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Taxact 2012 login in Part One -   The Income Tax Return The four chapters in this part provide basic information on the tax system. Taxact 2012 login in They take you through the first steps of filling out a tax return—such as deciding what your filing status is, how many exemptions you can take, and what form to file. Taxact 2012 login in They also discuss recordkeeping requirements, IRS e-file (electronic filing), certain penalties, and the two methods used to pay tax during the year: withholding and estimated tax. Taxact 2012 login in Table of Contents 1. Taxact 2012 login in   Filing InformationWhat's New Reminders Introduction Do I Have To File a Return?Individuals—In General Dependents Certain Children Under Age 19 or Full-Time Students Self-Employed Persons Aliens Who Should File Which Form Should I Use?Form 1040EZ Form 1040A Form 1040 Does My Return Have To Be on Paper?IRS e-file When Do I Have To File?Private delivery services. Taxact 2012 login in Extensions of Time To File How Do I Prepare My Return?When Do I Report My Income and Expenses? Social Security Number (SSN) Presidential Election Campaign Fund Computations Attachments Third Party Designee Signatures Paid Preparer Refunds Amount You Owe Gift To Reduce Debt Held by the Public Name and Address Where Do I File? What Happens After I File?What Records Should I Keep? Why Keep Records? Kinds of Records to Keep Basic Records How Long to Keep Records Refund Information Interest on Refunds Change of Address What If I Made a Mistake?Amended Returns and Claims for Refund Penalties Identity Theft 2. Taxact 2012 login in   Filing StatusWhat's New Introduction Useful Items - You may want to see: Marital StatusDivorced persons. Taxact 2012 login in Divorce and remarriage. Taxact 2012 login in Annulled marriages. Taxact 2012 login in Head of household or qualifying widow(er) with dependent child. Taxact 2012 login in Considered married. Taxact 2012 login in Same-sex marriage. Taxact 2012 login in Spouse died during the year. Taxact 2012 login in Married persons living apart. Taxact 2012 login in Single Married Filing JointlyFiling a Joint Return Married Filing SeparatelySpecial Rules Head of HouseholdConsidered Unmarried Keeping Up a Home Qualifying Person Qualifying Widow(er) With Dependent Child 3. Taxact 2012 login in   Personal Exemptions and DependentsWhat's New Introduction Useful Items - You may want to see: ExemptionsPersonal Exemptions Exemptions for Dependents Qualifying Child Qualifying Relative Phaseout of Exemptions Social Security Numbers for DependentsBorn and died in 2013. Taxact 2012 login in Taxpayer identification numbers for aliens. Taxact 2012 login in Taxpayer identification numbers for adoptees. Taxact 2012 login in 4. Taxact 2012 login in   Tax Withholding and Estimated TaxWhat's New for 2014 Reminders Introduction Useful Items - You may want to see: Tax Withholding for 2014Salaries and Wages Tips Taxable Fringe Benefits Sick Pay Pensions and Annuities Gambling Winnings Unemployment Compensation Federal Payments Backup Withholding Estimated Tax for 2014Who Does Not Have To Pay Estimated Tax Who Must Pay Estimated Tax How To Figure Estimated Tax When To Pay Estimated Tax How To Figure Each Payment How To Pay Estimated Tax Credit for Withholding and Estimated Tax for 2013Withholding Estimated Tax Underpayment Penalty for 2013 Prev  Up  Next   Home   More Online Publications
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  • Coupon and Promotion Codes. Search for coupon and promotion codes to be sure you get all discounts the e-tailer currently offers. To find current codes, perform a search for the e-tailer’s name along with the words ‘promotion code’ or ‘coupon’. After applying the coupon code double check your total price to ensure the discount was applied properly. Also check "Deal of the Day" websites, where retailers offer deep discounts on merchandise and services.
  • Payment Methods. The way you pay matters! You get the most protection with a credit card; debit cards are more risky. Virtual wallets such as PayPal are convenient but have disadvantages, too. Single use credit card numbers are another option – ask your credit card provider if they offer this feature.
