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Compare tax software Publication 557 - Additional Material Table of Contents Appendix. Compare tax software Sample Articles of Organization, continued Organization Reference Chart Section of 1986 Code Description of organization General nature of activities Application  Form Annual return required to be  filed Contributions  allowable 501(c)(1) Corporations Organized under Act of Congress (including Federal Credit Unions) Instrumentalities of the  United States No Form None Yes, if made for exclusively public purposes 501(c)(2) Title Holding Corporation For Exempt Organization Holding title to property of an  exempt organization 1024 9901 or 990-EZ8 No2 501(c)(3) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations Activities of nature implied by description of class of organization 1023 9901 or 990-EZ8, or 990-PF Yes, generally 501(c)(4) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees Promotion of community welfare; charitable, educational, or recreational 1024 9901 or 990-EZ8 No, generally 2, 3 501(c)(5) Labor, Agricultural, and Horticultural Organizations Educational or instructive, the  purpose being to improve conditions of work, and to improve products of efficiency 1024 9901 or 990-EZ8 No2 501(c)(6) Business Leagues, Chambers of Commerce, Real Estate Boards, etc. Compare tax software Improvement of business  conditions of one or more lines of business 1024 9901 or 990-EZ8 No2 501(c)(7) Social and Recreational Clubs Pleasure, recreation, social activities 1024 9901 or 990-EZ8 No2 501(c)(8) Fraternal Beneficiary Societies  and Associations Lodge providing for payment of life, sickness, accident or other benefits  to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Compare tax software 501(c)(3) purposes 501(c)(9) Voluntary Employees Beneficiary Associations Providing for payment of life, sickness, accident, or other benefits to members 1024 9901 or 990-EZ8 No2 501(c)(10) Domestic Fraternal Societies  and Associations Lodge devoting its net earnings to charitable, fraternal, and other  specified purposes. Compare tax software No life, sickness, or accident benefits to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Compare tax software 501(c)(3) purposes 501(c)(11) Teachers' Retirement Fund Associations Teachers' association for payment of retirement benefits Letter6 9901 or 990-EZ8 No2 501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or  Irrigation Companies, Mutual or Cooperative Telephone Companies, etc. Compare tax software Activities of a mutually beneficial  nature similar to those implied by the description of class of organization 1024 9901 or 990-EZ8 No2 501(c)(13) Cemetery Companies Burials and incidental activities 1024 9901 or 990-EZ8 Yes, generally 501(c)(14) State-Chartered Credit Unions,  Mutual Reserve Funds Loans to members Letter6 9901 or 990-EZ8 No2 501(c)(15) Mutual Insurance Companies or Associations Providing insurance to members substantially at cost 1024 9901 or 990-EZ8 No2 501(c)(16) Cooperative Organizations to  Finance Crop Operations Financing crop operations in  conjunction with activities of a marketing  or purchasing association Form 1120-C6 9901 or 990-EZ8 No2 501(c)(17) Supplemental Unemployment  Benefit Trusts Provides for payment of  supplemental unemployment compensation benefits 1024 9901 or 990-EZ8 No2 501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) Payment of benefits under a  pension plan funded by employees Letter6 9901 or 990-EZ8 No2 501(c)(19) Post or Organization of Past or  Present Members of the Armed Forces Activities implied by nature of organization 1024 9901 or 990-EZ8 No, generally7 501(c)(21) Black Lung Benefit Trusts Funded by coal mine operators to satisfy their liability for disability or  death due to black lung diseases Letter6 990-BL No4 501(c)(22) Withdrawal Liability Payment Fund To provide funds to meet the  liability of employers withdrawing from  a multi-employer pension fund Letter6 9901 or 990-EZ8 No5 501(c)(23) Veterans' Organization (created before 1880) To provide insurance and other  benefits to veterans Letter6 9901 or 990-EZ8 No, generally7 501(c)(25) Title Holding Corporations or Trusts with Multiple Parent Corporations Holding title and paying over  income from property to 35 or fewer parents or beneficiaries 1024 9901 or 990-EZ8 No 501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals Provides health care coverage to high-risk individuals Letter6 9901 or 990-EZ8 No 501(c)(27) State-Sponsored Workers' Compensation Reinsurance Organization Reimburses members for losses  under workers' compensation acts Letter6 9901 or 990-EZ8 No 501(c)(28) National Railroad Retirement Investment Trust Manages and invests the assets of the Railroad Retirement Account No Form 99011 No11 501(c)(29) CO-OP health insurance issuers A qualified health insurance issuer which has received a loan or grant under the CO-OP program Letter and Form 871814 9901 No13 501(d) Religious and Apostolic Associations Regular business activities;  Communal religious community No Form 10659 No2 501(e) Cooperative Hospital Service Organizations Performs cooperative services for hospitals 1023 9901 or 990-EZ8 Yes 501(f) Cooperative Service Organizations  of Operating Educational Organizations Performs collective investment  services for educational organizations 1023 9901 or 990-EZ8 Yes 501(k) Child Care Organizations Provides care for children 1023 9901 or 990-EZ8 Yes 501(n) Charitable Risk Pools Pools certain insurance risks of sec. Compare tax software 501(c)(3) organizations 1023 9901 or 990-EZ8 Yes 501(q) Credit Counseling Organization Credit counseling services 1023 102312 No 521(a) Farmers' Cooperative Associations Cooperative marketing and  purchasing for agricultural procedures 1028 1120-C No 527 Political organizations A party, committee, fund,  association, etc. Compare tax software , that directly or indirectly accepts contributions or makes expenditures for political campaigns 8871 1120-POL10 9901 or 990-EZ8 No 1For exceptions to the filing requirement, see chapter 2 and the form instructions. Compare tax software Note: For annual tax periods beginning after 2006, most tax-exempt organizations, other than churches, are required to file an annual Form 990, 990-EZ, or 990-PF with the IRS or to submit an annual electronic notice, Form 990-N (e-Postcard), to the IRS. Compare tax software Tax-exempt organizations failing to file an annual return or submit an annual notice as required for 3 consecutive years will automatically lose their tax-exempt status. Compare tax software    2An organization exempt under a subsection of section 501 other than 501(c)(3) can establish a charitable fund, contributions to which are deductible. Compare tax software Such a fund must itself meet the requirements of section 501(c)(3) and the related notice requirements of section 508(a). Compare tax software    3Contributions to volunteer fire companies and similar organizations are deductible, but only if made for exclusively public purposes. Compare tax software    4Deductible as a business expense to the extent allowed by section 192. Compare tax software    5Deductible as a business expense to the extent allowed by section 194A. Compare tax software 6Application is by letter to the address shown on Form 8718. Compare tax software A copy of the organizing document should be attached and the letter should be signed by an officer. Compare tax software    7Contributions to these organizations are deductible only if 90% or more of the organization's members are war veterans. Compare tax software    8For limits on the use of Form 990-EZ, see chapter 2 and the general instructions for Form 990-EZ (or Form 990). Compare tax software    9Although the organization files a partnership return, all distributions are deemed dividends. Compare tax software The members are not entitled to pass through treatment of the organization's income or expenses. Compare tax software    10Form 1120-POL is required only if the organization has taxable income as defined in section 527(c). Compare tax software    11Only required to annually file so much of the Form 990 that relates to the names and addresses of the