Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Irs Gov Forms

Efile 2009 TaxesFile Free State Tax Return1040a FormCan I Amend My 2010 Tax ReturnEfile 2012 Tax Return FreeAmended Tax1040ez File Online FreeIrs File 1040ezHow Do I File My 2010 Tax Return2012 Tax Forms 1040H&r Block Free Tax FilingHelp With 1040xWalmart Free Tax Preparation 2013E File 2012 Taxes For Free2013 1040ezMilitary Tax CreditsFederal 1040x1040ez Form BookletFile 1040x Online Amended ReturnFile 2011 Tax Return LateFile 2011 Taxes Late Online FreeBack Taxes OwedTaxes Online Free1040 EsEz File 1040Visit Www Irs Gov Freefile1040ez RefundState Income Tax Return FormsState Tax Filing SoftwareIrs Efile 20122008 Federal Tax Forms2013 1040 Ez FormHr Block TaxTurbo Tax 1040xIrs FormsTurbotax 2009 Download FreeClaim Social Security Income TaxesTurbotax 2010 SoftwareHow To File Amended TaxesForgot To File 2012 Taxes

Irs Gov Forms

Irs gov forms 8. Irs gov forms   Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesDetermining Gain or Loss Like-Kind Exchanges Transfer to Spouse Ordinary or Capital Gain or LossCapital Assets Noncapital Assets Hedging (Commodity Futures) Livestock Converted Wetland and Highly Erodible Cropland Timber Sale of a Farm Foreclosure or Repossession Abandonment Introduction This chapter explains how to figure, and report on your tax return, your gain or loss on the disposition of your property or debt and whether such gain or loss is ordinary or capital. Irs gov forms Ordinary gain is taxed at the same rates as wages and interest income while capital gain is generally taxed at lower rates. Irs gov forms Dispositions discussed in this chapter include sales, exchanges, foreclosures, repossessions, canceled debts, hedging transactions, and elections to treat cutting of timber as a sale or exchange. Irs gov forms Topics - This chapter discusses: Sales and exchanges Ordinary or capital gain or loss Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 523 Selling Your Home 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8949 Sales and Other Dispositions of Capital Assets See chapter 16 for information about getting publications and forms. Irs gov forms Sales and Exchanges If you sell, exchange, or otherwise dispose of your property, you usually have a gain or a loss. Irs gov forms This section explains certain rules for determining whether any gain you have is taxable, and whether any loss you have is deductible. Irs gov forms A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Irs gov forms An exchange is a transfer of property for other property or services. Irs gov forms Determining Gain or Loss You usually realize a gain or loss when you sell or exchange property. Irs gov forms If the amount you realize from a sale or exchange of property is more than its adjusted basis, you will have a gain. Irs gov forms If the adjusted basis of the property is more than the amount you realize, you will have a loss. Irs gov forms Basis and adjusted basis. Irs gov forms   The basis of property you buy is usually its cost. Irs gov forms The adjusted basis of property is basis plus certain additions and minus certain deductions. Irs gov forms See chapter 6 for more information about basis and adjusted basis. Irs gov forms Amount realized. Irs gov forms   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (FMV) (defined in chapter 6) of all property or services you receive. Irs gov forms The amount you realize also includes any of your liabilities assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Irs gov forms   If the liabilities relate to an exchange of multiple properties, see Multiple Property Exchanges in chapter 1 of Publication 544. Irs gov forms Amount recognized. Irs gov forms   Your gain or loss realized from a sale or exchange of certain property is usually a recognized gain or loss for tax purposes. Irs gov forms A recognized gain is a gain you must include in gross income and report on your income tax return. Irs gov forms A recognized loss is a loss you deduct from gross income. Irs gov forms However, your gain or loss realized from the exchange of certain property may not be recognized for tax purposes. Irs gov forms See Like-Kind Exchanges next. Irs gov forms Also, a loss from the disposition of property held for personal use is not deductible. Irs gov forms Like-Kind Exchanges Certain exchanges of property are not taxable. Irs gov forms This means any gain from the exchange is not recognized, and any loss cannot be deducted. Irs gov forms Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. Irs gov forms The exchange of property for the same kind of property is the most common type of nontaxable exchange. Irs gov forms To qualify for treatment as a like-kind exchange, the property traded and the property received must be both of the following. Irs gov forms Qualifying property. Irs gov forms Like-kind property. Irs gov forms These two requirements are discussed later. Irs gov forms Multiple-party transactions. Irs gov forms   The like-kind exchange rules also apply to property exchanges that involve three and four-party transactions. Irs gov forms Any part of these multiple-party transactions can qualify as a like-kind exchange if it meets all the requirements described in this section. Irs gov forms Receipt of title from third party. Irs gov forms   If you receive property in a like-kind exchange and the other party who transfers the property to you does not give you the title, but a third party does, you can still treat this transaction as a like-kind exchange if it meets all the requirements. Irs gov forms Basis of property received. Irs gov forms   If you receive property in a like-kind exchange, the basis of the property will be the same as the basis of the property you gave up. Irs gov forms See chapter 6 for more information. Irs gov forms Money paid. Irs gov forms   If, in addition to giving up like-kind property, you pay money in a like-kind exchange, you still have no recognized gain or loss. Irs gov forms The basis of the property received is the basis of the property given up, increased by the money paid. Irs gov forms Example. Irs gov forms You traded an old tractor with an adjusted basis of $15,000 for a new one. Irs gov forms The new tractor costs $300,000. Irs gov forms You were allowed $80,000 for the old tractor and paid $220,000 cash. Irs gov forms You have no recognized gain or loss on the transaction regardless of the adjusted basis of your old tractor and the basis of the new tractor is $235,000, the adjusted basis of the old tractor plus the cash paid ($15,000 + $220,000). Irs gov forms If you had sold the old tractor to a third party for $80,000 and bought a new one, you would have a recognized gain or loss on the sale of your old tractor equal to the difference between the amount realized and the adjusted basis of the old tractor. Irs gov forms In this case, the taxable gain would be $65,000 ($80,000 − $15,000) and the basis of the new tractor would be $300,000. Irs gov forms Reporting the exchange. Irs gov forms   Report the exchange of like-kind property, even though no gain or loss is recognized, on Form 8824, Like-Kind Exchanges. Irs gov forms The Instructions for Form 8824 explain how to report the details of the exchange. Irs gov forms   If you have any recognized gain because you received money or unlike property, report it on Schedule D (Form 1040) or Form 4797, whichever applies. Irs gov forms You may also have to report the recognized gain as ordinary income because of depreciation recapture on Form 4797. Irs gov forms See chapter 9 for more information. Irs gov forms Qualifying property. Irs gov forms   In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment or for productive use in your trade or business. Irs gov forms Machinery, buildings, land, trucks, breeding livestock, rental houses, and certain mutual ditch, reservoir, or irrigation company stock are examples of property that may qualify. Irs gov forms Nonqualifying property. Irs gov forms   The rules for like-kind exchanges do not apply to exchanges of the following property. Irs gov forms Property you use for personal purposes, such as your home and family car. Irs gov forms Stock in trade or other property held primarily for sale, such as crops and produce. Irs gov forms Stocks, bonds, or notes. Irs gov forms However, see Qualifying property above. Irs gov forms Other securities or evidences of indebtedness, such as accounts receivable. Irs gov forms Partnership interests. Irs gov forms However, you may have a nontaxable exchange under other rules. Irs gov forms See Other Nontaxable Exchanges in chapter 1 of Publication 544. Irs gov forms Like-kind property. Irs gov forms   To qualify as a nontaxable exchange, the properties exchanged must be of like kind. Irs gov forms Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Irs gov forms Generally, real property exchanged for real property qualifies as an exchange of like-kind property. Irs gov forms For example, an exchange of city property for farm property or improved property for unimproved property is a like-kind exchange. Irs gov forms   An exchange of a tractor for a new tractor is an exchange of like-kind property, and so is an exchange of timber land for crop acreage. Irs gov forms An exchange of a tractor for acreage, however, is not an exchange of like-kind property. Irs gov forms The exchange of livestock of one sex for livestock of the other sex is not a like-kind exchange. Irs gov forms For example, the exchange of a bull for a cow is not a like-kind exchange. Irs gov forms An exchange of the assets of a business for the assets of a similar business cannot be