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1040x 2013 Form

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1040x 2013 Form

1040x 2013 form 10. 1040x 2013 form   Installment Sales Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Installment Sale of a Farm Installment MethodWhen to elect out. 1040x 2013 form Revoking the election. 1040x 2013 form More information. 1040x 2013 form Figuring Installment Sale Income Payments Received or Considered Received ExampleSection 1231 gains. 1040x 2013 form Summary. 1040x 2013 form Introduction An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 1040x 2013 form If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. 1040x 2013 form This method of reporting gain is called the installment method. 1040x 2013 form You cannot use the installment method to report a loss. 1040x 2013 form You can choose to report all of your gain in the year of sale. 1040x 2013 form Installment obligation. 1040x 2013 form   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. 1040x 2013 form Topics - This chapter discusses: The general rules that apply to using the installment method Installment sale of a farm Useful Items - You may want to see: Publication 523 Selling Your Home 535 Business Expenses 537 Installment Sales 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property 6252 Installment Sale Income See chapter 16 for information about getting publications and forms. 1040x 2013 form Installment Sale of a Farm The installment sale of a farm for one overall price under a single contract is not the sale of a single asset. 1040x 2013 form It generally includes the sale of real property and personal property reportable on the installment method. 1040x 2013 form It may also include the sale of property for which you must maintain an inventory, which cannot be reported on the installment method. 1040x 2013 form See Inventory , later. 1040x 2013 form The selling price must be allocated to determine the amount received for each class of asset. 1040x 2013 form The tax treatment of the gain or loss on the sale of each class of assets is determined by its classification as a capital asset, as property used in the business, or as property held for sale and by the length of time the asset was held. 1040x 2013 form (See chapter 8 for a discussion of capital assets and chapter 9 for a discussion of property used in the business. 1040x 2013 form ) Separate computations must be made to figure the gain or loss for each class of asset sold. 1040x 2013 form See Sale of a Farm in chapter 8. 1040x 2013 form If you report the sale of property on the installment method, any depreciation recapture under section 1245 or 1250 of the Internal Revenue Code is generally taxable as ordinary income in the year of sale. 1040x 2013 form See Depreciation recapture , later. 1040x 2013 form This applies even if no payments are received in that year. 1040x 2013 form Installment Method An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 1040x 2013 form A farmer who is not required to maintain an inventory can use the installment method to report gain from the sale of property used or produced in farming. 1040x 2013 form See Inventory , later, for information on the sale of farm property where inventory items are included in the assets sold. 1040x 2013 form If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. 1040x 2013 form Electing out of the installment method. 1040x 2013 form   If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. 1040x 2013 form   To make this election, do not report your sale on Form 6252. 1040x 2013 form Instead, report it on Schedule D (Form 1040), Form 4797, or both. 1040x 2013 form When to elect out. 1040x 2013 form   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. 1040x 2013 form   However, if you timely file your tax return for the year the sale takes place without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040x 2013 form Write “Filed pursuant to section 301. 1040x 2013 form 9100-2” at the top of the amended return and file it where the original return was filed. 1040x 2013 form Revoking the election. 1040x 2013 form   Once made, the election can be revoked only with IRS approval. 1040x 2013 form A revocation is retroactive. 1040x 2013 form More information. 1040x 2013 form   See Electing Out of the Installment Method in Publication 537 for more information. 1040x 2013 form Inventory. 1040x 2013 form   The sale of farm inventory items cannot be reported on the installment method. 1040x 2013 form All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. 1040x 2013 form   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. 1040x 2013 form If you do not, each payment must be allocated between the inventory and the other assets sold. 1040x 2013 form Sale at a loss. 1040x 2013 form   If your sale results in a loss, you cannot use the installment method. 1040x 2013 form If the loss is on an installment sale of business assets, you can deduct it only in the tax year of sale. 1040x 2013 form Figuring Installment Sale Income Each payment on an installment sale usually consists of the following three parts. 1040x 2013 form Interest income. 1040x 2013 form Return of your adjusted basis in the property. 1040x 2013 form Gain on the sale. 1040x 2013 form In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. 1040x 2013 form You do not include in income the part that is the return of your basis in the property. 1040x 2013 form Basis is the amount of your investment in the property for installment sale purposes. 1040x 2013 form Interest income. 1040x 2013 form   You must report interest as ordinary income. 1040x 2013 form Interest is generally not included in a down payment. 1040x 2013 form However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. 1040x 2013 form Interest provided in the agreement is called stated interest. 1040x 2013 form If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. 1040x 2013 form See Unstated interest , later. 1040x 2013 form    You must continue to report the interest income on payments you receive in subsequent years as interest income. 1040x 2013 form Adjusted basis and installment sale income (gain on sale). 1040x 2013 form   After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. 1040x 2013 form A tax-free return of your adjusted basis in the property, and Your gain (referred to as “installment sale income” on Form 6252). 1040x 2013 form Figuring adjusted basis for installment sale purposes. 1040x 2013 form   You can use Worksheet 10-1 to figure your adjusted basis in the property for installment sale purposes. 1040x 2013 form When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. 1040x 2013 form    Worksheet 10-1. 1040x 2013 form Figuring Adjusted Basis and Gross Profit Percentage 1. 1040x 2013 form Enter the selling price for the property   2. 1040x 2013 form Enter your adjusted basis for the property     3. 1040x 2013 form Enter your selling expenses     4. 1040x 2013 form Enter any depreciation recapture     5. 1040x 2013 form Add lines 2, 3, and 4. 1040x 2013 form  This is your adjusted basis  for installment sale purposes   6. 1040x 2013 form Subtract line 5 from line 1. 1040x 2013 form If zero or less, enter -0-. 1040x 2013 form  This is your gross profit     If the amount entered on line 6 is zero, Stop here. 1040x 2013 form You cannot use the installment method. 1040x 2013 form   7. 1040x 2013 form Enter the contract price for the property   8. 1040x 2013 form Divide line 6 by line 7. 1040x 2013 form This is your gross profit percentage   Selling price. 1040x 2013 form   The selling price is the total cost of the property to the buyer and includes the following. 1040x 2013 form Any money you are to receive. 1040x 2013 form The fair market value (FMV) of any property you are to receive (FMV is discussed at Property used as a payment under Payments Received or Considered Received ). 