officers, directors, trustees, and key employees, and their titles, compensation, and hours devoted to their positions (Part VII of Form 990), and to complete Item I in the Heading of Form 990 to confirm its tax-exempt status under section 501(c)(28). Compare tax software    12See section 501(q) if the organization provides credit counseling services and seeks recognition of exemption under section 501(c)(4). Compare tax software Use Form 1024 if applying for recognition under section 501(c)(4). Compare tax software    13See section 501(c)(29) for details. Compare tax software    14See Revenue Procedure 2012-11, sec. Compare tax software 4. Compare tax software 01, 2012-7 I. Compare tax software R. Compare tax software B. Compare tax software 368, for details. Compare tax software Appendix. Compare tax software Sample Articles of Organization The following are examples of Articles of Incorporation (Draft A) and a declaration of trust (Draft B) that contain the required information as to purposes and powers of an organization and disposition of its assets upon dissolution. Compare tax software You should bear in mind that requirements for these instruments may vary under applicable state law. Compare tax software See Private Foundations and Public Charities , earlier for the special provisions required in a private foundation's governing instrument in order for it to qualify for exemption. Compare tax software DRAFT A  Articles of Incorporation of the undersigned, a majority of whom are citizens of the United States, desiring to form a Non-Profit Corporation under the Non-Profit Corporation Law of , do hereby certify: First: The name of the Corporation shall be . Compare tax software Second: The place in this state where the principal office of the Corporation is to be located is the City of , County. Compare tax software Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Compare tax software Fourth: The names and addresses of the persons who are the initial trustees of the corporation are as follows: Name , Address Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. Compare tax software No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Compare tax software Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Compare tax software   If reference to federal law in articles of incorporation imposes a limitation that is invalid in your state, you may wish to substitute the following for the last sentence of the preceding paragraph: “Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation. Compare tax software ” Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Compare tax software Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes. Compare tax software   In witness whereof, we have hereunto subscribed our names this day of , 20. Compare tax software Appendix. Compare tax software Sample Articles of Organization, continued Draft B The Charitable Trust. Compare tax software Declaration of Trust made as of the day of , 20 , by , of , and , of , who hereby declare and agree that they have received this day from , as Donor, the sum of Ten Dollars ($10) and that they will hold and manage the same, and any additions to it, in trust, as follows: First: This trust shall be called “The Charitable Trust. Compare tax software ” Second: The trustees may receive and accept property, whether real, personal, or mixed, by way of gift, bequest, or devise, from any person, firm, trust, or corporation, to be held, administered, and disposed of in accordance with and pursuant to the provisions of this Declaration of Trust; but no gift, bequest, or devise of any such property shall be received and accepted if it is conditioned or limited in such manner as to require the disposition of the income or its principal to any person or organization other than a “charitable organization” or for other than “charitable purposes” within the meaning of such terms as defined in Article Third of this Declaration of Trust, or as shall, in the opinion of the trustees, jeopardize the federal income tax exemption of this trust pursuant to section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Compare tax software Third: a) The principal and income of all property received and accepted by the trustees to be administered under this Declaration of Trust shall be held in trust by them, and the trustees may make payments or distributions from income or principal, or both, to or for the use of such charitable organizations, within the meaning of that term as defined in paragraph C, in such amounts and for such charitable purposes of the trust as the trustees shall from time to time select and determine; and the trustees may make payments or distributions from income or principal, or both, directly for such charitable purposes, within the meaning of that term as defined in paragraph D, in such amounts as the trustees shall from time to time select and determine without making use of any other charitable organization. Compare tax software The trustees may also make payments or distributions of all or any part of the income or principal to states, territories, or possessions of the United States, any political subdivision of any of the foregoing, or to the United States or the District of Columbia but only for charitable purposes within the meaning of that term as defined in paragraph D. Compare tax software Income or principal derived from contributions by corporations shall be distributed by the trustees for use solely within the United States or its possessions. Compare tax software No part of the net earnings of this trust shall inure or be payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of this trust shall be the carrying on of propaganda, or otherwise attempting to influence legislation. Compare tax software No part of the activities of this trust shall be the participation in, or intervention in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. Compare tax software b) The trust shall continue forever unless the trustees terminate it and distribute all of the principal and income, which action may be taken by the trustees in their discretion at any time. Compare tax software On such termination, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Compare tax software The donor authorizes and empowers the trustees to form and organize a nonprofit corporation limited to the uses and purposes provided for in this Declaration of Trust, such corporation to be organized under the laws of any state or under the laws of the United States as may be determined by the trustees; such corporation when organized to have power to administer and control the affairs and property and to carry out the uses, objects, and purposes of this trust. Compare tax software Upon the creation and organization of such corporation, the trustees are authorized and empowered to convey, transfer, and deliver to such corporation all the property and assets to which this trust may be or become entitled. Compare tax software The charter, bylaws, and other provisions for the organization and management of such corporation and its affairs and property shall be such as the trustees shall determine, consistent with the provisions of this paragraph. Compare tax software c) In this Declaration of Trust and in any amendments to it, references to “charitable organizations” or “charitable organization” mean corporations, trusts, funds, foundations, or community chests created or organized in the United States or in any of its possessions, whether under the laws of the United States, any state or territory, the District of Columbia, or any possession of the United States, organized and operated exclusively for charitable purposes, no part of the net earnings of which inures or is payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which do not participate in or intervene in (including the publishing or distributing of statements) any political campaign on behalf of or in opposition to any candidate for public office. Compare tax software It is intended that the organization described in this paragraph C shall be entitled to exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Compare tax software d) In this Declaration of Trust and in any amendments to it, the term “charitable