treated as an exchange of one property for another property. Irs gov forms    Note. Irs gov forms Whether you engaged in a like-kind exchange depends on an analysis of each asset involved in the exchange. Irs gov forms Personal property. Irs gov forms   Depreciable tangible personal property can be either like kind or like class to qualify for nontaxable exchange treatment. Irs gov forms Like-class properties are depreciable tangible personal properties within the same General Asset Class or Product Class. Irs gov forms Property classified in any General Asset Class may not be classified within a Product Class. Irs gov forms Assets that are not in the same class will qualify as like-kind property if they are of the same nature or character. Irs gov forms General Asset Classes. Irs gov forms   General Asset Classes describe the types of property frequently used in many businesses. Irs gov forms They include, but are not limited to, the following property. Irs gov forms Office furniture, fixtures, and equipment (asset class 00. Irs gov forms 11). Irs gov forms Information systems, such as computers and peripheral equipment (asset class 00. Irs gov forms 12). Irs gov forms Data handling equipment except computers (asset class 00. Irs gov forms 13). Irs gov forms Automobiles and taxis (asset class 00. Irs gov forms 22). Irs gov forms Light general purpose trucks (asset class 00. Irs gov forms 241). Irs gov forms Heavy general purpose trucks (asset class 00. Irs gov forms 242). Irs gov forms Tractor units for use over-the-road (asset class 00. Irs gov forms 26). Irs gov forms Trailers and trailer-mounted containers (asset class 00. Irs gov forms 27). Irs gov forms Industrial steam and electric generation and/or distribution systems (asset class 00. Irs gov forms 4). Irs gov forms Product Classes. Irs gov forms   Product Classes include property listed in a 6-digit product class in sectors 31 through 33 of the North American Industry Classification System (NAICS) of the Executive Office of the President, Office of Management and Budget, United States, (NAICS Manual). Irs gov forms The latest version of the manual can be accessed at www. Irs gov forms census. Irs gov forms gov/eos/www/naics/. Irs gov forms Copies of the printed manual may be purchased from the National Technical Information Service (NTIS) at  www. Irs gov forms ntis. Irs gov forms gov/products/naics. Irs gov forms aspx or by calling 1-800-553-NTIS (1-800-553-6847) or (703) 605-6000. Irs gov forms A CD-ROM version with search and retrieval software is also available from NTIS. Irs gov forms    NAICS class 333111, Farm Machinery and Equipment Manufacturing, includes most machinery and equipment used in a farming business. Irs gov forms Partially nontaxable exchange. Irs gov forms   If, in addition to like-kind property, you receive money or unlike property in an exchange on which you realize gain, you have a partially nontaxable exchange. Irs gov forms You are taxed on the gain you realize, but only to the extent of the money and the FMV of the unlike property you receive. Irs gov forms A loss is not deductible. Irs gov forms Example 1. Irs gov forms You trade farmland that cost $30,000 for $10,000 cash and other land to be used in farming with a FMV of $50,000. Irs gov forms You have a realized gain of $30,000 ($50,000 FMV of new land + $10,000 cash − $30,000 basis of old farmland = $30,000 realized gain). Irs gov forms However, only $10,000, the cash received, is recognized (included in income). Irs gov forms Example 2. Irs gov forms Assume the same facts as in Example 1, except that, instead of money, you received a tractor with a FMV of $10,000. Irs gov forms Your recognized gain is still limited to $10,000, the value of the tractor (the unlike property). Irs gov forms Example 3. Irs gov forms Assume in Example 1 that the FMV of the land you received was only $15,000. Irs gov forms Your $5,000 loss is not recognized. Irs gov forms Unlike property given up. Irs gov forms   If, in addition to like-kind property, you give up unlike property, you must recognize gain or loss on the unlike property you give up. Irs gov forms The gain or loss is the difference between the FMV of the unlike property and the adjusted basis of the unlike property. Irs gov forms Like-kind exchanges between related persons. Irs gov forms   Special rules apply to like-kind exchanges between related persons. Irs gov forms These rules affect both direct and indirect exchanges. Irs gov forms Under these rules, if either person disposes of the property within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. Irs gov forms The gain or loss on the original exchange must be recognized as of the date of the later disposition. Irs gov forms The 2-year holding period begins on the date of the last transfer of property that was part of the like-kind exchange. Irs gov forms Related persons. Irs gov forms   Under these rules, related persons include, for example, you and a member of your family (spouse, brother, sister, parent, child, etc. Irs gov forms ), you and a corporation in which you have more than 50% ownership, you and a partnership in which you directly or indirectly own more than a 50% interest of the capital or profits, and two partnerships in which you directly or indirectly own more than 50% of the capital interests or profits. Irs gov forms   For the complete list of related persons, see Related persons in chapter 2 of Publication 544. Irs gov forms Example. Irs gov forms You used a grey pickup truck in your farming business. Irs gov forms Your sister used a red pickup truck in her landscaping business. Irs gov forms In December 2012, you exchanged your grey pickup truck, plus $200, for your sister's red pickup truck. Irs gov forms At that time, the FMV of the grey pickup truck was $7,000 and its adjusted basis was $6,000. Irs gov forms The FMV of the red pickup truck was $7,200 and its adjusted basis was $1,000. Irs gov forms You realized a gain of $1,000 (the $7,200 FMV of the red pickup truck, minus the grey pickup truck's $6,000 adjusted basis, minus the $200 you paid). Irs gov forms Your sister realized a gain of $6,200 (the $7,000 FMV of the grey pickup truck plus the $200 you paid, minus the $1,000 adjusted basis of the red pickup truck). Irs gov forms However, because this was a like-kind exchange, you recognized no gain. Irs gov forms Your basis in the red pickup truck was $6,200 (the $6,000 adjusted basis of the grey pickup truck plus the $200 you paid). Irs gov forms She recognized gain only to the extent of the money she received, $200. Irs gov forms Her basis in the grey pickup truck was $1,000 (the $1,000 adjusted basis of the red pickup truck minus the $200 received, plus the $200 gain recognized). Irs gov forms In 2013, you sold the red pickup truck to a third party for $7,000. Irs gov forms Because you sold it within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. Irs gov forms On your tax return for 2013, you must report your $1,000 gain on the 2012 exchange. Irs gov forms You also report a loss on the sale as $200 (the adjusted basis of the red pickup truck, $7,200 (its $6,200 basis plus the $1,000 gain recognized), minus the $7,000 realized from the sale). Irs gov forms In addition, your sister must report on her tax return for 2013 the $6,000 balance of her gain on the 2012 exchange. Irs gov forms Her adjusted basis in the grey pickup truck is increased to $7,000 (its $1,000 basis plus the $6,000 gain recognized). Irs gov forms Exceptions to the rules for related persons. Irs gov forms   The following property dispositions are excluded from these rules. Irs gov forms Dispositions due to the death of either related person. Irs gov forms Involuntary conversions. Irs gov forms Dispositions where it is established to the satisfaction of the IRS that neither the exchange nor the disposition has, as a main purpose, the avoidance of federal income tax. Irs gov forms Multiple property exchanges. Irs gov forms   Under the like-kind exchange rules, you must generally make a property-by-property comparison to figure your recognized gain and the basis of the property you receive in the exchange. Irs gov forms However, for exchanges of multiple properties, you do not make a property-by-property comparison if you do either of the following. Irs gov forms Transfer and receive properties in two or more exchange groups. Irs gov forms Transfer or receive more than one property within a single exchange group. Irs gov forms   For more information, see Multiple Property Exchanges in chapter 1 of Publication 544. Irs gov forms Deferred exchange. Irs gov forms   A deferred exchange for like-kind property may qualify for nonrecognition of gain or loss. Irs gov forms A deferred exchange is an exchange in which you transfer property you use in business or hold for investment and later receive like-kind property you will use in business or hold for investment. Irs gov forms The property you receive is replacement property. Irs gov forms The transaction must be an exchange of property for property rather than a transfer of property for money used to buy replacement property. Irs gov forms In addition, the replacement property will not be treated as like-kind property unless certain identification and receipt requirements are met. Irs gov forms   For more information see Deferred Exchanges in chapter 1 of Publication 544. Irs gov forms Transfer to Spouse 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 a former spouse if incident to divorce. Irs gov forms This rule does not apply if the recipient is a nonresident alien. Irs gov forms Nor does this rule apply to a transfer in trust to