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1040ez For 2011

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1040ez For 2011

1040ez for 2011 Publication 54 - Additional Material Questions and AnswersThis section answers tax- related questions commonly asked by taxpayers living abroad. 1040ez for 2011 1. 1040ez for 2011 Filing Requirements—Where, When, and How . 1040ez for 2011 1) When are U. 1040ez for 2011 S. 1040ez for 2011 income tax returns due? . 1040ez for 2011 2) I am going abroad this year and expect to qualify for the foreign earned income exclusion. 1040ez for 2011 How can I secure an extension of time to file my return, when should I file my return, and what forms are required? . 1040ez for 2011 3) My entire income qualifies for the foreign earned income exclusion. 1040ez for 2011 Must I file a tax return? . 1040ez for 2011 4) I was sent abroad by my company in November of last year. 1040ez for 2011 I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. 1040ez for 2011 However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return? . 1040ez for 2011 5) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen and have no taxable income from the United States, but I have substantial income from a foreign source. 1040ez for 2011 Am I required to file a U. 1040ez for 2011 S. 1040ez for 2011 income tax return? . 1040ez for 2011 6) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen who has retired, and I expect to remain in a foreign country. 1040ez for 2011 Do I have any further U. 1040ez for 2011 S. 1040ez for 2011 tax obligations? . 1040ez for 2011 7) I have been a bona fide resident of a foreign country for over 5 years. 1040ez for 2011 Is it necessary for me to pay estimated tax? . 1040ez for 2011 8) Will a check payable in foreign currency be acceptable in payment of my U. 1040ez for 2011 S. 1040ez for 2011 tax? . 1040ez for 2011 9) I have met the test for physical presence in a foreign country and am filing returns for 2 years. 1040ez for 2011 Must I file a separate Form 2555 (or Form 2555-EZ) with each return? . 1040ez for 2011 10) Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return? . 1040ez for 2011 11) On Form 2350, Application for Extension of Time To File U. 1040ez for 2011 S. 1040ez for 2011 Income Tax Return, I stated that I would qualify for the foreign earned income exclusion under the physical presence test. 1040ez for 2011 If I qualify under the bona fide residence test, can I file my return on that basis? . 1040ez for 2011 12) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen who worked in the United States for 6 months last year. 1040ez for 2011 I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. 1040ez for 2011 Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year? . 1040ez for 2011 13) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen. 1040ez for 2011 I have lived abroad for a number of years and recently realized that I should have been filing U. 1040ez for 2011 S. 1040ez for 2011 income tax returns. 1040ez for 2011 How do I correct this oversight in not having filed returns for these years? . 1040ez for 2011 14) In 2008, I qualified to exclude my foreign earned income, but I did not claim this exclusion on the return I filed in 2009. 1040ez for 2011 I paid all outstanding taxes with the return. 1040ez for 2011 Can I file a claim for refund now? . 1040ez for 2011 1) When are U. 1040ez for 2011 S. 1040ez for 2011 income tax returns due? Generally, for calendar year taxpayers, U. 1040ez for 2011 S. 1040ez for 2011 income tax returns are due on April 15. 1040ez for 2011 If you are a U. 1040ez for 2011 S. 1040ez for 2011 citizen or resident and both your tax home and your abode are outside the United States and Puerto Rico on the regular due date, an automatic extension is granted to June 15 for filing the return. 1040ez for 2011 Interest will be charged on any tax due, as shown on the return, from April 15. 1040ez for 2011 a) You should file Form 2350 by the due date of your return to request an extension of time to file. 1040ez for 2011 Form 2350 is a special form for those U. 1040ez for 2011 S. 1040ez for 2011 citizens or residents abroad who expect to qualify for the foreign earned income exclusion or the housing exclusion or deduction under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. 1040ez for 2011 b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. 1040ez for 2011 c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ). 1040ez for 2011 Generally, yes. 1040ez for 2011 Every U. 1040ez for 2011 S. 1040ez for 2011 citizen or resident who receives income must file a U. 1040ez for 2011 S. 1040ez for 2011 income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. 1040ez for 2011 The income levels for filing purposes are discussed under Filing Requirements in chapter 1. 1040ez for 2011 If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez for 2011 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez for 2011 You must report your worldwide income on the return. 1040ez for 2011 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax. 1040ez for 2011 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez for 2011 Yes. 1040ez for 2011 All U. 1040ez for 2011 S. 1040ez for 2011 citizens and resident aliens are subject to U. 1040ez for 2011 S. 1040ez for 2011 tax on their worldwide income. 1040ez for 2011 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax liability for the foreign taxes paid. 1040ez for 2011 Form 1116 is used to figure the allowable credit. 1040ez for 2011 Your U. 1040ez for 2011 S. 1040ez for 2011 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez for 2011 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez for 2011 ) U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 2) I am going abroad this year and expect to qualify for the foreign earned income exclusion. 1040ez for 2011 How can I secure an extension of time to file my return, when should I file my return, and what forms are required? a) You should file Form 2350 by the due date of your return to request an extension of time to file. 1040ez for 2011 Form 2350 is a special form for those U. 1040ez for 2011 S. 1040ez for 2011 citizens or residents abroad who expect to qualify for the foreign earned income exclusion or the housing exclusion or deduction under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. 1040ez for 2011 b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. 1040ez for 2011 c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ). 1040ez for 2011 Generally, yes. 1040ez for 2011 Every U. 1040ez for 2011 S. 1040ez for 2011 citizen or resident who receives income must file a U. 1040ez for 2011 S. 1040ez for 2011 income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. 1040ez for 2011 The income levels for filing purposes are discussed under Filing Requirements in chapter 1. 1040ez for 2011 If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez for 2011 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez for 2011 You must report your worldwide income on the return. 1040ez for 2011 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax. 1040ez for 2011 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez for 2011 Yes. 1040ez for 2011 All U. 1040ez for 2011 S. 1040ez for 2011 citizens and resident aliens are subject to U. 1040ez for 2011 S. 1040ez for 2011 tax on their worldwide income. 1040ez for 2011 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax liability for the foreign taxes paid. 1040ez for 2011 Form 1116 is used to figure the allowable credit. 1040ez for 2011 Your U. 1040ez for 2011 S. 1040ez for 2011 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez for 2011 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez for 2011 ) U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 3) My entire income qualifies for the foreign earned income exclusion. 1040ez for 2011 Must I file a tax return? Generally, yes. 1040ez for 2011 Every U. 1040ez for 2011 S. 1040ez for 2011 citizen or resident who receives income must file a U. 1040ez for 2011 S. 1040ez for 2011 income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. 1040ez for 2011 The income levels for filing purposes are discussed under Filing Requirements in chapter 1. 1040ez for 2011 If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez for 2011 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez for 2011 You must report your worldwide income on the return. 1040ez for 2011 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax. 1040ez for 2011 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez for 2011 Yes. 1040ez for 2011 All U. 1040ez for 2011 S. 1040ez for 2011 citizens and resident aliens are subject to U. 1040ez for 2011 S. 1040ez for 2011 tax on their worldwide income. 1040ez for 2011 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax liability for the foreign taxes paid. 1040ez for 2011 Form 1116 is used to figure the allowable credit. 1040ez for 2011 Your U. 1040ez for 2011 S. 1040ez for 2011 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez for 2011 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez for 2011 ) U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 4) I was sent abroad by my company in November of last year. 1040ez for 2011 I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. 1040ez for 2011 However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return? If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez for 2011 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez for 2011 You must report your worldwide income on the return. 1040ez for 2011 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax. 1040ez for 2011 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez for 2011 Yes. 1040ez for 2011 All U. 1040ez for 2011 S. 1040ez for 2011 citizens and resident aliens are subject to U. 1040ez for 2011 S. 1040ez for 2011 tax on their worldwide income. 1040ez for 2011 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax liability for the foreign taxes paid. 1040ez for 2011 Form 1116 is used to figure the allowable credit. 1040ez for 2011 Your U. 1040ez for 2011 S. 1040ez for 2011 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez for 2011 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez for 2011 ) U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 5) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen and have no taxable income from the United States, but I have substantial income from a foreign source. 1040ez for 2011 Am I required to file a U. 1040ez for 2011 S. 1040ez for 2011 income tax return? Yes. 1040ez for 2011 All U. 1040ez for 2011 S. 1040ez for 2011 citizens and resident aliens are subject to U. 1040ez for 2011 S. 1040ez for 2011 tax on their worldwide income. 1040ez for 2011 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez for 2011 S. 1040ez for 2011 income tax liability for the foreign taxes paid. 1040ez for 2011 Form 1116 is used to figure the allowable credit. 1040ez for 2011 Your U. 1040ez for 2011 S. 1040ez for 2011 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez for 2011 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez for 2011 ) U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 6) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen who has retired, and I expect to remain in a foreign country. 1040ez for 2011 Do I have any further U. 1040ez for 2011 S. 1040ez for 2011 tax obligations? Your U. 1040ez for 2011 S. 1040ez for 2011 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez for 2011 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez for 2011 ) U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 7) I have been a bona fide resident of a foreign country for over 5 years. 1040ez for 2011 Is it necessary for me to pay estimated tax? U. 1040ez for 2011 S. 1040ez for 2011 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez for 2011 See the discussion under Estimated Tax in chapter 1. 1040ez for 2011 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez for 2011 S. 1040ez for 2011 taxation. 1040ez for 2011 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez for 2011 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez for 2011 Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 8) Will a check payable in foreign currency be acceptable in payment of my U. 1040ez for 2011 S. 1040ez for 2011 tax? Generally, only U. 1040ez for 2011 S. 1040ez for 2011 currency is acceptable for payment of income tax. 1040ez for 2011 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez for 2011 Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 9) I have met the test for physical presence in a foreign country and am filing returns for 2 years. 1040ez for 2011 Must I file a separate Form 2555 (or Form 2555-EZ) with each return? Yes. 1040ez for 2011 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez for 2011 No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 10) Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return? No. 1040ez for 2011 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez for 2011 Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 11) On Form 2350, Application for Extension of Time To File U. 1040ez for 2011 S. 1040ez for 2011 Income Tax Return, I stated that I would qualify for the foreign earned income exclusion under the physical presence test. 1040ez for 2011 If I qualify under the bona fide residence test, can I file my return on that basis? Yes. 1040ez for 2011 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez for 2011 You are not bound by the test indicated in the application for extension of time. 1040ez for 2011 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez for 2011 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez for 2011 No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 12) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen who worked in the United States for 6 months last year. 1040ez for 2011 I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. 