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Irs 1040ez 2011 Form

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Irs 1040ez 2011 Form

Irs 1040ez 2011 form Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. Irs 1040ez 2011 form SIMPLE plans. Irs 1040ez 2011 form Qualified plans. Irs 1040ez 2011 form Ordering forms and publications. Irs 1040ez 2011 form Tax questions. Irs 1040ez 2011 form Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/pub560. Irs 1040ez 2011 form What's New Compensation limit increased for 2013 and 2014. Irs 1040ez 2011 form  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. Irs 1040ez 2011 form This limit increases to $260,000 for 2014. Irs 1040ez 2011 form Elective deferral limit for 2013 and 2014. Irs 1040ez 2011 form  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. Irs 1040ez 2011 form These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. Irs 1040ez 2011 form Defined contribution limit increased for 2013 and 2014. Irs 1040ez 2011 form  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. Irs 1040ez 2011 form This limit increases to $52,000 for 2014. Irs 1040ez 2011 form SIMPLE plan salary reduction contribution limit for 2013 and 2014. Irs 1040ez 2011 form  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. Irs 1040ez 2011 form Catch-up contribution limit remains unchanged for 2013 and 2014. Irs 1040ez 2011 form  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. Irs 1040ez 2011 form The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. Irs 1040ez 2011 form The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. Irs 1040ez 2011 form The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. Irs 1040ez 2011 form The catch-up contribution limit. Irs 1040ez 2011 form The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Irs 1040ez 2011 form See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. Irs 1040ez 2011 form All section references are to the Internal Revenue Code, unless otherwise stated. Irs 1040ez 2011 form Reminders In-plan Roth rollovers. Irs 1040ez 2011 form  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. Irs 1040ez 2011 form An in-plan Roth rollover is not treated as a distribution for most purposes. Irs 1040ez 2011 form Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. Irs 1040ez 2011 form For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Irs 1040ez 2011 form R. Irs 1040ez 2011 form B. Irs 1040ez 2011 form 872, available at  www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/irb/2010-51_IRB/ar11. Irs 1040ez 2011 form html. Irs 1040ez 2011 form In-plan Roth rollovers expanded. Irs 1040ez 2011 form  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. Irs 1040ez 2011 form Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. Irs 1040ez 2011 form For more information, see Notice 2013-74, 2013-52 I. Irs 1040ez 2011 form R. Irs 1040ez 2011 form B. Irs 1040ez 2011 form 819, available at www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/irb/2013-52_IRB/ar11. Irs 1040ez 2011 form html. Irs 1040ez 2011 form Credit for startup costs. Irs 1040ez 2011 form  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. Irs 1040ez 2011 form The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. Irs 1040ez 2011 form You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. Irs 1040ez 2011 form You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. Irs 1040ez 2011 form At least one participant must be a non-highly compensated employee. Irs 1040ez 2011 form The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. Irs 1040ez 2011 form You. Irs 1040ez 2011 form A member of a controlled group that includes you. Irs 1040ez 2011 form A predecessor of (1) or (2). Irs 1040ez 2011 form The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. Irs 1040ez 2011 form However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. Irs 1040ez 2011 form You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. Irs 1040ez 2011 form To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. Irs 1040ez 2011 form Retirement savings contributions credit. Irs 1040ez 2011 form  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. Irs 1040ez 2011 form The maximum contribution eligible for the credit is $2,000. Irs 1040ez 2011 form To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. Irs 1040ez 2011 form For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). Irs 1040ez 2011 form Photographs of missing children. Irs 1040ez 2011 form  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs 1040ez 2011 form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs 1040ez 2011 form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs 1040ez 2011 form Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. Irs 1040ez 2011 form In this publication, “you” refers to the employer. Irs 1040ez 2011 form See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. Irs 1040ez 2011 form This publication covers the following types of retirement plans. Irs 1040ez 2011 form SEP (simplified employee pension) plans. Irs 1040ez 2011 form SIMPLE (savings incentive match plan for employees) plans. Irs 1040ez 2011 form Qualified plans (also called H. Irs 1040ez 2011 form R. Irs 1040ez 2011 form 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. Irs 1040ez 2011 form SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. Irs 1040ez 2011 form You can deduct contributions you make to the plan for your employees. Irs 1040ez 2011 form If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. Irs 1040ez 2011 form You can also deduct trustees' fees if contributions to the plan do not cover them. Irs 1040ez 2011 form Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Irs 1040ez 2011 form Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. Irs 1040ez 2011 form These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. Irs 1040ez 2011 form What this publication covers. Irs 1040ez 2011 form   This publication contains the information you need to understand the following topics. Irs 1040ez 2011 form What type of plan to set up. Irs 1040ez 2011 form How to set up a plan. Irs 1040ez 2011 form How much you can contribute to a plan. Irs 1040ez 2011 form How much of your contribution is deductible. Irs 1040ez 2011 form How to treat certain distributions. Irs 1040ez 2011 form How to report information about the plan to the IRS and your employees. Irs 1040ez 2011 form Basic features of SEP, SIMPLE, and qualified plans. Irs 1040ez 2011 form The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. Irs 1040ez 2011 form SEP plans. Irs 1040ez 2011 form   