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Turbo tax free online Publication 557 - Additional Material Table of Contents Appendix. Turbo tax free online Sample Articles of Organization, continued Organization Reference Chart Section of 1986 Code Description of organization General nature of activities Application  Form Annual return required to be  filed Contributions  allowable 501(c)(1) Corporations Organized under Act of Congress (including Federal Credit Unions) Instrumentalities of the  United States No Form None Yes, if made for exclusively public purposes 501(c)(2) Title Holding Corporation For Exempt Organization Holding title to property of an  exempt organization 1024 9901 or 990-EZ8 No2 501(c)(3) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations Activities of nature implied by description of class of organization 1023 9901 or 990-EZ8, or 990-PF Yes, generally 501(c)(4) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees Promotion of community welfare; charitable, educational, or recreational 1024 9901 or 990-EZ8 No, generally 2, 3 501(c)(5) Labor, Agricultural, and Horticultural Organizations Educational or instructive, the  purpose being to improve conditions of work, and to improve products of efficiency 1024 9901 or 990-EZ8 No2 501(c)(6) Business Leagues, Chambers of Commerce, Real Estate Boards, etc. Turbo tax free online Improvement of business  conditions of one or more lines of business 1024 9901 or 990-EZ8 No2 501(c)(7) Social and Recreational Clubs Pleasure, recreation, social activities 1024 9901 or 990-EZ8 No2 501(c)(8) Fraternal Beneficiary Societies  and Associations Lodge providing for payment of life, sickness, accident or other benefits  to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Turbo tax free online 501(c)(3) purposes 501(c)(9) Voluntary Employees Beneficiary Associations Providing for payment of life, sickness, accident, or other benefits to members 1024 9901 or 990-EZ8 No2 501(c)(10) Domestic Fraternal Societies  and Associations Lodge devoting its net earnings to charitable, fraternal, and other  specified purposes. Turbo tax free online No life, sickness, or accident benefits to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Turbo tax free online 501(c)(3) purposes 501(c)(11) Teachers' Retirement Fund Associations Teachers' association for payment of retirement benefits Letter6 9901 or 990-EZ8 No2 501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or  Irrigation Companies, Mutual or Cooperative Telephone Companies, etc. Turbo tax free online Activities of a mutually beneficial  nature similar to those implied by the description of class of organization 1024 9901 or 990-EZ8 No2 501(c)(13) Cemetery Companies Burials and incidental activities 1024 9901 or 990-EZ8 Yes, generally 501(c)(14) State-Chartered Credit Unions,  Mutual Reserve Funds Loans to members Letter6 9901 or 990-EZ8 No2 501(c)(15) Mutual Insurance Companies or Associations Providing insurance to members substantially at cost 1024 9901 or 990-EZ8 No2 501(c)(16) Cooperative Organizations to  Finance Crop Operations Financing crop operations in  conjunction with activities of a marketing  or purchasing association Form 1120-C6 9901 or 990-EZ8 No2 501(c)(17) Supplemental Unemployment  Benefit Trusts Provides for payment of  supplemental unemployment compensation benefits 1024 9901 or 990-EZ8 No2 501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) Payment of benefits under a  pension plan funded by employees Letter6 9901 or 990-EZ8 No2 501(c)(19) Post or Organization of Past or  Present Members of the Armed Forces Activities implied by nature of organization 1024 9901 or 990-EZ8 No, generally7 501(c)(21) Black Lung Benefit Trusts Funded by coal mine operators to satisfy their liability for disability or  death due to black lung diseases Letter6 990-BL No4 501(c)(22) Withdrawal Liability Payment Fund To provide funds to meet the  liability of employers withdrawing from  a multi-employer pension fund Letter6 9901 or 990-EZ8 No5 501(c)(23) Veterans' Organization (created before 1880) To provide insurance and other  benefits to veterans Letter6 9901 or 990-EZ8 No, generally7 501(c)(25) Title Holding Corporations or Trusts with Multiple Parent Corporations Holding title and paying over  income from property to 35 or fewer parents or beneficiaries 1024 9901 or 990-EZ8 No 501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals Provides health care coverage to high-risk individuals Letter6 9901 or 990-EZ8 No 501(c)(27) State-Sponsored Workers' Compensation Reinsurance Organization Reimburses members for losses  under workers' compensation acts Letter6 9901 or 990-EZ8 No 501(c)(28) National Railroad Retirement Investment Trust Manages and invests the assets of the Railroad Retirement Account No Form 99011 No11 501(c)(29) CO-OP health insurance issuers A qualified health insurance issuer which has received a loan or grant under the CO-OP program Letter and Form 871814 9901 No13 501(d) Religious and Apostolic Associations Regular business activities;  Communal religious community No Form 10659 No2 501(e) Cooperative Hospital Service Organizations Performs cooperative services for hospitals 1023 9901 or 990-EZ8 Yes 501(f) Cooperative Service Organizations  of Operating Educational Organizations Performs collective investment  services for educational organizations 1023 9901 or 990-EZ8 Yes 501(k) Child Care Organizations Provides care for children 1023 9901 or 990-EZ8 Yes 501(n) Charitable Risk Pools Pools certain insurance risks of sec. Turbo tax free online 501(c)(3) organizations 1023 9901 or 990-EZ8 Yes 501(q) Credit Counseling Organization Credit counseling services 1023 102312 No 521(a) Farmers' Cooperative Associations Cooperative marketing and  purchasing for agricultural procedures 1028 1120-C No 527 Political organizations A party, committee, fund,  association, etc. Turbo tax free online , that directly or indirectly accepts contributions or makes expenditures for political campaigns 8871 1120-POL10 9901 or 990-EZ8 No 1For exceptions to the filing requirement, see chapter 2 and the form instructions. Turbo tax free online Note: For annual tax periods beginning after 2006, most tax-exempt organizations, other than churches, are required to file an annual Form 990, 990-EZ, or 990-PF with the IRS or to submit an annual electronic notice, Form 990-N (e-Postcard), to the IRS. Turbo tax free online Tax-exempt organizations failing to file an annual return or submit an annual notice as required for 3 consecutive years will automatically lose their tax-exempt status. Turbo tax free online    2An organization exempt under a subsection of section 501 other than 501(c)(3) can establish a charitable fund, contributions to which are deductible. Turbo tax free online Such a fund must itself meet the requirements of section 501(c)(3) and the related notice requirements of section 508(a). Turbo tax free online    3Contributions to volunteer fire companies and similar organizations are deductible, but only if made for exclusively public purposes. Turbo tax free online    4Deductible as a business expense to the extent allowed by section 192. Turbo tax free online    5Deductible as a business expense to the extent allowed by section 194A. Turbo tax free online 6Application is by letter to the address shown on Form 8718. Turbo tax free online A copy of the organizing document should be attached and the letter should be signed by an officer. Turbo tax free online    7Contributions to these organizations are deductible only if 90% or more of the organization's members are war veterans. Turbo tax free online    8For limits on the use of Form 990-EZ, see chapter 2 and the general instructions for Form 990-EZ (or Form 990). Turbo tax free online    9Although the organization files a partnership return, all distributions are deemed dividends. Turbo tax free online The members are not entitled to pass through treatment of the organization's income or expenses. Turbo tax free