  • Shipping and Handling. Shipping and handling can put a big dent in a shopping budget. Look for sites that offer free or discounted shipping rates. Make sure you understand all conditions placed on free shipping offers and that you’ll get your merchandise in time if you choose that option. The law affords you rights surrounding time-frames for shipping your purchase.
  • Return Policies. Understand the e-tailer’s return policy. Do they offer a special, extended return policy for the holiday season? What documentation needs to accompany a return? If you purchase online, and the e-tailer also has a brick and mortar site can you return to the store? Do you need a return authorization number or an “RA” to return an item? Will the e-tailer pay for return shipping of the item or do you have to cover that cost? Will you have to pay a re-stocking fee?
  • Problems with the purchase. One of the most common online purchasing problems is products that don't arrive in time. Even if the company is unable to ship as promised, it must provide you adequate notice promptly and give you a revised delivery date. You must be allowed to agree to the delay or cancel the order and get a refund. If you're not happy about a transaction, you should complain to the retailer using the address or phone number you kept from your transaction receipts. If you don’t receive the merchandise you ordered file a dispute with your credit card company.

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Taxact 2012 login in 9. Taxact 2012 login in   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Taxact 2012 login in Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Taxact 2012 login in Amount to report as ordinary income. Taxact 2012 login in Applicable percentage. Taxact 2012 login in Amount to report as ordinary income. Taxact 2012 login in Applicable percentage. Taxact 2012 login in Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. Taxact 2012 login in When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Taxact 2012 login in Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Taxact 2012 login in Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Taxact 2012 login in Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. Taxact 2012 login in Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Taxact 2012 login in Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Taxact 2012 login in Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Taxact 2012 login in Table 9-1. Taxact 2012 login in Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. Taxact 2012 login in Held 24 mos. Taxact 2012 login in  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. Taxact 2012 login in Held 12 mos. Taxact 2012 login in   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Taxact 2012 login in Do not take that gain into account as section 1231 gain. Taxact 2012 login in Section 1231 transactions. Taxact 2012 login in   Gain or loss on the following transactions is subject to section 1231 treatment. Taxact 2012 login in Sale or exchange of cattle and horses. Taxact 2012 login in The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Taxact 2012 login in Sale or exchange of other livestock. Taxact 2012 login in This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Taxact 2012 login in Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Taxact 2012 login in Other livestock does not include poultry. Taxact 2012 login in Sale or exchange of depreciable personal property. Taxact 2012 login in This property must be used in your business and held longer than 1 year. Taxact 2012 login in Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Taxact 2012 login in Examples of depreciable personal property include farm machinery and trucks. Taxact 2012 login in It also includes amortizable section 197 intangibles. Taxact 2012 login in Sale or exchange of real estate. Taxact 2012 login in This property must be used in your business and held longer than 1 year. Taxact 2012 login in Examples are your farm or ranch (including barns and sheds). Taxact 2012 login in Sale or exchange of unharvested crops. Taxact 2012 login in The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. Taxact 2012 login in You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). Taxact 2012 login in Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Taxact 2012 login in Distributive share of partnership gains and losses. Taxact 2012 login in Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). Taxact 2012 login in Cutting or disposal of timber. Taxact 2012 login in Special 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, as described in chapter 8 under Timber . Taxact 2012 login in Condemnation. Taxact 2012 login in The condemned property (defined in chapter 11) must have been held longer than 1 year. Taxact 2012 login in It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Taxact 2012 login in It cannot be property held for personal use. Taxact 2012 login in Casualty or theft. Taxact 2012 login in The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). Taxact 2012 login in You must have held the property longer than 1 year. Taxact 2012 login in However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Taxact 2012 login in Section 1231 does not apply to personal casualty gains and losses. Taxact 2012 login in See chapter 11 for information on how to treat those gains and losses. Taxact 2012 login in If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. Taxact 2012 login in See Table 9-1. Taxact 2012 login in Property for sale to customers. Taxact 2012 login in   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Taxact 2012 login in If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Taxact 2012 login in Treatment as ordinary or capital. Taxact 2012 login in   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Taxact 2012 login in If you have a net section 1231 loss, it is an ordinary loss. Taxact 2012 login in If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Taxact 2012 login in The rest, if any, is long-term capital gain. Taxact 