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. Irs 1040ez 2011 form Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. Irs 1040ez 2011 form SIMPLE plans. Irs 1040ez 2011 form   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. Irs 1040ez 2011 form Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. Irs 1040ez 2011 form In addition, you will contribute matching or nonelective contributions. Irs 1040ez 2011 form The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. Irs 1040ez 2011 form Qualified plans. Irs 1040ez 2011 form   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. Irs 1040ez 2011 form However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. Irs 1040ez 2011 form Table 1. Irs 1040ez 2011 form Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). Irs 1040ez 2011 form Smaller of $51,000 or 25%1 of participant's compensation. Irs 1040ez 2011 form 2 25%1 of all participants' compensation. Irs 1040ez 2011 form 2 Any time up to the due date of employer's return (including extensions). Irs 1040ez 2011 form SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. Irs 1040ez 2011 form 4  Matching or nonelective contributions: Due date of employer's return (including extensions). Irs 1040ez 2011 form Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. Irs 1040ez 2011 form   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. Irs 1040ez 2011 form 2 Same as maximum contribution. Irs 1040ez 2011 form Any time between 1/1 and 10/1 of the calendar year. Irs 1040ez 2011 form   For a new employer coming into existence after 10/1, as soon as administratively feasible. Irs 1040ez 2011 form Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). Irs 1040ez 2011 form 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). Irs 1040ez 2011 form  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. Irs 1040ez 2011 form   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. Irs 1040ez 2011 form 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. Irs 1040ez 2011 form 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. Irs 1040ez 2011 form   By the end of the tax year. Irs 1040ez 2011 form Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. Irs 1040ez 2011 form See Minimum Funding Requirement in chapter 4. Irs 1040ez 2011 form Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Irs 1040ez 2011 form Based on actuarial assumptions and computations. Irs 1040ez 2011 form By the end of the tax year. Irs 1040ez 2011 form 1Net earnings from self-employment must take the contribution into account. Irs 1040ez 2011 form See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . Irs 1040ez 2011 form  2Compensation is generally limited to $255,000 in 2013. Irs 1040ez 2011 form  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. Irs 1040ez 2011 form  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. Irs 1040ez 2011 form What this publication does not cover. Irs 1040ez 2011 form   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. Irs 1040ez 2011 form You may also need professional help and guidance. Irs 1040ez 2011 form   Also, this publication does not cover all the rules that may be of interest to employees. Irs 1040ez 2011 form For example, it does not cover the following topics. Irs 1040ez 2011 form The comprehensive IRA rules an employee needs to know. Irs 1040ez 2011 form These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). Irs 1040ez 2011 form The comprehensive rules that apply to distributions from retirement plans. Irs 1040ez 2011 form These rules are covered in Publication 575, Pension and Annuity Income. Irs 1040ez 2011 form The comprehensive rules that apply to section 403(b) plans. Irs 1040ez 2011 form These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). Irs 1040ez 2011 form Comments and suggestions. Irs 1040ez 2011 form   We welcome your comments about this publication and your suggestions for future editions. Irs 1040ez 2011 form   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Irs 1040ez 2011 form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs 1040ez 2011 form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs 1040ez 2011 form   You can send your comments from www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/formspubs. Irs 1040ez 2011 form Click on “More Information” and then on “Give us feedback. Irs 1040ez 2011 form ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Irs 1040ez 2011 form Ordering forms and publications. Irs 1040ez 2011 form   Visit www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/formspubs to download forms  and publications, call 1-800-TAX-FORM  (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Irs 1040ez 2011 form Internal Revenue Service 1201 N. Irs 1040ez 2011 form Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Irs 1040ez 2011 form   If you have a tax question, check the information available on IRS. Irs 1040ez 2011 form gov or call 1-800-829-1040. Irs 1040ez 2011 form We cannot answer tax questions sent to either of the above addresses. Irs 1040ez 2011 form Note. Irs 1040ez 2011 form Forms filed electronically with the Department of Labor are not available on the IRS website. Irs 1040ez 2011 form Instead, see www. Irs 1040ez 2011 form efast. Irs 1040ez 2011 form dol. Irs 1040ez 2011 form gov. Irs 1040ez 2011 form Prev  Up  Next   Home   More Online Publications
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The Irs 1040ez 2011 Form

Irs 1040ez 2011 form 4. Irs 1040ez 2011 form   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Irs 1040ez 2011 form Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Irs 1040ez 2011 form Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Irs 1040ez 2011 form Debt paid off. Irs 1040ez 2011 form Payment of cash. Irs 1040ez 2011 form Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Irs 1040ez 2011 form S. Irs 1040ez 2011 form Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Irs 1040ez 2011 form Exception 2. Irs 1040ez 2011 form Section 1256 contracts and straddles. Irs 1040ez 2011 form Market discount bonds. Irs 1040ez 2011 form File Form 1099-B or Form 1099-S with the IRS. Irs 1040ez 2011 form Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Irs 1040ez 2011 form Investment property. Irs 1040ez 2011 form   This is property that produces investment income. Irs 1040ez 2011 form Examples include stocks, bonds, and Treasury bills and notes. Irs 1040ez 2011 form Property used in a trade or business is not investment property. Irs 1040ez 2011 form Form 1099-B. Irs 1040ez 2011 form   If you sold property such as stocks, bonds, mutual