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Irs 1040x Form

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Irs 1040x Form

Irs 1040x form Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Irs 1040x form Stock. Irs 1040x form Options. Irs 1040x form Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). Irs 1040x form What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. Irs 1040x form Fair market value. Irs 1040x form   Fair market value (FMV) is the price that property would sell for on the open market. Irs 1040x form It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Irs 1040x form If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Irs 1040x form Example 1. Irs 1040x form If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Irs 1040x form Usually, such items are worth far less than what you paid for them. Irs 1040x form Example 2. Irs 1040x form If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. Irs 1040x form Factors. Irs 1040x form   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Irs 1040x form These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Irs 1040x form   These factors are discussed later. Irs 1040x form Also, see Table 1 for a summary of questions to ask as you consider each factor. Irs 1040x form Date of contribution. Irs 1040x form   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Irs 1040x form Stock. Irs 1040x form   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. Irs 1040x form If the certificate is mailed and received through the regular mail, it is the date of mailing. Irs 1040x form If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. Irs 1040x form Options. Irs 1040x form   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. Irs 1040x form The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Irs 1040x form Example. Irs 1040x form You grant an option to a local university, which is a qualified organization, to buy real property. Irs 1040x form Under the option, the university could buy the property at any time during a 2-year period for $40,000. Irs 1040x form The FMV of the property on the date the option is granted is $50,000. Irs 1040x form In the following tax year, the university exercises the option. Irs 1040x form The FMV of the property on the date the option is exercised is $55,000. Irs 1040x form Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. Irs 1040x form Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. Irs 1040x form Usually it is not that simple. Irs 1040x form Using such formulas, etc. Irs 1040x form , seldom results in an acceptable determination of FMV. Irs 1040x form There is no single formula that always applies when determining the value of property. Irs 1040x form This is not to say that a valuation is only guesswork. Irs 1040x form You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Irs 1040x form For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Irs 1040x form When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Irs 1040x form On the other hand, it may be an antique, the value of which could not be determined by using any formula. Irs 1040x form Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. Irs 1040x form However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. Irs 1040x form The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. Irs 1040x form Example. Irs 1040x form Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Irs 1040x form The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. Irs 1040x form The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. Irs 1040x form Tom gave the gems to a qualified charity 13 months after buying them. Irs 1040x form The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Irs 1040x form The best evidence of FMV depends on actual transactions and not on some artificial estimate. Irs 1040x form The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Irs 1040x form Terms of the purchase or sale. Irs 1040x form   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Irs 1040x form These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Irs 1040x form Rate of increase or decrease in value. Irs 1040x form   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. Irs 1040x form For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. Irs 1040x form Example. Irs 1040x form Bill Brown bought a painting for $10,000. Irs 1040x form Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Irs 1040x form The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. Irs 1040x form Arm's-length offer. Irs 1040x form   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. Irs 1040x form To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Irs 1040x form Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. Irs 1040x form Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Irs 1040x form The weight to be given to each sale depends on the following. Irs 1040x form The degree of similarity between the property sold and the donated property. Irs 1040x form The time of the sale—whether it was close to the valuation date. Irs 1040x form The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Irs 1040x form The conditions of the market in which the sale was made—whether unusually inflated or deflated. Irs 1040x form The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Irs 1040x form Example 1. Irs 1040x form Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. Irs 1040x form The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. Irs 1040x form The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. Irs 1040x form Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Irs 1040x form At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Irs 1040x form The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. Irs 1040x form Example 2. Irs 1040x form The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Irs 1040x form The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. Irs 1040x form The principal and interest on the note would not be due for 12 years. Irs 1040x form According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. Irs 1040x form She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. Irs 1040x form At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Irs 1040x form The difference between the two prices was solely at the discretion of the buyer. Irs 1040x form The promoter was a willing seller for $10,000. Irs 1040x form Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. Irs 1040x form Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Irs 1040x form However, there must be a reasonable relationship between the replacement cost and the FMV. Irs 1040x form The replacement cost is the amount it would cost to replace the donated item on the valuation date. Irs 1040x form Often there is no relationship between the replacement cost and the FMV. Irs 1040x form If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Irs 1040x form To determine the replacement cost of the donated property, find the “estimated replacement cost new. Irs 1040x form ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Irs 1040x form You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. Irs 1040x form ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. Irs 1040x form For an expert's opinion to deserve much weight, the facts must support the opinion. Irs 1040x form For additional information, see Appraisals, later. Irs 1040x form Table 1. Irs 1040x form Factors That Affect FMV IF the factor you are considering is. Irs 1040x form . Irs 1040x form . Irs 1040x form THEN you should ask these questions. Irs 1040x form . Irs 1040x form . Irs 1040x form     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. Irs 1040x form Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. Irs 1040x form When you rely on sales of comparable property, the sales must have been made in an open market. Irs 1040x form If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. Irs 1040x form For example, liquidation sale prices usually do not indicate the FMV. Irs 1040x form Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. Irs 1040x form Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Irs 1040x form However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Irs 1040x form The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. Irs 1040x form Example. Irs 1040x form You give a rare, old book to your former college. Irs 1040x form The book is a third edition and is in poor condition because of a missing back cover. Irs 1040x form You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. Irs 1040x form Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Irs 1040x form Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Irs 1040x form Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Irs 1040x form You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. Irs 1040x form Example. Irs 1040x form You give farmland to a qualified charity. Irs 1040x form The transfer provides that your mother will have the right to all income and full use of the property for her life. Irs 1040x form Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. Irs 1040x form You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Irs 1040x form Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. Irs 1040x form Example. Irs 1040x form You give all your rights in a successful patent to your favorite charity. Irs 1040x form Your records show that before the valuation date there were three stages in the patent's history of earnings. Irs 1040x form First, there was rapid growth in earnings when the invention was introduced. Irs 1040x form Then, there was a period of high earnings