn t file my 2011 taxes   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. I didn t file my 2011 taxes If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. I didn t file my 2011 taxes For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. I didn t file my 2011 taxes Mutual fund shares. I didn t file my 2011 taxes   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. I didn t file my 2011 taxes For more information, see Publication 550. I didn t file my 2011 taxes Real Property Real property, also called real estate, is land and generally anything built on or attached to it. I didn t file my 2011 taxes If you buy real property, certain fees and other expenses become part of your cost basis in the property. I didn t file my 2011 taxes Real estate taxes. I didn t file my 2011 taxes   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. I didn t file my 2011 taxes You cannot deduct them as taxes. I didn t file my 2011 taxes   If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. I didn t file my 2011 taxes Do not include that amount in the basis of the property. I didn t file my 2011 taxes If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. I didn t file my 2011 taxes Settlement costs. I didn t file my 2011 taxes   Your basis includes the settlement fees and closing costs for buying property. I didn t file my 2011 taxes You cannot include in your basis the fees and costs for getting a loan on property. I didn t file my 2011 taxes A fee for buying property is a cost that must be paid even if you bought the property for cash. I didn t file my 2011 taxes   The following items are some of the settlement fees or closing costs you can include in the basis of your property. I didn t file my 2011 taxes Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. I didn t file my 2011 taxes   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. I didn t file my 2011 taxes   The following items are some settlement fees and closing costs you cannot include in the basis of the property. I didn t file my 2011 taxes Casualty insurance premiums. I didn t file my 2011 taxes Rent for occupancy of the property before closing. I didn t file my 2011 taxes Charges for utilities or other services related to occupancy of the property before closing. I didn t file my 2011 taxes Charges connected with getting a loan. I didn t file my 2011 taxes The following are examples of these charges. I didn t file my 2011 taxes Points (discount points, loan origination fees). I didn t file my 2011 taxes Mortgage insurance premiums. I didn t file my 2011 taxes Loan assumption fees. I didn t file my 2011 taxes Cost of a credit report. I didn t file my 2011 taxes Fees for an appraisal required by a lender. I didn t file my 2011 taxes Fees for refinancing a mortgage. I didn t file my 2011 taxes If these costs relate to business property, items (1) through (3) are deductible as business expenses. I didn t file my 2011 taxes Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. I didn t file my 2011 taxes Points. I didn t file my 2011 taxes   If you pay points to obtain a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. I didn t file my 2011 taxes Generally, you deduct the points over the term of the loan. I didn t file my 2011 taxes For more information on how to deduct points, see Points in chapter 4 of Publication 535. I didn t file my 2011 taxes Points on home mortgage. I didn t file my 2011 taxes   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. I didn t file my 2011 taxes If certain requirements are met, you can deduct the points in full for the year in which they are paid. I didn t file my 2011 taxes Reduce the basis of your home by any seller-paid points. I didn t file my 2011 taxes For more information, see Points in Publication 936, Home Mortgage Interest Deduction. I didn t file my 2011 taxes Assumption of mortgage. I didn t file my 2011 taxes   If you buy property and assume (or buy subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. I didn t file my 2011 taxes Constructing assets. I didn t file my 2011 taxes   If you build property or have assets built for you, your expenses for this construction are part of your basis. I didn t file my 2011 taxes Some of these expenses include the following costs. I didn t file my 2011 taxes Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. I didn t file my 2011 taxes In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. I didn t file my 2011 taxes You must include them in the asset's basis. I didn t file my 2011 taxes Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. I didn t file my 2011 taxes    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. I didn t file my 2011 taxes Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. I didn t file my 2011 taxes If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. I didn t file my 2011 taxes In certain circumstances, you may be subject to the uniform capitalization rules, next. I didn t file my 2011 taxes Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. I didn t file my 2011 taxes Activities subject to the rules. I didn t file my 2011 taxes   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. I didn t file my 2011 taxes Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. I didn t file my 2011 taxes However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. I didn t file my 2011 taxes   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. I didn t file my 2011 taxes Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. I didn t file my 2011 taxes Tangible personal property includes films, sound recordings, video tapes, books, or similar property. I didn t file my 2011 taxes    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. I didn t file my 2011 taxes To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. I didn t file my 2011 taxes You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. I didn