the extent the liabilities assumed and the liabilities on the property are more than the property's adjusted basis. Irs gov forms Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is not considered a sale or exchange. Irs gov forms The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Irs gov forms This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its FMV at the time of transfer or any consideration paid by the recipient. Irs gov forms This rule applies for determining loss as well as gain. Irs gov forms Any gain recognized on a transfer in trust increases the basis. Irs gov forms For more information on transfers of property incident to divorce, see Property Settlements in Publication 504, Divorced or Separated Individuals. Irs gov forms Ordinary or Capital Gain or Loss Generally, you will have a capital gain or loss if you sell or exchange a capital asset (defined below). Irs gov forms You may also have a capital gain if your section 1231 transactions result in a net gain. Irs gov forms See Section 1231 Gains and Losses in  chapter 9. Irs gov forms To figure your net capital gain or loss, you must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). Irs gov forms Your net capital gains may be taxed at a lower tax rate than ordinary income. Irs gov forms See Capital Gains Tax Rates , later. Irs gov forms Your deduction for a net capital loss may be limited. Irs gov forms See Treatment of Capital Losses , later. Irs gov forms Capital Assets Almost everything you own and use for personal purposes or investment is a capital asset. Irs gov forms The following items are examples of capital assets. Irs gov forms A home owned and occupied by you and your family. Irs gov forms Household furnishings. Irs gov forms A car used for pleasure. Irs gov forms If your car is used both for pleasure and for farm business, it is partly a capital asset and partly a noncapital asset, defined later. Irs gov forms Stocks and bonds. Irs gov forms However, there are special rules for gains on qualified small business stock. Irs gov forms For more information on this subject, see Gains on Qualified Small Business Stock and Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Irs gov forms Personal-use property. Irs gov forms   Gain from a sale or exchange of personal-use property is a capital gain and is taxable. Irs gov forms Loss from the sale or exchange of personal-use property is not deductible. Irs gov forms You can deduct a loss relating to personal-use property only if it results from a casualty or theft. Irs gov forms For information on casualties and thefts, see chapter 11. Irs gov forms Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Irs gov forms The time you own an asset before disposing of it is the holding period. Irs gov forms If you hold a capital asset 1 year or less, the gain or loss resulting from its disposition is short term. Irs gov forms Report it in Part I of Schedule D (Form 1040). Irs gov forms If you hold a capital asset longer than 1 year, the gain or loss resulting from its disposition is long term. Irs gov forms Report it in Part II of Schedule D (Form 1040). Irs gov forms Holding period. Irs gov forms   To figure if you held property longer than 1 year, start counting on the day after the day you acquired the property. Irs gov forms The day you disposed of the property is part of your holding period. Irs gov forms Example. Irs gov forms If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Irs gov forms If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Irs gov forms Inherited property. Irs gov forms   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Irs gov forms This rule does not apply to livestock used in a farm business. Irs gov forms See Holding period under Livestock , later. Irs gov forms Nonbusiness bad debt. Irs gov forms   A nonbusiness bad debt is a short-term capital loss, deductible in the year the debt becomes worthless. Irs gov forms See chapter 4 of Publication 550. Irs gov forms Nontaxable exchange. Irs gov forms   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Irs gov forms That is, it begins on the same day as your holding period for the old property. Irs gov forms Gift. Irs gov forms   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Irs gov forms Real property. Irs gov forms   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, on the day after you took possession of it and assumed the burdens and privileges of ownership. Irs gov forms   However, taking possession of real property under an option agreement is not enough to start the holding period. Irs gov forms The holding period cannot start until there is an actual contract of sale. Irs gov forms The holding period of the seller cannot end before that time. Irs gov forms Figuring Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Irs gov forms Net short-term capital gain or loss. Irs gov forms   Combine your short-term capital gains and losses. Irs gov forms Do this by adding all of your short-term capital gains. Irs gov forms Then add all of your short-term capital losses. Irs gov forms Subtract the lesser total from the greater. Irs gov forms The difference is your net short-term capital gain or loss. Irs gov forms Net long-term capital gain or loss. Irs gov forms   Follow the same steps to combine your long-term capital gains and losses. Irs gov forms The result is your net long-term capital gain or loss. Irs gov forms Net gain. Irs gov forms   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Irs gov forms However, part of your gain (but not more than your net capital gain) may be taxed at a lower rate than the rate of tax on your ordinary income. Irs gov forms See Capital Gains Tax Rates , later. Irs gov forms Net loss. Irs gov forms   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Irs gov forms But there are limits on how much loss you can deduct and when you can deduct it. Irs gov forms See Treatment of Capital Losses next. Irs gov forms Treatment of Capital Losses If your capital losses are more than your capital gains, you must claim the difference even if you do not have ordinary income to offset it. Irs gov forms For taxpayers other than corporations, the yearly limit on the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Irs gov forms If your other income is low, you may not be able to use the full $3,000. Irs gov forms The part of the $3,000 you cannot use becomes part of your capital loss carryover (discussed next). Irs gov forms Capital loss carryover. Irs gov forms   Generally, you have a capital loss carryover if either of the following situations applies to you. Irs gov forms Your net loss on Schedule D (Form 1040), is more than the yearly limit. Irs gov forms Your taxable income without your deduction for exemptions is less than zero. Irs gov forms If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carry over to 2014. Irs gov forms    To figure your capital loss carryover from 2013 to 2014, you will need a copy of your 2013 Form 1040 and Schedule D (Form 1040). Irs gov forms Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Irs gov forms These lower rates are called the maximum capital gains rates. Irs gov forms The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Irs gov forms See Schedule D (Form 1040) and the Instructions for Schedule D (Form 1040). Irs gov forms Also see Publication 550. Irs gov forms Noncapital Assets Noncapital assets include property such as inventory and depreciable property used in a trade or business. Irs gov forms A list of properties that are not capital assets is provided in the Instructions for Schedule D (Form 1040). Irs gov forms Property held for sale in the ordinary course of your farm business. Irs gov forms   Property you hold mainly for sale to customers, such as livestock, poultry, livestock products, and crops, is a noncapital asset. Irs gov forms Gain or loss from sales or other dispositions of this property is reported on Schedule F (Form 1040) (not on Schedule D (Form 1040) or Form 4797). Irs gov forms The treatment of this property is discussed in chapter 3. Irs gov forms Land and depreciable properties. Irs gov forms   Land and depreciable property you use in farming are not capital assets. Irs gov forms Noncapital assets also include livestock held for draft, breeding, dairy, or sporting purposes. Irs gov forms However, your gains and losses from sales and exchanges of your farmland and depreciable properties must be considered together with certain other transactions to determine whether the gains and losses are treated as capital or ordinary gains and losses. Irs gov forms The sales of these business assets are reported on Form 4797. Irs gov forms See chapter 9 for more information. Irs gov forms Hedging (Commodity Futures) Hedging transactions are transactions that you enter into in the normal course of business primarily to manage the risk of interest rate or price changes, or currency fluctuations, with respect to borrowings, ordinary property, or ordinary obligations. Irs gov forms Ordinary property or obligations are those that cannot produce capital gain or loss if sold or exchanged. Irs gov forms A commodity futures contract is a standardized, exchange-traded contract for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price. Irs gov forms The holder of an option on a futures contract has the right (but not the obligation) for a specified period of time to enter into a futures contract to buy or sell at a particular price. Irs gov forms A forward contract is generally similar to a futures contract except that the terms are not standardized and the contract is not exchange traded. Irs gov forms Businesses may