when the invention was being exploited. Irs 1040x form Finally, there was a decline in earnings when competing inventions were introduced. Irs 1040x form The entire history of earnings may be relevant in estimating the future earnings. Irs 1040x form However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Irs 1040x form The market conditions at those times do not represent the condition of the market at the valuation date. Irs 1040x form What is most significant is the trend of decline in earnings up to the valuation date. Irs 1040x form For more information about donations of patents, see Patents, later. Irs 1040x form Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Irs 1040x form For information on appraisals, see Appraisals, later. Irs 1040x form Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Irs 1040x form Such used property may have little or no market value because of its worn condition. Irs 1040x form It may be out of style or no longer useful. Irs 1040x form You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Irs 1040x form A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Irs 1040x form See Deduction over $500 for certain clothing or household items, later. Irs 1040x form If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Irs 1040x form Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Irs 1040x form Valuation of items of clothing does not lend itself to fixed formulas or methods. Irs 1040x form The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. Irs 1040x form You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Irs 1040x form An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Irs 1040x form See Deduction over $500 for certain clothing or household items, later. Irs 1040x form For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Irs 1040x form Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. Irs 1040x form The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. Irs 1040x form If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Irs 1040x form The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Irs 1040x form Sentimental personal value has no effect on FMV. Irs 1040x form But if the jewelry was owned by a famous person, its value might increase. Irs 1040x form Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. Irs 1040x form Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Irs 1040x form Art valued at $20,000 or more. Irs 1040x form   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. Irs 1040x form For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. Irs 1040x form Art valued at $50,000 or more. Irs 1040x form   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. Irs 1040x form You must request the statement before filing the tax return that reports the donation. Irs 1040x form Your request must include the following. Irs 1040x form A copy of a qualified appraisal of the item. Irs 1040x form See Qualified Appraisal, later. Irs 1040x form A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Irs 1040x form Add $250 for each item in excess of three. Irs 1040x form A completed Form 8283, Section B. Irs 1040x form The location of the IRS territory that has examination responsibility for your return. Irs 1040x form If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Irs 1040x form   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Irs 1040x form O. Irs 1040x form Box 27720 McPherson Station Washington, DC 20038 Refunds. Irs 1040x form   You can withdraw your request for a Statement of Value at any time before it is issued. Irs 1040x form However, the IRS will not refund the user fee if you do. Irs 1040x form   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Irs 1040x form Authenticity. Irs 1040x form   The authenticity of the donated art must be determined by the appraiser. Irs 1040x form Physical condition. Irs 1040x form   Important items in the valuation of antiques and art are physical condition and extent of restoration. Irs 1040x form These have a significant effect on the value and must be fully reported in an appraisal. Irs 1040x form An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Irs 1040x form Art appraisers. Irs 1040x form   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. Irs 1040x form Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Irs 1040x form Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. Irs 1040x form They can report more recent comparable sales to support their opinion. Irs 1040x form   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. Irs 1040x form It lists museums both by state and by category. Irs 1040x form   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. Irs 1040x form The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Irs 1040x form You may be able to find a qualified appraiser on the Internet. Irs 1040x form You may also contact associations of dealers for guidance. Irs 1040x form Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Irs 1040x form Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Irs 1040x form Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Irs 1040x form Reference material. Irs 1040x form   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Irs 1040x form When using one of these price guides, you must use the current edition at the date of contribution. Irs 1040x form However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Irs 1040x form   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. Irs 1040x form The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Irs 1040x form The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Irs 1040x form If you are donating a valuable collection, you should get an appraisal. Irs 1040x form If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. Irs 1040x form Stamp collections. Irs 1040x form   Most libraries have catalogs or other books that report the publisher's estimate of values. Irs 1040x form Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Irs 1040x form Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Irs 1040x form Coin collections. Irs 1040x form   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. Irs 1040x form Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Irs 1040x form Another important factor is the coin's condition. Irs 1040x form For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Irs 1040x form   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. Irs 1040x form Books. Irs 1040x form   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. Irs 1040x form This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Irs 1040x form Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Irs 1040x form Modest value of collection. Irs 1040x form   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. Irs 1040x form   A book that is very old, or very rare, is not necessarily valuable. Irs 1040x form There are many books that are very old or rare, but that have little or no market value. Irs 1040x form Condition of book. Irs 1040x form   The condition of a book may have a great influence on its value. Irs 1040x form Collectors are interested in items that are in fine, or at least good, condition. Irs 1040x form When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Irs 1040x form Other factors. Irs 1040x form   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Irs 1040x form Collectors usually want first editions of books. Irs 1040x form However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Irs 1040x form Manuscripts, autographs, diaries, and similar items. Irs 1040x form   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Irs 1040x form The writings of unknowns also may be of value if they are of unusual historical or literary importance. Irs 1040x form Determining the value of such material is difficult. Irs 1040x form For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. Irs 1040x form The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Irs 1040x form Signatures. Irs 1040x form   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Irs 1040x form But complete sets of the signatures of U. Irs 1040x form S. Irs 1040x form presidents are in demand. Irs 1040x form Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Irs 1040x form Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. Irs 1040x form Prices are reported for each make, model, and year. Irs 1040x form These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Irs 1040x form The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Irs 1040x form But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Irs 1040x form These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Irs 1040x form You can also find pricing information about used cars on the Internet. Irs 1040x form An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. Irs 1040x form However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. Irs 1040x form The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. Irs 1040x form Example. Irs 1040x form You donate a used car in poor condition to a local high school for use by students studying car repair. Irs 1040x form A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Irs 1040x form However, the guide shows the price for a private party sale of the car is only $750. Irs 1040x form The FMV of the car is considered to be no more than $750. Irs 1040x form Boats. Irs 1040x form   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. Irs 1040x form More information. Irs 1040x form   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Irs 1040x form This rule applies if the claimed value of the donated vehicle is more than $500. Irs 1040x form In certain cases, you can deduct the vehicle's FMV. Irs 1040x form For details, see Publication 526. Irs 1040x form Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. Irs 1040x form For more information, see Publication 526. Irs 1040x form Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. Irs 1040x form However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. Irs 1040x form Generally, this means your deduction is the lesser of the property's FMV or its basis. Irs 1040x form For details, see Publication 526. Irs 1040x form Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Irs 1040x form See Date of contribution, earlier, under What Is Fair Market Value (FMV). Irs 1040x form Selling prices on valuation date. Irs 1040x form   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. Irs 1040x form For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Irs 1040x form You get the average price by adding $11 and $9 and dividing the sum by 2. Irs 1040x form No sales on valuation date. Irs 1040x form   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. Irs 1040x form Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Irs 1040x form Example. Irs 1040x form   On the day you gave stock to a qualified organization, there were no sales of the stock. Irs 1040x form Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. Irs 1040x form The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. Irs 1040x form   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. Irs 1040x form This applies if these prices are published in a generally available listing or publication of general circulation. Irs 1040x form If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. Irs 1040x form See also Unavailable prices or closely held corporation, later. Irs 1040x form Bid and asked prices on valuation date. Irs 1040x form   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. Irs 1040x form Example. Irs 1040x form Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. Irs 1040x form The FMV is $15, the average price between the bid and asked prices. Irs 1040x form No prices on valuation date. Irs 1040x form   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. Irs 1040x form Both dates must be within a reasonable period. Irs 1040x form Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. Irs 1040x form Example. Irs 1040x form On the day you gave stock to a qualified organization, no prices were available. Irs 1040x form Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Irs 1040x form The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. Irs 1040x form   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. Irs 1040x form Large blocks of stock. Irs 1040x form   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. Irs 1040x form On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Irs 1040x form Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. Irs 1040x form Unavailable prices or closely held corporation. Irs 1040x form   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. Irs 1040x form For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Irs 1040x form For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Irs 1040x form Other factors. Irs 1040x form   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. Irs 1040x form For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Irs 1040x form   You should keep complete financial and other information on which the valuation is based. Irs 1040x form This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. Irs 1040x form Restricted securities. Irs 1040x form   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. Irs 1040x form These restricted securities usually trade at a discount in relation to freely traded securities. Irs 1040x form   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. Irs 1040x form Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Irs 1040x form The appraiser must be thoroughly trained in the application of appraisal principles and theory. Irs 1040x form In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. Irs 1040x form The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. Irs 1040x form The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. Irs 1040x form In general, there are three main approaches to the valuation of real estate. Irs 1040x form An appraisal may require the combined use of two or three methods rather than one method only. Irs 1040x form 1. Irs 1040x form Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Irs 1040x form The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. Irs 1040x form If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. Irs 1040x form , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Irs 1040x form For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. Irs 1040x form The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Irs 1040x form Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. Irs 1040x form Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. Irs 1040x form 2. Irs 1040x form Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. Irs 1040x form The key elements are the determination of the income to be capitalized and the rate of capitalization. Irs 1040x form 3. Irs 1040x form Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Irs 1040x form Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Irs 1040x form Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Irs 1040x form Generally, this method serves to support the value determined from other methods. Irs 1040x form When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Irs 1040x form The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. Irs 1040x form This cost represents the total cost of labor and material, overhead, and profit. Irs 1040x form After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. Irs 1040x form Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. Irs 1040x form The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. Irs 1040x form The value of the goodwill of the business should also be taken into consideration. Irs 1040x form You should keep complete financial and other information on which you base the valuation. Irs 1040x form This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. Irs 1040x form Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. Irs 1040x form The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Irs 1040x form To determine present value, you must know the applicable interest rate and use actuarial tables. Irs 1040x form Interest rate. Irs 1040x form   The applicable interest rate varies. Irs 1040x form It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Irs 1040x form The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Irs 1040x form You can call the IRS office at 1-800-829-1040 to obtain this rate. Irs 1040x form Actuarial tables. Irs 1040x form   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. Irs 1040x form   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Irs 1040x form Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. Irs 1040x form For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. Irs 1040x form   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. Irs 1040x form Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Irs 1040x form You can download Publications 1457 and 1458 from www. Irs 1040x form irs. Irs 1040x form gov. Irs 1040x form In addition, they are available for purchase via the website of the U. Irs 1040x form S. Irs 1040x form Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Irs 1040x form O. Irs 1040x form Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. Irs 1040x form 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Irs 1040x form 664-4(e), and other transfers in Regulation 20. Irs 1040x form 2031-7(d)(6). Irs 1040x form Special factors. Irs 1040x form   If you need a special factor for an actual transaction, you can request a letter ruling. Irs 1040x form Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Irs 1040x form Also include copies of the relevant instruments. Irs 1040x form IRS charges a user fee for providing special factors. Irs 1040x form   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Irs 1040x form R. Irs 1040x form B. Irs 1040x form 1. Irs 1040x form Revenue Procedure 2006-1 is available at www. Irs 1040x form irs. Irs 1040x form gov/irb/2006-01_IRB/ar06. Irs 1040x form html. Irs 1040x form   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. Irs 1040x form Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. Irs 1040x form But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. Irs 1040x form If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. Irs 1040x form Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. Irs 1040x form However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. Irs 1040x form Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. Irs 1040x form To determine this value, you must know the FMV of the property on the date of the contribution. Irs 1040x form Multiply this value by the appropriate factor. Irs 1040x form Publications 1457 and 1458 contain these factors. Irs 1040x form You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Irs 1040x form You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Irs 1040x form See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Irs 1040x form You can download Publication 1459 from www. Irs 1040x form irs. Irs 1040x form gov. Irs 1040x form For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. Irs 1040x form If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. Irs 1040x form This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Irs 1040x form Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Irs 1040x form For more information, see section 1. Irs 1040x form 170A-12 of the Income Tax Regulations. Irs 1040x form Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. Irs 1040x form It must extend over the entire term of your interest in the property. Irs 1040x form For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. Irs 1040x form You can claim a deduction for the contribution if you do not have any other interest in the property. Irs 1040x form To figure the value of a contribution involving a partial interest, see Publication 1457. Irs 1040x form If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. Irs 1040x form Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. Irs 1040x form Qualified organization. Irs 1040x form   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Irs 1040x form , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Irs 1040x form The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Irs 1040x form Conservation purposes. Irs 1040x form   Your contribution must be made only for one of the following conservation purposes. Irs 1040x form Preserving land areas for outdoor recreation by, or for the education of, the general public. Irs 1040x form Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Irs 1040x form Preserving open space, including farmland and forest land, if it yields a significant public benefit. Irs 1040x form It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Irs 1040x form Preserving a historically important land area or a certified historic structure. Irs 1040x form There must be some visual public access to the property. Irs 1040x form Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. Irs 1040x form Building in registered historic district. Irs 1040x form   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. Irs 1040x form The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. Irs 1040x form You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. Irs 1040x form If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. Irs 1040x form   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. Irs 1040x form See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Irs 1040x form Qualified real property interest. Irs 1040x form   This is any of the following interests in real property. Irs 1040x form Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). Irs 1040x form A remainder interest. Irs 1040x form A restriction (granted in perpetuity) on the use that may be made of the real property. Irs 1040x form Valuation. Irs 1040x form   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Irs 1040x form If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Irs 1040x form If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Irs 1040x form   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Irs 1040x form If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Irs 1040x form   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. Irs 1040x form If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. Irs 1040x form   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. Irs 1040x form You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Irs 1040x form Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Irs 1040x form Example. Irs 1040x form   You own 10 acres of farmland. Irs 1040x form Similar land in the area has an FMV of $2,000 an acre. Irs 1040x form However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Irs 1040x form Your county wants to preserve open space and prevent further development in your area. Irs 1040x form   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Irs 1040x form The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. Irs 1040x form More information. Irs 1040x form   For more information about qualified conservation contributions, see Publication 526. Irs 1040x form Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Irs 1040x form (There is one exception, described next, for certain clothing and household items. Irs 1040x form ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Irs 1040x form There are exceptions. Irs 1040x form See Deductions of More Than $5,000, later. Irs 1040x form The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. Irs 1040x form An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Irs 1040x form The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. Irs 1040x form The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Irs 1040x form The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Irs 1040x form All facts associated with the donation must be considered. Irs 1040x form Deduction over $500 for certain clothing or household items. Irs 1040x form   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. Irs 1040x form See Household Goods and Used Clothing, earlier. Irs 1040x form Cost of appraisals. Irs 1040x form   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Irs 1040x form However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. Irs 1040x form Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. Irs 1040x form There are exceptions, discussed later. Irs 1040x form You should keep the appraiser's report with your written records. Irs 1040x form Records are discussed in Publication 526. Irs 1040x form The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. Irs 1040x form For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. Irs 1040x form You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. Irs 1040x form Exceptions. Irs 1040x form   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. Irs 1040x form   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. Irs 1040x form Publicly traded securities. Irs 1040x form   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. Irs 1040x form Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Irs 1040x form   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. Irs 1040x form   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. Irs 1040x form A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. Irs 1040x form   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. Irs 1040x form Bid and asked quotations are not taken into account. Irs 1040x form   The computation period is weekly during October through December and monthly during January through September. Irs 1040x form The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. Irs 1040x form Nonpublicly traded stock. Irs 1040x form   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Irs 1040x form However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Irs 1040x form Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. Irs 1040x form This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Irs 1040x form If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. Irs 1040x form Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. Irs 1040x form You must also complete Form 8283, Section B, and attach it to your tax return. Irs 1040x form See Deductions of More Than $5,000, earlier. Irs 1040x form A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. Irs 1040x form 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Irs 1040x form R. Irs 1040x form B. Irs 1040x form 902 (available at www. Irs 1040x form irs. Irs 1040x form gov/irb/2006-46_IRB/ar13. Irs 1040x form html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). Irs 1040x form You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. Irs 1040x form If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. Irs 1040x form Form 8283, Section B, must be attached to your tax return. Irs 1040x form Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. Irs 1040x form There are four exceptions. Irs 1040x form If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Irs 1040x form See Paintings, Antiques, and Other Objects of Art, earlier. Irs 1040x form If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Irs 1040x form See Deductions of More Than $500,000, earlier. Irs 1040x form If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. Irs 1040x form See Deduction over $500 for certain clothing or household items, earlier. Irs 1040x form If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. Irs 1040x form See Building in registered historic district, earlier. Irs 1040x form Prohibited appraisal fee. Irs 1040x form   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Irs 1040x form If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. Irs 1040x form However, appraisals are not disqualified when an otherwise prohi
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Tax Relief for Victims of Hurricane Irene in New York

IRS e-File to Remain Open through Oct. 31 for Victims of Hurricane Irene

Updated 9/14/11 to include Herkimer county.
Updated 9/12/11 to include Bronx, Kings, Queens and Richmond counties.
Updated 9/911 to include Columbia, Putnam and Washington counties.
Updated 9/6/11 to include Clinton, Montgomery, Orange, Otsego, Rockland, Saratoga, Sullivan, Suffolk and Warren counties.
Updated 9/2/11 to include Nassau, Rensselaer and Westchester counties.

NY-2011-34, Sept. 1, 2011

NEW YORK — Victims of Hurricane Irene that began on Aug. 26, 2011, in parts of New York may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Albany, Bronx, Clinton, Columbia, Delaware, Dutchess, Essex, Greene, Herkimer, Kings, Montgomery, Nassau, Orange, Otsego, Putnam, Queens, Rensselaer, Richmond, Rockland, Saratoga, Schenectady, Schoharie, Suffolk, Sullivan, Ulster, Warren, Washington and Westchester. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 26 and on or before Oct. 31 have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.  

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 26 and on or before Sept. 12 as long as the deposits are made by Sept. 12, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 26 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 26 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 26 and on or before Sept. 12 provided the taxpayer makes these deposits by Sept. 12.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “New York/Hurricane Irene” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Page Last Reviewed or Updated: 20-Mar-2014

The Irs 1040x Form

Irs 1040x form 14. Irs 1040x form   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Irs 1040x form  If you are a U. Irs 1040x form S. Irs 1040x form citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Irs 1040x form S. Irs 1040x form law. Irs 1040x form This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Irs 1040x form Introduction This chapter discusses the tax consequences of selling or trading investment property. Irs 1040x form It explains the following. Irs 1040x form What a sale or trade is. Irs 1040x form Figuring gain or loss. Irs 1040x form Nontaxable trades. Irs 1040x form Related party transactions. Irs 1040x form Capital gains or losses. Irs 1040x form Capital assets and noncapital assets. Irs 1040x form Holding period. Irs 1040x form Rollover of gain from publicly traded securities. Irs 1040x form Other property transactions. Irs 1040x form   Certain transfers of property are not discussed here. Irs 1040x form They are discussed in other IRS publications. Irs 1040x form These include the following. Irs 1040x form Sales of a main home, covered in chapter 15. Irs 1040x form Installment sales, covered in Publication 537, Installment Sales. Irs 1040x form Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Irs 1040x form Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Irs 1040x form    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Irs 1040x form Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Irs 1040x form It also discusses investment-related expenses. Irs 1040x form Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, 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 1040x form Generally, you should receive the statement by February 15 of the next year. Irs 1040x form It will show the gross proceeds from the sale. Irs 1040x form If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Irs 1040x form Generally, a covered security is a security you acquired after 2010, with certain exceptions. Irs 1040x form See the Instructions for Form 8949. Irs 1040x form The IRS will also get a copy of Form 1099-B from the broker. Irs 1040x form Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Irs 1040x form What Is a Sale or Trade? This section explains what is a sale or trade. Irs 1040x form It also explains certain transactions and events that are treated as sales or trades. Irs 1040x form A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Irs 1040x 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 1040x form Sale and purchase. Irs 1040x form   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Irs 1040x form The sale and purchase are two separate transactions. Irs 1040x form But see Like-kind exchanges under Nontaxable Trades, later. Irs 1040x form Redemption of stock. Irs 1040x 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 1040x form Dividend versus sale or trade. Irs 1040x form   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Irs 1040x form Both direct and indirect ownership of stock will be considered. Irs 1040x form The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), 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 1040x form Redemption or retirement of bonds. Irs 1040x form   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Irs 1040x form   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Irs 1040x form For details, see Regulations section 1. Irs 1040x form 1001-3. Irs 1040x form Surrender of stock. Irs 1040x 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 1040x form The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Irs 1040x form Worthless securities. Irs 1040x form    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 1040x form This affects whether your capital loss is long term or short term. Irs 1040x form See Holding Period , later. Irs 1040x form   Worthless securities also include securities that you abandon after March 12, 2008. Irs 1040x 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 1040x 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 1040x 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 1040x form Do not deduct them in the year the stock became worthless. Irs 1040x form How to report loss. Irs 1040x form    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Irs 1040x form In column (a), enter “Worthless. Irs 1040x form ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Irs 1040x form See Form 8949 and the Instructions for Form 8949. Irs 1040x form For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Irs 1040x form See also Schedule D (Form 1040), Form 8949, and their separate instructions. Irs 1040x form Filing a claim for refund. Irs 1040x 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 1040x form You must use Form 1040X, Amended U. Irs 1040x form S. Irs 1040x form Individual Income Tax Return, to amend your return for the year the security became worthless. Irs 1040x 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 1040x form For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Irs 1040x 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 1040x form Gain. Irs 1040x 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 1040x form Loss. Irs 1040x form   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Irs 1040x form Adjusted basis. Irs 1040x form   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Irs 1040x form See chapter 13 for more information about determining the adjusted basis of property. Irs 1040x form Amount realized. Irs 1040x 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 1040x form Amount realized includes the money you receive plus the fair market value of any property or services you receive. Irs 1040x form If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Irs 1040x 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 1040x form For more information, see Publication 537. Irs 1040x form Fair market value. Irs 1040x form   Fair market value 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 1040x form Example. Irs 1040x 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 1040x form Your gain is $3,000 ($10,000 − $7,000). Irs 1040x form Debt paid off. Irs 1040x 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 1040x form This is true even if neither you nor the buyer is personally liable for the debt. Irs 1040x 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 1040x form Example. Irs 1040x form You sell stock that you had pledged as security for a bank loan of $8,000. Irs 1040x form Your basis in the stock is $6,000. Irs 1040x form The buyer pays off your bank loan and pays you $20,000 in cash. Irs 1040x form The amount realized is $28,000 ($20,000 + $8,000). Irs 1040x form Your gain is $22,000 ($28,000 − $6,000). Irs 1040x form Payment of cash. Irs 1040x 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 1040x form Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Irs 1040x form If the result is a positive number, it is a gain. Irs 1040x form If the result is a negative number, it is a loss. Irs 1040x form No gain or loss. Irs 1040x form   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Irs 1040x form In this case, you may have neither a gain nor a loss. Irs 1040x form See Basis Other Than Cost in chapter 13. Irs 1040x form Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Irs 1040x form For more information on nontaxable trades, see chapter 1 of Publication 544. Irs 1040x form Like-kind exchanges. Irs 1040x form   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Irs 1040x form To be nontaxable, a trade must meet all six of the following conditions. Irs 1040x form The property must be business or investment property. Irs 1040x form You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Irs 1040x form Neither property may be property used for personal purposes, such as your home or family car. Irs 1040x form The property must not be held primarily for sale. Irs 1040x form The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Irs 1040x form The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Irs 1040x form However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Irs 1040x form Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Irs 1040x form There must be a trade of like property. Irs 1040x form The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Irs 1040x form The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Irs 1040x form The trade of a piece of machinery for a store building is not a trade of like property. Irs 1040x form Real property located in the United States and real property located outside the United States are not like property. Irs 1040x form Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Irs 1040x form The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Irs 1040x form The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Irs 1040x form    If you trade property with a related party in a like-kind exchange, a special rule may apply. Irs 1040x form See Related Party Transactions , later in this chapter. Irs 1040x form Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Irs 1040x form Partly nontaxable exchange. Irs 1040x form   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Irs 1040x form You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Irs 1040x form You cannot deduct a loss. Irs 1040x form Like property and unlike property transferred. Irs 1040x form   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Irs 1040x form The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Irs 1040x form Like property and money transferred. Irs 1040x form   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Irs 1040x form Basis of property received. Irs 1040x form   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Irs 1040x form How to report. Irs 1040x form   You must report the trade of like property on Form 8824. Irs 1040x form If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Irs 1040x form See the instructions for Line 22 in the Instructions for Form 8824. Irs 1040x form   For information on using Form 4797, see chapter 4 of Publication 544. Irs 1040x form Corporate stocks. Irs 1040x form   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Irs 1040x form Corporate reorganizations. Irs 1040x form   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Irs 1040x form If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Irs 1040x form Stock for stock of the same corporation. Irs 1040x form   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Irs 1040x form This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Irs 1040x form Convertible stocks and bonds. Irs 1040x form   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Irs 1040x form Property for stock of a controlled corporation. Irs 1040x form   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Irs 1040x form This rule applies both to individuals and to groups who transfer property to a corporation. Irs 1040x form It does not apply if the corporation is an investment company. Irs 1040x form   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Irs 1040x form   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Irs 1040x form For details, see Regulations section 1. Irs 1040x form 351-3. Irs 1040x form Additional information. Irs 1040x form   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Irs 1040x form Insurance policies and annuities. Irs 1040x form   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Irs 1040x form   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Irs 1040x form For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Irs 1040x form Revenue Ruling 2003-76 is available at www. Irs 1040x form irs. Irs 1040x form gov/irb/2003-33_IRB/ar11. Irs 1040x form html. Irs 1040x form Revenue Procedure 2008-24 is available at www. Irs 1040x form irs. Irs 1040x form gov/irb/2008-13_IRB/ar13. Irs 1040x form html. Irs 1040x form For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Irs 1040x form Revenue Procedure 2011-38 is available at www. Irs 1040x form irs. Irs 1040x form gov/irb/2011-30_IRB/ar09. Irs 1040x form html. Irs 1040x form   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Irs 1040x form A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Irs 1040x form The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Irs 1040x form   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Irs 1040x form Demutualization of life insurance companies. Irs 1040x form   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Irs 1040x form See Demutualization of Life Insurance Companies in Publication 550. Irs 1040x form U. Irs 1040x form S. Irs 1040x form Treasury notes or bonds. Irs 1040x form   You can trade certain issues of U. Irs 1040x form S. Irs 1040x form Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Irs 1040x form See Savings bonds traded in chapter 1 of Publication 550 for more information. Irs 1040x form Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Irs 1040x form This nonrecognition rule does not apply in the following situations. Irs 1040x form The recipient spouse or former spouse is a nonresident alien. Irs 1040x form Property is transferred in trust and liability exceeds basis. Irs 1040x form Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Irs 1040x form For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Irs 1040x form Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Irs 1040x form The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Irs 1040x form This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Irs 1040x form This rule applies for purposes of determining loss as well as gain. Irs 1040x form Any gain recognized on a transfer in trust increases the basis. Irs 1040x form A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Irs 1040x form Related Party Transactions Special rules apply to the sale or trade of property between related parties. Irs 1040x form Gain on sale or trade of depreciable property. Irs 1040x form   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Irs 1040x form See chapter 3 of Publication 544 for more information. Irs 1040x form Like-kind exchanges. Irs 1040x form   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Irs 1040x form See Like-kind exchanges , earlier, under Nontaxable Trades. Irs 1040x form   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Irs 1040x form However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Irs 1040x form See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Irs 1040x form Losses on sales or trades of property. Irs 1040x form   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Irs 1040x form Members of your family. Irs 1040x form This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Irs 1040x form ), and lineal descendants (children, grandchildren, etc. Irs 1040x form ). Irs 1040x form A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Irs 1040x form A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Irs 1040x form (See Constructive ownership of stock , later. Irs 1040x form ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Irs 1040x form   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Irs 1040x form A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Irs 1040x form Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Irs 1040x form A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Irs 1040x form A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Irs 1040x form Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Irs 1040x form Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Irs 1040x form An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Irs 1040x form Two corporations that are members of the same controlled group. Irs 1040x form (Under certain conditions, however, these losses are not disallowed but must be deferred. Irs 1040x form ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Irs 1040x form Multiple property sales or trades. Irs 1040x form   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Irs 1040x form The gain on each item may be taxable. Irs 1040x form However, you cannot deduct the loss on any item. Irs 1040x form Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Irs 1040x form Indirect transactions. Irs 1040x form   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Irs 1040x form This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Irs 1040x form Constructive ownership of stock. Irs 1040x form   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Irs 1040x form Rule 1. Irs 1040x form   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Irs 1040x form Rule 2. Irs 1040x form   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Irs 1040x form Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Irs 1040x form Rule 3. Irs 1040x form   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Irs 1040x form Rule 4. Irs 1040x form   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Irs 1040x form But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Irs 1040x form Property received from a related party. Irs 1040x form    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Irs 1040x form This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Irs 1040x form This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Irs 1040x form   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Irs 1040x form Example 1. Irs 1040x form Your brother sells you stock for $7,600. Irs 1040x form His cost basis is $10,000. Irs 1040x form Your brother cannot deduct the loss of $2,400. Irs 1040x form Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Irs 1040x form Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Irs 1040x form Example 2. Irs 1040x form If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Irs 1040x form You cannot deduct the loss that was not allowed to your brother. Irs 1040x form Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Irs 1040x form Character of gain or loss. Irs 1040x form   You need to classify your gains and losses as either ordinary or capital gains or losses. Irs 1040x form You then need to classify your capital gains and losses as either short term or long term. Irs 1040x form If you have long-term gains and losses, you must identify your 28% rate gains and losses. Irs 1040x form If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Irs 1040x form   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Irs 1040x form Reporting capital gains and losses is explained in chapter 16. Irs 1040x form Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Irs 1040x form Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Irs 1040x form A sale or trade of a noncapital asset generally results in ordinary gain or loss. Irs 1040x form Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Irs 1040x form In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Irs 1040x form Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Irs 1040x form Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Irs 1040x form Any property you own is a capital asset, except the following noncapital assets. Irs 1040x form Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Irs 1040x form For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Irs 1040x form Depreciable property used in your trade or business, even if fully depreciated. Irs 1040x form Real property used in your trade or business. Irs 1040x form A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Irs 1040x form For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Irs 1040x form Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Irs 1040x form U. Irs 1040x form S. Irs 1040x form Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Irs 1040x form Certain commodities derivative financial instruments held by commodities derivatives dealers. Irs 1040x form Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Irs 1040x form Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Irs 1040x form Investment Property Investment property is a capital asset. Irs 1040x form Any gain or loss from its sale or trade is generally a capital gain or loss. Irs 1040x form Gold, silver, stamps, coins, gems, etc. Irs 1040x form   These are capital assets except when they are held for sale by a dealer. Irs 1040x form Any gain or loss you have from their sale or trade generally is a capital gain or loss. Irs 1040x form Stocks, stock rights, and bonds. Irs 1040x form   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Irs 1040x form However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Irs 1040x form Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Irs 1040x form However, you cannot deduct a loss from selling personal use property. Irs 1040x form Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Irs 1040x form You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Irs 1040x form You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Irs 1040x form You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Irs 1040x form For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Irs 1040x form See also Schedule D (Form 1040), Form 8949, and their separate instructions. Irs 1040x form You can revoke the election if you have IRS approval. Irs 1040x form To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Irs 1040x form See, for example, Rev. Irs 1040x form Proc. Irs 1040x form 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Irs 1040x form Proc. Irs 1040x form 2013–32, available at www. Irs 1040x form irs. Irs 1040x form gov/irb/2013-01_IRB/ar06. Irs 1040x form html. Irs 1040x form Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Irs 1040x form Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Irs 1040x form Short-term government obligations. Irs 1040x form   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Irs 1040x form This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Irs 1040x form Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Irs 1040x form   However, do not treat these gains as income to the extent you previously included the discount in income. Irs 1040x form See Discount on Short-Term Obligations in chapter 1 of Publication 550. Irs 1040x form Short-term nongovernment obligations. Irs 1040x form   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Irs 1040x form This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Irs 1040x form   However, to the extent you previously included the discount in income, you do not have to include it in income again. Irs 1040x form See Discount on Short-Term Obligations in chapter 1 of Publication 550. Irs 1040x form Tax-exempt state and local government bonds. Irs 1040x form   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Irs 1040x form To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Irs 1040x form   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Irs 1040x form For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Irs 1040x form   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Irs 1040x form If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Irs 1040x form If you bought the bonds after April 30, 1993, the gain is ordinary income. Irs 1040x form   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Irs 1040x form For more information, see Market Discount Bonds in chapter 1 of Publication 550. Irs 1040x form    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Irs 1040x form Redeemed before maturity. Irs 1040x form   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Irs 1040x form   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Irs 1040x form However, you must report the unearned part of OID as a capital gain. Irs 1040x form Example. Irs 1040x form On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Irs 1040x form The face amount of the bond was $1,000. Irs 1040x form The $200 discount was OID. Irs 1040x form At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Irs 1040x form The bond was callable at its face amount beginning 10 years after the issue date. Irs 1040x form The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Irs 1040x form The OID earned during the time you held the bond, $73, is not taxable. Irs 1040x form The $60 accrued annual interest also is not taxable. Irs 1040x form However, you must report the unearned part of OID ($127) as a capital gain. Irs 1040x form Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Irs 1040x form   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Irs 1040x form The rest of the gain is capital gain. Irs 1040x form If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Irs 1040x form This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Irs 1040x form Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Irs 1040x form   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Irs 1040x form Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Irs 1040x form See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Irs 1040x form   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Irs 1040x form However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Irs 1040x form In this case, the rest of the gain is capital gain. Irs 1040x form Market discount bonds. Irs 1040x form   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Irs 1040x form If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Irs 1040x form The rest of the gain is capital gain. Irs 1040x form See Market Discount Bonds in chapter 1 of Publication 550. Irs 1040x form   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Irs 1040x form See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Irs 1040x form Retirement of debt instrument. Irs 1040x form   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Irs 1040x form Notes of individuals. Irs 1040x form   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Irs 1040x form An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Irs 1040x form The lender is not in the business of lending money. Irs 1040x form The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Irs 1040x form Avoiding federal tax is not one of the principal purposes of the loan. Irs 1040x form   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Irs 1040x form When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Irs 1040x form The rest of the gain, if any, is capital gain. Irs 1040x form Any loss on the sale or redemption is capital loss. Irs 1040x form Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Irs 1040x form Ordinary loss. Irs 1040x form Casualty loss. Irs 1040x form Nonbusiness bad debt (short-term capital loss). Irs 1040x form  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Irs 1040x form Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Irs 1040x form Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Irs 1040x form Report the loss on Form 4797, line 10. Irs 1040x form Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Irs 1040x form Report the gain on Form 8949. Irs 1040x form See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Irs 1040x form For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Irs 1040x form See also Schedule D (Form 1040), Form 8949, and their separate instructions. Irs 1040x form Holding Period If you sold or traded investment property, you must determine your holding period for the property. Irs 1040x form Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Irs 1040x form Long-term or short-term. Irs 1040x form   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Irs 1040x form If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Irs 1040x form   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Irs 1040x form The day you disposed of the property is part of your holding period. Irs 1040x form Example. Irs 1040x form If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Irs 1040x form If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Irs 1040x form Securities traded on established market. Irs 1040x form   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Irs 1040x form    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Irs 1040x form Example. Irs 1040x form You are a cash method, calendar year taxpayer. Irs 1040x form You sold stock at a gain on December 30, 2013. Irs 1040x form According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Irs 1040x form You received payment of the sales price on that same day. Irs 1040x form Report your gain on your 2013 return, even though you received the payment in 2014. Irs 1040x form The gain is long term or short term depending on whether you held the stock more than 1 year. Irs 1040x form Your holding period ended on December 30. Irs 1040x form If you had sold the stock at a loss, you would also report it on your 2013 return. Irs 1040x form U. Irs 1040x form S. Irs 1040x form Treasury notes and bonds. Irs 1040x form   The holding period of U. Irs 1040x form S. Irs 1040x form Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Irs 1040x form The holding period of U. Irs 1040x form S. Irs 1040x form Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Irs 1040x form Automatic investment service. Irs 1040x form   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Irs 1040x form Your holding period starts on the day after the bank's purchase date. Irs 1040x form If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Irs 1040x form A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Irs 1040x form Nontaxable trades. Irs 1040x form   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Irs 1040x form Property received as a gift. Irs 1040x form   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Irs 1040x form   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Irs 1040x form Inherited property. Irs 1040x form   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Irs 1040x form This is true regardless of how long you actually held the property. Irs 1040x form However, if you inherited property from someone who died in 2010, see the information below. Irs 1040x form Inherited property from someone who died in 2010. Irs 1040x form   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Irs 1040x form Real property bought. Irs 1040x form   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Irs 1040x form However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Irs 1040x form The holding period cannot start until there is an actual contract of sale. Irs 1040x form The holding period of the seller cannot end before that time. Irs 1040x form Real property repossessed. Irs 1040x form   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Irs 1040x form Your holding period does not include the time between the original sale and the repossession. Irs 1040x form That is, it does not include the period during which the first buyer held the property. Irs 1040x form Stock dividends. Irs 1040x form   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Irs 1040x form   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Irs 1040x form This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Irs 1040x form Nontaxable stock rights. Irs 1040x form   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Irs 1040x form The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Irs 1040x form Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Irs 1040x form You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Irs 1040x form Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Irs 1040x form To be deductible, nonbusiness bad debts must be totally worthless. Irs 1040x form You cannot deduct a partly worthless nonbusiness debt. Irs 1040x form Genuine debt required. Irs 1040x form   A debt must be genuine for you to deduct a loss. Irs 1040x form A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Irs 1040x form Basis in bad debt required. Irs 1040x form    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Irs 1040x form For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Irs 1040x form If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Irs 1040x form When deductible. Irs 1040x form   You can take a bad debt deduction only in the year the debt becomes worthless. Irs 1040x form You do not have to wait until a debt is due to determine whether it is worthless. Irs 1040x form A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Irs 1040x form   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Irs 1040x form You must only show that you have taken reasonable steps to collect the debt. Irs 1040x form Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Irs 1040x form How to report bad debts. Irs 1040x form    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Irs 1040x form    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Irs 1040x form    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Irs 1040x form See also Schedule D (Form 1040), Form 8949, and their separate instructions. Irs 1040x form   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Irs 1040x form For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Irs 1040x form Filing a claim for refund. Irs 1040x form    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Irs 1040x form To do this, use Form 1040X to amend your return for the year the debt became worthless. Irs 1040x 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 1040x form For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Irs 1040x form Additional information. Irs 1040x form   For more information, see Nonbusiness Bad Debts in Publication 550. Irs 1040x form For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Irs 1040x form Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Irs 1040x form A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Irs 1040x form If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Irs 1040x form The result is your basis in the new stock or securities. Irs 1040x form This adjustment postpones the loss deduction until the disposition of the new stock or securities. Irs 1040x form Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Irs 1040x form For more information, see Wash Sales, in chapter 4 of Publication 550. Irs 1040x form Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Irs 1040x form This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Irs 1040x form You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Irs 1040x form This postpones your gain until the year you dispose of the replacement property. Irs 1040x form You qualify to make this choice if you meet all the following tests. Irs 1040x form You sell publicly traded securities at a gain. Irs 1040x form Publicly traded securities are securities traded on an established securities market. Irs 1040x form Your gain from the sale is a capital gain. Irs 1040x form During the 60-day period beginning on the date of the sale, you buy replacement property. Irs 1040x form This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Irs 1040x form This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Irs 1040x form Amount of gain recognized. Irs 1040x form   If you make the choice described in this section, you must recognize gain only up to the following amount. Irs 1040x form The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Irs 1040x form  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Irs 1040x form If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Irs 1040x form Limit on gain postponed. Irs 1040x form   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Irs 1040x form Basis of replacement property. Irs 1040x form   You must subtract the amount of postponed gain from the basis of your replacement property. Irs 1040x form How to report and postpone gain. Irs 1040x form    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 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