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

Www Hrblock Com W2

H R Block 2011 DownloadH&r Block At Home DeluxeIrs Short Form2011 Amended Tax Return Form1040 A1040ez InstructionFree Income Tax Return1040 EsIrs Ammended ReturnFree File 2010 TaxesFree Tax Calculator 2011Can You E File A 1040x1040 Ez Tax Table1040 Form 2011Free E File State Taxes Only1040ez Tax Form 2013Www Myfreetaxes Com UpstreetfreetaxPrint 1040ez1040 Ez Instructions 2013Can I Efile My 2012 Taxes NowHow To Do A Tax Amendment1040ez Form Online2012 Tax Returns OnlineTurbotax Amended Return 2012Student TaxesFree Taxact 2011Free 2011 Tax Software DownloadAmending My 2010 Tax Return2008 TaxesFile Tax Return For 2012Add 1098 T Information 1040x FormState Taxes For MilitaryTaxes 2006Irs 1040ez Instructions 2012Free Efile State TaxE File 2012 Taxes For FreeH&rblockonlineTax FormsMass Income State Tax Forms2010 Federal Tax Forms And Instructions

Www Hrblock Com W2

Www hrblock com w2 15. Www hrblock com w2   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. Www hrblock com w2 More information. Www hrblock com w2 Special SituationsException for sales to related persons. Www hrblock com w2 Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. Www hrblock com w2  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. Www hrblock com w2 See Mortgage ending early under Points in chapter 23. Www hrblock com w2 Introduction This chapter explains the tax rules that apply when you sell your main home. Www hrblock com w2 In most cases, your main home is the one in which you live most of the time. Www hrblock com w2 If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Www hrblock com w2 See Excluding the Gain , later. Www hrblock com w2 Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Www hrblock com w2 If you have gain that cannot be excluded, it is taxable. Www hrblock com w2 Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). Www hrblock com w2 You may also have to complete Form 4797, Sales of Business Property. Www hrblock com w2 See Reporting the Sale , later. Www hrblock com w2 If you have a loss on the sale, you generally cannot deduct it on your return. Www hrblock com w2 However, you may need to report it. Www hrblock com w2 See Reporting the Sale , later. Www hrblock com w2 The following are main topics in this chapter. Www hrblock com w2 Figuring gain or loss. Www hrblock com w2 Basis. Www hrblock com w2 Excluding the gain. Www hrblock com w2 Ownership and use tests. Www hrblock com w2 Reporting the sale. Www hrblock com w2 Other topics include the following. Www hrblock com w2 Business use or rental of home. Www hrblock com w2 Recapturing a federal mortgage subsidy. Www hrblock com w2 Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. Www hrblock com w2 ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Www hrblock com w2 To exclude gain under the rules of this chapter, you in most cases must have 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. Www hrblock com w2 Land. Www hrblock com w2   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Www hrblock com w2 However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. Www hrblock com w2 See Vacant land under Main Home in Publication 523 for more information. Www hrblock com w2 Example. Www hrblock com w2 You buy a piece of land and move your main home to it. Www hrblock com w2 Then you sell the land on which your main home was located. Www hrblock com w2 This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Www hrblock com w2 More than one home. Www hrblock com w2   If you have more than one home, you can exclude gain only from the sale of your main home. Www hrblock com w2 You must include in income gain from the sale of any other home. Www hrblock com w2 If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. Www hrblock com w2 Example 1. Www hrblock com w2 You own two homes, one in New York and one in Florida. Www hrblock com w2 From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Www hrblock com w2 In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Www hrblock com w2 You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Www hrblock com w2 Example 2. Www hrblock com w2 You own a house, but you live in another house that you rent. Www hrblock com w2 The rented house is your main home. Www hrblock com w2 Example 3. Www hrblock com w2 You own two homes, one in Virginia and one in New Hampshire. Www hrblock com w2 In 2009 and 2010, you lived in the Virginia home. Www hrblock com w2 In 2011 and 2012, you lived in the New Hampshire home. Www hrblock com w2 In 2013, you lived again in the Virginia home. Www hrblock com w2 Your main home in 2009, 2010, and 2013 is the Virginia home. Www hrblock com w2 Your main home in 2011 and 2012 is the New Hampshire home. Www hrblock com w2 You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Www hrblock com w2 Property used partly as your main home. Www hrblock com w2   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Www hrblock com w2 For details, see Business Use or Rental of Home , later. Www hrblock com w2 Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Www hrblock com w2 Subtract the adjusted basis from the amount realized to get your gain or loss. Www hrblock com w2     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. Www hrblock com w2 It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Www hrblock com w2 Payment by employer. Www hrblock com w2   You may have to sell your home because of a job transfer. Www hrblock com w2 If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Www hrblock com w2 Your employer will include it as wages in box 1 of your Form W-2, and you will include it in your income on Form 1040, line 7. Www hrblock com w2 Option to buy. Www hrblock com w2   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Www hrblock com w2 If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Www hrblock com w2 Report this amount on Form 1040, line 21. Www hrblock com w2 Form 1099-S. Www hrblock com w2   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. Www hrblock com w2   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Www hrblock com w2 Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Www hrblock com w2 Amount Realized The amount realized is the selling price minus selling expenses. Www hrblock com w2 Selling expenses. Www hrblock com w2   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Www hrblock com w2 ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Www hrblock com w2 This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Www