1040x 2013 form Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). 1040x 2013 form Any of your selling expenses the buyer pays. 1040x 2013 form Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. 1040x 2013 form Adjusted basis for installment sale purposes. 1040x 2013 form   Your adjusted basis is the total of the following three items. 1040x 2013 form Adjusted basis. 1040x 2013 form Selling expenses. 1040x 2013 form Depreciation recapture. 1040x 2013 form Adjusted basis. 1040x 2013 form   Basis is your investment in the property for installment sale purposes. 1040x 2013 form The way you figure basis depends on how you acquire the property. 1040x 2013 form The basis of property you buy is generally its cost. 1040x 2013 form The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. 1040x 2013 form   While you own property, various events may change your original basis. 1040x 2013 form Some events, such as adding rooms or making permanent improvements, increase basis. 1040x 2013 form Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. 1040x 2013 form The result is adjusted basis. 1040x 2013 form See chapter 6 and Publication 551, Basis of Assets, for more information. 1040x 2013 form Selling expenses. 1040x 2013 form   Selling expenses relate to the sale of the property. 1040x 2013 form They include commissions, attorney fees, and any other expenses paid on the sale. 1040x 2013 form Selling expenses are added to the basis of the sold property. 1040x 2013 form Depreciation recapture. 1040x 2013 form   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. 1040x 2013 form See Depreciation Recapture in chapter 9 and Depreciation Recapture Income in Publication 537. 1040x 2013 form Gross profit. 1040x 2013 form   Gross profit is the total gain you report on the installment method. 1040x 2013 form   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. 1040x 2013 form If the property you sold was your home, subtract from the gross profit any gain you can exclude. 1040x 2013 form Contract price. 1040x 2013 form   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. 1040x 2013 form Gross profit percentage. 1040x 2013 form   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. 1040x 2013 form This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. 1040x 2013 form   The gross profit percentage generally remains the same for each payment you receive. 1040x 2013 form However, see the example under Selling price reduced , later, for a situation where the gross profit percentage changes. 1040x 2013 form Amount to report as installment sale income. 1040x 2013 form   Multiply the payments you receive each year (less interest) by the gross profit percentage. 1040x 2013 form The result is your installment sales income for the tax year. 1040x 2013 form In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. 1040x 2013 form A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. 1040x 2013 form For a detailed discussion, see Payments Received or Considered Received , later. 1040x 2013 form Selling price reduced. 1040x 2013 form   If the selling price is reduced at a later date, the gross profit on the sale also will change. 1040x 2013 form You then must refigure the gross profit percentage for the remaining payments. 1040x 2013 form Refigure your gross profit using Worksheet 10-2. 1040x 2013 form New Gross Profit Percentage — Selling Price Reduced. 1040x 2013 form You will spread any remaining gain over future installments. 1040x 2013 form    Worksheet 10-2. 1040x 2013 form New Gross Profit Percentage — Selling Price Reduced 1. 1040x 2013 form Enter the reduced selling  price for the property   2. 1040x 2013 form Enter your adjusted  basis for the  property     3. 1040x 2013 form Enter your selling  expenses     4. 1040x 2013 form Enter any depreciation  recapture     5. 1040x 2013 form Add lines 2, 3, and 4. 1040x 2013 form   6. 1040x 2013 form Subtract line 5 from line 1. 1040x 2013 form  This is your adjusted  gross profit   7. 1040x 2013 form Enter any installment sale  income reported in  prior year(s)   8. 1040x 2013 form Subtract line 7 from line 6   9. 1040x 2013 form Future installments     10. 1040x 2013 form Divide line 8 by line 9. 1040x 2013 form  This is your new  gross profit percentage*. 1040x 2013 form   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. 1040x 2013 form Example. 1040x 2013 form In 2011, you sold land with a basis of $40,000 for $100,000. 1040x 2013 form Your gross profit was $60,000. 1040x 2013 form You received a $20,000 down payment and the buyer's note for $80,000. 1040x 2013 form The note provides for monthly payments of $1,953 each, figured at 8% interest, amortized over four years, beginning in January 2012. 1040x 2013 form Your gross profit percentage was 60%. 1040x 2013 form You received the down payment of $20,000 in 2011 and total payments of $23,436 in 2012, of which $17,675 was principal and $5,761 was interest according to the amortization schedule. 1040x 2013 form You reported a gain of $12,000 on the down payment received in 2011 and $10,605 ($17,675 X 60% (. 1040x 2013 form 60)) in 2012. 1040x 2013 form In January 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $1,483 a month amortized over the remaining three years. 1040x 2013 form The new gross profit percentage, 47. 1040x 2013 form 32%, is figured in Example — Worksheet 10-2. 1040x 2013 form Example — Worksheet 10-2. 1040x 2013 form New Gross Profit Percentage — Selling Price Reduced 1. 1040x 2013 form Enter the reduced selling  price for the property 85,000 2. 1040x 2013 form Enter your adjusted  basis for the  property 40,000   3. 1040x 2013 form Enter your selling  expenses -0-   4. 1040x 2013 form Enter any depreciation  recapture -0-   5. 1040x 2013 form Add lines 2, 3, and 4. 1040x 2013 form 40,000 6. 1040x 2013 form Subtract line 5 from line 1. 1040x 2013 form  This is your adjusted  gross profit 45,000 7. 1040x 2013 form Enter any installment sale  income reported in  prior year(s) 22,605 8. 1040x 2013 form Subtract line 7 from line 6 22,395 9. 1040x 2013 form Future installments   47,325 10. 1040x 2013 form Divide line 8 by line 9. 1040x 2013 form  This is your new  gross profit percentage*. 1040x 2013 form 47. 1040x 2013 form 32% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. 1040x 2013 form You will report installment sale income of $6,878 (47. 1040x 2013 form 32% of $14,535) in 2013, $7,449 (47. 1040x 2013 form 32% of $15,742) in 2014, and $8,067 (47. 1040x 2013 form 32% of $17,048) in 2015. 1040x 2013 form Form 6252. 1040x 2013 form   Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. 1040x 2013 form Attach it to your tax return for each year. 1040x 2013 form Disposition of Installment Obligation If you are using the installment method and you dispose of the installment obligation, generally you will have a gain or loss to report. 1040x 2013 form It is considered gain or loss on the sale of the property for which you received the installment obligation. 1040x 2013 form Cancellation. 1040x 2013 form   If an installment obligation is canceled or otherwise becomes unenforceable, it is treated as a disposition other than a sale or exchange. 1040x 2013 form Your gain or loss is the difference between your basis in the obligation and its fair market value (FMV) at the time you cancel it. 1040x 2013 form If the parties are related, the FMV of the obligation is considered to be no less than its full face value. 1040x 2013 form Transfer due to death. 1040x 2013 form   The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller is not a disposition. 1040x 2013 form Any unreported gain from the installment obligation is not treated as gross income to the decedent. 1040x 2013 form No income is reported on the decedent's return due to the transfer. 1040x 2013 form Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments. 