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Print Free 2010 1040ez Tax Form

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Print Free 2010 1040ez Tax Form

Print free 2010 1040ez tax form 8. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Ordinary gain is taxed at the same rates as wages and interest income while capital gain is generally taxed at lower rates. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Sales and Exchanges If you sell, exchange, or otherwise dispose of your property, you usually have a gain or a loss. Print free 2010 1040ez tax form This section explains certain rules for determining whether any gain you have is taxable, and whether any loss you have is deductible. Print free 2010 1040ez tax form A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Print free 2010 1040ez tax form An exchange is a transfer of property for other property or services. Print free 2010 1040ez tax form Determining Gain or Loss You usually realize a gain or loss when you sell or exchange property. Print free 2010 1040ez tax form If the amount you realize from a sale or exchange of property is more than its adjusted basis, you will have a gain. Print free 2010 1040ez tax form If the adjusted basis of the property is more than the amount you realize, you will have a loss. Print free 2010 1040ez tax form Basis and adjusted basis. Print free 2010 1040ez tax form   The basis of property you buy is usually its cost. Print free 2010 1040ez tax form The adjusted basis of property is basis plus certain additions and minus certain deductions. Print free 2010 1040ez tax form See chapter 6 for more information about basis and adjusted basis. Print free 2010 1040ez tax form Amount realized. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form   If the liabilities relate to an exchange of multiple properties, see Multiple Property Exchanges in chapter 1 of Publication 544. Print free 2010 1040ez tax form Amount recognized. Print free 2010 1040ez tax form   Your gain or loss realized from a sale or exchange of certain property is usually a recognized gain or loss for tax purposes. Print free 2010 1040ez tax form A recognized gain is a gain you must include in gross income and report on your income tax return. Print free 2010 1040ez tax form A recognized loss is a loss you deduct from gross income. Print free 2010 1040ez tax form However, your gain or loss realized from the exchange of certain property may not be recognized for tax purposes. Print free 2010 1040ez tax form See Like-Kind Exchanges next. Print free 2010 1040ez tax form Also, a loss from the disposition of property held for personal use is not deductible. Print free 2010 1040ez tax form Like-Kind Exchanges Certain exchanges of property are not taxable. Print free 2010 1040ez tax form This means any gain from the exchange is not recognized, and any loss cannot be deducted. Print free 2010 1040ez tax form Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. Print free 2010 1040ez tax form The exchange of property for the same kind of property is the most common type of nontaxable exchange. Print free 2010 1040ez tax form To qualify for treatment as a like-kind exchange, the property traded and the property received must be both of the following. Print free 2010 1040ez tax form Qualifying property. Print free 2010 1040ez tax form Like-kind property. Print free 2010 1040ez tax form These two requirements are discussed later. Print free 2010 1040ez tax form Multiple-party transactions. Print free 2010 1040ez tax form   The like-kind exchange rules also apply to property exchanges that involve three and four-party transactions. Print free 2010 1040ez tax form Any part of these multiple-party transactions can qualify as a like-kind exchange if it meets all the requirements described in this section. Print free 2010 1040ez tax form Receipt of title from third party. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Basis of property received. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form See chapter 6 for more information. Print free 2010 1040ez tax form Money paid. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form The basis of the property received is the basis of the property given up, increased by the money paid. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form You traded an old tractor with an adjusted basis of $15,000 for a new one. Print free 2010 1040ez tax form The new tractor costs $300,000. Print free 2010 1040ez tax form You were allowed $80,000 for the old tractor and paid $220,000 cash. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Reporting the exchange. Print free 2010 1040ez tax form   Report the exchange of like-kind property, even though no gain or loss is recognized, on Form 8824, Like-Kind Exchanges. Print free 2010 1040ez tax form The Instructions for Form 8824 explain how to report the details of the exchange. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form You may also have to report the recognized gain as ordinary income because of depreciation recapture on Form 4797. Print free 2010 1040ez tax form See chapter 9 for more information. Print free 2010 1040ez tax form Qualifying property. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Machinery, buildings, land, trucks, breeding livestock, rental houses, and certain mutual ditch, reservoir, or irrigation company stock are examples of property that may qualify. Print free 2010 1040ez tax form Nonqualifying property. Print free 2010 1040ez tax form   The rules for like-kind exchanges do not apply to exchanges of the following property. Print free 2010 1040ez tax form Property you use for personal purposes, such as your home and family car. Print free 2010 1040ez tax form Stock in trade or other property held primarily for sale, such as crops and produce. Print free 2010 1040ez tax form Stocks, bonds, or notes. Print free 2010 1040ez tax form However, see Qualifying property above. Print free 2010 1040ez tax form Other securities or evidences of indebtedness, such as accounts receivable. Print free 2010 1040ez tax form Partnership interests. Print free 2010 1040ez tax form However, you may have a nontaxable exchange under other rules. Print free 2010 1040ez tax form See Other Nontaxable Exchanges in chapter 1 of Publication 544. Print free 2010 1040ez tax form Like-kind property. Print free 2010 1040ez tax form   To qualify as a nontaxable exchange, the properties exchanged must be of like kind. Print free 2010 1040ez tax form Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Print free 2010 1040ez tax form Generally, real property exchanged for real property qualifies as an exchange of like-kind property. Print free 2010 1040ez tax form For example, an exchange of city property for farm property or improved property for unimproved property is a like-kind exchange. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form An exchange of a tractor for acreage, however, is not an exchange of like-kind property. Print free 2010 1040ez tax form The exchange of livestock of one sex for livestock of the other sex is not a like-kind exchange. Print free 2010 1040ez tax form For example, the exchange of a bull for a cow is not a like-kind exchange. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form    Note. Print free 2010 1040ez tax form Whether you engaged in a like-kind exchange depends on an analysis of each asset involved in the exchange. Print free 2010 1040ez tax form Personal property. Print free 2010 1040ez tax form   Depreciable tangible personal property can be either like kind or like class to qualify for nontaxable exchange treatment. Print free 2010 1040ez tax form Like-class properties are depreciable tangible personal properties within the same General Asset Class or Product Class. Print free 2010 1040ez tax form Property classified in any General Asset Class may not be classified within a Product Class. Print free 2010 1040ez tax form Assets that are not in the same class will qualify as like-kind property if they are of the same nature or character. Print free 2010 1040ez tax form General Asset Classes. Print free 2010 1040ez tax form   General Asset Classes describe the types of property frequently used in many businesses. Print free 2010 1040ez tax form They include, but are not limited to, the following property. Print free 2010 1040ez tax form Office furniture, fixtures, and equipment (asset class 00. Print free 2010 1040ez tax form 11). Print free 2010 1040ez tax form Information systems, such as computers and peripheral equipment (asset class 00. Print free 2010 1040ez tax form 12). Print free 2010 1040ez tax form Data handling equipment except computers (asset class 00. Print free 2010 1040ez tax form 13). Print free 2010 1040ez tax form Automobiles and taxis (asset class 00. Print free 2010 1040ez tax form 22). Print free 2010 1040ez tax form Light general purpose trucks (asset class 00. Print free 2010 1040ez tax form 241). Print free 2010 1040ez tax form Heavy general purpose trucks (asset class 00. Print free 2010 1040ez tax form 242). Print free 2010 1040ez tax form Tractor units for use over-the-road (asset class 00. Print free 2010 1040ez tax form 26). Print free 2010 1040ez tax form Trailers and trailer-mounted containers (asset class 00. Print free 2010 1040ez tax form 27). Print free 2010 1040ez tax form Industrial steam and electric generation and/or distribution systems (asset class 00. Print free 2010 1040ez tax form 4). Print free 2010 1040ez tax form Product Classes. Print free 2010 1040ez tax form   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). Print free 2010 1040ez tax form The latest version of the manual can be accessed at www. Print free 2010 1040ez tax form census. Print free 2010 1040ez tax form gov/eos/www/naics/. Print free 2010 1040ez tax form Copies of the printed manual may be purchased from the National Technical Information Service (NTIS) at  www. Print free 2010 1040ez tax form ntis. Print free 2010 1040ez tax form gov/products/naics. Print free 2010 1040ez tax form aspx or by calling 1-800-553-NTIS (1-800-553-6847) or (703) 605-6000. Print free 2010 1040ez tax form A CD-ROM version with search and retrieval software is also available from NTIS. Print free 2010 1040ez tax form    NAICS class 333111, Farm Machinery and Equipment Manufacturing, includes most machinery and equipment used in a farming business. Print free 2010 1040ez tax form Partially nontaxable exchange. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form A loss is not deductible. Print free 2010 1040ez tax form Example 1. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form However, only $10,000, the cash received, is recognized (included in income). Print free 2010 1040ez tax form Example 2. Print free 2010 1040ez tax form Assume the same facts as in Example 1, except that, instead of money, you received a tractor with a FMV of $10,000. Print free 2010 1040ez tax form Your recognized gain is still limited to $10,000, the value of the tractor (the unlike property). Print free 2010 1040ez tax form Example 3. Print free 2010 1040ez tax form Assume in Example 1 that the FMV of the land you received was only $15,000. Print free 2010 1040ez tax form Your $5,000 loss is not recognized. Print free 2010 1040ez tax form Unlike property given up. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form The gain or loss is the difference between the FMV of the unlike property and the adjusted basis of the unlike property. Print free 2010 1040ez tax form Like-kind exchanges between related persons. Print free 2010 1040ez tax form   Special rules apply to like-kind exchanges between related persons. Print free 2010 1040ez tax form These rules affect both direct and indirect exchanges. Print free 2010 1040ez tax form Under these rules, if either person disposes of the property within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. Print free 2010 1040ez tax form The gain or loss on the original exchange must be recognized as of the date of the later disposition. Print free 2010 1040ez tax form The 2-year holding period begins on the date of the last transfer of property that was part of the like-kind exchange. Print free 2010 1040ez tax form Related persons. Print free 2010 1040ez tax form   Under these rules, related persons include, for example, you and a member of your family (spouse, brother, sister, parent, child, etc. Print free 2010 1040ez tax form ), 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. Print free 2010 1040ez tax form   For the complete list of related persons, see Related persons in chapter 2 of Publication 544. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form You used a grey pickup truck in your farming business. Print free 2010 1040ez tax form Your sister used a red pickup truck in her landscaping business. Print free 2010 1040ez tax form In December 2012, you exchanged your grey pickup truck, plus $200, for your sister's red pickup truck. Print free 2010 1040ez tax form At that time, the FMV of the grey pickup truck was $7,000 and its adjusted basis was $6,000. Print free 2010 1040ez tax form The FMV of the red pickup truck was $7,200 and its adjusted basis was $1,000. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form However, because this was a like-kind exchange, you recognized no gain. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form She recognized gain only to the extent of the money she received, $200. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form In 2013, you sold the red pickup truck to a third party for $7,000. Print free 2010 1040ez tax form Because you sold it within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. Print free 2010 1040ez tax form On your tax return for 2013, you must report your $1,000 gain on the 2012 exchange. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form In addition, your sister must report on her tax return for 2013 the $6,000 balance of her gain on the 2012 exchange. Print free 2010 1040ez tax form Her adjusted basis in the grey pickup truck is increased to $7,000 (its $1,000 basis plus the $6,000 gain recognized). Print free 2010 1040ez tax form Exceptions to the rules for related persons. Print free 2010 1040ez tax form   The following property dispositions are excluded from these rules. Print free 2010 1040ez tax form Dispositions due to the death of either related person. Print free 2010 1040ez tax form Involuntary conversions. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Multiple property exchanges. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form However, for exchanges of multiple properties, you do not make a property-by-property comparison if you do either of the following. Print free 2010 1040ez tax form Transfer and receive properties in two or more exchange groups. Print free 2010 1040ez tax form Transfer or receive more than one property within a single exchange group. Print free 2010 1040ez tax form   For more information, see Multiple Property Exchanges in chapter 1 of Publication 544. Print free 2010 1040ez tax form Deferred exchange. Print free 2010 1040ez tax form   A deferred exchange for like-kind property may qualify for nonrecognition of gain or loss. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The property you receive is replacement property. Print free 2010 1040ez tax form The transaction must be an exchange of property for property rather than a transfer of property for money used to buy replacement property. Print free 2010 1040ez tax form In addition, the replacement property will not be treated as like-kind property unless certain identification and receipt requirements are met. Print free 2010 1040ez tax form   For more information see Deferred Exchanges in chapter 1 of Publication 544. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form This rule does not apply if the recipient is a nonresident alien. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form This rule applies for determining loss as well as gain. Print free 2010 1040ez tax form Any gain recognized on a transfer in trust increases the basis. Print free 2010 1040ez tax form For more information on transfers of property incident to divorce, see Property Settlements in Publication 504, Divorced or Separated Individuals. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form You may also have a capital gain if your section 1231 transactions result in a net gain. Print free 2010 1040ez tax form See Section 1231 Gains and Losses in  chapter 9. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form Your net capital gains may be taxed at a lower tax rate than ordinary income. Print free 2010 1040ez tax form See Capital Gains Tax Rates , later. Print free 2010 1040ez tax form Your deduction for a net capital loss may be limited. Print free 2010 1040ez tax form See Treatment of Capital Losses , later. Print free 2010 1040ez tax form Capital Assets Almost everything you own and use for personal purposes or investment is a capital asset. Print free 2010 1040ez tax form The following items are examples of capital assets. Print free 2010 1040ez tax form A home owned and occupied by you and your family. Print free 2010 1040ez tax form Household furnishings. Print free 2010 1040ez tax form A car used for pleasure. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Stocks and bonds. Print free 2010 1040ez tax form However, there are special rules for gains on qualified small business stock. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Personal-use property. Print free 2010 1040ez tax form   Gain from a sale or exchange of personal-use property is a capital gain and is taxable. Print free 2010 1040ez tax form Loss from the sale or exchange of personal-use property is not deductible. Print free 2010 1040ez tax form You can deduct a loss relating to personal-use property only if it results from a casualty or theft. Print free 2010 1040ez tax form For information on casualties and thefts, see chapter 11. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The time you own an asset before disposing of it is the holding period. Print free 2010 1040ez tax form If you hold a capital asset 1 year or less, the gain or loss resulting from its disposition is short term. Print free 2010 1040ez tax form Report it in Part I of Schedule D (Form 1040). Print free 2010 1040ez tax form If you hold a capital asset longer than 1 year, the gain or loss resulting from its disposition is long term. Print free 2010 1040ez tax form Report it in Part II of Schedule D (Form 1040). Print free 2010 1040ez tax form Holding period. Print free 2010 1040ez tax form   To figure if you held property longer than 1 year, start counting on the day after the day you acquired the property. Print free 2010 1040ez tax form The day you disposed of the property is part of your holding period. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Inherited property. Print free 2010 1040ez tax form   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Print free 2010 1040ez tax form This rule does not apply to livestock used in a farm business. Print free 2010 1040ez tax form See Holding period under Livestock , later. Print free 2010 1040ez tax form Nonbusiness bad debt. Print free 2010 1040ez tax form   A nonbusiness bad debt is a short-term capital loss, deductible in the year the debt becomes worthless. Print free 2010 1040ez tax form See chapter 4 of Publication 550. Print free 2010 1040ez tax form Nontaxable exchange. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form That is, it begins on the same day as your holding period for the old property. Print free 2010 1040ez tax form Gift. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Real property. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form   However, taking possession of real property under an option agreement is not enough to start the holding period. Print free 2010 1040ez tax form The holding period cannot start until there is an actual contract of sale. Print free 2010 1040ez tax form The holding period of the seller cannot end before that time. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Net short-term capital gain or loss. Print free 2010 1040ez tax form   Combine your short-term capital gains and losses. Print free 2010 1040ez tax form Do this by adding all of your short-term capital gains. Print free 2010 1040ez tax form Then add all of your short-term capital losses. Print free 2010 1040ez tax form Subtract the lesser total from the greater. Print free 2010 1040ez tax form The difference is your net short-term capital gain or loss. Print free 2010 1040ez tax form Net long-term capital gain or loss. Print free 2010 1040ez tax form   Follow the same steps to combine your long-term capital gains and losses. Print free 2010 1040ez tax form The result is your net long-term capital gain or loss. Print free 2010 1040ez tax form Net gain. Print free 2010 1040ez tax form   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form See Capital Gains Tax Rates , later. Print free 2010 1040ez tax form Net loss. Print free 2010 1040ez tax form   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Print free 2010 1040ez tax form But there are limits on how much loss you can deduct and when you can deduct it. Print free 2010 1040ez tax form See Treatment of Capital Losses next. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form If your other income is low, you may not be able to use the full $3,000. Print free 2010 1040ez tax form The part of the $3,000 you cannot use becomes part of your capital loss carryover (discussed next). Print free 2010 1040ez tax form Capital loss carryover. Print free 2010 1040ez tax form   Generally, you have a capital loss carryover if either of the following situations applies to you. Print free 2010 1040ez tax form Your net loss on Schedule D (Form 1040), is more than the yearly limit. Print free 2010 1040ez tax form Your taxable income without your deduction for exemptions is less than zero. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form    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). Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form These lower rates are called the maximum capital gains rates. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form See Schedule D (Form 1040) and the Instructions for Schedule D (Form 1040). Print free 2010 1040ez tax form Also see Publication 550. Print free 2010 1040ez tax form Noncapital Assets Noncapital assets include property such as inventory and depreciable property used in a trade or business. Print free 2010 1040ez tax form A list of properties that are not capital assets is provided in the Instructions for Schedule D (Form 1040). Print free 2010 1040ez tax form Property held for sale in the ordinary course of your farm business. Print free 2010 1040ez tax form   Property you hold mainly for sale to customers, such as livestock, poultry, livestock products, and crops, is a noncapital asset. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form The treatment of this property is discussed in chapter 3. Print free 2010 1040ez tax form Land and depreciable properties. Print free 2010 1040ez tax form   Land and depreciable property you use in farming are not capital assets. Print free 2010 1040ez tax form Noncapital assets also include livestock held for draft, breeding, dairy, or sporting purposes. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The sales of these business assets are reported on Form 4797. Print free 2010 1040ez tax form See chapter 9 for more information. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Ordinary property or obligations are those that cannot produce capital gain or loss if sold or exchanged. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form A forward contract is generally similar to a futures contract except that the terms are not standardized and the contract is not exchange traded. Print free 2010 1040ez tax form Businesses may enter into commodity futures contracts or forward contracts and may acquire options on commodity futures contracts as either of the following. Print free 2010 1040ez tax form Hedging transactions. Print free 2010 1040ez tax form Transactions that are not hedging transactions. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form There is a limit on the amount of capital losses you can deduct each year. Print free 2010 1040ez tax form Hedging transactions are not subject to the mark-to-market rules. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The gain or loss on the termination of these hedges is generally ordinary gain or loss. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Examples include fuel and feed. Print free 2010 1040ez tax form If you have numerous transactions in the commodity futures market during the year, you must be able to show which transactions are hedging transactions. Print free 2010 1040ez tax form Clearly identify a hedging transaction on your books and records before the end of the day you entered into the transaction. Print free 2010 1040ez tax form It may be helpful to have separate brokerage accounts for your hedging and speculation transactions. Print free 2010 1040ez tax form Retain the identification of each hedging transaction with your books and records. Print free 2010 1040ez tax form Also, identify the item(s) or aggregate risk that is being hedged in your records. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Accounting methods for hedging transactions. Print free 2010 1040ez tax form   The accounting method you use for a hedging transaction must clearly reflect income. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form There are requirements and limits on the method you can use for certain hedging transactions. Print free 2010 1040ez tax form See Regulations section 1. Print free 2010 1040ez tax form 446-4(e) for those requirements and limits. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Cash method. Print free 2010 1040ez tax form Farm-price method. Print free 2010 1040ez tax form Unit-livestock-price method. Print free 2010 1040ez tax form   Once you adopt a method, you must apply it consistently and must have IRS approval before changing it. Print free 2010 1040ez tax form   Your books and records must describe the accounting method used for each type of hedging transaction. Print free 2010 1040ez tax form They must also contain any additional identification necessary to verify the application of the accounting method you used for the transaction. Print free 2010 1040ez tax form You must make the additional identification no more than 35 days after entering into the hedging transaction. Print free 2010 1040ez tax form Example of a hedging transaction. Print free 2010 1040ez tax form   You file your income tax returns on the cash method. Print free 2010 1040ez tax form On July 2 you anticipate a yield of 50,000 bushels of corn this year. Print free 2010 1040ez tax form The December futures price is $5. Print free 2010 1040ez tax form 75 a bushel, but there are indications that by harvest time the price will drop. Print free 2010 1040ez tax form To protect yourself against a drop in the price, you enter into the following hedging transaction. Print free 2010 1040ez tax form You sell ten December futures contracts of 5,000 bushels each for a total of 50,000 bushels of corn at $5. Print free 2010 1040ez tax form 75 a bushel. Print free 2010 1040ez tax form   The price did not drop as anticipated but rose to $6 a bushel. Print free 2010 1040ez tax form In November, you sell your crop at a local elevator for $6 a bushel. Print free 2010 1040ez tax form You also close out your futures position by buying ten December contracts for $6 a bushel. Print free 2010 1040ez tax form You paid a broker's commission of $1,400 ($70 per contract) for the complete in and out position in the futures market. Print free 2010 1040ez tax form   The result is that the price of corn rose 25 cents a bushel and the actual selling price is $6 a bushel. Print free 2010 1040ez tax form Your loss on the hedge is 25 cents a bushel. Print free 2010 1040ez tax form In effect, the net selling price of your corn is $5. Print free 2010 1040ez tax form 75 a bushel. Print free 