1040ez for 2011 Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year? No. 1040ez for 2011 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez for 2011 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez for 2011 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez for 2011 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez for 2011 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez for 2011 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez for 2011 File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 13) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen. 1040ez for 2011 I have lived abroad for a number of years and recently realized that I should have been filing U. 1040ez for 2011 S. 1040ez for 2011 income tax returns. 1040ez for 2011 How do I correct this oversight in not having filed returns for these years? File the late returns as soon as possible, stating your reason for filing late. 1040ez for 2011 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez for 2011 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 . 1040ez for 2011 14) In 2008, I qualified to exclude my foreign earned income, but I did not claim this exclusion on the return I filed in 2009. 1040ez for 2011 I paid all outstanding taxes with the return. 1040ez for 2011 Can I file a claim for refund now? It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez for 2011 A return filed before the due date is considered filed on the due date. 1040ez for 2011 2. 1040ez for 2011 Meeting the Requirements of Either the Bona Fide Residence Test or the Physical Presence Test . 1040ez for 2011 1) I recently came to Country X to work for the Orange Tractor Co. 1040ez for 2011 and I expect to be here for 5 or 6 years. 1040ez for 2011 I understand that upon the completion of 1 full year I will qualify for an exclusion or deduction under the bona fide residence test. 1040ez for 2011 Is this correct? . 1040ez for 2011 2) I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test? . 1040ez for 2011 3) To meet the qualification of an uninterrupted period which includes an entire taxable year, do I have to be physically present in a foreign country for the entire year? . 1040ez for 2011 4) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen and during 2012 was a bona fide resident of Country X. 1040ez for 2011 On January 15, 2013, I was notified that I was to be assigned to Country Y. 1040ez for 2011 I was recalled to New York for 90 days orientation and then went to Country Y, where I have been since. 1040ez for 2011 Although I was not in Country Y on January 1, I was a bona fide resident of Country X and was in Country Y on December 31, 2013. 1040ez for 2011 My family remained in Country X until completion of the orientation period, and my household goods were shipped directly to my new post. 1040ez for 2011 Am I a bona fide resident of a foreign country for 2013, or must I wait for the entire year of 2014 to become one? . 1040ez for 2011 5) Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. 1040ez for 2011 Can I figure the exclusion for the period I resided abroad? . 1040ez for 2011 6) Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test? . 1040ez for 2011 7) On August 13 of last year I left the United States and arrived in Country Z to work for the Gordon Manufacturing Company. 1040ez for 2011 I expected to be able to exclude my foreign earned income under the physical presence test because I planned to be in Country Z for at least 1 year. 1040ez for 2011 However, I was reassigned back to the United States and left Country Z on July 1 of this year. 1040ez for 2011 Can I exclude any of my foreign earned income? . 1040ez for 2011 1) I recently came to Country X to work for the Orange Tractor Co. 1040ez for 2011 and I expect to be here for 5 or 6 years. 1040ez for 2011 I understand that upon the completion of 1 full year I will qualify for an exclusion or deduction under the bona fide residence test. 1040ez for 2011 Is this correct? Not necessarily. 1040ez for 2011 The law provides that to qualify under this test for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, a person must be a “bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year. 1040ez for 2011 ” If, like most U. 1040ez for 2011 S. 1040ez for 2011 citizens, you file your return on a calendar year basis, the taxable year referred to in the law would be from January 1 to December 31 of any particular year. 1040ez for 2011 Unless you established residence in Country X on January 1, it would be more than 1 year before you would be a bona fide resident of a foreign country. 1040ez for 2011 Once you have completed your qualifying period, however, you are entitled to exclude the income or to claim the housing exclusion or deduction from the date you established bona fide residence. 1040ez for 2011 To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. 1040ez for 2011 Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. 1040ez for 2011 To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 – December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began. 1040ez for 2011 No. 1040ez for 2011 Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. 1040ez for 2011 During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. 1040ez for 2011 To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. 1040ez for 2011 Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez for 2011 No. 1040ez for 2011 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez for 2011 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 tax. 1040ez for 2011 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez for 2011 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez for 2011 No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 . 1040ez for 2011 2) I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test? To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. 1040ez for 2011 Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. 1040ez for 2011 To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 – December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began. 1040ez for 2011 No. 1040ez for 2011 Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. 1040ez for 2011 During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. 1040ez for 2011 To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. 1040ez for 2011 Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez for 2011 No. 1040ez for 2011 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez for 2011 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 tax. 1040ez for 2011 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez for 2011 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez for 2011 No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 . 1040ez for 2011 3) To meet the qualification of “an uninterrupted period which includes an entire taxable year,” do I have to be physically present in a foreign country for the entire year? No. 1040ez for 2011 Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. 1040ez for 2011 During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. 1040ez for 2011 To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. 1040ez for 2011 Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez for 2011 No. 1040ez for 2011 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez for 2011 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 tax. 1040ez for 2011 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez for 2011 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez for 2011 No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 . 1040ez for 2011 4) I am a U. 1040ez for 2011 S. 1040ez for 2011 citizen and during 2012 was a bona fide resident of Country X. 1040ez for 2011 On January 15, 2013, I was notified that I was to be assigned to Country Y. 1040ez for 2011 I was recalled to New York for 90 days orientation and then went to Country Y, where I have been since. 1040ez for 2011 Although I was not in Country Y on January 1, I was a bona fide resident of Country X and was in Country Y on December 31, 2013. 1040ez for 2011 My family remained in Country X until completion of the orientation period, and my household goods were shipped directly to my new post. 1040ez for 2011 Am I a bona fide resident of a foreign country for 2013, or must I wait for the entire year of 2014 to become one? Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez for 2011 No. 1040ez for 2011 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez for 2011 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 tax. 1040ez for 2011 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez for 2011 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez for 2011 No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 . 1040ez for 2011 5) Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. 1040ez for 2011 Can I figure the exclusion for the period I resided abroad? No. 1040ez for 2011 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez for 2011 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez for 2011 S. 1040ez for 2011 tax. 1040ez for 2011 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez for 2011 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez for 2011 No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 . 1040ez for 2011 6) Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test? Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez for 2011 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez for 2011 No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 . 1040ez for 2011 7) On August 13 of last year I left the United States and arrived in Country Z to work for the Gordon Manufacturing Company. 1040ez for 2011 I expected to be able to exclude my foreign earned income under the physical presence test because I planned to be in Country Z for at least 1 year. 1040ez for 2011 However, I was reassigned back to the United States and left Country Z on July 1 of this year. 1040ez for 2011 Can I exclude any of my foreign earned income? No. 1040ez for 2011 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez for 2011 3. 1040ez for 2011 Foreign Earned Income . 1040ez for 2011 1) I am an employee of the U. 1040ez for 2011 S. 1040ez for 2011 Government working abroad. 1040ez for 2011 Can all or part of my government income earned abroad qualify for the foreign earned income exclusion? . 1040ez for 2011 2) I qualify for the foreign earned income exclusion under the bona fide residence test. 1040ez for 2011 Does my foreign earned income include my U. 1040ez for 2011 S. 1040ez for 2011 dividends and the interest I receive on a foreign bank account? . 1040ez for 2011 3) My company pays my foreign income tax on my foreign earnings. 1040ez for 2011 Is this taxable compensation? . 1040ez for 2011 4) I live in an apartment in a foreign city for which my employer pays the rent. 1040ez for 2011 Should I include in my income the cost to my employer ($1,200 a month) or the fair market value of equivalent housing in the United States ($800 a month)? . 1040ez for 2011 5) My U. 1040ez for 2011 S. 1040ez for 2011 employer pays my salary into my U. 1040ez for 2011 S. 1040ez for 2011 bank account. 1040ez for 2011 Is this income considered earned in the United States or is it considered foreign earned income? . 1040ez for 2011 6) What is considered a foreign country? . 1040ez for 2011 7) What is the source of earned income? . 1040ez for 2011 1) I am an employee of the U. 1040ez for 2011 S. 1040ez for 2011 Government working abroad. 1040ez for 2011 Can all or part of my government income earned abroad qualify for the foreign earned income exclusion? No. 1040ez for 2011 The foreign earned income exclusion applies to your foreign earned income. 1040ez for 2011 Amounts paid by the United States or its agencies to their employees are not treated, for this purpose, as foreign earned income. 1040ez for 2011 No. 1040ez for 2011 The only income that is foreign earned income is income from the performance of personal services abroad. 1040ez for 2011 Investment income is not earned income. 1040ez for 2011 However, you must include it in gross income reported on your Form 1040. 1040ez for 2011 Yes. 1040ez for 2011 The amount is compensation for services performed. 1040ez for 2011 The tax paid by your company should be reported on Form 1040, line 7, and on Form 2555, Part IV, line 22(f) (or on Form 2555-EZ, Part IV, line 17). 1040ez for 2011 You must include in income the fair market value (FMV) of the facility provided, where it is provided. 1040ez for 2011 This will usually be the rent your employer pays. 1040ez for 2011 Situations when the FMV is not included in income are discussed in chapter 4 under Exclusion of Meals and Lodging. 1040ez for 2011 If you performed the services to earn this salary outside the United States, your salary is considered earned abroad. 1040ez for 2011 It does not matter that you are paid by a U. 1040ez for 2011 S. 1040ez for 2011 employer or that your salary is deposited in a U. 1040ez for 2011 S. 1040ez for 2011 bank account in the United States. 1040ez for 2011 The source of salary, wages, commissions, and other personal service income is the place where you perform the services. 1040ez for 2011 For the purposes of the foreign earned income exclusion and the foreign housing exclusion or deduction, any territory under the sovereignty of a countr
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American Holidays

Americans celebrate a variety of federal holidays and other national observances.