enter into commodity futures contracts or forward contracts and may acquire options on commodity futures contracts as either of the following. Irs gov forms Hedging transactions. Irs gov forms Transactions that are not hedging transactions. Irs gov forms Futures transactions with exchange-traded commodity futures contracts that are not hedging transactions, generally, result in capital gain or loss and are subject to the mark-to-market rules discussed in Publication 550. Irs gov forms There is a limit on the amount of capital losses you can deduct each year. Irs gov forms Hedging transactions are not subject to the mark-to-market rules. Irs gov forms If, as a farmer-producer, to protect yourself from the risk of unfavorable price fluctuations, you enter into commodity forward contracts, futures contracts, or options on futures contracts and the contracts cover an amount of the commodity within your range of production, the transactions are generally considered hedging transactions. Irs gov forms They can take place at any time you have the commodity under production, have it on hand for sale, or reasonably expect to have it on hand. Irs gov forms The gain or loss on the termination of these hedges is generally ordinary gain or loss. Irs gov forms Farmers who file their income tax returns on the cash method report any profit or loss on the hedging transaction on Schedule F, line 8. Irs gov forms Gains or losses from hedging transactions that hedge supplies of a type regularly used or consumed in the ordinary course of your trade or business may be ordinary gains or losses. Irs gov forms Examples include fuel and feed. Irs gov forms If you have numerous transactions in the commodity futures market during the year, you must be able to show which transactions are hedging transactions. Irs gov forms Clearly identify a hedging transaction on your books and records before the end of the day you entered into the transaction. Irs gov forms It may be helpful to have separate brokerage accounts for your hedging and speculation transactions. Irs gov forms Retain the identification of each hedging transaction with your books and records. Irs gov forms Also, identify the item(s) or aggregate risk that is being hedged in your records. Irs gov forms Although the identification of the hedging transaction must be made before the end of the day it was entered into, you have 35 days after entering into the transaction to identify the hedged item(s) or risk. Irs gov forms For more information on the tax treatment of futures and options contracts, see Commodity Futures and Section 1256 Contracts Marked to Market in Publication 550. Irs gov forms Accounting methods for hedging transactions. Irs gov forms   The accounting method you use for a hedging transaction must clearly reflect income. Irs gov forms This means that your accounting method must reasonably match the timing of income, deduction, gain, or loss from a hedging transaction with the timing of income, deduction, gain, or loss from the item or items being hedged. Irs gov forms There are requirements and limits on the method you can use for certain hedging transactions. Irs gov forms See Regulations section 1. Irs gov forms 446-4(e) for those requirements and limits. Irs gov forms   Hedging transactions must be accounted for under the rules stated above unless the transaction is subject to mark-to-market accounting under section 475 or you use an accounting method other than the following methods. Irs gov forms Cash method. Irs gov forms Farm-price method. Irs gov forms Unit-livestock-price method. Irs gov forms   Once you adopt a method, you must apply it consistently and must have IRS approval before changing it. Irs gov forms   Your books and records must describe the accounting method used for each type of hedging transaction. Irs gov forms They must also contain any additional identification necessary to verify the application of the accounting method you used for the transaction. Irs gov forms You must make the additional identification no more than 35 days after entering into the hedging transaction. Irs gov forms Example of a hedging transaction. Irs gov forms   You file your income tax returns on the cash method. Irs gov forms On July 2 you anticipate a yield of 50,000 bushels of corn this year. Irs gov forms The December futures price is $5. Irs gov forms 75 a bushel, but there are indications that by harvest time the price will drop. Irs gov forms To protect yourself against a drop in the price, you enter into the following hedging transaction. Irs gov forms You sell ten December futures contracts of 5,000 bushels each for a total of 50,000 bushels of corn at $5. Irs gov forms 75 a bushel. Irs gov forms   The price did not drop as anticipated but rose to $6 a bushel. Irs gov forms In November, you sell your crop at a local elevator for $6 a bushel. Irs gov forms You also close out your futures position by buying ten December contracts for $6 a bushel. Irs gov forms You paid a broker's commission of $1,400 ($70 per contract) for the complete in and out position in the futures market. Irs gov forms   The result is that the price of corn rose 25 cents a bushel and the actual selling price is $6 a bushel. Irs gov forms Your loss on the hedge is 25 cents a bushel. Irs gov forms In effect, the net selling price of your corn is $5. Irs gov forms 75 a bushel. Irs gov forms   Report the results of your futures transactions and your sale of corn separately on Schedule F. Irs gov forms See the instructions for the 2013 Schedule F (Form 1040). Irs gov forms   The loss on your futures transactions is $13,900, figured as follows. Irs gov forms July 2 - Sold December corn futures (50,000 bu. Irs gov forms @$5. Irs gov forms 75) $287,500 November 6 - Bought December corn futures (50,000 bu. Irs gov forms @$6 plus $1,400 broker's commission) 301,400 Futures loss ($13,900) This loss is reported as a negative figure on Schedule F, Part I, line 8, as other income. Irs gov forms   The proceeds from your corn sale at the local elevator are $300,000 (50,000 bu. Irs gov forms × $6). Irs gov forms Report it on Schedule F, Part I, line 2, as income from sales of products you raised. Irs gov forms   Assume you were right and the price went down 25 cents a bushel. Irs gov forms In effect, you would still net $5. Irs gov forms 75 a bushel, figured as follows. Irs gov forms Sold cash corn, per bushel $5. Irs gov forms 50 Gain on hedge, per bushel . Irs gov forms 25 Net price, per bushel $5. Irs gov forms 75       The gain on your futures transactions would have been $11,100, figured as follows. Irs gov forms July 2 - Sold December corn futures (50,000 bu. Irs gov forms @$5. Irs gov forms 75) $287,500 November 6 - Bought December corn futures (50,000 bu. Irs gov forms @$5. Irs gov forms 50 plus $1,400 broker's commission) 276,400 Futures gain $11,100 The $11,100 is reported on Schedule F, Part I, line 8, as other income. Irs gov forms   The proceeds from the sale of your corn at the local elevator, $275,000, are reported on Schedule F, Part I, line 2, as income from sales of products you raised. Irs gov forms Livestock This part discusses the sale or exchange of livestock used in your farm business. Irs gov forms Gain or loss from the sale or exchange of this livestock may qualify as a section 1231 gain or loss. Irs gov forms However, any part of the gain that is ordinary income from the recapture of depreciation is not included as section 1231 gain. Irs gov forms See chapter 9 for more information on section 1231 gains and losses and the recapture of depreciation under section 1245. Irs gov forms The rules discussed here do not apply to the sale of livestock held primarily for sale to customers. Irs gov forms The sale of this livestock is reported on Schedule F. Irs gov forms See chapter 3. Irs gov forms Also, special rules apply to sales or exchanges caused by weather-related conditions. Irs gov forms See chapter 3. Irs gov forms Holding period. Irs gov forms   The sale or exchange of livestock used in your farm business (defined below) qualifies as a section 1231 transaction if you held the livestock for 12 months or more (24 months or more for horses and cattle). Irs gov forms Livestock. Irs gov forms   For section 1231 transactions, livestock includes cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals, and other mammals. Irs gov forms Also, for section 1231 transactions, livestock does not include chickens, turkeys, pigeons, geese, emus, ostriches, rheas, or other birds, fish, frogs, reptiles, etc. Irs gov forms Livestock used in farm business. Irs gov forms   If livestock is held primarily for draft, breeding, dairy, or sporting purposes, it is used in your farm business. Irs gov forms The purpose for which an animal is held ordinarily is determined by a farmer's actual use of the animal. Irs gov forms An animal is not held for draft, breeding, dairy, or sporting purposes merely because it is suitable for that purpose, or because it is held for sale to other persons for use by them for that purpose. Irs gov forms However, a draft, breeding, or sporting purpose may be present if an animal is disposed of within a reasonable time after it is prevented from its intended use or made undesirable as a result of an accident, disease, drought, or unfitness of the animal. Irs gov forms Example 1. Irs gov forms You discover an animal that you intend to use for breeding purposes is sterile. Irs gov forms You dispose of it within a reasonable time. Irs gov forms This animal was held for breeding purposes. Irs gov forms Example 2. Irs gov forms You retire and sell your entire herd, including young animals that