online    10Form 1120-POL is required only if the organization has taxable income as defined in section 527(c). Turbo tax free online    11Only required to annually file so much of the Form 990 that relates to the names and addresses of the officers, directors, trustees, and key employees, and their titles, compensation, and hours devoted to their positions (Part VII of Form 990), and to complete Item I in the Heading of Form 990 to confirm its tax-exempt status under section 501(c)(28). Turbo tax free online    12See section 501(q) if the organization provides credit counseling services and seeks recognition of exemption under section 501(c)(4). Turbo tax free online Use Form 1024 if applying for recognition under section 501(c)(4). Turbo tax free online    13See section 501(c)(29) for details. Turbo tax free online    14See Revenue Procedure 2012-11, sec. Turbo tax free online 4. Turbo tax free online 01, 2012-7 I. Turbo tax free online R. Turbo tax free online B. Turbo tax free online 368, for details. Turbo tax free online Appendix. Turbo tax free online Sample Articles of Organization The following are examples of Articles of Incorporation (Draft A) and a declaration of trust (Draft B) that contain the required information as to purposes and powers of an organization and disposition of its assets upon dissolution. Turbo tax free online You should bear in mind that requirements for these instruments may vary under applicable state law. Turbo tax free online See Private Foundations and Public Charities , earlier for the special provisions required in a private foundation's governing instrument in order for it to qualify for exemption. Turbo tax free online DRAFT A  Articles of Incorporation of the undersigned, a majority of whom are citizens of the United States, desiring to form a Non-Profit Corporation under the Non-Profit Corporation Law of , do hereby certify: First: The name of the Corporation shall be . Turbo tax free online Second: The place in this state where the principal office of the Corporation is to be located is the City of , County. Turbo tax free online Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Turbo tax free online Fourth: The names and addresses of the persons who are the initial trustees of the corporation are as follows: Name , Address Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. Turbo tax free online No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Turbo tax free online Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Turbo tax free online   If reference to federal law in articles of incorporation imposes a limitation that is invalid in your state, you may wish to substitute the following for the last sentence of the preceding paragraph: “Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation. Turbo tax free online ” Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Turbo tax free online Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes. Turbo tax free online   In witness whereof, we have hereunto subscribed our names this day of , 20. Turbo tax free online Appendix. Turbo tax free online Sample Articles of Organization, continued Draft B The Charitable Trust. Turbo tax free online Declaration of Trust made as of the day of , 20 , by , of , and , of , who hereby declare and agree that they have received this day from , as Donor, the sum of Ten Dollars ($10) and that they will hold and manage the same, and any additions to it, in trust, as follows: First: This trust shall be called “The Charitable Trust. Turbo tax free online ” Second: The trustees may receive and accept property, whether real, personal, or mixed, by way of gift, bequest, or devise, from any person, firm, trust, or corporation, to be held, administered, and disposed of in accordance with and pursuant to the provisions of this Declaration of Trust; but no gift, bequest, or devise of any such property shall be received and accepted if it is conditioned or limited in such manner as to require the disposition of the income or its principal to any person or organization other than a “charitable organization” or for other than “charitable purposes” within the meaning of such terms as defined in Article Third of this Declaration of Trust, or as shall, in the opinion of the trustees, jeopardize the federal income tax exemption of this trust pursuant to section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Turbo tax free online Third: a) The principal and income of all property received and accepted by the trustees to be administered under this Declaration of Trust shall be held in trust by them, and the trustees may make payments or distributions from income or principal, or both, to or for the use of such charitable organizations, within the meaning of that term as defined in paragraph C, in such amounts and for such charitable purposes of the trust as the trustees shall from time to time select and determine; and the trustees may make payments or distributions from income or principal, or both, directly for such charitable purposes, within the meaning of that term as defined in paragraph D, in such amounts as the trustees shall from time to time select and determine without making use of any other charitable organization. Turbo tax free online The trustees may also make payments or distributions of all or any part of the income or principal to states, territories, or possessions of the United States, any political subdivision of any of the foregoing, or to the United States or the District of Columbia but only for charitable purposes within the meaning of that term as defined in paragraph D. Turbo tax free online Income or principal derived from contributions by corporations shall be distributed by the trustees for use solely within the United States or its possessions. Turbo tax free online No part of the net earnings of this trust shall inure or be payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of this trust shall be the carrying on of propaganda, or otherwise attempting to influence legislation. Turbo tax free online No part of the activities of this trust shall be the participation in, or intervention in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. Turbo tax free online b) The trust shall continue forever unless the trustees terminate it and distribute all of the principal and income, which action may be taken by the trustees in their discretion at any time. Turbo tax free online On such termination, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Turbo tax free online The donor authorizes and empowers the trustees to form and organize a nonprofit corporation limited to the uses and purposes provided for in this Declaration of Trust, such corporation to be organized under the laws of any state or under the laws of the United States as may be determined by the trustees; such corporation when organized to have power to administer and control the affairs and property and to carry out the uses, objects, and purposes of this trust. Turbo tax free online Upon the creation and organization of such corporation, the trustees are authorized and empowered to convey, transfer, and deliver to such corporation all the property and assets to which this trust may be or become entitled. Turbo tax free online The charter, bylaws, and other provisions for the organization and management of such corporation and its affairs and property shall be such as the trustees shall determine, consistent with the provisions of this paragraph. Turbo tax free online c) In this Declaration of Trust and in any amendments to it, references to “charitable organizations” or “charitable organization” mean corporations, trusts, funds, foundations, or community chests created or organized in the United States or in any of its possessions, whether under the laws of the United States, any state or territory, the District of Columbia, or any possession of the United States, organized and operated exclusively for charitable purposes, no part of the net earnings of which inures or is payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which do not participate in or intervene in (including the publishing or distributing of statements) any political campaign on behalf of or in opposition to any candidate for public office. Turbo tax free online It is intended that the organization described in this paragraph C shall be entitled to exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Turbo tax free online d) In this Declaration of Trust and in any amendments to it, the term “charitable purposes” shall be limited to and shall include only religious, charitable, scientific, literary, or educational purposes within the meaning of those terms as used in section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, but only such purposes as also constitute public charitable purposes under the law of trusts of the State of. Turbo tax free online Fourth: This Declaration of Trust may be amended at any time or times by written instrument or instruments signed and sealed by the trustees, and acknowledged by any of the trustees, provided that no amendment shall authorize the trustees to conduct the affairs of this trust in any manner or for any purpose contrary to the provisions of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Turbo tax free online An amendment of the provisions of this Article Fourth (or any amendment to it) shall be valid only if and to the extent that such amendment further restricts the trustees' amending power. Turbo tax free online All instruments amending this Declaration of Trust shall be noted upon or kept attached to the executed original of this Declaration of Trust held by the trustees. Turbo tax free online Fifth: Any trustee under this Declaration of Trust may, by written instrument, signed and acknowledged, resign his office. Turbo tax free online The number of trustees shall be at all times not less than two, and whenever for any reason the number is reduced to one, there shall be, and at any other time there may be, appointed one or more additional trustees. Turbo tax free online Appointments shall be made by the trustee or trustees for the time in office by written instruments signed and acknowledged. Turbo tax free online Any succeeding or additional trustee shall, upon his or her acceptance of the office by written instrument signed and acknowledged, have the same powers, rights, and duties, and the same title to the trust estate jointly with the surviving or remaining trustee or trustees as if originally appointed. Turbo tax free online  None of the trustees shall be required to furnish any bond or surety. Turbo tax free online None of them shall be responsible or liable for the acts or omissions of any other of the trustees or of any predecessor or of a custodian, agent, depositary, or counsel selected with reasonable care. Turbo tax free online  The one or more trustees, whether original or successor, for the time being in office, shall have full authority to act even though one or more vacancies may exist. Turbo tax free online A trustee may, by appropriate written instrument, delegate all or any part of his or her powers to another or others of the trustees for such periods and subject to such conditions as such delegating trustee may determine. Turbo tax free online  The trustees serving under this Declaration of Trust are authorized to pay to themselves amounts for reasonable expenses incurred and reasonable compensation for services rendered in the administration of this trust, but in no event shall any trustee who has made a contribution to this trust ever receive any compensation thereafter. Turbo tax free online Sixth: In extension and not in limitation of the common law and statutory powers of trustees and other powers granted in this Declaration of Trust, the trustees shall have the following discretionary powers. Turbo tax free online a) To invest and reinvest the principal and income of the trust in such property, real, personal, or mixed, and in such manner as they shall deem proper, and from time to time to change investments as they shall deem advisable; to invest in or retain any stocks, shares, bonds, notes, obligations, or personal or real property (including without limitation any interests in or obligations of any corporation, association, business trust, investment trust, common trust fund, or investment company) although some or all of the property so acquired or retained is of a kind or size which but for this express authority would not be considered proper and although all of the trust funds are invested in the securities of one company. Turbo tax free online No principal or income, however, shall be loaned, directly or indirectly, to any trustee or to anyone else, corporate or otherwise, who has at any time made a contribution to this trust, nor to anyone except on the basis of an adequate interest charge and with adequate security. Turbo tax free online b) To sell, lease, or exchange any personal, mixed, or real property, at public auction or by private contract, for such consideration and on such terms as to credit or otherwise, and to make such contracts and enter into such undertakings relating to the trust property, as they consider advisable, whether or not such leases or contracts may extend beyond the duration of the trust. Turbo tax free online c) To borrow money for such periods, at such rates of interest, and upon such terms as the trustees consider advisable, and as security for such loans to mortgage or pledge any real or personal property with or without power of sale; to acquire or hold any real or personal property, subject to any mortgage or pledge on or of property acquired or held by this trust. Turbo tax free online d) To execute and deliver deeds, assignments, transfers, mortgages, pledges, leases, covenants, contracts, promissory notes, releases, and other instruments, sealed or unsealed, incident to any transaction in which they engage. Turbo tax free online e) To vote, to give proxies, to participate in the reorganization, merger, or consolidation of any concern, or in the sale, lease, disposition, or distribution of its assets; to join with other security holders in acting through a committee, depositary, voting trustees, or otherwise, and in this connection to delegate authority to such committee, depositary, or trustees and to deposit securities with them or transfer securities to them; to pay assessments levied on securities or to exercise subscription rights in respect of securities. Turbo tax free online f) To employ a bank or trust company as custodian of any funds or securities and to delegate to it such powers as they deem appropriate; to hold trust property without indication of fiduciary capacity but only in the name of a registered nominee, provided the trust property is at all times identified as such on the books of the trust; to keep any or all of the trust property or funds in any place or places in the United States of America; to employ clerks, accountants, investment counsel, investment agents, and any special services, and to pay the reasonable compensation and expenses of all such services in addition to the compensation of the trustees. Turbo tax free online Seventh: The trustees' powers are exercisable solely in the fiduciary capacity consistent with and in furtherance of the charitable purposes of this trust as specified in Article Third and not otherwise. Turbo tax free online Eighth: In this Declaration of Trust and in any amendment to it, references to “trustees” mean the one or more trustees, whether original or successor, for the time being in office. Turbo tax free online Ninth: Any person may rely on a copy, certified by a notary public, of the executed original of this Declaration of Trust held by the trustees, and of any of the notations on it and writings attached to it, as fully as he might rely on the original documents themselves. Turbo tax free online Any such person may rely fully on any statements of fact certified by anyone who appears from such original documents or from such certified copy to be a trustee under this Declaration of Trust. Turbo tax free online No one dealing with the trustees need inquire concerning the validity of anything the trustees purport to do. Turbo tax free online No one dealing with the trustees need see to the application of anything paid or transferred to or upon the order of the trustees of the trust. Turbo tax free online Tenth: This Declaration of Trust is to be governed in all respects by the laws of the State of . Turbo tax free online Trustee Trustee Prev  Up  Next   Home   More Online Publications