funds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Irs 1040ez 2011 form You should receive the statement by February 15 of the next year. Irs 1040ez 2011 form It will show the gross proceeds from the sale. Irs 1040ez 2011 form The IRS will also get a copy of Form 1099-B from the broker. Irs 1040ez 2011 form   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Irs 1040ez 2011 form If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Irs 1040ez 2011 form This will help you complete Form 8949. Irs 1040ez 2011 form Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Irs 1040ez 2011 form    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Irs 1040ez 2011 form Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Irs 1040ez 2011 form Nominees. Irs 1040ez 2011 form   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Irs 1040ez 2011 form   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Irs 1040ez 2011 form Other property transactions. Irs 1040ez 2011 form   Certain transfers of property are discussed in other IRS publications. Irs 1040ez 2011 form These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Irs 1040ez 2011 form Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Irs 1040ez 2011 form Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Irs 1040ez 2011 form What Is a Sale or Trade? This section explains what is a sale or trade. Irs 1040ez 2011 form It also explains certain transactions and events that are treated as sales or trades. Irs 1040ez 2011 form A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Irs 1040ez 2011 form A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Irs 1040ez 2011 form Sale and purchase. Irs 1040ez 2011 form   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Irs 1040ez 2011 form The sale and purchase are two separate transactions. Irs 1040ez 2011 form But see Like-Kind Exchanges under Nontaxable Trades, later. Irs 1040ez 2011 form Redemption of stock. Irs 1040ez 2011 form   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Irs 1040ez 2011 form Dividend versus sale or trade. Irs 1040ez 2011 form   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Irs 1040ez 2011 form Both direct and indirect ownership of stock will be considered. Irs 1040ez 2011 form The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Irs 1040ez 2011 form Redemption or retirement of bonds. Irs 1040ez 2011 form   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Irs 1040ez 2011 form See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Irs 1040ez 2011 form   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Irs 1040ez 2011 form For details, see Regulations section 1. Irs 1040ez 2011 form 1001-3. Irs 1040ez 2011 form Surrender of stock. Irs 1040ez 2011 form   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Irs 1040ez 2011 form The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Irs 1040ez 2011 form Trade of investment property for an annuity. Irs 1040ez 2011 form   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Irs 1040ez 2011 form If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Irs 1040ez 2011 form Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Irs 1040ez 2011 form Transfer by inheritance. Irs 1040ez 2011 form   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Irs 1040ez 2011 form No taxable gain or deductible loss results from the transfer. Irs 1040ez 2011 form Termination of certain rights and obligations. Irs 1040ez 2011 form   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Irs 1040ez 2011 form Any gain or loss is treated as a capital gain or loss. Irs 1040ez 2011 form   This rule does not apply to the retirement of a debt instrument. Irs 1040ez 2011 form See Redemption or retirement of bonds , earlier. Irs 1040ez 2011 form Worthless Securities Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Irs 1040ez 2011 form This affects whether your capital loss is long term or short term. Irs 1040ez 2011 form See Holding Period , later. Irs 1040ez 2011 form Worthless securities also include securities that you abandon after March 12, 2008. Irs 1040ez 2011 form To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Irs 1040ez 2011 form All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Irs 1040ez 2011 form If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Irs 1040ez 2011 form Do not deduct them in the year the stock became worthless. Irs 1040ez 2011 form How to report loss. Irs 1040ez 2011 form   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Irs 1040ez 2011 form    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Irs 1040ez 2011 form See Form 8949 and the Instructions for Form 8949. Irs 1040ez 2011 form Filing a claim for refund. Irs 1040ez 2011 form   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Irs 1040ez 2011 form You must use Form 1040X, Amended U. Irs 1040ez 2011 form S. Irs 1040ez 2011 form Individual Income Tax Return, to amend your return for the year the security became worthless. Irs 1040ez 2011 form You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Irs 1040ez 2011 form (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Irs 1040ez 2011 form ) For more information about filing a claim, see Publication 556. Irs 1040ez 2011 form Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Irs 1040ez 2011 form You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Irs 1040ez 2011 form This gives you a new holding period for the position that begins on the date of the constructive sale. Irs 1040ez 2011 form Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Irs 1040ez 2011 form Constructive sale. Irs 1040ez 2011 form   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Irs 1040ez 2011 form   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Irs 1040ez 2011 form For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Irs 1040ez 2011 form Exception for nonmarketable securities. Irs 1040ez 2011 form   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Irs 1040ez 2011 form Exception for certain closed transactions. Irs 1040ez 2011 form   Do not treat a transaction as a constructive sale if all of the following are true. Irs 1040ez 2011 form You closed the transaction on or before the 30th day after the end of your tax year. Irs 1040ez 2011 form You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Irs 1040ez 2011 form Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Irs 1040ez 2011 form   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Irs 1040ez 2011 form   This exception also applies to successive short sales of an entire appreciated financial position. Irs 1040ez 2011 form