you would have used for breeding or dairy purposes had you remained in business. Irs gov forms These young animals were held for breeding or dairy purposes. Irs gov forms Also, if you sell young animals to reduce your breeding or dairy herd because of drought, these animals are treated as having been held for breeding or dairy purposes. Irs gov forms See Sales Caused by Weather-Related Conditions in chapter 3. Irs gov forms Example 3. Irs gov forms You are in the business of raising hogs for slaughter. Irs gov forms Customarily, before selling your sows, you obtain a single litter of pigs that you will raise for sale. Irs gov forms You sell the brood sows after obtaining the litter. Irs gov forms Even though you hold these brood sows for ultimate sale to customers in the ordinary course of your business, they are considered to be held for breeding purposes. Irs gov forms Example 4. Irs gov forms You are in the business of raising registered cattle for sale to others for use as breeding cattle. Irs gov forms The business practice is to breed the cattle before sale to establish their fitness as registered breeding cattle. Irs gov forms Your use of the young cattle for breeding purposes is ordinary and necessary for selling them as registered breeding cattle. Irs gov forms Such use does not demonstrate that you are holding the cattle for breeding purposes. Irs gov forms However, those cattle you held as additions or replacements to your own breeding herd to produce calves are considered to be held for breeding purposes, even though they may not actually have produced calves. Irs gov forms The same applies to hog and sheep breeders. Irs gov forms Example 5. Irs gov forms You breed, raise, and train horses for racing purposes. Irs gov forms Every year you cull horses from your racing stable. Irs gov forms In 2013, you decided that to prevent your racing stable from getting too large to be effectively operated, you must cull six horses that had been raced at public tracks in 2012. Irs gov forms These horses are all considered held for sporting purposes. Irs gov forms Figuring gain or loss on the cash method. Irs gov forms   Farmers or ranchers who use the cash method of accounting figure their gain or loss on the sale of livestock used in their farming business as follows. Irs gov forms Raised livestock. Irs gov forms   Gain on the sale of raised livestock is generally the gross sales price reduced by any expenses of the sale. Irs gov forms Expenses of sale include sales commissions, freight or hauling from farm to commission company, and other similar expenses. Irs gov forms The basis of the animal sold is zero if the costs of raising it were deducted during the years the animal was being raised. Irs gov forms However, see Uniform Capitalization Rules in chapter 6. Irs gov forms Purchased livestock. Irs gov forms   The gross sales price minus your adjusted basis and any expenses of sale is the gain or loss. Irs gov forms Example. Irs gov forms A farmer sold a breeding cow on January 8, 2013, for $1,250. Irs gov forms Expenses of the sale were $125. Irs gov forms The cow was bought July 2, 2009, for $1,300. Irs gov forms Depreciation (not less than the amount allowable) was $867. Irs gov forms Gross sales price $1,250 Cost (basis) $1,300   Minus: Depreciation deduction 867   Unrecovered cost (adjusted basis) $ 433   Expense of sale 125 558 Gain realized $ 692 Converted Wetland and Highly Erodible Cropland Special rules apply to dispositions of land converted to farming use after March 1, 1986. Irs gov forms Any gain realized on the disposition of converted wetland or highly erodible cropland is treated as ordinary income. Irs gov forms Any loss on the disposition of such property is treated as a long-term capital loss. Irs gov forms Converted wetland. Irs gov forms   This is generally land that was drained or filled to make the production of agricultural commodities possible. Irs gov forms It includes converted wetland held by the person who originally converted it or held by any other person who used the converted wetland at any time after conversion for farming. Irs gov forms   A wetland (before conversion) is land that meets all the following conditions. Irs gov forms It is mostly soil that, in its undrained condition, is saturated, flooded, or ponded long enough during a growing season to develop an oxygen-deficient state that supports the growth and regeneration of plants growing in water. Irs gov forms It is saturated by surface or groundwater at a frequency and duration sufficient to support mostly plants that are adapted for life in saturated soil. Irs gov forms It supports, under normal circumstances, mostly plants that grow in saturated soil. Irs gov forms Highly erodible cropland. Irs gov forms   This is cropland subject to erosion that you used at any time for farming purposes other than grazing animals. Irs gov forms Generally, highly erodible cropland is land currently classified by the Department of Agriculture as Class IV, VI, VII, or VIII under its classification system. Irs gov forms Highly erodible cropland also includes land that would have an excessive average annual erosion rate in relation to the soil loss tolerance level, as determined by the Department of Agriculture. Irs gov forms Successor. Irs gov forms   Converted wetland or highly erodible cropland is also land held by any person whose basis in the land is figured by reference to the adjusted basis of a person in whose hands the property was converted wetland or highly erodible cropland. Irs gov forms Timber Standing timber you held as investment property is a capital asset. Irs gov forms Gain or loss from its sale is capital gain or loss reported on Form 8949 and Schedule D (Form 1040), as applicable. Irs gov forms If you held the timber primarily for sale to customers, it is not a capital asset. Irs gov forms Gain or loss on its sale is ordinary business income or loss. Irs gov forms It is reported on Schedule F, line 1 (purchased timber) or line 2 (raised timber). Irs gov forms See the Instructions for Schedule F (Form 1040). Irs gov forms Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. Irs gov forms Amounts realized from these sales, and the expenses incurred in cutting, hauling, etc. Irs gov forms , are ordinary farm income and expenses reported on Schedule F. Irs gov forms Different rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange or you enter into a cutting contract, discussed below. Irs gov forms Timber considered cut. Irs gov forms   Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. Irs gov forms This is true whether the timber is cut under contract or whether you cut it yourself. Irs gov forms Christmas trees. Irs gov forms   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. Irs gov forms They qualify for both rules discussed below. Irs gov forms Election to treat cutting as a sale or exchange. Irs gov forms   Under the general rule, the cutting of timber results in no gain or loss. Irs gov forms It is not until a sale or exchange occurs that gain or loss is realized. Irs gov forms But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year it is cut. Irs gov forms Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. Irs gov forms Any later sale results in ordinary business income or loss. Irs gov forms See the example below. Irs gov forms   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or use in your trade or business. Irs gov forms Making the election. Irs gov forms   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of your gain or loss. Irs gov forms You do not have to make the election in the first year you cut the timber. Irs gov forms You can make it in any year to which the election would apply. Irs gov forms If the timber is partnership property, the election is made on the partnership return. Irs gov forms This election cannot be made on an amended return. Irs gov forms   Once you have made the election, it remains in effect for all later years unless you revoke it. Irs gov forms Election under section 631(a) may be revoked. Irs gov forms   If you previously elected for any tax year ending before October 23, 2004, to treat the cutting of timber as a sale or exchange under section 631(a), you may revoke this election without the consent of the IRS for any tax year ending after October 22, 2004. Irs gov forms The prior election (and revocation) is disregarded for purposes of making a subsequent election. Irs gov forms See Form T (Timber), Forest Activities Schedule, for more information. Irs gov forms Gain or loss. Irs gov forms   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its FMV on the first day of your tax year in which it is cut. Irs gov forms   Your adjusted basis for depletion of cut timber is based on the number of units (board feet, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. Irs gov forms Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 and Regulations section 1. Irs gov forms 611-3. Irs gov forms   Depletion of timber is discussed in chapter 7. Irs gov forms Example. Irs gov forms   In April 2013, you owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. Irs gov forms It had an adjusted basis for depletion of $40 per MBF. Irs gov forms You are a calendar year taxpayer. Irs gov forms On January 1, 2013, the timber had a FMV of $350 per MBF. Irs gov forms It was cut in April for sale. Irs gov forms On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. Irs gov forms You report the difference between the FMV and your adjusted basis for depletion as a gain. Irs gov forms This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as a capital gain or as ordinary