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Turbo tax free online 14. Turbo tax free online   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Turbo tax free online  If you are a U. Turbo tax free online S. Turbo tax free online citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Turbo tax free online S. Turbo tax free online law. Turbo tax free online This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Turbo tax free online Introduction This chapter discusses the tax consequences of selling or trading investment property. Turbo tax free online It explains the following. Turbo tax free online What a sale or trade is. Turbo tax free online Figuring gain or loss. Turbo tax free online Nontaxable trades. Turbo tax free online Related party transactions. Turbo tax free online Capital gains or losses. Turbo tax free online Capital assets and noncapital assets. Turbo tax free online Holding period. Turbo tax free online Rollover of gain from publicly traded securities. Turbo tax free online Other property transactions. Turbo tax free online   Certain transfers of property are not discussed here. Turbo tax free online They are discussed in other IRS publications. Turbo tax free online These include the following. Turbo tax free online Sales of a main home, covered in chapter 15. Turbo tax free online Installment sales, covered in Publication 537, Installment Sales. Turbo tax free online Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Turbo tax free online Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Turbo tax free online    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Turbo tax free online Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Turbo tax free online It also discusses investment-related expenses. Turbo tax free online Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Turbo tax free online Generally, you should receive the statement by February 15 of the next year. Turbo tax free online It will show the gross proceeds from the sale. Turbo tax free online If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Turbo tax free online Generally, a covered security is a security you acquired after 2010, with certain exceptions. Turbo tax free online See the Instructions for Form 8949. Turbo tax free online The IRS will also get a copy of Form 1099-B from the broker. Turbo tax free online Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Turbo tax free online What Is a Sale or Trade? This section explains what is a sale or trade. Turbo tax free online It also explains certain transactions and events that are treated as sales or trades. Turbo tax free online A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Turbo tax free online A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Turbo tax free online Sale and purchase. Turbo tax free online   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Turbo tax free online The sale and purchase are two separate transactions. Turbo tax free online But see Like-kind exchanges under Nontaxable Trades, later. Turbo tax free online Redemption of stock. Turbo tax free online   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Turbo tax free online Dividend versus sale or trade. Turbo tax free online   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Turbo tax free online Both direct and indirect ownership of stock will be considered. Turbo tax free online The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Turbo tax free online Redemption or retirement of bonds. Turbo tax free online   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Turbo tax free online   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Turbo tax free online For details, see Regulations section 1. Turbo tax free online 1001-3. Turbo tax free online Surrender of stock. Turbo tax free online   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Turbo tax free online The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Turbo tax free online Worthless securities. Turbo tax free online    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Turbo tax free online This affects whether your capital loss is long term or short term. Turbo tax free online See Holding Period , later. Turbo tax free online   Worthless securities also include securities that you abandon after March 12, 2008. Turbo tax free online To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Turbo tax free online All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Turbo tax free online    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Turbo tax free online Do not deduct them in the year the stock became worthless. Turbo tax free online How to report loss. Turbo tax free online    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Turbo tax free online In column (a), enter “Worthless. Turbo tax free online ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Turbo tax free online See Form 8949 and the Instructions for Form 8949. Turbo tax free online For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbo tax free online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbo tax free online Filing a claim for refund. Turbo tax free online   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Turbo tax free online You must use Form 1040X, Amended U. Turbo tax free online S. Turbo tax free online Individual Income Tax Return, to amend your return for the year the security became worthless. Turbo tax free online You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Turbo tax free online For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Turbo tax free online How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Turbo tax free online Gain. Turbo tax free online   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Turbo tax free online Loss. Turbo tax free online   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Turbo tax free online Adjusted basis. Turbo tax free online   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Turbo tax free online See chapter 13 for more information about determining the adjusted basis of property. Turbo tax free online Amount realized. Turbo tax free online   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Turbo tax free online Amount realized includes the money you receive plus the fair market value of any property or services you receive. Turbo tax free online If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Turbo tax free online If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Turbo tax free online For more information, see Publication 537. Turbo tax free online Fair market value. Turbo tax free online   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Turbo tax free online Example. Turbo tax free online You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Turbo tax free online Your gain is $3,000 ($10,000 − $7,000). Turbo tax free online Debt paid off. Turbo tax free online    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Turbo tax free online This is true even if neither you nor the buyer is personally liable for the debt. Turbo tax free online For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Turbo tax free online Example. Turbo tax free online You sell stock that you had pledged as security for a bank loan of $8,000. Turbo tax free online Your basis in the stock is $6,000. Turbo tax free online The buyer pays off your bank loan and pays you $20,000 in cash. Turbo tax free online The amount realized is $28,000 ($20,000 + $8,000). Turbo tax free online Your gain is $22,000 ($28,000 − $6,000). Turbo tax free online Payment of cash. Turbo tax free online   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Turbo tax free online Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Turbo tax free online If the result is a positive number, it is a gain. Turbo tax free online If the result is a negative number, it is a loss. Turbo tax free online No gain or loss. Turbo tax free online   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Turbo tax free online In this case, you may have neither a gain nor a loss. Turbo tax free online See Basis Other Than Cost in chapter 13. Turbo tax free online Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Turbo tax free online For more information on nontaxable trades, see chapter 1 of Publication 544. Turbo tax free online Like-kind exchanges. Turbo tax free online   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Turbo tax free online To be nontaxable, a trade must meet all six of the following conditions. Turbo tax free online The property must be business or investment property. Turbo tax free online You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Turbo tax free online Neither property may be property used for personal purposes, such as your home or family car. Turbo tax free online The property must not be held primarily for sale. Turbo tax free online The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Turbo tax free online The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Turbo tax free online However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Turbo tax free online Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Turbo tax free online There must be a trade of like property. Turbo tax free online The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Turbo tax free online The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Turbo tax free online The trade of a piece of machinery for a store building is not a trade of like property. Turbo tax free online Real property located in the United States and real property located outside the United States are not like property. Turbo tax free online Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Turbo tax free online The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Turbo tax free online The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Turbo tax free online    If you trade property with a related party in a like-kind exchange, a special rule may apply. Turbo tax free online See Related Party Transactions , later in this chapter. Turbo tax free online Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Turbo tax free online Partly nontaxable exchange. Turbo tax free online   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Turbo tax free online You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Turbo tax free online You cannot deduct a loss. Turbo tax free online Like property and unlike property transferred. Turbo tax free online   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Turbo tax free online The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Turbo tax free online Like property and money transferred. Turbo tax free online   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Turbo tax free online Basis of property received. Turbo tax free online   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Turbo tax free online How to report. Turbo tax free online   You must report the trade of like property on Form 8824. Turbo tax free online If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Turbo tax free online See the instructions for Line 22 in the Instructions for Form 8824. Turbo tax free online   For information on using Form 4797, see chapter 4 of Publication 544. Turbo tax free online Corporate stocks. Turbo tax free online   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Turbo tax free online Corporate reorganizations. Turbo tax free online   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Turbo tax free online If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Turbo tax free online Stock for stock of the same corporation. Turbo tax free online   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Turbo tax free online This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Turbo tax free online Convertible stocks and bonds. Turbo tax free online   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Turbo tax free online Property for stock of a controlled corporation. Turbo tax free online   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Turbo tax free online This rule applies both to individuals and to groups who transfer property to a corporation. Turbo tax free online It does not apply if the corporation is an investment company. Turbo tax free online   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Turbo tax free online   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Turbo tax free online For details, see Regulations section 1. Turbo tax free online 351-3. Turbo tax free online Additional information. Turbo tax free online   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Turbo tax free online Insurance policies and annuities. Turbo tax free online   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Turbo tax free online   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Turbo tax free online For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Turbo tax free online Revenue Ruling 2003-76 is available at www. Turbo tax free online irs. Turbo tax free online gov/irb/2003-33_IRB/ar11. Turbo tax free online html. Turbo tax free online Revenue Procedure 2008-24 is available at www. Turbo tax free online irs. Turbo tax free online gov/irb/2008-13_IRB/ar13. Turbo tax free online html. Turbo tax free online For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Turbo tax free online Revenue Procedure 2011-38 is available at www. Turbo tax free online irs. Turbo tax free online gov/irb/2011-30_IRB/ar09. Turbo tax free online html. Turbo tax free online   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Turbo tax free online A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Turbo tax free online The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Turbo tax free online   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Turbo tax free online Demutualization of life insurance companies. Turbo tax free online   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Turbo tax free online See Demutualization of Life Insurance Companies in Publication 550. Turbo tax free online U. Turbo tax free online S. Turbo tax free online Treasury notes or bonds. Turbo tax free online   You can trade certain issues of U. Turbo tax free online S. Turbo tax free online Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Turbo tax free online See Savings bonds traded in chapter 1 of Publication 550 for more information. Turbo tax free online Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Turbo tax free online This nonrecognition rule does not apply in the following situations. Turbo tax free online The recipient spouse or former spouse is a nonresident alien. Turbo tax free online Property is transferred in trust and liability exceeds basis. Turbo tax free online Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Turbo tax free online For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Turbo tax free online Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Turbo tax free online The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Turbo tax free online This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Turbo tax free online This rule applies for purposes of determining loss as well as gain. Turbo tax free online Any gain recognized on a transfer in trust increases the basis. Turbo tax free online A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Turbo tax free online Related Party Transactions Special rules apply to the sale or trade of property between related parties. Turbo tax free online Gain on sale or trade of depreciable property. Turbo tax free online   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Turbo tax free online See chapter 3 of Publication 544 for more information. Turbo tax free online Like-kind exchanges. Turbo tax free online   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Turbo tax free online See Like-kind exchanges , earlier, under Nontaxable Trades. Turbo tax free online   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Turbo tax free online However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Turbo tax free online See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Turbo tax free online Losses on sales or trades of property. Turbo tax free online   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Turbo tax free online Members of your family. Turbo tax free online This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Turbo tax free online ), and lineal descendants (children, grandchildren, etc. Turbo tax free online ). Turbo tax free online A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Turbo tax free online A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Turbo tax free online (See Constructive ownership of stock , later. Turbo tax free online ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Turbo tax free online   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Turbo tax free online A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Turbo tax free online Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Turbo tax free online A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Turbo tax free online A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Turbo tax free online Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Turbo tax free online Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Turbo tax free online An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Turbo tax free online Two corporations that are members of the same controlled group. Turbo tax free online (Under certain conditions, however, these losses are not disallowed but must be deferred. Turbo tax free online ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Turbo tax free online Multiple property sales or trades. Turbo tax free online   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Turbo tax free online The gain on each item may be taxable. Turbo tax free online However, you cannot deduct the loss on any item. Turbo tax free online Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Turbo tax free online Indirect transactions. Turbo tax free online   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Turbo tax free online This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Turbo tax free online Constructive ownership of stock. Turbo tax free online   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Turbo tax free online Rule 1. Turbo tax free online   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Turbo tax free online Rule 2. Turbo tax free online   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Turbo tax free online Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Turbo tax free online Rule 3. Turbo tax free online   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Turbo tax free online Rule 4. Turbo tax free online   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Turbo tax free online But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Turbo tax free online Property received from a related party. Turbo tax free online    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Turbo tax free online This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Turbo tax free online This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Turbo tax free online   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Turbo tax free online Example 1. Turbo tax free online Your brother sells you stock for $7,600. Turbo tax free online His cost basis is $10,000. Turbo tax free online Your brother cannot deduct the loss of $2,400. Turbo tax free online Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Turbo tax free online Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Turbo tax free online Example 2. Turbo tax free online If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Turbo tax free online You cannot deduct the loss that was not allowed to your brother. Turbo tax free online Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Turbo tax free online Character of gain or loss. Turbo tax free online   You need to classify your gains and losses as either ordinary or capital gains or losses. Turbo tax free online You then need to classify your capital gains and losses as either short term or long term. Turbo tax free online If you have long-term gains and losses, you must identify your 28% rate gains and losses. Turbo tax free online If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Turbo tax free online   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Turbo tax free online Reporting capital gains and losses is explained in chapter 16. Turbo tax free online Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Turbo tax free online Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Turbo tax free online A sale or trade of a noncapital asset generally results in ordinary gain or loss. Turbo tax free online Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Turbo tax free online In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Turbo tax free online Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Turbo tax free online Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Turbo tax free online Any property you own is a capital asset, except the following noncapital assets. Turbo tax free online Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Turbo tax free online For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Turbo tax free online Depreciable property used in your trade or business, even if fully depreciated. Turbo tax free online Real property used in your trade or business. Turbo tax free online A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Turbo tax free online For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Turbo tax free online Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Turbo tax free online U. Turbo tax free online S. Turbo tax free online Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Turbo tax free online Certain commodities derivative financial instruments held by commodities derivatives dealers. Turbo tax free online Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Turbo tax free online Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Turbo tax free online Investment Property Investment property is a capital asset. Turbo tax free online Any gain or loss from its sale or trade is generally a capital gain or loss. Turbo tax free online Gold, silver, stamps, coins, gems, etc. Turbo tax free online   These are capital assets except when they are held for sale by a dealer. Turbo tax free online Any gain or loss you have from their sale or trade generally is a capital gain or loss. Turbo tax free online Stocks, stock rights, and bonds. Turbo tax free online   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Turbo tax free online However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Turbo tax free online Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Turbo tax free online However, you cannot deduct a loss from selling personal use property. Turbo tax free online Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Turbo tax free online You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Turbo tax free online You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Turbo tax free online You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Turbo tax free online For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbo tax free online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbo tax free online