Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Website Efile Past Year Tax Returns

Form 1040ez More:label_form_201040ez More:taxesTelefileAmend Taxes For 2010State ReturnsH&r Block Amended Return 20122006 Free Tax FilingFree Internet Tax FilingCan I File My 2011 Taxes Online FreeTax Act Online 20092010 Tax Form 1040Free Fed 1040ez FilingTurbotax 2012 Amended ReturnFree Efile Tax ReturnFree Taxes OnlineFree 2010 Tax ReturnFile 2011 Taxes TurbotaxTurbotax 2005 Free DownloadFree 2007 Tax Filing2012 Federal Tax FormMy Pay GovAmend 2009 Tax Return Online FreeAmend Tax Return Already FiledPrintable 1040 FormHow Do You Amend A Tax Return2010 Tax Forms 1040ezFiling Back Tax1040xformTaxes 1040ezFiling 1040nrWhere To File Tax Return 20121040 Ez 2010 PdfHrblock OnlineState Tax Filing Free OnlineOnline Tax ExtensionFederal Tax Amendment FormWww Taxes Hrblock ComHow To Amend Tax ReturnFree 1040ez Tax FormsFree State TaxFile Taxes Online Free 2012

Website Efile Past Year Tax Returns

Website efile past year tax returns 4. Website efile past year tax returns   Communications and Air Transportation Taxes Table of Contents Uncollected Tax Report Communications TaxLocal-only service. Website efile past year tax returns Private communication service. Website efile past year tax returns Exemptions Credits or Refunds Air Transportation TaxesTransportation of Persons by Air International Air Travel Facilities Transportation of Property by Air Special Rules on Transportation Taxes Excise taxes are imposed on amounts paid for certain facilities and services. Website efile past year tax returns If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government. Website efile past year tax returns If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. Website efile past year tax returns See chapter 14, later. Website efile past year tax returns Uncollected Tax Report A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. Website efile past year tax returns The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid. Website efile past year tax returns Regular method taxpayers. Website efile past year tax returns   For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported. Website efile past year tax returns Alternative method taxpayers. Website efile past year tax returns   For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. Website efile past year tax returns See Alternative method in  chapter 11. Website efile past year tax returns Where to file. Website efile past year tax returns    Do not file the uncollected tax report with Form 720. Website efile past year tax returns Instead, mail the report to: Internal Revenue Service Excise Tax Program SE:S:SP:EX MS C9-109 5000 Ellin Rd. Website efile past year tax returns  Lanham, MD 20706 Communications Tax A 3% tax is imposed on amounts paid for local telephone service and teletypewriter exchange service. Website efile past year tax returns Local telephone service. Website efile past year tax returns   This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. Website efile past year tax returns Local telephone service also includes any facility or services provided in connection with this service. Website efile past year tax returns The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system. Website efile past year tax returns Local-only service. Website efile past year tax returns   Local-only service is local telephone service as described above, provided under a plan that does not include long distance telephone service or that separately states the charge for local service on the bill to customers. Website efile past year tax returns Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service. Website efile past year tax returns Private communication service. Website efile past year tax returns   Private communication service is not local telephone service. Website efile past year tax returns Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. Website efile past year tax returns However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations. Website efile past year tax returns Teletypewriter exchange service. Website efile past year tax returns   This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system. Website efile past year tax returns Figuring the tax. Website efile past year tax returns   The tax is based on the sum of all charges for local telephone service included in the bill. Website efile past year tax returns However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. Website efile past year tax returns The tax on the remaining items not included in any group is based on the charge for each item separately. Website efile past year tax returns Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill. Website efile past year tax returns Exemptions Payments for certain services or payments from certain users are exempt from the communications tax. Website efile past year tax returns Nontaxable service. Website efile past year tax returns   Nontaxable service means bundled service and long distance service. Website efile past year tax returns Nontaxable service also includes pre-paid telephone cards and pre-paid cellular service. Website efile past year tax returns Bundled service. Website efile past year tax returns   Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. Website efile past year tax returns Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. Website efile past year tax returns Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. Website efile past year tax returns If Voice over Internet Protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service. Website efile past year tax returns   The method for sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled. Website efile past year tax returns Long distance service. Website efile past year tax returns   Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller. Website efile past year tax returns Pre-paid telephone cards (PTC). Website efile past year tax returns   A PTC will be treated as bundled service unless a PTC expressly states it is for local-only service. Website efile past year tax returns Generally, the person responsible for collecting the tax is the carrier who transfers the PTC to the transferee. Website efile past year tax returns The transferee is the first person that is not a carrier to whom a PTC is transferred by the carrier. Website efile past year tax returns The transferee is the person liable for the tax and is eligible to request a credit or refund. Website efile past year tax returns For more information, see Regulations section 49. Website efile past year tax returns 4251-4. Website efile past year tax returns   The holder is the person that purchases a PTC to use and not to resell. Website efile past year tax returns Holders are not liable for the tax and cannot request a credit or refund. Website efile past year tax returns Pre-paid cellular telephones. Website efile past year tax returns   Rules similar to the PTC rules described above apply to pre-paid cellular telephones. Website efile past year tax returns The transferee is the person eligible to request the credit or refund. Website efile past year tax returns Installation charges. Website efile past year tax returns   The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. Website efile past year tax returns However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance. Website efile past year tax returns Answering services. Website efile past year tax returns   The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system. Website efile past year tax returns Mobile radio telephone service. Website efile past year tax returns   The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system. Website efile past year tax returns Coin-operated telephones. Website efile past year tax returns   The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. Website efile past year tax returns But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. Website efile past year tax returns Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge. Website efile past year tax returns Telephone-operated security systems. Website efile past year tax returns   The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. Website efile past year tax returns In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system. Website efile past year tax returns News services. Website efile past year tax returns   The tax on teletypewriter exchange service does not apply to charges for the following news services. Website efile past year tax returns Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting. Website efile past year tax returns Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. Website efile past year tax returns This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). Website efile past year tax returns For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose. Website efile past year tax returns Services not exempted. Website efile past year tax returns   The tax applies to amounts paid by members of the news media for local telephone service. Website efile past year tax returns International organizations and the American Red Cross. Website efile past year tax returns   The tax does not apply to communication services furnished to an international organization or to the American National Red Cross. Website efile past year tax returns Nonprofit hospitals. Website efile past year tax returns   The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. Website efile past year tax returns Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours. Website