purposes” shall be limited to and shall include only religious, charitable, scientific, literary, or educational purposes within the meaning of those terms as used in section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, but only such purposes as also constitute public charitable purposes under the law of trusts of the State of. Compare tax software Fourth: This Declaration of Trust may be amended at any time or times by written instrument or instruments signed and sealed by the trustees, and acknowledged by any of the trustees, provided that no amendment shall authorize the trustees to conduct the affairs of this trust in any manner or for any purpose contrary to the provisions of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Compare tax software An amendment of the provisions of this Article Fourth (or any amendment to it) shall be valid only if and to the extent that such amendment further restricts the trustees' amending power. Compare tax software All instruments amending this Declaration of Trust shall be noted upon or kept attached to the executed original of this Declaration of Trust held by the trustees. Compare tax software Fifth: Any trustee under this Declaration of Trust may, by written instrument, signed and acknowledged, resign his office. Compare tax software The number of trustees shall be at all times not less than two, and whenever for any reason the number is reduced to one, there shall be, and at any other time there may be, appointed one or more additional trustees. Compare tax software Appointments shall be made by the trustee or trustees for the time in office by written instruments signed and acknowledged. Compare tax software Any succeeding or additional trustee shall, upon his or her acceptance of the office by written instrument signed and acknowledged, have the same powers, rights, and duties, and the same title to the trust estate jointly with the surviving or remaining trustee or trustees as if originally appointed. Compare tax software  None of the trustees shall be required to furnish any bond or surety. Compare tax software None of them shall be responsible or liable for the acts or omissions of any other of the trustees or of any predecessor or of a custodian, agent, depositary, or counsel selected with reasonable care. Compare tax software  The one or more trustees, whether original or successor, for the time being in office, shall have full authority to act even though one or more vacancies may exist. Compare tax software A trustee may, by appropriate written instrument, delegate all or any part of his or her powers to another or others of the trustees for such periods and subject to such conditions as such delegating trustee may determine. Compare tax software  The trustees serving under this Declaration of Trust are authorized to pay to themselves amounts for reasonable expenses incurred and reasonable compensation for services rendered in the administration of this trust, but in no event shall any trustee who has made a contribution to this trust ever receive any compensation thereafter. Compare tax software Sixth: In extension and not in limitation of the common law and statutory powers of trustees and other powers granted in this Declaration of Trust, the trustees shall have the following discretionary powers. Compare tax software a) To invest and reinvest the principal and income of the trust in such property, real, personal, or mixed, and in such manner as they shall deem proper, and from time to time to change investments as they shall deem advisable; to invest in or retain any stocks, shares, bonds, notes, obligations, or personal or real property (including without limitation any interests in or obligations of any corporation, association, business trust, investment trust, common trust fund, or investment company) although some or all of the property so acquired or retained is of a kind or size which but for this express authority would not be considered proper and although all of the trust funds are invested in the securities of one company. Compare tax software No principal or income, however, shall be loaned, directly or indirectly, to any trustee or to anyone else, corporate or otherwise, who has at any time made a contribution to this trust, nor to anyone except on the basis of an adequate interest charge and with adequate security. Compare tax software b) To sell, lease, or exchange any personal, mixed, or real property, at public auction or by private contract, for such consideration and on such terms as to credit or otherwise, and to make such contracts and enter into such undertakings relating to the trust property, as they consider advisable, whether or not such leases or contracts may extend beyond the duration of the trust. Compare tax software c) To borrow money for such periods, at such rates of interest, and upon such terms as the trustees consider advisable, and as security for such loans to mortgage or pledge any real or personal property with or without power of sale; to acquire or hold any real or personal property, subject to any mortgage or pledge on or of property acquired or held by this trust. Compare tax software d) To execute and deliver deeds, assignments, transfers, mortgages, pledges, leases, covenants, contracts, promissory notes, releases, and other instruments, sealed or unsealed, incident to any transaction in which they engage. Compare tax software e) To vote, to give proxies, to participate in the reorganization, merger, or consolidation of any concern, or in the sale, lease, disposition, or distribution of its assets; to join with other security holders in acting through a committee, depositary, voting trustees, or otherwise, and in this connection to delegate authority to such committee, depositary, or trustees and to deposit securities with them or transfer securities to them; to pay assessments levied on securities or to exercise subscription rights in respect of securities. Compare tax software f) To employ a bank or trust company as custodian of any funds or securities and to delegate to it such powers as they deem appropriate; to hold trust property without indication of fiduciary capacity but only in the name of a registered nominee, provided the trust property is at all times identified as such on the books of the trust; to keep any or all of the trust property or funds in any place or places in the United States of America; to employ clerks, accountants, investment counsel, investment agents, and any special services, and to pay the reasonable compensation and expenses of all such services in addition to the compensation of the trustees. Compare tax software Seventh: The trustees' powers are exercisable solely in the fiduciary capacity consistent with and in furtherance of the charitable purposes of this trust as specified in Article Third and not otherwise. Compare tax software Eighth: In this Declaration of Trust and in any amendment to it, references to “trustees” mean the one or more trustees, whether original or successor, for the time being in office. Compare tax software Ninth: Any person may rely on a copy, certified by a notary public, of the executed original of this Declaration of Trust held by the trustees, and of any of the notations on it and writings attached to it, as fully as he might rely on the original documents themselves. Compare tax software Any such person may rely fully on any statements of fact certified by anyone who appears from such original documents or from such certified copy to be a trustee under this Declaration of Trust. Compare tax software No one dealing with the trustees need inquire concerning the validity of anything the trustees purport to do. Compare tax software No one dealing with the trustees need see to the application of anything paid or transferred to or upon the order of the trustees of the trust. Compare tax software Tenth: This Declaration of Trust is to be governed in all respects by the laws of the State of . Compare tax software Trustee Trustee Prev  Up  Next   Home   More Online Publications
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Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Bloomington 2017 S. Liberty Dr.
Bloomington, IN 47403