For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Irs 1040ez 2011 form This bulletin is available at www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/pub/irs-irbs/irb03-03. Irs 1040ez 2011 form pdf. Irs 1040ez 2011 form Appreciated financial position. Irs 1040ez 2011 form   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Irs 1040ez 2011 form Exceptions. Irs 1040ez 2011 form   An appreciated financial position does not include the following. Irs 1040ez 2011 form Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Irs 1040ez 2011 form Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Irs 1040ez 2011 form 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Irs 1040ez 2011 form Any hedge with respect to a position described in (2). Irs 1040ez 2011 form Certain trust instruments treated as stock. Irs 1040ez 2011 form   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Irs 1040ez 2011 form Sale of appreciated financial position. Irs 1040ez 2011 form   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Irs 1040ez 2011 form However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Irs 1040ez 2011 form Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Irs 1040ez 2011 form Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Irs 1040ez 2011 form Exceptions. Irs 1040ez 2011 form   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Irs 1040ez 2011 form For more details, including definitions of these terms, see section 1256. Irs 1040ez 2011 form Regulated futures contract. Irs 1040ez 2011 form   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Irs 1040ez 2011 form A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Irs 1040ez 2011 form Foreign currency contract. Irs 1040ez 2011 form   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Irs 1040ez 2011 form   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Irs 1040ez 2011 form   Special rules apply to certain foreign currency transactions. Irs 1040ez 2011 form These transactions may result in ordinary gain or loss treatment. Irs 1040ez 2011 form For details, see Internal Revenue Code section 988 and Regulations sections 1. Irs 1040ez 2011 form 988-1(a)(7) and 1. Irs 1040ez 2011 form 988-3. Irs 1040ez 2011 form Nonequity option. Irs 1040ez 2011 form   This is any listed option (defined later) that is not an equity option. Irs 1040ez 2011 form Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Irs 1040ez 2011 form A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Irs 1040ez 2011 form Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Irs 1040ez 2011 form Cash-settled options. Irs 1040ez 2011 form   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Irs 1040ez 2011 form   This rule does not apply to options established before the SEC determines that the stock index is broad based. Irs 1040ez 2011 form Listed option. Irs 1040ez 2011 form   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Irs 1040ez 2011 form A listed option, however, does not include an option that is a right to acquire stock from the issuer. Irs 1040ez 2011 form Dealer equity option. Irs 1040ez 2011 form   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Irs 1040ez 2011 form   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Irs 1040ez 2011 form Equity option. Irs 1040ez 2011 form   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Irs 1040ez 2011 form  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Irs 1040ez 2011 form Dealer securities futures contract. Irs 1040ez 2011 form   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Irs 1040ez 2011 form A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Irs 1040ez 2011 form Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Irs 1040ez 2011 form That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Irs 1040ez 2011 form Hedging exception. Irs 1040ez 2011 form   The marked-to-market rules do not apply to hedging transactions. Irs 1040ez 2011 form See Hedging Transactions , later. Irs 1040ez 2011 form 60/40 rule. Irs 1040ez 2011 form   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Irs 1040ez 2011 form This is true regardless of how long you actually held the property. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form On June 22, 2012, you bought a regulated futures contract for $50,000. Irs 1040ez 2011 form On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Irs 1040ez 2011 form You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Irs 1040ez 2011 form On February 1, 2013, you sold the contract for $56,000. Irs 1040ez 2011 form Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Irs 1040ez 2011 form Limited partners or entrepreneurs. Irs 1040ez 2011 form   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Irs 1040ez 2011 form Instead, these gains or losses are treated as short term. Irs 1040ez 2011 form Terminations and transfers. Irs 1040ez 2011 form   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Irs 1040ez 2011 form In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Irs 1040ez 2011 form Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Irs 1040ez 2011 form Loss carryback election. Irs 1040ez 2011 form   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Irs 1040ez 2011 form See How To Report , later, for information about reporting this election on your return. Irs 1040ez 2011 form   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Irs 1040ez 2011 form In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Irs 1040ez 2011 form   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Irs 1040ez 2011 form In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Irs 1040ez 2011 form   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Irs 1040ez 2011 form (See Capital Losses under Reporting Capital Gains and Losses, later. Irs 1040ez 2011 form ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Irs 1040ez 2011 form In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Irs 1040ez 2011 form Net section 1256 contracts loss. Irs 1040ez 2011 form   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Irs 1040ez 2011 form Net section 1256 contracts gain. Irs 1040ez 2011 form   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Irs 1040ez 2011 form  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Irs 1040ez 2011 form Traders in section 1256 contracts. Irs 1040ez 2011 form   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Irs 1040ez 2011 form However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Irs 1040ez 2011 form Treatment of underlying property. Irs 1040ez 2011 form   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Irs 1040ez 2011 form