efile past year tax returns Nonprofit educational organizations. Website efile past year tax returns   The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. Website efile past year tax returns A nonprofit educational organization is one that satisfies all the following requirements. Website efile past year tax returns It normally maintains a regular faculty and curriculum. Website efile past year tax returns It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. Website efile past year tax returns It is exempt from income tax under section 501(a). Website efile past year tax returns This includes a school operated by an organization exempt under section 501(c)(3) if the school meets the above qualifications. Website efile past year tax returns Qualified blood collector organizations. Website efile past year tax returns   The tax does not apply to telephone services furnished to qualified blood collector organizations for their use. Website efile past year tax returns A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered with the IRS, and Registered by the Food and Drug Administration to collect blood. Website efile past year tax returns Federal, state, and local government. Website efile past year tax returns   The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. Website efile past year tax returns Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function. Website efile past year tax returns Exemption certificate. Website efile past year tax returns   Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. Website efile past year tax returns See Regulations section 49. Website efile past year tax returns 4253-11. Website efile past year tax returns File the certificate with the provider of the communication services. Website efile past year tax returns An exemption certificate is not required for nontaxable services. Website efile past year tax returns   The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax. Website efile past year tax returns The American National Red Cross and other international organizations. Website efile past year tax returns Nonprofit hospitals. Website efile past year tax returns Nonprofit educational organizations. Website efile past year tax returns Qualified blood collector organizations. Website efile past year tax returns State and local governments. Website efile past year tax returns   The federal government does not have to file any exemption certificate. Website efile past year tax returns   All other organizations must furnish exemption certificates when required. Website efile past year tax returns Credits or Refunds If tax is collected and paid over for nontaxable services, or for certain services or users exempt from the communications tax, the collector or taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Website efile past year tax returns Alternatively, the person who paid the tax may claim a refund. Website efile past year tax returns For more information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. Website efile past year tax returns Collectors. Website efile past year tax returns   The collector may request a credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Website efile past year tax returns These requirements also apply to nontaxable service refunds. Website efile past year tax returns Collectors using the regular method for deposits. Website efile past year tax returns   Collectors using the regular method for deposits must use Form 720X to request a credit or refund if the collector has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Website efile past year tax returns Collectors using the alternative method for deposits. Website efile past year tax returns   Collectors using the alternative method for deposits must adjust their separate accounts for the credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Website efile past year tax returns For more information, see the Instructions for Form 720. Website efile past year tax returns Air Transportation Taxes Taxes are imposed on amounts paid for: Transportation of persons by air, Use of international air travel facilities, and Transportation of property by air. Website efile past year tax returns Transportation of Persons by Air The tax on transportation of persons by air is made up of the: Percentage tax, and Domestic-segment tax. Website efile past year tax returns Percentage tax. Website efile past year tax returns   A tax of 7. Website efile past year tax returns 5% applies to amounts paid for taxable transportation of persons by air. Website efile past year tax returns Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service. Website efile past year tax returns Mileage awards. Website efile past year tax returns   The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. Website efile past year tax returns For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses. Website efile past year tax returns   Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. Website efile past year tax returns Until regulations are issued, the following rules apply to mileage awards. Website efile past year tax returns Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. Website efile past year tax returns For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Website efile past year tax returns Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax. Website efile past year tax returns Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation. Website efile past year tax returns Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation. Website efile past year tax returns Domestic-segment tax. Website efile past year tax returns   The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. Website efile past year tax returns However, see Rural airports, later. Website efile past year tax returns A segment is a single takeoff and a single landing. Website efile past year tax returns The amount of the domestic-segment tax is in the Instructions for Form 720. Website efile past year tax returns Charter flights. Website efile past year tax returns    If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft. Website efile past year tax returns Rural airports. Website efile past year tax returns   The domestic-segment tax does not apply to a segment to or from a rural airport. Website efile past year tax returns An airport is a rural airport for a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar year (the 100,000 passenger rule), and one of the following is true: The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year, The airport was receiving essential air service subsidies as of August 5, 1997, or The airport is not connected by paved roads to another airport. Website efile past year tax returns   To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing from the airport by air on flight segments of at least 100 miles. Website efile past year tax returns   An updated list of rural airports can be found on the Department of Transportation website at www. Website efile past year tax returns dot. Website efile past year tax returns gov and enter the phrase “Essential Air Service” in the search box. Website efile past year tax returns Taxable transportation. Website efile past year tax returns   Taxable transportation is transportation by air that meets either of the following tests. Website efile past year tax returns It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). Website efile past year tax returns It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later. Website efile past year tax returns Round trip. Website efile past year tax returns   A round trip is considered two separate trips. Website efile past year tax returns The first trip is from the point of departure to the destination. Website efile past year tax returns The second trip is the return trip from that destination. Website efile past year tax returns Uninterrupted international air transportation. Website efile past year tax returns   This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. Website efile past year tax returns For a special rule that applies to military personnel, see Exemptions, later. Website efile past year tax returns Transportation between the continental U. Website efile past year tax returns S. Website efile past year tax returns and Alaska or Hawaii. Website efile past year tax returns   This transportation is partially exempt from the tax on transportation of persons by air. Website efile past year tax returns The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Website efile past year tax returns Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3. Website efile past year tax returns 45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Website efile past year tax returns Therefore, this transportation is subject to the percentage tax on the part of the trip in U. Website efile past year tax returns S. Website efile past year tax returns airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later. Website efile past year tax returns Transportation within Alaska or Hawaii. Website efile past year tax returns   The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. Website efile past year tax returns The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska). Website efile past year tax returns Package tours. Website efile past year tax returns   The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. Website efile past year tax returns The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free. Website efile past year tax returns ” This rule also applies to the tax