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

**This office will be open 9:00 a.m. - 3:30 p.m. on 4/2**

 

Services Provided

(812) 337-7600
Columbus 2425 Northpark Dr.
Columbus, IN 47203

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)
 

Services Provided

(812) 379-7400
Evansville 7409 Eagle Crest Blvd.
Evansville, IN 47715

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(812) 474-4800
Ft. Wayne 201 E. Rudisill Blvd.
Fort Wayne, IN 46806

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(260) 458-5000
Indianapolis 575 N. Pennsylvania St.
Indianapolis, IN 46204

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(317) 685-7500 
Lafayette  955 Mezzanine Drive
Suite B
Lafayette, IN 47905 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(765) 449-3880 
Merrillville  233 E. 84th Dr.
Merrillville, IN 46410 

Monday-Friday - 8:30 a.m.-4:30 p.m.


Services Provided

(219) 736-4378
 
Muncie  225 N. High St.
Muncie, IN 47305 

Monday-Friday 8:30 a.m.- 4:30 p.m. 
(Closed for lunch 12:30 p.m.- 1:30 p.m.)
 

Services Provided

(765) 747-5533 
South Bend  100 E Wayne St
South Bend, IN 46601 

Monday-Friday - 8:30 a.m.-4:30 p.m.  
 

Services Provided

(574) 236-8149 
Terre Haute  801 Wabash Ave. 
Terre Haute, IN 47807 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(812) 231-6521 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (317) 685-7840 in Indianapolis or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
575 N. Pennsylvania St.
Room 573, Stop WI-665
Indianapolis, IN 46204

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Compare Tax Software

Compare tax software 9. Compare tax software   Depletion Table of Contents Introduction Topics - This chapter discusses: Who Can Claim Depletion? Mineral PropertyCost Depletion Percentage Depletion Oil and Gas Wells Mines and Geothermal Deposits Lessor's Gross Income TimberTimber units. Compare tax software Depletion unit. Compare tax software Introduction Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. Compare tax software The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. Compare tax software There are two ways of figuring depletion: cost depletion and percentage depletion. Compare tax software For mineral property, you generally must use the method that gives you the larger deduction. Compare tax software For standing timber, you must use cost depletion. Compare tax software Topics - This chapter discusses: Who can claim depletion Mineral property Timber Who Can Claim Depletion? If you have an economic interest in mineral property or standing timber, you can take a deduction for depletion. Compare tax software More than one person can have an economic interest in the same mineral deposit or timber. Compare tax software In the case of leased property, the depletion deduction is divided between the lessor and the lessee. Compare tax software You have an economic interest if both the following apply. Compare tax software You have acquired by investment any interest in mineral deposits or standing timber. Compare tax software You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment. Compare tax software A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. Compare tax software A production payment carved out of, or retained on the sale of, mineral property is not an economic interest. Compare tax software Individuals, corporations, estates, and trusts who claim depletion deductions may be liable for alternative minimum tax. Compare tax software Basis adjustment for depletion. Compare tax software   You must reduce the basis of your property by the depletion allowed or allowable, whichever is greater. Compare tax software Mineral Property Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). Compare tax software For this purpose, the term “property” means each separate interest you own in each mineral deposit in each separate tract or parcel of land. Compare tax software You can treat two or more separate interests as one property or as separate properties. Compare tax software See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests. Compare tax software There are two ways of figuring depletion on mineral property. Compare tax software Cost depletion. Compare tax software Percentage depletion. Compare tax software Generally, you must use the method that gives you the larger deduction. Compare tax software However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. Compare tax software See Oil and Gas Wells , later. Compare tax software Cost Depletion To figure cost depletion you must first determine the following. Compare tax software The property's basis for depletion. Compare tax software The total recoverable units of mineral in the property's natural deposit. Compare tax software The number of units of mineral sold during the tax year. Compare tax software Basis for depletion. Compare tax software   To figure the property's basis for depletion, subtract all the following from the property's adjusted basis. Compare tax software Amounts recoverable through: Depreciation deductions, Deferred expenses (including deferred exploration and development costs), and Deductions other than depletion. Compare tax software The residual value of land and improvements at the end of operations. Compare tax software The cost or value of land acquired for purposes other than mineral production. Compare tax software Adjusted basis. Compare tax software   The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. Compare tax software Your adjusted basis can never be less than zero. Compare tax software See Publication 551, Basis of Assets, for more information on adjusted basis. Compare tax software Total recoverable units. Compare tax software   The total recoverable units is the sum of the following. Compare tax software The number of units of mineral remaining at the end of the year (including units recovered but not sold). Compare tax software The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next). Compare tax software   You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. Compare tax software You must include ores and minerals that are developed, in sight, blocked out, or assured. Compare tax software You must also include probable or prospective ores or minerals that are believed to exist based on good evidence. Compare tax software But see Elective safe harbor for owners of oil and gas property , later. Compare tax software Number of units sold. Compare tax software   You determine the number of units sold during the tax year based on your method of accounting. Compare tax software Use the following table to make this determination. Compare tax software    IF you  use . Compare tax software . Compare tax software . Compare tax software THEN the units sold during the year are . Compare tax software . Compare tax software . Compare tax software The cash method of accounting The units sold for which you receive payment during the tax year (regardless of the year of sale). Compare tax software An accrual method of accounting The units sold based on your inventories and method of accounting for inventory. Compare tax software   The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. Compare tax software Figuring the cost depletion deduction. Compare tax software   Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps. Compare tax software Step Action Result 1 Divide your property's basis for depletion by total recoverable units. Compare tax software Rate per unit. Compare tax software 2 Multiply the rate per unit by units sold during the tax year. Compare tax software Cost depletion deduction. Compare tax software You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed. Compare tax software Elective safe harbor for owners of oil and gas property. Compare tax software   Instead of using the method described earlier to determine the total recoverable units, you can use an elective safe harbor. Compare tax software If you choose the elective safe harbor, the total recoverable units equal 105% of a property's proven reserves (both developed and undeveloped). Compare tax software For details, see Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www. Compare tax software irs. Compare tax software gov/pub/irs-irbs/irb04-10. Compare tax software pdf. Compare tax software   To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. Compare tax software The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. Compare tax software The election, if made, is effective for the tax year in which it is made and all later years. Compare tax software It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. Compare tax software Once revoked, it cannot be re-elected for the next 5 years. Compare tax software Percentage Depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. Compare tax software The rates to be used and other rules for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells . Compare tax software Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits . Compare tax software Gross income. Compare tax software   When figuring percentage depletion, subtract from your gross income from the property the following amounts. Compare tax software Any rents or royalties you paid or incurred for the property. Compare tax software The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year. Compare tax software A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor. Compare tax software   Use the following fraction to figure the part of the bonus you must subtract. Compare tax software No. Compare tax software of units sold in the tax year Recoverable units from the property × Bonus Payments For oil and gas wells and geothermal deposits, more information about the definition of gross income from the property is under Oil and Gas Wells , later. Compare tax software For other property, more information about the definition of gross income from the property is under Mines and Geothermal Deposits , later. Compare tax software Taxable income limit. Compare tax software   The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction. Compare tax software   Taxable income from the property means gross income from the property minus all