gain. Irs gov forms You figure your gain as follows. Irs gov forms FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000   The FMV becomes your basis in the cut timber, and a later sale of the cut timber, including any by-product or tree tops, will result in ordinary business income or loss. Irs gov forms Outright sales of timber. Irs gov forms   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined later). Irs gov forms However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see Date of disposal below). Irs gov forms Cutting contract. Irs gov forms   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. Irs gov forms You are the owner of the timber. Irs gov forms You held the timber longer than 1 year before its disposal. Irs gov forms You kept an economic interest in the timber. Irs gov forms   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. Irs gov forms   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. Irs gov forms Include this amount on Form 4797 along with your other section 1231 gains or losses. Irs gov forms Date of disposal. Irs gov forms   The date of disposal is the date the timber is cut. Irs gov forms However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. Irs gov forms   This election applies only to figure the holding period of the timber. Irs gov forms It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). Irs gov forms   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. Irs gov forms The statement must identify the advance payments subject to the election and the contract under which they were made. Irs gov forms   If you timely filed your return for the year you received payment without making the election, you can still make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). Irs gov forms Attach the statement to the amended return and write “Filed pursuant to section 301. Irs gov forms 9100-2” at the top of the statement. Irs gov forms File the amended return at the same address the original return was filed. Irs gov forms Owner. Irs gov forms   An owner is any person who owns an interest in the timber, including a sublessor and the holder of a contract to cut the timber. Irs gov forms You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. Irs gov forms Tree stumps. Irs gov forms   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. Irs gov forms Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. Irs gov forms However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. Irs gov forms Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. Irs gov forms   See Form T (Timber) and its separate instructions for more information about dispositions of timber. Irs gov forms Sale of a Farm The sale of your farm will usually involve the sale of both nonbusiness property (your home) and business property (the land and buildings used in the farm operation and perhaps machinery and livestock). Irs gov forms If you have a gain from the sale, you may be allowed to exclude the gain on your home. Irs gov forms For more information, see Publication 523, Selling Your Home. Irs gov forms The gain on the sale of your business property is taxable. Irs gov forms A loss on the sale of your business property to an unrelated person is deducted as an ordinary loss. Irs gov forms Your taxable gain or loss on the sale of property used in your farm business is taxed under the rules for section 1231 transactions. Irs gov forms See chapter 9. Irs gov forms Losses from personal-use property, other than casualty or theft losses, are not deductible. Irs gov forms If you receive payments for your farm in installments, your gain is taxed over the period of years the payments are received, unless you elect not to use the installment method of reporting the gain. Irs gov forms See chapter 10 for information about installment sales. Irs gov forms When you sell your farm, the gain or loss on each asset is figured separately. Irs gov forms The tax treatment of gain or loss on the sale of each asset is determined by the classification of the asset. Irs gov forms Each of the assets sold must be classified as one of the following. Irs gov forms Capital asset held 1 year or less. Irs gov forms Capital asset held longer than 1 year. Irs gov forms Property (including real estate) used in your business and held 1 year or less (including draft, breeding, dairy, and sporting animals held less than the holding periods discussed earlier under Livestock ). Irs gov forms Property (including real estate) used in your business and held longer than 1 year (including only draft, breeding, dairy, and sporting animals held for the holding periods discussed earlier). Irs gov forms Property held primarily for sale or which is of the kind that would be included in inventory if on hand at the end of your tax year. Irs gov forms Allocation of consideration paid for a farm. Irs gov forms   The sale of a farm for a lump sum is considered a sale of each individual asset rather than a single asset. Irs gov forms The residual method is required only if the group of assets sold constitutes a trade or business. Irs gov forms This method determines gain or loss from the transfer of each asset. Irs gov forms It also determines the buyer's basis in the business assets. Irs gov forms For more information, see Sale of a Business in chapter 2 of Publication 544. Irs gov forms Property used in farm operation. Irs gov forms   The rules for excluding the gain on the sale of your home, described later under Sale of your home , do not apply to the property used for your farming business. Irs gov forms Recognized gains and losses on business property must be reported on your return for the year of the sale. Irs gov forms If the property was held longer than 1 year, it may qualify for section 1231 treatment (see chapter 9). Irs gov forms Example. Irs gov forms You sell your farm, including your main home, which you have owned since December 2001. Irs gov forms You realize gain on the sale as follows. Irs gov forms   Farm   Farm   With Home Without   Home Only Home Selling price $382,000 $158,000 $224,000 Cost (or other basis) 240,000 110,000 130,000 Gain $142,000 $48,000 $94,000 You must report the $94,000 gain from the sale of the property used in your farm business. Irs gov forms All or a part of that gain may have to be reported as ordinary income from the recapture of depreciation or soil and water conservation expenses. Irs gov forms Treat the balance as section 1231 gain. Irs gov forms The $48,000 gain from the sale of your home is not taxable as long as you meet the requirements explained later under Sale of your home . Irs gov forms Partial sale. Irs gov forms   If you sell only part of your farm, you must report any recognized gain or loss on the sale of that part on your tax return for the year of the sale. Irs gov forms You cannot wait until you have sold enough of the farm to recover its entire cost before reporting gain or loss. Irs gov forms For a detailed discussion on installment sales, see Publication 544. Irs gov forms Adjusted basis of the part sold. Irs gov forms   This is the properly allocated part of your original cost or other basis of the entire farm plus or minus necessary adjustments for improvements, depreciation, etc. Irs gov forms , on the part sold. Irs gov forms If your home is on the farm, you must properly adjust the basis to exclude those costs from your farm asset costs, as discussed below under Sale of your home . Irs gov forms Example. Irs gov forms You bought a 600-acre farm for $700,000. Irs gov forms The farm included land and buildings. Irs gov forms The purchase contract designated $600,000 of the purchase price to the land. Irs gov forms You later sold 60 acres of land on which you had installed a fence. Irs gov forms Your adjusted basis for the part of your farm sold is $60,000 (1/10 of $600,000), plus any unrecovered cost (cost not depreciated) of the fence on the 60 acres at the time of sale. Irs gov forms Use this amount to determine your gain or loss on the sale of the 60 acres. Irs gov forms Assessed values for local property taxes. Irs gov forms   If you paid a flat sum for the entire farm and no other facts are available for properly allocating your original cost or other basis between the land and the buildings, you can use the assessed values for local property taxes for the year of purchase to allocate the costs. Irs gov forms Example. Irs gov forms Assume that in the preceding example there was no breakdown of the $700,000 purchase price between land and buildings. Irs gov forms However, in the year of purchase, local taxes on the entire property were based on assessed valuations of $420,000 for land and $140,000 for improvements, or a total of $560,000. Irs gov forms The assessed valuation of the land is 3/4 (75%) of the total assessed valuation. Irs gov forms Multiply the $700,000 total purchase price by 75% to figure basis of $525,000 for the 600 acres of land. Irs gov forms The unadjusted basis of the 60 acres you sold would then be $52,500 (1/10 of $525,000). Irs gov forms Sale of your home. Irs gov forms   Your home is a capital asset and not property used in the trade or business of farming. Irs gov forms If you sell a farm that includes a house you and your family occupy, you must determine the part of the selling price and the part of the cost or other basis allocable to your home. Irs gov forms Your home includes the immediate surroundings and outbuildings relating to it that are not used for business purposes. Irs gov forms   If you use part of your home for business, you must make an appropriate adjustment to the basis for depreciation allowed or allowable. Irs gov forms For