t file my 2011 taxes   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. I didn t file my 2011 taxes The nondeductible part of the cost is not subject to the uniform capitalization rules. I didn t file my 2011 taxes More information. I didn t file my 2011 taxes   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. I didn t file my 2011 taxes Exceptions. I didn t file my 2011 taxes   The following are not subject to the uniform capitalization rules. I didn t file my 2011 taxes Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. I didn t file my 2011 taxes For other exceptions to the uniform capitalization rules, see section 1. I didn t file my 2011 taxes 263A-1(b) of the regulations. I didn t file my 2011 taxes   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. I didn t file my 2011 taxes Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. I didn t file my 2011 taxes The basis of an intangible asset is usually the cost to buy or create it. I didn t file my 2011 taxes If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. I didn t file my 2011 taxes The basis of certain intangibles can be amortized. I didn t file my 2011 taxes See chapter 8 of Publication 535 for information on the amortization of these costs. I didn t file my 2011 taxes Patents. I didn t file my 2011 taxes   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. I didn t file my 2011 taxes If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. I didn t file my 2011 taxes The value of the inventor's time spent on an invention is not part of the basis. I didn t file my 2011 taxes Copyrights. I didn t file my 2011 taxes   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. I didn t file my 2011 taxes Do not include the value of your time as the author, or any other person's time you did not pay for. I didn t file my 2011 taxes Franchises, trademarks, and trade names. I didn t file my 2011 taxes   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. I didn t file my 2011 taxes Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. I didn t file my 2011 taxes You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. I didn t file my 2011 taxes See Trade or Business Acquired below. I didn t file my 2011 taxes Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. I didn t file my 2011 taxes If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. I didn t file my 2011 taxes However, see Trade or Business Acquired, next. I didn t file my 2011 taxes Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. I didn t file my 2011 taxes Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. I didn t file my 2011 taxes Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. I didn t file my 2011 taxes Certificates of deposit, U. I didn t file my 2011 taxes S. I didn t file my 2011 taxes Government securities, foreign currency, and actively traded personal property, including stock and securities. I didn t file my 2011 taxes Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. I didn t file my 2011 taxes Property of a kind that would properly 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. I didn t file my 2011 taxes All other assets except section 197 intangibles, goodwill, and going concern value. I didn t file my 2011 taxes Section 197 intangibles except goodwill and going concern value. I didn t file my 2011 taxes Goodwill and going concern value (whether or not they qualify as section 197 intangibles). I didn t file my 2011 taxes Agreement. I didn t file my 2011 taxes   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. I didn t file my 2011 taxes This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. I didn t file my 2011 taxes Reporting requirement. I didn t file my 2011 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. I didn t file my 2011 taxes Use Form 8594 to provide this information. I didn t file my 2011 taxes The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. I didn t file my 2011 taxes More information. I didn t file my 2011 taxes   See Sale of a Business in chapter 2 of Publication 544 for more information. I didn t file my 2011 taxes Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. I didn t file my 2011 taxes Figure the basis of each asset by multiplying the lump sum by a fraction. I didn t file my 2011 taxes The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. I didn t file my 2011 taxes If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. I didn t file my 2011 taxes Demolition of building. I didn t file my 2011 taxes   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. I didn t file my 2011 taxes Do not claim the costs as a current deduction. I didn t file my 2011 taxes Modification of building. I didn t file my 2011 taxes   A modification of a building will not be treated as a demolition if the following conditions are satisfied. I didn t file my 2011 taxes 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. I didn t file my 2011 taxes   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. I didn t file my 2011 taxes   If these conditions are met, add the costs of the modifications to the basis of the building. I didn t file my 2011 taxes Subdivided lots. I didn t file my 2011 taxes   If you buy a tract of land and subdivide it, you must determine the basis of each lot. I didn t file my 2011 taxes This is necessary because you must figure the gain or loss on the sale of each individual lot. I didn t file my 2011 taxes As a result, you do not recover your entire cost in the tract until you have sold all of the lots. I didn t file my 2011 taxes   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. I didn t file my 2011 taxes The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. I didn t file my 2011 taxes Future improvement costs. I didn t file my 2011 taxes   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. I didn t file my 2011 taxes See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. I