allowable deductions (except any deduction for depletion or domestic production activities) attributable to mining processes, including mining transportation. Compare tax software These deductible items include, but are not limited to, the following. Compare tax software Operating expenses. Compare tax software Certain selling expenses. Compare tax software Administrative and financial overhead. Compare tax software Depreciation. Compare tax software Intangible drilling and development costs. Compare tax software Exploration and development expenditures. Compare tax software Deductible taxes (see chapter 5), but not taxes that you capitalize or take as a credit. Compare tax software Losses sustained. Compare tax software   The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit. Compare tax software Do not deduct any net operating loss deduction from the gross income from the property. Compare tax software Corporations do not deduct charitable contributions from the gross income from the property. Compare tax software If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. Compare tax software See section 1. Compare tax software 613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property. Compare tax software Oil and Gas Wells You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies. Compare tax software You are either an independent producer or a royalty owner. Compare tax software The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine. Compare tax software If you are an independent producer or royalty owner, see Independent Producers and Royalty Owners , next. Compare tax software For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells , later. Compare tax software Independent Producers and Royalty Owners If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. Compare tax software However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained next, cannot claim percentage depletion. Compare tax software For information on figuring the deduction, see Figuring percentage depletion , later. Compare tax software Refiners who cannot claim percentage depletion. Compare tax software   You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. Compare tax software The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. Compare tax software Related person. Compare tax software   You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you. Compare tax software For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. Compare tax software A partnership and a trust are related persons if one person holds a significant ownership interest in each of them. Compare tax software For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following. Compare tax software The value of the outstanding stock of a corporation. Compare tax software The interest in the profits or capital of a partnership. Compare tax software The beneficial interests in an estate or trust. Compare tax software Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. Compare tax software Retailers who cannot claim percentage depletion. Compare tax software   You cannot claim percentage depletion if both the following apply. Compare tax software You sell oil or natural gas or their by-products directly or through a related person in any of the following situations. Compare tax software Through a retail outlet operated by you or a related person. Compare tax software To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products. Compare tax software To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person. Compare tax software The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year. Compare tax software   For the purpose of determining if this rule applies, do not count the following. Compare tax software Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users. Compare tax software Bulk sales of aviation fuels to the Department of Defense. Compare tax software Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year. Compare tax software Related person. Compare tax software   To determine if you and another person are related persons, see Related person under Refiners who cannot claim percentage depletion, earlier. Compare tax software Sales through a related person. Compare tax software   You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person. Compare tax software   You are not considered to be selling through a related person who is a retailer if all the following apply. Compare tax software You do not have a significant ownership interest in the retailer. Compare tax software You sell your production to persons who are not related to either you or the retailer. Compare tax software The retailer does not buy oil or natural gas from your customers or persons related to your customers. Compare tax software There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer. Compare tax software Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale. Compare tax software Transferees who cannot claim percentage depletion. Compare tax software   You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. Compare tax software For a definition of the term “transfer,” see section 1. Compare tax software 613A-7(n) of the regulations. Compare tax software For a definition of the term “interest in proven oil or gas property,” see section 1. Compare tax software 613A-7(p) of the regulations. Compare tax software Figuring percentage depletion. Compare tax software   Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. Compare tax software If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. Compare tax software If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production. Compare tax software   In addition, there is a limit on the percentage depletion deduction. Compare tax software See Taxable income limit , later. Compare tax software Average daily production. Compare tax software   Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. Compare tax software Partial interest. Compare tax software   If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property. Compare tax software   You have a partial interest in the production from a property if you have a net profits interest in the property. Compare tax software To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. Compare tax software To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. Compare tax software Then multiply the total production from the property by your percentage participation to figure your share of the production. Compare tax software Example. Compare tax software Javier Robles owns oil property in which Pablo Olmos owns a 20% net profits interest. Compare tax software During the year, the property produced 10,000 barrels of oil, which Javier sold for $200,000. Compare tax software Javier had expenses of $90,000 attributable to the property. Compare tax software The property generated a net profit of $110,000 ($200,000 − $90,000). Compare tax software Pablo received income of $22,000 ($110,000 × . Compare tax software 20) for his net profits interest. Compare tax software Pablo determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). Compare tax software Pablo determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). Compare tax software Depletable oil or natural gas quantity. Compare tax software   Generally, your depletable oil quantity is 1,000 barrels. Compare tax software Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. Compare tax software If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity. Compare tax software Example. Compare tax software You have both oil and natural gas production. Compare tax software To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. Compare tax software Your depletable natural gas quantity is 2. Compare tax software 16 million cubic feet of gas (360 × 6000). Compare tax software You must reduce your depletable oil quantity to 640 barrels (1000 − 360). Compare tax software If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity. Compare tax software Also, see Notice 2012-50, available at www. Compare tax software irs. Compare tax software gov/irb/2012–31_IRB/index. Compare tax software html. Compare tax software Business entities and family members. Compare tax software   You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year. Compare tax software Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest). Compare tax software You and your spouse and minor children. Compare tax software A related person is anyone mentioned in the related persons discussion under Nondeductible loss in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children. Compare tax software Controlled group of corporations. Compare tax software   Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. Compare tax software They share the depletable quantity. Compare tax software A controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that, for this purpose, the stock ownership requirement in that definition is “more than 50%” rather than “at least 80%. Compare tax software ” Gross income from the property. Compare tax software   For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. Compare tax software If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation. Compare tax software   If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP. Compare tax software   Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. Compare tax software Average daily production exceeds depletable quantities. Compare tax software   If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows. Compare tax software Figure your average daily production of oil or natural gas for the year. Compare tax software Figure your depletable oil or natural gas quantity for the year. Compare tax software Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%. Compare tax software Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). Compare tax software This is your depletion allowance for that property for the year. Compare tax software Taxable income limit. Compare tax software   If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following. Compare tax software 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. Compare tax software For a definition of taxable income from the property, see Taxable income limit , earlier, under Mineral Property. Compare tax software 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback. Compare tax software You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. Compare tax software Add it to your depletion allowance (before applying any limits) for the following year. Compare tax software Partnerships and S Corporations Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately. Compare tax software (However, see Electing large partnerships must figure depletion allowance , later. Compare tax software ) Each partner or shareholder must decide whether to use cost or percentage depletion. Compare tax software If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources. Compare tax software Partner's or shareholder's adjusted basis. Compare tax software   The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. Compare tax software The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property. Compare tax software   Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. Compare tax software However, in some cases, it is figured according to the partner's interest in partnership income. Compare tax software   The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests. Compare tax software Recordkeeping. Compare tax software Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. Compare tax software The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. Compare tax software The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property. Compare tax software Reporting the deduction. Compare tax software   Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). Compare tax software Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). Compare tax software The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. Compare tax software The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms. Compare tax software Form 6198, At-Risk Limitations. Compare tax software Form 8582, Passive Activity Loss Limitations. Compare tax software Electing large partnerships must figure depletion allowance. Compare tax software   An electing large partnership, rather than each partner, generally must figure the depletion allowance. Compare tax software The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. Compare tax software Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance. Compare tax software   An electing large partnership is one that meets both the following requirements. Compare tax software The partnership had 100 or more partners in the preceding year. Compare tax software The partnership chooses to be an electing large partnership. Compare tax software Disqualified persons. Compare tax software   An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. Compare tax software Disqualified persons must figure it themselves, as explained earlier. Compare tax software   All the following are disqualified persons. Compare tax software Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). Compare tax software Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). Compare tax software Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. Compare tax software Average daily production is discussed earlier. Compare tax software Natural Gas Wells You can use percentage depletion for a well that produces natural gas that is either Sold under a fixed contract, or Produced from geopressured brine. Compare tax software Natural gas sold under a fixed contract. Compare tax software   Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. Compare tax software This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. Compare tax software The contract must have been in effect from February 1, 1975, until the date of sale of the gas. Compare tax software Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. Compare tax software Natural gas from geopressured brine. Compare tax software   Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. Compare tax software This is natural gas that is both the following. Compare tax software Produced from a well you began to drill after September 1978 and before 1984. Compare tax software Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine. Compare tax software Mines and Geothermal Deposits Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion. Compare tax software Mines and other natural deposits. Compare tax software   For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit. Compare tax software   The following is a list of the percentage depletion rates for the more common minerals. Compare tax software DEPOSITS RATE Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica 22% Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States 15% Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well 14% Coal, lignite, and sodium chloride 10% Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates 7½% Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone) 5%   You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. Compare tax software Corporate deduction for iron ore and coal. Compare tax software   The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of: The percentage depletion deduction for the tax year (figured without this reduction), minus The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year). Compare tax software Gross income from the property. Compare tax software   For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. Compare tax software Mining includes all the following. Compare tax software Extracting ores or minerals from the ground. Compare tax software Applying certain treatment processes described later. Compare tax software Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied. Compare tax software Excise tax. Compare tax software   Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. Compare tax software Extraction. Compare tax software   Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. Compare tax software This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. Compare tax software Treatment processes. Compare tax software   The processes included as mining depend on the ore or mineral mined. Compare tax software To qualify as mining, the treatment processes must be applied by the mine owner or operator. Compare tax software For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. Compare tax software Transportation of more than 50 miles. Compare tax software   If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining. Compare tax software    If you wish to include transportation of more than 50 miles in the computation of gross income from mining, request an advance ruling from the IRS. Compare tax software Include in the request the facts about the physical and other requirements that prevented the construction and operation of the plant within 50 miles of the point of extraction. Compare tax software For more information about requesting an advance ruling, see Revenue Procedure 2013-1, available at www. Compare tax software irs. Compare tax software gov/irb/2013-01_IRB/ar11. Compare tax software html. Compare tax