1040x 2013 form   However, if the installment obligation is canceled, becomes unenforceable, or is transferred to the buyer because of the death of the holder of the obligation, it is a disposition. 1040x 2013 form The estate must figure its gain or loss on the disposition. 1040x 2013 form If the holder and the buyer were related, the FMV of the installment obligation is considered to be no less than its full face value. 1040x 2013 form More information. 1040x 2013 form   For more information on the disposition of an installment obligation, see Publication 537. 1040x 2013 form Sale of depreciable property. 1040x 2013 form   You generally cannot report gain from the sale of depreciable property to a related person on the installment method. 1040x 2013 form See Sale to a Related Person in Publication 537. 1040x 2013 form   You cannot use the installment method to report any depreciation recapture income up to the gain on the sale. 1040x 2013 form However, report any gain greater than the recapture income on the installment method. 1040x 2013 form   The recapture income reported in the year of sale is included in your installment sale basis to determine your gross profit on the installment sale. 1040x 2013 form   Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. 1040x 2013 form Report the depreciation recapture income in Part II of Form 4797 as ordinary income in the year of sale. 1040x 2013 form    If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. 1040x 2013 form See the Form 6252 instructions for details. 1040x 2013 form   For more information on the section 179 deduction, see Section 179 Expense Deduction in chapter 7. 1040x 2013 form For more information on depreciation recapture, see Depreciation Recapture in  chapter 9. 1040x 2013 form Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. 1040x 2013 form In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. 1040x 2013 form These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. 1040x 2013 form However, as discussed later, the buyer's assumption of your debt is treated as a recovery of basis, rather than as a payment, in many cases. 1040x 2013 form Buyer pays seller's expenses. 1040x 2013 form   If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. 1040x 2013 form Include these expenses in the selling and contract prices when figuring the gross profit percentage. 1040x 2013 form Buyer assumes mortgage. 1040x 2013 form   If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. 1040x 2013 form Mortgage less than basis. 1040x 2013 form   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. 1040x 2013 form It is considered a recovery of your basis. 1040x 2013 form The contract price is the selling price minus the mortgage. 1040x 2013 form Example. 1040x 2013 form You sell property with an adjusted basis of $19,000. 1040x 2013 form You have selling expenses of $1,000. 1040x 2013 form The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 8% interest) in each of the next 4 years). 1040x 2013 form The selling price is $25,000 ($15,000 + $10,000). 1040x 2013 form Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). 1040x 2013 form The contract price is $10,000 ($25,000 − $15,000 mortgage). 1040x 2013 form Your gross profit percentage is 50% ($5,000 ÷ $10,000). 1040x 2013 form You report half of each $2,000 payment received as gain from the sale. 1040x 2013 form You also report all interest you receive as ordinary income. 1040x 2013 form Mortgage more than basis. 1040x 2013 form   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. 1040x 2013 form The part of the mortgage greater than your basis is treated as a payment received in the year of sale. 1040x 2013 form   To figure the contract price, subtract the mortgage from the selling price. 1040x 2013 form This is the total amount (other than interest) you will receive directly from the buyer. 1040x 2013 form Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). 1040x 2013 form The contract price is then the same as your gross profit from the sale. 1040x 2013 form    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. 1040x 2013 form Example. 1040x 2013 form The selling price for your property is $9,000. 1040x 2013 form The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. 1040x 2013 form Your adjusted basis in the property is $4,400. 1040x 2013 form You have selling expenses of $600, for a total installment sale basis of $5,000. 1040x 2013 form The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). 1040x 2013 form This amount is included in the contract price and treated as a payment received in the year of sale. 1040x 2013 form The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000   Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000   Your gross profit percentage is 100%. 1040x 2013 form Report 100% of each payment (less interest) as gain from the sale. 1040x 2013 form Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. 1040x 2013 form Buyer assumes other debts. 1040x 2013 form   If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. 1040x 2013 form   If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. 1040x 2013 form Compare the debt to your installment sale basis in the property being sold. 1040x 2013 form If the debt is less than your installment sale basis, none of it is treated as a payment. 1040x 2013 form If it is more, only the difference is treated as a payment. 1040x 2013 form If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. 1040x 2013 form These rules are the same as the rules discussed earlier under Buyer assumes mortgage . 1040x 2013 form However, they apply only to the following types of debt the buyer assumes. 1040x 2013 form Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. 1040x 2013 form Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. 1040x 2013 form   If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. 1040x 2013 form The value of the assumed debt is then considered a payment to you in the year of sale. 1040x 2013 form Property used as a payment. 1040x 2013 form   If you receive property rather than money from the buyer, it is still considered a payment in the year received. 1040x 2013 form However, see Trading property for like-kind property , later. 1040x 2013 form Generally, the amount of the payment is the property's FMV on the date you receive it. 1040x 2013 form Exception. 1040x 2013 form   If the property the buyer gives you is payable on demand or readily tradable (see examples later), the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use an accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. 1040x 2013 form See Unstated interest , later. 1040x 2013 form Examples. 1040x 2013 form If you receive a note from the buyer as payment, and the note stipulates that you can demand payment from the buyer at any time, the note is payable on demand. 1040x 2013 form If you receive marketable securities from the buyer as payment, and you can sell the securities on an established securities market (such as the New York Stock Exchange) at any time, the securities are readily tradable. 1040x 2013 form In these examples, use the above rules to determine the amount you should consider as payment in the year received. 1040x 2013 form Debt not payable on demand. 1040x 2013 form   Any evidence of debt you receive from the buyer that is not payable on demand is not considered a payment. 1040x 2013 form This is true even if the debt is guaranteed by a third party, including a government agency. 1040x 2013 form Fair market value (FMV). 1040x 2013 form   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. 1040x 2013 form Third-party note. 1040x 2013 form   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. 1040x 2013 form Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. 1040x 2013 form The excess of the note's face value over its FMV is interest. 1040x 2013 form Exclude this interest in determining the selling price of the property. 