How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Irs 1040ez 2011 form Form 6781. Irs 1040ez 2011 form   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Irs 1040ez 2011 form This includes the amount shown in box 10 of Form 1099-B. Irs 1040ez 2011 form Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Irs 1040ez 2011 form Include a copy of Form 6781 with your income tax return. Irs 1040ez 2011 form   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Irs 1040ez 2011 form Follow the Form 6781 instructions for completing Part I. Irs 1040ez 2011 form Loss carryback election. Irs 1040ez 2011 form   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Irs 1040ez 2011 form Follow the instructions for completing Form 6781 for the loss year to make this election. Irs 1040ez 2011 form Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Irs 1040ez 2011 form A transaction is a hedging transaction if both of the following conditions are met. Irs 1040ez 2011 form You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Irs 1040ez 2011 form You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Irs 1040ez 2011 form This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Irs 1040ez 2011 form A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Irs 1040ez 2011 form A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Irs 1040ez 2011 form However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Irs 1040ez 2011 form Hedging loss limit. Irs 1040ez 2011 form   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Irs 1040ez 2011 form A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Irs 1040ez 2011 form   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Irs 1040ez 2011 form Ignore any hedging transaction items in determining this taxable income. Irs 1040ez 2011 form If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Irs 1040ez 2011 form   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Irs 1040ez 2011 form   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Irs 1040ez 2011 form The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Irs 1040ez 2011 form Sale of property used in a hedge. Irs 1040ez 2011 form   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Irs 1040ez 2011 form Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Irs 1040ez 2011 form See the Instructions for Schedule SE (Form 1040). Irs 1040ez 2011 form In addition, the rules relating to contributions to self-employment retirement plans apply. Irs 1040ez 2011 form For information on retirement plan contributions, see Publication 560 and Publication 590. Irs 1040ez 2011 form Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Irs 1040ez 2011 form You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Irs 1040ez 2011 form Investment property you buy normally has an original basis equal to its cost. Irs 1040ez 2011 form If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Irs 1040ez 2011 form Cost Basis The basis of property you buy is usually its cost. Irs 1040ez 2011 form The cost is the amount you pay in cash, debt obligations, or other property or services. Irs 1040ez 2011 form Unstated interest. Irs 1040ez 2011 form   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. Irs 1040ez 2011 form You generally have unstated interest if your interest rate is less than the applicable federal rate. Irs 1040ez 2011 form For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Irs 1040ez 2011 form Basis Other Than Cost There are times when you must use a basis other than cost. Irs 1040ez 2011 form In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Irs 1040ez 2011 form Fair market value. Irs 1040ez 2011 form   This is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Irs 1040ez 2011 form Sales of similar property, around the same date, may be helpful in figuring fair market value. Irs 1040ez 2011 form Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Irs 1040ez 2011 form The amount you include in income then becomes your basis in the property. Irs 1040ez 2011 form If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Irs 1040ez 2011 form Restricted property. Irs 1040ez 2011 form   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Irs 1040ez 2011 form Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Irs 1040ez 2011 form See Restricted Property in Publication 525 for more information. Irs 1040ez 2011 form Bargain purchases. Irs 1040ez 2011 form   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Irs 1040ez 2011 form Your basis in the property is the price you pay plus the amount you include in income. Irs 1040ez 2011 form Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You trade A Company stock for B Company stock having a fair market value of $1,200. Irs 1040ez 2011 form If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Irs 1040ez 2011 form If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Irs 1040ez 2011 form The basis of your B Company stock is $1,200. Irs 1040ez 2011 form If you later sell the B Company stock for $1,300, you will have a gain of $100. Irs 1040ez 2011 form Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Irs 1040ez 2011 form See Nontaxable Trades , later. Irs 1040ez 2011 form The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Irs 1040ez 2011 form Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Irs 1040ez 2011 form Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Irs 1040ez 2011 form Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Irs 1040ez 2011 form See Transfers Between Spouses , later. Irs 1040ez 2011 form Recordkeeping. Irs 1040ez 2011 form The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Irs 1040ez 2011 form Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Irs 1040ez 2011 form Fair market value less than donor's adjusted basis. Irs 1040ez 2011 form   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Irs 1040ez 2011 form Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Irs 1040ez 2011 form No gain or loss. Irs 1040ez 2011 form   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Irs 1040ez 2011 form The fair market value at the time of the gift is $9,000. Irs 1040ez 2011 form You later sell the property for $9,500. Irs 1040ez 2011 form You have neither gain nor loss. Irs 1040ez 2011 form Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Irs 1040ez 2011 form Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Irs 1040ez 2011 form Fair market value equal to or more than donor's adjusted basis. Irs 1040ez 2011 form   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Irs 1040ez 2011 form Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Irs 