2010 1040ez tax form   Report the results of your futures transactions and your sale of corn separately on Schedule F. Print free 2010 1040ez tax form See the instructions for the 2013 Schedule F (Form 1040). Print free 2010 1040ez tax form   The loss on your futures transactions is $13,900, figured as follows. Print free 2010 1040ez tax form July 2 - Sold December corn futures (50,000 bu. Print free 2010 1040ez tax form @$5. Print free 2010 1040ez tax form 75) $287,500 November 6 - Bought December corn futures (50,000 bu. Print free 2010 1040ez tax form @$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. Print free 2010 1040ez tax form   The proceeds from your corn sale at the local elevator are $300,000 (50,000 bu. Print free 2010 1040ez tax form × $6). Print free 2010 1040ez tax form Report it on Schedule F, Part I, line 2, as income from sales of products you raised. Print free 2010 1040ez tax form   Assume you were right and the price went down 25 cents a bushel. Print free 2010 1040ez tax form In effect, you would still net $5. Print free 2010 1040ez tax form 75 a bushel, figured as follows. Print free 2010 1040ez tax form Sold cash corn, per bushel $5. Print free 2010 1040ez tax form 50 Gain on hedge, per bushel . Print free 2010 1040ez tax form 25 Net price, per bushel $5. Print free 2010 1040ez tax form 75       The gain on your futures transactions would have been $11,100, figured as follows. Print free 2010 1040ez tax form July 2 - Sold December corn futures (50,000 bu. Print free 2010 1040ez tax form @$5. Print free 2010 1040ez tax form 75) $287,500 November 6 - Bought December corn futures (50,000 bu. Print free 2010 1040ez tax form @$5. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Livestock This part discusses the sale or exchange of livestock used in your farm business. Print free 2010 1040ez tax form Gain or loss from the sale or exchange of this livestock may qualify as a section 1231 gain or loss. Print free 2010 1040ez tax form However, any part of the gain that is ordinary income from the recapture of depreciation is not included as section 1231 gain. Print free 2010 1040ez tax form See chapter 9 for more information on section 1231 gains and losses and the recapture of depreciation under section 1245. Print free 2010 1040ez tax form The rules discussed here do not apply to the sale of livestock held primarily for sale to customers. Print free 2010 1040ez tax form The sale of this livestock is reported on Schedule F. Print free 2010 1040ez tax form See chapter 3. Print free 2010 1040ez tax form Also, special rules apply to sales or exchanges caused by weather-related conditions. Print free 2010 1040ez tax form See chapter 3. Print free 2010 1040ez tax form Holding period. Print free 2010 1040ez tax form   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). Print free 2010 1040ez tax form Livestock. Print free 2010 1040ez tax form   For section 1231 transactions, livestock includes cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals, and other mammals. Print free 2010 1040ez tax form Also, for section 1231 transactions, livestock does not include chickens, turkeys, pigeons, geese, emus, ostriches, rheas, or other birds, fish, frogs, reptiles, etc. Print free 2010 1040ez tax form Livestock used in farm business. Print free 2010 1040ez tax form   If livestock is held primarily for draft, breeding, dairy, or sporting purposes, it is used in your farm business. Print free 2010 1040ez tax form The purpose for which an animal is held ordinarily is determined by a farmer's actual use of the animal. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Example 1. Print free 2010 1040ez tax form You discover an animal that you intend to use for breeding purposes is sterile. Print free 2010 1040ez tax form You dispose of it within a reasonable time. Print free 2010 1040ez tax form This animal was held for breeding purposes. Print free 2010 1040ez tax form Example 2. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form These young animals were held for breeding or dairy purposes. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form See Sales Caused by Weather-Related Conditions in chapter 3. Print free 2010 1040ez tax form Example 3. Print free 2010 1040ez tax form You are in the business of raising hogs for slaughter. Print free 2010 1040ez tax form Customarily, before selling your sows, you obtain a single litter of pigs that you will raise for sale. Print free 2010 1040ez tax form You sell the brood sows after obtaining the litter. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Example 4. Print free 2010 1040ez tax form You are in the business of raising registered cattle for sale to others for use as breeding cattle. Print free 2010 1040ez tax form The business practice is to breed the cattle before sale to establish their fitness as registered breeding cattle. Print free 2010 1040ez tax form Your use of the young cattle for breeding purposes is ordinary and necessary for selling them as registered breeding cattle. Print free 2010 1040ez tax form Such use does not demonstrate that you are holding the cattle for breeding purposes. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The same applies to hog and sheep breeders. Print free 2010 1040ez tax form Example 5. Print free 2010 1040ez tax form You breed, raise, and train horses for racing purposes. Print free 2010 1040ez tax form Every year you cull horses from your racing stable. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form These horses are all considered held for sporting purposes. Print free 2010 1040ez tax form Figuring gain or loss on the cash method. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Raised livestock. Print free 2010 1040ez tax form   Gain on the sale of raised livestock is generally the gross sales price reduced by any expenses of the sale. Print free 2010 1040ez tax form Expenses of sale include sales commissions, freight or hauling from farm to commission company, and other similar expenses. Print free 2010 1040ez tax form The basis of the animal sold is zero if the costs of raising it were deducted during the years the animal was being raised. Print free 2010 1040ez tax form However, see Uniform Capitalization Rules in chapter 6. Print free 2010 1040ez tax form Purchased livestock. Print free 2010 1040ez tax form   The gross sales price minus your adjusted basis and any expenses of sale is the gain or loss. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form A farmer sold a breeding cow on January 8, 2013, for $1,250. Print free 2010 1040ez tax form Expenses of the sale were $125. Print free 2010 1040ez tax form The cow was bought July 2, 2009, for $1,300. Print free 2010 1040ez tax form Depreciation (not less than the amount allowable) was $867. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Any gain realized on the disposition of converted wetland or highly erodible cropland is treated as ordinary income. Print free 2010 1040ez tax form Any loss on the disposition of such property is treated as a long-term capital loss. Print free 2010 1040ez tax form Converted wetland. Print free 2010 1040ez tax form   This is generally land that was drained or filled to make the production of agricultural commodities possible. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form   A wetland (before conversion) is land that meets all the following conditions. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form It supports, under normal circumstances, mostly plants that grow in saturated soil. Print free 2010 1040ez tax form Highly erodible cropland. Print free 2010 1040ez tax form   This is cropland subject to erosion that you used at any time for farming purposes other than grazing animals. Print free 2010 1040ez tax form Generally, highly erodible cropland is land currently classified by the Department of Agriculture as Class IV, VI, VII, or VIII under its classification system. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Successor. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Timber Standing timber you held as investment property is a capital asset. Print free 2010 1040ez tax form Gain or loss from its sale is capital gain or loss reported on Form 8949 and Schedule D (Form 1040), as applicable. Print free 2010 1040ez tax form If you held the timber primarily for sale to customers, it is not a capital asset. Print free 2010 1040ez tax form Gain or loss on its sale is ordinary business income or loss. Print free 2010 1040ez tax form It is reported on Schedule F, line 1 (purchased timber) or line 2 (raised timber). Print free 2010 1040ez tax form See the Instructions for Schedule F (Form 1040). Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Amounts realized from these sales, and the expenses incurred in cutting, hauling, etc. Print free 2010 1040ez tax form , are ordinary farm income and expenses reported on Schedule F. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Timber considered cut. Print free 2010 1040ez tax form   Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. Print free 2010 1040ez tax form This is true whether the timber is cut under contract or whether you cut it yourself. Print free 2010 1040ez tax form Christmas trees. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form They qualify for both rules discussed below. Print free 2010 1040ez tax form Election to treat cutting as a sale or exchange. Print free 2010 1040ez tax form   Under the general rule, the cutting of timber results in no gain or loss. Print free 2010 1040ez tax form It is not until a sale or exchange occurs that gain or loss is realized. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Any later sale results in ordinary business income or loss. Print free 2010 1040ez tax form See the example below. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Making the election. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form You do not have to make the election in the first year you cut the timber. Print free 2010 1040ez tax form You can make it in any year to which the election would apply. Print free 2010 1040ez tax form If the timber is partnership property, the election is made on the partnership return. Print free 2010 1040ez tax form This election cannot be made on an amended return. Print free 2010 1040ez tax form   Once you have made the election, it remains in effect for all later years unless you revoke it. Print free 2010 1040ez tax form Election under section 631(a) may be revoked. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form The prior election (and revocation) is disregarded for purposes of making a subsequent election. Print free 2010 1040ez tax form See Form T (Timber), Forest Activities Schedule, for more information. Print free 2010 1040ez tax form Gain or loss. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 611-3. Print free 2010 1040ez tax form   Depletion of timber is discussed in chapter 7. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form   In April 2013, you owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. Print free 2010 1040ez tax form It had an adjusted basis for depletion of $40 per MBF. Print free 2010 1040ez tax form You are a calendar year taxpayer. Print free 2010 1040ez tax form On January 1, 2013, the timber had a FMV of $350 per MBF. Print free 2010 1040ez tax form It was cut in April for sale. Print free 2010 1040ez tax form On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. Print free 2010 1040ez tax form You report the difference between the FMV and your adjusted basis for depletion as a gain. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form You figure your gain as follows. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Outright sales of timber. Print free 2010 1040ez tax form   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). Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form Cutting contract. Print free 2010 1040ez tax form   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. Print free 2010 1040ez tax form You are the owner of the timber. Print free 2010 1040ez tax form You held the timber longer than 1 year before its disposal. Print free 2010 1040ez tax form You kept an economic interest in the timber. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Include this amount on Form 4797 along with your other section 1231 gains or losses. Print free 2010 1040ez tax form Date of disposal. Print free 2010 1040ez tax form   The date of disposal is the date the timber is cut. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form   This election applies only to figure the holding period of the timber. Print free 2010 1040ez tax form It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). Print free 2010 1040ez tax form   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. Print free 2010 1040ez tax form The statement must identify the advance payments subject to the election and the contract under which they were made. Print free 2010 1040ez tax form   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). Print free 2010 1040ez tax form Attach the statement to the amended return and write “Filed pursuant to section 301. Print free 2010 1040ez tax form 9100-2” at the top of the statement. Print free 2010 1040ez tax form File the amended return at the same address the original return was filed. Print free 2010 1040ez tax form Owner. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Tree stumps. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. Print free 2010 1040ez tax form However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. Print free 2010 1040ez tax form Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. Print free 2010 1040ez tax form   See Form T (Timber) and its separate instructions for more information about dispositions of timber. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form If you have a gain from the sale, you may be allowed to exclude the gain on your home. Print free 2010 1040ez tax form For more information, see Publication 523, Selling Your Home. Print free 2010 1040ez tax form The gain on the sale of your business property is taxable. Print free 2010 1040ez tax form A loss on the sale of your business property to an unrelated person is deducted as an ordinary loss. Print free 2010 1040ez tax form Your taxable gain or loss on the sale of property used in your farm business is taxed under the rules for section 1231 transactions. Print free 2010 1040ez tax form See chapter 9. Print free 2010 1040ez tax form Losses from personal-use property, other than casualty or theft losses, are not deductible. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form See chapter 10 for information about installment sales. Print free 2010 1040ez tax form When you sell your farm, the gain or loss on each asset is figured separately. Print free 2010 1040ez tax form The tax treatment of gain or loss on the sale of each asset is determined by the classification of the asset. Print free 2010 1040ez tax form Each of the assets sold must be classified as one of the following. Print free 2010 1040ez tax form Capital asset held 1 year or less. Print free 2010 1040ez tax form Capital asset held longer than 1 year. Print free 2010 1040ez tax form 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 ). Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Allocation of consideration paid for a farm. Print free 2010 1040ez tax form   The sale of a farm for a lump sum is considered a sale of each individual asset rather than a single asset. Print free 2010 1040ez tax form The residual method is required only if the group of assets sold constitutes a trade or business. Print free 2010 1040ez tax form This method determines gain or loss from the transfer of each asset. Print free 2010 1040ez tax form It also determines the buyer's basis in the business assets. Print free 2010 1040ez tax form For more information, see Sale of a Business in chapter 2 of Publication 544. Print free 2010 1040ez tax form Property used in farm operation. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Recognized gains and losses on business property must be reported on your return for the year of the sale. Print free 2010 1040ez tax form If the property was held longer than 1 year, it may qualify for section 1231 treatment (see chapter 9). Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form You sell your farm, including your main home, which you have owned since December 2001. Print free 2010 1040ez tax form You realize gain on the sale as follows. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Treat the balance as section 1231 gain. Print free 2010 1040ez tax form 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 . Print free 2010 1040ez tax form Partial sale. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form You cannot wait until you have sold enough of the farm to recover its entire cost before reporting gain or loss. Print free 2010 1040ez tax form For a detailed discussion on installment sales, see Publication 544. Print free 2010 1040ez tax form Adjusted basis of the part sold. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form , on the part sold. Print free 2010 1040ez tax form 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 . Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form You bought a 600-acre farm for $700,000. Print free 2010 1040ez tax form The farm included land and buildings. Print free 2010 1040ez tax form The purchase contract designated $600,000 of the purchase price to the land. Print free 2010 1040ez tax form You later sold 60 acres of land on which you had installed a fence. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Use this amount to determine your gain or loss on the sale of the 60 acres. Print free 2010 1040ez tax form Assessed values for local property taxes. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form Assume that in the preceding example there was no breakdown of the $700,000 purchase price between land and buildings. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The assessed valuation of the land is 3/4 (75%) of the total assessed valuation. Print free 2010 1040ez tax form Multiply the $700,000 total purchase price by 75% to figure basis of $525,000 for the 600 acres of land. Print free 2010 1040ez tax form The unadjusted basis of the 60 acres you sold would then be $52,500 (1/10 of $525,000). Print free 2010 1040ez tax form Sale of your home. Print free 2010 1040ez tax form   Your home is a capital asset and not property used in the trade or business of farming. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Your home includes the immediate surroundings and outbuildings relating to it that are not used for business purposes. Print free 2010 1040ez tax form   If you use part of your home for business, you must make an appropriate adjustment to the basis for depreciation allowed or allowable. Print free 2010 1040ez tax form For more information on basis, see chapter 6. Print free 2010 1040ez tax form More information. Print free 2010 1040ez tax form   For more information on selling your home, see Publication 523. Print free 2010 1040ez tax form Gain from condemnation. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Print free 2010 1040ez tax form This is true even if you voluntarily return the property to the lender. Print free 2010 1040ez tax form You may also realize ordinary income from cancellation of debt if the loan balance is more than the FMV of the property. Print free 2010 1040ez tax form Buyer's (borrower's) gain or loss. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Print free 2010 1040ez tax form See Determining Gain or Loss , earlier. Print free 2010 1040ez tax form Worksheet 8-1. Print free 2010 1040ez tax form Worksheet for Foreclosures andRepossessions Part 1. Print free 2010 1040ez tax form Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Print free 2010 1040ez tax form Complete this part only if you were personally liable for the debt. Print free 2010 1040ez tax form Otherwise, go to Part 2. Print free 2010 1040ez tax form   1. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Enter the Fair Market Value of the transferred property   3. Print free 2010 1040ez tax form Ordinary income from cancellation of debt upon foreclosure or repossession. Print free 2010 1040ez tax form * Subtract line 2 from line 1. Print free 2010 1040ez tax form If zero or less, enter -0-   Part 2. Print free 2010 1040ez tax form Figure your gain or loss from foreclosure or repossession. Print free 2010 1040ez tax form   4. Print free 2010 1040ez tax form If you completed Part 1, enter the smaller of line 1 or line 2. Print free 2010 1040ez tax form If you did not complete Part 1, enter the outstanding debt immediately before the transfer of property   5. Print free 2010 1040ez tax form Enter any proceeds you received from the foreclosure sale   6. Print free 2010 1040ez tax form Add lines 4 and 5   7. Print free 2010 1040ez tax form Enter the adjusted basis of the transferred property   8. Print free 2010 1040ez tax form Gain or loss from foreclosure or repossession. Print free 2010 1040ez tax form Subtract line 7  from line 6   * The income may not be taxable. Print free 2010 1040ez tax form See Cancellation of debt . Print free 2010 1040ez tax form    You can use Worksheet 8-1 to figure your gain or loss from a foreclosure or repossession. Print free 2010 1040ez tax form Amount realized on a nonrecourse debt. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Example 1. Print free 2010 1040ez tax form Ann paid $200,000 for land used in her farming business. Print free 2010 1040ez tax form She paid $15,000 down and borrowed the remaining $185,000 from a bank. Print free 2010 1040ez tax form Ann is not personally liable for the loan (nonrecourse debt), but pledges the land as security. Print free 2010 1040ez tax form The bank foreclosed on the loan 2 years after Ann stopped making payments. Print free 2010 1040ez tax form When the bank foreclosed, the balance due on the loan was $180,000 and the FMV of the land was $170,000. Print free 2010 1040ez tax form The amount Ann realized on the foreclosure was $180,000, the debt canceled by the foreclosure. Print free 2010 1040ez tax form She figures her gain or loss on Form 4797, Part I, by comparing the amount realized ($180,000) with her adjusted basis ($200,000). Print free 2010 1040ez tax form She has a $20,000 deductible loss. Print free 2010 1040ez tax form Example 2. Print free 2010 1040ez tax form Assume the same facts as in Example 1 except the FMV of the land was $210,000. Print free 2010 1040ez tax form The result is the same. Print free 2010 1040ez tax form The amount Ann realized on the foreclosure is $180,000, the debt canceled by the foreclosure. Print free 2010 1040ez tax form Because her adjusted basis is $200,000, she has a deductible loss of $20,000, which she reports on Form 4797, Part I. Print free 2010 1040ez tax form Amount realized on a recourse debt. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form The amount realized does not include the canceled debt that is your income from cancellation of debt. Print free 2010 1040ez tax form See Cancellation of debt , later. Print free 2010 1040ez tax form Example 3. Print free 2010 1040ez tax form Assume the same facts as in Example 1 above except Ann is personally liable for the loan (recourse debt). Print free 2010 1040ez tax form In this case, the amount she realizes is $170,000. Print free 2010 1040ez tax form This is the canceled debt ($180,000) up to the FMV of the land ($170,000). Print free 2010 1040ez tax form Ann figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($200,000). Print free 2010 1040ez tax form She has a $30,000 deductible loss, which she figures on Form 4797, Part I. Print free 2010 1040ez tax form She is also treated as receiving ordinary income from cancellation of debt. Print free 2010 1040ez tax form That income is $10,000 ($180,000 − $170,000). Print free 2010 1040ez tax form This is the part of the canceled debt not included in the amount realized. Print free 2010 1040ez tax form She reports this as other income on Schedule F, line 8. Print free 2010 1040ez tax form Seller's (lender's) gain or loss on repossession. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form For more information, see Repossession in Publication 537, Installment Sales. Print free 2010 1040ez tax form Cancellation of debt. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form This income is separate from any gain or loss realized from the foreclosure or repossession. Print free 2010 1040ez tax form Report the income from cancellation of a business debt on Schedule F, line 8. Print free 2010 1040ez tax form Report the income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. Print free 2010 1040ez tax form    You can use Worksheet 8-1 to figure your income from cancellation of debt. Print free 2010 1040ez tax form   However, income from cancellation of debt is not taxed if any of the following apply. Print free 2010 1040ez tax form The cancellation is intended as a gift. Print free 2010 1040ez tax form The debt is qualified farm debt (see chapter 3). Print free 2010 1040ez tax form The debt is qualified real property business debt (see chapter 5 of Publication 334). Print free 2010 1040ez tax form You are insolvent or bankrupt (see  chapter 3). Print free 2010 1040ez tax form The debt is qualified principal residence indebtedness (see chapter 3). Print free 2010 1040ez tax form   Use Form 982 to report the income exclusion. Print free 2010 1040ez tax form Abandonment The abandonment of property is a disposition of property. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form Business or investment property. Print free 2010 1040ez tax form   Loss from abandonment of business or investment property is deductible as a loss. Print free 2010 1040ez tax form Loss from abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Print free 2010 1040ez tax form If your adjusted basis is more than the amount you realize (if any), then you have a loss. Print free 2010 1040ez tax form If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Print free 2010 1040ez tax form This rule also applies to leasehold improvements the lessor made for the lessee. Print free 2010 1040ez tax form 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 . Print free 2010 1040ez tax form   If the abandoned property is secured by debt, special rules apply. Print free 2010 1040ez tax form 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). Print free 2010 1040ez tax form For more information, see chapter 3 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). Print free 2010 1040ez tax form The abandonment loss is deducted in the tax year in which the loss is sustained. Print free 2010 1040ez tax form Report the loss on Form 4797, Part II, line 10. Print free 2010 1040ez tax form Personal-use property. Print free 2010 1040ez tax form   You cannot deduct any loss from abandonment of your home or other property held for personal use. Print free 2010 1040ez tax form Canceled debt. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form This income is separate from any loss realized from abandonment of the property. Print free 2010 1040ez tax form Report income from cancellation of a debt related to a business or rental activity as business or rental income. Print free 2010 1040ez tax form Report income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. Print free 2010 1040ez tax form   However, income from cancellation of debt is not taxed in certain circumstances. Print free 2010 1040ez tax form See Cancellation of debt earlier under Foreclosure or Repossession . Print free 2010 1040ez tax form Forms 1099-A and 1099-C. Print free 2010 1040ez tax form   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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form 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. Print free 2010 1040ez tax form For foreclosures, repossessions, abandonments of property, and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Print free 2010 1040ez tax form Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Corporate Foreign Tax Credit Statistics