1040x 2013 form However, see Exception under Property used as a payment , earlier. 1040x 2013 form Example. 1040x 2013 form You sold real estate in an installment sale. 1040x 2013 form As part of the down payment, the buyer assigned to you a $50,000, 8% third-party note. 1040x 2013 form The FMV of the third-party note at the time of the sale was $30,000. 1040x 2013 form This amount, not $50,000, is a payment to you in the year of sale. 1040x 2013 form The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. 1040x 2013 form The remaining 40% is interest taxed as ordinary income. 1040x 2013 form Bond. 1040x 2013 form   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. 1040x 2013 form For more information on the amount you should treat as a payment, see Exception under Property used as a payment , earlier. 1040x 2013 form   If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. 1040x 2013 form However, see Exception under Property used as a payment , earlier. 1040x 2013 form Buyer's note. 1040x 2013 form   The buyer's note (unless payable on demand) is not considered payment on the sale. 1040x 2013 form However, its full face value is included when figuring the selling price and the contract price. 1040x 2013 form Payments you receive on the note are used to figure your gain in the year received. 1040x 2013 form Sale to a related person. 1040x 2013 form   If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. 1040x 2013 form For information on these rules, see the Instructions for Form 6252 and Sale to a Related Person in Publication 537. 1040x 2013 form Trading property for like-kind property. 1040x 2013 form   If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. 1040x 2013 form See Like-Kind Exchanges in chapter 8 for a discussion of like-kind property. 1040x 2013 form   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine installment sale income each year. 1040x 2013 form The contract price is reduced by the FMV of the like-kind property received in the trade. 1040x 2013 form The gross profit is reduced by any gain on the trade that can be postponed. 1040x 2013 form Like-kind property received in the trade is not considered payment on the installment obligation. 1040x 2013 form Unstated interest. 1040x 2013 form   An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. 1040x 2013 form Interest provided in the contract is called stated interest. 1040x 2013 form   If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. 1040x 2013 form If Internal Revenue Code section 483 applies to the contract, this interest is called unstated interest. 1040x 2013 form   If Internal Revenue Code section 1274 applies to the contract, this interest is called original issue discount (OID). 1040x 2013 form   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. 1040x 2013 form Therefore, the buyer cannot deduct the unstated interest. 1040x 2013 form The seller must report the unstated interest as income. 1040x 2013 form Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. 1040x 2013 form   If the debt is subject to the Internal Revenue Code section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. 1040x 2013 form   Unstated interest reduces the stated selling price of the property and the buyer's basis in the property. 1040x 2013 form It increases the seller's interest income and the buyer's interest expense. 1040x 2013 form   In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the applicable federal rate (AFR). 1040x 2013 form    The AFRs are published monthly in the Internal Revenue Bulletin (IRB). 1040x 2013 form You can get this information by contacting an IRS office. 1040x 2013 form IRBs are also available at IRS. 1040x 2013 form gov. 1040x 2013 form More information. 1040x 2013 form   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. 1040x 2013 form Example. 1040x 2013 form You sell property at a contract price of $6,000 and your gross profit is $1,500. 1040x 2013 form Your gross profit percentage is 25% ($1,500 ÷ $6,000). 1040x 2013 form After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. 1040x 2013 form The remainder (balance) of each payment is the tax-free return of your adjusted basis. 1040x 2013 form Example On January 3, 2013, you sold your farm, including the home, farm land and buildings. 1040x 2013 form You received $50,000 down and the buyer's note for $200,000. 1040x 2013 form In addition, the buyer assumed an outstanding $50,000 mortgage on the farm land. 1040x 2013 form The total selling price was $300,000. 1040x 2013 form The note payments of $25,000 each, plus adequate interest, are due every July 1 and January 1, beginning in July 2013. 1040x 2013 form Your selling expenses were $15,000. 1040x 2013 form Adjusted basis and depreciation. 1040x 2013 form   The adjusted basis and depreciation claimed on each asset sold are as follows:   Depreciation Adjusted Asset Claimed Basis Home* -0- $33,743 Farm land -0- 73,610 Buildings $31,500 35,130 * Owned and used as main home for at least 2 of the 5 years prior to the sale Gain on each asset. 1040x 2013 form   The following schedule shows the assets included in the sale, each asset's selling price based on its respective value, the selling expense allocated to each asset, the adjusted basis of each asset, and the gain on each asset. 1040x 2013 form The selling expense for each asset is 5% of the selling price ($15,000 selling expense ÷ $300,000 selling price). 1040x 2013 form   Selling Selling Adjusted     Price Expense Basis Gain Home* $60,000 $3,000 $33,743 $23,257 Farm land  165,000  8,250  73,610  83,140 Buildings 75,000 3,750 35,130 36,120   $300,000 $15,000 $142,483 $142,517 * Owned and used as main home for at least 2 of the 5 years prior to the sale Depreciation recapture. 1040x 2013 form   The buildings are section 1250 property. 1040x 2013 form There is no depreciation recapture income for them because they were depreciated using the straight line method. 1040x 2013 form See chapter 9 for more information on depreciation recapture. 1040x 2013 form   Special rules may apply when you sell section 1250 assets depreciated under the straight line method. 1040x 2013 form See the Unrecaptured Section 1250 Gain Worksheet in the Instructions for Schedule D (Form 1040). 1040x 2013 form See chapter 3 of Publication 544, Sales and Other Dispositions of Assets, for more information on section 1250 assets. 1040x 2013 form Installment sale basis and gross profit. 1040x 2013 form   The following table shows each asset reported on the installment method, its selling price, installment sale basis, and gross profit. 1040x 2013 form     Installment     Selling Sale Gross   Price Basis Profit Farm land $165,000 $73,610 $83,140 Buildings 75,000 35,130 36,120   $240,000 $108,740 $119,260 Section 1231 gains. 1040x 2013 form   The gain on the farm land and buildings is reported as section 1231 gains. 1040x 2013 form See Section 1231 Gains and Losses in chapter 9. 1040x 2013 form Contract price and gross profit percentage. 1040x 2013 form   The contract price is $250,000 for the part of the sale reported on the installment method. 1040x 2013 form This is the selling price ($300,000) minus the mortgage assumed ($50,000). 1040x 2013 form   Gross profit percentage for the sale is 47. 1040x 2013 form 70% ($119,260 gross profit ÷ $250,000 contract price). 1040x 2013 form The gross profit percentage for each asset is figured as follows:   Percent Farm land ($83,140 ÷ $250,000) 33. 1040x 2013 form 256 Buildings ($36,120 ÷ $250,000) 14. 1040x 2013 form 448 Total 47. 1040x 2013 form 70 Figuring the gain to report on the installment method. 1040x 2013 form   One hundred percent (100%) of each payment is reported on the installment method. 1040x 2013 form The total amount received on the sale in 2013 is $75,000 ($50,000 down payment + $25,000 payment on July 1). 1040x 2013 form The installment sale part of the total payments received in 2013 is also $75,000. 1040x 2013 form Figure the gain to report for each asset by multiplying its gross profit percentage times $75,000. 1040x 2013 form   Income Farm land—33. 1040x 2013 form 256% × $75,000 $24,942 Buildings—14. 1040x 2013 form 448% × $75,000 10,836 Total installment income for 2013 $35,778 Reporting the sale. 1040x 2013 form   Report the installment sale on Form 6252. 1040x 2013 form Then report the amounts from Form 6252 on Form 4797 and Schedule D (Form 1040). 1040x 2013 form Attach a separate page to Form 6252 that shows the computations in the example. 1040x 2013 form If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. 1040x 2013 form Section 1231 gains. 1040x 2013 form   The gains on the farm land and buildings are section 1231 gains. 1040x 2013 form They may be reported as either capital or ordinary gain depending on the net balance when combined with other section 1231 losses. 1040x 2013 form A net 1231 gain is capital gain and a net 1231 loss is an ordinary loss. 1040x 2013 form Installment income for years after 2013. 1040x 2013 form   You figure installment income for the years after 2013 by applying the same gross profit percentages to the payments you receive each year. 1040x 2013 form If you receive $50,000 during the year, the entire $50,000 is considered received on the installment sale (100% × $50,000). 1040x 2013 form You realize income as follows:   Income Farm land—33. 1040x 2013 form 256% × $50,000 $16,628 Buildings—14. 1040x 2013 form 448% × $50,000 7,224 Total installment income $23,852   In this example, no gain ever is recognized from the sale of your home. 1040x 2013 form You will combine your section 1231 gains from this sale with section 1231 gains and losses from other sales in each of the later years to determine whether to report them as ordinary or capital gains. 1040x 2013 form The interest received with each payment will be included in full as ordinary income. 1040x 2013 form Summary. 1040x 2013 form   The installment income (rounded to the nearest dollar) from the sale of the farm is reported as follows: Selling price $190,000 Minus: Installment basis (108,740) Gross profit $81,260     Gain reported in 2012 (year of sale) $35,778 Gain reported in 2013:   $50,000 × 47. 1040x 2013 form 70% 23,850 Gain reported in 2014:   $50,000 × 47. 1040x 2013 form 70% 23,850 Gain reported in 2015:   $50,000 × 47. 1040x 2013 form 70% 23,850 Gain reported in 2016:   $25,000 × 47. 1040x 2013 form 70% 11,925 Total gain reported $119,253 Prev  Up  Next   Home   More Online Publications
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Understanding your CP14 Notice

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Page Last Reviewed or Updated: 28-Mar-2014

The 1040x 2013 Form

1040x 2013 form Index A Abandonment, Abandonment Accounting method Accrual, Accrual Method Cash, Cash Method Change in, Changes in Methods of Accounting Crop, Crop method. 1040x 2013 form Farm inventory, Farm Inventory Accounting periods, Introduction Accrual method of accounting, Accrual Method Additional Medicare Tax withholding, What's New for 2013, Additional Medicare Tax. 1040x 2013 form Adjusted basis for installment sale, Adjusted basis for installment sale purposes. 1040x 2013 form Adjusted basis of assets, Adjusted Basis Agricultural activity codes, Schedule F, Reminders Agricultural program payments, Agricultural Program Payments Agricultural structure, defined, Agricultural structure. 1040x 2013 form Alternative Depreciation System (ADS), Required use of ADS. 1040x 2013 form , ADS election. 1040x 2013 form Amortization Going into business, Business Start-Up Costs Reforestation expenses, Reforestation Costs Section 197 intangibles, Section 197 Intangibles Assessments By conservation district, Assessment by Conservation District Depreciable property, Assessment for Depreciable Property Assistance (see Tax help) Automobiles, depreciation, Limits for passenger automobiles. 1040x 2013 form B Bankruptcy, Bankruptcy. 1040x 2013 form Barter income, Barter income. 1040x 2013 form Basis Adjusted, Adjusted basis. 1040x 2013 form Installment sale, Adjusted basis for installment sale purposes. 1040x 2013 form Involuntary conversion, Basis for depreciation. 1040x 2013 form Like-kind exchange, Basis for depreciation. 1040x 2013 form Partner's basis, Property Distributed From a Partnership or Corporation Replacement property, Basis of replacement property. 1040x 2013 form Shareholder's basis, Property Distributed From a Partnership or Corporation Basis of assets Adjusted basis, Adjusted Basis Allocating to several assets, Allocating the Basis Changed to business use, Property changed from personal to business or rental use. 1040x 2013 form Constructing assets, Constructing assets. 1040x 2013 form Cost, Cost Basis Decreases, Decreases to Basis Depreciation, What Is the Basis for Depreciation? Exchanges Like-kind, Like-Kind Exchanges Nontaxable, Nontaxable Exchanges Partially nontaxable, Partially Nontaxable Exchanges Taxable, Taxable Exchanges Gifts, Property Received as a Gift Increases, Increases to Basis Real property, Real Property Received for services, Property received for services. 1040x 2013 form Uniform capitalization rules, Uniform Capitalization Rules Below-market loans, Below-market loans. 1040x 2013 form Books and records, Importance of Records Breeding fees, Breeding Fees Business income limit, section 179 expense deduction, Business Income Limit Business use of home, Business Use of Your Home C Canceled debt, Cancellation of Debt Capital assets, Capital Assets Capital expenses, Capital Expenses Car expenses, Truck and Car Expenses Cash method of accounting, Cash Method Casualties and thefts Adjustments to basis, Adjustments to basis. 1040x 2013 form Casualty, defined, Casualty. 1040x 2013 form Disaster area losses, Disaster Area Losses Leased property, Leased property. 1040x 2013 form Livestock, Livestock or produce bought for resale. 1040x 2013 form , Raised draft, breeding, dairy, or sporting animals. 1040x 2013 form Reimbursement, Insurance and other reimbursements. 1040x 2013 form Reporting gains and losses, Reporting Gains and Losses Theft, defined, Theft. 1040x 2013 form Change in accounting method, Changes in Methods of Accounting Chickens, purchased, Chickens, seeds, and young plants. 1040x 2013 form Christmas trees, Christmas tree cultivation. 1040x 2013 form , Christmas trees. 1040x 2013 form Club dues, Club dues and membership fees. 1040x 2013 form Comments on publication, Comments and suggestions. 1040x 2013 form Commodity Futures, Hedging (Commodity Futures) Wages, Noncash wages. 1040x 2013 form Commodity Credit Corporation (CCC) Loans, Commodity Credit Corporation (CCC) Loans Market gain, Market Gain Community property, Community property. 1040x 2013 form , Community property. 1040x 2013 form Computer, software, Computer software. 1040x 2013 form Condemnation, Casualties, Thefts, and Condemnations, Condemnation Conservation Cost-sharing exclusion, Conservation Expenses District assessments, Assessment by Conservation District Expenses, Conservation Expenses Plans, Conservation plan. 1040x 2013 form Conservation Reserve Program, Conservation Reserve Program (CRP) payments. 1040x 2013 form Conservation Reserve Program (CRP), Conservation Reserve Program (CRP) Constructing assets, Constructing assets. 1040x 2013 form Constructive receipt of income, Constructive receipt. 1040x 2013 form Contamination, Soil or other environmental contamination. 1040x 2013 form Contract price, Contract price. 1040x 2013 form Converted wetland, Converted Wetland and Highly Erodible Cropland Cooperatives, income from, Income From Cooperatives Cost-sharing exclusion, Cost-Sharing Exclusion (Improvements) Counter-cyclical payments, Direct payments and counter-cyclical payments. 1040x 2013 form , Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Credits Employment, Employment Credits Fuel tax, Fuel tax credit and refund. 1040x 2013 form , How To Claim a Credit or Refund, Claiming a Credit Social security and Medicare, Earning credits in 2013. 1040x 2013 form Social security coverage, How to become insured under social security. 1040x 2013 form State unemployment tax, Tax rate and credit. 1040x 2013 form Crew leaders, Crew Leaders Crop Destroyed, Standing crop destroyed by casualty. 1040x 2013 form Insurance proceeds, Crop Insurance and Crop Disaster Payments Method of accounting, Crop method. 1040x 2013 form Shares, Rents (Including Crop Shares) Unharvested, Cost of raising unharvested crops. 1040x 2013 form , Section 1231 transactions. 1040x 2013 form , Gain or loss. 1040x 2013 form Cropland, highly erodible, Converted Wetland and Highly Erodible Cropland D Damage Casualties and thefts, Casualties and Thefts Crop insurance, Crop Insurance and Crop Disaster Payments Tree seedlings, Tree Seedlings Debt Bad, Nonbusiness bad debt. 1040x 2013 form Canceled, Cancellation of Debt, Canceled debt excluded from income. 1040x 2013 form , Cancellation of debt. 1040x 2013 form , Canceled debt. 1040x 2013 form Nonrecourse, Amount realized on a nonrecourse debt. 1040x 2013 form Qualified farm, Qualified Farm Debt Qualified principal residence, Qualified Principal Residence Debt Recourse, Amount realized on a recourse debt. 1040x 2013 form Depletion, Depletion Depreciation, Claiming the Special Depreciation Allowance ADS election, ADS election. 1040x 2013 form Conservation assets, Depreciable conservation assets. 1040x 2013 form Deduction, Overview of Depreciation Incorrect amount deducted, How Do You Correct Depreciation Deductions? Limit for automobiles, Limits for passenger automobiles. 1040x 2013 form Listed property, Additional Rules for Listed Property Raised livestock, Livestock. 1040x 2013 form Recapture, When Do You Recapture MACRS Depreciation?, Depreciation Recapture, Section 1250 Property When to file, Do You Have To File Form 4562? Depreciation allowable, Basis adjustment for depreciation allowed or allowable. 1040x 2013 form Depreciation allowed, Basis adjustment for depreciation allowed or allowable. 1040x 2013 form Direct payments, Direct payments and counter-cyclical payments. 1040x 2013 form , Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Disaster area losses, Disaster Area Losses Disaster payments, Crop Insurance and Crop Disaster Payments Disaster relief grants, Federal disaster relief grants. 1040x 2013 form Disaster relief payments, Qualified disaster relief payments. 1040x 2013 form Dispositions, Sale or other disposal of land during 9-year period. 1040x 2013 form , Gain on sale of farmland. 1040x 2013 form , Introduction Domestic production activities deduction, Domestic Production Activities Deduction Dyed diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Dyed kerosene, Dyed Diesel Fuel and Dyed Kerosene E e-file, Reminders Easement, Easements and rights-of-way. 1040x 2013 form , Easements. 1040x 2013 form Election ADS depreciation, Electing ADS. 1040x 2013 form , ADS election. 1040x 2013 form Amortization Business start-up costs, Business Start-Up Costs Reforestation costs, Reforestation Costs Crop method, Election to use crop method. 1040x 2013 form Cutting of timber, Election to treat cutting as a sale or exchange. 1040x 2013 form Deducting conservation expenses, When to Deduct or Capitalize Not excluding cost-sharing payments, Electing not to exclude payments. 1040x 2013 form Out of installment method, Electing out of the installment method. 1040x 2013 form Postponing casualty gain, Postponing Gain Postponing reporting crop insurance proceeds, Election to postpone reporting until the following year. 1040x 2013 form Section 179 expense deduction, How Do You Elect the Deduction? Electronic filing, Reminders Embryo transplants, Transplanted embryo. 1040x 2013 form Employer identification number, Reminders, Employer identification number (EIN). 1040x 2013 form Endangered species recovery expenses, Endangered species recovery expenses. 1040x 2013 form Environmental contamination, Soil or other environmental contamination. 1040x 2013 form Estimated tax Farm gross income, Gross Income From Farming Gross income, Gross Income Penalties, Estimated Tax Penalty for 2013 Exchanges Basis Like-kind, Like-Kind Exchanges Nontaxable, Nontaxable Exchanges Partially nontaxable, Partially Nontaxable Exchanges Taxable, Taxable Exchanges Like-kind, Like-Kind Exchanges Nontaxable, Like-Kind Exchanges Excise taxes Credit, Claiming a Credit Diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Farming purposes, Fuels Used in Farming Home use of fuels, Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines Off-highway uses, Fuels Used in Off-Highway Business Use Refund, Claiming a Refund F Fair market value defined, Fair market value (FMV). 1040x 2013 form , Fair market value (FMV). 1040x 2013 form Family member Business expenses, Special rule for related persons. 1040x 2013 form Installment sale, Sale to a related person. 1040x 2013 form Like-kind exchange, Like-kind exchanges between related persons. 1040x 2013 form Loss on sale or exchange of property, Losses from sales or exchanges between related persons. 1040x 2013 form Personal-use property, Personal-use property. 1040x 2013 form Social security coverage, Family Employees Farm Business expenses, Farm Business Expenses Business, defined, Business of Farming Defined, Farm defined. 1040x 2013 form , Farm. 1040x 2013 form Income averaging, Income Averaging for Farmers Rental, Farm rental. 1040x 2013 form Sale of, Sale of a Farm Farmer, Farmer. 1040x 2013 form Federal unemployment tax (FUTA), Federal Unemployment (FUTA) Tax Fertilizer, Fertilizer and Lime, Fertilizer and Lime Foreclosure, Foreclosure or Repossession Forestation costs, Forestation and reforestation costs. 1040x 2013 form Form 1099-A, Form 1099-A. 1040x 2013 form , Forms 1099-A and 1099-C. 1040x 2013 form 1099-C, Cancellation of Debt, Form 1099-C. 1040x 2013 form , Forms 1099-A and 1099-C. 1040x 2013 form 1099-G, Market Gain, Payment to More Than One Person 1099-MISC, Reminders, Nonemployee compensation. 1040x 2013 form 1099-PATR, Form 1099-PATR. 1040x 2013 form 1128, Introduction 2210-F, Estimated Tax Penalty for 2013 3115, Changes in Methods of Accounting 4136, Claiming a Credit 4562, Do You Have To File Form 4562? 4797, Form 4797. 1040x 2013 form , Recapture. 1040x 2013 form , Reporting the exchange. 1040x 2013 form 4835, Rents (Including Crop Shares) 5213, Using the presumption later. 1040x 2013 form 6252, Form 6252. 1040x 2013 form 8822, Reminders 8824, Reporting the exchange. 1040x 2013 form 8849, Claiming a Refund 8886, Reminders 940, Form 940. 1040x 2013 form 943, Form 943. 1040x 2013 form 982, Form 982 I-9, Form I-9. 1040x 2013 form SS-4, Reminders, Employer identification number (EIN). 1040x 2013 form SS-5, Obtaining a social security number. 1040x 2013 form T (Timber), Form T (Timber). 1040x 2013 form W-2, Form W-2. 1040x 2013 form W-4, Reminders, New hire reporting. 1040x 2013 form , Form W-4. 1040x 2013 form W-4V, Commodity Credit Corporation (CCC) Loans, Crop Insurance and Crop Disaster Payments W-7, Obtaining an individual taxpayer identification number. 1040x 2013 form Free tax services, How To Get Tax Help, Free help with your tax return. 1040x 2013 form Fuel tax credit or refund, Fuel tax credit and refund. 1040x 2013 form , How To Claim a Credit or Refund G Gains and losses Basis of assets, Cost Basis Capital assets, defined, Capital Assets Casualty, How To Figure a Loss, Figuring a Gain Installment sales, Installment Sales Livestock, Livestock Long- or short-term, Long and Short Term Ordinary or capital, Ordinary or Capital Gain or Loss Sale of farm, Sale of a Farm Section 1231, Section 1231 Gains and Losses Theft, How To Figure a Loss, Figuring a Gain Timber, Timber General asset accounts, How Do You Use General Asset Accounts? Gifts, Crop shares you give to others (gift). 