Federal Holidays

Find the dates for this year's federal holidays.

Federal law establishes the following public holidays for federal employees. If the holiday falls during the weekend, it may be observed on a different day.

Many government offices are closed on federal holidays and some private businesses may close as well. If you plan to visit a government office on or around a federal holiday, you should contact them to determine when they will be open. Find contact information for government departments and agencies.

New Year's Day

New Year's Day is January 1. The celebration of this holiday begins the night before, when Americans gather to wish each other a happy and prosperous coming year. Many Americans make New Year's resolutions. See the New Year's resolutions that are popular every year.

Birthday of Martin Luther King, Jr.

Martin Luther King, Jr. Day is celebrated on the third Monday in January. The Reverend Martin Luther King, Jr. was an African-American clergyman who is recognized for his tireless efforts to win civil rights for all people through nonviolent means.

Washington's Birthday

Washington's Birthday is observed the third Monday of February in honor George Washington, the first President of the United States. This date is commonly called Presidents' Day and many groups honor the legacy of past presidents on this date.

Memorial Day

Memorial Day is a observed the last Monday of May. It originally honored the people killed in the American Civil War, but has become a day on which the American dead of all wars are remembered.

Independence Day

Independence Day is July 4. This holiday honors the nation's birthday - the adoption of the Declaration of Independence on July 4, 1776. It is a day of picnics and patriotic parades, a night of concerts, and fireworks.

Labor Day

Labor Day is the first Monday of September. This holiday honors the nation's working people, typically with parades. For most Americans it marks the end of the summer vacation season and the start of the school year.

Columbus Day

Columbus Day is a celebrated on the second Monday in October. The day commemorates October 12, 1492, when Italian navigator Christopher Columbus landed in the New World. The holiday was first proclaimed in 1937 by President Franklin D. Roosevelt.

Veterans Day

Veterans Day is celebrated on November 11. This holiday was originally called Armistice Day and established to honor Americans who had served in World War I. It now honors veterans of all wars in which the U.S. has fought. Veterans' organizations hold parades, and the president places a wreath on the Tomb of the Unknowns at Arlington National Cemetery in Virginia.

Thanksgiving Day

Thanksgiving Day is celebrated on the fourth Thursday in November. In the fall of 1621, the Pilgrims held a three-day feast to celebrate a bountiful harvest. Many regard this event as the nation's first Thanksgiving. The Thanksgiving feast became a national tradition and almost always includes some of the foods served at the first feast: roast turkey, cranberry sauce, potatoes, and pumpkin pie.

Christmas Day

Christmas Day is a celebrated on December 25. Christmas is a Christian holiday marking the birth of the Christ Child. Decorating houses and yards with lights, putting up Christmas trees, giving gifts, and sending greeting cards have become holiday traditions even for many non-Christian Americans. Find tips to help celebrate.

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Other Celebrations and Observances

There are many commonly observed celebrations in the United States that are not federal holidays. Some of these observances honor groups of people, such as National African American History Month and Women's History Month, or causes, such as National Oceans Month and National Substance Abuse Prevention Month. Many of these holidays and observances are proclaimed by the President ever year. View recent Presidential proclamations.

These are some of the most popular American celebrations and observances that occur every year.

Groundhog Day

Groundhog Day is February 2 and has been celebrated since 1887. On Groundhog Day, crowds gather in Punxsutawney, Pennsylvania, to see if groundhog Punxsutawney Phil sees his shadow after emerging from his burrow, thus predicting six more weeks of winter weather.

Valentine's Day

Valentine's Day is celebrated on February 14. The day was named after an early Christian martyr, and on Valentine's Day, Americans give presents like candy or flowers to the ones they love. The first mass-produced valentine cards were sold in the 1840s.

Earth Day

Earth Day is observed on April 22. First celebrated in 1970 in the United States, it inspired national legislation such as the Clean Air and Clean Water Acts. Earth Day is designed to promote ecology, encourage respect for life on earth, and highlight concern over pollution of the soil, air, and water.

Arbor Day

National Arbor Day was proclaimed as the last Friday in April by President Richard Nixon in 1970. A number of state Arbor Days are observed at other times of the year to coincide with the best tree planting weather. The observance began in 1872, when Nebraska settlers and homesteaders were urged to plant trees on the largely treeless plains.

Mother's Day

Mother's Day is the second Sunday of May. President Woodrow Wilson issued a proclamation in 1914 that started the holiday. He asked Americans to give a public expression of reverence to mothers on this day. Carnations have come to represent Mother's Day, following President William McKinley's habit of always wearing a white carnation, his mother's favorite flower.

Flag Day

Flag Day, celebrated June 14, has been a presidentially proclaimed observance since 1916. Although Flag Day is not a federal holiday, Americans are encouraged to display the flag outside their homes and businesses on this day to honor the history and heritage the American flag represents.

Father's Day

Father's Day celebrates fathers every third Sunday of June. Father's Day began in 1909 in Spokane, Washington, when a daughter requested a special day to honor her father, a Civil War veteran who raised his children after his wife died. The first presidential proclamation honoring fathers was issued in 1966 by President Lyndon Johnson.

Patriot Day

September 11, 2001, was a defining moment in American history. On that day, terrorists hijacked four commercial airliners to strike targets in the United States. Nearly 3,000 people died as a consequence of the attacks. Patriot Day and National Day of Service and Remembrance is observed on September 11 in honor of the victims of these attacks.

Halloween

Halloween is celebrated on October 31. On Halloween, American children dress up in funny or scary costumes and go "trick or treating" by knocking on doors in their neighborhood. The neighbors are expected to respond by giving them small gifts of candy or money.

Pearl Harbor Day

Pearl Harbor Remembrance Day is December 7. In 1994, Congress designated this national observance to honor the more than 2,400 military service personnel who died on this date in 1941, during the surprise attack on Pearl Harbor, Hawaii, by Japanese forces. The attack on Pearl Harbor caused the United States to enter World War II.

Ethnic and Religious Holidays

Various ethnic and religious groups in America celebrate days with special meaning to them even though these are not national holidays. For example, Christians celebrate the resurrection of Jesus Christ on Easter, Jews observe their high holy days in September, Muslims celebrate Ramadan, and African Americans celebrate Kwanzaa. There are many other religious and ethnic celebrations in the United States.

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The 1040ez For 2011

1040ez for 2011 3. 1040ez for 2011   Ordinary or Capital Gain or Loss for Business Property Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. 1040ez for 2011 Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sales Gifts Transfers at Death Like-Kind Exchanges and Involuntary Conversions Multiple Properties Introduction When you dispose of business property, your taxable gain or loss is usually a section 1231 gain or loss. 1040ez for 2011 Its treatment as ordinary or capital is determined under rules for section 1231 transactions. 1040ez for 2011 When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. 1040ez for 2011 Any remaining gain is a section 1231 gain. 1040ez for 2011 Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 537 Installment Sales 547 Casualties, Disasters and Thefts 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) 4797 Sales of Business Property See chapter 5 for information about getting publications and forms. 1040ez for 2011 Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (discussed below). 1040ez for 2011 Their treatment as ordinary or capital depends on whether you have a net gain or a net loss from all your section 1231 transactions. 1040ez for 2011 If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). 1040ez for 2011 Do not take that gain into account as section 1231 gain. 1040ez for 2011 Section 1231 transactions. 1040ez for 2011   The following transactions result in gain or loss subject to section 1231 treatment. 1040ez for 2011 Sales or exchanges of real property or depreciable personal property. 1040ez for 2011 This property must be used in a trade or business and held longer than 1 year. 1040ez for 2011 Generally, property held for the production of rents or royalties is considered to be used in a trade or business. 1040ez for 2011 Depreciable personal property includes amortizable section 197 intangibles (described in chapter 2 under Other Dispositions). 1040ez for 2011 Sales or exchanges of leaseholds. 1040ez for 2011 The leasehold must be used in a trade or business and held longer than 1 year. 1040ez for 2011 Sales or exchanges of cattle and horses. 1040ez for 2011 The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 2 years or longer. 1040ez for 2011 Sales or exchanges of other livestock. 1040ez for 2011 This livestock does not include poultry. 1040ez for 2011 It must be held for draft, breeding, dairy, or sporting purposes and held for 1 year or longer. 1040ez for 2011 Sales or exchanges of unharvested crops. 1040ez for 2011 The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person and the land must be held longer than 1 year. 1040ez for 2011 You cannot keep any right or option to directly or indirectly reacquire the land (other than a right customarily incident to a mortgage or other security transaction). 1040ez for 2011 Growing crops sold with a lease on the land, though sold to the same person in the same transaction, are not included. 1040ez for 2011 Cutting of timber or disposal of timber, coal, or iron ore. 1040ez for 2011 The cutting or disposal must be treated as a sale, as described in chapter 2 under Timber and Coal and Iron Ore. 1040ez for 2011 Condemnations. 1040ez for 2011 The condemned property must have been held longer than 1 year. 1040ez for 2011 It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. 1040ez for 2011 It cannot be property held for personal use. 1040ez for 2011 Casualties and thefts. 1040ez for 2011 The casualty or theft must have affected business property, property held for the production of rents and royalties, or investment property (such as notes and bonds). 1040ez for 2011 You must have held the property longer than 1 year. 1040ez for 2011 However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. 1040ez for 2011 For more information on casualties and thefts, see Publication 547. 1040ez for 2011 Property for sale to customers. 1040ez for 2011   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. 1040ez for 2011 If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. 1040ez for 2011 Example. 1040ez for 2011 You manufacture and sell steel cable, which you deliver on returnable reels that are depreciable property. 1040ez for 2011 Customers make deposits on the reels, which you refund if the reels are returned within a year. 1040ez for 2011 If they are not returned, you keep each deposit as the agreed-upon sales price. 1040ez for 2011 Most reels are returned within the 1-year period. 1040ez for 2011 You keep adequate records showing depreciation and other charges to the capitalized cost of the reels. 1040ez for 2011 Under these conditions, the reels are not property held for sale to customers in the ordinary course of your business. 1040ez for 2011 Any gain or loss resulting from their not being returned may be capital or ordinary, depending on your section 1231 transactions. 1040ez for 2011 Copyrights. 1040ez for 2011    The sale of a copyright, a literary, musical, or artistic composition, or similar property is not a section 1231 transaction if your personal efforts created the property, or if you acquired the property in a way that entitled you to the basis of the previous owner whose personal efforts created it (for example, if you receive the property as a gift). 1040ez for 2011 The sale of such property results in ordinary income and generally is reported in Part II of Form 4797. 1040ez for 2011 Treatment as ordinary or capital. 1040ez for 2011   To determine the treatment of section 1231 gains and losses, combine all your section 1231 gains and losses for the year. 1040ez for 2011 If you have a net section 1231 loss, it is ordinary loss. 1040ez for 2011 If you have a net section 1231 gain, it is ordinary income up to the amount of your nonrecaptured section 1231 losses from previous years. 1040ez for 2011 The rest, if any, is long-term capital gain. 1040ez for 2011 Nonrecaptured section 1231 losses. 1040ez for 2011   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain. 1040ez for 2011 Therefore, if in any of your five preceding tax years you had section 1231 losses, a net gain for the current year from the sale of section 1231 assets is ordinary gain to the extent of your prior losses. 1040ez for 2011 These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. 1040ez for 2011 Example. 1040ez for 2011 In 2013, Ben has a $2,000 net section 1231 gain. 1040ez for 2011 To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. 1040ez for 2011 From 2008 through 2012 he had the following section 1231 gains and losses. 1040ez for 2011 Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800 Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. 1040ez for 2011 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if otherwise nontaxable) as ordinary income. 1040ez for 2011 To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. 1040ez for 2011 This includes the date and manner of acquisition, cost or other basis, depreciation or amortization, and all other adjustments that affect basis. 1040ez for 2011 On property you acquired in a nontaxable exchange or as a gift, your records also must indicate the following information. 1040ez for 2011 Whether the adjusted basis was figured using depreciation or amortization you claimed on other property. 1040ez for 2011 Whether the adjusted basis was figured using depreciation or amortization another person claimed. 1040ez for 2011 Corporate distributions. 1040ez for 2011   For information on property distributed by corporations, see Distributions to Shareholders in Publication 542, Corporations. 1040ez for 2011 General asset accounts. 1040ez for 2011   Different rules apply to dispositions of property you depreciated using a general asset account. 1040ez for 2011 For information on these rules, see Publication 946. 1040ez for 2011 Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable on the property. 1040ez for 2011 See Gain Treated as Ordinary Income, later. 1040ez for 2011 Any gain recognized that is more than the part that is ordinary income from depreciation is a section 1231 gain. 1040ez for 2011 See Treatment as ordinary or capital under Section 1231 Gains and Losses, earlier. 1040ez for 2011 Section 1245 property defined. 1040ez for 2011   Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. 1040ez for 2011 Personal property (either tangible or intangible). 1040ez for 2011 Other tangible property (except buildings and their structural components) used as any of the following. 1040ez for 2011 See Buildings and structural components below. 1040ez for 2011 An integral part of manufacturing, production, or extraction, or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services. 1040ez for 2011 A research facility in any of the activities in (a). 1040ez for 2011 A facility in any of the activities in (a) for the bulk storage of fungible commodities (discussed on the next page). 1040ez for 2011 That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. 1040ez for 2011 Amortization of certified pollution control facilities. 1040ez for 2011 The section 179 expense deduction. 1040ez for 2011 Deduction for clean-fuel vehicles and certain refueling property. 1040ez for 2011 Deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations. 1040ez for 2011 Deduction for certain qualified refinery property. 1040ez for 2011 Deduction for qualified energy efficient commercial building property. 1040ez for 2011 Amortization of railroad grading and tunnel bores, if in effect before the repeal by the Revenue Reconciliation Act of 1990. 1040ez for 2011 (Repealed by Public Law 99-514, Tax Reform Act of 1986, section 242(a). 1040ez for 2011 ) Certain expenditures for child care facilities if in effect before repeal by Public Law 101-58, Omnibus Budget Reconciliation Act of 1990, section 11801(a)(13) (except with regards to deductions made prior to November 5, 1990). 1040ez for 2011 Expenditures to remove architectural and transportation barriers to the handicapped and elderly. 1040ez for 2011 Deduction for qualified tertiary injectant expenses. 1040ez for 2011 Certain reforestation expenditures. 1040ez for 2011 Deduction for election to expense qualified advanced mine safety equipment property. 1040ez for 2011 Single purpose agricultural (livestock) or horticultural structures. 1040ez for 2011 Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. 1040ez for 2011 Any railroad grading or tunnel bore. 1040ez for 2011 Buildings and structural components. 1040ez for 2011   Section 1245 property does not include buildings and structural components. 1040ez for 2011 The term building includes a house, barn, warehouse, or garage. 1040ez for 2011 The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. 1040ez for 2011   Do not treat a structure that is essentially machinery or equipment as a building or structural component. 1040ez for 2011 Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. 1040ez for 2011   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. 1040ez for 2011 Structures such as oil and gas storage tanks, grain storage bins, silos, fractionating towers, blast furnaces, basic oxygen furnaces, coke ovens, brick kilns, and coal tipples are not treated as buildings, but as section 1245 property. 1040ez for 2011 Facility for bulk storage of fungible commodities. 1040ez for 2011   This term includes oil or gas storage tanks and grain storage bins. 1040ez for 2011 Bulk storage means the storage of a commodity in a large mass before it is used. 1040ez for 2011 For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. 1040ez for 2011 To be fungible, a commodity must be such that one part may be used in place of another. 1040ez for 2011   Stored materials that vary in composition, size, and weight are not fungible. 1040ez for 2011 Materials are not fungible if one part cannot be used in place of another part and the materials cannot be estimated and replaced by simple reference to weight, measure, and number. 1040ez for 2011 For example, the storage of different grades and forms of aluminum scrap is not storage of fungible commodities. 1040ez for 2011 Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. 1040ez for 2011 The depreciation and amortization allowed or allowable on the property. 1040ez for 2011 The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). 1040ez for 2011 A limit on this amount for gain on like-kind exchanges and involuntary conversions is explained later. 1040ez for 2011 For any other disposition of section 1245 property, ordinary income is the lesser of (1) earlier or the amount by which its fair market value is more than its adjusted basis. 1040ez for 2011 See Gifts and Transfers at Death, later. 1040ez for 2011 Use Part III of Form 4797 to figure the ordinary income part of the gain. 1040ez for 2011 Depreciation taken on other property or taken by other taxpayers. 1040ez for 2011   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. 1040ez for 2011 Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. 1040ez for 2011 Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift). 1040ez for 2011 Depreciation and amortization. 1040ez for 2011   Depreciation and amortization that must be recaptured as ordinary income include (but are not limited to) the following items. 1040ez for 2011 Ordinary depreciation deductions. 1040ez for 2011 Any special depreciation allowance you claimed. 1040ez for 2011 Amortization deductions for all the following costs. 1040ez for 2011 Acquiring a lease. 1040ez for 2011 Lessee improvements. 1040ez for 2011 Certified pollution control facilities. 1040ez for 2011 Certain reforestation expenses. 1040ez for 2011 Section 197 intangibles. 1040ez for 2011 Childcare facility expenses made before 1982, if in effect before the repeal of IRC 188. 1040ez for 2011 Franchises, trademarks, and trade names acquired before August 11, 1993. 1040ez for 2011 The section 179 deduction. 1040ez for 2011 Deductions for all the following costs. 1040ez for 2011 Removing barriers to the disabled and the elderly. 1040ez for 2011 Tertiary injectant expenses. 1040ez for 2011 Depreciable clean-fuel vehicles and refueling property (minus the amount of any recaptured deduction). 1040ez for 2011 Environmental cleanup costs. 1040ez for 2011 Certain reforestation expenses. 1040ez for 2011 Qualified disaster expenses. 1040ez for 2011 Any basis reduction for the investment credit (minus any basis increase for credit recapture). 1040ez for 2011 Any basis reduction for the qualified electric vehicle credit (minus any basis increase for credit recapture). 1040ez for 2011 Example. 1040ez for 2011 You file your returns on a calendar year basis. 1040ez for 2011 In February 2011, you bought and placed in service for 100% use in your business a light-duty truck (5-year property) that cost $10,000. 1040ez for 2011 You used the half-year convention and your MACRS deductions for the truck were $2,000 in 2011 and $3,200 in 2012. 1040ez for 2011 You did not take the section 179 deduction. 1040ez for 2011 You sold the truck in May 2013 for $7,000. 1040ez for 2011 The MACRS deduction in 2013, the year of sale, is $960 (½ of $1,920). 1040ez for 2011 Figure the gain treated as ordinary income as follows. 1040ez for 2011 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $2,000 + $3,200 + $960) 6,160   4) Adjusted basis (subtract line 3 from line 2) $3,840 5) Gain realized (subtract line 4 from line 1) $3,160 6) Gain treated as ordinary income (lesser of line 3 or line 5) $3,160 Depreciation on other tangible property. 1040ez for 2011   You must take into account depreciation during periods when the property was not used as an integral part of an activity or did not constitute a research or storage facility, as described earlier under Section 1245 property. 1040ez for 2011   For example, if depreciation deductions taken on certain storage facilities amounted to $10,000, of which $6,000 is from the periods before their use in a prescribed business activity, you must use the entire $10,000 in determining ordinary income from depreciation. 1040ez for 2011 Depreciation allowed or allowable. 1040ez for 2011   The greater of the depreciation allowed or allowable is generally the amount to use in figuring the part of gain to report as ordinary income. 1040ez for 2011 However, if in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. 1040ez for 2011 If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. 1040ez for 2011   This treatment applies only when figuring what part of gain is treated as ordinary income under the rules for section 1245 depreciation recapture. 1040ez for 2011 Multiple asset accounts. 1040ez for 2011   In figuring ordinary income from depreciation, you can treat any number of units of section 1245 property in a single depreciation account as one item if the total ordinary income from depreciation figured by using this method is not less than it would be if depreciation on each unit were figured separately. 1040ez for 2011 Example. 1040ez for 2011 In one transaction you sold 50 machines, 25 trucks, and certain other property that is not section 1245 property. 1040ez for 2011 All of the depreciation was recorded in a single depreciation account. 1040ez for 2011 After dividing the total received among the various assets sold, you figured that each unit of section 1245 property was sold at a gain. 1040ez for 2011 You can figure the ordinary income from depreciation as if the 50 machines and 25 trucks were one item. 1040ez for 2011 However, if five of the trucks had been sold at a loss, only the 50 machines and 20 of the trucks could be treated as one item in determining the ordinary income from depreciation. 1040ez for 2011 Normal retirement. 1040ez for 2011   The normal retirement of section 1245 property in multiple asset accounts does not require recognition of gain as ordinary income from depreciation if your method of accounting for asset retirements does not require recognition of that gain. 1040ez for 2011 Section 1250 Property Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property. 1040ez for 2011 To determine the additional depreciation on section 1250 property, see Additional Depreciation, below. 1040ez for 2011 Section 1250 property defined. 1040ez for 2011   This includes all real property that is subject to an allowance for depreciation and that is not and never has been section 1245 property. 1040ez for 2011 It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. 1040ez for 2011 A fee simple interest in land is not included because it is not depreciable. 1040ez for 2011   If your section 1250 property becomes section 1245 property because you change its use, you can never again treat it as section 1250 property. 1040ez for 2011 Additional Depreciation If you hold section 1250 property longer than 1 year, the additional depreciation is the actual depreciation adjustments that are more than the depreciation figured using the straight line method. 1040ez for 2011 For a list of items treated as depreciation adjustments, see Depreciation and amortization under Gain Treated as Ordinary Income, earlier. 1040ez for 2011 For the treatment of unrecaptured section 1250 gain, see Capital Gains Tax Rate, later. 1040ez for 2011 If you hold section 1250 property for 1 year or less, all the depreciation is additional depreciation. 1040ez for 2011 You will not have additional depreciation if any of the following conditions apply to the property disposed of. 1040ez for 2011 You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method; you held the property longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. 1040ez for 2011 In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction for property placed in service before January 1, 2010. 1040ez for 2011 The property was residential low-income rental property you held for 162/3 years or longer. 1040ez for 2011 For low-income rental housing on which the special 60-month depreciation for rehabilitation expenses was allowed, the 162/3 years start when the rehabilitated property is placed in service. 1040ez for 2011 You chose the alternate ACRS method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. 1040ez for 2011 The property was residential rental property or nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. 1040ez for 2011 These properties are depreciated using the straight line method. 1040ez for 2011 In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction. 1040ez for 2011 Depreciation taken by other taxpayers or on other property. 1040ez for 2011   Additional depreciation includes all depreciation adjustments to the basis of section 1250 property whether allowed to you or another person (as carryover basis property). 1040ez for 2011 Example. 1040ez for 2011 Larry Johnson gives his son section 1250 property on which he took $2,000 in depreciation deductions, of which $500 is additional depreciation. 1040ez for 2011 Immediately after the gift, the son's adjusted basis in the property is the same as his father's and reflects the $500 additional depreciation. 1040ez for 2011 On January 1 of the next year, after taking depreciation deductions of $1,000 on the property, of which $200 is additional depreciation, the son sells the property. 1040ez for 2011 At the time of sale, the additional depreciation is $700 ($500 allowed the father plus $200 allowed the son). 1040ez for 2011 Depreciation allowed or allowable. 1040ez for 2011   The greater of depreciation allowed or allowable (to any person who held the property if the depreciation was used in figuring its adjusted basis in your hands) generally is the amount to use in figuring the part of the gain to be reported as ordinary income. 1040ez for 2011 If you can show that the deduction allowed for any tax year was less than the amount allowable, the lesser figure will be the depreciation adjustment for figuring additional depreciation. 1040ez for 2011 Retired or demolished property. 1040ez for 2011   The adjustments reflected in adjusted basis generally do not include deductions for depreciation on retired or demolished parts of section 1250 property unless these deductions are reflected in the basis of replacement property that is section 1250 property. 1040ez for 2011 Example. 1040ez for 2011 A wing of your building is totally destroyed by fire. 1040ez for 2011 The depreciation adjustments figured in the adjusted basis of the building after the wing is destroyed do not include any deductions for depreciation on the destroyed wing unless it is replaced and the adjustments for depreciation on it are reflected in the basis of the replacement property. 1040ez for 2011 Figuring straight line depreciation. 1040ez for 2011   The useful life and salvage value you would have used to figure straight line depreciation are the same as those used under the depreciation method you actually used. 1040ez for 2011 If you did not use a useful life under the depreciation method actually used (such as with the units-of-production method) or if you did not take salvage value into account (such as with the declining balance method), the useful life or salvage value for figuring what would have been the straight line depreciation is the useful life and salvage value you would have used under the straight line method. 1040ez for 2011   Salvage value and useful life are not used for the ACRS method of depreciation. 1040ez for 2011 Figure straight line depreciation for ACRS real property by using its 15-, 18-, or 19-year recovery period as the property's useful life. 1040ez for 2011   The straight line method is applied without any basis reduction for the investment credit. 1040ez for 2011 Property held by lessee. 1040ez for 2011   If a lessee makes a leasehold improvement, the lease period for figuring what would have been the straight line depreciation adjustments includes all renewal periods. 1040ez for 2011 This inclusion of the renewal periods cannot extend the lease period taken into account to a period that is longer than the remaining useful life of the improvement. 1040ez for 2011 The same rule applies to the cost of acquiring a lease. 1040ez for 2011   The term renewal period means any period for which the lease may be renewed, extended, or continued under an option exercisable by the lessee. 1040ez for 2011 However, the inclusion of renewal periods cannot extend the lease by more than two-thirds of the period that was the basis on which the actual depreciation adjustments were allowed. 1040ez for 2011 Applicable Percentage The applicable percentage used to figure the ordinary income because of additional depreciation depends on whether the real property you disposed of is nonresidential real property, residential rental property, or low-income housing. 1040ez for 2011 The percentages for these types of real property are as follows. 1040ez for 2011 Nonresidential real property. 1040ez for 2011   For real property that is not residential rental property, the applicable percentage for periods after 1969 is 100%. 1040ez for 2011 For periods before 1970, the percentage is zero and no ordinary income because of additional depreciation before 1970 will result from its disposition. 1040ez for 2011 Residential rental property. 1040ez for 2011   For residential rental property (80% or more of the gross income is from dwelling units) other than low-income housing, the applicable percentage for periods after 1975 is 100%. 1040ez for 2011 The percentage for periods before 1976 is zero. 1040ez for 2011 Therefore, no ordinary income because of additional depreciation before 1976 will result from a disposition of residential rental property. 1040ez for 2011 Low-income housing. 1040ez for 2011    Low-income housing includes all the following types of residential rental property. 1040ez for 2011 Federally assisted housing projects if the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. 1040ez for 2011 Low-income rental housing for which a depreciation deduction for rehabilitation expenses was allowed. 1040ez for 2011 Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under provisions of state or local laws that authorize similar subsidies for low-income families. 1040ez for 2011 Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. 1040ez for 2011   The applicable percentage for low-income housing is 100% minus 1% for each full month the property was held over 100 full months. 1040ez for 2011 If you have held low-income housing at least 16 years and 8 months, the percentage is zero and no ordinary income will result from its disposition. 1040ez for 2011 Foreclosure. 1040ez for 2011   If low-income housing is disposed of because of foreclosure or similar proceedings, the monthly applicable percentage reduction is figured as if you disposed of the property on the starting date of the proceedings. 1040ez for 2011 Example. 1040ez for 2011 On June 1, 2001, you acquired low-income housing property. 1040ez for 2011 On April 3, 2012 (130 months after the property was acquired), foreclosure proceedings were started on the property and on December 3, 2013 (150 months after the property was acquired), the property was disposed of as a result of the foreclosure proceedings. 1040ez for 2011 The property qualifies for a reduced applicable percentage because it was held more than 100 full months. 1040ez for 2011 The applicable percentage reduction is 30% (130 months minus 100 months) rather than 50% (150 months minus 100 months) because it does not apply after April 3, 2012, the starting date of the foreclosure proceedings. 1040ez for 2011 Therefore, 70% of the additional depreciation is treated as ordinary income. 1040ez for 2011 Holding period. 1040ez for 2011   The holding period used to figure the applicable percentage for low-income housing generally starts on the day after you acquired it. 1040ez for 2011 For example, if you bought low-income housing on January 1, 1997, the holding period starts on January 2, 1997. 1040ez for 2011 If you sold it on January 2, 2013, the holding period is exactly 192 full months. 1040ez for 2011 The applicable percentage for additional depreciation is 8%, or 100% minus 1% for each full month the property was held over 100 full months. 1040ez for 2011 Holding period for constructed, reconstructed, or erected property. 1040ez for 2011   The holding period used to figure the applicable percentage for low-income housing you constructed, reconstructed, or erected starts on the first day of the month it is placed in service in a trade or business, in an activity for the production of income, or in a personal activity. 1040ez for 2011 Property acquired by gift or received in a tax-free transfer. 1040ez for 2011   For low-income housing you acquired by gift or in a tax-free transfer the basis of which is figured by reference to the basis in the hands of the transferor, the holding period for the applicable percentage includes the holding period of the transferor. 1040ez for 2011   If the adjusted basis of the property in your hands just after acquiring it is more than its adjusted basis to the transferor just before transferring it, the holding period of the difference is figured as if it were a separate improvement. 1040ez for 2011 See Low-Income Housing With Two or More Elements, next. 1040ez for 2011 Low-Income Housing With Two or More Elements If you dispose of low-income housing property that has two or more separate elements, the applicable percentage used to figure ordinary income because of additional depreciation may be different for each element. 1040ez for 2011 The gain to be reported as ordinary income is the sum of the ordinary income figured for each element. 1040ez for 2011 The following are the types of separate elements. 1040ez for 2011 A separate improvement (defined below). 1040ez for 2011 The basic section 1250 property plus improvements not qualifying as separate improvements. 1040ez for 2011 The units placed in service at different times before all the section 1250 property is finished. 1040ez for 2011 For example, this happens when a taxpayer builds an apartment building of 100 units and places 30 units in service (available for renting) on January 4, 2011, 50 on July 18, 2011, and the remaining 20 on January 18, 2012. 1040ez for 2011 As a result, the apartment house consists of three separate elements. 1040ez for 2011 The 36-month test for separate improvements. 1040ez for 2011   A separate improvement is any improvement (qualifying under The 1-year test, below) added to the capital account of the property, but only if the total of the improvements during the 36-month period ending on the last day of any tax year is more than the greatest of the following amounts. 1040ez for 2011 Twenty-five percent of the adjusted basis of the property at the start of the first day of the 36-month period, or the first day of the holding period of the property, whichever is later. 1040ez for 2011 Ten percent of the unadjusted basis (adjusted basis plus depreciation and amortization adjustments) of the property at the start of the period determined in (1). 1040ez for 2011 $5,000. 1040ez for 2011 The 1-year test. 1040ez for 2011   An addition to the capital account for any tax year (including a short tax year) is treated as an improvement only if the sum of all additions for the year is more than the greater of $2,000 or 1% of the unadjusted basis of the property. 1040ez for 2011 The unadjusted basis is figured as of the start of that tax year or the holding period of the property, whichever is later. 1040ez for 2011 In applying the 36-month test, improvements in any one of the 3 years are omitted entirely if the total improvements in that year do not qualify under the 1-year test. 1040ez for 2011 Example. 1040ez for 2011 The unadjusted basis of a calendar year taxpayer's property was $300,000 on January 1 of this year. 1040ez for 2011 During the year, the taxpayer made improvements A, B, and C, which cost $1,000, $600, and $700, respectively. 1040ez for 2011 The sum of the improvements, $2,300, is less than 1% of the unadjusted basis ($3,000), so the improvements do not satisfy the 1-year test and are not treated as improvements for the 36-month test. 1040ez for 2011 However, if improvement C had cost $1,500, the sum of these improvements would have been $3,100. 1040ez for 2011 Then, it would be necessary to apply the 36-month test to figure if the improvements must be treated as separate improvements. 1040ez for 2011 Addition to the capital account. 1040ez for 2011   Any addition to the capital account made after the initial acquisition or completion of the property by you or any person who held the property during a period included in your holding period is to be considered when figuring the total amount of separate improvements. 1040ez for 2011   The addition to the capital account of depreciable real property is the gross addition not reduced by amounts attributable to replaced property. 1040ez for 2011 For example, if a roof with an adjusted basis of $20,000 is replaced by a new roof costing $50,000, the improvement is the gross addition to the account, $50,000, and not the net addition of $30,000. 1040ez for 2011 The $20,000 adjusted basis of the old roof is no longer reflected in the basis of the property. 1040ez for 2011 The status of an addition to the capital account is not affected by whether it is treated as a separate property for determining depreciation deductions. 1040ez for 2011   Whether an expense is treated as an addition to the capital account may depend on the final disposition of the entire property. 1040ez for 2011 If the expense item property and the basic property are sold in two separate transactions, the entire section 1250 property is treated as consisting of two distinct properties. 1040ez for 2011 Unadjusted basis. 1040ez for 2011   In figuring the unadjusted basis as of a certain date, include the actual cost of all previous additions to the capital account plus those that did not qualify as separate improvements. 1040ez for 2011 However, the cost of components retired before that date is not included in the unadjusted basis. 1040ez for 2011 Holding period. 1040ez for 2011   Use the following guidelines for figuring the applicable percentage for property with two or more elements. 1040ez for 2011 The holding period of a separate element placed in service before the entire section 1250 property is finished starts on the first day of the month that the separate element is placed in service. 1040ez for 2011 The holding period for each separate improvement qualifying as a separate element starts on the day after the improvement is acquired or, for improvements constructed, reconstructed, or erected, the first day of the month that the improvement is placed in service. 1040ez for 2011 The holding period for each improvement not qualifying as a separate element takes the holding period of the basic property. 1040ez for 2011   If an improvement by itself does not meet the 1-year test (greater of $2,000 or 1% of the unadjusted basis), but it does qualify as a separate improvement that is a separate element (when grouped with other improvements made during the tax year), determine the start of its holding period as follows. 1040ez for 2011 Use the first day of a calendar month that is closest to the middle of the tax year. 1040ez for 2011 If there are two first days of a month that are equally close to the middle of the year, use the earlier date. 1040ez for 2011 Figuring ordinary income attributable to each separate element. 1040ez for 2011   Figure ordinary income attributable to each separate element as follows. 1040ez for 2011   Step 1. 1040ez for 2011 Divide the element's additional depreciation after 1975 by the sum of all the elements' additional depreciation after 1975 to determine the percentage used in Step 2. 1040ez for 2011   Step 2. 1040ez for 2011 Multiply the percentage figured in Step 1 by the lesser of the additional depreciation after 1975 for the entire property or the gain from disposition of the entire property (the difference between the fair market value or amount realized and the adjusted basis). 1040ez for 2011   Step 3. 1040ez for 2011 Multiply the result in Step 2 by the applicable percentage for the element. 1040ez for 2011 Example. 1040ez for 2011 You sold at a gain of $25,000 low-income housing property subject to the ordinary income rules of section 1250. 1040ez for 2011 The property consisted of four elements (W, X, Y, and Z). 1040ez for 2011 Step 1. 1040ez for 2011 The additional depreciation for each element is: W-$12,000; X-None; Y-$6,000; and Z-$6,000. 1040ez for 2011 The sum of the additional depreciation for all the elements is $24,000. 1040ez for 2011 Step 2. 1040ez for 2011 The depreciation deducted on element X was $4,000 less than it would have been under the straight line method. 1040ez for 2011 Additional depreciation on the property as a whole is $20,000 ($24,000 − $4,000). 1040ez for 2011 $20,000 is lower than the $25,000 gain on the sale, so $20,000 is used in Step 2. 1040ez for 2011 Step 3. 1040ez for 2011 The applicable percentages to be used in Step 3 for the elements are: W-68%; X-85%; Y-92%; and Z-100%. 1040ez for 2011 From these facts, the sum of the ordinary income for each element is figured as follows. 1040ez for 2011   Step 1 Step 2 Step 3 Ordinary Income W . 1040ez for 2011 50 $10,000 68% $ 6,800 X -0- -0- 85% -0- Y . 1040ez for 2011 25 5,000 92% 4,600 Z . 1040ez for 2011 25 5,000 100% 5,000 Sum of ordinary income of separate elements $16,400 Gain Treated as Ordinary Income To find what part of the gain from the disposition of section 1250 property is treated as ordinary income, follow these steps. 1040ez for 2011 In a sale, exchange, or involuntary conversion of the property, figure the amount realized that is more than the adjusted basis of the property. 1040ez for 2011 In any other disposition of the property, figure the fair market value that is more than the adjusted basis. 1040ez for 2011 Figure the additional depreciation for the periods after 1975. 1040ez for 2011 Multiply the lesser of (1) or (2) by the applicable percentage, discussed earlier under Applicable Percentage. 1040ez for 2011 Stop here if this is residential rental property or if (2) is equal to or more than (1). 1040ez for 2011 This is the gain treated as ordinary income because of additional depreciation. 1040ez for 2011 Subtract (2) from (1). 1040ez for 2011 Figure the additional depreciation for periods after 1969 but before 1976. 1040ez for 2011 Add the lesser of (4) or (5) to the result in (3). 1040ez for 2011 This is the gain treated as ordinary income because of additional depreciation. 1040ez for 2011 A limit on the amount treated as ordinary income for gain on like-kind exchanges and involuntary conversions is explained later. 1040ez for 2011 Use Form 4797, Part III, to figure the ordinary income part of the gain. 1040ez for 2011 Corporations. 1040ez for 2011   Corporations, other than S corporations, must recognize an additional amount as ordinary income on the sale or other disposition of section 1250 property. 1040ez for 2011 The additional amount treated as ordinary income is 20% of the excess of the amount that would have been ordinary income if the property were section 1245 property over the amount treated as ordinary income under section 1250. 1040ez for 2011 Report this additional ordinary income on Form 4797, Part III, line 26 (f). 1040ez for 2011 Installment Sales If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. 1040ez for 2011 This applies even if no payments are received in that year. 1040ez for 2011 If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. 1040ez for 2011 For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. 1040ez for 2011 If you dispose of more than one asset in a single transaction, you must figure the gain on each asset separately so that it may be properly reported. 1040ez for 2011 To do this, allocate the selling price and the payments you receive in the year of sale to each asset. 1040ez for 2011 Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. 1040ez for 2011 For a detailed discussion of installment sales, see Publication 537. 1040ez for 2011 Gifts If you make a gift of depreciable personal property or real property, you do not have to report income on the transaction. 1040ez for 2011 However, if the person who receives it (donee) sells or otherwise disposes of the property in a disposition subject to recapture, the donee must take into account the depreciation you deducted in figuring the gain to be reported as ordinary income. 1040ez for 2011 For low-income housing, the donee must take into account the donor's holding period to figure the applicable percentage. 1040ez for 2011 See Applicable Percentage and its discussion Holding period under Section 1250 Property, earlier. 1040ez for 2011 Part gift and part sale or exchange. 1040ez for 2011   If you transfer depreciable personal property or real property for less than its fair market value in a transaction considered to be partly a gift and partly a sale or exchange and you have a gain because the amount realized is more than your adjusted basis, you must report ordinary income (up to the amount of gain) to recapture depreciation. 1040ez for 2011 If the depreciation (additional depreciation, if section 1250 property) is more than the gain, the balance is carried over to the transferee to be taken into account on any later disposition of the property. 1040ez for 2011 However, see Bargain sale to charity, later. 1040ez for 2011 Example. 1040ez for 2011 You transferred depreciable personal property to your son for $20,000. 1040ez for 2011 When transferred, the property had an adjusted basis to you of $10,000 and a fair market value of $40,000. 1040ez for 2011 You took depreciation of $30,000. 1040ez for 2011 You are considered to have made a gift of $20,000, the difference between the $40,000 fair market value and the $20,000 sale price to your son. 1040ez for 2011 You have a taxable gain on the transfer of $10,000 ($20,000 sale price minus $10,000 adjusted basis) that must be reported as ordinary income from depreciation. 1040ez for 2011 You report $10,000 of your $30,000 depreciation as ordinary income on the transfer of the property, so the remaining $20,000 depreciation is carried over to your son for him to take into account on any later disposition of the property. 1040ez for 2011 Gift to charitable organization. 1040ez for 2011   If you give property to a charitable organization, you figure your deduction for your charitable contribution by reducing the fair market value of the property by the ordinary income and short-term capital gain that would have resulted had you sold the property at its fair market value at the time of the contribution. 1040ez for 2011 Thus, your deduction for depreciable real or personal property given to a charitable organization does not include the potential ordinary gain from depreciation. 1040ez for 2011   You also may have to reduce the fair market value of the contributed property by the long-term capital gain (including any section 1231 gain) that would have resulted had the property been sold. 1040ez for 2011 For more information, see Giving Property That Has Increased in Value in Publication 526. 1040ez for 2011 Bargain sale to charity. 1040ez for 2011   If you transfer section 1245 or section 1250 property to a charitable organization for less than its fair market value and a deduction for the contribution part of the transfer is allowable, your ordinary income from depreciation is figured under different rules. 1040ez for 2011 First, figure the ordinary income as if you had sold the property at its fair market value. 1040ez for 2011 Then, allocate that amount between the sale and the contribution parts of the transfer in the same proportion that you allocated your adjusted basis in the property to figure your gain. 1040ez for 2011 See Bargain Sale under Gain or Loss From Sales and Exchanges in chapter 1. 1040ez for 2011 Report as ordinary income the lesser of the ordinary income allocated to the sale or your gain from the sale. 1040ez for 2011 Example. 1040ez for 2011 You sold section 1245 property in a bargain sale to a charitable organization and are allowed a deduction for your contribution. 1040ez for 2011 Your gain on the sale was $1,200, figured by allocating 20% of your adjusted basis in the property to the part sold. 1040ez for 2011 If you had sold the property at its fair market value, your ordinary income would have been $5,000. 1040ez for 2011 Your ordinary income is $1,000 ($5,000 × 20%) and your section 1231 gain is $200 ($1,200 – $1,000). 1040ez for 2011 Transfers at Death When a taxpayer dies, no gain is reported on depreciable personal property or real property transferred to his or her estate or beneficiary. 1040ez for 2011 For information on the tax liability of a decedent, see Publication 559, Survivors, Executors, and Administrators. 1040ez for 2011 However, if the decedent disposed of the property while alive and, because of his or her method of accounting or for any other reason, the gain from the disposition is reportable by the estate or beneficiary, it must be reported in the same way the decedent would have had to report it if he or she were still alive. 1040ez for 2011 Ordinary income due to depreciation must be reported on a transfer from an executor, administrator, or trustee to an heir, beneficiary, or other individual if the transfer is a sale or exchange on which gain is realized. 1040ez for 2011 Example 1. 1040ez for 2011 Janet Smith owned depreciable property that, upon her death, was inherited by her son. 1040ez for 2011 No ordinary income from depreciation is reportable on the transfer, even though the value used for estate tax purposes is more than the adjusted basis of the property to Janet when she died. 1040ez for 2011 However, if she sold the property before her death and realized a gain and if, because of her method of accounting, the proceeds from the sale are income in respect of a decedent reportable by her son, he must report ordinary income from depreciation. 1040ez for 2011 Example 2. 1040ez for 2011 The trustee of a trust created by a will transfers depreciable property to a beneficiary in satisfaction of a specific bequest of $10,000. 1040ez for 2011 If the property had a value of $9,000 at the date used for estate tax valuation purposes, the $1,000 increase in value to the date of distribution is a gain realized by the trust. 1040ez for 2011 Ordinary income from depreciation must be reported by the trust on the transfer. 1040ez for 2011 Like-Kind Exchanges and Involuntary Conversions A like-kind exchange of your depreciable property or an involuntary conversion of the property into similar or related property will not result in your having to report ordinary income from depreciation unless money or property other than like-kind, similar, or related property is also received in the transaction. 1040ez for 2011 For information on like-kind exchanges and involuntary conversions, see chapter 1. 1040ez for 2011 Depreciable personal property. 1040ez for 2011   If you have a gain from either a like-kind exchange or an involuntary conversion of your depreciable personal property, the amount to be reported as ordinary income from depreciation is the amount figured under the rules explained earlier (see Section 1245 Property), limited to the sum of the following amounts. 1040ez for 2011 The gain that must be included in income under the rules for like-kind exchanges or involuntary conversions. 1040ez for 2011 The fair market value of the like-kind, similar, or related property other than depreciable personal property acquired in the transaction. 1040ez for 2011 Example 1. 1040ez for 2011 You bought a new machine for $4,300 cash plus your old machine for which you were allowed a $1,360 trade-in. 1040ez for 2011 The old machine cost you $5,000 two years ago. 1040ez for 2011 You took depreciation deductions of $3,950. 1040ez for 2011 Even though you deducted depreciation of $3,950, the $310 gain ($1,360 trade-in allowance minus $1,050 adjusted basis) is not reported because it is postponed under the rules for like-kind exchanges and you received only depreciable personal property in the exchange. 1040ez for 2011 Example 2. 1040ez for 2011 You bought office machinery for $1,500 two years ago and deducted $780 depreciation. 1040ez for 2011 This year a fire destroyed the machinery and you received $1,200 from your fire insurance, realizing a gain of $480 ($1,200 − $720 adjusted basis). 1040ez for 2011 You choose to postpone reporting gain, but replacement machinery cost you only $1,000. 1040ez for 2011 Your taxable gain under the rules for involuntary conversions is limited to the remaining $200 insurance payment. 1040ez for 2011 All your replacement property is depreciable personal property, so your ordinary income from depreciation is limited to $200. 1040ez for 2011 Example 3. 1040ez for 2011 A fire destroyed office machinery you bought for $116,000. 1040ez for 2011 The depreciation deductions were $91,640 and the machinery had an adjusted basis of $24,360. 1040ez for 2011 You received a $117,000 insurance payment, realizing a gain of $92,640. 1040ez for 2011 You immediately spent $105,000 of the insurance payment for replacement machinery and $9,000 for stock that qualifies as replacement property and you choose to postpone reporting the gain. 1040ez for 2011 $114,000 of the $117,000 insurance payment was used to buy replacement property, so the gain that must be included in income under the rules for involuntary conversions is the part not spent, or $3,000. 1040ez for 2011 The part of the insurance payment ($9,000) used to buy the nondepreciable property (the stock) also must be included in figuring the gain from depreciation. 1040ez for 2011 The amount you must report as ordinary income on the transaction is $12,000, figured as follows. 1040ez for 2011 1) Gain realized on the transaction ($92,640) limited to depreciation ($91,640) $91,640 2) Gain includible in income (amount not spent) 3,000     Plus: fair market value of property other than depreciable personal property (the stock) 9,000 12,000 Amount reportable as ordinary income (lesser of (1) or (2)) $12,000   If, instead of buying $9,000 in stock, you bought $9,000 worth of depreciable personal property similar or related in use to the destroyed property, you would only report $3,000 as ordinary income. 1040ez for 2011 Depreciable real property. 1040ez for 2011   If you have a gain from either a like-kind exchange or involuntary conversion of your depreciable real property, ordinary income from additional depreciation is figured under the rules explained earlier (see Section 1250 Property), limited to the greater of the following amounts. 1040ez for 2011 The gain that must be reported under the rules for like-kind exchanges or involuntary conversions plus the fair market value of stock bought as replacement property in acquiring control of a corporation. 1040ez for 2011 The gain you would have had to report as ordinary income from additional depreciation had the transaction been a cash sale minus the cost (or fair market value in an exchange) of the depreciable real property acquired. 1040ez for 2011   The ordinary income not reported for the year of the disposition is carried over to the depreciable real property acquired in the like-kind exchange or involuntary conversion as additional depreciation from the property disposed of. 1040ez for 2011 Further, to figure the applicable percentage of additional depreciation to be treated as ordinary income, the holding period starts over for the new property. 1040ez for 2011 Example. 1040ez for 2011 The state paid you $116,000 when it condemned your depreciable real property for public use. 1040ez for 2011 You bought other real property similar in use to the property condemned for $110,000 ($15,000 for depreciable real property and $95,000 for land). 1040ez for 2011 You also bought stock for $5,000 to get control of a corporation owning property similar in use to the property condemned. 1040ez for 2011 You choose to postpone reporting the gain. 1040ez for 2011 If the transaction had been a sale for cash only, under the rules described earlier, $20,000 would have been reportable as ordinary income because of additional depreciation. 1040ez for 2011 The ordinary income to be reported is $6,000, which is the greater of the following amounts. 1040ez for 2011 The gain that must be reported under the rules for involuntary conversions, $1,000 ($116,000 − $115,000) plus the fair market value of stock bought as qualified replacement property, $5,000, for a total of $6,000. 1040ez for 2011 The gain you would have had to report as ordinary income from additional depreciation ($20,000) had this transaction been a cash sale minus the cost of the depreciable real property bought ($15,000), or $5,000. 1040ez for 2011   The ordinary income not reported, $14,000 ($20,000 − $6,000), is carried over to the depreciable real property you bought as additional depreciation. 1040ez for 2011 Basis of property acquired. 1040ez for 2011   If the ordinary income you have to report because of additional depreciation is limited, the total basis of the property you acquired is its fair market value (its cost, if bought to replace property involuntarily converted into money) minus the gain postponed. 1040ez for 2011   If you acquired more than one item of property, allocate the total basis among the properties in proportion to their fair market value (their cost, in an involuntary conversion into money). 1040ez for 2011 However, if you acquired both depreciable real property and other property, allocate the total basis as follows. 1040ez for 2011 Subtract the ordinary income because of additional depreciation that you do not have to report from the fair market value (or cost) of the depreciable real property acquired. 1040ez for 2011 Add the fair market value (or cost) of the other property acquired to the result in (1). 1040ez for 2011 Divide the result in (1) by the result in (2). 1040ez for 2011 Multiply the total basis by the result in (3). 1040ez for 2011 This is the basis of the depreciable real property acquired. 1040ez for 2011 If you acquired more than one item of depreciable real property, allocate this basis amount among the properties in proportion to their fair market value (or cost). 1040ez for 2011 Subtract the result in (4) from the total basis. 1040ez for 2011 This is the basis of the other property acquired. 1040ez for 2011 If you acquired more than one item of other property, allocate this basis amount among the properties in proportion to their fair market value (or cost). 1040ez for 2011 Example 1. 1040ez for 2011 In 1988, low-income housing property that you acquired and placed in service in 1983 was destroyed by fire and you received a $90,000 insurance payment. 1040ez for 2011 The property's adjusted basis was $38,400, with additional depreciation of $14,932. 1040ez for 2011 On December 1, 1988, you used the insurance payment to acquire and place in service replacement low-income housing property. 1040ez for 2011 Your realized gain from the involuntary conversion was $51,600 ($90,000 − $38,400). 1040ez for 2011 You chose to postpone reporting the gain under the involuntary conversion rules. 1040ez for 2011 Under the rules for depreciation recapture on real property, the ordinary gain was $14,932, but you did not have to report any of it because of the limit for involuntary conversions. 1040ez for 2011 The basis of the replacement low-income housing property was its $90,000 cost minus the $51,600 gain you postponed, or $38,400. 1040ez for 2011 The $14,932 ordinary gain you did not report is treated as additional depreciation on the replacement property. 1040ez for 2011 If you sold the property in 2013, your holding period for figuring the applicable percentage of additional depreciation to report as ordinary income will have begun December 2, 1988, the day after you acquired the property. 1040ez for 2011 Example 2. 1040ez for 2011 John Adams received a $90,000 fire insurance payment for depreciable real property (office building) with an adjusted basis of $30,000. 1040ez for 2011 He uses the whole payment to buy property similar in use, spending $42,000 for depreciable real property and $48,000 for land. 1040ez for 2011 He chooses to postpone reporting the $60,000 gain realized on the involuntary conversion. 1040ez for 2011 Of this gain, $10,000 is ordinary income from additional depreciation but is not reported because of the limit for involuntary conversions of depreciable real property. 1040ez for 2011 The basis of the property bought is $30,000 ($90,000 − $60,000), allocated as follows. 1040ez for 2011 The $42,000 cost of depreciable real property minus $10,000 ordinary income not reported is $32,000. 1040ez for 2011 The $48,000 cost of other property (land) plus the $32,000 figured in (1) is $80,000. 1040ez for 2011 The $32,000 figured in (1) divided by the $80,000 figured in (2) is 0. 1040ez for 2011 4. 1040ez for 2011 The basis of the depreciable real property is $12,000. 1040ez for 2011 This is the $30,000 total basis multiplied by the 0. 1040ez for 2011 4 figured in (3). 1040ez for 2011 The basis of the other property (land) is $18,000. 1040ez for 2011 This is the $30,000 total basis minus the $12,000 figured in (4). 1040ez for 2011 The ordinary income that is not reported ($10,000) is carried over as additional depreciation to the depreciable real property that was bought and may be taxed as ordinary income on a later disposition. 1040ez for 2011 Multiple Properties If you dispose of depreciable property and other property in one transaction and realize a gain, you must allocate the amount realized between the two types of property in proportion to their respective fair market values to figure the part of your gain to be reported as ordinary income from depreciation. 1040ez for 2011 Different rules may apply to the allocation of the amount realized on the sale of a business that includes a group of assets. 1040ez for 2011 See chapter 2. 1040ez for 2011 In general, if a buyer and seller have adverse interests as to the allocation of the amount realized between the depreciable property and other property, any arm's length agreement between them will establish the allocation. 1040ez for 2011 In the absence of an agreement, the allocation should be made by taking into account the appropriate facts and circumstances. 1040ez for 2011 These include, but are not limited to, a comparison between the depreciable property and all the other property being disposed of in the transaction. 1040ez for 2011 The comparison should take into account all the following facts and circumstances. 1040ez for 2011 The original cost and reproduction cost of construction, erection, or production. 1040ez for 2011 The remaining economic useful life. 1040ez for 2011 The state of obsolescence. 1040ez for 2011 The anticipated expenditures required to maintain, renovate, or modernize the properties. 1040ez for 2011 Like-kind exchanges and involuntary conversions. 1040ez for 2011   If you dispose of and acquire depreciable personal property and other property (other than depreciable real property) in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. 1040ez for 2011 The amount allocated to the depreciable personal property disposed of is treated as consisting of, first, the fair market value of the depreciable personal property acquired and, second (to the extent of any remaining balance), the fair market value of the other property acquired. 1040ez for 2011 The amount allocated to the other property disposed of is treated as consisting of the fair market value of all property acquired that has not already been taken into account. 1040ez for 2011   If you dispose of and acquire depreciable real property and other property in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. 1040ez for 2011 The amount allocated to each of the three types of property (depreciable real property, depreciable personal property, or other property) disposed of is treated as consisting of, first, the fair market value of that type of property acquired and, second (to the extent of any remaining balance), any excess fair market value of the other types of property acquired. 1040ez for 2011 If the excess fair market value is more than the remaining balance of the amount realized and is from both of the other two types of property, you can apply the unallocated amount in any manner you choose. 1040ez for 2011 Example. 1040ez for 2011 A fire destroyed your property with a total fair market value of $50,000. 1040ez for 2011 It consisted of machinery worth $30,000 and nondepreciable property worth $20,000. 1040ez for 2011 You received an insurance payment of $40,000 and immediately used it with $10,000 of your own funds (for a total of $50,000) to buy machinery with a fair market value of $15,000 and nondepreciable property with a fair market value of $35,000. 1040ez for 2011 The adjusted basis of the destroyed machinery was $5,000 and your depreciation on it was $35,000. 1040ez for 2011 You choose to postpone reporting your gain from the involuntary conversion. 1040ez for 2011 You must report $9,000 as ordinary income from depreciation arising from this transaction, figured as follows. 1040ez for 2011 The $40,000 insurance payment must be allocated between the machinery and the other property destroyed in proportion to the fair market value of each. 1040ez for 2011 The amount allocated to the machinery is 30,000/50,000 × $40,000, or $24,000. 1040ez for 2011 The amount allocated to the other property is 20,000/50,000 × $40,000, or $16,000. 1040ez for 2011 Your gain on the involuntary conversion of the machinery is $24,000 minus $5,000 adjusted basis, or $19,000. 1040ez for 2011 The $24,000 allocated to the machinery disposed of is treated as consisting of the $15,000 fair market value of the replacement machinery bought and $9,000 of the fair market value of other property bought in the transaction. 1040ez for 2011 All $16,000 allocated to the other property disposed of is treated as consisting of the fair market value of the other property that was bought. 1040ez for 2011 Your potential ordinary income from depreciation is $19,000, the gain on the machinery, because it is less than the $35,000 depreciation. 1040ez for 2011 However, the amount you must report as ordinary income is limited to the $9,000 included in the amount realized for the machinery that represents the fair market value of property other than the depreciable property you bought. 1040ez for 2011 Prev  Up  Next   Home   More Online Publications