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Corporate Foreign Tax Credit, Tax Year 2010 One Sheet
 

What is the Corporate Foreign Tax Credit?

The corporate foreign tax credit is a set of provisions designed by Congress to eliminate potential double taxation on the foreign-source income of U.S. corporations. Double taxation occurs when an item of income is taxed by both the United States, as the corporation's country of residence, as well as by the country where the income was generated. The current provisions allow U.S. businesses to credit their foreign taxes paid, accrued, or deemed paid against their U.S. income tax liability, subject to limitations that prevent taxpayers from using taxes paid in a country with a higher tax rate than the U.S. to offset their tax liability on U.S. income. Corporations are required to calculate this credit separately for different income categories to prevent taxpayers from combining income that is traditionally taxed at low rates, such as dividend or interest income, with income that is typically taxed at higher rates, such as active business income. The corporate foreign tax credit is reported on Form 1118, Foreign Tax Credit - Corporations.

For information about selected terms and concepts and a description of the data sources and limitations, please visit Corporate Foreign Tax Credit Study Metadata.

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Statistical Tables

The following tables are available as Microsoft Excel®  files.  A free Excel viewer is available for download, if needed.

U.S. Corporation Income Tax Returns with a Foreign Tax Credit: Total Assets, Income, Taxes, and Credits, and Foreign Income, Deductions, and Taxes 
Shown by major and selected minor industry.

U.S. Corporation Income Tax Returns with a Foreign Tax Credit: Returns with Income in Excess Credit Position: Foreign Income, Deductions, and Taxes 
Shown by major and selected minor industry.

U.S. Corporation Income Tax Returns with a Foreign Tax Credit: Returns with Income in Excess Limitation Position: Foreign Income, Deductions, and Taxes 
Shown by major and selected minor industry.

U.S. Corporation Income Tax Returns with a Foreign Tax Credit: Foreign Income, Deductions, and Taxes
Shown by industrial sector and by type of foreign income for which separate credit was computed. (Tax Year 2006 is the last year published for this table.)

U.S. Corporation Income Tax Returns with a Foreign Tax Credit: Foreign Income, Deductions, and Taxes Reported on Form 1118
Shown by selected country to which foreign taxes were paid.
 


SOI Bulletin Articles

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Archives

Foreign Tax Credit, Claimed on Corporation Income Tax Returns

 


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The Print Free 2010 1040ez Tax Form

Print free 2010 1040ez tax form 2. Print free 2010 1040ez tax form   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Print free 2010 1040ez tax form How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Print free 2010 1040ez tax form Deferral percentage. Print free 2010 1040ez tax form Employee compensation. Print free 2010 1040ez tax form Compensation of self-employed individuals. Print free 2010 1040ez tax form Choice not to treat deferrals as compensation. Print free 2010 1040ez tax form Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Print free 2010 1040ez tax form Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Print free 2010 1040ez tax form S. Print free 2010 1040ez tax form Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Print free 2010 1040ez tax form Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Print free 2010 1040ez tax form A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Print free 2010 1040ez tax form SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Print free 2010 1040ez tax form A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Print free 2010 1040ez tax form Eligible employee. Print free 2010 1040ez tax form   An eligible employee is an individual who meets all the following requirements. Print free 2010 1040ez tax form Has reached age 21. Print free 2010 1040ez tax form Has worked for you in at least 3 of the last 5 years. Print free 2010 1040ez tax form Has received at least $550 in compensation from you in 2013. Print free 2010 1040ez tax form This amount remains the same in 2014. Print free 2010 1040ez tax form    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Print free 2010 1040ez tax form Excludable employees. Print free 2010 1040ez tax form   The following employees can be excluded from coverage under a SEP. Print free 2010 1040ez tax form Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Print free 2010 1040ez tax form Nonresident alien employees who have received no U. Print free 2010 1040ez tax form S. Print free 2010 1040ez tax form source wages, salaries, or other personal services compensation from you. Print free 2010 1040ez tax form For more information about nonresident aliens, see Publication 519, U. Print free 2010 1040ez tax form S. Print free 2010 1040ez tax form Tax Guide for Aliens. Print free 2010 1040ez tax form Setting Up a SEP There are three basic steps in setting up a SEP. Print free 2010 1040ez tax form You must execute a formal written agreement to provide benefits to all eligible employees. Print free 2010 1040ez tax form You must give each eligible employee certain information about the SEP. Print free 2010 1040ez tax form A SEP-IRA must be set up by or for each eligible employee. Print free 2010 1040ez tax form Many financial institutions will help you set up a SEP. Print free 2010 1040ez tax form Formal written agreement. Print free 2010 1040ez tax form   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Print free 2010 1040ez tax form You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Print free 2010 1040ez tax form However, see When not to use Form 5305-SEP, below. Print free 2010 1040ez tax form   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Print free 2010 1040ez tax form Keep the original form. Print free 2010 1040ez tax form Do not file it with the IRS. Print free 2010 1040ez tax form Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Print free 2010 1040ez tax form See the Form 5305-SEP instructions for details. Print free 2010 1040ez tax form If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Print free 2010 1040ez tax form When not to use Form 5305-SEP. Print free 2010 1040ez tax form   You cannot use Form 5305-SEP if any of the following apply. Print free 2010 1040ez tax form You currently maintain any other qualified retirement plan other than another SEP. Print free 2010 1040ez tax form You have any eligible employees for whom IRAs have not been set up. Print free 2010 1040ez tax form You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Print free 2010 1040ez tax form You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Print free 2010 1040ez tax form An affiliated service group described in section 414(m). Print free 2010 1040ez tax form A controlled group of corporations described in section 414(b). Print free 2010 1040ez tax form Trades or businesses under common control described in section 414(c). Print free 2010 1040ez tax form You do not pay the cost of the SEP contributions. Print free 2010 1040ez tax form Information you must give to employees. Print free 2010 1040ez tax form   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Print free 2010 1040ez tax form An IRS model SEP is not considered adopted until you give each employee this information. Print free 2010 1040ez tax form Setting up the employee's SEP-IRA. Print free 2010 1040ez tax form   A SEP-IRA must be set up by or for each eligible employee. Print free 2010 1040ez tax form SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Print free 2010 1040ez tax form You send SEP contributions to the financial institution where the SEP-IRA is maintained. Print free 2010 1040ez tax form Deadline for setting up a SEP. Print free 2010 1040ez tax form   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Print free 2010 1040ez tax form Credit for startup costs. Print free 2010 1040ez tax form   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Print free 2010 1040ez tax form For more information, see Credit for startup costs under Reminders, earlier. Print free 2010 1040ez tax form How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Print free 2010 1040ez tax form If you are self-employed, you can contribute to your own SEP-IRA. Print free 2010 1040ez tax form Contributions must be in the form of money (cash, check, or money order). Print free 2010 1040ez tax form You cannot contribute property. Print free 2010 1040ez tax form However, participants may be able to transfer or roll over certain property from one retirement plan to another. Print free 2010 1040ez tax form See Publication 590 for more information about rollovers. Print free 2010 1040ez tax form You do not have to make contributions every year. Print free 2010 1040ez tax form But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Print free 2010 1040ez tax form When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Print free 2010 1040ez tax form Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Print free 2010 1040ez tax form A SEP-IRA cannot be a Roth IRA. Print free 2010 1040ez tax form Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Print free 2010 1040ez tax form Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Print free 2010 1040ez tax form If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Print free 2010 1040ez tax form Participants age 70½ or over must take required minimum distributions. Print free 2010 1040ez tax form Time limit for making contributions. Print free 2010 1040ez tax form   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Print free 2010 1040ez tax form Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Print free 2010 1040ez tax form Compensation generally does not include your contributions to the SEP. Print free 2010 1040ez tax form The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form Your employee, Mary Plant, earned $21,000 for 2013. Print free 2010 1040ez tax form The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Print free 2010 1040ez tax form Contributions for yourself. Print free 2010 1040ez tax form   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Print free 2010 1040ez tax form However, special rules apply when figuring your maximum deductible contribution. Print free 2010 1040ez tax form See Deduction Limit for Self-Employed Individuals , later. Print free 2010 1040ez tax form Annual compensation limit. Print free 2010 1040ez tax form   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Print free 2010 1040ez tax form However, $51,000 is the maximum contribution for an eligible employee. Print free 2010 1040ez tax form These limits are $260,000 and $52,000, respectively, in 2014. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form Your employee, Susan Green, earned $210,000 for 2013. Print free 2010 1040ez tax form Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Print free 2010 1040ez tax form More than one plan. Print free 2010 1040ez tax form   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Print free 2010 1040ez tax form When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Print free 2010 1040ez tax form Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Print free 2010 1040ez tax form Tax treatment of excess contributions. Print free 2010 1040ez tax form   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Print free 2010 1040ez tax form 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Print free 2010 1040ez tax form $51,000. Print free 2010 1040ez tax form Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Print free 2010 1040ez tax form For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Print free 2010 1040ez tax form Reporting on Form W-2. Print free 2010 1040ez tax form   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Print free 2010 1040ez tax form Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Print free 2010 1040ez tax form If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Print free 2010 1040ez tax form Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Print free 2010 1040ez tax form Your contributions (including any excess contributions carryover). Print free 2010 1040ez tax form 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Print free 2010 1040ez tax form In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Print free 2010 1040ez tax form Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Print free 2010 1040ez tax form When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Print free 2010 1040ez tax form The deduction for the deductible part of your self-employment tax. Print free 2010 1040ez tax form The deduction for contributions to your own SEP-IRA. Print free 2010 1040ez tax form The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Print free 2010 1040ez tax form For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Print free 2010 1040ez tax form To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Print free 2010 1040ez tax form Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Print free 2010 1040ez tax form Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Print free 2010 1040ez tax form However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Print free 2010 1040ez tax form If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Print free 2010 1040ez tax form Excise tax. Print free 2010 1040ez tax form   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Print free 2010 1040ez tax form For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Print free 2010 1040ez tax form When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Print free 2010 1040ez tax form If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Print free 2010 1040ez tax form If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Print free 2010 1040ez tax form Example. Print free 2010 1040ez tax form You are a fiscal year taxpayer whose tax year ends June 30. Print free 2010 1040ez tax form You maintain a SEP on a calendar year basis. Print free 2010 1040ez tax form You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Print free 2010 1040ez tax form Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Print free 2010 1040ez tax form For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Print free 2010 1040ez tax form S. Print free 2010 1040ez tax form Return of Partnership Income; and corporations deduct them on Form 1120, U. Print free 2010 1040ez tax form S. Print free 2010 1040ez tax form Corporation Income Tax Return, or Form 1120S, U. Print free 2010 1040ez tax form S. Print free 2010 1040ez tax form Income Tax Return for an S Corporation. Print free 2010 1040ez tax form Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Print free 2010 1040ez tax form (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Print free 2010 1040ez tax form , you receive from the partnership. Print free 2010 1040ez tax form ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Print free 2010 1040ez tax form Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Print free 2010 1040ez tax form (See the Caution, next. Print free 2010 1040ez tax form ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Print free 2010 1040ez tax form This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Print free 2010 1040ez tax form You are not allowed to set up a SARSEP after 1996. Print free 2010 1040ez tax form However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Print free 2010 1040ez tax form If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Print free 2010 1040ez tax form Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Print free 2010 1040ez tax form At least 50% of your employees eligible to participate choose to make elective deferrals. Print free 2010 1040ez tax form You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Print free 2010 1040ez tax form The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Print free 2010 1040ez tax form SARSEP ADP test. Print free 2010 1040ez tax form   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Print free 2010 1040ez tax form A highly compensated employee is defined in chapter 1. Print free 2010 1040ez tax form Deferral percentage. Print free 2010 1040ez tax form   The deferral percentage for an employee for a year is figured as follows. Print free 2010 1040ez tax form   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Print free 2010 1040ez tax form Employee compensation. Print free 2010 1040ez tax form   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Print free 2010 1040ez tax form Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Print free 2010 1040ez tax form See Compensation in chapter 1. Print free 2010 1040ez tax form Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Print free 2010 1040ez tax form Compensation of self-employed individuals. Print free 2010 1040ez tax form   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Print free 2010 1040ez tax form   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Print free 2010 1040ez tax form Choice not to treat deferrals as compensation. Print free 2010 1040ez tax form   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Print free 2010 1040ez tax form Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Print free 2010 1040ez tax form 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Print free 2010 1040ez tax form $17,500. Print free 2010 1040ez tax form The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Print free 2010 1040ez tax form Cash or deferred arrangement (section 401(k) plan). Print free 2010 1040ez tax form Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Print free 2010 1040ez tax form SIMPLE IRA plan. Print free 2010 1040ez tax form In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Print free 2010 1040ez tax form Catch-up contributions. Print free 2010 1040ez tax form   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Print free 2010 1040ez tax form The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Print free 2010 1040ez tax form Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Print free 2010 1040ez tax form However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Print free 2010 1040ez tax form The catch-up contribution limit. Print free 2010 1040ez tax form The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Print free 2010 1040ez tax form   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Print free 2010 1040ez tax form Overall limit on SEP contributions. Print free 2010 1040ez tax form   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Print free 2010 1040ez tax form The same rule applies to contributions you make to your own SEP-IRA. Print free 2010 1040ez tax form See Contribution Limits , earlier. Print free 2010 1040ez tax form Figuring the elective deferral. Print free 2010 1040ez tax form   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Print free 2010 1040ez tax form Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Print free 2010 1040ez tax form However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Print free 2010 1040ez tax form Excess deferrals. Print free 2010 1040ez tax form   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Print free 2010 1040ez tax form For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Print free 2010 1040ez tax form The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Print free 2010 1040ez tax form See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Print free 2010 1040ez tax form Excess SEP contributions. Print free 2010 1040ez tax form   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Print free 2010 1040ez tax form You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Print free 2010 1040ez tax form If you do not notify them within this time period, you must pay a 10% tax on the excess. Print free 2010 1040ez tax form For an explanation of the notification requirements, see Rev. Print free 2010 1040ez tax form Proc. Print free 2010 1040ez tax form 91-44, 1991-2 C. Print free 2010 1040ez tax form B. Print free 2010 1040ez tax form 733. Print free 2010 1040ez tax form If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Print free 2010 1040ez tax form Reporting on Form W-2. Print free 2010 1040ez tax form   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Print free 2010 1040ez tax form You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Print free 2010 1040ez tax form You must also include them in box 12. Print free 2010 1040ez tax form Mark the “Retirement plan” checkbox in box 13. Print free 2010 1040ez tax form For more information, see the Form W-2 instructions. Print free 2010 1040ez tax form Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Print free 2010 1040ez tax form Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Print free 2010 1040ez tax form Distributions are subject to IRA rules. Print free 2010 1040ez tax form Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Print free 2010 1040ez tax form For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Print free 2010 1040ez tax form Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Print free 2010 1040ez tax form Making excess contributions. Print free 2010 1040ez tax form Making early withdrawals. Print free 2010 1040ez tax form Not making required withdrawals. Print free 2010 1040ez tax form For information about these taxes, see chapter 1 in Publication 590. Print free 2010 1040ez tax form Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Print free 2010 1040ez tax form Prohibited transaction. Print free 2010 1040ez tax form   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Print free 2010 1040ez tax form In that case, the SEP-IRA will no longer qualify as an IRA. Print free 2010 1040ez tax form For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Print free 2010 1040ez tax form Effects on employee. Print free 2010 1040ez tax form   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Print free 2010 1040ez tax form The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Print free 2010 1040ez tax form Also, the employee may have to pay the additional tax for making early withdrawals. Print free 2010 1040ez tax form Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Print free 2010 1040ez tax form See Setting Up a SEP , earlier. Print free 2010 1040ez tax form Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Print free 2010 1040ez tax form You must also give them notice of any excess contributions. Print free 2010 1040ez tax form For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Print free 2010 1040ez tax form Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Print free 2010 1040ez tax form For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Print free 2010 1040ez tax form Prev  Up  Next   Home   More Online Publications