on the use of international air travel facilities, discussed later. Website efile past year tax returns Liability for tax. Website efile past year tax returns   The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. Website efile past year tax returns However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax. Website efile past year tax returns    A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. Website efile past year tax returns However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government. Website efile past year tax returns An independent third party that is not under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. Website efile past year tax returns For more information on resellers of air transportation, see Revenue Ruling 2006-52. Website efile past year tax returns You can find Revenue Ruling 2006-52 on page 761 of I. Website efile past year tax returns R. Website efile past year tax returns B. Website efile past year tax returns 2006-43 at www. Website efile past year tax returns irs. Website efile past year tax returns gov/pub/irs-irbs/irb06-43. Website efile past year tax returns pdf. Website efile past year tax returns   The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. Website efile past year tax returns But see Certain helicopter uses, later. Website efile past year tax returns   For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States. Website efile past year tax returns   If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax. Website efile past year tax returns Exemptions. Website efile past year tax returns   The tax on transportation of persons by air does not apply in the following situations. Website efile past year tax returns See also Special Rules on Transportation Taxes, later. Website efile past year tax returns Military personnel on international trips. Website efile past year tax returns   When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. Website efile past year tax returns However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. Website efile past year tax returns The trip must begin or end outside the United States and the 225-mile zone. Website efile past year tax returns Certain helicopter uses. Website efile past year tax returns   The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes. Website efile past year tax returns Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. Website efile past year tax returns Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Website efile past year tax returns Providing emergency medical transportation. Website efile past year tax returns   However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. Website efile past year tax returns For item (1), treat each flight segment as a separate flight. Website efile past year tax returns Fixed-wing aircraft uses. Website efile past year tax returns   The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of the following purposes. Website efile past year tax returns Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Website efile past year tax returns Providing emergency medical transportation. Website efile past year tax returns The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Website efile past year tax returns   However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. Website efile past year tax returns Skydiving. Website efile past year tax returns   The tax does not apply to any air transportation exclusively for the purpose of skydiving. Website efile past year tax returns Seaplanes. Website efile past year tax returns   The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways Trust Fund. Website efile past year tax returns Bonus tickets. Website efile past year tax returns   The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. Website efile past year tax returns However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets. Website efile past year tax returns International Air Travel Facilities A tax per person is imposed (whether in or outside the United States) for international flights that begin or end in the United States. Website efile past year tax returns However, for a domestic segment that begins or ends in Alaska or Hawaii, a reduced tax per person applies only to departures. Website efile past year tax returns This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier. Website efile past year tax returns It also doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. Website efile past year tax returns See the Instructions for Form 720 for the tax rates. Website efile past year tax returns Transportation of Property by Air A tax of 6. Website efile past year tax returns 25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. Website efile past year tax returns The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. Website efile past year tax returns The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire. Website efile past year tax returns The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. Website efile past year tax returns Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States. Website efile past year tax returns Exemptions. Website efile past year tax returns   The tax on transportation of property by air does not apply in the following situations. Website efile past year tax returns See also Special Rules on Transportation Taxes, later. Website efile past year tax returns Cropdusting and firefighting service. Website efile past year tax returns   The tax does not apply to amounts paid for cropdusting or aerial firefighting service. Website efile past year tax returns Exportation. Website efile past year tax returns    The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. Website efile past year tax returns See Form 1363 for more information. Website efile past year tax returns Certain helicopter and fixed-wing air ambulance uses. Website efile past year tax returns   The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts. Website efile past year tax returns   The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. Website efile past year tax returns The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Website efile past year tax returns Skydiving. Website efile past year tax returns   The tax does not apply to any air transportation exclusively for the purpose of skydiving. Website efile past year tax returns Excess baggage. Website efile past year tax returns    The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line. Website efile past year tax returns Surtax on fuel used in a fractional ownership program aircraft. Website efile past year tax returns   The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. Website efile past year tax returns Alaska and Hawaii. Website efile past year tax returns   For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). Website efile past year tax returns But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. Website efile past year tax returns The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States. Website efile past year tax returns Liability for tax. Website efile past year tax returns   The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government. Website efile past year tax returns   If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States. Website efile past year tax returns Special Rules on Transportation Taxes In certain circumstances, special rules apply to the taxes on transportation of persons and property by air. Website efile past year tax returns Aircraft used by affiliated corporations. Website efile past year tax returns   The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. Website efile past year tax returns However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Website efile past year tax returns Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis. Website efile past year tax returns   For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership. Website efile past year tax returns Small aircraft. Website efile past year tax returns   The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. Website efile past year tax returns However, the taxes do apply if the aircraft is operated on an established line. Website efile past year tax returns “Operated on an established line” means the aircraft operates with some degree of regularity between definite points. Website efile past year tax returns However, it does not include any time an aircraft is being operated on a flight that is solely for sightseeing. Website efile past year tax returns   Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis. Website efile past year tax returns   Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it is operated on an established line. Website efile past year tax returns Mixed load of persons and property. Website efile past year tax returns   If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. Website efile past year tax returns The allocation must be reasonable and supported by adequate records. Website efile past year tax returns Credits or refunds. Website efile past year tax returns   If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Website efile past year tax returns Alternatively, the person who paid the tax may claim a refund. Website efile past year tax returns For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. Website efile past year tax returns Prev  Up  Next   Home   More Online Publications
Español

Defense & International Relations Podcasts from the Government

Government podcasts on topics such as State Department Stories, Pentagon Channel, DoD Briefings, and Air Force News.