didn t file my 2011 taxes Use of erroneous cost basis. I didn t file my 2011 taxes   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. I didn t file my 2011 taxes Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You bought a tract of land to which you assigned a cost of $15,000. I didn t file my 2011 taxes You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. I didn t file my 2011 taxes You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. I didn t file my 2011 taxes Several years later you determine that your original basis in the tract was $22,500 and not $15,000. I didn t file my 2011 taxes You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. I didn t file my 2011 taxes You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). I didn t file my 2011 taxes You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. I didn t file my 2011 taxes Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. I didn t file my 2011 taxes The result of these adjustments to the basis is the adjusted basis. I didn t file my 2011 taxes Increases to Basis Increase the basis of any property by all items properly added to a capital account. I didn t file my 2011 taxes These include the cost of any improvements having a useful life of more than 1 year. I didn t file my 2011 taxes Rehabilitation expenses also increase basis. I didn t file my 2011 taxes However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. I didn t file my 2011 taxes If you have to recapture any of the credit, increase your basis by the recaptured amount. I didn t file my 2011 taxes If you make additions or improvements to business property, keep separate accounts for them. I didn t file my 2011 taxes Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. I didn t file my 2011 taxes For more information, see Publication 946. I didn t file my 2011 taxes The following items increase the basis of property. I didn t file my 2011 taxes The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. I didn t file my 2011 taxes Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. I didn t file my 2011 taxes Do not deduct them as taxes. I didn t file my 2011 taxes However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. I didn t file my 2011 taxes Add the assessment to your property's basis. I didn t file my 2011 taxes In this example, the assessment is a depreciable asset. I didn t file my 2011 taxes Deducting vs. I didn t file my 2011 taxes Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. I didn t file my 2011 taxes For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. I didn t file my 2011 taxes However, you can choose either to deduct or to capitalize certain other costs. I didn t file my 2011 taxes If you capitalize these costs, include them in your basis. I didn t file my 2011 taxes If you deduct them, do not include them in your basis. I didn t file my 2011 taxes See Uniform Capitalization Rules earlier. I didn t file my 2011 taxes The costs you can choose to deduct or to capitalize include the following. I didn t file my 2011 taxes Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. I didn t file my 2011 taxes If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. I didn t file my 2011 taxes For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. I didn t file my 2011 taxes Table 1. I didn t file my 2011 taxes Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. I didn t file my 2011 taxes Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. I didn t file my 2011 taxes Some of these items are discussed next. I didn t file my 2011 taxes Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. I didn t file my 2011 taxes You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. I didn t file my 2011 taxes To make this determination, compare the repaired property to the property before the casualty. I didn t file my 2011 taxes For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. I didn t file my 2011 taxes Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. I didn t file my 2011 taxes It reduces the basis of the affected part of the property. I didn t file my 2011 taxes If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. I didn t file my 2011 taxes Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. I didn t file my 2011 taxes For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. I didn t file my 2011 taxes Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. I didn t file my 2011 taxes This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. I didn t file my 2011 taxes If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. I didn t file my 2011 taxes Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. I didn t file my 2011 taxes For more information about the section 179 deduction, see Publication 946. I didn t file my 2011 taxes Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. I didn t file my 2011 taxes Reduce the basis of the property for which you received the subsidy by the excluded amount. I didn t file my 2011 taxes For more information on this subsidy, see Publication 525. I didn t file my 2011 taxes Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. I didn t file my 2011 taxes If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. I didn t file my 2011 taxes If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. I didn t file my 2011 taxes Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. I didn t file my 2011 taxes If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. I didn t file my 2011 taxes In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. I didn t file my 2011 taxes For information on figuring depreciation, see Publication 946. I didn t file my 2011 taxes If you are claiming depreciation on a business vehicle, see Publication 463. I didn t file my 2011 taxes If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. I didn t file my 2011 taxes Include the excess depreciation in your gross income and add it to your basis in the property. I didn t file my 2011 taxes For information on the computation of excess depreciation, see chapter 4 in Publication 463. I didn t file my 2011 taxes Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. I didn t file my 2011 taxes A debt includes any indebtedness for which you are liable or which attaches to property you hold. I didn t file my 2011 taxes You can exclude canceled debt from income in the following situations. I didn t file my 2011 taxes Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). I didn t file my 2011 taxes If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. I didn t file my 2011 taxes However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. I didn t file my 2011 taxes For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. I didn t file my 2011 taxes For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. I didn t file my 2011 taxes For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. I didn t file my 2011 taxes Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. I didn t file my 2011 taxes For more information on the rules for the sale of a home, see Publication 523. I didn t file my 2011 taxes Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. I didn t file my 2011 taxes This also applies to amounts you received under an employer's adoption assistance program and excluded from income. I didn t file my 2011 taxes For more information Form 8839, Qualified Adoption Expenses. I didn t file my 2011 taxes Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. I didn t file my 2011 taxes You must reduce your basis in that property by the credit claimed. I didn t file my 2011 taxes For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. I didn t file my 2011 taxes Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. I didn t file my 2011 taxes You also paid commissions of $2,000 and title search and legal fees of $600. I didn t file my 2011 taxes You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. I didn t file my 2011 taxes Immediately you spent $20,000 in remodeling the building before you placed it in service. I didn t file my 2011 taxes You were allowed depreciation of $14,526 for the years 2005 through 2009. I didn t file my 2011 taxes In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. I didn t file my 2011 taxes You claimed a deduction for this loss. I didn t file my 2011 taxes You spent $5,500 to repair the damages and extend the useful life of the building. I didn t file my 2011 taxes The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. I didn t file my 2011 taxes It is not affected by any of the above adjustments. I didn t file my 2011 taxes Basis Other Than Cost There are many times when you cannot use cost as basis. I didn t file my 2011 taxes In these cases, the fair market value or the adjusted basis of property may be used. I didn t file my 2011 taxes Adjusted basis is discussed earlier. I didn t file my 2011 taxes Fair market value (FMV). I didn t file my 2011 taxes   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. I didn t file my 2011 taxes Sales of similar property on or about the same date may be helpful in figuring the property's FMV. I didn t file my 2011 taxes Property Received for Services If you receive property for services, include the property's FMV in income. I didn t file my 2011 taxes The amount you include in income becomes your basis. I didn t file my 2011 taxes If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. I didn t file my 2011 taxes Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. I didn t file my 2011 taxes If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. I didn t file my 2011 taxes Your basis in the property is its FMV (your purchase price plus the amount you include in income). I didn t file my 2011 taxes If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. I didn t file my 2011 taxes However, your basis in the property is still its FMV. I didn t file my 2011 taxes See Employee Discounts in Publication 15-B. I didn t file my 2011 taxes Restricted Property If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested unless you make the election discussed later. I didn t file my 2011 taxes Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. I didn t file my 2011 taxes There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. I didn t file my 2011 taxes When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. I didn t file my 2011 taxes The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. I didn t file my 2011 taxes You do not report any income until you have completed the 5 years of service that satisfy the condition. I didn t file my 2011 taxes Fair market value. I didn t file my 2011 taxes   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You received stock from your employer for services you performed. I didn t file my 2011 taxes If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. I didn t file my 2011 taxes At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. I didn t file my 2011 taxes This is a restriction that by its terms will never end and you must consider it when you figure the FMV. I didn t file my 2011 taxes Election. I didn t file my 2011 taxes   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. I didn t file my 2011 taxes If you make this choice, the substantially vested rules do not apply. I didn t file my 2011 taxes Your basis is the amount you paid plus the amount you included in income. I didn t file my 2011 taxes   See the discussion of Restricted Property in Publication 525 for more information. I didn t file my 2011 taxes Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. I didn t file my 2011 taxes A taxable gain or deductible loss is also known as a recognized gain or loss. I didn t file my 2011 taxes If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. I