1040ez 2011 form Gift received before 1977. Irs 1040ez 2011 form   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Irs 1040ez 2011 form However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Irs 1040ez 2011 form Example 1. Irs 1040ez 2011 form You were given XYZ Company stock in 1976. Irs 1040ez 2011 form At the time of the gift, the stock had a fair market value of $21,000. Irs 1040ez 2011 form The donor's adjusted basis was $20,000. Irs 1040ez 2011 form The donor paid a gift tax of $500 on the gift. Irs 1040ez 2011 form Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Irs 1040ez 2011 form Example 2. Irs 1040ez 2011 form The facts are the same as in Example 1 except that the gift tax paid was $1,500. Irs 1040ez 2011 form Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Irs 1040ez 2011 form Gift received after 1976. Irs 1040ez 2011 form   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Irs 1040ez 2011 form You figure this part by multiplying the gift tax paid on the gift by a fraction. Irs 1040ez 2011 form The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Irs 1040ez 2011 form   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Irs 1040ez 2011 form 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. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form In 2013, you received a gift of property from your mother. Irs 1040ez 2011 form At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Irs 1040ez 2011 form The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Irs 1040ez 2011 form You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Irs 1040ez 2011 form 701 ($61,000 ÷ $87,000) . Irs 1040ez 2011 form 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Irs 1040ez 2011 form   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Irs 1040ez 2011 form Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Irs 1040ez 2011 form For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Irs 1040ez 2011 form Gift tax information. Irs 1040ez 2011 form   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Irs 1040ez 2011 form For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Irs 1040ez 2011 form Property Received as Inheritance Before or after 2010. Irs 1040ez 2011 form   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Irs 1040ez 2011 form If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Irs 1040ez 2011 form For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Irs 1040ez 2011 form Appreciated property you gave the decedent. Irs 1040ez 2011 form   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Irs 1040ez 2011 form This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Irs 1040ez 2011 form Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Irs 1040ez 2011 form More information. Irs 1040ez 2011 form   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Irs 1040ez 2011 form Inherited in 2010 and executor elected to file Form 8939. Irs 1040ez 2011 form   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Irs 1040ez 2011 form Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Irs 1040ez 2011 form The result of these adjustments to the basis is the adjusted basis. Irs 1040ez 2011 form Adjustments to the basis of stocks and bonds are explained in the following discussion. Irs 1040ez 2011 form For information about other adjustments to basis, see Publication 551. Irs 1040ez 2011 form Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Irs 1040ez 2011 form If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Irs 1040ez 2011 form The basis of stock must be adjusted for certain events that occur after purchase. Irs 1040ez 2011 form For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Irs 1040ez 2011 form You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Irs 1040ez 2011 form These distributions, up to the amount of your basis, are a nontaxable return of capital. Irs 1040ez 2011 form The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Irs 1040ez 2011 form To find out more, go to www. Irs 1040ez 2011 form irs. Irs 1040ez 2011 form gov/Filing/Filing-Options. Irs 1040ez 2011 form Identifying stock or bonds sold. Irs 1040ez 2011 form   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. Irs 1040ez 2011 form Adequate identification. Irs 1040ez 2011 form   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Irs 1040ez 2011 form Broker holds stock. Irs 1040ez 2011 form   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Irs 1040ez 2011 form  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Irs 1040ez 2011 form Single stock certificate. Irs 1040ez 2011 form   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Irs 1040ez 2011 form   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Irs 1040ez 2011 form Bonds. Irs 1040ez 2011 form   These methods of identification also apply to bonds sold or transferred. Irs 1040ez 2011 form Identification not possible. Irs 1040ez 2011 form   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. Irs 1040ez 2011 form Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Irs 1040ez 2011 form In January 1999 you bought another 200 shares for $11 a share. Irs 1040ez 2011 form In July 1999 you gave your son 50 shares. Irs 1040ez 2011 form In December 2001 you bought 100 shares for $9 a share. Irs 1040ez 2011 form In April 2013 you sold 130 shares. Irs 1040ez 2011 form You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Irs 1040ez 2011 form The shares of stock you gave your son had a basis of $500 (50 × $10). Irs 1040ez 2011 form You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Irs 1040ez 2011 form    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You bought 100 shares of Fund A for $10 a share. Irs 1040ez 2011 form You paid a $50 commission to the broker for the purchase. Irs 1040ez 2011 form Your cost basis for each share is $10. Irs 1040ez 2011 form 50 ($1,050 ÷ 100). Irs 1040ez 2011 form Commissions and load charges. Irs 1040ez 2011 form   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Irs 1040ez 2011 form You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Irs 1040ez 2011 form A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Irs 1040ez 2011 form   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Irs 1040ez 2011 form You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Irs 1040ez 2011 form You dispose of the shares within 90 days of the purchase date. Irs 1040ez 2011 form You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Irs 1040ez 2011 form   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Irs 1040ez 2011 form The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Irs 