2012 login in Nonrecaptured section 1231 losses. Taxact 2012 login in   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. Taxact 2012 login in These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Taxact 2012 login in Example. Taxact 2012 login in In 2013, Ben has a $2,000 net section 1231 gain. Taxact 2012 login in To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Taxact 2012 login in From 2008 through 2012 he had the following section 1231 gains and losses. Taxact 2012 login in Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Taxact 2012 login in 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. Taxact 2012 login in Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. Taxact 2012 login in To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Taxact 2012 login in For more information, see chapter 3 of Publication 544. Taxact 2012 login in Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. Taxact 2012 login in Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Taxact 2012 login in See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Taxact 2012 login in Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Taxact 2012 login in Personal property (either tangible or intangible). Taxact 2012 login in Other tangible property (except buildings and their structural components) used as any of the following. Taxact 2012 login in See Buildings and structural components below. Taxact 2012 login in An integral part of manufacturing, production, or extraction, or of furnishing certain services. Taxact 2012 login in A research facility in any of the activities in (a). Taxact 2012 login in A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Taxact 2012 login in That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Taxact 2012 login in Amortization of certified pollution control facilities. Taxact 2012 login in The section 179 expense deduction. Taxact 2012 login in Deduction for clean-fuel vehicles and certain refueling property. Taxact 2012 login in Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Taxact 2012 login in Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Taxact 2012 login in Single purpose agricultural (livestock) or horticultural structures. Taxact 2012 login in Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Taxact 2012 login in Buildings and structural components. Taxact 2012 login in   Section 1245 property does not include buildings and structural components. Taxact 2012 login in The term building includes a house, barn, warehouse, or garage. Taxact 2012 login in The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Taxact 2012 login in   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Taxact 2012 login in Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Taxact 2012 login in   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Taxact 2012 login in Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Taxact 2012 login in Facility for bulk storage of fungible commodities. Taxact 2012 login in   This is a facility used mainly for the bulk storage of fungible commodities. Taxact 2012 login in Bulk storage means storage of a commodity in a large mass before it is used. Taxact 2012 login in For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Taxact 2012 login in To be fungible, a commodity must be such that one part may be used in place of another. Taxact 2012 login in Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Taxact 2012 login in The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Taxact 2012 login in The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Taxact 2012 login in For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. Taxact 2012 login in For details, see chapter 3 of Publication 544. Taxact 2012 login in Use Part III of Form 4797 to figure the ordinary income part of the gain. Taxact 2012 login in Depreciation claimed on other property or claimed by other taxpayers. Taxact 2012 login in   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Taxact 2012 login in Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Taxact 2012 login in For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Taxact 2012 login in Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). Taxact 2012 login in Example. Taxact 2012 login in Jeff Free paid $120,000 for a tractor in 2012. Taxact 2012 login in On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Taxact 2012 login in To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. Taxact 2012 login in Jeff can also depreciate the additional $30,000 for the chopper. Taxact 2012 login in Depreciation and amortization. Taxact 2012 login in   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Taxact 2012 login in See Depreciation Recapture in chapter 3 of Publication 544 for more details. Taxact 2012 login in Ordinary depreciation deductions. Taxact 2012 login in Section 179 deduction (see chapter 7). Taxact 2012 login in Any special depreciation allowance. Taxact 2012 login in Amortization deductions for all the following costs. Taxact 2012 login in Acquiring a lease. Taxact 2012 login in Lessee improvements. Taxact 2012 login in Pollution control facilities. Taxact 2012 login in Reforestation expenses. Taxact 2012 login in Section 197 intangibles. Taxact 2012 login in Qualified disaster expenses. Taxact 2012 login in Franchises, trademarks, and trade names acquired before August 11, 1993. Taxact 2012 login in Example. Taxact 2012 login in You file your returns on a calendar year basis. Taxact 2012 login in In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. Taxact 2012 login in You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Taxact 2012 login in You did not claim the section 179 expense deduction for the truck. Taxact 2012 login in You sold it in May 2013 for $7,000. Taxact 2012 login in The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Taxact 2012 login in Figure the gain treated as ordinary income as follows. Taxact 2012 login in 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. Taxact 2012 login in   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Taxact 