1040x 2013 form , Cost related to gifts. 1040x 2013 form , Property Received as a Gift, Gift. 1040x 2013 form Going into business, Business Start-Up Costs Grants, disaster relief, Federal disaster relief grants. 1040x 2013 form Gross profit percentage, Gross profit percentage. 1040x 2013 form Gross profit, defined, Gross profit. 1040x 2013 form Guarantee, Debt not payable on demand. 1040x 2013 form H Health insurance deduction, Self-employed health insurance deduction. 1040x 2013 form Hedging, Hedging (Commodity Futures) Help (see Tax help) Highway use tax, Highway use tax. 1040x 2013 form Holding period, Holding period. 1040x 2013 form Horticultural structure, Horticultural structure. 1040x 2013 form I Illegal irrigation subsidy, Illegal federal irrigation subsidy. 1040x 2013 form Important dates, Important Dates for 2014 Improvements, Cost-Sharing Exclusion (Improvements) Income Accounting for, Accounting Methods Accrual method of accounting, Income Canceled debt excluded, Cancellation of Debt From farming, Farm Income, Gross income from farming. 1040x 2013 form , Gross Income From Farming Gross, Gross Income Not-for-profit farming, Not-for-Profit Farming Pasture, Pasture income and rental. 1040x 2013 form Schedule F, Farm Income Withholding of tax, Federal Income Tax Withholding Income averaging (see Farm: Income averaging) Incorrect amount of depreciation deducted, How Do You Correct Depreciation Deductions? Individual taxpayer identification number (ITIN), Obtaining an individual taxpayer identification number. 1040x 2013 form Inherited property, Inherited Property Insolvency, Insolvency. 1040x 2013 form Installment sales, Form 6252. 1040x 2013 form Electing out, Electing out of the installment method. 1040x 2013 form Farm, sale of, Installment Sale of a Farm Figuring income, Figuring Installment Sale Income Reporting income, Form 6252. 1040x 2013 form Unstated interest, Unstated interest. 1040x 2013 form Insurance, Insurance, Self-employed health insurance deduction. 1040x 2013 form Intangible property, Section 197 Intangibles Interest Expense, Interest Income, Interest income. 1040x 2013 form Unstated, Unstated interest. 1040x 2013 form Inventory Items included, Farm Inventory Methods of valuation, Inventory valuation methods. 1040x 2013 form Involuntary conversions, Involuntary Conversions, Property acquired in a like-kind exchange or involuntary conversion. 1040x 2013 form , Introduction Irrigation Illegal subsidy, Illegal federal irrigation subsidy. 1040x 2013 form Project, Irrigation Project L Labor hired, Labor Hired Landlord participation, Landlord Participation in Farming Lease or purchase, Lease or Purchase Life tenant (see Term interests) Like-kind exchanges, Like-Kind Exchanges, Like-Kind Exchanges Lime, Fertilizer and Lime Limits At-risk, At-Risk Limits Business use of home, Deduction limit. 1040x 2013 form Capital losses, Treatment of Capital Losses Conservation expenses, Assessment for Depreciable Property, 25% Limit on Deduction Depreciation Business-use, What Is the Business-Use Requirement? Excluded farm debt, Exclusion limit. 1040x 2013 form Farm losses, Losses From Operating a Farm Loss of personal-use property, Deduction Limits on Losses of Personal-Use Property Not-for-profit farming, Not-for-Profit Farming Passive activity, Passive Activity Limits Percentage depletion, Taxable income limit. 1040x 2013 form Prepaid farm supplies, Deduction limit. 1040x 2013 form Reforestation costs, Reforestation Costs Section 179 expense deduction Automobile, Limits for passenger automobiles. 1040x 2013 form Business income, Business Income Limit Dollar, Dollar Limits Time to keep records, How Long To Keep Records Listed property Defined, What Is Listed Property? Passenger automobile, Passenger automobiles. 1040x 2013 form Rules, Additional Rules for Listed Property Livestock, Section 1231 transactions. 1040x 2013 form Casualty and theft losses, Livestock or produce bought for resale. 1040x 2013 form Crop shares, Crop shares you use to feed livestock. 1040x 2013 form Depreciation, Livestock. 1040x 2013 form Diseased, Diseased livestock. 1040x 2013 form Feed assistance, Feed Assistance and Payments Immature, Immature livestock. 1040x 2013 form Losses, Loss of livestock. 1040x 2013 form , Livestock Purchased, Purchased livestock. 1040x 2013 form Raised, Raised livestock. 1040x 2013 form Sale of, Sales of Farm Products, Livestock Unit-livestock-price, inventory valuation, Unit-livestock-price method. 1040x 2013 form Used in a farm business, Livestock used in farm business. 1040x 2013 form Weather-related sales, Sales Caused by Weather-Related Conditions, Weather-related sales of livestock. 1040x 2013 form Loans, Commodity Credit Corporation (CCC) Loans, Loan expenses. 1040x 2013 form Losses At-risk limits, At-Risk Limits Casualty, Casualties, Thefts, and Condemnations Disaster areas, Disaster Area Losses Farming, Farming Losses Growing crops, Loss of growing plants, produce, and crops. 1040x 2013 form Hobby farming, Not-for-Profit Farming Livestock, Livestock, Diseased livestock. 1040x 2013 form Nondeductible, Other Nondeductible Items Theft, Casualties, Thefts, and Condemnations Lost income payments, Lost income payments. 1040x 2013 form Lost property, Mislaid or lost property. 1040x 2013 form M MACRS property Involuntary conversion, Property acquired in a like-kind exchange or involuntary conversion. 1040x 2013 form Like-kind exchange, Property acquired in a like-kind exchange or involuntary conversion. 1040x 2013 form Nontaxable transfer, Property acquired in a nontaxable transfer. 1040x 2013 form Market gain, reporting, Market Gain Marketing quota penalties, Marketing Quota Penalties Material participation, Landlord Participation in Farming Meals, Meals. 1040x 2013 form Membership fees, Club dues and membership fees. 1040x 2013 form Methods of accounting, Accounting Methods Modified ACRS (MACRS) ADS election, ADS election. 1040x 2013 form Conventions, Which Convention Applies? Depreciation methods, Which Depreciation Method Applies? Exchange, Property acquired in a like-kind exchange or involuntary conversion. 1040x 2013 form Figuring the deduction, How Is the Depreciation Deduction Figured? Involuntary conversion, Property acquired in a like-kind exchange or involuntary conversion. 1040x 2013 form Nontaxable transfer, Property acquired in a nontaxable transfer. 1040x 2013 form Percentage tables, Rules for using the tables. 1040x 2013 form Property classes, Which Property Class Applies Under GDS? Recovery periods, Which Recovery Period Applies? N New hire reporting, New hire reporting. 1040x 2013 form Noncapital asset, Noncapital Assets Nontaxable exchanges, Like-Kind Exchanges Nontaxable transfer of MACRS property, Property acquired in a nontaxable transfer. 1040x 2013 form Not-for-profit farming, Not-for-Profit Farming O Organizational costs, Business start-up and organizational costs. 1040x 2013 form P Partners, limited, Limited partner. 1040x 2013 form Partners, retired, Retired partner. 1040x 2013 form Partners, Spouse, Business Owned and Operated by Spouses. 1040x 2013 form Partnership, Partnership income or loss. 1040x 2013 form Passenger automobile, Passenger automobiles. 1040x 2013 form Pasture income, Pasture income and rental. 1040x 2013 form Patronage dividends, Patronage Dividends Payments considered received, Payments Received or Considered Received Payments received, Payments Received or Considered Received Penalties Estimated tax, Estimated Tax Penalty for 2013 Returns, Estimated Tax Penalty for 2013 Trust fund recovery, Trust fund recovery penalty. 1040x 2013 form Per-unit retain certificates, Per-Unit Retain Certificates Personal expenses, Personal, Living, and Family Expenses Placed in service, Placed in Service, What Is the Placed-in-Service Date? Postponing casualty gain, Postponing Gain Prepaid expense Advance premiums, Advance premiums. 