The Website Efile Past Year Tax Returns

Website efile past year tax returns 1. Website efile past year tax returns   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. Website efile past year tax returns Amount realized on a recourse debt. Website efile past year tax returns Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. Website efile past year tax returns S. Website efile past year tax returns Individual Income Tax Return 1040X Amended U. Website efile past year tax returns S. Website efile past year tax returns Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. Website efile past year tax returns However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Website efile past year tax returns See chapter 5 for information about getting publications and forms. Website efile past year tax returns Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Website efile past year tax returns An exchange is a transfer of property for other property or services. Website efile past year tax returns The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Website efile past year tax returns Sale or lease. Website efile past year tax returns    Some agreements that seem to be leases may really be conditional sales contracts. Website efile past year tax returns The intention of the parties to the agreement can help you distinguish between a sale and a lease. Website efile past year tax returns   There is no test or group of tests to prove what the parties intended when they made the agreement. Website efile past year tax returns You should consider each agreement based on its own facts and circumstances. Website efile past year tax returns For more information, see chapter 3 in Publication 535, Business Expenses. Website efile past year tax returns Cancellation of a lease. Website efile past year tax returns    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Website efile past year tax returns Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. Website efile past year tax returns Copyright. Website efile past year tax returns    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. Website efile past year tax returns It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. Website efile past year tax returns Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Website efile past year tax returns   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. Website efile past year tax returns For more information, see Section 1231 Gains and Losses in chapter 3. Website efile past year tax returns Easement. Website efile past year tax returns   The amount received for granting an easement is subtracted from the basis of the property. Website efile past year tax returns If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. Website efile past year tax returns If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. Website efile past year tax returns   Any amount received that is more than the basis to be reduced is a taxable gain. Website efile past year tax returns The transaction is reported as a sale of property. Website efile past year tax returns   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. Website efile past year tax returns However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. Website efile past year tax returns   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Website efile past year tax returns Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. Website efile past year tax returns See Gain or Loss From Condemnations, later. Website efile past year tax returns Property transferred to satisfy debt. Website efile past year tax returns   A transfer of property to satisfy a debt is an exchange. Website efile past year tax returns Note's maturity date extended. Website efile past year tax returns   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Website efile past year tax returns Also, it is not considered a closed and completed transaction that would result in a gain or loss. Website efile past year tax returns However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. Website efile past year tax returns Each case must be determined by its own facts. Website efile past year tax returns For more information, see Regulations section 1. Website efile past year tax returns 1001-3. Website efile past year tax returns Transfer on death. Website efile past year tax returns   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. Website efile past year tax returns No taxable gain or deductible loss results from the transfer. Website efile past year tax returns Bankruptcy. Website efile past year tax returns   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Website efile past year tax returns Consequently, the transfer generally does not result in gain or loss. Website efile past year tax returns For more information, see Publication 908, Bankruptcy Tax Guide. Website efile past year tax returns Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Website efile past year tax returns A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Website efile past year tax returns A loss is the adjusted basis of the property that is more than the amount you realize. Website efile past year tax returns   Table 1-1. Website efile past year tax returns How To Figure Whether You Have a Gain or Loss IF your. Website efile past year tax returns . Website efile past year tax returns . Website efile past year tax returns THEN you have a. Website efile past year tax returns . Website efile past year tax returns . Website efile past year tax returns Adjusted basis is more than the amount realized, Loss. Website efile past year tax returns Amount realized is more than the adjusted basis, Gain. Website efile past year tax returns Basis. Website efile past year tax returns   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Website efile past year tax returns The basis of property you buy is usually its cost. Website efile past year tax returns However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. Website efile past year tax returns See Basis Other Than Cost in Publication 551, Basis of Assets. Website efile past year tax returns Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. Website efile past year tax returns See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Website efile past year tax returns Adjusted basis. Website efile past year tax returns   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Website efile past year tax returns Increases include costs of any improvements having a useful life of more than 1 year. Website efile past year tax returns Decreases include depreciation and casualty losses. Website efile past year tax returns For more details and additional examples, see Adjusted Basis in Publication 551. Website efile past year tax returns Amount realized. Website efile past year tax returns   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. Website efile past year tax returns The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Website efile past year tax returns Fair market value. Website efile past year tax returns   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. Website efile past year tax returns If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Website efile past year tax returns If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Website efile past year tax returns Example. Website efile past year tax returns You used a building in your business that cost you $70,000. Website efile past year tax returns You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Website efile past year tax returns You sold the building for $100,000 plus property having an FMV of $20,000. Website efile past year tax returns The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Website efile past year tax returns The selling expenses were $4,000. Website efile past year tax returns Your gain on the sale is figured as follows. Website efile past year tax returns Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. Website efile past year tax returns   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Website efile past year tax returns Recognized gains must be included in gross income. Website efile past year tax returns Recognized losses are deductible from gross income. Website efile past year tax returns However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Website efile past year tax returns See Nontaxable Exchanges, later. Website efile past year tax returns Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. Website efile past year tax returns Interest in property. Website efile past year tax returns   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. Website efile past year tax returns If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. Website efile past year tax returns Your basis in the property is disregarded. Website efile past year tax returns This rule does not apply if all interests in the property are disposed of at the same time. Website efile past year tax returns Example 1. Website efile past year tax returns Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Website efile past year tax returns You decide to sell your life interest in the farm. Website efile past year tax returns The entire amount you receive is a recognized gain. Website efile past year tax returns Your basis in the farm is disregarded. Website efile past year tax returns Example 2. Website efile past year tax returns The facts are the same as in Example 1, except that your brother joins you in selling the farm. Website efile past year tax returns The entire interest in the property is sold, so your basis in the farm is not disregarded. Website efile past year tax returns Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Website efile past year tax returns Canceling a sale of real property. Website efile past year tax returns   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. Website efile past year tax returns If the buyer returns the property in the year of sale, no gain or loss is recognized. Website efile past year tax returns This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. Website efile past year tax returns If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. Website efile past year tax returns When the property is returned in a later year, you acquire a new basis in the property. Website efile past year tax returns That basis is equal to the amount you pay to the buyer. Website efile past year tax returns Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. Website efile past year tax returns You have a gain if the amount realized is more than your adjusted basis in the property. Website efile past year tax returns However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Website efile past year tax returns Bargain sales to charity. Website efile past year tax returns   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Website efile past year tax returns If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. Website efile past year tax returns The adjusted basis of the part sold is figured as follows. Website efile past year tax returns Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. Website efile past year tax returns This allocation rule does not apply if a charitable contribution deduction is not allowable. Website efile past year tax returns   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Website efile past year tax returns Example. Website efile past year tax returns You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. Website efile past year tax returns Your adjusted basis in the property is $4,000. Website efile past year tax returns Your gain on the sale is $1,200, figured as follows. Website efile past year tax returns Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. Website efile past year tax returns You must subtract depreciation you took or could have taken from the basis of the business or rental part. Website efile past year tax returns However, see the special rule below for a home used partly for business or rental. Website efile past year tax returns You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Website efile past year tax returns Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. Website efile past year tax returns Any gain on the personal part of the property is a capital gain. Website efile past year tax returns You cannot deduct a loss on the personal part. Website efile past year tax returns Home used partly for business or rental. Website efile past year tax returns    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Website efile past year tax returns See Property Used Partly for Business or Rental, in Publication 523. Website efile past year tax returns Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. Website efile past year tax returns You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. Website efile past year tax returns However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. Website efile past year tax returns Figure the loss you can deduct as follows. Website efile past year tax returns Use the lesser of the property's adjusted basis or fair market value at the time of the change. Website efile past year tax returns Add to (1) the cost of any improvements and other increases to basis since the change. Website efile past year tax returns Subtract from (2) depreciation and any other decreases to basis since the change. Website efile past year tax returns Subtract the amount you realized on the sale from the result in (3). Website efile past year tax returns If the amount you realized is more than the result in (3), treat this result as zero. Website efile past year tax returns The result in (4) is the loss you can deduct. Website efile past year tax returns Example. Website efile past year tax returns You changed your main home to rental property 5 years ago. Website efile past year tax returns At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Website efile past year tax returns This year, you sold the property for $55,000. Website efile past year tax returns You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Website efile past year tax returns Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. Website efile past year tax returns Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. Website efile past year tax returns   If you have a gain on the sale, you generally must recognize the full amount of the gain. Website efile past year tax returns You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Website efile past year tax returns   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Website efile past year tax returns However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Website efile past year tax returns   For more information, see Business Use or Rental of Home in Publication 523. Website efile past year tax returns In addition, special rules apply if the home sold was acquired in a like-kind exchange. Website efile past year tax returns See Special Situations in Publication 523. Website efile past year tax returns Also see Like-Kind Exchanges, later. Website efile past year tax returns Abandonments The abandonment of property is a disposition of property. Website efile past year tax returns You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Website efile past year tax returns Generally, abandonment is not treated as a sale or exchange of the property. Website efile past year tax returns If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Website efile past year tax returns If your adjusted basis is more than the amount you realize (if any), then you have a loss. Website efile past year tax returns Loss from abandonment of business or investment property is deductible as a loss. Website efile past year tax returns A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Website efile past year tax returns This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Website efile past year tax returns If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Website efile past year tax returns The abandonment loss is deducted in the tax year in which the loss is sustained. Website efile past year tax returns If the abandoned property is secured by debt, special rules apply. Website efile past year tax returns The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). Website efile past year tax returns For more information, including examples, see chapter 3 of Publication 4681. Website efile past year tax returns You cannot deduct any loss from abandonment of your home or other property held for personal use only. Website efile past year tax returns Cancellation of debt. Website efile past year tax returns   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. Website efile past year tax returns This income is separate from any loss realized from abandonment of the property. Website efile past year tax returns   You must report this income on your tax return unless one of the following applies. Website efile past year tax returns The cancellation is intended as a gift. Website efile past year tax returns The debt is qualified farm debt. Website efile past year tax returns The debt is qualified real property business debt. Website efile past year tax returns You are insolvent or bankrupt. Website efile past year tax returns The debt is qualified principal residence indebtedness. Website efile past year tax returns File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Website efile past year tax returns For more information, including other exceptions and exclusion, see Publication 4681. Website efile past year tax returns Forms 1099-A and 1099-C. Website efile past year tax returns   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. Website efile past year tax returns However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. Website efile past year tax returns The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Website efile past year tax returns For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Website efile past year tax returns Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Website efile past year tax returns The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Website efile past year tax returns This is true even if you voluntarily return the property to the lender. Website efile past year tax returns You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Website efile past year tax returns Buyer's (borrower's) gain or loss. Website efile past year tax returns   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. Website efile past year tax returns The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Website efile past year tax returns See Gain or Loss From Sales and Exchanges, earlier. Website efile past year tax returns You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Website efile past year tax returns Amount realized on a nonrecourse debt. Website efile past year tax returns   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. Website efile past year tax returns The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Website efile past year tax returns Example 1. Website efile past year tax returns Chris bought a new car for $15,000. Website efile past year tax returns He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Website efile past year tax returns Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Website efile past year tax returns The credit company repossessed the car because he stopped making loan payments. Website efile past year tax returns The balance due after taking into account the payments Chris made was $10,000. Website efile past year tax returns The fair market value of the car when repossessed was $9,000. Website efile past year tax returns The amount Chris realized on the repossession is $10,000. Website efile past year tax returns That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. Website efile past year tax returns Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Website efile past year tax returns He has a $5,000 nondeductible loss. Website efile past year tax returns Example 2. Website efile past year tax returns Abena paid $200,000 for her home. Website efile past year tax returns She paid $15,000 down and borrowed the remaining $185,000 from a bank. Website efile past year tax returns Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Website efile past year tax returns The bank foreclosed on the loan because Abena stopped making payments. Website efile past year tax returns When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. Website efile past year tax returns The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Website efile past year tax returns She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Website efile past year tax returns She has a $5,000 realized gain. Website efile past year tax returns Amount realized on a recourse debt. Website efile past year tax returns   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. Website efile past year tax returns You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. Website efile past year tax returns The amount realized does not include the canceled debt that is your income from cancellation of debt. Website efile past year tax returns See Cancellation of debt, below. Website efile past year tax returns Seller's (lender's) gain or loss on repossession. Website efile past year tax returns   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. Website efile past year tax returns For more information, see Repossession in Publication 537. Website efile past year tax returns    Table 1-2. Website efile past year tax returns Worksheet for Foreclosures and Repossessions Part 1. Website efile past year tax returns Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Website efile past year tax returns Complete this part only  if you were personally liable for the debt. Website efile past year tax returns Otherwise,  go to Part 2. Website efile past year tax returns   1. Website efile past year tax returns Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. Website efile past year tax returns Enter the fair market value of the transferred property   3. Website efile past year tax returns Ordinary income from cancellation of debt upon foreclosure or    repossession. Website efile past year tax returns * Subtract line 2 from line 1. Website efile past year tax returns   If less than zero, enter zero   Part 2. Website efile past year tax returns Figure your gain or loss from foreclosure or repossession. Website efile past year tax returns   4. Website efile past year tax returns If you completed Part 1, enter the smaller of line 1 or line 2. Website efile past year tax returns   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. Website efile past year tax returns Enter any proceeds you received from the foreclosure sale   6. Website efile past year tax returns Add lines 4 and 5   7. Website efile past year tax returns Enter the adjusted basis of the transferred property   8. Website efile past year tax returns Gain or loss from foreclosure or repossession. Website efile past year tax returns Subtract line 7  from line 6   * The income may not be taxable. Website efile past year tax returns See Cancellation of debt. Website efile past year tax returns Cancellation of debt. Website efile past year tax returns   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. Website efile past year tax returns This income is separate from any gain or loss realized from the foreclosure or repossession. Website efile past year tax returns Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Website efile past year tax returns    You can use Table 1-2 to figure your income from cancellation of debt. Website efile past year tax returns   You must report this income on your tax return unless one of the following applies. Website efile past year tax returns The cancellation is intended as a gift. Website efile past year tax returns The debt is qualified farm debt. Website efile past year tax returns The debt is qualified real property business debt. Website efile past year tax returns You are insolvent or bankrupt. Website efile past year tax returns The debt is qualified principal residence indebtedness. Website efile past year tax returns File Form 982 to report the income exclusion. Website efile past year tax returns Example 1. Website efile past year tax returns Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). Website efile past year tax returns In this case, the amount he realizes is $9,000. Website efile past year tax returns This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Website efile past year tax returns Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Website efile past year tax returns He has a $6,000 nondeductible loss. Website efile past year tax returns He also is treated as receiving ordinary income from cancellation of debt. Website efile past year tax returns That income is $1,000 ($10,000 − $9,000). Website efile past year tax returns This is the part of the canceled debt not included in the amount realized. Website efile past year tax returns Example 2. Website efile past year tax returns Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). Website efile past year tax returns In this case, the amount she realizes is $170,000. Website efile past year tax returns This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Website efile past year tax returns Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Website efile past year tax returns She has a $5,000 nondeductible loss. Website efile past year tax returns She also is treated as receiving ordinary income from cancellation of debt. Website efile past year tax returns (The debt is not exempt from tax as discussed under Cancellation of debt, above. Website efile past year tax returns ) That income is $10,000 ($180,000 − $170,000). Website efile past year tax returns This is the part of the canceled debt not included in the amount realized. Website efile past year tax returns Forms 1099-A and 1099-C. Website efile past year tax returns   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. Website efile past year tax returns However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. Website efile past year tax returns The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Website efile past year tax returns For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Website efile past year tax returns Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Website efile past year tax returns Involuntary conversions are also called involuntary exchanges. Website efile past year tax returns Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Website efile past year tax returns You report the gain or deduct the loss on your tax return for the year you realize it. Website efile past year tax returns You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. Website efile past year tax returns However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Website efile past year tax returns Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Website efile past year tax returns Your basis for the new property is the same as your basis for the converted property. Website efile past year tax returns This means that the gain is deferred until a taxable sale or exchange occurs. Website efile past year tax returns If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. Website efile past year tax returns This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Website efile past year tax returns If you have a gain or loss from the destruction or theft of property, see Publication 547. Website efile past year tax returns Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Website efile past year tax returns The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. Website efile past year tax returns The owner receives a condemnation award (money or property) in exchange for the property taken. Website efile past year tax returns A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Website efile past year tax returns Example. Website efile past year tax returns A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Website efile past year tax returns After the local government took action to condemn your property, you went to court to keep it. Website efile past year tax returns But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Website efile past year tax returns This is a condemnation of private property for public use. Website efile past year tax returns Threat of condemnation. Website efile past year tax returns   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. Website efile past year tax returns You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Website efile past year tax returns   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. Website efile past year tax returns If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. Website efile past year tax returns Reports of condemnation. Website efile past year tax returns   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. Website efile past year tax returns You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Website efile past year tax returns If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. Website efile past year tax returns Example. Website efile past year tax returns Your property lies along public utility lines. Website efile past year tax returns The utility company has the authority to condemn your property. Website efile past year tax returns The company informs you that it intends to acquire your property by negotiation or condemnation. Website efile past year tax returns A threat of condemnation exists when you receive the notice. Website efile past year tax returns Related property voluntarily sold. Website efile past year tax returns   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. Website efile past year tax returns A substantial economic relationship exists if together the properties were one economic unit. Website efile past year tax returns You also must show that the condemned property could not reasonably or adequately be replaced. Website efile past year tax returns You can elect to postpone reporting the gain by buying replacement property. Website efile past year tax returns See Postponement of Gain, later. Website efile past year tax returns Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. Website efile past year tax returns If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Website efile past year tax returns You can postpone reporting gain from a condemnation if you buy replacement property. Website efile past year tax returns If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. Website efile past year tax returns See Postponement of Gain, later. Website efile past year tax returns If your net condemnation award is less than your adjusted basis, you have a loss. Website efile past year tax returns If your loss is from property you held for personal use, you cannot deduct it. Website efile past year tax returns You must report any deductible loss in the tax year it happened. Website efile past year tax returns You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Website efile past year tax returns Main home condemned. Website efile past year tax returns   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Website efile past year tax returns You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Website efile past year tax returns For information on this exclusion, see Publication 523. Website efile past year tax returns If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. Website efile past year tax returns See Postponement of Gain, later. Website efile past year tax returns Table 1-3. Website efile past year tax returns Worksheet for Condemnations Part 1. Website efile past year tax returns Gain from severance damages. Website efile past year tax returns  If you did not receive severance damages, skip Part 1 and go to Part 2. Website efile past year tax returns   1. Website efile past year tax returns Enter gross severance damages received   2. Website efile past year tax returns Enter your expenses in getting severance damages   3. Website efile past year tax returns Subtract line 2 from line 1. Website efile past year tax returns If less than zero, enter -0-   4. Website efile past year tax returns Enter any special assessment on remaining property taken out of your award   5. Website efile past year tax returns Net severance damages. Website efile past year tax returns Subtract line 4 from line 3. Website efile past year tax returns If less than zero, enter -0-   6. Website efile past year tax returns Enter the adjusted basis of the remaining property   7. Website efile past year tax returns Gain from severance damages. Website efile past year tax returns Subtract line 6 from line 5. Website efile past year tax returns If less than zero, enter -0-   8. Website efile past year tax returns Refigured adjusted basis of the remaining property. Website efile past year tax returns Subtract line 5 from line 6. Website efile past year tax returns If less than zero, enter -0-   Part 2. Website efile past year tax returns Gain or loss from condemnation award. Website efile past year tax returns   9. Website efile past year tax returns Enter the gross condemnation award received   10. Website efile past year tax returns Enter your expenses in getting the condemnation award   11. Website efile past year tax returns If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Website efile past year tax returns If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Website efile past year tax returns Otherwise, enter -0-   12. Website efile past year tax returns Add lines 10 and 11   13. Website efile past year tax returns Net condemnation award. Website efile past year tax returns Subtract line 12 from line 9   14. Website efile past year tax returns Enter the adjusted basis of the condemned property   15. Website efile past year tax returns Gain from condemnation award. Website efile past year tax returns If line 14 is more than line 13, enter -0-. Website efile past year tax returns Otherwise, subtract line 14 from  line 13 and skip line 16   16. Website efile past year tax returns Loss from condemnation award. Website efile past year tax returns Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Website efile past year tax returns )   Part 3. Website efile past year tax returns Postponed gain from condemnation. Website efile past year tax returns  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. Website efile past year tax returns )   17. Website efile past year tax returns If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Website efile past year tax returns Otherwise, enter -0-   18. Website efile past year tax returns If line 15 is more than zero, enter the amount from line 13. Website efile past year tax returns Otherwise, enter -0-   19. Website efile past year tax returns Add lines 17 and 18. Website efile past year tax returns If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. Website efile past year tax returns Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. Website efile past year tax returns Subtract line 20 from line 19. Website efile past year tax returns If less than zero, enter -0-   22. Website efile past year tax returns If you completed Part 1, add lines 7 and 15. Website efile past year tax returns Otherwise, enter the amount from line 15. Website efile past year tax returns If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. Website efile past year tax returns Recognized gain. Website efile past year tax returns Enter the smaller of line 21 or line 22. Website efile past year tax returns   24. Website efile past year tax returns Postponed gain. Website efile past year tax returns Subtract line 23 from line 22. Website efile past year tax returns If less than zero, enter -0-   Condemnation award. Website efile past year tax returns   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Website efile past year tax returns The award is also the amount you are paid for the sale of your property under threat of condemnation. Website efile past year tax returns Payment of your debts. Website efile past year tax returns   Amounts taken out of the award to pay your debts are considered paid to you. Website efile past year tax returns Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. Website efile past year tax returns Example. Website efile past year tax returns The state condemned your property for public use. Website efile past year tax returns The award was set at $200,000. Website efile past year tax returns The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Website efile past year tax returns You are considered to have received the entire $200,000 as a condemnation award. Website efile past year tax returns Interest on award. Website efile past year tax returns   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Website efile past year tax returns You must report the interest separately as ordinary income. Website efile past year tax returns Payments to relocate. Website efile past year tax returns   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. Website efile past year tax returns Do not include them in your income. Website efile past year tax returns Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Website efile past year tax returns Net condemnation award. Website efile past year tax returns   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. Website efile past year tax returns If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. Website efile past year tax returns This is discussed later under Special assessment taken out of award. Website efile past year tax returns Severance damages. Website efile past year tax returns    Severance damages are not part of the award paid for the property condemned. Website efile past year tax returns They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. Website efile past year tax returns   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. Website efile past year tax returns Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. Website efile past year tax returns   The contracting parties should agree on the specific amount of severance damages in writing. Website efile past year tax returns If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Website efile past year tax returns   You cannot make a completely new allocation of the total award after the transaction is completed. Website efile past year tax returns However, you can show how much of the award both parties intended for severance damages. Website efile past year tax returns The severance damages part of the award is determined from all the facts and circumstances. Website efile past year tax returns Example. Website efile past year tax returns You sold part of your property to the state under threat of condemnation. Website efile past year tax returns The contract you and the condemning authority signed showed only the total purchase price. Website efile past year tax returns It did not specify a fixed sum for severance damages. Website efile past year tax returns However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Website efile past year tax returns You may treat this part as severance damages. Website efile past year tax returns Treatment of severance damages. Website efile past year tax returns   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Website efile past year tax returns Use them to reduce the basis of the remaining property. Website efile past year tax returns If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. Website efile past year tax returns   If your net severance damages are more than the basis of your retained property, you have a gain. Website efile past year tax returns You may be able to postpone reporting the gain. Website efile past year tax returns See Postponement of Gain, later. Website efile past year tax returns    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. Website efile past year tax returns Net severance damages. Website efile past year tax returns   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Website efile past year tax returns You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. Website efile past year tax returns The balance is your net severance damages. Website efile past year tax returns Expenses of obtaining a condemnation award and severance damages. Website efile past year tax returns   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Website efile past year tax returns Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Website efile past year tax returns If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Website efile past year tax returns Example. Website efile past year tax returns You receive a condemnation award and severance damages. Website efile past year tax returns One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Website efile past year tax returns You had legal expenses for the entire condemnation proceeding. Website efile past year tax returns You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Website efile past year tax returns You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Website efile past year tax returns Special assessment retained out of award. Website efile past year tax returns   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. Website efile past year tax returns An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Website efile past year tax returns Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Website efile past year tax returns   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Website efile past year tax returns Example. Website efile past year tax returns To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Website efile past year tax returns You were awarded $5,000 for this and spent $300 to get the award. Website efile past year tax returns Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Website efile past year tax returns The city then paid you only $4,300. Website efile past year tax returns Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Website efile past year tax returns If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). Website efile past year tax returns The net award would not change, even if you later paid the assessment from the amount you received. Website efile past year tax returns Severance damages received. Website efile past year tax returns   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. Website efile past year tax returns Any balance of the special assessment is used to reduce the condemnation award. Website efile past year tax returns Example. Website efile past year tax returns You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Website efile past year tax returns You spent $300 to obtain the severance damages. Website efile past year tax returns A special assessment of $800 was retained out of the award. Website efile past year tax returns The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Website efile past year tax returns Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Website efile past year tax returns Part business or rental. Website efile past year tax returns   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. Website efile past year tax returns Figure your gain or loss separately because gain or loss on each part may be treated differently. Website efile past year tax returns   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. Website efile past year tax returns Example. Website efile past year tax returns You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Website efile past year tax returns You rented half the building and lived in the other half. Website efile past year tax returns You paid $25,000 for the building and spent an additional $1,000 for a new roof. Website efile past year tax returns You claimed allowable depreciation of $4,600 on the rental half. Website efile past year tax returns You spent $200 in legal expenses to obtain the condemnation award. Website efile past year tax returns Figure your gain or loss as follows. Website efile past year tax returns     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. Website efile past year tax returns Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. Website efile past year tax returns Your basis for the new property is the same as your basis for the old. Website efile past year tax returns Money or unlike property received. Website efile past year tax returns   You ordinarily must report the gain if you receive money or unlike property. Website efile past year tax returns You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. Website efile past year tax returns You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. Website efile past year tax returns See Controlling interest in a corporation, later. Website efile past year tax returns   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Website efile past year tax returns If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. Website efile past year tax returns   The basis of the replacement property is its cost, reduced by the postponed gain. Website efile past year tax returns Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. Website efile past year tax returns See Controlling interest in a corporation, later. Website efile past year tax returns You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Website efile past year tax returns Postponing gain on severance damages. Website efile past year tax returns   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. Website efile past year tax returns See Treatment of severance damages, earlier. Website efile past year tax returns You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). Website efile past year tax returns   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. Website efile past year tax returns If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. Website efile past year tax returns   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Website efile past year tax returns Postponing gain on the sale of related property. Website efile past year tax returns   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. Website efile past year tax returns You must meet the requirements explained earlier under Related property voluntarily sold. Website efile past year tax returns You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). Website efile past year tax returns Buying replacement property from a related person. Website efile past year tax returns   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Website efile past year tax returns For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Website efile past year tax returns   This rule applies to the following taxpayers. Website efile past year tax returns C corporations. Website efile past year tax returns Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. Website efile past year tax returns All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. Website efile past year tax returns   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Website efile past year tax returns If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Website efile past year tax returns If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Website efile past year tax returns Exception. Website efile past year tax returns   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Website efile past year tax returns Advance payment. Website efile past year tax returns   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). Website efile past year tax returns Replacement property. Website efile past year tax returns   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Website efile past year tax returns You do not have to use the actual funds from the condemnation award to acquire the replacement property. Website efile past year tax returns Property you acquire by gift or inheritance does not qualify as replacement property. Website efile past year tax returns Similar or related in service or use. Website efile past year tax returns   Your replacement property must be similar or related in service or use to the property it replaces. Website efile past year tax returns   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. Website efile past year tax returns For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Website efile past year tax returns Owner-user. Website efile past year tax returns   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Website efile past year tax returns Example. Website efile past year tax returns Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Website efile past year tax returns Your replacement property is not similar or related in service or use to the condemned property. Website efile past year tax returns To be similar or related in service or use, your replacement property must also be used by you as your home. Website efile past year tax returns Owner-investor. Website efile past year tax returns   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. Website efile past year tax returns You decide this by determining all the following information. Website efile past year tax returns Whether the properties are of similar service to you. Website efile past year tax returns The nature of the business risks connected with the properties. Website efile past year tax returns What the properties demand of you in the way of management, service, and relations to your tenants. Website efile past year tax returns Example. Website efile past year tax returns You owned land and a building you rented to a manufacturing company. Website efile past year tax returns The building was condemned. Website efile past year tax returns During the replacement period, you had a new building built on other land you already owned. Website efile past year tax returns You rented out the new building for use as a wholesale grocery warehouse. Website efile past year tax returns The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. Website efile past year tax returns Your management activities. Website efile past year tax returns The amount and kind of services you provide to your tenants. Website efile past year tax returns The nature of your business risks connected with the properties. Website efile past year tax returns Leasehold replaced with fee simple property. Website efile past year tax returns   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. Website efile past year tax returns   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. Website efile past year tax returns A leasehold is property held under a lease, usually for a term of years. Website efile past year tax returns Outdoor advertising display replaced with real property. Website efile past year tax returns   You can elect to treat an outdoor advertising display as real property. Website efile past year tax returns If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. Website efile past year tax returns For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. Website efile past year tax returns   You can make this election only if you did not claim a section 179 deduction for the display. Website efile past year tax returns You cannot cancel this election unless you get the consent of the IRS. Website efile past year tax returns   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. Website efile past year tax returns Substituting replacement property. Website efile past year tax returns   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Website efile past year tax returns But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Website efile past year tax returns Controlling interest in a corporation. Website efile past year tax returns   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. Website efile past year tax returns You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. Website efile past year tax returns Basis adjustment to corporation's property. Website efile past year tax returns   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Website efile past year tax returns You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). Website efile past year tax returns   Allocate this reduction to the following classes of property in the order shown below. Website efile past year tax returns Property that is similar or related in service or use to the condemned property. Website efile past year tax returns Depreciable property not reduced in (1). Website efile past year tax returns All other property. Website efile past year tax returns If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. Website efile past year tax returns The reduced basis of any single property cannot be less than zero. Website efile past year tax returns Main home replaced. Website efile past year tax returns   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. Website efile past year tax returns The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Website efile past year tax returns   You must reduce the basis of your replacement property by the postponed gain. Website efile past year tax returns Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. Website efile past year tax returns Example. Website efile past year tax returns City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Website efile past year tax returns The city paid you a condemnation award of $400,000. Website efile past year tax returns Your adjusted basis in the property was $80,000. Website efile past year tax returns You realize a gain of $320,000 ($400,000 − $80,000). Website efile past year tax returns You purchased a new home for $100,000. Website efile past year tax returns You can exclude $250,000 of the realized gain from your gross income. Website efile past year tax returns The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). Website efile past year tax returns You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Website efile past year tax returns The remaining $20,000 of realized gain is postponed. Website efile past year tax returns Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Website efile past year tax returns Replacement period. Website efile past year tax returns   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Website efile past year tax returns This is the replacement period. Website efile past year tax returns   The replacement period for a condemnation begins on the earlier of the following dates. Website efile past year tax returns The date on which you disposed of the condemned property. Website efile past year tax returns The date on which the threat of condemnation began. Website efile past year tax returns   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Website efile past year tax returns However, see the exceptions below. Website efile past year tax returns Three-year replacement period for certain property. Website efile past year tax returns   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Website efile past year tax returns However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. Website efile past year tax returns Five-year replacement period for certain property. Website efile past year tax returns   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. Website efile past year tax returns Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. Website efile past year tax returns Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. Website efile past year tax returns Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Website efile past year tax returns Extended replacement period for taxpayers affected by other federally declared disasters. Website efile past year tax returns    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. Website efile past year tax returns For more information visit www. Website efile past year tax returns irs. Website efile past year tax returns gov/uac/Tax-Relief-in-Disaster-Situations. Website efile past year tax returns Weather-related sales of livestock in an area eligible for federal assistance. Website efile past year tax returns   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Website efile past year tax returns    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. Website efile past year tax returns See Notice 2006-82. Website efile past year tax returns You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Website efile past year tax returns irs. Website efile past year tax returns gov/irb/2006-39_IRB/ar13. Website efile past year tax returns html. Website efile past year tax returns    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Website efile past year tax returns If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. Website efile past year tax returns You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Website efile past year tax returns irs. Website efile past year tax returns gov/irb/2013-45_IRB/ar04. Website efile past year tax returns html. Website efile past year tax returns The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Website efile past year tax returns Determining when gain is realized. Website efile past year tax returns   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Website efile past year tax returns If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. Website efile past year tax returns   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Website efile past year tax returns A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. Website efile past year tax returns   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Website efile past year tax returns All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Website efile past year tax returns All or part of the award is actually or constructively received. Website efile past year tax returns For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. Website efile past year tax returns Replacement property bought before the condemnation. Website efile past year tax returns   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. Website efile past year tax returns Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Website efile past year tax returns Example. Website efile past year tax returns On April 3, 2012, city authorities notified you that your property would be condemned. Website efile past year tax returns On June 5, 2012, you acquired property to replace the property to be condemned. Website efile past year tax returns You still had the new property when the city took possession of your old property on September 4, 2013. Website efile past year tax returns You have made a replacement within the replacement period. Website efile past year tax returns Extension. Website efile past year tax returns   You can request an extension of the replacement period from the IRS director for your area. Website efile past year tax returns You should apply before the end of the replacement period. Website efile past year tax returns Your request should explain in detail why you need an extension. Website efile past year tax returns The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Website efile past year tax returns An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Website efile past year tax returns   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Website efile past year tax returns Extensions are usually limited to a period of 1 year or less. Website efile past year tax returns The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Website efile past year tax returns If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri