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Free tax forms 2012 1. Free tax forms 2012 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. Free tax forms 2012 Amount realized on a recourse debt. Free tax forms 2012 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. Free tax forms 2012 S. Free tax forms 2012 Individual Income Tax Return 1040X Amended U. Free tax forms 2012 S. Free tax forms 2012 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. Free tax forms 2012 However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Free tax forms 2012 See chapter 5 for information about getting publications and forms. Free tax forms 2012 Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Free tax forms 2012 An exchange is a transfer of property for other property or services. Free tax forms 2012 The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Free tax forms 2012 Sale or lease. Free tax forms 2012 Some agreements that seem to be leases may really be conditional sales contracts. Free tax forms 2012 The intention of the parties to the agreement can help you distinguish between a sale and a lease. Free tax forms 2012 There is no test or group of tests to prove what the parties intended when they made the agreement. Free tax forms 2012 You should consider each agreement based on its own facts and circumstances. Free tax forms 2012 For more information, see chapter 3 in Publication 535, Business Expenses. Free tax forms 2012 Cancellation of a lease. Free tax forms 2012 Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Free tax forms 2012 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. Free tax forms 2012 Copyright. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Free tax forms 2012 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. Free tax forms 2012 For more information, see Section 1231 Gains and Losses in chapter 3. Free tax forms 2012 Easement. Free tax forms 2012 The amount received for granting an easement is subtracted from the basis of the property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Any amount received that is more than the basis to be reduced is a taxable gain. Free tax forms 2012 The transaction is reported as a sale of property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 See Gain or Loss From Condemnations, later. Free tax forms 2012 Property transferred to satisfy debt. Free tax forms 2012 A transfer of property to satisfy a debt is an exchange. Free tax forms 2012 Note's maturity date extended. Free tax forms 2012 The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Free tax forms 2012 Also, it is not considered a closed and completed transaction that would result in a gain or loss. Free tax forms 2012 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. Free tax forms 2012 Each case must be determined by its own facts. Free tax forms 2012 For more information, see Regulations section 1. Free tax forms 2012 1001-3. Free tax forms 2012 Transfer on death. Free tax forms 2012 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. Free tax forms 2012 No taxable gain or deductible loss results from the transfer. Free tax forms 2012 Bankruptcy. Free tax forms 2012 Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Free tax forms 2012 Consequently, the transfer generally does not result in gain or loss. Free tax forms 2012 For more information, see Publication 908, Bankruptcy Tax Guide. Free tax forms 2012 Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Free tax forms 2012 A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Free tax forms 2012 A loss is the adjusted basis of the property that is more than the amount you realize. Free tax forms 2012 Table 1-1. Free tax forms 2012 How To Figure Whether You Have a Gain or Loss IF your. Free tax forms 2012 . Free tax forms 2012 . Free tax forms 2012 THEN you have a. Free tax forms 2012 . Free tax forms 2012 . Free tax forms 2012 Adjusted basis is more than the amount realized, Loss. Free tax forms 2012 Amount realized is more than the adjusted basis, Gain. Free tax forms 2012 Basis. Free tax forms 2012 You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Free tax forms 2012 The basis of property you buy is usually its cost. Free tax forms 2012 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. Free tax forms 2012 See Basis Other Than Cost in Publication 551, Basis of Assets. Free tax forms 2012 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. Free tax forms 2012 See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Free tax forms 2012 Adjusted basis. Free tax forms 2012 The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Free tax forms 2012 Increases include costs of any improvements having a useful life of more than 1 year. Free tax forms 2012 Decreases include depreciation and casualty losses. Free tax forms 2012 For more details and additional examples, see Adjusted Basis in Publication 551. Free tax forms 2012 Amount realized. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Fair market value. Free tax forms 2012 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. Free tax forms 2012 If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Free tax forms 2012 If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Free tax forms 2012 Example. Free tax forms 2012 You used a building in your business that cost you $70,000. Free tax forms 2012 You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Free tax forms 2012 You sold the building for $100,000 plus property having an FMV of $20,000. Free tax forms 2012 The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Free tax forms 2012 The selling expenses were $4,000. Free tax forms 2012 Your gain on the sale is figured as follows. Free tax forms 2012 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. Free tax forms 2012 Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Free tax forms 2012 Recognized gains must be included in gross income. Free tax forms 2012 Recognized losses are deductible from gross income. Free tax forms 2012 However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Free tax forms 2012 See Nontaxable Exchanges, later. Free tax forms 2012 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. Free tax forms 2012 Interest in property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Your basis in the property is disregarded. Free tax forms 2012 This rule does not apply if all interests in the property are disposed of at the same time. Free tax forms 2012 Example 1. Free tax forms 2012 Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Free tax forms 2012 You decide to sell your life interest in the farm. Free tax forms 2012 The entire amount you receive is a recognized gain. Free tax forms 2012 Your basis in the farm is disregarded. Free tax forms 2012 Example 2. Free tax forms 2012 The facts are the same as in Example 1, except that your brother joins you in selling the farm. Free tax forms 2012 The entire interest in the property is sold, so your basis in the farm is not disregarded. Free tax forms 2012 Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Free tax forms 2012 Canceling a sale of real property. Free tax forms 2012 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. Free tax forms 2012 If the buyer returns the property in the year of sale, no gain or loss is recognized. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 When the property is returned in a later year, you acquire a new basis in the property. Free tax forms 2012 That basis is equal to the amount you pay to the buyer. Free tax forms 2012 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. Free tax forms 2012 You have a gain if the amount realized is more than your adjusted basis in the property. Free tax forms 2012 However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Free tax forms 2012 Bargain sales to charity. Free tax forms 2012 A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Free tax forms 2012 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. Free tax forms 2012 The adjusted basis of the part sold is figured as follows. Free tax forms 2012 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. Free tax forms 2012 This allocation rule does not apply if a charitable contribution deduction is not allowable. Free tax forms 2012 See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Free tax forms 2012 Example. Free tax forms 2012 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. Free tax forms 2012 Your adjusted basis in the property is $4,000. Free tax forms 2012 Your gain on the sale is $1,200, figured as follows. Free tax forms 2012 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. Free tax forms 2012 You must subtract depreciation you took or could have taken from the basis of the business or rental part. Free tax forms 2012 However, see the special rule below for a home used partly for business or rental. Free tax forms 2012 You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Free tax forms 2012 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. Free tax forms 2012 Any gain on the personal part of the property is a capital gain. Free tax forms 2012 You cannot deduct a loss on the personal part. Free tax forms 2012 Home used partly for business or rental. Free tax forms 2012 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. Free tax forms 2012 See Property Used Partly for Business or Rental, in Publication 523. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Figure the loss you can deduct as follows. Free tax forms 2012 Use the lesser of the property's adjusted basis or fair market value at the time of the change. Free tax forms 2012 Add to (1) the cost of any improvements and other increases to basis since the change. Free tax forms 2012 Subtract from (2) depreciation and any other decreases to basis since the change. Free tax forms 2012 Subtract the amount you realized on the sale from the result in (3). Free tax forms 2012 If the amount you realized is more than the result in (3), treat this result as zero. Free tax forms 2012 The result in (4) is the loss you can deduct. Free tax forms 2012 Example. Free tax forms 2012 You changed your main home to rental property 5 years ago. Free tax forms 2012 At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Free tax forms 2012 This year, you sold the property for $55,000. Free tax forms 2012 You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 If you have a gain on the sale, you generally must recognize the full amount of the gain. Free tax forms 2012 You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Free tax forms 2012 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. Free tax forms 2012 However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Free tax forms 2012 For more information, see Business Use or Rental of Home in Publication 523. Free tax forms 2012 In addition, special rules apply if the home sold was acquired in a like-kind exchange. Free tax forms 2012 See Special Situations in Publication 523. Free tax forms 2012 Also see Like-Kind Exchanges, later. Free tax forms 2012 Abandonments The abandonment of property is a disposition of property. Free tax forms 2012 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. Free tax forms 2012 Generally, abandonment is not treated as a sale or exchange of the property. Free tax forms 2012 If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Free tax forms 2012 If your adjusted basis is more than the amount you realize (if any), then you have a loss. Free tax forms 2012 Loss from abandonment of business or investment property is deductible as a loss. Free tax forms 2012 A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Free tax forms 2012 This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Free tax forms 2012 If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Free tax forms 2012 The abandonment loss is deducted in the tax year in which the loss is sustained. Free tax forms 2012 If the abandoned property is secured by debt, special rules apply. Free tax forms 2012 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). Free tax forms 2012 For more information, including examples, see chapter 3 of Publication 4681. Free tax forms 2012 You cannot deduct any loss from abandonment of your home or other property held for personal use only. Free tax forms 2012 Cancellation of debt. Free tax forms 2012 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. Free tax forms 2012 This income is separate from any loss realized from abandonment of the property. Free tax forms 2012 You must report this income on your tax return unless one of the following applies. Free tax forms 2012 The cancellation is intended as a gift. Free tax forms 2012 The debt is qualified farm debt. Free tax forms 2012 The debt is qualified real property business debt. Free tax forms 2012 You are insolvent or bankrupt. Free tax forms 2012 The debt is qualified principal residence indebtedness. Free tax forms 2012 File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Free tax forms 2012 For more information, including other exceptions and exclusion, see Publication 4681. Free tax forms 2012 Forms 1099-A and 1099-C. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Free tax forms 2012 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. Free tax forms 2012 The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Free tax forms 2012 This is true even if you voluntarily return the property to the lender. Free tax forms 2012 You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Free tax forms 2012 Buyer's (borrower's) gain or loss. Free tax forms 2012 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. Free tax forms 2012 The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Free tax forms 2012 See Gain or Loss From Sales and Exchanges, earlier. Free tax forms 2012 You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Free tax forms 2012 Amount realized on a nonrecourse debt. Free tax forms 2012 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. Free tax forms 2012 The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Free tax forms 2012 Example 1. Free tax forms 2012 Chris bought a new car for $15,000. Free tax forms 2012 He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Free tax forms 2012 Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Free tax forms 2012 The credit company repossessed the car because he stopped making loan payments. Free tax forms 2012 The balance due after taking into account the payments Chris made was $10,000. Free tax forms 2012 The fair market value of the car when repossessed was $9,000. Free tax forms 2012 The amount Chris realized on the repossession is $10,000. Free tax forms 2012 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. Free tax forms 2012 Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Free tax forms 2012 He has a $5,000 nondeductible loss. Free tax forms 2012 Example 2. Free tax forms 2012 Abena paid $200,000 for her home. Free tax forms 2012 She paid $15,000 down and borrowed the remaining $185,000 from a bank. Free tax forms 2012 Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Free tax forms 2012 The bank foreclosed on the loan because Abena stopped making payments. Free tax forms 2012 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. Free tax forms 2012 The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Free tax forms 2012 She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Free tax forms 2012 She has a $5,000 realized gain. Free tax forms 2012 Amount realized on a recourse debt. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 The amount realized does not include the canceled debt that is your income from cancellation of debt. Free tax forms 2012 See Cancellation of debt, below. Free tax forms 2012 Seller's (lender's) gain or loss on repossession. Free tax forms 2012 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. Free tax forms 2012 For more information, see Repossession in Publication 537. Free tax forms 2012 Table 1-2. Free tax forms 2012 Worksheet for Foreclosures and Repossessions Part 1. Free tax forms 2012 Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Free tax forms 2012 Complete this part only if you were personally liable for the debt. Free tax forms 2012 Otherwise, go to Part 2. Free tax forms 2012 1. Free tax forms 2012 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. Free tax forms 2012 Enter the fair market value of the transferred property 3. Free tax forms 2012 Ordinary income from cancellation of debt upon foreclosure or repossession. Free tax forms 2012 * Subtract line 2 from line 1. Free tax forms 2012 If less than zero, enter zero Part 2. Free tax forms 2012 Figure your gain or loss from foreclosure or repossession. Free tax forms 2012 4. Free tax forms 2012 If you completed Part 1, enter the smaller of line 1 or line 2. Free tax forms 2012 If you did not complete Part 1, enter the outstanding debt immediately before the transfer of property 5. Free tax forms 2012 Enter any proceeds you received from the foreclosure sale 6. Free tax forms 2012 Add lines 4 and 5 7. Free tax forms 2012 Enter the adjusted basis of the transferred property 8. Free tax forms 2012 Gain or loss from foreclosure or repossession. Free tax forms 2012 Subtract line 7 from line 6 * The income may not be taxable. Free tax forms 2012 See Cancellation of debt. Free tax forms 2012 Cancellation of debt. Free tax forms 2012 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. Free tax forms 2012 This income is separate from any gain or loss realized from the foreclosure or repossession. Free tax forms 2012 Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Free tax forms 2012 You can use Table 1-2 to figure your income from cancellation of debt. Free tax forms 2012 You must report this income on your tax return unless one of the following applies. Free tax forms 2012 The cancellation is intended as a gift. Free tax forms 2012 The debt is qualified farm debt. Free tax forms 2012 The debt is qualified real property business debt. Free tax forms 2012 You are insolvent or bankrupt. Free tax forms 2012 The debt is qualified principal residence indebtedness. Free tax forms 2012 File Form 982 to report the income exclusion. Free tax forms 2012 Example 1. Free tax forms 2012 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). Free tax forms 2012 In this case, the amount he realizes is $9,000. Free tax forms 2012 This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Free tax forms 2012 Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Free tax forms 2012 He has a $6,000 nondeductible loss. Free tax forms 2012 He also is treated as receiving ordinary income from cancellation of debt. Free tax forms 2012 That income is $1,000 ($10,000 − $9,000). Free tax forms 2012 This is the part of the canceled debt not included in the amount realized. Free tax forms 2012 Example 2. Free tax forms 2012 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). Free tax forms 2012 In this case, the amount she realizes is $170,000. Free tax forms 2012 This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Free tax forms 2012 Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Free tax forms 2012 She has a $5,000 nondeductible loss. Free tax forms 2012 She also is treated as receiving ordinary income from cancellation of debt. Free tax forms 2012 (The debt is not exempt from tax as discussed under Cancellation of debt, above. Free tax forms 2012 ) That income is $10,000 ($180,000 − $170,000). Free tax forms 2012 This is the part of the canceled debt not included in the amount realized. Free tax forms 2012 Forms 1099-A and 1099-C. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Free tax forms 2012 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. Free tax forms 2012 Involuntary conversions are also called involuntary exchanges. Free tax forms 2012 Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Free tax forms 2012 You report the gain or deduct the loss on your tax return for the year you realize it. Free tax forms 2012 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. Free tax forms 2012 However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Free tax forms 2012 Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Free tax forms 2012 Your basis for the new property is the same as your basis for the converted property. Free tax forms 2012 This means that the gain is deferred until a taxable sale or exchange occurs. Free tax forms 2012 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. Free tax forms 2012 This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Free tax forms 2012 If you have a gain or loss from the destruction or theft of property, see Publication 547. Free tax forms 2012 Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Free tax forms 2012 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. Free tax forms 2012 The owner receives a condemnation award (money or property) in exchange for the property taken. Free tax forms 2012 A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Free tax forms 2012 Example. Free tax forms 2012 A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Free tax forms 2012 After the local government took action to condemn your property, you went to court to keep it. Free tax forms 2012 But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Free tax forms 2012 This is a condemnation of private property for public use. Free tax forms 2012 Threat of condemnation. Free tax forms 2012 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. Free tax forms 2012 You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Reports of condemnation. Free tax forms 2012 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. Free tax forms 2012 You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Free tax forms 2012 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. Free tax forms 2012 Example. Free tax forms 2012 Your property lies along public utility lines. Free tax forms 2012 The utility company has the authority to condemn your property. Free tax forms 2012 The company informs you that it intends to acquire your property by negotiation or condemnation. Free tax forms 2012 A threat of condemnation exists when you receive the notice. Free tax forms 2012 Related property voluntarily sold. Free tax forms 2012 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. Free tax forms 2012 A substantial economic relationship exists if together the properties were one economic unit. Free tax forms 2012 You also must show that the condemned property could not reasonably or adequately be replaced. Free tax forms 2012 You can elect to postpone reporting the gain by buying replacement property. Free tax forms 2012 See Postponement of Gain, later. Free tax forms 2012 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. Free tax forms 2012 If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Free tax forms 2012 You can postpone reporting gain from a condemnation if you buy replacement property. Free tax forms 2012 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. Free tax forms 2012 See Postponement of Gain, later. Free tax forms 2012 If your net condemnation award is less than your adjusted basis, you have a loss. Free tax forms 2012 If your loss is from property you held for personal use, you cannot deduct it. Free tax forms 2012 You must report any deductible loss in the tax year it happened. Free tax forms 2012 You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Free tax forms 2012 Main home condemned. Free tax forms 2012 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. Free tax forms 2012 You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Free tax forms 2012 For information on this exclusion, see Publication 523. Free tax forms 2012 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. Free tax forms 2012 See Postponement of Gain, later. Free tax forms 2012 Table 1-3. Free tax forms 2012 Worksheet for Condemnations Part 1. Free tax forms 2012 Gain from severance damages. Free tax forms 2012 If you did not receive severance damages, skip Part 1 and go to Part 2. Free tax forms 2012 1. Free tax forms 2012 Enter gross severance damages received 2. Free tax forms 2012 Enter your expenses in getting severance damages 3. Free tax forms 2012 Subtract line 2 from line 1. Free tax forms 2012 If less than zero, enter -0- 4. Free tax forms 2012 Enter any special assessment on remaining property taken out of your award 5. Free tax forms 2012 Net severance damages. Free tax forms 2012 Subtract line 4 from line 3. Free tax forms 2012 If less than zero, enter -0- 6. Free tax forms 2012 Enter the adjusted basis of the remaining property 7. Free tax forms 2012 Gain from severance damages. Free tax forms 2012 Subtract line 6 from line 5. Free tax forms 2012 If less than zero, enter -0- 8. Free tax forms 2012 Refigured adjusted basis of the remaining property. Free tax forms 2012 Subtract line 5 from line 6. Free tax forms 2012 If less than zero, enter -0- Part 2. Free tax forms 2012 Gain or loss from condemnation award. Free tax forms 2012 9. Free tax forms 2012 Enter the gross condemnation award received 10. Free tax forms 2012 Enter your expenses in getting the condemnation award 11. Free tax forms 2012 If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Free tax forms 2012 If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Free tax forms 2012 Otherwise, enter -0- 12. Free tax forms 2012 Add lines 10 and 11 13. Free tax forms 2012 Net condemnation award. Free tax forms 2012 Subtract line 12 from line 9 14. Free tax forms 2012 Enter the adjusted basis of the condemned property 15. Free tax forms 2012 Gain from condemnation award. Free tax forms 2012 If line 14 is more than line 13, enter -0-. Free tax forms 2012 Otherwise, subtract line 14 from line 13 and skip line 16 16. Free tax forms 2012 Loss from condemnation award. Free tax forms 2012 Subtract line 13 from line 14 (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Free tax forms 2012 ) Part 3. Free tax forms 2012 Postponed gain from condemnation. Free tax forms 2012 (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. Free tax forms 2012 ) 17. Free tax forms 2012 If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Free tax forms 2012 Otherwise, enter -0- 18. Free tax forms 2012 If line 15 is more than zero, enter the amount from line 13. Free tax forms 2012 Otherwise, enter -0- 19. Free tax forms 2012 Add lines 17 and 18. Free tax forms 2012 If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result 20. Free tax forms 2012 Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property 21. Free tax forms 2012 Subtract line 20 from line 19. Free tax forms 2012 If less than zero, enter -0- 22. Free tax forms 2012 If you completed Part 1, add lines 7 and 15. Free tax forms 2012 Otherwise, enter the amount from line 15. Free tax forms 2012 If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result 23. Free tax forms 2012 Recognized gain. Free tax forms 2012 Enter the smaller of line 21 or line 22. Free tax forms 2012 24. Free tax forms 2012 Postponed gain. Free tax forms 2012 Subtract line 23 from line 22. Free tax forms 2012 If less than zero, enter -0- Condemnation award. Free tax forms 2012 A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Free tax forms 2012 The award is also the amount you are paid for the sale of your property under threat of condemnation. Free tax forms 2012 Payment of your debts. Free tax forms 2012 Amounts taken out of the award to pay your debts are considered paid to you. Free tax forms 2012 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. Free tax forms 2012 Example. Free tax forms 2012 The state condemned your property for public use. Free tax forms 2012 The award was set at $200,000. Free tax forms 2012 The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Free tax forms 2012 You are considered to have received the entire $200,000 as a condemnation award. Free tax forms 2012 Interest on award. Free tax forms 2012 If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Free tax forms 2012 You must report the interest separately as ordinary income. Free tax forms 2012 Payments to relocate. Free tax forms 2012 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. Free tax forms 2012 Do not include them in your income. Free tax forms 2012 Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Free tax forms 2012 Net condemnation award. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 This is discussed later under Special assessment taken out of award. Free tax forms 2012 Severance damages. Free tax forms 2012 Severance damages are not part of the award paid for the property condemned. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 The contracting parties should agree on the specific amount of severance damages in writing. Free tax forms 2012 If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Free tax forms 2012 You cannot make a completely new allocation of the total award after the transaction is completed. Free tax forms 2012 However, you can show how much of the award both parties intended for severance damages. Free tax forms 2012 The severance damages part of the award is determined from all the facts and circumstances. Free tax forms 2012 Example. Free tax forms 2012 You sold part of your property to the state under threat of condemnation. Free tax forms 2012 The contract you and the condemning authority signed showed only the total purchase price. Free tax forms 2012 It did not specify a fixed sum for severance damages. Free tax forms 2012 However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Free tax forms 2012 You may treat this part as severance damages. Free tax forms 2012 Treatment of severance damages. Free tax forms 2012 Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Free tax forms 2012 Use them to reduce the basis of the remaining property. Free tax forms 2012 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. Free tax forms 2012 If your net severance damages are more than the basis of your retained property, you have a gain. Free tax forms 2012 You may be able to postpone reporting the gain. Free tax forms 2012 See Postponement of Gain, later. Free tax forms 2012 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. Free tax forms 2012 Net severance damages. Free tax forms 2012 To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Free tax forms 2012 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. Free tax forms 2012 The balance is your net severance damages. Free tax forms 2012 Expenses of obtaining a condemnation award and severance damages. Free tax forms 2012 Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Free tax forms 2012 Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Free tax forms 2012 If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Free tax forms 2012 Example. Free tax forms 2012 You receive a condemnation award and severance damages. Free tax forms 2012 One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Free tax forms 2012 You had legal expenses for the entire condemnation proceeding. Free tax forms 2012 You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Free tax forms 2012 You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Free tax forms 2012 Special assessment retained out of award. Free tax forms 2012 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. Free tax forms 2012 An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Free tax forms 2012 Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Free tax forms 2012 To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Free tax forms 2012 Example. Free tax forms 2012 To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Free tax forms 2012 You were awarded $5,000 for this and spent $300 to get the award. Free tax forms 2012 Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Free tax forms 2012 The city then paid you only $4,300. Free tax forms 2012 Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Free tax forms 2012 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). Free tax forms 2012 The net award would not change, even if you later paid the assessment from the amount you received. Free tax forms 2012 Severance damages received. Free tax forms 2012 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. Free tax forms 2012 Any balance of the special assessment is used to reduce the condemnation award. Free tax forms 2012 Example. Free tax forms 2012 You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Free tax forms 2012 You spent $300 to obtain the severance damages. Free tax forms 2012 A special assessment of $800 was retained out of the award. Free tax forms 2012 The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Free tax forms 2012 Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Free tax forms 2012 Part business or rental. Free tax forms 2012 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. Free tax forms 2012 Figure your gain or loss separately because gain or loss on each part may be treated differently. Free tax forms 2012 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. Free tax forms 2012 Example. Free tax forms 2012 You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Free tax forms 2012 You rented half the building and lived in the other half. Free tax forms 2012 You paid $25,000 for the building and spent an additional $1,000 for a new roof. Free tax forms 2012 You claimed allowable depreciation of $4,600 on the rental half. Free tax forms 2012 You spent $200 in legal expenses to obtain the condemnation award. Free tax forms 2012 Figure your gain or loss as follows. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Your basis for the new property is the same as your basis for the old. Free tax forms 2012 Money or unlike property received. Free tax forms 2012 You ordinarily must report the gain if you receive money or unlike property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 See Controlling interest in a corporation, later. Free tax forms 2012 To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Free tax forms 2012 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. Free tax forms 2012 The basis of the replacement property is its cost, reduced by the postponed gain. Free tax forms 2012 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. Free tax forms 2012 See Controlling interest in a corporation, later. Free tax forms 2012 You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Free tax forms 2012 Postponing gain on severance damages. Free tax forms 2012 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. Free tax forms 2012 See Treatment of severance damages, earlier. Free tax forms 2012 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). Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Free tax forms 2012 Postponing gain on the sale of related property. Free tax forms 2012 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. Free tax forms 2012 You must meet the requirements explained earlier under Related property voluntarily sold. Free tax forms 2012 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). Free tax forms 2012 Buying replacement property from a related person. Free tax forms 2012 Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Free tax forms 2012 For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Free tax forms 2012 This rule applies to the following taxpayers. Free tax forms 2012 C corporations. Free tax forms 2012 Partnerships in which more than 50% of the capital or profits interest is owned by C corporations. Free tax forms 2012 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. Free tax forms 2012 For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Free tax forms 2012 If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Free tax forms 2012 If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Free tax forms 2012 Exception. Free tax forms 2012 This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Free tax forms 2012 Advance payment. Free tax forms 2012 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). Free tax forms 2012 Replacement property. Free tax forms 2012 To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Free tax forms 2012 You do not have to use the actual funds from the condemnation award to acquire the replacement property. Free tax forms 2012 Property you acquire by gift or inheritance does not qualify as replacement property. Free tax forms 2012 Similar or related in service or use. Free tax forms 2012 Your replacement property must be similar or related in service or use to the property it replaces. Free tax forms 2012 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. Free tax forms 2012 For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Free tax forms 2012 Owner-user. Free tax forms 2012 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. Free tax forms 2012 Example. Free tax forms 2012 Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Free tax forms 2012 Your replacement property is not similar or related in service or use to the condemned property. Free tax forms 2012 To be similar or related in service or use, your replacement property must also be used by you as your home. Free tax forms 2012 Owner-investor. Free tax forms 2012 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. Free tax forms 2012 You decide this by determining all the following information. Free tax forms 2012 Whether the properties are of similar service to you. Free tax forms 2012 The nature of the business risks connected with the properties. Free tax forms 2012 What the properties demand of you in the way of management, service, and relations to your tenants. Free tax forms 2012 Example. Free tax forms 2012 You owned land and a building you rented to a manufacturing company. Free tax forms 2012 The building was condemned. Free tax forms 2012 During the replacement period, you had a new building built on other land you already owned. Free tax forms 2012 You rented out the new building for use as a wholesale grocery warehouse. Free tax forms 2012 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. Free tax forms 2012 Your management activities. Free tax forms 2012 The amount and kind of services you provide to your tenants. Free tax forms 2012 The nature of your business risks connected with the properties. Free tax forms 2012 Leasehold replaced with fee simple property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 A leasehold is property held under a lease, usually for a term of years. Free tax forms 2012 Outdoor advertising display replaced with real property. Free tax forms 2012 You can elect to treat an outdoor advertising display as real property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 You can make this election only if you did not claim a section 179 deduction for the display. Free tax forms 2012 You cannot cancel this election unless you get the consent of the IRS. Free tax forms 2012 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. Free tax forms 2012 Substituting replacement property. Free tax forms 2012 Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Free tax forms 2012 But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Free tax forms 2012 Controlling interest in a corporation. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Basis adjustment to corporation's property. Free tax forms 2012 The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Free tax forms 2012 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). Free tax forms 2012 Allocate this reduction to the following classes of property in the order shown below. Free tax forms 2012 Property that is similar or related in service or use to the condemned property. Free tax forms 2012 Depreciable property not reduced in (1). Free tax forms 2012 All other property. Free tax forms 2012 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. Free tax forms 2012 The reduced basis of any single property cannot be less than zero. Free tax forms 2012 Main home replaced. Free tax forms 2012 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. Free tax forms 2012 The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Free tax forms 2012 You must reduce the basis of your replacement property by the postponed gain. Free tax forms 2012 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. Free tax forms 2012 Example. Free tax forms 2012 City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Free tax forms 2012 The city paid you a condemnation award of $400,000. Free tax forms 2012 Your adjusted basis in the property was $80,000. Free tax forms 2012 You realize a gain of $320,000 ($400,000 − $80,000). Free tax forms 2012 You purchased a new home for $100,000. Free tax forms 2012 You can exclude $250,000 of the realized gain from your gross income. Free tax forms 2012 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). Free tax forms 2012 You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Free tax forms 2012 The remaining $20,000 of realized gain is postponed. Free tax forms 2012 Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Free tax forms 2012 Replacement period. Free tax forms 2012 To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Free tax forms 2012 This is the replacement period. Free tax forms 2012 The replacement period for a condemnation begins on the earlier of the following dates. Free tax forms 2012 The date on which you disposed of the condemned property. Free tax forms 2012 The date on which the threat of condemnation began. Free tax forms 2012 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. Free tax forms 2012 However, see the exceptions below. Free tax forms 2012 Three-year replacement period for certain property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Five-year replacement period for certain property. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 Extended replacement period for taxpayers affected by other federally declared disasters. Free tax forms 2012 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. Free tax forms 2012 For more information visit www. Free tax forms 2012 irs. Free tax forms 2012 gov/uac/Tax-Relief-in-Disaster-Situations. Free tax forms 2012 Weather-related sales of livestock in an area eligible for federal assistance. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 See Notice 2006-82. Free tax forms 2012 You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Free tax forms 2012 irs. Free tax forms 2012 gov/irb/2006-39_IRB/ar13. Free tax forms 2012 html. Free tax forms 2012 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. Free tax forms 2012 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. Free tax forms 2012 You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Free tax forms 2012 irs. Free tax forms 2012 gov/irb/2013-45_IRB/ar04. Free tax forms 2012 html. Free tax forms 2012 The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Free tax forms 2012 Determining when gain is realized. Free tax forms 2012 If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Free tax forms 2012 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. Free tax forms 2012 This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Free tax forms 2012 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. Free tax forms 2012 For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Free tax forms 2012 All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Free tax forms 2012 All or part of the award is actually or constructively received. Free tax forms 2012 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. Free tax forms 2012 Replacement property bought before the condemnation. Free tax forms 2012 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. Free tax forms 2012 Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Free tax forms 2012 Example. Free tax forms 2012 On April 3, 2012, city authorities notified you that your property would be condemned. Free tax forms 2012 On June 5, 2012, you acquired property to replace the property to be condemned. Free tax forms 2012 You still had the new property when the city took possession of your old property on September 4, 2013. Free tax forms 2012 You have made a replacement within the replacement period. Free tax forms 2012 Extension. Free tax forms 2012 You can request an extension of the replacement period from the IRS director for your area. Free tax forms 2012 You should apply before the end of the replacement period. Free tax forms 2012 Your request should explain in detail why you need an extension. Free tax forms 2012 The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Free tax forms 2012 An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Free tax forms 2012 Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Free tax forms 2012 Extensions are usually limited to a period of 1 year or less. Free tax forms 2012 The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Free tax forms 2012 If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri	Skip Navigation
Free tax forms 2012 3. Free tax forms 2012 Environmental Taxes Table of Contents Oil Spill Liability Tax ODCs Imported Taxable Products Floor Stocks Tax Environmental taxes are imposed on crude oil and petroleum products (oil spill liability), the sale or use of ozone-depleting chemicals (ODCs), and imported products containing or manufactured with ODCs. Free tax forms 2012 In addition, a floor stocks tax is imposed on ODCs held on January 1 by any person (other than the manufacturer or importer of the ODCs) for sale or for use in further manufacture. Free tax forms 2012 Figure the environmental tax on Form 6627. Free tax forms 2012 Enter the tax on the appropriate lines of Form 720 and attach Form 6627 to Form 720. Free tax forms 2012 For environmental tax purposes, United States includes the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, the Commonwealth of the Northern Mariana Islands, the Trust Territory of the Pacific Islands, the continental shelf areas (applying the principles of section 638), and foreign trade zones. Free tax forms 2012 No one is exempt from the environmental taxes, including the federal government, state and local governments, Indian tribal governments, and nonprofit educational organizations. Free tax forms 2012 Oil Spill Liability Tax The oil spill liability tax is reported on Form 6627, Environmental Taxes, and Form 720, Quarterly Federal Excise Tax Return (IRS Nos. Free tax forms 2012 18 and 21). Free tax forms 2012 The oil spill liability tax rate is $. Free tax forms 2012 08 per barrel and generally applies to crude oil received at a U. Free tax forms 2012 S. Free tax forms 2012 refinery and to petroleum products entered into the United States for consumption, use, or warehousing. Free tax forms 2012 The tax also applies to certain uses and the exportation of domestic crude oil. Free tax forms 2012 Crude oil includes crude oil condensates and natural gasoline. Free tax forms 2012 Petroleum products include crude oil, refined and residual oil, and other liquid hydrocarbon refinery products. Free tax forms 2012 Crude oil. Free tax forms 2012 Tax is imposed on crude oil when it is received at a United Sates refinery. Free tax forms 2012 The operator of the refinery is liable for the tax. Free tax forms 2012 Tax is imposed on domestic crude oil used or exported before it is received at a United States refinery. Free tax forms 2012 However, the use of crude oil for extracting oil or natural gas on the premises where such crude oil was produced is not taxable. Free tax forms 2012 The user or exporter is liable for the tax. Free tax forms 2012 Imported petroleum products. Free tax forms 2012 Tax is imposed on petroleum products when they enter the United States for consumption, use, or warehousing. Free tax forms 2012 The person entering the petroleum product into the country is liable for the tax, including the tax on imported crude oil, even if it is subsequently received at a U. Free tax forms 2012 S. Free tax forms 2012 refinery. Free tax forms 2012 Tax is imposed only once on any imported petroleum product. Free tax forms 2012 Thus, the operator of a U. Free tax forms 2012 S. Free tax forms 2012 refinery that receives imported crude oil must establish that the petroleum tax has already been imposed on such crude oil in order not to be liable for the tax. Free tax forms 2012 ODCs For a list of the taxable ODCs and tax rates, see the Form 6627 instructions. Free tax forms 2012 Taxable event. Free tax forms 2012 Tax is imposed on an ODC when it is first used or sold by its manufacturer or importer. Free tax forms 2012 The manufacturer or importer is liable for the tax. Free tax forms 2012 Use of ODCs. Free tax forms 2012 You use an ODC if you put it into service in a trade or business or for the production of income. Free tax forms 2012 Also, an ODC is used if you use it in the making of an article, including incorporation into the article, chemical transformation, or release into the air. Free tax forms 2012 The loss, destruction, packaging, repackaging, or warehousing of ODCs is not a use of the ODC. Free tax forms 2012 The creation of a mixture containing an ODC is treated as a taxable use of the ODC contained in the mixture. Free tax forms 2012 An ODC is contained in a mixture only if the chemical identity of the ODC is not changed. Free tax forms 2012 Generally, tax is imposed when the mixture is created and not on its sale or use. Free tax forms 2012 However, you can choose to have the tax imposed on its sale or use by checking the appropriate box on Form 6627. Free tax forms 2012 You can revoke this choice only with IRS consent. Free tax forms 2012 The creation of a mixture for export or for use as a feedstock is not a taxable use of the ODCs contained in the mixture. Free tax forms 2012 Exceptions. Free tax forms 2012 The following may be exempt from the tax on ODCs. Free tax forms 2012 Metered-dose inhalers. Free tax forms 2012 Recycled ODCs. Free tax forms 2012 Exported ODCs. Free tax forms 2012 ODCs used as feedstock. Free tax forms 2012 Metered-dose inhalers. Free tax forms 2012 There is no tax on ODCs used or sold for use as propellants in metered-dose inhalers. Free tax forms 2012 For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. Free tax forms 2012 The certificate must be in substantially the form as the sample certificate set forth in Regulations section 52. Free tax forms 2012 4682-2(d)(5). Free tax forms 2012 The certificate may be included as part of the sales documentation. Free tax forms 2012 Keep the certificate with your records. Free tax forms 2012 Recycled ODCs. Free tax forms 2012 There is no tax on any ODC diverted or recovered in the United States as part of a recycling process (and not as part of the original manufacturing or production process). Free tax forms 2012 There is no tax on recycled Halon-1301 or recycled Halon-2402 imported from a country that has signed the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol). Free tax forms 2012 The Montreal Protocol is administered by the United Nations (U. Free tax forms 2012 N. Free tax forms 2012 ). Free tax forms 2012 To determine if a country has signed the Montreal Protocol, contact the U. Free tax forms 2012 N. Free tax forms 2012 The website is untreaty. Free tax forms 2012 un. Free tax forms 2012 org. Free tax forms 2012 Exported ODCs. Free tax forms 2012 Generally, there is no tax on ODCs sold for export if certain requirements are met. Free tax forms 2012 For a sale to be nontaxable, you and the purchaser must be registered. Free tax forms 2012 See Form 637, Application for Registration (for Certain Excise Tax Activities). Free tax forms 2012 Also, you must obtain from the purchaser an exemption certificate that you rely on in good faith. Free tax forms 2012 Keep the certificate with your records. Free tax forms 2012 The certificate must be in substantially the form as the sample certificate set forth in Regulations section 52. Free tax forms 2012 4682-5(d)(3). Free tax forms 2012 The tax benefit of this exemption is limited. Free tax forms 2012 For more information, see Regulations section 52. Free tax forms 2012 4682-5. Free tax forms 2012 ODCs used as feedstock. Free tax forms 2012 There is no tax on ODCs sold for use or used as a feedstock. Free tax forms 2012 An ODC is used as a feedstock only if the ODC is entirely consumed in the manufacture of another chemical. Free tax forms 2012 The transformation of an ODC into one or more new compounds qualifies as use as a feedstock, but use of an ODC in a mixture does not qualify. Free tax forms 2012 For a sale to be nontaxable, you must obtain from the purchaser an exemption certificate that you rely on in good faith. Free tax forms 2012 The certificate must be in substantially the form as the sample certificate set forth in Regulations section 52. Free tax forms 2012 4682-2(d)(2). Free tax forms 2012 Keep the certificate with your records. Free tax forms 2012 Credits or refunds. Free tax forms 2012 A credit or refund (without interest) of tax paid on ODCs may be claimed if a taxed ODC is: Used as a propellant in a metered-dose inhaler (the person who used the ODC as a propellant may file a claim), Exported (the manufacturer may file a claim), or Used as a feedstock (the person who used the ODC may file a claim). Free tax forms 2012 For information on how to file for credits or refunds, see the Instructions for Form 720 or Schedule 6 (Form 8849). Free tax forms 2012 Conditions to allowance for ODCs exported. Free tax forms 2012 To claim a credit or refund for ODCs that are exported, you must have repaid or agreed to repay the tax to the exporter, or obtained the exporter's written consent to allowance of the credit or refund. Free tax forms 2012 You must also have the evidence required by the EPA as proof that the ODCs were exported. Free tax forms 2012 Imported Taxable Products An imported product containing or manufactured with ODCs is subject to tax if it is entered into the United States for consumption, use, or warehousing and is listed in the Imported Products Table. Free tax forms 2012 The Imported Products Table is listed in Regulations section 52. Free tax forms 2012 4682-3(f)(6). Free tax forms 2012 The tax is based on the weight of the ODCs used in the manufacture of the product. Free tax forms 2012 Use the following methods to figure the ODC weight. Free tax forms 2012 The actual (exact) weight of each ODC used as a material in manufacturing the product. Free tax forms 2012 If the actual weight cannot be determined, the ODC weight listed for the product in the Imported Products Table. Free tax forms 2012 However, if you cannot determine the actual weight and the table does not list an ODC weight for the product, the rate of tax is 1% of the entry value of the product. Free tax forms 2012 Taxable event. Free tax forms 2012 Tax is imposed on an imported taxable product when the product is first sold or used by its importer. Free tax forms 2012 The importer is liable for the tax. Free tax forms 2012 Use of imported products. Free tax forms 2012 You use an imported product if you put it into service in a trade or business or for the production of income or use it in the making of an article, including incorporation into the article. Free tax forms 2012 The loss, destruction, packaging, repackaging, warehousing, or repair of an imported product is not a use of that product. Free tax forms 2012 Entry as use. Free tax forms 2012 The importer may choose to treat the entry of a product into the United States as the use of the product. Free tax forms 2012 Tax is imposed on the date of entry instead of when the product is sold or used. Free tax forms 2012 The choice applies to all imported taxable products that you own and have not used when you make the choice and all later entries. Free tax forms 2012 Make the choice by checking the box in Part II of Form 6627. Free tax forms 2012 The choice is effective as of the beginning of the calendar quarter to which the Form 6627 applies. Free tax forms 2012 You can revoke this choice only with IRS consent. Free tax forms 2012 Sale of article incorporating imported product. Free tax forms 2012 The importer may treat the sale of an article manufactured or assembled in the United States as the first sale or use of an imported taxable product incorporated in that article if both the following apply. Free tax forms 2012 The importer has consistently treated the sale of similar items as the first sale or use of similar taxable imported products. Free tax forms 2012 The importer has not chosen to treat entry into the United States as use of the product. Free tax forms 2012 Imported products table. Free tax forms 2012 The table lists all the products that are subject to the tax on imported taxable products and specifies the ODC weight (discussed later) of each product. Free tax forms 2012 Each listing in the table identifies a product by name and includes only products that are described by that name. Free tax forms 2012 Most listings identify a product by both name and Harmonized Tariff Schedule (HTS) heading. Free tax forms 2012 In those cases, a product is included in that listing only if the product is described by that name and the rate of duty on the product is determined by reference to that HTS heading. Free tax forms 2012 A product is included in the listing even if it is manufactured with or contains a different ODC than the one specified in the table. Free tax forms 2012 Part II of the table lists electronic items that are not included within any other list in the table. Free tax forms 2012 An imported product is included in this list only if the product meets one of the following tests. Free tax forms 2012 It is an electronic component whose operation involves the use of nonmechanical amplification or switching devices such as tubes, transistors, and integrated circuits. Free tax forms 2012 It contains components described in (1), which account for more than 15% of the cost of the product. Free tax forms 2012 These components do not include passive electrical devices, such as resistors and capacitors. Free tax forms 2012 Items such as screws, nuts, bolts, plastic parts, and similar specially fabricated parts that may be used to construct an electronic item are not themselves included in the listing for electronic items. Free tax forms 2012 Rules for listing products. Free tax forms 2012 Products are listed in the table according to the following rules. Free tax forms 2012 A product is listed in Part I of the table if it is a mixture containing ODCs. Free tax forms 2012 A product is listed in Part II of the table if the Commissioner has determined that the ODCs used as materials in the manufacture of the product under the predominant method are used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components. Free tax forms 2012 A product is listed in Part III of the table if the Commissioner has determined that the product meets both the following tests. Free tax forms 2012 It is not an imported taxable product. Free tax forms 2012 It would otherwise be included within a list in Part II of the table. Free tax forms 2012 For example, floppy disk drive units are listed in Part III because they are not imported taxable products and would have been included in the Part II list for electronic items not specifically identified, but for their listing in Part III. Free tax forms 2012 ODC weight. Free tax forms 2012 The Table ODC weight of a product is the weight, determined by the Commissioner, of the ODCs used as materials in the manufacture of the product under the predominant method of manufacturing. Free tax forms 2012 The ODC weight is listed in Part II in pounds per single unit of product unless otherwise specified. Free tax forms 2012 Modifying the table. Free tax forms 2012 A manufacturer or importer of a product may request the IRS add a product and its ODC weight to the table. Free tax forms 2012 They also may request the IRS remove a product from the table, or change or specify the ODC weight of a product. Free tax forms 2012 To request a modification, see Regulations section 52. Free tax forms 2012 4682-3(g) for the mailing address and information that must be included in the request. Free tax forms 2012 Floor Stocks Tax Tax is imposed on any ODC held (other than by the manufacturer or importer of the ODC) on January 1 for sale or use in further manufacturing. Free tax forms 2012 The person holding title (as determined under local law) to the ODC is liable for the tax, whether or not delivery has been made. Free tax forms 2012 These chemicals are taxable without regard to the type or size of storage container in which the ODCs are held. Free tax forms 2012 The tax may apply to an ODC whether it is in a 14-ounce can or a 30-pound tank. Free tax forms 2012 You are liable for the floor stocks tax if you hold any of the following on January 1. Free tax forms 2012 At least 400 pounds of ODCs other than halons or methyl chloroform, At least 50 pounds of halons, or At least 1,000 pounds of methyl chloroform. Free tax forms 2012 If you are liable for the tax, prepare an inventory on January 1 of the taxable ODCs held on that date for sale or for use in further manufacturing. Free tax forms 2012 You must pay this floor stocks tax by June 30 of each year. Free tax forms 2012 Report the tax on Form 6627 and Part II of Form 720 for the second calendar quarter. Free tax forms 2012 For the tax rates, see the Form 6627 instructions. Free tax forms 2012 ODCs not subject to floor stocks tax. Free tax forms 2012 The floor stocks tax is not imposed on any of the following ODCs. Free tax forms 2012 ODCs mixed with other ingredients that contribute to achieving the purpose for which the mixture will be used, unless the mixture contains only ODCs and one or more stabilizers. Free tax forms 2012 ODCs contained in a manufactured article in which the ODCs will be used for their intended purpose without being released from the article. Free tax forms 2012 ODCs that have been reclaimed or recycled. Free tax forms 2012 ODCs sold in a qualifying sale for: Use as a feedstock, Export, or Use as a propellant in a metered-dose inhaler. Free tax forms 2012 Prev Up Next Home More Online Publications