1040x 2013 form Extends useful life, Prepayment. 1040x 2013 form Farm supplies, Prepaid Farm Supplies Livestock feed, Prepaid Livestock Feed Prizes, Prizes. 1040x 2013 form Produce, Sales of Farm Products Property Changed to business use, Property changed from personal to business or rental use. 1040x 2013 form Received for services, Property received for services. 1040x 2013 form Repairs and improvements, How Do You Treat Repairs and Improvements? Section 1231, Section 1231 transactions. 1040x 2013 form Section 1245, Section 1245 Property Section 1250, Section 1250 Property Section 1252, Section 1252 property. 1040x 2013 form Section 1255, Section 1255 property. 1040x 2013 form Tangible personal, Tangible personal property. 1040x 2013 form Publications (see Tax help) Q Qualified disaster relief payments, Qualified disaster relief payments. 1040x 2013 form Qualified farm debt, Qualified Farm Debt Qualified joint venture, Qualified joint venture. 1040x 2013 form Qualified principal residence debt, Qualified Principal Residence Debt R Recapture Amortization, Depreciation and amortization. 1040x 2013 form Basis reductions, Recapture of basis reductions. 1040x 2013 form Certain depreciation, Recapture of certain depreciation. 1040x 2013 form Cost-sharing payments, Recapture. 1040x 2013 form Depreciation, When Do You Recapture MACRS Depreciation?, Depreciation Recapture, Depreciation recapture. 1040x 2013 form Section 1245 property, Section 1245 Property Section 1250 property, Section 1250 Property Section 179 expense deduction, When Must You Recapture the Deduction? Section 179 GO Zone property, Recapture for qualified section 179 GO Zone property. 1040x 2013 form Special depreciation allowance, When Must You Recapture an Allowance Recordkeeping, Importance of Records, Meals. 1040x 2013 form Records on depreciable property, Depreciation Recapture Reforestation costs, Forestation and reforestation costs. 1040x 2013 form , Reforestation Costs Refund Deduction taken, Refund or reimbursement. 1040x 2013 form Fuel tax, Fuel tax credit and refund. 1040x 2013 form , Including the Credit or Refund in Income Reimbursements Casualties and thefts, Casualty and theft losses. 1040x 2013 form , Casualties and Thefts, Insurance and other reimbursements. 1040x 2013 form Deduction taken, Refund or reimbursement. 1040x 2013 form Expenses, Reimbursed expenses. 1040x 2013 form Feed assistance, Feed Assistance and Payments Real estate taxes, Real estate taxes. 1040x 2013 form Reforestation expenses, Qualifying costs. 1040x 2013 form To employees, Reimbursements to employees. 1040x 2013 form Related persons, Special rule for related persons. 1040x 2013 form , Losses from sales or exchanges between related persons. 1040x 2013 form , Special rules for related persons. 1040x 2013 form , Like-kind exchanges between related persons. 1040x 2013 form , Sale to a related person. 1040x 2013 form , Buying replacement property from a related person. 1040x 2013 form , Related persons. 1040x 2013 form Rental income, Rents (Including Crop Shares) Rented property, improvements, Improvements to rented property. 1040x 2013 form Repairs, Repairs and Maintenance Repairs and improvements, How Do You Treat Repairs and Improvements? Repayment of income, Repayment of income. 1040x 2013 form Replacement Period, Replacement Period Property, Replacement Property Reportable transactions. 1040x 2013 form , Reminders Repossessions, Foreclosure or Repossession Right-of-way income, Easements and rights-of-way. 1040x 2013 form S Sale of home, Sale of your home. 1040x 2013 form Section 179 expense deduction, Section 179 Expense Deduction How to elect, How Do You Elect the Deduction? Listed property, Additional Rules for Listed Property Qualifying property, What Property Qualifies? Recapture, When Must You Recapture the Deduction? Self-employed health insurance, Self-employed health insurance deduction. 1040x 2013 form Self-employed health insurance deduction, Self-employed health insurance deduction. 1040x 2013 form Self-employment tax Community property, Community property. 1040x 2013 form Deduction, Deduction for employer-equivalent portion of self-employment tax. 1040x 2013 form How to pay, How To Pay Self-Employment Tax Landlord participation, Landlord Participation in Farming Material participation, Material participation for landlords. 1040x 2013 form Maximum net earnings, What's New for 2013 Methods for figuring net earnings, Methods for Figuring Net Earnings Optional method, Farm Optional Method Regular method, Regular Method Rental income, Landlord Participation in Farming Reporting, Reporting Self-Employment Tax Self-employment tax rate, Self-employment tax rate. 1040x 2013 form Share farming, Share farmer. 1040x 2013 form Tax rates, What's New for 2013 Who must pay, Who Must Pay Self-Employment Tax? Selling expenses, Selling expenses. 1040x 2013 form Selling price Defined, Selling price. 1040x 2013 form Reduced, Selling price reduced. 1040x 2013 form Settlement costs (fees), Settlement costs. 1040x 2013 form Social security and Medicare Credits of coverage, Earning credits in 2013. 1040x 2013 form Withholding of tax, Social Security and Medicare Taxes Social security number, Obtaining a social security number. 1040x 2013 form Software, computer, Computer software. 1040x 2013 form Soil Conservation, Conservation Expenses Contamination, Soil or other environmental contamination. 1040x 2013 form Special depreciation allowance How to elect not to claim, How Can You Elect Not To Claim the Allowance? Recapture, When Must You Recapture an Allowance Standard mileage rate, Standard mileage rate. 1040x 2013 form Start-up costs for businesses, Business start-up and organizational costs. 1040x 2013 form Suggestions for publication, Comments and suggestions. 1040x 2013 form T Tangible personal property, Tangible personal property. 1040x 2013 form Tax help, How To Get Tax Help Tax preparation fees, Tax preparation fees. 1040x 2013 form Tax shelter At-risk limits, At-Risk Limits Defined, Tax shelter. 1040x 2013 form Tax-free exchanges, Like-Kind Exchanges Taxes Excise, Excise Taxes Federal use, Highway use tax. 1040x 2013 form General, Taxes Self-employment, Self-Employment Tax State and federal, State and federal income taxes. 1040x 2013 form State and local general sales, State and local general sales taxes. 1040x 2013 form Withholding, Federal income tax withholding. 1040x 2013 form , Social Security and Medicare Taxes, Federal Income Tax Withholding Telephone expense, Telephone expense. 1040x 2013 form Tenant house expenses, Tenant House Expenses Term interests, Certain term interests in property. 1040x 2013 form Theft losses, Casualties, Thefts, and Condemnations Timber, Timber. 1040x 2013 form , Timber Depletion, Timber Tobacco quota buyout payments, Tobacco Quota Buyout Program Payments Tobacco settlement payments, National Tobacco Growers' Settlement Trust Fund Payments Trade-in, Sale and Purchase Travel expenses, Travel Expenses Truck expenses, Truck and Car Expenses Trust fund recovery penalty, Trust fund recovery penalty. 1040x 2013 form TTY/TDD information, How To Get Tax Help U Uniform capitalization rules Basis of assets, Uniform Capitalization Rules Inventory, Uniform capitalization rules. 1040x 2013 form Unstated interest, Unstated interest. 1040x 2013 form W Wages and salaries, Wages and salaries. 1040x 2013 form Water conservation, Conservation Expenses Water well, Water well. 1040x 2013 form , Water wells. 1040x 2013 form Weather-related sales, livestock, Sales Caused by Weather-Related Conditions, Weather-related sales of livestock. 1040x 2013 form Withholding Income tax, Federal Income Tax Withholding Social security and Medicare tax, Social Security and Medicare Taxes Prev  Up     Home   More Online Publications