software Disposal of coal or iron ore. Compare tax software   You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply. Compare tax software You disposed of it after holding it for more than 1 year. Compare tax software You disposed of it under a contract under which you retain an economic interest in the coal or iron ore. Compare tax software Treat any gain on the disposition as a capital gain. Compare tax software Disposal to related person. Compare tax software   This rule does not apply if you dispose of the coal or iron ore to one of the following persons. Compare tax software A related person (as listed in chapter 2 of Publication 544). Compare tax software A person owned or controlled by the same interests that own or control you. Compare tax software Geothermal deposits. Compare tax software   Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. Compare tax software A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. Compare tax software For percentage depletion purposes, a geothermal deposit is not considered a gas well. Compare tax software   Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. Compare tax software See Gross income from the property , earlier, under Oil and Gas Wells. Compare tax software Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property. Compare tax software Lessor's Gross Income In the case of leased property, the depletion deduction is divided between the lessor and the lessee. Compare tax software A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. Compare tax software Bonuses and advanced royalties. Compare tax software   Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. Compare tax software If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion, as explained in the next two paragraphs. Compare tax software Figuring cost depletion. Compare tax software   To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. Compare tax software To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion , treating the number of units for which the advanced royalty is received as the number of units sold. Compare tax software Figuring percentage depletion. Compare tax software   In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits . Compare tax software Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. Compare tax software However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. Compare tax software Ending the lease. Compare tax software   If you receive a bonus on a lease that ends or is abandoned before you derive any income from mineral extraction, include in income the depletion deduction you took. Compare tax software Do this for the year the lease ends or is abandoned. Compare tax software Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted. Compare tax software   For advanced royalties, include in income the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before the lease ended. Compare tax software Include this amount in income for the year the lease ends. Compare tax software Increase your adjusted basis in the property by the amount you include in income. Compare tax software Delay rentals. Compare tax software   These are payments for deferring development of the property. Compare tax software Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. Compare tax software These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production. Compare tax software Timber You can figure timber depletion only by the cost method. Compare tax software Percentage depletion does not apply to timber. Compare tax software Base your depletion on your cost or other basis in the timber. Compare tax software Your cost does not include the cost of land or any amounts recoverable through depreciation. Compare tax software Depletion takes place when you cut standing timber. Compare tax software You can figure your depletion deduction when the quantity of cut timber is first accurately measured in the process of exploitation. Compare tax software Figuring cost depletion. Compare tax software   To figure your cost depletion allowance, you multiply the number of timber units cut by your depletion unit. Compare tax software Timber units. Compare tax software   When you acquire timber property, you must make an estimate of the quantity of marketable timber that exists on the property. Compare tax software You measure the timber using board feet, log scale, cords, or other units. Compare tax software If you later determine that you have more or less units of timber, you must adjust the original estimate. Compare tax software   The term “timber property” means your economic interest in standing timber in each tract or block representing a separate timber account. Compare tax software Depletion unit. Compare tax software   You figure your depletion unit each year by taking the following steps. Compare tax software Determine your cost or adjusted basis of the timber on hand at the beginning of the year. Compare tax software Adjusted basis is defined under Cost Depletion in the discussion on Mineral Property. Compare tax software Add to the amount determined in (1) the cost of any timber units acquired during the year and any additions to capital. Compare tax software Figure the number of timber units to take into account by adding the number of timber units acquired during the year to the number of timber units on hand in the account at the beginning of the year and then adding (or subtracting) any correction to the estimate of the number of timber units remaining in the account. Compare tax software Divide the result of (2) by the result of (3). Compare tax software This is your depletion unit. Compare tax software Example. Compare tax software You bought a timber tract for $160,000 and the land was worth as much as the timber. Compare tax software Your basis for the timber is $80,000. Compare tax software Based on an estimated one million board feet (1,000 MBF) of standing timber, you figure your depletion unit to be $80 per MBF ($80,000 ÷ 1,000). Compare tax software If you cut 500 MBF of timber, your depletion allowance would be $40,000 (500 MBF × $80). Compare tax software When to claim depletion. Compare tax software   Claim your depletion allowance as a deduction in the year of sale or other disposition of the products cut from the timber, unless you choose to treat the cutting of timber as a sale or exchange (explained below). Compare tax software Include allowable depletion for timber products not sold during the tax year the timber is cut as a cost item in the closing inventory of timber products for the year. Compare tax software The inventory is your basis for determining gain or loss in the tax year you sell the timber products. Compare tax software Example. Compare tax software The facts are the same as in the previous example except that you sold only half of the timber products in the cutting year. Compare tax software You would deduct $20,000 of the $40,000 depletion that year. Compare tax software You would add the remaining $20,000 depletion to your closing inventory of timber products. Compare tax software Electing to treat the cutting of timber as a sale or exchange. Compare tax software   You can elect, under certain circumstances, to treat the cutting of timber held for more than 1 year as a sale or exchange. Compare tax software You must make the election on your income tax return for the tax year to which it applies. Compare tax software If you make this election, subtract the adjusted basis for depletion from the fair market value of the timber on the first day of the tax year in which you cut it to figure the gain or loss on the cutting. Compare tax software You generally report the gain as long-term capital gain. Compare tax software The fair market value then becomes your basis for figuring your ordinary gain or loss on the sale or other disposition of the products cut from the timber. Compare tax software For more information, see Timber in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. Compare tax software   You may revoke an election to treat the cutting of timber as a sale or exchange without IRS's consent. Compare tax software The prior election (and revocation) is disregarded for purposes of making a subsequent election. Compare tax software See Form T (Timber), Forest Activities Schedule, for more information. Compare tax software Form T. Compare tax software   Complete and attach Form T (Timber) to your income tax return if you claim a deduction for timber depletion, choose to treat the cutting of timber as a sale or exchange, or make an outright sale of timber. Compare tax software Prev  Up  Next   Home   More Online Publications