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

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Turbotax 2012 coupon Publication 595 - Main Contents Table of Contents Capital Construction FundCCF Accounts Types of Accounts You Must Maintain Within a CCF Tax Treatment of CCF Deposits Tax Treatment of CCF Earnings Tax Treatment of CCF Withdrawals More Information How To Get Tax Help Capital Construction Fund The following sections discuss CCF accounts and the types of bookkeeping accounts you must maintain when you invest in a CCF account. Turbotax 2012 coupon They also discuss the income tax treatment of CCF deposits, earnings, and withdrawals. Turbotax 2012 coupon CCF Accounts This section explains who can open a CCF account and how to use the account to defer income tax. Turbotax 2012 coupon Opening a CCF account. Turbotax 2012 coupon   If you are a U. Turbotax 2012 coupon S. Turbotax 2012 coupon citizen and you own or lease one or more eligible vessels (defined later), you can open a CCF account. Turbotax 2012 coupon However, before you open your CCF account, you must enter into an agreement with the Secretary of Commerce through the NMFS. Turbotax 2012 coupon This agreement will establish the following. Turbotax 2012 coupon Agreement vessels. Turbotax 2012 coupon Eligible vessels named in the agreement that will be the basis for the deferral of income tax. Turbotax 2012 coupon Planned use of withdrawals. Turbotax 2012 coupon Use of CCF funds to acquire, build, or rebuild a vessel. Turbotax 2012 coupon CCF depository. Turbotax 2012 coupon Where your CCF funds will be held. Turbotax 2012 coupon    You can request an application kit or get additional information from NMFS at the following address. Turbotax 2012 coupon NOAA/NMFS, Financial Services Division, F/MB5 Capital Construction Fund Program 1315 East-West Highway Silver Spring, MD 20910-3282    You can obtain information on the Capital Construction Fund Program at the following website: www. Turbotax 2012 coupon nmfs. Turbotax 2012 coupon noaa. Turbotax 2012 coupon gov/mb/financial_services/ccf. Turbotax 2012 coupon htm. Turbotax 2012 coupon    You can call NMFS to request an application kit or get additional information at (301) 713-2393 (ext. Turbotax 2012 coupon 204). Turbotax 2012 coupon Their fax number is (301) 713-1939. Turbotax 2012 coupon Eligible vessels. Turbotax 2012 coupon   There are two types of vessels that may be considered eligible, those weighing 5 tons or more and those weighing less than 5 tons. Turbotax 2012 coupon For each type, certain requirements must be met. Turbotax 2012 coupon Vessel weighing 5 tons or more. Turbotax 2012 coupon   To be considered eligible, the vessel must meet all the following requirements. Turbotax 2012 coupon Be built or rebuilt in the United States. Turbotax 2012 coupon Be documented under the laws of the United States. Turbotax 2012 coupon Be used commercially in the fisheries of the United States. Turbotax 2012 coupon Be operated in the foreign or domestic commerce of the United States. Turbotax 2012 coupon Vessel weighing less than 5 tons. Turbotax 2012 coupon   A small vessel, weighing at least 2 net tons but less than 5 net tons, must meet all the following requirements to be considered eligible. Turbotax 2012 coupon Be built or rebuilt in the United States. Turbotax 2012 coupon Be owned by a U. Turbotax 2012 coupon S. Turbotax 2012 coupon citizen. Turbotax 2012 coupon Have a home port in the United States. Turbotax 2012 coupon Be used commercially in the fisheries of the United States. Turbotax 2012 coupon Deferring tax on CCF deposits and earnings. Turbotax 2012 coupon   You can use a CCF account to defer income tax by taking the following actions. Turbotax 2012 coupon Making deposits to your CCF account from taxable income. Turbotax 2012 coupon Excluding from income deposits assigned to certain accounts (discussed later). Turbotax 2012 coupon Making withdrawals from your CCF account when you acquire, build, or rebuild fishing vessels. Turbotax 2012 coupon Reducing the basis of fishing vessels you acquire, build, or rebuild to recapture amounts previously excluded from tax. Turbotax 2012 coupon    Reporting requirements. Turbotax 2012 coupon Beginning with the tax year in which you establish your agreement, you must report annual deposit and withdrawal activity to the NMFS on NOAA Form 34-82. Turbotax 2012 coupon This form is due within 30 days after you file your federal income tax return even if no deposits or withdrawals are made. Turbotax 2012 coupon For more information, contact the NMFS at the address or phone number given earlier. Turbotax 2012 coupon Types of Accounts You Must Maintain Within a CCF This section discusses the three types of bookkeeping accounts you must maintain when you invest in a CCF account. Turbotax 2012 coupon Your total CCF deposits and earnings for any given year are limited to the amount attributed to these three accounts for that year. Turbotax 2012 coupon Capital account. Turbotax 2012 coupon   The capital account consists primarily of amounts attributable to the following items. Turbotax 2012 coupon Allowable depreciation deductions for agreement vessels. Turbotax 2012 coupon Any nontaxable return of capital from either (a) or (b), below. Turbotax 2012 coupon The sale or other disposition of agreement vessels. Turbotax 2012 coupon Insurance or indemnity proceeds attributable to agreement vessels. Turbotax 2012 coupon Any tax-exempt interest earned on state or local bonds in your CCF account. Turbotax 2012 coupon Capital gain account. Turbotax 2012 coupon   The capital gain account consists of amounts attributable to the following items reduced by any capital losses from assets held in your CCF account for more than 6 months. Turbotax 2012 coupon Any capital gain from either of the following sources. Turbotax 2012 coupon The sale or other disposition of agreement vessels held for more than 6 months. Turbotax 2012 coupon Insurance or indemnity proceeds attributable to agreement vessels held for more than 6 months. Turbotax 2012 coupon Any capital gain from assets held in your CCF account for more than 6 months. Turbotax 2012 coupon Ordinary income account. Turbotax 2012 coupon   The ordinary income account consists of amounts attributable to the following items. Turbotax 2012 coupon Any earnings (without regard to the carryback of any net operating or net capital loss) from the operation of agreement vessels in the fisheries of the United States or in the foreign or domestic commerce of the United States. Turbotax 2012 coupon Any capital gain from the following sources reduced by any capital losses from assets held in your CCF account for 6 months or less. Turbotax 2012 coupon The sale or other disposition of agreement vessels held for 6 months or less. Turbotax 2012 coupon Insurance or indemnity proceeds attributable to agreement vessels held for 6 months or less. Turbotax 2012 coupon Any capital gain from assets held in your CCF account for 6 months or less. Turbotax 2012 coupon Any ordinary income (such as depreciation recapture) from either of the following sources. Turbotax 2012 coupon The sale or other disposition of agreement vessels. Turbotax 2012 coupon Insurance or indemnity proceeds attributable to agreement vessels. Turbotax 2012 coupon Any interest (not including tax-exempt interest from state and local bonds), most dividends, and other ordinary income earned on the assets in your CCF account. Turbotax 2012 coupon Tax Treatment of CCF Deposits This section explains the tax treatment of income used as the basis for CCF deposits. Turbotax 2012 coupon Capital gains. Turbotax 2012 coupon   Do not report any transaction that produces a capital gain if you deposit the net proceeds into your CCF account. Turbotax 2012 coupon This treatment applies to either of the following transactions. Turbotax 2012 coupon The sale or other disposition of an agreement vessel. Turbotax 2012 coupon The receipt of insurance or indemnity proceeds attributable to an agreement vessel. Turbotax 2012 coupon Depreciation recapture. Turbotax 2012 coupon   Do not report any transaction that produces depreciation recapture if you deposit the net proceeds into your CCF account. Turbotax 2012 coupon This treatment applies to either of the following transactions. Turbotax 2012 coupon The sale or other disposition of an agreement vessel. Turbotax 2012 coupon The receipt of insurance or indemnity proceeds attributable to an agreement vessel. Turbotax 2012 coupon Earnings from operations. Turbotax 2012 coupon   Report earnings from the operation of agreement vessels on your Schedule C or C-EZ (Form 1040) even if you deposit part of these earnings into your CCF account. Turbotax 2012 coupon You subtract any part of the earnings you deposited into your CCF account from the amount you would otherwise enter as taxable income on Form 1040, line 43 (for 2005). Turbotax 2012 coupon Next to line 43, write “CCF” and the amount of the deposits. Turbotax 2012 coupon Do not deduct these CCF deposits on Schedule C or C-EZ (Form 1040). Turbotax 2012 coupon If you deposit earnings from operations into your CCF account and you must complete other forms such as Form 6251, Alternative Minimum Tax (Individuals), or a worksheet for Schedule D (Form 1040), you will need to make an extra computation. Turbotax 2012 coupon When the other form instructs you to use the amount from Form 1040, line 41 (for 2005), do not use that amount. Turbotax 2012 coupon Instead, add Form 1040, lines 42 and 43 (for 2005), and use that amount. Turbotax 2012 coupon Self-employment tax. Turbotax 2012 coupon   You must use your net profit or loss from your fishing business to figure your self-employment tax. Turbotax 2012 coupon Do not reduce your net profit or loss by any earnings from operations you deposit into your CCF account. Turbotax 2012 coupon    Partnerships and S corporations. Turbotax 2012 coupon The deduction for partnership earnings from operations deposited into a CCF account is separately stated on Schedule K (Form 1065), line 13d, and allocated to the partners on Schedule K-1 (Form 1065), box 13 (for 2005). Turbotax 2012 coupon   The deduction for S corporation earnings deposited into a CCF account is separately stated on Schedule K (Form 1120S), line 12d, and allocated to the shareholders on Schedule K-1 (Form 1120S), box 12 (for 2005). Turbotax 2012 coupon Tax Treatment of CCF Earnings This section explains the tax treatment of the earnings from the assets in your CCF account when the earnings are redeposited or left in your account. Turbotax 2012 coupon However, if you choose to withdraw the earnings in the year earned, you must generally pay income tax on them. Turbotax 2012 coupon Capital gains. Turbotax 2012 coupon   Do not report any capital gains from the sale of capital assets held in your CCF account. Turbotax 2012 coupon This includes capital gain distributions reported to you on Form 1099-DIV or a substitute statement. Turbotax 2012 coupon However, you should attach a statement to your tax return to list the payers and the amounts and to identify the capital gains as “CCF account earnings. Turbotax 2012 coupon ” Interest and dividends. Turbotax 2012 coupon   Do not report any ordinary income (such as interest and dividends) you earn on the assets in your CCF account. Turbotax 2012 coupon However, you should attach a statement to your return to list the payers and the amounts and to identify them as “CCF account earnings. Turbotax 2012 coupon ”   If you are required to file Schedule B (Form 1040), you can add these earnings to the list of payers and amounts on line 1 or line 5 and identify them as “CCF earnings. Turbotax 2012 coupon ” Then, subtract the same amounts from the list and identify them as “CCF deposits. Turbotax 2012 coupon ” Tax-exempt interest. Turbotax 2012 coupon   Do not report tax-exempt interest from state or local bonds you held in your CCF account. Turbotax 2012 coupon You are not required to report this interest on Form 1040, line 8b. Turbotax 2012 coupon Tax Treatment of CCF Withdrawals This section discusses the tax treatment of amounts you withdraw from your CCF account during the year. Turbotax 2012 coupon Qualified Withdrawals A qualified withdrawal from a CCF account is one that is approved by NMFS for either of the following uses. Turbotax 2012 coupon Acquiring, building, or rebuilding qualified vessels (defined next). Turbotax 2012 coupon Making principal payments on the mortgage of a qualified vessel. Turbotax 2012 coupon NMFS will not approve amounts withdrawn to purchase nets not continuously attached to the vessel, such as seine nets, gill set-nets, and gill drift-nets. Turbotax 2012 coupon NMFS will approve amounts withdrawn to purchase trawl nets. Turbotax 2012 coupon Qualified vessel. Turbotax 2012 coupon   This is any vessel that meets all of the following requirements. Turbotax 2012 coupon The vessel was built or rebuilt in the United States. Turbotax 2012 coupon The vessel is documented under the laws of the United States. Turbotax 2012 coupon The person maintaining the CCF account agrees with the Secretary of Commerce that the vessel will be operated in United States foreign trade, Great Lakes trade, noncontiguous domestic trade, or the fisheries of the United States. Turbotax 2012 coupon How to determine the source of qualified withdrawals. Turbotax 2012 coupon   When you make a qualified withdrawal, the amount is treated as being withdrawn in the following order from the accounts listed below. Turbotax 2012 coupon The capital account. Turbotax 2012 coupon The capital gain account. Turbotax 2012 coupon The ordinary income account. Turbotax 2012 coupon Excluding qualified withdrawals from tax. Turbotax 2012 coupon   Do not report on your income tax return any qualified withdrawals from your CCF account. Turbotax 2012 coupon Reduce the depreciable basis of fishing vessels you acquire, build, or rebuild when you make a qualified withdrawal from either the capital gain or the ordinary income account. Turbotax 2012 coupon Nonqualified Withdrawals A nonqualified withdrawal from a CCF account is generally any withdrawal that is not a qualified withdrawal. Turbotax 2012 coupon Qualified withdrawals are defined under Qualified Withdrawals, earlier. Turbotax 2012 coupon Examples. Turbotax 2012 coupon   Examples of nonqualified withdrawals include the following amounts from either the ordinary income account or the capital gain account. Turbotax 2012 coupon Amounts remaining in a CCF account upon termination of your agreement with NMFS. Turbotax 2012 coupon Amounts you withdraw and use to make principal payments on the mortgage of a vessel if the basis of that vessel and the bases of other vessels you own have already been reduced to zero. Turbotax 2012 coupon Amounts determined by the IRS to cause your CCF account balance to exceed the amount appropriate to meet your planned use of withdrawals. Turbotax 2012 coupon You will generally be given 3 years to revise your plans to cover this excess balance. Turbotax 2012 coupon Amounts you leave in your account for more than 25 years. Turbotax 2012 coupon There is a graduated schedule under which the percentage applied to determine the amount of the nonqualified withdrawal increases from 20% in the 26th year to 100% in the 30th year. Turbotax 2012 coupon How to determine the source of nonqualified withdrawals. Turbotax 2012 coupon    When you make a nonqualified withdrawal from your CCF account, the amount is treated as being withdrawn in the following order from the accounts listed below. Turbotax 2012 coupon The ordinary income account. Turbotax 2012 coupon The capital gain account. Turbotax 2012 coupon The capital account. Turbotax 2012 coupon Paying tax on nonqualified withdrawals. Turbotax 2012 coupon   In general, nonqualified withdrawals are taxed separately from your other gross income and at the highest marginal tax rate in effect for the year of withdrawal. Turbotax 2012 coupon However, nonqualified withdrawals treated as made from the capital gain account are taxed at a rate that cannot exceed 15% for individuals and 34% for corporations. Turbotax 2012 coupon    Partnerships and S corporations. Turbotax 2012 coupon Taxable nonqualified partnership withdrawals are separately stated on Schedule K (Form 1065), line 20c, and allocated to the partners on Schedule K-1 (Form 1065), box 20 (for 2005). Turbotax 2012 coupon Taxable nonqualified withdrawals by an S corporation are separately stated on Schedule K (Form 1120S), line 17d, and allocated to the shareholders on Schedule K-1 (Form 1120S), box 17. Turbotax 2012 coupon Interest. Turbotax 2012 coupon   You must pay interest on the additional tax due to nonqualified withdrawals that are treated as made from either the ordinary income or the capital gain account. Turbotax 2012 coupon The interest period begins on the last date for paying tax for the year for which you deposited the amount you withdrew from your CCF account. Turbotax 2012 coupon The period ends on the last date for paying tax for the year in which you make the nonqualified withdrawal. Turbotax 2012 coupon The interest rate on the nonqualified withdrawal is simple interest. Turbotax 2012 coupon The rate is subject to change annually and is published in the Federal Register. Turbotax 2012 coupon    You also can call NMFS at (301) 713-2393 (ext. Turbotax 2012 coupon 204) to get the current interest rate. Turbotax 2012 coupon Interest deduction. Turbotax 2012 coupon   You can deduct the interest you pay on a nonqualified withdrawal as a trade or business expense. Turbotax 2012 coupon Reporting the additional tax and interest. Turbotax 2012 coupon   Attach a statement to your income tax return showing your computation of the tax and the interest on a nonqualified withdrawal. Turbotax 2012 coupon Include the tax and interest on Form 1040, line 63 (for 2005). Turbotax 2012 coupon To the left of line 63, write in the amount of tax and interest and “CCF. Turbotax 2012 coupon ” Tax benefit rule. Turbotax 2012 coupon   If any portion of your nonqualified withdrawal is properly attributable to contributions (not earnings on the contributions) you made to the CCF account that did not reduce your tax liability for any tax year prior to the withdrawal year, the following tax treatment applies. Turbotax 2012 coupon The part that did not reduce your tax liability for any year prior to the withdrawal year is not taxed. Turbotax 2012 coupon That part is allowed as a net operating loss deduction. Turbotax 2012 coupon More Information This section briefly discussed the CCF program. Turbotax 2012 coupon For more detailed information, see the following legislative authorities. Turbotax 2012 coupon Section 607 of the Merchant Marine Act of 1936, as amended (46 U. Turbotax 2012 coupon S. Turbotax 2012 coupon C. Turbotax 2012 coupon 1177). Turbotax 2012 coupon Chapter 2, Part 259 of title 50 of the Code of Federal Regulations (50 C. Turbotax 2012 coupon F. Turbotax 2012 coupon R. Turbotax 2012 coupon , Part 259). Turbotax 2012 coupon Subchapter A, Part 3 of title 26 of the Code of Federal Regulations (26 C. Turbotax 2012 coupon F. Turbotax 2012 coupon R. Turbotax 2012 coupon , Part 3). Turbotax 2012 coupon Section 7518 of the Internal Revenue Code (IRC 7518). Turbotax 2012 coupon The application kit you can obtain from NMFS at the address or phone number given earlier may contain copies of some of these sources of additional information. Turbotax 2012 coupon Also, see their web page at www. Turbotax 2012 coupon nmfs. Turbotax 2012 coupon noaa. Turbotax 2012 coupon gov/mb/financial_services/ccf. Turbotax 2012 coupon htm. Turbotax 2012 coupon How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Turbotax 2012 coupon By selecting the method that is best for you, you will have quick and easy access to tax help. Turbotax 2012 coupon Contacting your Taxpayer Advocate. Turbotax 2012 coupon   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Turbotax 2012 coupon   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Turbotax 2012 coupon While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Turbotax 2012 coupon   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778, Call, write, or fax the Taxpayer Advocate office in your area, Call 1-800-829-4059 if you are a TTY/TDD user, or Visit www. Turbotax 2012 coupon irs. Turbotax 2012 coupon gov/advocate. Turbotax 2012 coupon   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). Turbotax 2012 coupon Free tax services. Turbotax 2012 coupon   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Turbotax 2012 coupon It contains a list of free tax publications and an index of tax topics. 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