2012 login in If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Taxact 2012 login in If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Taxact 2012 login in This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Taxact 2012 login in Disposition of plants and animals. Taxact 2012 login in   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Taxact 2012 login in If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. Taxact 2012 login in For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Taxact 2012 login in For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. Taxact 2012 login in You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Taxact 2012 login in Example. Taxact 2012 login in Janet Maple sold her apple orchard in 2013 for $80,000. Taxact 2012 login in Her adjusted basis at the time of sale was $60,000. Taxact 2012 login in She bought the orchard in 2006, but the trees did not produce a crop until 2009. Taxact 2012 login in Her pre-productive expenses were $6,000. Taxact 2012 login in She elected not to use the uniform capitalization rules. Taxact 2012 login in Janet must treat $6,000 of the gain as ordinary income. Taxact 2012 login in Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. Taxact 2012 login in It includes buildings and structural components that are not section 1245 property (discussed earlier). Taxact 2012 login in It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Taxact 2012 login in A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Taxact 2012 login in Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Taxact 2012 login in To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Taxact 2012 login in You will not have additional depreciation if any of the following apply to the property disposed of. Taxact 2012 login in You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. Taxact 2012 login in You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Taxact 2012 login in The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. Taxact 2012 login in These properties are depreciated using the straight line method. Taxact 2012 login in Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Taxact 2012 login in This applies even if no payments are received in that year. Taxact 2012 login in If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Taxact 2012 login in For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Taxact 2012 login in If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. Taxact 2012 login in To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Taxact 2012 login in Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Taxact 2012 login in For more information on installment sales, see chapter 10. Taxact 2012 login in Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Taxact 2012 login in By gift. Taxact 2012 login in At death. Taxact 2012 login in In like-kind exchanges. Taxact 2012 login in In involuntary conversions. Taxact 2012 login in Publication 544 also explains how to handle a single transaction involving multiple properties. Taxact 2012 login in Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Taxact 2012 login in Deductions for soil and water conservation expenditures (section 1252 property). Taxact 2012 login in Exclusions from income for certain cost sharing payments (section 1255 property). Taxact 2012 login in Section 1252 property. Taxact 2012 login in   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. Taxact 2012 login in Exceptions. Taxact 2012 login in   Do not treat gain on the following transactions as gain on section 1252 property. Taxact 2012 login in Disposition of farmland by gift. Taxact 2012 login in Transfer of farm property at death (except for income in respect of a decedent). Taxact 2012 login in For more information, see Regulations section 1. Taxact 2012 login in 1252-2. Taxact 2012 login in Amount to report as ordinary income. Taxact 2012 login in   You report as ordinary income the lesser of the following amounts. Taxact 2012 login in Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). Taxact 2012 login in The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Taxact 2012 login in Applicable percentage. Taxact 2012 login in   The applicable percentage is based on the length of time you held the land. Taxact 2012 login in If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Taxact 2012 login in If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. Taxact 2012 login in If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. Taxact 2012 login in Example. Taxact 2012 login in You acquired farmland on January 19, 2005. Taxact 2012 login in On October 3, 2013, you sold the land at a $30,000 gain. Taxact 2012 login in Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. Taxact 2012 login in The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Taxact 2012 login in You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. Taxact 2012 login in Section 1255 property. Taxact 2012 login in   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. Taxact 2012 login in If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Taxact 2012 login in Amount to report as ordinary income. Taxact 2012 login in   You report as ordinary income the lesser of the following amounts. Taxact 2012 login in The applicable percentage of the total excluded cost-sharing payments. Taxact 2012 login in The gain on the disposition of the property. Taxact 2012 login in You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. Taxact 2012 login in However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Taxact 2012 login in Applicable percentage. Taxact 2012 login in   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. Taxact 2012 login in If the property is held less than 10 years after you receive the payments, the percentage is 100%. Taxact 2012 login in After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Taxact 2012 login in Form 4797, Part III. Taxact 2012 login in   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. Taxact 2012 login in Prev  Up  Next   Home   More Online Publications