1040ez 2011 form Choosing average basis for mutual fund shares. Irs 1040ez 2011 form   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Irs 1040ez 2011 form The methods you can use to figure average basis are explained later. Irs 1040ez 2011 form Undistributed capital gains. Irs 1040ez 2011 form   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Irs 1040ez 2011 form See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Irs 1040ez 2011 form Reinvestment right. Irs 1040ez 2011 form   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Irs 1040ez 2011 form      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Irs 1040ez 2011 form This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Irs 1040ez 2011 form Table 4-1. Irs 1040ez 2011 form This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Irs 1040ez 2011 form Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Irs 1040ez 2011 form This worksheet will help you figure the adjusted basis when you sell or redeem shares. Irs 1040ez 2011 form Table 4-1. Irs 1040ez 2011 form Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Irs 1040ez 2011 form 2 Cost plus or minus adjustments. Irs 1040ez 2011 form Automatic investment service. Irs 1040ez 2011 form   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Irs 1040ez 2011 form Dividend reinvestment plans. Irs 1040ez 2011 form   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Irs 1040ez 2011 form You must include the amount of the discount in your income. Irs 1040ez 2011 form Public utilities. Irs 1040ez 2011 form   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Irs 1040ez 2011 form Stock dividends. Irs 1040ez 2011 form   Stock dividends are distributions made by a corporation of its own stock. Irs 1040ez 2011 form Generally, stock dividends are not taxable to you. Irs 1040ez 2011 form However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Irs 1040ez 2011 form If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Irs 1040ez 2011 form New and old stock identical. Irs 1040ez 2011 form   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Irs 1040ez 2011 form The result is your basis for each share of stock. Irs 1040ez 2011 form Example 1. Irs 1040ez 2011 form You owned one share of common stock that you bought for $45. Irs 1040ez 2011 form The corporation distributed two new shares of common stock for each share held. Irs 1040ez 2011 form You then had three shares of common stock. Irs 1040ez 2011 form Your basis in each share is $15 ($45 ÷ 3). Irs 1040ez 2011 form Example 2. Irs 1040ez 2011 form You owned two shares of common stock. Irs 1040ez 2011 form You bought one for $30 and the other for $45. Irs 1040ez 2011 form The corporation distributed two new shares of common stock for each share held. Irs 1040ez 2011 form You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Irs 1040ez 2011 form New and old stock not identical. Irs 1040ez 2011 form   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Irs 1040ez 2011 form Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You bought a share of common stock for $100. Irs 1040ez 2011 form Later, the corporation distributed a share of preferred stock for each share of common stock held. Irs 1040ez 2011 form At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Irs 1040ez 2011 form You figure the basis of the old and new stock by dividing your $100 basis between them. Irs 1040ez 2011 form The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Irs 1040ez 2011 form Stock bought at various times. Irs 1040ez 2011 form   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Irs 1040ez 2011 form Taxable stock dividends. Irs 1040ez 2011 form   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Irs 1040ez 2011 form The basis of your old stock does not change. Irs 1040ez 2011 form Stock splits. Irs 1040ez 2011 form   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Irs 1040ez 2011 form Stock rights. Irs 1040ez 2011 form   A stock right is a right to acquire a corporation's stock. Irs 1040ez 2011 form It may be exercised, it may be sold if it has a market value, or it may expire. Irs 1040ez 2011 form Stock rights are rarely taxable when you receive them. Irs 1040ez 2011 form See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Irs 1040ez 2011 form Taxable stock rights. Irs 1040ez 2011 form   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Irs 1040ez 2011 form The basis of the old stock does not change. Irs 1040ez 2011 form Nontaxable stock rights. Irs 1040ez 2011 form   If you receive nontaxable stock rights and allow them to expire, they have no basis. Irs 1040ez 2011 form   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Irs 1040ez 2011 form Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Irs 1040ez 2011 form   If the fair market value of the stock rights was less than 15%, their basis is zero. Irs 1040ez 2011 form However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Irs 1040ez 2011 form To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Irs 1040ez 2011 form Basis of new stock. Irs 1040ez 2011 form   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You own 100 shares of ABC Company stock, which cost you $22 per share. Irs 1040ez 2011 form The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Irs 1040ez 2011 form At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Irs 1040ez 2011 form Each stock right had a market value of $3. Irs 1040ez 2011 form The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Irs 1040ez 2011 form You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Irs 1040ez 2011 form 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Irs 1040ez 2011 form 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Irs 1040ez 2011 form 18 ($21. Irs 1040ez 2011 form 78 ÷ 10) per right. Irs 1040ez 2011 form If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Irs 1040ez 2011 form 18), or $28. Irs 1040ez 2011 form 18 per share. Irs 1040ez 2011 form The remaining basis of the old stock is $21. Irs 1040ez 2011 form 78 per share. Irs 1040ez 2011 form Investment property received in liquidation. Irs 1040ez 2011 form   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Irs 1040ez 2011 form S corporation stock. Irs 1040ez 2011 form   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Irs 1040ez 2011 form All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Irs 1040ez 2011 form The nonseparately stated income of the S corporation. Irs 1040ez 2011 form The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Irs 1040ez 2011 form   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Irs 