hrblock com w2 For information on how to figure your home's adjusted basis, see Determining Basis , later. Www hrblock com w2 Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Www hrblock com w2 Gain on sale. Www hrblock com w2   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. Www hrblock com w2 Loss on sale. Www hrblock com w2   If the amount realized is less than the adjusted basis, the difference is a loss. Www hrblock com w2 A loss on the sale of your main home cannot be deducted. Www hrblock com w2 Jointly owned home. Www hrblock com w2   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Www hrblock com w2 Separate returns. Www hrblock com w2   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Www hrblock com w2 Your ownership interest is generally determined by state law. Www hrblock com w2 Joint owners not married. Www hrblock com w2   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Www hrblock com w2 Each of you applies the rules discussed in this chapter on an individual basis. Www hrblock com w2 Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Www hrblock com w2 Foreclosure or repossession. Www hrblock com w2   If your home was foreclosed on or repossessed, you have a disposition. Www hrblock com w2 See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. Www hrblock com w2 Abandonment. Www hrblock com w2   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Www hrblock com w2 Trading (exchanging) homes. Www hrblock com w2   If you trade your old home for another home, treat the trade as a sale and a purchase. Www hrblock com w2 Example. Www hrblock com w2 You owned and lived in a home with an adjusted basis of $41,000. Www hrblock com w2 A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Www hrblock com w2 This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). Www hrblock com w2 If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Www hrblock com w2 Transfer to spouse. Www hrblock com w2   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss. Www hrblock com w2 This is true even if you receive cash or other consideration for the home. Www hrblock com w2 As a result, the rules in this chapter do not apply. Www hrblock com w2 More information. Www hrblock com w2   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. Www hrblock com w2 Involuntary conversion. Www hrblock com w2   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Www hrblock com w2 This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations . Www hrblock com w2 Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Www hrblock com w2 Your basis in your home is determined by how you got the home. Www hrblock com w2 Generally, your basis is its cost if you bought it or built it. Www hrblock com w2 If you got it in some other way (inheritance, gift, etc. Www hrblock com w2 ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Www hrblock com w2 While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Www hrblock com w2 The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Www hrblock com w2 See Adjusted Basis , later. Www hrblock com w2 You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. Www hrblock com w2 Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Www hrblock com w2 Purchase. Www hrblock com w2   If you bought your home, your basis is its cost to you. Www hrblock com w2 This includes the purchase price and certain settlement or closing costs. Www hrblock com w2 In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Www hrblock com w2 If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. Www hrblock com w2 Settlement fees or closing costs. Www hrblock com w2   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Www hrblock com w2 You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Www hrblock com w2 A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Www hrblock com w2    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. Www hrblock com w2 It also lists some settlement costs that cannot be included in basis. Www hrblock com w2   Also see Publication 523 for additional items and a discussion of basis other than cost. Www hrblock com w2 Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Www hrblock com w2 To figure your adjusted basis, you can use Worksheet 1 in Publication 523. Www hrblock com w2 Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. Www hrblock com w2 Increases to basis. Www hrblock com w2   These include the following. Www hrblock com w2 Additions and other improvements that have a useful life of more than 1 year. Www hrblock com w2 Special assessments for local improvements. Www hrblock com w2 Amounts you spent after a casualty to restore damaged property. Www hrblock com w2 Improvements. Www hrblock com w2   These add to the value of your home, prolong its useful life, or adapt it to new uses. Www hrblock com w2 You add the cost of additions and other improvements to the basis of your property. Www hrblock com w2   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. Www hrblock com w2 An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. Www hrblock com w2 Repairs. Www hrblock com w2   These maintain your home in good condition but do not add to its value or prolong its life. Www hrblock com w2 You do not add their cost to the basis of your property. Www hrblock com w2   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. Www hrblock com w2 Decreases to basis. Www hrblock com w2   These include the following. Www hrblock com w2 Discharge of qualified principal residence indebtedness that was excluded from income. Www hrblock com w2 Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Www hrblock com w2 For details, see Publication 4681. Www hrblock com w2 Gain you postponed from the sale of a previous home before May 7, 1997. Www hrblock com w2 Deductible casualty losses. Www hrblock com w2 Insurance payments you received or expect to receive for casualty losses. Www hrblock com w2 Payments you received for granting an easement or right-of-way. Www hrblock com w2 Depreciation allowed or allowable if you used your home for business or rental purposes. Www hrblock com w2 Energy-related credits allowed for expenditures made on the residence. Www hrblock com w2 (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Www hrblock com w2 ) Adoption credit you claimed for improvements added to the basis of your home. Www hrblock com w2 Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Www hrblock com w2 Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Www hrblock com w2 An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Www hrblock com w2 District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). Www hrblock com w2 General sales taxes (allowed beginning 2004 and ending before 2014) claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Www hrblock com w2 Discharges of qualified principal residence indebtedness. Www hrblock com w2   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Www hrblock com w2 This exclusion applies to discharges made after 2006 and before 2014. Www hrblock com w2 If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. Www hrblock com w2   File Form 982 with your tax return. Www hrblock com w2 See the form's instructions for detailed information. Www hrblock com w2 Recordkeeping. Www hrblock com w2 You should keep records to prove your home's adjusted basis. Www hrblock com w2 Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Www hrblock com w2 But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Www hrblock com w2 Keep records proving the basis of both homes as long as they are needed for tax purposes. Www hrblock com w2 The records you should keep include: Proof of the home's purchase price and purchase expenses, Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis, Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain, Any Form 982 you filed to report any discharge of qualified principal residence indebtedness, Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997, and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Www hrblock com w2 Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Www hrblock com w2 This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Www hrblock com w2 To qualify, you must meet the ownership and use tests described later. Www hrblock com w2 You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Www hrblock com w2 You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. Www hrblock com w2 If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Www hrblock com w2 See Publication 505, Tax Withholding and Estimated Tax. Www hrblock com w2 Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Www hrblock com w2 You meet the ownership test. Www hrblock com w2 You meet the use test. Www hrblock com w2 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Www hrblock com w2 For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. Www hrblock com w2 You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Www hrblock com w2 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Www hrblock com w2 This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Www hrblock com w2 Exception. Www hrblock com w2   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Www hrblock com w2 However, the maximum amount you may be able to exclude will be reduced. Www hrblock com w2 See Reduced Maximum Exclusion , later. Www hrblock com w2 Example 1—home owned and occupied for at least 2 years. Www hrblock com w2 Mya bought and moved into her main home in September 2011. Www hrblock com w2 She sold the home at a gain in October 2013. Www hrblock com w2 During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Www hrblock com w2 She meets the ownership and use tests. Www hrblock com w2 Example 2—ownership test met but use test not met. Www hrblock com w2 Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Www hrblock com w2 He later sold the home for a gain. Www hrblock com w2 He owned the home during the entire 5-year period ending on the date of sale. Www hrblock com w2 He meets the ownership test but not the use test. Www hrblock com w2 He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Www hrblock com w2 Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Www hrblock com w2 You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Www hrblock com w2 Temporary absence. Www hrblock com w2   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Www hrblock com w2 The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Www hrblock com w2 Example 1. Www hrblock com w2 David Johnson, who is single, bought and moved into his home on February 1, 2011. Www hrblock com w2 Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Www hrblock com w2 David sold the house on March 1, 2013. Www hrblock com w2 Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. Www hrblock com w2 The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Www hrblock com w2 Example 2. Www hrblock com w2 Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. Www hrblock com w2 He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. Www hrblock com w2 On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. Www hrblock com w2 Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Www hrblock com w2 He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. Www hrblock com w2 Ownership and use tests met at different times. Www hrblock com w2   You can meet the ownership and use tests during different 2-year periods. Www hrblock com w2 However, you must meet both tests during the 5-year period ending on the date of the sale. Www hrblock com w2 Example. Www hrblock com w2 Beginning in 2002, Helen Jones lived in a rented apartment. Www hrblock com w2 The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Www hrblock com w2 In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Www hrblock com w2 On July 12, 2013, while still living in her daughter's home, she sold her condominium. Www hrblock com w2 Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Www hrblock com w2 She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Www hrblock com w2 She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Www hrblock com w2 The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Www hrblock com w2 Cooperative apartment. Www hrblock com w2   If you sold stock as a tenant-stockholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitles you to occupy as your main home for at least 2 years. Www hrblock com w2 Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Www hrblock com w2 Exception for individuals with a disability. Www hrblock com w2   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Www hrblock com w2 Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Www hrblock com w2 If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Www hrblock com w2 Previous home destroyed or condemned. Www hrblock com w2   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Www hrblock com w2 This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home. Www hrblock com w2 Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Www hrblock com w2 Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Www hrblock com w2   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on “qualified official extended duty” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Www hrblock com w2 You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on "qualified official extended duty" or as an enrolled volunteer or volunteer leader of the Peace Corps. Www hrblock com w2 This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Www hrblock com w2   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Www hrblock com w2 For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. Www hrblock com w2 Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Www hrblock com w2 (But see Special rules for joint returns , next. Www hrblock com w2 ) Special rules for joint returns. Www hrblock com w2   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Www hrblock com w2 You are married and file a joint return for the year. Www hrblock com w2 Either you or your spouse meets the ownership test. Www hrblock com w2 Both you and your spouse meet the use test. Www hrblock com w2 During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Www hrblock com w2 If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Www hrblock com w2 For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Www hrblock com w2 Example 1—one spouse sells a home. Www hrblock com w2 Emily sells her home in June 2013 for a gain of $300,000. Www hrblock com w2 She marries Jamie later in the year. Www hrblock com w2 She meets the ownership and use tests, but Jamie does not. Www hrblock com w2 Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Www hrblock com w2 The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Www hrblock com w2 Example 2—each spouse sells a home. Www hrblock com w2 The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Www hrblock com w2 He meets the ownership and use tests on his home, but Emily does not. Www hrblock com w2 Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Www hrblock com w2 However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Www hrblock com w2 Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Www hrblock com w2 The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Www hrblock com w2 Sale of main home by surviving spouse. Www hrblock com w2   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Www hrblock com w2   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Www hrblock com w2 The sale or exchange took place after 2008. Www hrblock com w2 The sale or exchange took place no more than 2 years after the date of death of your spouse. Www hrblock com w2 You have not remarried. Www hrblock com w2 You and your spouse met the use test at the time of your spouse's death. Www hrblock com w2 You or your spouse met the ownership test at the time of your spouse's death. Www hrblock com w2 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Www hrblock com w2 Example. Www hrblock com w2   Harry owned and used a house as his main home since 2009. Www hrblock com w2 Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. Www hrblock com w2 Harry died on August 15, 2013, and Wilma inherited the property. Www hrblock com w2 Wilma sold the property on September 3, 2013, at which time she had not remarried. Www hrblock com w2 Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Www hrblock com w2 Home transferred from spouse. Www hrblock com w2   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Www hrblock com w2 Use of home after divorce. Www hrblock com w2   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Www hrblock com w2 Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Www hrblock com w2 This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Www hrblock com w2 In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Www hrblock com w2 A change in place of employment. Www hrblock com w2 Health. Www hrblock com w2 Unforeseen circumstances. Www hrblock com w2 Unforeseen circumstances. Www hrblock com w2   The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. Www hrblock com w2   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. Www hrblock com w2 Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income. Www hrblock com w2 But you must meet the ownership and use tests. Www hrblock com w2 Periods of nonqualified use. Www hrblock com w2   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. Www hrblock com w2 Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. Www hrblock com w2 Exceptions. Www hrblock com w2   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Www hrblock com w2 The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. Www hrblock com w2 Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. Www hrblock com w2 Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. Www hrblock com w2 Calculation. Www hrblock com w2   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:   Total nonqualified use during the period of ownership after 2008      Total period of ownership     This calculation can be found in Worksheet 2, line 10, in Publication 523. Www hrblock com w2 Example 1. Www hrblock com w2 On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Www hrblock com w2 She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Www hrblock com w2 The house was rented from June 1, 2009, to March 31, 2011. Www hrblock com w2 Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Www hrblock com w2 Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Www hrblock com w2 During the 5-year period ending on the date of the sale (January 31, 2008-January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Www hrblock com w2 Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 1/31/13 22 months         38 months 22 months During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Www hrblock com w2 Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. Www hrblock com w2 321. Www hrblock com w2 To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. Www hrblock com w2 321. Www hrblock com w2 Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. Www hrblock com w2 Example 2. Www hrblock com w2 William owned and used a house as his main home from 2007 through 2010. Www hrblock com w2 On January 1, 2011, he moved to another state. Www hrblock com w2 He rented his house from that date until April 30, 2013, when he sold it. Www hrblock com w2 During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Www hrblock com w2 He must report the sale on Form 4797 because it was rental property at the time of sale. Www hrblock com w2 Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Www hrblock com w2 Because he met the ownership and use tests, he can exclude gain up to $250,000. Www hrblock com w2 However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Www hrblock com w2 Depreciation after May 6, 1997. Www hrblock com w2   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Www hrblock com w2 If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Www hrblock com w2 See Publication 544 for more information. Www hrblock com w2 Property used partly for business or rental. Www hrblock com w2   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. Www hrblock com w2 Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. Www hrblock com w2 If any of these conditions apply, report the entire gain or loss. Www hrblock com w2 For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. Www hrblock com w2 If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). Www hrblock com w2 See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. Www hrblock com w2 Installment sale. Www hrblock com w2    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. Www hrblock com w2 These sales are called “installment sales. Www hrblock com w2 ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. Www hrblock com w2 You may be able to report the part of the gain you cannot exclude on the installment basis. Www hrblock com w2    Use Form 6252, Installment Sale Income, to report the sale. Www hrblock com w2 Enter your exclusion on line 15 of Form 6252. Www hrblock com w2 Seller-financed mortgage. Www hrblock com w2   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. Www hrblock com w2 You must separately report as interest income the interest you receive as part of each payment. Www hrblock com w2 If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). Www hrblock com w2 The buyer must give you his or her SSN, and you must give the buyer your SSN. Www hrblock com w2 Failure to meet these requirements may result in a $50 penalty for each failure. Www hrblock com w2 If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. Www hrblock com w2 More information. Www hrblock com w2   For more information on installment sales, see Publication 537, Installment Sales. Www hrblock com w2 Special Situations The situations that follow may affect your exclusion. Www hrblock com w2 Sale of home acquired in a like-kind exchange. Www hrblock com w2   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. Www hrblock com w2 Gain from a like-kind exchange is not taxable at the time of the exchange. Www hrblock com w2 This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. Www hrblock com w2 To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. Www hrblock com w2 For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. Www hrblock com w2 Home relinquished in a like-kind exchange. Www hrblock com w2   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. Www hrblock com w2 Expatriates. Www hrblock com w2   You cannot claim the exclusion if the expatriation tax applies to you. Www hrblock com w2 The expatriation tax applies to certain U. Www hrblock com w2 S. Www hrblock com w2 citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). Www hrblock com w2 For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. Www hrblock com w2 S. Www hrblock com w2 Tax Guide for Aliens. Www hrblock com w2 Home destroyed or condemned. Www hrblock com w2   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. Www hrblock com w2   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. Www hrblock com w2 Sale of remainder interest. Www hrblock com w2   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. Www hrblock com w2 If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. Www hrblock com w2 Exception for sales to related persons. Www hrblock com w2   You cannot exclude gain from the sale of a remainder interest in your home to a related person. Www hrblock com w2 Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Www hrblock com w2 ), and lineal descendants (children, grandchildren, etc. Www hrblock com w2 ). Www hrblock com w2 Related persons also include certain corporations, partnerships, trusts, and exempt organizations. Www hrblock com w2 Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Www hrblock com w2 You recapture the benefit by increasing your federal income tax for the year of the sale. Www hrblock com w2 You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. Www hrblock com w2 Loans subject to recapture rules. Www hrblock com w2   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. Www hrblock com w2 The recapture also applies to assumptions of these loans. Www hrblock com w2 When recapture applies. Www hrblock com w2   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. Www hrblock com w2 You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. Www hrblock com w2 Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). Www hrblock com w2 When recapture does not apply. Www hrblock com w2   Recapture does not apply in any of the following situations. Www hrblock com w2 Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. Www hrblock com w2 Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. Www hrblock com w2 For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. Www hrblock com w2 Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Www hrblock com w2 The home is disposed of as a result of your death. Www hrblock com w2 You dispose of the home more than 9 years after the date you closed your mortgage loan. Www hrblock com w2 You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. Www hrblock com w2 You dispose of the home at a loss. Www hrblock com w2 Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. Www hrblock com w2 The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. Www hrblock com w2 For more information, see Replacement Period in Publication 547. Www hrblock com w2 You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). Www hrblock com w2 Notice of amounts. Www hrblock com w2   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. Www hrblock com w2 How to figure and report the recapture. Www hrblock com w2    The recapture tax is figured on Form 8828. Www hrblock com w2 If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. Www hrblock com w2 Attach Form 8828 to your Form 1040. Www hrblock com w2 For more information, see Form 8828 and its instructions. Www hrblock com w2 Prev  Up  Next   Home   More Online Publications
Español

Bureau of Transportation Statistics

The Bureau of Transportation Statistics collects and publishes comprehensive transportation statistics.

Contact the Agency or Department

Website: Bureau of Transportation Statistics

E-mail:

Address: Research and Innovative Technology Administration
1200 New Jersey Avenue, SE

Washington, DC 20590

Phone Number: (202) 366-3492

Toll-free: (800) 853-1351

The Www Hrblock Com W2

Www hrblock com w2 9. Www hrblock com w2   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Www hrblock com w2 Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Www hrblock com w2 Amount to report as ordinary income. Www hrblock com w2 Applicable percentage. Www hrblock com w2 Amount to report as ordinary income. Www hrblock com w2 Applicable percentage. Www hrblock com w2 Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. Www hrblock com w2 When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Www hrblock com w2 Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Www hrblock com w2 Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Www hrblock com w2 Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. Www hrblock com w2 Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Www hrblock com w2 Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Www hrblock com w2 Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Www hrblock com w2 Table 9-1. Www hrblock com w2 Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. Www hrblock com w2 Held 24 mos. Www hrblock com w2  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. Www hrblock com w2 Held 12 mos. Www hrblock com w2   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Www hrblock com w2 Do not take that gain into account as section 1231 gain. Www hrblock com w2 Section 1231 transactions. Www hrblock com w2   Gain or loss on the following transactions is subject to section 1231 treatment. Www hrblock com w2 Sale or exchange of cattle and horses. Www hrblock com w2 The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Www hrblock com w2 Sale or exchange of other livestock. Www hrblock com w2 This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Www hrblock com w2 Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Www hrblock com w2 Other livestock does not include poultry. Www hrblock com w2 Sale or exchange of depreciable personal property. Www hrblock com w2 This property must be used in your business and held longer than 1 year. Www hrblock com w2 Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Www hrblock com w2 Examples of depreciable personal property include farm machinery and trucks. Www hrblock com w2 It also includes amortizable section 197 intangibles. Www hrblock com w2 Sale or exchange of real estate. Www hrblock com w2 This property must be used in your business and held longer than 1 year. Www hrblock com w2 Examples are your farm or ranch (including barns and sheds). Www hrblock com w2 Sale or exchange of unharvested crops. Www hrblock com w2 The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. Www hrblock com w2 You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). Www hrblock com w2 Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Www hrblock com w2 Distributive share of partnership gains and losses. Www hrblock com w2 Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). Www hrblock com w2 Cutting or disposal of timber. Www hrblock com w2 Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . Www hrblock com w2 Condemnation. Www hrblock com w2 The condemned property (defined in chapter 11) must have been held longer than 1 year. Www hrblock com w2 It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Www hrblock com w2 It cannot be property held for personal use. Www hrblock com w2 Casualty or theft. Www hrblock com w2 The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). Www hrblock com w2 You must have held the property longer than 1 year. Www hrblock com w2 However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Www hrblock com w2 Section 1231 does not apply to personal casualty gains and losses. Www hrblock com w2 See chapter 11 for information on how to treat those gains and losses. Www hrblock com w2 If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. Www hrblock com w2 See Table 9-1. Www hrblock com w2 Property for sale to customers. Www hrblock com w2   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Www hrblock com w2 If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Www hrblock com w2 Treatment as ordinary or capital. Www hrblock com w2   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Www hrblock com w2 If you have a net section 1231 loss, it is an ordinary loss. Www hrblock com w2 If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Www hrblock com w2 The rest, if any, is long-term capital gain. Www hrblock com w2 Nonrecaptured section 1231 losses. Www hrblock com w2   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. Www hrblock com w2 These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Www hrblock com w2 Example. Www hrblock com w2 In 2013, Ben has a $2,000 net section 1231 gain. Www hrblock com w2 To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Www hrblock com w2 From 2008 through 2012 he had the following section 1231 gains and losses. Www hrblock com w2 Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Www hrblock com w2 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. Www hrblock com w2 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. Www hrblock com w2 To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Www hrblock com w2 For more information, see chapter 3 of Publication 544. Www hrblock com w2 Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. Www hrblock com w2 Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Www hrblock com w2 See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Www hrblock com w2 Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Www hrblock com w2 Personal property (either tangible or intangible). Www hrblock com w2 Other tangible property (except buildings and their structural components) used as any of the following. Www hrblock com w2 See Buildings and structural components below. Www hrblock com w2 An integral part of manufacturing, production, or extraction, or of furnishing certain services. Www hrblock com w2 A research facility in any of the activities in (a). Www hrblock com w2 A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Www hrblock com w2 That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Www hrblock com w2 Amortization of certified pollution control facilities. Www hrblock com w2 The section 179 expense deduction. Www hrblock com w2 Deduction for clean-fuel vehicles and certain refueling property. Www hrblock com w2 Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Www hrblock com w2 Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Www hrblock com w2 Single purpose agricultural (livestock) or horticultural structures. Www hrblock com w2 Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Www hrblock com w2 Buildings and structural components. Www hrblock com w2   Section 1245 property does not include buildings and structural components. Www hrblock com w2 The term building includes a house, barn, warehouse, or garage. Www hrblock com w2 The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Www hrblock com w2   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Www hrblock com w2 Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Www hrblock com w2   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Www hrblock com w2 Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Www hrblock com w2 Facility for bulk storage of fungible commodities. Www hrblock com w2   This is a facility used mainly for the bulk storage of fungible commodities. Www hrblock com w2 Bulk storage means storage of a commodity in a large mass before it is used. Www hrblock com w2 For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Www hrblock com w2 To be fungible, a commodity must be such that one part may be used in place of another. Www hrblock com w2 Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Www hrblock com w2 The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Www hrblock com w2 The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Www hrblock com w2 For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. Www hrblock com w2 For details, see chapter 3 of Publication 544. Www hrblock com w2 Use Part III of Form 4797 to figure the ordinary income part of the gain. Www hrblock com w2 Depreciation claimed on other property or claimed by other taxpayers. Www hrblock com w2   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Www hrblock com w2 Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Www hrblock com w2 For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Www hrblock com w2 Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). Www hrblock com w2 Example. Www hrblock com w2 Jeff Free paid $120,000 for a tractor in 2012. Www hrblock com w2 On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Www hrblock com w2 To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. Www hrblock com w2 Jeff can also depreciate the additional $30,000 for the chopper. Www hrblock com w2 Depreciation and amortization. Www hrblock com w2   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Www hrblock com w2 See Depreciation Recapture in chapter 3 of Publication 544 for more details. Www hrblock com w2 Ordinary depreciation deductions. Www hrblock com w2 Section 179 deduction (see chapter 7). Www hrblock com w2 Any special depreciation allowance. Www hrblock com w2 Amortization deductions for all the following costs. Www hrblock com w2 Acquiring a lease. Www hrblock com w2 Lessee improvements. Www hrblock com w2 Pollution control facilities. Www hrblock com w2 Reforestation expenses. Www hrblock com w2 Section 197 intangibles. Www hrblock com w2 Qualified disaster expenses. Www hrblock com w2 Franchises, trademarks, and trade names acquired before August 11, 1993. Www hrblock com w2 Example. Www hrblock com w2 You file your returns on a calendar year basis. Www hrblock com w2 In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. Www hrblock com w2 You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Www hrblock com w2 You did not claim the section 179 expense deduction for the truck. Www hrblock com w2 You sold it in May 2013 for $7,000. Www hrblock com w2 The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Www hrblock com w2 Figure the gain treated as ordinary income as follows. Www hrblock com w2 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. Www hrblock com w2   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Www hrblock com w2 If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Www hrblock com w2 If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Www hrblock com w2 This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Www hrblock com w2 Disposition of plants and animals. Www hrblock com w2   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Www hrblock com w2 If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. Www hrblock com w2 For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Www hrblock com w2 For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. Www hrblock com w2 You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Www hrblock com w2 Example. Www hrblock com w2 Janet Maple sold her apple orchard in 2013 for $80,000. Www hrblock com w2 Her adjusted basis at the time of sale was $60,000. Www hrblock com w2 She bought the orchard in 2006, but the trees did not produce a crop until 2009. Www hrblock com w2 Her pre-productive expenses were $6,000. Www hrblock com w2 She elected not to use the uniform capitalization rules. Www hrblock com w2 Janet must treat $6,000 of the gain as ordinary income. Www hrblock com w2 Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. Www hrblock com w2 It includes buildings and structural components that are not section 1245 property (discussed earlier). Www hrblock com w2 It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Www hrblock com w2 A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Www hrblock com w2 Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Www hrblock com w2 To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Www hrblock com w2 You will not have additional depreciation if any of the following apply to the property disposed of. Www hrblock com w2 You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. Www hrblock com w2 You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Www hrblock com w2 The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. Www hrblock com w2 These properties are depreciated using the straight line method. Www hrblock com w2 Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Www hrblock com w2 This applies even if no payments are received in that year. Www hrblock com w2 If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Www hrblock com w2 For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Www hrblock com w2 If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. Www hrblock com w2 To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Www hrblock com w2 Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Www hrblock com w2 For more information on installment sales, see chapter 10. Www hrblock com w2 Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Www hrblock com w2 By gift. Www hrblock com w2 At death. Www hrblock com w2 In like-kind exchanges. Www hrblock com w2 In involuntary conversions. Www hrblock com w2 Publication 544 also explains how to handle a single transaction involving multiple properties. Www hrblock com w2 Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Www hrblock com w2 Deductions for soil and water conservation expenditures (section 1252 property). Www hrblock com w2 Exclusions from income for certain cost sharing payments (section 1255 property). Www hrblock com w2 Section 1252 property. Www hrblock com w2   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. Www hrblock com w2 Exceptions. Www hrblock com w2   Do not treat gain on the following transactions as gain on section 1252 property. Www hrblock com w2 Disposition of farmland by gift. Www hrblock com w2 Transfer of farm property at death (except for income in respect of a decedent). Www hrblock com w2 For more information, see Regulations section 1. Www hrblock com w2 1252-2. Www hrblock com w2 Amount to report as ordinary income. Www hrblock com w2   You report as ordinary income the lesser of the following amounts. Www hrblock com w2 Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). Www hrblock com w2 The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Www hrblock com w2 Applicable percentage. Www hrblock com w2   The applicable percentage is based on the length of time you held the land. Www hrblock com w2 If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Www hrblock com w2 If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. Www hrblock com w2 If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. Www hrblock com w2 Example. Www hrblock com w2 You acquired farmland on January 19, 2005. Www hrblock com w2 On October 3, 2013, you sold the land at a $30,000 gain. Www hrblock com w2 Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. Www hrblock com w2 The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Www hrblock com w2 You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. Www hrblock com w2 Section 1255 property. Www hrblock com w2   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. Www hrblock com w2 If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Www hrblock com w2 Amount to report as ordinary income. Www hrblock com w2   You report as ordinary income the lesser of the following amounts. Www hrblock com w2 The applicable percentage of the total excluded cost-sharing payments. Www hrblock com w2 The gain on the disposition of the property. Www hrblock com w2 You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. Www hrblock com w2 However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Www hrblock com w2 Applicable percentage. Www hrblock com w2   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. Www hrblock com w2 If the property is held less than 10 years after you receive the payments, the percentage is 100%. Www hrblock com w2 After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Www hrblock com w2 Form 4797, Part III. Www hrblock com w2   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. Www hrblock com w2 Prev  Up  Next   Home   More Online Publications