didn t file my 2011 taxes A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. I didn t file my 2011 taxes You must report a taxable gain of $3,000 for the land. I didn t file my 2011 taxes The tractor has a basis of $6,000. I didn t file my 2011 taxes Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. I didn t file my 2011 taxes Similar or related property. I didn t file my 2011 taxes   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. I didn t file my 2011 taxes However, make the following adjustments. I didn t file my 2011 taxes Decrease the basis by the following. I didn t file my 2011 taxes Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. I didn t file my 2011 taxes Increase the basis by the following. I didn t file my 2011 taxes Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. I didn t file my 2011 taxes Money or property not similar or related. I didn t file my 2011 taxes   If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the new property is its cost decreased by the gain not recognized on the conversion. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes The state condemned your property. I didn t file my 2011 taxes The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. I didn t file my 2011 taxes You realized a gain of $5,000 ($31,000 − $26,000). I didn t file my 2011 taxes You bought replacement property similar in use to the converted property for $29,000. I didn t file my 2011 taxes You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. I didn t file my 2011 taxes Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. I didn t file my 2011 taxes The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. I didn t file my 2011 taxes   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. I didn t file my 2011 taxes Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. I didn t file my 2011 taxes More information. I didn t file my 2011 taxes   For more information about condemnations, see Involuntary Conversions in Publication 544. I didn t file my 2011 taxes For more information about casualty and theft losses, see Publication 547. I didn t file my 2011 taxes Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. I didn t file my 2011 taxes If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. I didn t file my 2011 taxes A nontaxable gain or loss is also known as an unrecognized gain or loss. I didn t file my 2011 taxes Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. I didn t file my 2011 taxes To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. I didn t file my 2011 taxes There must also be an exchange of like-kind property. I didn t file my 2011 taxes For more information, see Like-Kind Exchanges in Publication 544. I didn t file my 2011 taxes The basis of the property you receive is the same as the basis of the property you gave up. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. I didn t file my 2011 taxes Your basis in the new property is the same as the basis of the old ($50,000). I didn t file my 2011 taxes Exchange expenses. I didn t file my 2011 taxes   Exchange expenses are generally the closing costs you pay. I didn t file my 2011 taxes They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. I didn t file my 2011 taxes Add them to the basis of the like-kind property received. I didn t file my 2011 taxes Property plus cash. I didn t file my 2011 taxes   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. I didn t file my 2011 taxes Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). I didn t file my 2011 taxes Special rules for related persons. I didn t file my 2011 taxes   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. I didn t file my 2011 taxes Each person must report any gain or loss not recognized on the original exchange. I didn t file my 2011 taxes Each person reports it on the tax return filed for the year in which the later disposition occurs. I didn t file my 2011 taxes If this rule applies, the basis of the property received in the original exchange will be its fair market value. I didn t file my 2011 taxes   These rules generally do not apply to the following kinds of property dispositions. I didn t file my 2011 taxes Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. I didn t file my 2011 taxes Related persons. I didn t file my 2011 taxes   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. I didn t file my 2011 taxes   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. I didn t file my 2011 taxes ), see Nondeductible Loss in chapter 2 of Publication 544. I didn t file my 2011 taxes Exchange of business property. I didn t file my 2011 taxes   Exchanging the assets of one business for the assets of another business is a multiple property exchange. I didn t file my 2011 taxes For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. I didn t file my 2011 taxes Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. I didn t file my 2011 taxes The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. I didn t file my 2011 taxes Decrease the basis by the following amounts. I didn t file my 2011 taxes Any money you receive, and Any loss you recognize on the exchange. I didn t file my 2011 taxes Increase the basis by the following amounts. I didn t file my 2011 taxes Any additional costs you incur, and Any gain you recognize on the exchange. I didn t file my 2011 taxes If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. I didn t file my 2011 taxes You realized a gain of $200 ($6,200 − $6,000). I didn t file my 2011 taxes This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). I didn t file my 2011 taxes You include all the gain in income (recognized gain) because the gain is less than the cash received. I didn t file my 2011 taxes Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. I didn t file my 2011 taxes   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. I didn t file my 2011 taxes The rest is the basis of the like property. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You had an adjusted basis of $15,000 in real estate you held for investment. I didn t file my 2011 taxes You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. I didn t file my 2011 taxes The truck is unlike property. I didn t file my 2011 taxes You realized a gain of $1,500 ($16,500 − $15,000). I didn t file my 2011 taxes This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). I didn t file my 2011 taxes You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. I didn t file my 2011 taxes Your basis in the properties you received is figured as follows. I didn t file my 2011 taxes Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). I didn t file my 2011 taxes This is the truck's FMV. I didn t file my 2011 taxes The rest ($12,500) is the basis of the real estate. I didn t file my 2011 taxes Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You are a salesperson and you use one of your cars 100% for business. I didn t file my 2011 taxes You have used this car in your sales activities for 2 years and have depreciated it. I didn t file my 2011 taxes Your adjusted basis in the car is $22,600 and its FMV is $23,100. I didn t file my 2011 taxes You are interested in a new car, which sells for $28,000. I didn t file my 2011 taxes If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). I didn t file my 2011 taxes However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. I didn t file my 2011 taxes Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). I didn t file my 2011 taxes Your basis for depreciating the new car is $27,500, the same as if you traded the old car. I didn t file my 2011 taxes Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. I didn t file my 2011 taxes The first is an exchange of like-kind property. I didn t file my 2011 taxes The second is personal-use property on which gain is recognized and loss is not recognized. I didn t file my 2011 taxes First, figure your adjusted basis in the property as if you transferred two separate properties. I didn t file my 2011 taxes Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. I didn t file my 2011 taxes Deduct the depreciation you took or could have taken from the adjusted basis of the business part. I didn t file my 2011 taxes Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. I didn t file my 2011 taxes The business part of the property is permitted to be exchanged tax free. I didn t file my 2011 taxes However, you must recognize any gain from the exchange of the nonbusiness part. I didn t file my 2011 taxes You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. I didn t file my 2011 taxes The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. I didn t file my 2011 taxes If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. I didn t file my 2011 taxes For more information, see Publication 523. I didn t file my 2011 taxes Trade of car used partly in business. I didn t file my 2011 taxes   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. I didn t file my 2011 taxes   For information on figuring your basis for depreciation, see Publication 463. I didn t file my 2011 taxes Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. I didn t file my 2011 taxes However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. I didn t file my 2011 taxes This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. I didn t file my 2011 taxes If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. I didn t file my 2011 taxes Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. I didn t file my 2011 taxes For more information on these bonds, see Publication 550. I didn t file my 2011 taxes At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. I didn t file my 2011 taxes For more information, see Publication 504, Divorced or Separated Individuals. I didn t file my 2011 taxes Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. I didn t file my 2011 taxes FMV Less Than Donor's Adjusted Basis If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. I didn t file my 2011 taxes Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. I didn t file my 2011 taxes Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). I didn t file my 2011 taxes If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes You received an acre of land as a gift. I didn t file my 2011 taxes At the time of the gift, the land had an FMV of $8,000. I didn t file my 2011 taxes The donor's adjusted basis was $10,000. I didn t file my 2011 taxes After you received the land, no events occurred to increase or decrease your basis. I didn t file my 2011 taxes If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. I didn t file my 2011 taxes If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. I didn t file my 2011 taxes If the sales price is between $8,000 and $10,000, you have neither gain nor loss. I didn t file my 2011 taxes For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. I didn t file my 2011 taxes If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. I didn t file my 2011 taxes Business property. I didn t file my 2011 taxes   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. I didn t file my 2011 taxes FMV Equal to or More Than Donor's Adjusted Basis If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. I didn t file my 2011 taxes Increase your basis by all or part of any gift tax paid, depending on the date of the gift. I didn t file my 2011 taxes Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. I didn t file my 2011 taxes See Adjusted Basis earlier. I didn t file my 2011 taxes Gift received before 1977. I didn t file my 2011 taxes   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. I didn t file my 2011 taxes However, do not increase your basis above the FMV of the gift at the time it was given to you. I didn t file my 2011 taxes Example 1. I didn t file my 2011 taxes You were given a house in 1976 with an FMV of $21,000. I didn t file my 2011 taxes The donor's adjusted basis was $20,000. I didn t file my 2011 taxes The donor paid a gift tax of $500. I didn t file my 2011 taxes Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. I didn t file my 2011 taxes Example 2. I didn t file my 2011 taxes If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. I didn t file my 2011 taxes This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. I didn t file my 2011 taxes Gift received after 1976. I didn t file my 2011 taxes   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. I didn t file my 2011 taxes Figure the increase by multiplying the gift tax paid by a fraction. I didn t file my 2011 taxes The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. I didn t file my 2011 taxes   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. I didn t file my 2011 taxes The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. I didn t file my 2011 taxes For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes In 2010, you received a gift of property from your mother that had an FMV of $50,000. I didn t file my 2011 taxes Her adjusted basis was $20,000. I didn t file my 2011 taxes The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). I didn t file my 2011 taxes She paid a gift tax of $9,000. I didn t file my 2011 taxes Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . I didn t file my 2011 taxes 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. I didn t file my 2011 taxes See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. I didn t file my 2011 taxes If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. I didn t file my 2011 taxes The FMV of the property at the date of the individual's death. I didn t file my 2011 taxes The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. I didn t file my 2011 taxes For information on the alternate valuation date, see the Instructions for Form 706. I didn t file my 2011 taxes The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. I didn t file my 2011 taxes This method is discussed later. I didn t file my 2011 taxes The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. I didn t file my 2011 taxes For information on a qualified conservation easement, see the Instructions for Form 706. I didn t file my 2011 taxes If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. I didn t file my 2011 taxes For more information, see the Instructions for Form 706. I didn t file my 2011 taxes Appreciated property. I didn t file my 2011 taxes   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. I didn t file my 2011 taxes Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. I didn t file my 2011 taxes Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. I didn t file my 2011 taxes Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. I didn t file my 2011 taxes When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. I didn t file my 2011 taxes For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. I didn t file my 2011 taxes For example, you and your spouse owned community property that had a basis of $80,000. I didn t file my 2011 taxes When your spouse died, half the FMV of the community interest was includible in your spouse's estate. I didn t file my 2011 taxes The FMV of the community interest was $100,000. I didn t file my 2011 taxes The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). I didn t file my 2011 taxes The basis of the other half to your spouse's heirs is also $50,000. I didn t file my 2011 taxes For more information on community property, see Publication 555, Community Property. I didn t file my 2011 taxes Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. I didn t file my 2011 taxes John furnished two-thirds of the purchase price and Jim furnished one-third. I didn t file my 2011 taxes Depreciation deductions allowed before John's death were $12,000. I didn t file my 2011 taxes Under local law, each had a half interest in the income from the property. I didn t file my 2011 taxes At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. I didn t file my 2011 taxes Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. I didn t file my 2011 taxes This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. I didn t file my 2011 taxes If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. I didn t file my 2011 taxes Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. I didn t file my 2011 taxes It does not matter how much each spouse contributed to the purchase price. I didn t file my 2011 taxes Also, it does not matter which spouse dies first. I didn t file my 2011 taxes A qualified joint interest is any interest in property held by husband and wife as either of the following. I didn t file my 2011 taxes Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. I didn t file my 2011 taxes Basis. I didn t file my 2011 taxes   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. I didn t file my 2011 taxes Decrease the cost by any deductions allowed to you for depreciation and depletion. I didn t file my 2011 taxes Increase the reduced cost by your basis in the half you inherited. I didn t file my 2011 taxes Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. I didn t file my 2011 taxes If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. I didn t file my 2011 taxes If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. I didn t file my 2011 taxes Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. I didn t file my 2011 taxes Special-use valuation. I didn t file my 2011 taxes   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. I didn t file my 2011 taxes Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. I didn t file my 2011 taxes Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. I didn t file my 2011 taxes Figure all FMVs without regard to the special-use valuation. I didn t file my 2011 taxes   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. I didn t file my 2011 taxes This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. I didn t file my 2011 taxes   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. I didn t file my 2011 taxes If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. I didn t file my 2011 taxes The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. I didn t file my 2011 taxes   You make the election by filing with Form 706-A a statement that does all of the following. I didn t file my 2011 taxes Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. I didn t file my 2011 taxes   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. I didn t file my 2011 taxes Property Changed to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. I didn t file my 2011 taxes An example of changing property held for personal use to business use would be renting out your former main home. I didn t file my 2011 taxes Basis for depreciation. I didn t file my 2011 taxes   The basis for depreciation is the lesser of the following amounts. I didn t file my 2011 taxes The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. I didn t file my 2011 taxes You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. I didn t file my 2011 taxes Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. I didn t file my 2011 taxes Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). I didn t file my 2011 taxes On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. I didn t file my 2011 taxes The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). I didn t file my 2011 taxes Sale of property. I didn t file my 2011 taxes   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. I didn t file my 2011 taxes Gain. I didn t file my 2011 taxes   The basis for figuring a gain is your adjusted basis when you sell the property. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. I didn t file my 2011 taxes Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). I didn t file my 2011 taxes Loss. I didn t file my 2011 taxes   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. I didn t file my 2011 taxes Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. I didn t file my 2011 taxes Example. I didn t file my 2011 taxes Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. I didn t file my 2011 taxes In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000) on that date. I didn t file my 2011 taxes Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). I didn t file my 2011 taxes How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. I didn t file my 2011 taxes By selecting the method that is best for you, you will have quick and easy access to tax help. I didn t file my 2011 taxes Contacting your Taxpayer Advocate. I didn t file my 2011 taxes   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. I didn t file my 2011 taxes We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. I didn t file my 2011 taxes Here are seven things every taxpayer should know about TAS. I didn t file my 2011 taxes TAS is your voice at the IRS. I didn t file my 2011 taxes Our service is free, confidential, and tailored to meet your needs. I didn t file my 2011 taxes You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. I didn t file my 2011 taxes We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. I didn t file my 2011 taxes This includes businesses as well as individuals. I didn t file my 2011 taxes Our employees know the IRS and how to navigate it. I didn t file my 2011 taxes If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. I didn t file my 2011 taxes We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. I didn t file my 2011 taxes You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. I didn t file my 2011 taxes irs. I didn t file my 2011 taxes gov/advocate. I didn t file my 2011 taxes You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. I didn t file my 2011 taxes You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. I didn t file my 2011 taxes taxtoolkit. I didn t file my 2011 taxes irs. I didn t file my 2011 taxes gov. I didn t file my 2011 taxes You can get updates on hot tax topics by visiting our YouTube channel at www. I didn t file my 2011 taxes youtube. I didn t file my 2011 taxes com/tasnta and our Facebook page at www. I didn t file my 2011 taxes facebook. I didn t file my 2011 taxes com/YourVoiceAtIRS, or by following our tweets at www. I didn t file my 2011 taxes twitter. I didn t file my 2011 taxes com/YourVoiceAtIRS. I didn t file my 2011 taxes Low Income Taxpayer Clinics (LITCs). I didn t file my 2011 taxes   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. I didn t file my 2011 taxes LITCs are independent from the IRS. I didn t file my 2011 taxes Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. I didn t file my 2011 taxes If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. I didn t file my 2011 taxes For more information, see Publication 4134, Low Income Taxpayer Clinic List. I didn t file my 2011 taxes This publication is available at IRS. I didn t file my 2011 taxes gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. I didn t file my 2011 taxes Free tax services. I didn t file my 2011 taxes   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. I didn t file my 2011 taxes Learn about free tax information from the IRS, including publications, services, and education and assistance programs. I didn t file my 2011 taxes The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. I didn t file my 2011 taxes The majority of the information and services listed in this publication are available to you free of charge. I didn t file my 2011 taxes If there is a fee associated with a resource or service, it is listed in the publication. I didn t file my 2011 taxes   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d