1040ez 2011 form Distributions by the S corporation that were not included in your income. Irs 1040ez 2011 form All loss and deduction items of the S corporation that are separately stated and passed through to you. Irs 1040ez 2011 form Any nonseparately stated loss of the S corporation. Irs 1040ez 2011 form Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Irs 1040ez 2011 form The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Irs 1040ez 2011 form However, your basis in the stock cannot be reduced below zero. Irs 1040ez 2011 form Specialized small business investment company stock or partnership interest. Irs 1040ez 2011 form   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Irs 1040ez 2011 form See Rollover of Gain From Publicly Traded Securities , later. Irs 1040ez 2011 form Qualified small business stock. Irs 1040ez 2011 form   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Irs 1040ez 2011 form See Gains on Qualified Small Business Stock , later. Irs 1040ez 2011 form Short sales. Irs 1040ez 2011 form   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Irs 1040ez 2011 form   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Irs 1040ez 2011 form Premiums on bonds. Irs 1040ez 2011 form   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Irs 1040ez 2011 form If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Irs 1040ez 2011 form   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Irs 1040ez 2011 form You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Irs 1040ez 2011 form   See Bond Premium Amortization in chapter 3 for more information. Irs 1040ez 2011 form Market discount on bonds. Irs 1040ez 2011 form   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Irs 1040ez 2011 form See Market Discount Bonds in chapter 1 for more information. Irs 1040ez 2011 form Bonds purchased at par value. Irs 1040ez 2011 form   A bond purchased at par value (face amount) has no premium or discount. Irs 1040ez 2011 form When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You purchased a bond several years ago for its par value of $10,000. Irs 1040ez 2011 form You sold the bond this year for $10,100. Irs 1040ez 2011 form You have a gain of $100. Irs 1040ez 2011 form However, if you had sold the bond for $9,900, you would have a loss of $100. Irs 1040ez 2011 form Acquisition discount on short-term obligations. Irs 1040ez 2011 form   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Irs 1040ez 2011 form See Discount on Short-Term Obligations in chapter 1 for more information. Irs 1040ez 2011 form Original issue discount (OID) on debt instruments. Irs 1040ez 2011 form   Increase the basis of a debt instrument by the OID you include in your income. Irs 1040ez 2011 form See Original Issue Discount (OID) in chapter 1. Irs 1040ez 2011 form Discounted tax-exempt obligations. Irs 1040ez 2011 form   OID on tax-exempt obligations is generally not taxable. Irs 1040ez 2011 form However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Irs 1040ez 2011 form The accrued OID is added to the basis of the obligation to determine your gain or loss. Irs 1040ez 2011 form   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Irs 1040ez 2011 form   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Irs 1040ez 2011 form See Discount on Short-Term Obligations in chapter 1. Irs 1040ez 2011 form Stripped tax-exempt obligation. Irs 1040ez 2011 form   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Irs 1040ez 2011 form For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Irs 1040ez 2011 form You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Irs 1040ez 2011 form   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Irs 1040ez 2011 form Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Irs 1040ez 2011 form In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Irs 1040ez 2011 form How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Irs 1040ez 2011 form Gain. Irs 1040ez 2011 form   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Irs 1040ez 2011 form Loss. Irs 1040ez 2011 form   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Irs 1040ez 2011 form Amount realized. Irs 1040ez 2011 form   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Irs 1040ez 2011 form Amount realized includes the money you receive plus the fair market value of any property or services you receive. Irs 1040ez 2011 form   If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Irs 1040ez 2011 form For more information, see Publication 537. Irs 1040ez 2011 form   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Irs 1040ez 2011 form See Regulations section 1. Irs 1040ez 2011 form 1001-1(g). Irs 1040ez 2011 form However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Irs 1040ez 2011 form Fair market value. Irs 1040ez 2011 form   Fair market value is the price at which property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Irs 1040ez 2011 form Your gain is $3,000 ($10,000 – $7,000). Irs 1040ez 2011 form If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Irs 1040ez 2011 form Debt paid off. Irs 1040ez 2011 form   A debt against the property, or against you, that is paid off as a part of the transaction or that is assumed by the buyer must be included in the amount realized. Irs 1040ez 2011 form This is true even if neither you nor the buyer is personally liable for the debt. Irs 1040ez 2011 form For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Irs 1040ez 2011 form Example. Irs 1040ez 2011 form You sell stock that you had pledged as security for a bank loan of $8,000. Irs 1040ez 2011 form Your basis in the stock is $6,000. Irs 1040ez 2011 form The buyer pays off your bank loan and pays you $20,000 in cash. Irs 1040ez 2011 form The amount realized is $28,000 ($20,000 + $8,000). Irs 1040ez 2011 form Your gain is $22,000 ($28,000 – $6,000). Irs 1040ez 2011 form Payment of cash. Irs 1040ez 2011 form   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Irs 1040ez 2011 form Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Irs 1040ez 2011 form If the result is a positive number, it is a gain. Irs 1040ez 2011 form If the result is a negative number, it is a loss. Irs 1040ez 2011 form No gain or loss. Irs 1040ez 2011 form   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Irs 1040ez 2011 form In this case, you may have neither a gain nor a loss. Irs 1040ez 2011 form See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Irs 1040ez 2011 form Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Irs 1040ez 2011 form If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu