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Turbotax Deluxe Federal Efile State 2009

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Turbotax Deluxe Federal Efile State 2009

Turbotax deluxe federal efile state 2009 14. Turbotax deluxe federal efile state 2009   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Turbotax deluxe federal efile state 2009  If you are a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 law. Turbotax deluxe federal efile state 2009 This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Turbotax deluxe federal efile state 2009 Introduction This chapter discusses the tax consequences of selling or trading investment property. Turbotax deluxe federal efile state 2009 It explains the following. Turbotax deluxe federal efile state 2009 What a sale or trade is. Turbotax deluxe federal efile state 2009 Figuring gain or loss. Turbotax deluxe federal efile state 2009 Nontaxable trades. Turbotax deluxe federal efile state 2009 Related party transactions. Turbotax deluxe federal efile state 2009 Capital gains or losses. Turbotax deluxe federal efile state 2009 Capital assets and noncapital assets. Turbotax deluxe federal efile state 2009 Holding period. Turbotax deluxe federal efile state 2009 Rollover of gain from publicly traded securities. Turbotax deluxe federal efile state 2009 Other property transactions. Turbotax deluxe federal efile state 2009   Certain transfers of property are not discussed here. Turbotax deluxe federal efile state 2009 They are discussed in other IRS publications. Turbotax deluxe federal efile state 2009 These include the following. Turbotax deluxe federal efile state 2009 Sales of a main home, covered in chapter 15. Turbotax deluxe federal efile state 2009 Installment sales, covered in Publication 537, Installment Sales. Turbotax deluxe federal efile state 2009 Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Turbotax deluxe federal efile state 2009 Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Turbotax deluxe federal efile state 2009    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Turbotax deluxe federal efile state 2009 Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Turbotax deluxe federal efile state 2009 It also discusses investment-related expenses. Turbotax deluxe federal efile state 2009 Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Turbotax deluxe federal efile state 2009 Generally, you should receive the statement by February 15 of the next year. Turbotax deluxe federal efile state 2009 It will show the gross proceeds from the sale. Turbotax deluxe federal efile state 2009 If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Turbotax deluxe federal efile state 2009 Generally, a covered security is a security you acquired after 2010, with certain exceptions. Turbotax deluxe federal efile state 2009 See the Instructions for Form 8949. Turbotax deluxe federal efile state 2009 The IRS will also get a copy of Form 1099-B from the broker. Turbotax deluxe federal efile state 2009 Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Turbotax deluxe federal efile state 2009 What Is a Sale or Trade? This section explains what is a sale or trade. Turbotax deluxe federal efile state 2009 It also explains certain transactions and events that are treated as sales or trades. Turbotax deluxe federal efile state 2009 A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Turbotax deluxe federal efile state 2009 A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Turbotax deluxe federal efile state 2009 Sale and purchase. Turbotax deluxe federal efile state 2009   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Turbotax deluxe federal efile state 2009 The sale and purchase are two separate transactions. Turbotax deluxe federal efile state 2009 But see Like-kind exchanges under Nontaxable Trades, later. Turbotax deluxe federal efile state 2009 Redemption of stock. Turbotax deluxe federal efile state 2009   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Turbotax deluxe federal efile state 2009 Dividend versus sale or trade. Turbotax deluxe federal efile state 2009   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Turbotax deluxe federal efile state 2009 Both direct and indirect ownership of stock will be considered. Turbotax deluxe federal efile state 2009 The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Turbotax deluxe federal efile state 2009 Redemption or retirement of bonds. Turbotax deluxe federal efile state 2009   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Turbotax deluxe federal efile state 2009   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Turbotax deluxe federal efile state 2009 For details, see Regulations section 1. Turbotax deluxe federal efile state 2009 1001-3. Turbotax deluxe federal efile state 2009 Surrender of stock. Turbotax deluxe federal efile state 2009   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Turbotax deluxe federal efile state 2009 The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Turbotax deluxe federal efile state 2009 Worthless securities. Turbotax deluxe federal efile state 2009    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Turbotax deluxe federal efile state 2009 This affects whether your capital loss is long term or short term. Turbotax deluxe federal efile state 2009 See Holding Period , later. Turbotax deluxe federal efile state 2009   Worthless securities also include securities that you abandon after March 12, 2008. Turbotax deluxe federal efile state 2009 To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Turbotax deluxe federal efile state 2009 All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Turbotax deluxe federal efile state 2009    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Turbotax deluxe federal efile state 2009 Do not deduct them in the year the stock became worthless. Turbotax deluxe federal efile state 2009 How to report loss. Turbotax deluxe federal efile state 2009    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Turbotax deluxe federal efile state 2009 In column (a), enter “Worthless. Turbotax deluxe federal efile state 2009 ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Turbotax deluxe federal efile state 2009 See Form 8949 and the Instructions for Form 8949. Turbotax deluxe federal efile state 2009 For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbotax deluxe federal efile state 2009 See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbotax deluxe federal efile state 2009 Filing a claim for refund. Turbotax deluxe federal efile state 2009   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Turbotax deluxe federal efile state 2009 You must use Form 1040X, Amended U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Individual Income Tax Return, to amend your return for the year the security became worthless. Turbotax deluxe federal efile state 2009 You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Turbotax deluxe federal efile state 2009 For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Turbotax deluxe federal efile state 2009 How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Turbotax deluxe federal efile state 2009 Gain. Turbotax deluxe federal efile state 2009   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Turbotax deluxe federal efile state 2009 Loss. Turbotax deluxe federal efile state 2009   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Turbotax deluxe federal efile state 2009 Adjusted basis. Turbotax deluxe federal efile state 2009   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Turbotax deluxe federal efile state 2009 See chapter 13 for more information about determining the adjusted basis of property. Turbotax deluxe federal efile state 2009 Amount realized. Turbotax deluxe federal efile state 2009   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Turbotax deluxe federal efile state 2009 Amount realized includes the money you receive plus the fair market value of any property or services you receive. Turbotax deluxe federal efile state 2009 If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Turbotax deluxe federal efile state 2009 If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Turbotax deluxe federal efile state 2009 For more information, see Publication 537. Turbotax deluxe federal efile state 2009 Fair market value. Turbotax deluxe federal efile state 2009   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Turbotax deluxe federal efile state 2009 Your gain is $3,000 ($10,000 − $7,000). Turbotax deluxe federal efile state 2009 Debt paid off. Turbotax deluxe federal efile state 2009    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Turbotax deluxe federal efile state 2009 This is true even if neither you nor the buyer is personally liable for the debt. Turbotax deluxe federal efile state 2009 For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 You sell stock that you had pledged as security for a bank loan of $8,000. Turbotax deluxe federal efile state 2009 Your basis in the stock is $6,000. Turbotax deluxe federal efile state 2009 The buyer pays off your bank loan and pays you $20,000 in cash. Turbotax deluxe federal efile state 2009 The amount realized is $28,000 ($20,000 + $8,000). Turbotax deluxe federal efile state 2009 Your gain is $22,000 ($28,000 − $6,000). Turbotax deluxe federal efile state 2009 Payment of cash. Turbotax deluxe federal efile state 2009   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Turbotax deluxe federal efile state 2009 Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Turbotax deluxe federal efile state 2009 If the result is a positive number, it is a gain. Turbotax deluxe federal efile state 2009 If the result is a negative number, it is a loss. Turbotax deluxe federal efile state 2009 No gain or loss. Turbotax deluxe federal efile state 2009   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Turbotax deluxe federal efile state 2009 In this case, you may have neither a gain nor a loss. Turbotax deluxe federal efile state 2009 See Basis Other Than Cost in chapter 13. Turbotax deluxe federal efile state 2009 Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Turbotax deluxe federal efile state 2009 For more information on nontaxable trades, see chapter 1 of Publication 544. Turbotax deluxe federal efile state 2009 Like-kind exchanges. Turbotax deluxe federal efile state 2009   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Turbotax deluxe federal efile state 2009 To be nontaxable, a trade must meet all six of the following conditions. Turbotax deluxe federal efile state 2009 The property must be business or investment property. Turbotax deluxe federal efile state 2009 You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Turbotax deluxe federal efile state 2009 Neither property may be property used for personal purposes, such as your home or family car. Turbotax deluxe federal efile state 2009 The property must not be held primarily for sale. Turbotax deluxe federal efile state 2009 The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Turbotax deluxe federal efile state 2009 The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Turbotax deluxe federal efile state 2009 However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Turbotax deluxe federal efile state 2009 Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Turbotax deluxe federal efile state 2009 There must be a trade of like property. Turbotax deluxe federal efile state 2009 The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Turbotax deluxe federal efile state 2009 The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Turbotax deluxe federal efile state 2009 The trade of a piece of machinery for a store building is not a trade of like property. Turbotax deluxe federal efile state 2009 Real property located in the United States and real property located outside the United States are not like property. Turbotax deluxe federal efile state 2009 Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Turbotax deluxe federal efile state 2009 The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Turbotax deluxe federal efile state 2009 The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Turbotax deluxe federal efile state 2009    If you trade property with a related party in a like-kind exchange, a special rule may apply. Turbotax deluxe federal efile state 2009 See Related Party Transactions , later in this chapter. Turbotax deluxe federal efile state 2009 Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Turbotax deluxe federal efile state 2009 Partly nontaxable exchange. Turbotax deluxe federal efile state 2009   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Turbotax deluxe federal efile state 2009 You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Turbotax deluxe federal efile state 2009 You cannot deduct a loss. Turbotax deluxe federal efile state 2009 Like property and unlike property transferred. Turbotax deluxe federal efile state 2009   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Turbotax deluxe federal efile state 2009 The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Turbotax deluxe federal efile state 2009 Like property and money transferred. Turbotax deluxe federal efile state 2009   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Turbotax deluxe federal efile state 2009 Basis of property received. Turbotax deluxe federal efile state 2009   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Turbotax deluxe federal efile state 2009 How to report. Turbotax deluxe federal efile state 2009   You must report the trade of like property on Form 8824. Turbotax deluxe federal efile state 2009 If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Turbotax deluxe federal efile state 2009 See the instructions for Line 22 in the Instructions for Form 8824. Turbotax deluxe federal efile state 2009   For information on using Form 4797, see chapter 4 of Publication 544. Turbotax deluxe federal efile state 2009 Corporate stocks. Turbotax deluxe federal efile state 2009   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Turbotax deluxe federal efile state 2009 Corporate reorganizations. Turbotax deluxe federal efile state 2009   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Turbotax deluxe federal efile state 2009 If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Turbotax deluxe federal efile state 2009 Stock for stock of the same corporation. Turbotax deluxe federal efile state 2009   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Turbotax deluxe federal efile state 2009 This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Turbotax deluxe federal efile state 2009 Convertible stocks and bonds. Turbotax deluxe federal efile state 2009   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Turbotax deluxe federal efile state 2009 Property for stock of a controlled corporation. Turbotax deluxe federal efile state 2009   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Turbotax deluxe federal efile state 2009 This rule applies both to individuals and to groups who transfer property to a corporation. Turbotax deluxe federal efile state 2009 It does not apply if the corporation is an investment company. Turbotax deluxe federal efile state 2009   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Turbotax deluxe federal efile state 2009   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Turbotax deluxe federal efile state 2009 For details, see Regulations section 1. Turbotax deluxe federal efile state 2009 351-3. Turbotax deluxe federal efile state 2009 Additional information. Turbotax deluxe federal efile state 2009   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 Insurance policies and annuities. Turbotax deluxe federal efile state 2009   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Turbotax deluxe federal efile state 2009   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Turbotax deluxe federal efile state 2009 For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Turbotax deluxe federal efile state 2009 Revenue Ruling 2003-76 is available at www. Turbotax deluxe federal efile state 2009 irs. Turbotax deluxe federal efile state 2009 gov/irb/2003-33_IRB/ar11. Turbotax deluxe federal efile state 2009 html. Turbotax deluxe federal efile state 2009 Revenue Procedure 2008-24 is available at www. Turbotax deluxe federal efile state 2009 irs. Turbotax deluxe federal efile state 2009 gov/irb/2008-13_IRB/ar13. Turbotax deluxe federal efile state 2009 html. Turbotax deluxe federal efile state 2009 For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Turbotax deluxe federal efile state 2009 Revenue Procedure 2011-38 is available at www. Turbotax deluxe federal efile state 2009 irs. Turbotax deluxe federal efile state 2009 gov/irb/2011-30_IRB/ar09. Turbotax deluxe federal efile state 2009 html. Turbotax deluxe federal efile state 2009   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Turbotax deluxe federal efile state 2009 A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Turbotax deluxe federal efile state 2009 The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Turbotax deluxe federal efile state 2009   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Turbotax deluxe federal efile state 2009 Demutualization of life insurance companies. Turbotax deluxe federal efile state 2009   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Turbotax deluxe federal efile state 2009 See Demutualization of Life Insurance Companies in Publication 550. Turbotax deluxe federal efile state 2009 U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Treasury notes or bonds. Turbotax deluxe federal efile state 2009   You can trade certain issues of U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Turbotax deluxe federal efile state 2009 See Savings bonds traded in chapter 1 of Publication 550 for more information. Turbotax deluxe federal efile state 2009 Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Turbotax deluxe federal efile state 2009 This nonrecognition rule does not apply in the following situations. Turbotax deluxe federal efile state 2009 The recipient spouse or former spouse is a nonresident alien. Turbotax deluxe federal efile state 2009 Property is transferred in trust and liability exceeds basis. Turbotax deluxe federal efile state 2009 Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Turbotax deluxe federal efile state 2009 For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Turbotax deluxe federal efile state 2009 The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Turbotax deluxe federal efile state 2009 This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Turbotax deluxe federal efile state 2009 This rule applies for purposes of determining loss as well as gain. Turbotax deluxe federal efile state 2009 Any gain recognized on a transfer in trust increases the basis. Turbotax deluxe federal efile state 2009 A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Turbotax deluxe federal efile state 2009 Related Party Transactions Special rules apply to the sale or trade of property between related parties. Turbotax deluxe federal efile state 2009 Gain on sale or trade of depreciable property. Turbotax deluxe federal efile state 2009   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Turbotax deluxe federal efile state 2009 See chapter 3 of Publication 544 for more information. Turbotax deluxe federal efile state 2009 Like-kind exchanges. Turbotax deluxe federal efile state 2009   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Turbotax deluxe federal efile state 2009 See Like-kind exchanges , earlier, under Nontaxable Trades. Turbotax deluxe federal efile state 2009   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Turbotax deluxe federal efile state 2009 However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Turbotax deluxe federal efile state 2009 See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Turbotax deluxe federal efile state 2009 Losses on sales or trades of property. Turbotax deluxe federal efile state 2009   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Turbotax deluxe federal efile state 2009 Members of your family. Turbotax deluxe federal efile state 2009 This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Turbotax deluxe federal efile state 2009 ), and lineal descendants (children, grandchildren, etc. Turbotax deluxe federal efile state 2009 ). Turbotax deluxe federal efile state 2009 A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Turbotax deluxe federal efile state 2009 A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Turbotax deluxe federal efile state 2009 (See Constructive ownership of stock , later. Turbotax deluxe federal efile state 2009 ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Turbotax deluxe federal efile state 2009   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Turbotax deluxe federal efile state 2009 A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Turbotax deluxe federal efile state 2009 Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Turbotax deluxe federal efile state 2009 A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Turbotax deluxe federal efile state 2009 A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Turbotax deluxe federal efile state 2009 Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Turbotax deluxe federal efile state 2009 Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Turbotax deluxe federal efile state 2009 An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Turbotax deluxe federal efile state 2009 Two corporations that are members of the same controlled group. Turbotax deluxe federal efile state 2009 (Under certain conditions, however, these losses are not disallowed but must be deferred. Turbotax deluxe federal efile state 2009 ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Turbotax deluxe federal efile state 2009 Multiple property sales or trades. Turbotax deluxe federal efile state 2009   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Turbotax deluxe federal efile state 2009 The gain on each item may be taxable. Turbotax deluxe federal efile state 2009 However, you cannot deduct the loss on any item. Turbotax deluxe federal efile state 2009 Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Turbotax deluxe federal efile state 2009 Indirect transactions. Turbotax deluxe federal efile state 2009   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Turbotax deluxe federal efile state 2009 This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Turbotax deluxe federal efile state 2009 Constructive ownership of stock. Turbotax deluxe federal efile state 2009   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Turbotax deluxe federal efile state 2009 Rule 1. Turbotax deluxe federal efile state 2009   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Turbotax deluxe federal efile state 2009 Rule 2. Turbotax deluxe federal efile state 2009   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Turbotax deluxe federal efile state 2009 Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Turbotax deluxe federal efile state 2009 Rule 3. Turbotax deluxe federal efile state 2009   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Turbotax deluxe federal efile state 2009 Rule 4. Turbotax deluxe federal efile state 2009   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Turbotax deluxe federal efile state 2009 But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Turbotax deluxe federal efile state 2009 Property received from a related party. Turbotax deluxe federal efile state 2009    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Turbotax deluxe federal efile state 2009 This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Turbotax deluxe federal efile state 2009 This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Turbotax deluxe federal efile state 2009   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Turbotax deluxe federal efile state 2009 Example 1. Turbotax deluxe federal efile state 2009 Your brother sells you stock for $7,600. Turbotax deluxe federal efile state 2009 His cost basis is $10,000. Turbotax deluxe federal efile state 2009 Your brother cannot deduct the loss of $2,400. Turbotax deluxe federal efile state 2009 Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Turbotax deluxe federal efile state 2009 Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Turbotax deluxe federal efile state 2009 Example 2. Turbotax deluxe federal efile state 2009 If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Turbotax deluxe federal efile state 2009 You cannot deduct the loss that was not allowed to your brother. Turbotax deluxe federal efile state 2009 Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Turbotax deluxe federal efile state 2009 Character of gain or loss. Turbotax deluxe federal efile state 2009   You need to classify your gains and losses as either ordinary or capital gains or losses. Turbotax deluxe federal efile state 2009 You then need to classify your capital gains and losses as either short term or long term. Turbotax deluxe federal efile state 2009 If you have long-term gains and losses, you must identify your 28% rate gains and losses. Turbotax deluxe federal efile state 2009 If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Turbotax deluxe federal efile state 2009   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Turbotax deluxe federal efile state 2009 Reporting capital gains and losses is explained in chapter 16. Turbotax deluxe federal efile state 2009 Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Turbotax deluxe federal efile state 2009 Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Turbotax deluxe federal efile state 2009 A sale or trade of a noncapital asset generally results in ordinary gain or loss. Turbotax deluxe federal efile state 2009 Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Turbotax deluxe federal efile state 2009 In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Turbotax deluxe federal efile state 2009 Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Turbotax deluxe federal efile state 2009 Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Turbotax deluxe federal efile state 2009 Any property you own is a capital asset, except the following noncapital assets. Turbotax deluxe federal efile state 2009 Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Turbotax deluxe federal efile state 2009 For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Turbotax deluxe federal efile state 2009 Depreciable property used in your trade or business, even if fully depreciated. Turbotax deluxe federal efile state 2009 Real property used in your trade or business. Turbotax deluxe federal efile state 2009 A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Turbotax deluxe federal efile state 2009 For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Turbotax deluxe federal efile state 2009 Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Turbotax deluxe federal efile state 2009 U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Turbotax deluxe federal efile state 2009 Certain commodities derivative financial instruments held by commodities derivatives dealers. Turbotax deluxe federal efile state 2009 Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Turbotax deluxe federal efile state 2009 Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Turbotax deluxe federal efile state 2009 Investment Property Investment property is a capital asset. Turbotax deluxe federal efile state 2009 Any gain or loss from its sale or trade is generally a capital gain or loss. Turbotax deluxe federal efile state 2009 Gold, silver, stamps, coins, gems, etc. Turbotax deluxe federal efile state 2009   These are capital assets except when they are held for sale by a dealer. Turbotax deluxe federal efile state 2009 Any gain or loss you have from their sale or trade generally is a capital gain or loss. Turbotax deluxe federal efile state 2009 Stocks, stock rights, and bonds. Turbotax deluxe federal efile state 2009   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Turbotax deluxe federal efile state 2009 However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Turbotax deluxe federal efile state 2009 However, you cannot deduct a loss from selling personal use property. Turbotax deluxe federal efile state 2009 Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Turbotax deluxe federal efile state 2009 You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Turbotax deluxe federal efile state 2009 You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Turbotax deluxe federal efile state 2009 You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Turbotax deluxe federal efile state 2009 For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbotax deluxe federal efile state 2009 See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbotax deluxe federal efile state 2009 You can revoke the election if you have IRS approval. Turbotax deluxe federal efile state 2009 To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Turbotax deluxe federal efile state 2009 See, for example, Rev. Turbotax deluxe federal efile state 2009 Proc. Turbotax deluxe federal efile state 2009 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Turbotax deluxe federal efile state 2009 Proc. Turbotax deluxe federal efile state 2009 2013–32, available at www. Turbotax deluxe federal efile state 2009 irs. Turbotax deluxe federal efile state 2009 gov/irb/2013-01_IRB/ar06. Turbotax deluxe federal efile state 2009 html. Turbotax deluxe federal efile state 2009 Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Turbotax deluxe federal efile state 2009 Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Turbotax deluxe federal efile state 2009 Short-term government obligations. Turbotax deluxe federal efile state 2009   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Turbotax deluxe federal efile state 2009 This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Turbotax deluxe federal efile state 2009 Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Turbotax deluxe federal efile state 2009   However, do not treat these gains as income to the extent you previously included the discount in income. Turbotax deluxe federal efile state 2009 See Discount on Short-Term Obligations in chapter 1 of Publication 550. Turbotax deluxe federal efile state 2009 Short-term nongovernment obligations. Turbotax deluxe federal efile state 2009   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Turbotax deluxe federal efile state 2009 This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Turbotax deluxe federal efile state 2009   However, to the extent you previously included the discount in income, you do not have to include it in income again. Turbotax deluxe federal efile state 2009 See Discount on Short-Term Obligations in chapter 1 of Publication 550. Turbotax deluxe federal efile state 2009 Tax-exempt state and local government bonds. Turbotax deluxe federal efile state 2009   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Turbotax deluxe federal efile state 2009 To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Turbotax deluxe federal efile state 2009   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Turbotax deluxe federal efile state 2009 For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Turbotax deluxe federal efile state 2009 If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Turbotax deluxe federal efile state 2009 If you bought the bonds after April 30, 1993, the gain is ordinary income. Turbotax deluxe federal efile state 2009   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Turbotax deluxe federal efile state 2009 For more information, see Market Discount Bonds in chapter 1 of Publication 550. Turbotax deluxe federal efile state 2009    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Turbotax deluxe federal efile state 2009 Redeemed before maturity. Turbotax deluxe federal efile state 2009   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Turbotax deluxe federal efile state 2009   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Turbotax deluxe federal efile state 2009 However, you must report the unearned part of OID as a capital gain. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Turbotax deluxe federal efile state 2009 The face amount of the bond was $1,000. Turbotax deluxe federal efile state 2009 The $200 discount was OID. Turbotax deluxe federal efile state 2009 At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Turbotax deluxe federal efile state 2009 The bond was callable at its face amount beginning 10 years after the issue date. Turbotax deluxe federal efile state 2009 The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Turbotax deluxe federal efile state 2009 The OID earned during the time you held the bond, $73, is not taxable. Turbotax deluxe federal efile state 2009 The $60 accrued annual interest also is not taxable. Turbotax deluxe federal efile state 2009 However, you must report the unearned part of OID ($127) as a capital gain. Turbotax deluxe federal efile state 2009 Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Turbotax deluxe federal efile state 2009   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Turbotax deluxe federal efile state 2009 The rest of the gain is capital gain. Turbotax deluxe federal efile state 2009 If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Turbotax deluxe federal efile state 2009 This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Turbotax deluxe federal efile state 2009 Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Turbotax deluxe federal efile state 2009   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Turbotax deluxe federal efile state 2009 Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Turbotax deluxe federal efile state 2009 See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Turbotax deluxe federal efile state 2009   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Turbotax deluxe federal efile state 2009 However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Turbotax deluxe federal efile state 2009 In this case, the rest of the gain is capital gain. Turbotax deluxe federal efile state 2009 Market discount bonds. Turbotax deluxe federal efile state 2009   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Turbotax deluxe federal efile state 2009 If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Turbotax deluxe federal efile state 2009 The rest of the gain is capital gain. Turbotax deluxe federal efile state 2009 See Market Discount Bonds in chapter 1 of Publication 550. Turbotax deluxe federal efile state 2009   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Turbotax deluxe federal efile state 2009 See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 Retirement of debt instrument. Turbotax deluxe federal efile state 2009   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Turbotax deluxe federal efile state 2009 Notes of individuals. Turbotax deluxe federal efile state 2009   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Turbotax deluxe federal efile state 2009 An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Turbotax deluxe federal efile state 2009 The lender is not in the business of lending money. Turbotax deluxe federal efile state 2009 The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Turbotax deluxe federal efile state 2009 Avoiding federal tax is not one of the principal purposes of the loan. Turbotax deluxe federal efile state 2009   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Turbotax deluxe federal efile state 2009 When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Turbotax deluxe federal efile state 2009 The rest of the gain, if any, is capital gain. Turbotax deluxe federal efile state 2009 Any loss on the sale or redemption is capital loss. Turbotax deluxe federal efile state 2009 Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Turbotax deluxe federal efile state 2009 Ordinary loss. Turbotax deluxe federal efile state 2009 Casualty loss. Turbotax deluxe federal efile state 2009 Nonbusiness bad debt (short-term capital loss). Turbotax deluxe federal efile state 2009  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Turbotax deluxe federal efile state 2009 Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Turbotax deluxe federal efile state 2009 Report the loss on Form 4797, line 10. Turbotax deluxe federal efile state 2009 Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Turbotax deluxe federal efile state 2009 Report the gain on Form 8949. Turbotax deluxe federal efile state 2009 See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbotax deluxe federal efile state 2009 See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbotax deluxe federal efile state 2009 Holding Period If you sold or traded investment property, you must determine your holding period for the property. Turbotax deluxe federal efile state 2009 Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Turbotax deluxe federal efile state 2009 Long-term or short-term. Turbotax deluxe federal efile state 2009   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Turbotax deluxe federal efile state 2009 If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Turbotax deluxe federal efile state 2009   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Turbotax deluxe federal efile state 2009 The day you disposed of the property is part of your holding period. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Turbotax deluxe federal efile state 2009 If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Turbotax deluxe federal efile state 2009 Securities traded on established market. Turbotax deluxe federal efile state 2009   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Turbotax deluxe federal efile state 2009    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 You are a cash method, calendar year taxpayer. Turbotax deluxe federal efile state 2009 You sold stock at a gain on December 30, 2013. Turbotax deluxe federal efile state 2009 According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Turbotax deluxe federal efile state 2009 You received payment of the sales price on that same day. Turbotax deluxe federal efile state 2009 Report your gain on your 2013 return, even though you received the payment in 2014. Turbotax deluxe federal efile state 2009 The gain is long term or short term depending on whether you held the stock more than 1 year. Turbotax deluxe federal efile state 2009 Your holding period ended on December 30. Turbotax deluxe federal efile state 2009 If you had sold the stock at a loss, you would also report it on your 2013 return. Turbotax deluxe federal efile state 2009 U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Treasury notes and bonds. Turbotax deluxe federal efile state 2009   The holding period of U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Turbotax deluxe federal efile state 2009 The holding period of U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Turbotax deluxe federal efile state 2009 Automatic investment service. Turbotax deluxe federal efile state 2009   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Turbotax deluxe federal efile state 2009 Your holding period starts on the day after the bank's purchase date. Turbotax deluxe federal efile state 2009 If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Turbotax deluxe federal efile state 2009 A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Turbotax deluxe federal efile state 2009 Nontaxable trades. Turbotax deluxe federal efile state 2009   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Turbotax deluxe federal efile state 2009 Property received as a gift. Turbotax deluxe federal efile state 2009   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Turbotax deluxe federal efile state 2009   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Turbotax deluxe federal efile state 2009 Inherited property. Turbotax deluxe federal efile state 2009   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Turbotax deluxe federal efile state 2009 This is true regardless of how long you actually held the property. Turbotax deluxe federal efile state 2009 However, if you inherited property from someone who died in 2010, see the information below. Turbotax deluxe federal efile state 2009 Inherited property from someone who died in 2010. Turbotax deluxe federal efile state 2009   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Turbotax deluxe federal efile state 2009 Real property bought. Turbotax deluxe federal efile state 2009   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Turbotax deluxe federal efile state 2009 However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Turbotax deluxe federal efile state 2009 The holding period cannot start until there is an actual contract of sale. Turbotax deluxe federal efile state 2009 The holding period of the seller cannot end before that time. Turbotax deluxe federal efile state 2009 Real property repossessed. Turbotax deluxe federal efile state 2009   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Turbotax deluxe federal efile state 2009 Your holding period does not include the time between the original sale and the repossession. Turbotax deluxe federal efile state 2009 That is, it does not include the period during which the first buyer held the property. Turbotax deluxe federal efile state 2009 Stock dividends. Turbotax deluxe federal efile state 2009   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Turbotax deluxe federal efile state 2009   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Turbotax deluxe federal efile state 2009 This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Turbotax deluxe federal efile state 2009 Nontaxable stock rights. Turbotax deluxe federal efile state 2009   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Turbotax deluxe federal efile state 2009 The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Turbotax deluxe federal efile state 2009 Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Turbotax deluxe federal efile state 2009 You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Turbotax deluxe federal efile state 2009 Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Turbotax deluxe federal efile state 2009 To be deductible, nonbusiness bad debts must be totally worthless. Turbotax deluxe federal efile state 2009 You cannot deduct a partly worthless nonbusiness debt. Turbotax deluxe federal efile state 2009 Genuine debt required. Turbotax deluxe federal efile state 2009   A debt must be genuine for you to deduct a loss. Turbotax deluxe federal efile state 2009 A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Turbotax deluxe federal efile state 2009 Basis in bad debt required. Turbotax deluxe federal efile state 2009    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Turbotax deluxe federal efile state 2009 For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Turbotax deluxe federal efile state 2009 If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Turbotax deluxe federal efile state 2009 When deductible. Turbotax deluxe federal efile state 2009   You can take a bad debt deduction only in the year the debt becomes worthless. Turbotax deluxe federal efile state 2009 You do not have to wait until a debt is due to determine whether it is worthless. Turbotax deluxe federal efile state 2009 A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Turbotax deluxe federal efile state 2009   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Turbotax deluxe federal efile state 2009 You must only show that you have taken reasonable steps to collect the debt. Turbotax deluxe federal efile state 2009 Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Turbotax deluxe federal efile state 2009 How to report bad debts. Turbotax deluxe federal efile state 2009    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Turbotax deluxe federal efile state 2009    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Turbotax deluxe federal efile state 2009    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Turbotax deluxe federal efile state 2009 See also Schedule D (Form 1040), Form 8949, and their separate instructions. Turbotax deluxe federal efile state 2009   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Turbotax deluxe federal efile state 2009 For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Turbotax deluxe federal efile state 2009 Filing a claim for refund. Turbotax deluxe federal efile state 2009    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Turbotax deluxe federal efile state 2009 To do this, use Form 1040X to amend your return for the year the debt became worthless. Turbotax deluxe federal efile state 2009 You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Turbotax deluxe federal efile state 2009 For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Turbotax deluxe federal efile state 2009 Additional information. Turbotax deluxe federal efile state 2009   For more information, see Nonbusiness Bad Debts in Publication 550. Turbotax deluxe federal efile state 2009 For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Turbotax deluxe federal efile state 2009 Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Turbotax deluxe federal efile state 2009 A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Turbotax deluxe federal efile state 2009 If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Turbotax deluxe federal efile state 2009 The result is your basis in the new stock or securities. Turbotax deluxe federal efile state 2009 This adjustment postpones the loss deduction until the disposition of the new stock or securities. Turbotax deluxe federal efile state 2009 Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Turbotax deluxe federal efile state 2009 For more information, see Wash Sales, in chapter 4 of Publication 550. Turbotax deluxe federal efile state 2009 Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Turbotax deluxe federal efile state 2009 This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Turbotax deluxe federal efile state 2009 You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Turbotax deluxe federal efile state 2009 This postpones your gain until the year you dispose of the replacement property. Turbotax deluxe federal efile state 2009 You qualify to make this choice if you meet all the following tests. Turbotax deluxe federal efile state 2009 You sell publicly traded securities at a gain. Turbotax deluxe federal efile state 2009 Publicly traded securities are securities traded on an established securities market. Turbotax deluxe federal efile state 2009 Your gain from the sale is a capital gain. Turbotax deluxe federal efile state 2009 During the 60-day period beginning on the date of the sale, you buy replacement property. Turbotax deluxe federal efile state 2009 This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Turbotax deluxe federal efile state 2009 This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Turbotax deluxe federal efile state 2009 Amount of gain recognized. Turbotax deluxe federal efile state 2009   If you make the choice described in this section, you must recognize gain only up to the following amount. Turbotax deluxe federal efile state 2009 The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Turbotax deluxe federal efile state 2009  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Turbotax deluxe federal efile state 2009 If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Turbotax deluxe federal efile state 2009 Limit on gain postponed. Turbotax deluxe federal efile state 2009   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Turbotax deluxe federal efile state 2009 Basis of replacement property. Turbotax deluxe federal efile state 2009   You must subtract the amount of postponed gain from the basis of your replacement property. Turbotax deluxe federal efile state 2009 How to report and postpone gain. Turbotax deluxe federal efile state 2009    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 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The Turbotax Deluxe Federal Efile State 2009

Turbotax deluxe federal efile state 2009 Publication 575 - Main Content Table of Contents General InformationPension. Turbotax deluxe federal efile state 2009 Annuity. Turbotax deluxe federal efile state 2009 Qualified employee plan. Turbotax deluxe federal efile state 2009 Qualified employee annuity. Turbotax deluxe federal efile state 2009 Designated Roth account. Turbotax deluxe federal efile state 2009 Tax-sheltered annuity plan. Turbotax deluxe federal efile state 2009 Fixed-period annuities. Turbotax deluxe federal efile state 2009 Annuities for a single life. Turbotax deluxe federal efile state 2009 Joint and survivor annuities. Turbotax deluxe federal efile state 2009 Variable annuities. Turbotax deluxe federal efile state 2009 Disability pensions. Turbotax deluxe federal efile state 2009 Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. Turbotax deluxe federal efile state 2009 Taxation of Periodic PaymentsPeriod of participation. Turbotax deluxe federal efile state 2009 Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. Turbotax deluxe federal efile state 2009 No tax withheld. Turbotax deluxe federal efile state 2009 Partial rollovers. Turbotax deluxe federal efile state 2009 Frozen deposits. Turbotax deluxe federal efile state 2009 Reasonable period of time. Turbotax deluxe federal efile state 2009 20% Mandatory withholding. Turbotax deluxe federal efile state 2009 How to report. Turbotax deluxe federal efile state 2009 How to report. Turbotax deluxe federal efile state 2009 Special rule for Roth IRAs and designated Roth accounts. Turbotax deluxe federal efile state 2009 Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. Turbotax deluxe federal efile state 2009 How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. Turbotax deluxe federal efile state 2009   Some of the terms used in this publication are defined in the following paragraphs. Turbotax deluxe federal efile state 2009 Pension. Turbotax deluxe federal efile state 2009   A pension is generally a series of definitely determinable payments made to you after you retire from work. Turbotax deluxe federal efile state 2009 Pension payments are made regularly and are based on such factors as years of service and prior compensation. Turbotax deluxe federal efile state 2009 Annuity. Turbotax deluxe federal efile state 2009   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. Turbotax deluxe federal efile state 2009 They can be either fixed (under which you receive a definite amount) or variable (not fixed). Turbotax deluxe federal efile state 2009 You can buy the contract alone or with the help of your employer. Turbotax deluxe federal efile state 2009 Qualified employee plan. Turbotax deluxe federal efile state 2009   A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements. Turbotax deluxe federal efile state 2009 It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). Turbotax deluxe federal efile state 2009 To determine whether your plan is a qualified plan, check with your employer or the plan administrator. Turbotax deluxe federal efile state 2009 Qualified employee annuity. Turbotax deluxe federal efile state 2009   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Turbotax deluxe federal efile state 2009 Designated Roth account. Turbotax deluxe federal efile state 2009   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Turbotax deluxe federal efile state 2009 Elective deferrals that are designated as Roth contributions are included in your income. Turbotax deluxe federal efile state 2009 However, qualified distributions (explained later) are not included in your income. Turbotax deluxe federal efile state 2009 You should check with your plan administrator to determine if your plan will accept designated Roth contributions. Turbotax deluxe federal efile state 2009 Tax-sheltered annuity plan. Turbotax deluxe federal efile state 2009   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. Turbotax deluxe federal efile state 2009 Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. Turbotax deluxe federal efile state 2009 Types of pensions and annuities. Turbotax deluxe federal efile state 2009   Pensions and annuities include the following types. Turbotax deluxe federal efile state 2009 Fixed-period annuities. Turbotax deluxe federal efile state 2009   You receive definite amounts at regular intervals for a specified length of time. Turbotax deluxe federal efile state 2009 Annuities for a single life. Turbotax deluxe federal efile state 2009   You receive definite amounts at regular intervals for life. Turbotax deluxe federal efile state 2009 The payments end at death. Turbotax deluxe federal efile state 2009 Joint and survivor annuities. Turbotax deluxe federal efile state 2009   The first annuitant receives a definite amount at regular intervals for life. Turbotax deluxe federal efile state 2009 After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Turbotax deluxe federal efile state 2009 The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Turbotax deluxe federal efile state 2009 Variable annuities. Turbotax deluxe federal efile state 2009   You receive payments that may vary in amount for a specified length of time or for life. Turbotax deluxe federal efile state 2009 The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. Turbotax deluxe federal efile state 2009 Disability pensions. Turbotax deluxe federal efile state 2009   You receive disability payments because you retired on disability and have not reached minimum retirement age. Turbotax deluxe federal efile state 2009 More than one program. Turbotax deluxe federal efile state 2009   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. Turbotax deluxe federal efile state 2009 If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. Turbotax deluxe federal efile state 2009 Also, you may be considered to have received more than one pension or annuity. Turbotax deluxe federal efile state 2009 Your former employer or the plan administrator should be able to tell you if you have more than one contract. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 Your employer set up a noncontributory profit-sharing plan for its employees. Turbotax deluxe federal efile state 2009 The plan provides that the amount held in the account of each participant will be paid when that participant retires. Turbotax deluxe federal efile state 2009 Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. Turbotax deluxe federal efile state 2009 The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. Turbotax deluxe federal efile state 2009 Under the pension plan, however, a formula determines the amount of the pension benefits. Turbotax deluxe federal efile state 2009 The amount of contributions is the amount necessary to provide that pension. Turbotax deluxe federal efile state 2009 Each plan is a separate program and a separate contract. Turbotax deluxe federal efile state 2009 If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. Turbotax deluxe federal efile state 2009 Distributions from a designated Roth account are treated separately from other distributions from the plan. Turbotax deluxe federal efile state 2009 Qualified domestic relations order (QDRO). Turbotax deluxe federal efile state 2009   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. Turbotax deluxe federal efile state 2009 The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. Turbotax deluxe federal efile state 2009 A QDRO may not award an amount or form of benefit that is not available under the plan. Turbotax deluxe federal efile state 2009   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. Turbotax deluxe federal efile state 2009 The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. Turbotax deluxe federal efile state 2009 The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. Turbotax deluxe federal efile state 2009 The denominator is the present value of all benefits payable to the participant. Turbotax deluxe federal efile state 2009   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. Turbotax deluxe federal efile state 2009 Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. Turbotax deluxe federal efile state 2009 For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. Turbotax deluxe federal efile state 2009 Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. Turbotax deluxe federal efile state 2009 The earnings are not taxed until distributed either in a withdrawal or in annuity payments. Turbotax deluxe federal efile state 2009 The taxable part of a distribution is treated as ordinary income. Turbotax deluxe federal efile state 2009 Net investment income tax. Turbotax deluxe federal efile state 2009   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). Turbotax deluxe federal efile state 2009 For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. Turbotax deluxe federal efile state 2009 For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. Turbotax deluxe federal efile state 2009 Withdrawals. Turbotax deluxe federal efile state 2009   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. Turbotax deluxe federal efile state 2009 The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. Turbotax deluxe federal efile state 2009   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). Turbotax deluxe federal efile state 2009 However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. Turbotax deluxe federal efile state 2009 To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). Turbotax deluxe federal efile state 2009   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. Turbotax deluxe federal efile state 2009   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. Turbotax deluxe federal efile state 2009 The rest is taxable. Turbotax deluxe federal efile state 2009   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. Turbotax deluxe federal efile state 2009 If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. Turbotax deluxe federal efile state 2009 Annuity payments. Turbotax deluxe federal efile state 2009   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. Turbotax deluxe federal efile state 2009 For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. Turbotax deluxe federal efile state 2009 For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. Turbotax deluxe federal efile state 2009 For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. Turbotax deluxe federal efile state 2009 Death benefits. Turbotax deluxe federal efile state 2009    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. Turbotax deluxe federal efile state 2009 If you choose to receive an annuity, the payments are subject to tax as described above. Turbotax deluxe federal efile state 2009 If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. Turbotax deluxe federal efile state 2009 See Survivors and Beneficiaries , later. Turbotax deluxe federal efile state 2009 Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. Turbotax deluxe federal efile state 2009 If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. Turbotax deluxe federal efile state 2009 You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Turbotax deluxe federal efile state 2009 You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Turbotax deluxe federal efile state 2009 Your 457(b) plan may have a designated Roth account option. Turbotax deluxe federal efile state 2009 If so, you may be able to roll over amounts to the designated Roth account or make contributions. Turbotax deluxe federal efile state 2009 Elective deferrals to a designated Roth account are included in your income. Turbotax deluxe federal efile state 2009 Qualified distributions (explained later) are not included in your income. Turbotax deluxe federal efile state 2009 See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. Turbotax deluxe federal efile state 2009 This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Turbotax deluxe federal efile state 2009 For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. Turbotax deluxe federal efile state 2009 Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. Turbotax deluxe federal efile state 2009 Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. Turbotax deluxe federal efile state 2009 Nonelective deferred compensation plans for nonemployees (independent contractors). Turbotax deluxe federal efile state 2009 Deferred compensation plans maintained by churches. Turbotax deluxe federal efile state 2009 Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. Turbotax deluxe federal efile state 2009 An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. Turbotax deluxe federal efile state 2009 Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. Turbotax deluxe federal efile state 2009 You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Turbotax deluxe federal efile state 2009 Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Turbotax deluxe federal efile state 2009 You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Turbotax deluxe federal efile state 2009 For information on this credit, see Publication 524. Turbotax deluxe federal efile state 2009 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Turbotax deluxe federal efile state 2009 Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Turbotax deluxe federal efile state 2009 Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. Turbotax deluxe federal efile state 2009 For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Turbotax deluxe federal efile state 2009 Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Turbotax deluxe federal efile state 2009 The premiums can be for coverage for you, your spouse, or dependents. Turbotax deluxe federal efile state 2009 The distribution must be made directly from the plan to the insurance provider. Turbotax deluxe federal efile state 2009 You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Turbotax deluxe federal efile state 2009 You can only make this election for amounts that would otherwise be included in your income. Turbotax deluxe federal efile state 2009 The amount excluded from your income cannot be used to claim a medical expense deduction. Turbotax deluxe federal efile state 2009 An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. Turbotax deluxe federal efile state 2009 If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Turbotax deluxe federal efile state 2009 The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Turbotax deluxe federal efile state 2009 Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Turbotax deluxe federal efile state 2009 Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Turbotax deluxe federal efile state 2009 Enter “PSO” next to the appropriate line on which you report the taxable amount. Turbotax deluxe federal efile state 2009 If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. Turbotax deluxe federal efile state 2009 Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Turbotax deluxe federal efile state 2009 These categories are treated differently for income tax purposes. Turbotax deluxe federal efile state 2009 The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Turbotax deluxe federal efile state 2009 This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. Turbotax deluxe federal efile state 2009 If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Railroad Retirement Board (RRB). Turbotax deluxe federal efile state 2009 For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. Turbotax deluxe federal efile state 2009 The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). Turbotax deluxe federal efile state 2009 It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Turbotax deluxe federal efile state 2009 Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. Turbotax deluxe federal efile state 2009 This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Turbotax deluxe federal efile state 2009 (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. Turbotax deluxe federal efile state 2009 ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Turbotax deluxe federal efile state 2009 See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Turbotax deluxe federal efile state 2009 Form RRB-1099-R is used for U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizens, resident aliens, and nonresident aliens. Turbotax deluxe federal efile state 2009 Nonresident aliens. Turbotax deluxe federal efile state 2009   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Turbotax deluxe federal efile state 2009 Nonresident aliens are subject to mandatory U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. Turbotax deluxe federal efile state 2009 A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. Turbotax deluxe federal efile state 2009 See Tax withholding next for more information. Turbotax deluxe federal efile state 2009   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. Turbotax deluxe federal efile state 2009 To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. Turbotax deluxe federal efile state 2009 For information on filing requirements for aliens, see Publication 519, U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Tax Guide for Aliens. Turbotax deluxe federal efile state 2009 For information on tax treaties between the United States and other countries that may reduce or eliminate U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 tax on your benefits, see Publication 901, U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Tax Treaties. Turbotax deluxe federal efile state 2009 Tax withholding. Turbotax deluxe federal efile state 2009   To request or change your income tax withholding from SSEB payments, U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. Turbotax deluxe federal efile state 2009 To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. Turbotax deluxe federal efile state 2009 If you are a nonresident alien or a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 tax withholding. Turbotax deluxe federal efile state 2009 Nonresident U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizens cannot elect to be exempt from withholding on payments delivered outside of the U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 Help from the RRB. Turbotax deluxe federal efile state 2009   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 consulate/Embassy if you reside outside the United States. Turbotax deluxe federal efile state 2009 You can visit the RRB on the Internet at www. Turbotax deluxe federal efile state 2009 rrb. Turbotax deluxe federal efile state 2009 gov. Turbotax deluxe federal efile state 2009 Form RRB-1099-R. Turbotax deluxe federal efile state 2009   The following discussion explains the items shown on Form RRB-1099-R. Turbotax deluxe federal efile state 2009 The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. Turbotax deluxe federal efile state 2009   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. Turbotax deluxe federal efile state 2009   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. Turbotax deluxe federal efile state 2009 To determine if any of these rules apply to your benefits, see the discussions about them later. Turbotax deluxe federal efile state 2009   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Turbotax deluxe federal efile state 2009 Use distribution code “7” if you are asked for a distribution code. Turbotax deluxe federal efile state 2009 Distribution codes are not shown on Form RRB-1099-R. Turbotax deluxe federal efile state 2009   There are three copies of this form. Turbotax deluxe federal efile state 2009 Copy B is to be included with your income tax return if federal income tax is withheld. Turbotax deluxe federal efile state 2009 Copy C is for your own records. Turbotax deluxe federal efile state 2009 Copy 2 is filed with your state, city, or local income tax return, when required. Turbotax deluxe federal efile state 2009 See the illustrated Copy B (Form RRB-1099-R) above. Turbotax deluxe federal efile state 2009       Each beneficiary will receive his or her own Form RRB-1099-R. Turbotax deluxe federal efile state 2009 If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. Turbotax deluxe federal efile state 2009 So that you get your form timely, make sure the RRB always has your current mailing address. Turbotax deluxe federal efile state 2009 Please click here for the text description of the image. Turbotax deluxe federal efile state 2009 Form RRB-1099-R Box 1—Claim Number and Payee Code. Turbotax deluxe federal efile state 2009   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. Turbotax deluxe federal efile state 2009 This is the number under which the RRB paid your benefits. Turbotax deluxe federal efile state 2009 Your payee code follows your claim number and is the last number in this box. Turbotax deluxe federal efile state 2009 It is used by the RRB to identify you under your claim number. Turbotax deluxe federal efile state 2009 In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. Turbotax deluxe federal efile state 2009 Box 2—Recipient's Identification Number. Turbotax deluxe federal efile state 2009   This is the recipient's U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 taxpayer identification number. Turbotax deluxe federal efile state 2009 It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. Turbotax deluxe federal efile state 2009 If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. Turbotax deluxe federal efile state 2009 The Instructions for Form W-7 explain how and when to apply. Turbotax deluxe federal efile state 2009 Box 3—Employee Contributions. Turbotax deluxe federal efile state 2009   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. Turbotax deluxe federal efile state 2009 This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). Turbotax deluxe federal efile state 2009 (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. Turbotax deluxe federal efile state 2009 ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. Turbotax deluxe federal efile state 2009 It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. Turbotax deluxe federal efile state 2009 If this amount has changed, the change is retroactive. Turbotax deluxe federal efile state 2009 You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. Turbotax deluxe federal efile state 2009 If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. Turbotax deluxe federal efile state 2009    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. Turbotax deluxe federal efile state 2009 Box 4—Contributory Amount Paid. Turbotax deluxe federal efile state 2009   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. Turbotax deluxe federal efile state 2009 (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Turbotax deluxe federal efile state 2009 ) This amount is the total contributory pension paid in 2013. Turbotax deluxe federal efile state 2009 It may be partly taxable and partly tax free or fully taxable. Turbotax deluxe federal efile state 2009 If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. Turbotax deluxe federal efile state 2009 Box 5—Vested Dual Benefit. Turbotax deluxe federal efile state 2009   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. Turbotax deluxe federal efile state 2009 It is fully taxable. Turbotax deluxe federal efile state 2009 VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Turbotax deluxe federal efile state 2009 Note. Turbotax deluxe federal efile state 2009 The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. Turbotax deluxe federal efile state 2009 Box 6—Supplemental Annuity. Turbotax deluxe federal efile state 2009   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. Turbotax deluxe federal efile state 2009 It is fully taxable. Turbotax deluxe federal efile state 2009 Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Turbotax deluxe federal efile state 2009 Box 7—Total Gross Paid. Turbotax deluxe federal efile state 2009   This is the sum of boxes 4, 5, and 6. Turbotax deluxe federal efile state 2009 The amount represents the total pension paid in 2013. Turbotax deluxe federal efile state 2009 Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Turbotax deluxe federal efile state 2009 Box 8—Repayments. Turbotax deluxe federal efile state 2009   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. Turbotax deluxe federal efile state 2009 The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. Turbotax deluxe federal efile state 2009 It only includes repayments of benefits that were taxable to you. Turbotax deluxe federal efile state 2009 This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. Turbotax deluxe federal efile state 2009 If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. Turbotax deluxe federal efile state 2009 For more information about repayments, see Repayment of benefits received in an earlier year , later. Turbotax deluxe federal efile state 2009    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. Turbotax deluxe federal efile state 2009 Box 9—Federal Income Tax Withheld. Turbotax deluxe federal efile state 2009   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Turbotax deluxe federal efile state 2009 Include this on your income tax return as tax withheld. Turbotax deluxe federal efile state 2009 If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. Turbotax deluxe federal efile state 2009 Determine the total amount of U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. Turbotax deluxe federal efile state 2009 Box 10—Rate of Tax. Turbotax deluxe federal efile state 2009   If you are taxed as a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen or resident alien, this box does not apply to you. Turbotax deluxe federal efile state 2009 If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. Turbotax deluxe federal efile state 2009 If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. Turbotax deluxe federal efile state 2009 Box 11—Country. Turbotax deluxe federal efile state 2009   If you are taxed as a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen or resident alien, this box does not apply to you. Turbotax deluxe federal efile state 2009 If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. Turbotax deluxe federal efile state 2009 If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. Turbotax deluxe federal efile state 2009 Box 12—Medicare Premium Total. Turbotax deluxe federal efile state 2009   This is for information purposes only. Turbotax deluxe federal efile state 2009 The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. Turbotax deluxe federal efile state 2009 Medicare premium refunds are not included in the Medicare total. Turbotax deluxe federal efile state 2009 The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). Turbotax deluxe federal efile state 2009 However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. Turbotax deluxe federal efile state 2009 If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. Turbotax deluxe federal efile state 2009 Repayment of benefits received in an earlier year. Turbotax deluxe federal efile state 2009   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. Turbotax deluxe federal efile state 2009   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. Turbotax deluxe federal efile state 2009 The 2%-of-adjusted-gross-income limit applies to this deduction. Turbotax deluxe federal efile state 2009 You cannot take this deduction if you file Form 1040A. Turbotax deluxe federal efile state 2009    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. Turbotax deluxe federal efile state 2009 For more information, see Repayments in Publication 525. Turbotax deluxe federal efile state 2009 Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. Turbotax deluxe federal efile state 2009 However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. Turbotax deluxe federal efile state 2009 (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Turbotax deluxe federal efile state 2009 ) If you choose not to have tax withheld or if you do not have enough tax withheld, you may have to make estimated tax payments. Turbotax deluxe federal efile state 2009 See Estimated tax , later. Turbotax deluxe federal efile state 2009 The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. Turbotax deluxe federal efile state 2009 For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. Turbotax deluxe federal efile state 2009 There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. Turbotax deluxe federal efile state 2009 Choosing no withholding. Turbotax deluxe federal efile state 2009   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. Turbotax deluxe federal efile state 2009 You can make this choice on Form W-4P for periodic and nonperiodic payments. Turbotax deluxe federal efile state 2009 This choice generally remains in effect until you revoke it. Turbotax deluxe federal efile state 2009   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. Turbotax deluxe federal efile state 2009   To choose not to have tax withheld, a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen or resident alien must give the payer a home address in the United States or its possessions. Turbotax deluxe federal efile state 2009 Without that address, the payer must withhold tax. Turbotax deluxe federal efile state 2009 For example, the payer has to withhold tax if the recipient has provided a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 home address. Turbotax deluxe federal efile state 2009   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen, a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 resident alien, or someone who left the country to avoid tax. Turbotax deluxe federal efile state 2009 But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Turbotax deluxe federal efile state 2009 This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. Turbotax deluxe federal efile state 2009 For details, get Publication 519. Turbotax deluxe federal efile state 2009 Periodic payments. Turbotax deluxe federal efile state 2009   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. Turbotax deluxe federal efile state 2009 Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Turbotax deluxe federal efile state 2009 You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). Turbotax deluxe federal efile state 2009 If you do not, tax will be withheld as if you were married and claiming three withholding allowances. Turbotax deluxe federal efile state 2009   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. Turbotax deluxe federal efile state 2009   You must file a new withholding certificate to change the amount of withholding. Turbotax deluxe federal efile state 2009 Nonperiodic distributions. Turbotax deluxe federal efile state 2009    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. Turbotax deluxe federal efile state 2009 You can also ask the payer to withhold an additional amount using Form W-4P. Turbotax deluxe federal efile state 2009 The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. Turbotax deluxe federal efile state 2009 Eligible rollover distribution. Turbotax deluxe federal efile state 2009    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. Turbotax deluxe federal efile state 2009 You cannot choose not to have tax withheld from an eligible rollover distribution. Turbotax deluxe federal efile state 2009 However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. Turbotax deluxe federal efile state 2009 For more information about eligible rollover distributions, see Rollovers , later. Turbotax deluxe federal efile state 2009 Estimated tax. Turbotax deluxe federal efile state 2009   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. Turbotax deluxe federal efile state 2009 Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. Turbotax deluxe federal efile state 2009 If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. Turbotax deluxe federal efile state 2009 For more information, get Publication 505, Tax Withholding and Estimated Tax. Turbotax deluxe federal efile state 2009 In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. Turbotax deluxe federal efile state 2009 See Publication 915. Turbotax deluxe federal efile state 2009 You can choose to have income tax withheld from those benefits. Turbotax deluxe federal efile state 2009 Use Form W-4V to make this choice. Turbotax deluxe federal efile state 2009 Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). Turbotax deluxe federal efile state 2009 If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. Turbotax deluxe federal efile state 2009 Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. Turbotax deluxe federal efile state 2009 In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). Turbotax deluxe federal efile state 2009 To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. Turbotax deluxe federal efile state 2009 This includes the amounts your employer contributed that were taxable to you when paid. Turbotax deluxe federal efile state 2009 (However, see Foreign employment contributions , later. Turbotax deluxe federal efile state 2009 ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). Turbotax deluxe federal efile state 2009 It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). Turbotax deluxe federal efile state 2009 From this total cost you must subtract the following amounts. Turbotax deluxe federal efile state 2009 Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. Turbotax deluxe federal efile state 2009 Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). Turbotax deluxe federal efile state 2009 If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. Turbotax deluxe federal efile state 2009 (See Simplified Method , later, for information on its required use. Turbotax deluxe federal efile state 2009 ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. Turbotax deluxe federal efile state 2009 (See General Rule , later, for information on its use. Turbotax deluxe federal efile state 2009 ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. Turbotax deluxe federal efile state 2009 For more information, see Publication 939. Turbotax deluxe federal efile state 2009 The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . Turbotax deluxe federal efile state 2009 Form 1099-R. Turbotax deluxe federal efile state 2009 If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. Turbotax deluxe federal efile state 2009 Annuity starting date defined. Turbotax deluxe federal efile state 2009   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 On January 1, you completed all your payments required under an annuity contract providing for monthly payments starting on August 1 for the period beginning July 1. Turbotax deluxe federal efile state 2009 The annuity starting date is July 1. Turbotax deluxe federal efile state 2009 This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. Turbotax deluxe federal efile state 2009 Designated Roth accounts. Turbotax deluxe federal efile state 2009   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Turbotax deluxe federal efile state 2009 Your cost will also include any in-plan Roth rollovers you included in income. Turbotax deluxe federal efile state 2009 Foreign employment contributions. Turbotax deluxe federal efile state 2009   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Turbotax deluxe federal efile state 2009 The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. Turbotax deluxe federal efile state 2009 Foreign employment contributions while a nonresident alien. Turbotax deluxe federal efile state 2009   In determining your cost, special rules apply if you are a U. Turbotax deluxe federal efile state 2009 S. Turbotax deluxe federal efile state 2009 citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. Turbotax deluxe federal efile state 2009 Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. Turbotax deluxe federal efile state 2009 Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Turbotax deluxe federal efile state 2009 Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Turbotax deluxe federal efile state 2009 These payments are also known as amounts received as an annuity. Turbotax deluxe federal efile state 2009 If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. Turbotax deluxe federal efile state 2009 In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. Turbotax deluxe federal efile state 2009 The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Turbotax deluxe federal efile state 2009 Designated Roth accounts. Turbotax deluxe federal efile state 2009   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. Turbotax deluxe federal efile state 2009 This applies to both your cost in the account and income earned on that account. Turbotax deluxe federal efile state 2009 A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. Turbotax deluxe federal efile state 2009   If the distribution is not a qualified distribution, the rules discussed in this section apply. Turbotax deluxe federal efile state 2009 The designated Roth account is treated as a separate contract. Turbotax deluxe federal efile state 2009 Period of participation. Turbotax deluxe federal efile state 2009   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. Turbotax deluxe federal efile state 2009 Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. Turbotax deluxe federal efile state 2009   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. Turbotax deluxe federal efile state 2009   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. Turbotax deluxe federal efile state 2009 This is known as an in-plan Roth rollover. Turbotax deluxe federal efile state 2009 For more details, see In-plan Roth rollovers , later. Turbotax deluxe federal efile state 2009 Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Turbotax deluxe federal efile state 2009 You did not pay anything or are not considered to have paid anything for your pension or annuity. Turbotax deluxe federal efile state 2009 Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. Turbotax deluxe federal efile state 2009 Your employer did not withhold contributions from your salary. Turbotax deluxe federal efile state 2009 You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). Turbotax deluxe federal efile state 2009 Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. Turbotax deluxe federal efile state 2009 You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Turbotax deluxe federal efile state 2009 Deductible voluntary employee contributions. Turbotax deluxe federal efile state 2009   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Turbotax deluxe federal efile state 2009 Accumulated deductible voluntary employee contributions include net earnings on the contributions. Turbotax deluxe federal efile state 2009 If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. Turbotax deluxe federal efile state 2009 Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. Turbotax deluxe federal efile state 2009 This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Turbotax deluxe federal efile state 2009 The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Turbotax deluxe federal efile state 2009 You figure the tax-free part of the payment using one of the following methods. Turbotax deluxe federal efile state 2009 Simplified Method. Turbotax deluxe federal efile state 2009 You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Turbotax deluxe federal efile state 2009 You cannot use this method if your annuity is paid under a nonqualified plan. Turbotax deluxe federal efile state 2009 General Rule. Turbotax deluxe federal efile state 2009 You must use this method if your annuity is paid under a nonqualified plan. Turbotax deluxe federal efile state 2009 You generally cannot use this method if your annuity is paid under a qualified plan. Turbotax deluxe federal efile state 2009 You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Turbotax deluxe federal efile state 2009 If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Turbotax deluxe federal efile state 2009 Qualified plan annuity starting before November 19, 1996. Turbotax deluxe federal efile state 2009   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. Turbotax deluxe federal efile state 2009 If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. Turbotax deluxe federal efile state 2009 If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. Turbotax deluxe federal efile state 2009 Exclusion limit. Turbotax deluxe federal efile state 2009   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Turbotax deluxe federal efile state 2009 Once your annuity starting date is determined, it does not change. Turbotax deluxe federal efile state 2009 If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. Turbotax deluxe federal efile state 2009 That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Turbotax deluxe federal efile state 2009 Exclusion limited to cost. Turbotax deluxe federal efile state 2009   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. Turbotax deluxe federal efile state 2009 Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Turbotax deluxe federal efile state 2009 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Turbotax deluxe federal efile state 2009 Example 1. Turbotax deluxe federal efile state 2009 Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. Turbotax deluxe federal efile state 2009 The total cost of your annuity is $12,000. Turbotax deluxe federal efile state 2009 Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). Turbotax deluxe federal efile state 2009 After that, your annuity payments are generally fully taxable. Turbotax deluxe federal efile state 2009 Example 2. Turbotax deluxe federal efile state 2009 The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. Turbotax deluxe federal efile state 2009 You have recovered tax free only $9,600 (8 × $1,200) of your cost. Turbotax deluxe federal efile state 2009 An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. Turbotax deluxe federal efile state 2009 Exclusion not limited to cost. Turbotax deluxe federal efile state 2009   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Turbotax deluxe federal efile state 2009 If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Turbotax deluxe federal efile state 2009 The total exclusion may be more than your cost. Turbotax deluxe federal efile state 2009 Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Turbotax deluxe federal efile state 2009 For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Turbotax deluxe federal efile state 2009 For any other annuity, this number is the number of monthly annuity payments under the contract. Turbotax deluxe federal efile state 2009 Who must use the Simplified Method. Turbotax deluxe federal efile state 2009   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. Turbotax deluxe federal efile state 2009 You receive your pension or annuity payments from any of the following plans. Turbotax deluxe federal efile state 2009 A qualified employee plan. Turbotax deluxe federal efile state 2009 A qualified employee annuity. Turbotax deluxe federal efile state 2009 A tax-sheltered annuity plan (403(b) plan). Turbotax deluxe federal efile state 2009 On your annuity starting date, at least one of the following conditions applies to you. Turbotax deluxe federal efile state 2009 You are under age 75. Turbotax deluxe federal efile state 2009 You are entitled to less than 5 years of guaranteed payments. Turbotax deluxe federal efile state 2009 Guaranteed payments. Turbotax deluxe federal efile state 2009   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Turbotax deluxe federal efile state 2009 If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Turbotax deluxe federal efile state 2009 Annuity starting before November 19, 1996. Turbotax deluxe federal efile state 2009   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Turbotax deluxe federal efile state 2009 You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . Turbotax deluxe federal efile state 2009 Who cannot use the Simplified Method. Turbotax deluxe federal efile state 2009   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. Turbotax deluxe federal efile state 2009 See General Rule , later. Turbotax deluxe federal efile state 2009 How to use the Simplified Method. Turbotax deluxe federal efile state 2009    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. Turbotax deluxe federal efile state 2009 Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Turbotax deluxe federal efile state 2009   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Turbotax deluxe federal efile state 2009 How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Turbotax deluxe federal efile state 2009 For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Turbotax deluxe federal efile state 2009    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Turbotax deluxe federal efile state 2009 Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Turbotax deluxe federal efile state 2009 Single-life annuity. Turbotax deluxe federal efile state 2009   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Turbotax deluxe federal efile state 2009 Enter on line 3 the number shown for your age on your annuity starting date. Turbotax deluxe federal efile state 2009 This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Turbotax deluxe federal efile state 2009 Multiple-lives annuity. Turbotax deluxe federal efile state 2009   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Turbotax deluxe federal efile state 2009 Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Turbotax deluxe federal efile state 2009 For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Turbotax deluxe federal efile state 2009 For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Turbotax deluxe federal efile state 2009 Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Turbotax deluxe federal efile state 2009   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Turbotax deluxe federal efile state 2009 Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Turbotax deluxe federal efile state 2009 This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Turbotax deluxe federal efile state 2009 Fixed-period annuity. Turbotax deluxe federal efile state 2009   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Turbotax deluxe federal efile state 2009 Line 6. Turbotax deluxe federal efile state 2009   The amount on line 6 should include all amounts that could have been recovered in prior years. Turbotax deluxe federal efile state 2009 If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Turbotax deluxe federal efile state 2009 Example. Turbotax deluxe federal efile state 2009 Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. Turbotax deluxe federal efile state 2009 Bill's annuity starting date is January 1, 2013. Turbotax deluxe federal efile state 2009 The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Turbotax deluxe federal efile state 2009 Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Turbotax deluxe federal efile state 2009 Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Turbotax deluxe federal efile state 2009 Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Turbotax deluxe federal efile state 2009 Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. Turbotax deluxe federal efile state 2009 His completed worksheet is shown later. Turbotax deluxe federal efile state 2009 Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Turbotax deluxe federal efile state 2009 Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Turbotax deluxe federal efile state 2009 The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Turbotax deluxe federal efile state 2009 If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Turbotax deluxe federal efile state 2009 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Turbotax deluxe federal efile state 2009 Worksheet A. Turbotax deluxe federal efile state 2009 Simplified Method Worksheet for Bill Smith 1. Turbotax deluxe federal efile state 2009 Enter the total pension or annuity payments received this year. Turbotax deluxe federal efile state 2009 Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Turbotax deluxe federal efile state 2009 $14,400 2. Turbotax deluxe federal efile state 2009 Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Turbotax deluxe federal efile state 2009 * See Cost (Investment in the Contract) , earlier 2. Turbotax deluxe federal efile state 2009 31,000   Note. Turbotax deluxe federal efile state 2009 If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Turbotax deluxe federal efile state 2009 Otherwise, go to line 3. Turbotax deluxe federal efile state 2009     3. Turbotax deluxe federal efile state 2009 Enter the appropriate number from Table 1 below. Turbotax deluxe federal efile state 2009 But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Turbotax deluxe federal efile state 2009 310 4. Turbotax deluxe federal efile state 2009 Divide line 2 by the number on line 3 4. Turbotax deluxe federal efile state 2009 100 5. Turbotax deluxe federal efile state 2009 Multiply line 4 by the number of months for which this year's payments were made. Turbotax deluxe federal efile state 2009 If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Turbotax deluxe federal efile state 2009 Otherwise, go to line 6 5. Turbotax deluxe federal efile state 2009 1,200 6. Turbotax deluxe federal efile state 2009 Enter any amount previously recovered tax free in years after 1986. Turbotax deluxe federal efile state 2009 This is the amount shown on line 10 of your worksheet for last year 6. Turbotax deluxe federal efile state 2009 -0- 7. Turbotax deluxe federal efile state 2009 Subtract line 6 from line 2 7. Turbotax deluxe federal efile state 2009 31,000 8. Turbotax deluxe federal efile state 2009 Enter the smaller of line 5 or line 7 8. Turbotax deluxe federal efile state 2009 1,200 9. Turbotax deluxe federal efile state 2009 Taxable amount for year. Turbotax deluxe federal efile state 2009 Subtract line 8 from line 1. Turbotax deluxe federal efile state 2009 Enter the result, but not less than zero. Turbotax deluxe federal efile state 2009 Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Turbotax deluxe federal efile state 2009 Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Turbotax deluxe federal efile state 2009 If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Turbotax deluxe federal efile state 2009 $13,200 10. Turbotax deluxe federal efile state 2009 Was your annuity starting date before 1987? □ Yes. Turbotax deluxe federal efile state 2009 STOP. Turbotax deluxe federal efile state 2009 Do not complete the rest of this worksheet. Turbotax deluxe federal efile state 2009  ☑ No. Turbotax deluxe federal efile state 2009 Add lines 6 and 8. Turbotax deluxe federal efile state 2009 This is the amount you have recovered tax free through 2013. Turbotax deluxe federal efile state 2009 You will need this number if you need to fill out this worksheet next year 10. Turbotax deluxe federal efile state 2009 1,200 11. Turbotax deluxe federal efile state 2009 Balance of cost to be recovered. Turbotax deluxe federal efile state 2009 Subtract line 10 from line 2. Turbotax deluxe federal efile state 2009 If zero, you will not have to complete this worksheet next year. Turbotax deluxe federal efile state 2009 The payments you receive next year will generally be fully taxable 11. Turbotax deluxe federal efile state 2009 $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Turbotax deluxe federal efile state 2009           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 BEFORE November 19, 1996, enter on line 3. Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 AFTER November 18, 1996, enter on line 3. Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 THEN enter on line 3. Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009 . Turbotax deluxe federal efile state 2009     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. Turbotax deluxe federal efile state 2009   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. Turbotax deluxe federal efile state 2009 Figure your share by taking the following steps. Turbotax deluxe federal efile state 2009 Complete your worksheet through line 4 to figure the monthly tax-free amount. Turbotax deluxe federal efile state 2009 Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. Turbotax deluxe federal efile state 2009 Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. Turbotax deluxe federal efile state 2009 The result is your share of the monthly tax-free amount. Turbotax deluxe federal efile state 2009   Replace the amount on line 4 of the worksheet with the result in (3) above. Turbotax deluxe federal efile state 2009 Enter that amount on line 4 of your worksheet each year. Turbotax deluxe federal efile state 2009 General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. Turbotax deluxe federal efile state 2009 Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Turbotax deluxe federal efile state 2009 To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. Turbotax deluxe federal efile state 2009 Who must use the General Rule. Turbotax deluxe federal efile state 2009   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. Turbotax deluxe federal efile state 2009 Annuity starting before November 19, 1996. Turbotax deluxe federal efile state 2009   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. Turbotax deluxe federal efile state 2009 You also had to use it for any fixed-period annuity. Turbotax deluxe federal efile state 2009 If you did not have to use the General Rule, you could have chosen to use it. Turbotax deluxe federal efile state 2009 If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. Turbotax deluxe federal efile state 2009   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Turbotax deluxe federal efile state 2009 Who cannot use the General Rule. Turbotax deluxe federal efile state 2009   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. Turbotax deluxe federal efile state 2009 See Simplified Method , earlier. Turbotax deluxe federal efile state 2009 More information. Turbotax deluxe federal efile state 2009   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Turbotax deluxe federal efile state 2009 Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Turbotax deluxe federal efile state 2009 Nonperiodic distributions are also known as amounts not received as an annuity. Turbotax deluxe federal efile state 2009 They include all payments other than periodic payments and corrective distributions. Turbotax deluxe federal efile state 2009 For example, the following items are treated as nonperiodic distributions. Turbotax deluxe federal efile state 2009 Cash withdrawals. Turbotax deluxe federal efile state 2009 Distributions of current earnings (dividends) on your investment. Turbotax deluxe federal efile state 2009 However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. Turbotax deluxe federal efile state 2009 Certain loans. Turbotax deluxe federal efile state 2009 See Loans Treated as Distributions , later. Turbotax deluxe federal efile state 2009 The value of annuity contracts transferred without full and adequate consideration. Turbotax deluxe federal efile state 2009 See Transfers of Annuity Contracts , later. Turbotax deluxe federal efile state 2009 Corrective distributions of excess plan contributions. Turbotax deluxe federal efile state 2009   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Turbotax deluxe federal efile state 2009 To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Turbotax deluxe federal efile state 2009 Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. Turbotax deluxe federal efile state 2009 It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Turbotax deluxe federal efile state 2009    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. Turbotax deluxe federal efile state 2009   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. Turbotax deluxe federal efile state 2009 Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. Turbotax deluxe federal efile state 2009 If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. Turbotax deluxe federal efile state 2009 If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. Turbotax deluxe federal efile state 2009 You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. Turbotax deluxe federal efile state 2009 See Rollovers, later. Turbotax deluxe federal efile state 2009 If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. Turbotax deluxe federal efile state 2009 See Lump-Sum Distributions, later. Turbotax deluxe federal efile state 2009 Annuity starting date. Turbotax deluxe federal efile state 2009   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. Turbotax deluxe federal efile state 2009 Distributions of employer securities. Turbotax deluxe federal efile state 2009    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. Turbotax deluxe federal efile state 2009 The NUA is the net increase in the securities' value while they were in the trust. Turbotax deluxe federal efile state 2009 This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. Turbotax deluxe federal efile state 2009   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. Turbotax deluxe federal efile state 2009    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. Turbotax deluxe federal efile state 2009    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und