more information on basis, see chapter 6. Irs gov forms More information. Irs gov forms   For more information on selling your home, see Publication 523. Irs gov forms Gain from condemnation. Irs gov forms   If you have a gain from a condemnation or sale under threat of condemnation, you may use the preceding rules for excluding the gain, rather than the rules discussed under Postponing Gain in chapter 11. Irs gov forms However, any gain that cannot be excluded (because it is more than the limit) may be postponed under the rules discussed under Postponing Gain in chapter 11. Irs gov forms Foreclosure or Repossession If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Irs gov forms The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Irs gov forms This is true even if you voluntarily return the property to the lender. Irs gov forms You may also realize ordinary income from cancellation of debt if the loan balance is more than the FMV of the property. Irs gov forms Buyer's (borrower's) gain or loss. Irs gov forms   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. Irs gov forms The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Irs gov forms See Determining Gain or Loss , earlier. Irs gov forms Worksheet 8-1. Irs gov forms Worksheet for Foreclosures andRepossessions Part 1. Irs gov forms Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Irs gov forms Complete this part only if you were personally liable for the debt. Irs gov forms Otherwise, go to Part 2. Irs gov forms   1. Irs gov forms Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable after the transfer of property   2. Irs gov forms Enter the Fair Market Value of the transferred property   3. Irs gov forms Ordinary income from cancellation of debt upon foreclosure or repossession. Irs gov forms * Subtract line 2 from line 1. Irs gov forms If zero or less, enter -0-   Part 2. Irs gov forms Figure your gain or loss from foreclosure or repossession. Irs gov forms   4. Irs gov forms If you completed Part 1, enter the smaller of line 1 or line 2. Irs gov forms If you did not complete Part 1, enter the outstanding debt immediately before the transfer of property   5. Irs gov forms Enter any proceeds you received from the foreclosure sale   6. Irs gov forms Add lines 4 and 5   7. Irs gov forms Enter the adjusted basis of the transferred property   8. Irs gov forms Gain or loss from foreclosure or repossession. Irs gov forms Subtract line 7  from line 6   * The income may not be taxable. Irs gov forms See Cancellation of debt . Irs gov forms    You can use Worksheet 8-1 to figure your gain or loss from a foreclosure or repossession. Irs gov forms Amount realized on a nonrecourse debt. Irs gov forms   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full amount of the debt canceled by the transfer. Irs gov forms The full canceled debt is included in the amount realized even if the fair market value of the property is less than the canceled debt. Irs gov forms Example 1. Irs gov forms Ann paid $200,000 for land used in her farming business. Irs gov forms She paid $15,000 down and borrowed the remaining $185,000 from a bank. Irs gov forms Ann is not personally liable for the loan (nonrecourse debt), but pledges the land as security. Irs gov forms The bank foreclosed on the loan 2 years after Ann stopped making payments. Irs gov forms When the bank foreclosed, the balance due on the loan was $180,000 and the FMV of the land was $170,000. Irs gov forms The amount Ann realized on the foreclosure was $180,000, the debt canceled by the foreclosure. Irs gov forms She figures her gain or loss on Form 4797, Part I, by comparing the amount realized ($180,000) with her adjusted basis ($200,000). Irs gov forms She has a $20,000 deductible loss. Irs gov forms Example 2. Irs gov forms Assume the same facts as in Example 1 except the FMV of the land was $210,000. Irs gov forms The result is the same. Irs gov forms The amount Ann realized on the foreclosure is $180,000, the debt canceled by the foreclosure. Irs gov forms Because her adjusted basis is $200,000, she has a deductible loss of $20,000, which she reports on Form 4797, Part I. Irs gov forms Amount realized on a recourse debt. Irs gov forms   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. Irs gov forms   You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. Irs gov forms The amount realized does not include the canceled debt that is your income from cancellation of debt. Irs gov forms See Cancellation of debt , later. Irs gov forms Example 3. Irs gov forms Assume the same facts as in Example 1 above except Ann is personally liable for the loan (recourse debt). Irs gov forms In this case, the amount she realizes is $170,000. Irs gov forms This is the canceled debt ($180,000) up to the FMV of the land ($170,000). Irs gov forms Ann figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($200,000). Irs gov forms She has a $30,000 deductible loss, which she figures on Form 4797, Part I. Irs gov forms She is also treated as receiving ordinary income from cancellation of debt. Irs gov forms That income is $10,000 ($180,000 − $170,000). Irs gov forms This is the part of the canceled debt not included in the amount realized. Irs gov forms She reports this as other income on Schedule F, line 8. Irs gov forms Seller's (lender's) gain or loss on repossession. Irs gov forms   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. Irs gov forms For more information, see Repossession in Publication 537, Installment Sales. Irs gov forms Cancellation of debt. Irs gov forms   If property that is repossessed or foreclosed upon secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the FMV of the property. Irs gov forms This income is separate from any gain or loss realized from the foreclosure or repossession. Irs gov forms Report the income from cancellation of a business debt on Schedule F, line 8. Irs gov forms Report the income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. Irs gov forms    You can use Worksheet 8-1 to figure your income from cancellation of debt. Irs gov forms   However, income from cancellation of debt is not taxed if any of the following apply. Irs gov forms The cancellation is intended as a gift. Irs gov forms The debt is qualified farm debt (see chapter 3). Irs gov forms The debt is qualified real property business debt (see chapter 5 of Publication 334). Irs gov forms You are insolvent or bankrupt (see  chapter 3). Irs gov forms The debt is qualified principal residence indebtedness (see chapter 3). Irs gov forms   Use Form 982 to report the income exclusion. Irs gov forms Abandonment The abandonment of property is a disposition of property. Irs gov forms You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership, but without passing it on to anyone else. Irs gov forms Business or investment property. Irs gov forms   Loss from abandonment of business or investment property is deductible as a loss. Irs gov forms Loss from abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Irs gov forms If your adjusted basis is more than the amount you realize (if any), then you have a loss. Irs gov forms If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Irs gov forms This rule also applies to leasehold improvements the lessor made for the lessee. Irs gov forms However, if the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed earlier under Foreclosure or Repossession . Irs gov forms   If the abandoned property is secured by debt, special rules apply. Irs gov forms The tax consequences of abandonment of property that secures a debt depend on whether you are personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). Irs gov forms For more information, see chapter 3 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). Irs gov forms The abandonment loss is deducted in the tax year in which the loss is sustained. Irs gov forms Report the loss on Form 4797, Part II, line 10. Irs gov forms Personal-use property. Irs gov forms   You cannot deduct any loss from abandonment of your home or other property held for personal use. Irs gov forms Canceled debt. Irs gov forms   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. Irs gov forms This income is separate from any loss realized from abandonment of the property. Irs gov forms Report income from cancellation of a debt related to a business or rental activity as business or rental income. Irs gov forms Report income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. Irs gov forms   However, income from cancellation of debt is not taxed in certain circumstances. Irs gov forms See Cancellation of debt earlier under Foreclosure or Repossession . Irs gov forms Forms 1099-A and 1099-C. Irs gov forms   A lender who acquires an interest in your property in a foreclosure, repossession, or abandonment should send you Form 1099-A showing the information you need to figure your loss from the foreclosure, repossession, or abandonment. Irs gov forms However, if the lender cancels part of your debt and the lender must file Form 1099-C, the lender may include the information about the foreclosure, repossession, or abandonment on that form instead of Form 1099-A. Irs gov forms The lender must file Form 1099-C and send you a copy if the canceled debt is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Irs gov forms For foreclosures, repossessions, abandonments of property, and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Irs gov forms Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Subscribe to IRS Newswire

Subscribe to the IRS Newswire to get news releases via e-mail from the IRS National Media Relations Office in Washington, DC.

We issue, on average, two to three news releases each week. Topics cover the entire range of tax administration, including tax law changes, filing season updates, statistics and more.

Please provide your e-mail address in the space below. You’ll be welcomed to the Newswire by return e-mail.

Subscribe / Unsubscribe
Page Last Reviewed or Updated: 13-Mar-2014

The Irs Gov Forms

Irs gov forms 2. Irs gov forms   The Tax and Filing Requirements Table of Contents Returns and Filing Requirements Payment of TaxFederal Tax Deposits Must be Made by Electronic Funds Transfer All organizations subject to the tax on unrelated business income, except the exempt trusts described in section 511(b)(2), are taxable at corporate rates on that income. Irs gov forms All exempt trusts subject to the tax on unrelated business income that, if not exempt, would be taxable as trusts are taxable at trust rates on that income. Irs gov forms However, an exempt trust may not claim the deduction for a personal exemption that is normally allowed to a trust. Irs gov forms The tax is imposed on the organization's unrelated business taxable income (described in chapter 4). Irs gov forms The tax is reduced by any applicable tax credits, including the general business credits (such as the investment credit) and the foreign tax credit. Irs gov forms Alternative minimum tax. Irs gov forms   Organizations liable for tax on unrelated business income may be liable for alternative minimum tax on certain adjustments and tax preference items. Irs gov forms Returns and Filing Requirements An exempt organization subject to the tax on unrelated business income must file Form 990-T and attach any required supporting schedules and forms. Irs gov forms The obligation to file Form 990-T is in addition to the obligation to file any other required returns. Irs gov forms Form 990-T is required if the organization's gross income from unrelated businesses is $1,000 or more. Irs gov forms An exempt organization must report income from all its unrelated businesses on a single Form 990-T. Irs gov forms Each organization must file a separate Form 990-T, except section 501(c)(2) title holding corporations and organizations receiving their earnings that file a consolidated return under section 1501. Irs gov forms The various provisions of tax law relating to accounting periods, accounting methods, at-risk limits (described in section 465), assessments, and collection penalties that apply to tax returns generally also apply to Form 990-T. Irs gov forms When to file. Irs gov forms   The Form 990-T of an employees' trust described in section 401(a), an IRA (including a traditional, SEP, SIMPLE, Roth, or Coverdell IRA), or an MSA must be filed by the 15th day of the 4th month after the end of its tax year. Irs gov forms The Form 990-T of any other exempt organization must be filed by the 15th day of the 5th month after the end of its tax year. Irs gov forms If the due date falls on a Saturday, Sunday, or legal holiday, the return is due by the next business day. Irs gov forms Extension of time to file. Irs gov forms   A Form 990-T filer may request an automatic 3-month (6 months for corporation) extension of time to file a return by submitting Form 8868, Application for Extension of Time To File an Exempt Organization Return. Irs gov forms The Form 990-T filer may also use Form 8868 to apply for an additional (not automatic) 3-month extension to file the return if the original 3-month extension was not enough time. Irs gov forms Public Inspection Requirements of Section 501(c)(3) Organizations. Irs gov forms   Under section 6104(d), a section 501(c)(3) organization that has gross income from an unrelated trade or business of $1,000 or more must make its annual exempt organization business income tax return (including amended returns) available for public inspection. Irs gov forms    A section 501(c)(3) organization filing the Form 990-T only to request a credit for certain federal excise taxes paid does not have to make the Form 990-T available for public inspection. Irs gov forms Payment of Tax Estimated tax. Irs gov forms   A tax-exempt organization must make estimated tax payments if it expects its tax (unrelated business income tax after certain adjustments) to be $500 or more. Irs gov forms Estimated tax payments are generally due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. Irs gov forms If any due date falls on a Saturday, Sunday, or legal holiday, the payment is due on the next business day. Irs gov forms   Any organization that fails to pay the proper estimated tax when due may be charged an underpayment penalty for the period of underpayment. Irs gov forms Generally, to avoid the estimated tax penalty, the organization must make estimated tax payments that total 100% of the organization's current tax year liability. Irs gov forms However, an organization can base its required estimated tax payments on 100% of the tax shown on its return for the preceding year (unless no tax is shown) if its taxable income for each of the 3 preceding tax years was less than $1 million. Irs gov forms If an organization's taxable income for any of those years was $1 million or more, it can base only its first required installment payment on its last year's tax. Irs gov forms   All tax-exempt organizations should use Form 990-W (Worksheet), to figure their estimated tax. Irs gov forms    Tax due with Form 990-T. Irs gov forms   Any tax due with Form 990-T must be paid in full when the return is filed, but no later than the date the return is due (determined without extensions). Irs gov forms Federal Tax Deposits Must be Made by Electronic Funds Transfer You must use electronic funds transfer to make all federal deposits (such as deposits of estimated tax, employment tax, and excise tax). Irs gov forms Forms 8109 and 8109-B, Federal Tax Deposit Coupon, are no longer in use. Irs gov forms Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Irs gov forms If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf. Irs gov forms Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Irs gov forms EFTPS is a free service provided by the Department of Treasury. Irs gov forms Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Irs gov forms To get more information about EFTPS or to enroll in EFTPS, visit www. Irs gov forms eftps. Irs gov forms gov or call 1-800-555-4477. Irs gov forms Additional information about EFTPS is available in Publication 966, The Secure Way to Pay Your Federal Taxes. Irs gov forms Deposits on business days only. Irs gov forms   If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. Irs gov forms A business day is any day other than a Saturday, Sunday, or legal holiday. Irs gov forms For example, if a deposit is required to be made on a Friday and Friday is a legal holiday, the deposit will be considered timely if it is made by the following Monday (if that Monday is a business day). Irs gov forms The term "legal holiday" means any legal holiday in the District of Columbia. Irs gov forms Prev  Up  Next   Home   More Online Publications