You can revoke the election if you have IRS approval. Turbo tax free online To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Turbo tax free online See, for example, Rev. Turbo tax free online Proc. Turbo tax free online 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Turbo tax free online Proc. Turbo tax free online 2013–32, available at www. Turbo tax free online irs. Turbo tax free online gov/irb/2013-01_IRB/ar06. Turbo tax free online html. Turbo tax free online Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Turbo tax free online Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Turbo tax free online Short-term government obligations. Turbo tax free online   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Turbo tax free online This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Turbo tax free online Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Turbo tax free online   However, do not treat these gains as income to the extent you previously included the discount in income. Turbo tax free online See Discount on Short-Term Obligations in chapter 1 of Publication 550. Turbo tax free online Short-term nongovernment obligations. Turbo tax free online   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Turbo tax free online This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Turbo tax free online   However, to the extent you previously included the discount in income, you do not have to include it in income again. Turbo tax free online See Discount on Short-Term Obligations in chapter 1 of Publication 550. Turbo tax free online Tax-exempt state and local government bonds. Turbo tax free online   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Turbo tax free online To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Turbo tax free online   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Turbo tax free online For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Turbo tax free online   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Turbo tax free online If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Turbo tax free online If you bought the bonds after April 30, 1993, the gain is ordinary income. Turbo tax free online   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Turbo tax free online For more information, see Market Discount Bonds in chapter 1 of Publication 550. Turbo tax free online    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Turbo tax free online Redeemed before maturity. Turbo tax free online   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Turbo tax free online   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Turbo tax free online However, you must report the unearned part of OID as a capital gain. Turbo tax free online Example. Turbo tax free online On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Turbo tax free online The face amount of the bond was $1,000. Turbo tax free online The $200 discount was OID. Turbo tax free online At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Turbo tax free online The bond was callable at its face amount beginning 10 years after the issue date. Turbo tax free online The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Turbo tax free online The OID earned during the time you held the bond, $73, is not taxable. Turbo tax free online The $60 accrued annual interest also is not taxable. Turbo tax free online However, you must report the unearned part of OID ($127) as a capital gain. Turbo tax free online Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Turbo tax free online   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Turbo tax free online The rest of the gain is capital gain. Turbo tax free online If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Turbo tax free online This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Turbo tax free online Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Turbo tax free online   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Turbo tax free online Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Turbo tax free online See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Turbo tax free online   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Turbo tax free online However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Turbo tax free online In this case, the rest of the gain is capital gain. Turbo tax free online Market discount bonds. Turbo tax free online   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Turbo tax free online If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Turbo tax free online The rest of the gain is capital gain. Turbo tax free online See Market Discount Bonds in chapter 1 of Publication 550. Turbo tax free online   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Turbo tax free online See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Turbo tax free online Retirement of debt instrument. Turbo tax free online   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Turbo tax free online Notes of individuals. Turbo tax free online   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Turbo tax free online An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Turbo tax free online The lender is not in the business of lending money. Turbo tax free online The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Turbo tax free online Avoiding federal tax is not one of the principal purposes of the loan. Turbo tax free online   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Turbo tax free online When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Turbo tax free online The rest of the gain, if any, is capital gain. Turbo tax free online Any loss on the sale or redemption is capital loss. Turbo tax free online Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Turbo tax free online Ordinary loss. Turbo tax free online Casualty loss. Turbo tax free online Nonbusiness bad debt (short-term capital loss). Turbo tax free online  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Turbo tax free online Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Turbo tax free online Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Turbo tax free online Report the loss on Form 4797, line 10. Turbo tax free online Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Turbo tax free online Report the gain on Form 8949. Turbo tax free online See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Turbo tax free online For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbo tax free online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbo tax free online Holding Period If you sold or traded investment property, you must determine your holding period for the property. Turbo tax free online Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Turbo tax free online Long-term or short-term. Turbo tax free online   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Turbo tax free online If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Turbo tax free online   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Turbo tax free online The day you disposed of the property is part of your holding period. Turbo tax free online Example. Turbo tax free online If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Turbo tax free online If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Turbo tax free online Securities traded on established market. Turbo tax free online   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Turbo tax free online    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Turbo tax free online Example. Turbo tax free online You are a cash method, calendar year taxpayer. Turbo tax free online You sold stock at a gain on December 30, 2013. Turbo tax free online According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Turbo tax free online You received payment of the sales price on that same day. Turbo tax free online Report your gain on your 2013 return, even though you received the payment in 2014. Turbo tax free online The gain is long term or short term depending on whether you held the stock more than 1 year. Turbo tax free online Your holding period ended on December 30. Turbo tax free online If you had sold the stock at a loss, you would also report it on your 2013 return. Turbo tax free online U. Turbo tax free online S. Turbo tax free online Treasury notes and bonds. Turbo tax free online   The holding period of U. Turbo tax free online S. Turbo tax free online Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Turbo tax free online The holding period of U. Turbo tax free online S. Turbo tax free online Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Turbo tax free online Automatic investment service. Turbo tax free online   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Turbo tax free online Your holding period starts on the day after the bank's purchase date. Turbo tax free online If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Turbo tax free online A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Turbo tax free online Nontaxable trades. Turbo tax free online   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Turbo tax free online Property received as a gift. Turbo tax free online   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Turbo tax free online   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Turbo tax free online Inherited property. Turbo tax free online   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Turbo tax free online This is true regardless of how long you actually held the property. Turbo tax free online However, if you inherited property from someone who died in 2010, see the information below. Turbo tax free online Inherited property from someone who died in 2010. Turbo tax free online   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Turbo tax free online Real property bought. Turbo tax free online   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Turbo tax free online However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Turbo tax free online The holding period cannot start until there is an actual contract of sale. Turbo tax free online The holding period of the seller cannot end before that time. Turbo tax free online Real property repossessed. Turbo tax free online   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Turbo tax free online Your holding period does not include the time between the original sale and the repossession. Turbo tax free online That is, it does not include the period during which the first buyer held the property. Turbo tax free online Stock dividends. Turbo tax free online   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Turbo tax free online   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Turbo tax free online This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Turbo tax free online Nontaxable stock rights. Turbo tax free online   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Turbo tax free online The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Turbo tax free online Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Turbo tax free online You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Turbo tax free online Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Turbo tax free online To be deductible, nonbusiness bad debts must be totally worthless. Turbo tax free online You cannot deduct a partly worthless nonbusiness debt. Turbo tax free online Genuine debt required. Turbo tax free online   A debt must be genuine for you to deduct a loss. Turbo tax free online A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Turbo tax free online Basis in bad debt required. Turbo tax free online    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Turbo tax free online For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Turbo tax free online If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Turbo tax free online When deductible. Turbo tax free online   You can take a bad debt deduction only in the year the debt becomes worthless. Turbo tax free online You do not have to wait until a debt is due to determine whether it is worthless. Turbo tax free online A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Turbo tax free online   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Turbo tax free online You must only show that you have taken reasonable steps to collect the debt. Turbo tax free online Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Turbo tax free online How to report bad debts. Turbo tax free online    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Turbo tax free online    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Turbo tax free online    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbo tax free online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbo tax free online   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Turbo tax free online For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Turbo tax free online Filing a claim for refund. Turbo tax free online    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Turbo tax free online To do this, use Form 1040X to amend your return for the year the debt became worthless. Turbo tax free online You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Turbo tax free online For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Turbo tax free online Additional information. Turbo tax free online   For more information, see Nonbusiness Bad Debts in Publication 550. Turbo tax free online For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Turbo tax free online Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Turbo tax free online A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Turbo tax free online If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Turbo tax free online The result is your basis in the new stock or securities. Turbo tax free online This adjustment postpones the loss deduction until the disposition of the new stock or securities. Turbo tax free online Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Turbo tax free online For more information, see Wash Sales, in chapter 4 of Publication 550. Turbo tax free online Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Turbo tax free online This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Turbo tax free online You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Turbo tax free online This postpones your gain until the year you dispose of the replacement property. Turbo tax free online You qualify to make this choice if you meet all the following tests. Turbo tax free online You sell publicly traded securities at a gain. Turbo tax free online Publicly traded securities are securities traded on an established securities market. Turbo tax free online Your gain from the sale is a capital gain. Turbo tax free online During the 60-day period beginning on the date of the sale, you buy replacement property. Turbo tax free online This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Turbo tax free online This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Turbo tax free online Amount of gain recognized. Turbo tax free online   If you make the choice described in this section, you must recognize gain only up to the following amount. Turbo tax free online The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Turbo tax free online  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Turbo tax free online If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Turbo tax free online Limit on gain postponed. Turbo tax free online   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Turbo tax free online Basis of replacement property. Turbo tax free online   You must subtract the amount of postponed gain from the basis of your replacement property. Turbo tax free online How to report and postpone gain. Turbo tax free online    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. Turbo tax free online Prev  Up  Next   Home   More Online Publications