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H And R Block 1040x

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H And R Block 1040x

H and r block 1040x 8. H and r block 1040x   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. H and r block 1040x Reporting tax withheld. H and r block 1040x Nominees. H and r block 1040x Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. H and r block 1040x Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. H and r block 1040x Alternative minimum tax treatment. H and r block 1040x How To Report Dividend IncomeInvestment interest deducted. H and r block 1040x Reminder Foreign-source income. H and r block 1040x  If you are a U. H and r block 1040x S. H and r block 1040x citizen with dividend income from sources outside the United States (foreign-source income), you must report that income on your tax return unless it is exempt by U. H and r block 1040x S. H and r block 1040x law. H and r block 1040x This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. H and r block 1040x Introduction This chapter discusses the tax treatment of: Ordinary dividends, Capital gain distributions, Nondividend distributions, and Other distributions you may receive from a corporation or a mutual fund. H and r block 1040x This chapter also explains how to report dividend income on your tax return. H and r block 1040x Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. H and r block 1040x You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. H and r block 1040x However, some amounts you receive that are called dividends are actually interest income. H and r block 1040x (See Dividends that are actually interest under Taxable Interest in chapter 7. H and r block 1040x ) Most distributions are paid in cash (or check). H and r block 1040x However, distributions can consist of more stock, stock rights, other property, or services. H and r block 1040x Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 550 Investment Income and Expenses Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends General Information This section discusses general rules for dividend income. H and r block 1040x Tax on unearned income of certain children. H and r block 1040x   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. H and r block 1040x If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. H and r block 1040x If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. H and r block 1040x    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. H and r block 1040x Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. H and r block 1040x   For more information about the tax on unearned income of children and the parents' election, see chapter 31. H and r block 1040x Beneficiary of an estate or trust. H and r block 1040x    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. H and r block 1040x You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. H and r block 1040x , from the fiduciary. H and r block 1040x Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. H and r block 1040x Social security number (SSN) or individual taxpayer identification number (ITIN). H and r block 1040x    You must give your SSN or ITIN to any person required by federal tax law to make a return, statement, or other document that relates to you. H and r block 1040x This includes payers of dividends. H and r block 1040x If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. H and r block 1040x For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. H and r block 1040x Backup withholding. H and r block 1040x   Your dividend income is generally not subject to regular withholding. H and r block 1040x However, it may be subject to backup withholding to ensure that income tax is collected on the income. H and r block 1040x Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. H and r block 1040x   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. H and r block 1040x For more information, see Backup Withholding in chapter 4. H and r block 1040x Stock certificate in two or more names. H and r block 1040x   If two or more persons hold stock as joint tenants, tenants by the entirety, or tenants in common, each person's share of any dividends from the stock is determined by local law. H and r block 1040x Form 1099-DIV. H and r block 1040x   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. H and r block 1040x Keep this form with your records. H and r block 1040x You do not have to attach it to your tax return. H and r block 1040x Dividends not reported on Form 1099-DIV. H and r block 1040x   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. H and r block 1040x For example, you may receive distributive shares of dividends from partnerships or S corporations. H and r block 1040x These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. H and r block 1040x , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. H and r block 1040x Reporting tax withheld. H and r block 1040x   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. H and r block 1040x Nominees. H and r block 1040x   If someone receives distributions as a nominee for you, that person should give you a Form 1099-DIV, which will show distributions received on your behalf. H and r block 1040x Form 1099-MISC. H and r block 1040x   Certain substitute payments in lieu of dividends or tax-exempt interest received by a broker on your behalf must be reported to you on Form 1099-MISC, Miscellaneous Income, or a similar statement. H and r block 1040x See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. H and r block 1040x Incorrect amount shown on a Form 1099. H and r block 1040x   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. H and r block 1040x The new Form 1099 you receive will be marked “Corrected. H and r block 1040x ” Dividends on stock sold. H and r block 1040x   If stock is sold, exchanged, or otherwise disposed of after a dividend is declared but before it is paid, the owner of record (usually the payee shown on the dividend check) must include the dividend in income. H and r block 1040x Dividends received in January. H and r block 1040x   If a mutual fund (or other regulated investment company) or real estate investment trust (REIT) declares a dividend (including any exempt-interest dividend or capital gain distribution) in October, November, or December, payable to shareholders of record on a date in one of those months but actually pays the dividend during January of the next calendar year, you are considered to have received the dividend on December 31. H and r block 1040x You report the dividend in the year it was declared. H and r block 1040x Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. H and r block 1040x They are paid out of earnings and profits and are ordinary income to you. H and r block 1040x This means they are not capital gains. H and r block 1040x You can assume that any dividend you receive on common or preferred stock is an ordinary dividend unless the paying corporation or mutual fund tells you otherwise. H and r block 1040x Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. H and r block 1040x Qualified Dividends Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. H and r block 1040x They should be shown in box 1b of the Form 1099-DIV you receive. H and r block 1040x The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. H and r block 1040x 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. H and r block 1040x 6%. H and r block 1040x 20% on any amount that otherwise would be taxed at a 39. H and r block 1040x 6% rate. H and r block 1040x To qualify for the maximum rate, all of the following requirements must be met. H and r block 1040x The dividends must have been paid by a U. H and r block 1040x S. H and r block 1040x corporation or a qualified foreign corporation. H and r block 1040x (See Qualified foreign corporation , later. H and r block 1040x ) The dividends are not of the type listed later under Dividends that are not qualified dividends . H and r block 1040x You meet the holding period (discussed next). H and r block 1040x Holding period. H and r block 1040x   You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. H and r block 1040x The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. H and r block 1040x Instead, the seller will get the dividend. H and r block 1040x   When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. H and r block 1040x See the examples later. H and r block 1040x Exception for preferred stock. H and r block 1040x   In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. H and r block 1040x If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. H and r block 1040x Example 1. H and r block 1040x You bought 5,000 shares of XYZ Corp. H and r block 1040x common stock on July 9, 2013. H and r block 1040x XYZ Corp. H and r block 1040x paid a cash dividend of 10 cents per share. H and r block 1040x The ex-dividend date was July 16, 2013. H and r block 1040x Your Form 1099-DIV from XYZ Corp. H and r block 1040x shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). H and r block 1040x However, you sold the 5,000 shares on August 12, 2013. H and r block 1040x You held your shares of XYZ Corp. H and r block 1040x for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). H and r block 1040x The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. H and r block 1040x You have no qualified dividends from XYZ Corp. H and r block 1040x because you held the XYZ stock for less than 61 days. H and r block 1040x Example 2. H and r block 1040x Assume the same facts as in Example 1 except that you bought the stock on July 15, 2013 (the day before the ex-dividend date), and you sold the stock on September 16, 2013. H and r block 1040x You held the stock for 63 days (from July 16, 2013, through September 16, 2013). H and r block 1040x The $500 of qualified dividends shown in box 1b of your Form 1099-DIV are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 16, 2013, through September 14, 2013). H and r block 1040x Example 3. H and r block 1040x You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. H and r block 1040x ABC Mutual Fund paid a cash dividend of 10 cents a share. H and r block 1040x The ex-dividend date was July 16, 2013. H and r block 1040x The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. H and r block 1040x Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. H and r block 1040x However, you sold the 10,000 shares on August 12, 2013. H and r block 1040x You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. H and r block 1040x Holding period reduced where risk of loss is diminished. H and r block 1040x   When determining whether you met the minimum holding period discussed earlier, you cannot count any day during which you meet any of the following conditions. H and r block 1040x You had an option to sell, were under a contractual obligation to sell, or had made (and not closed) a short sale of substantially identical stock or securities. H and r block 1040x You were grantor (writer) of an option to buy substantially identical stock or securities. H and r block 1040x Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. H and r block 1040x   For information about how to apply condition (3), see Regulations section 1. H and r block 1040x 246-5. H and r block 1040x Qualified foreign corporation. H and r block 1040x   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. H and r block 1040x The corporation is incorporated in a U. H and r block 1040x S. H and r block 1040x possession. H and r block 1040x The corporation is eligible for the benefits of a comprehensive income tax treaty with the United States that the Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program. H and r block 1040x For a list of those treaties, see Table 8-1. H and r block 1040x The corporation does not meet (1) or (2) above, but the stock for which the dividend is paid is readily tradable on an established securities market in the United States. H and r block 1040x See Readily tradable stock , later. H and r block 1040x Exception. H and r block 1040x   A corporation is not a qualified foreign corporation if it is a passive foreign investment company during its tax year in which the dividends are paid or during its previous tax year. H and r block 1040x Readily tradable stock. H and r block 1040x   Any stock (such as common, ordinary, or preferred) or an American depositary receipt in respect of that stock is considered to satisfy requirement (3) under Qualified foreign corporation , if it is listed on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 or on the Nasdaq Stock Market. H and r block 1040x For a list of the exchanges that meet these requirements, see www. H and r block 1040x sec. H and r block 1040x gov/divisions/marketreg/mrexchanges. H and r block 1040x shtml. H and r block 1040x Dividends that are not qualified dividends. H and r block 1040x   The following dividends are not qualified dividends. H and r block 1040x They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. H and r block 1040x Capital gain distributions. H and r block 1040x Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. H and r block 1040x S. H and r block 1040x building and loan associations, U. H and r block 1040x S. H and r block 1040x savings and loan associations, federal savings and loan associations, and similar financial institutions. H and r block 1040x (Report these amounts as interest income. H and r block 1040x ) Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during the corporation's tax year in which the dividends were paid or during the corporation's previous tax year. H and r block 1040x Dividends paid by a corporation on employer securities held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation. H and r block 1040x Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. H and r block 1040x Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. H and r block 1040x Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. H and r block 1040x Table 8-1. H and r block 1040x Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. H and r block 1040x Australia Indonesia Romania Austria Ireland Russian Bangladesh Israel Federation Barbados Italy Slovak Belgium Jamaica Republic Bulgaria Japan Slovenia Canada Kazakhstan South Africa China Korea Spain Cyprus Latvia Sri Lanka Czech Lithuania Sweden Republic Luxembourg Switzerland Denmark Malta Thailand Egypt Mexico Trinidad and Estonia Morocco Tobago Finland Netherlands Tunisia France New Zealand Turkey Germany Norway Ukraine Greece Pakistan United Hungary Philippines Kingdom Iceland Poland Venezuela India Portugal     Dividends Used to Buy More Stock The corporation in which you own stock may have a dividend reinvestment plan. H and r block 1040x This plan lets you choose to use your dividends to buy (through an agent) more shares of stock in the corporation instead of receiving the dividends in cash. H and r block 1040x Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. H and r block 1040x If you use your dividends to buy more stock at a price equal to its fair market value, you still must report the dividends as income. H and r block 1040x If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must report as dividend income the fair market value of the additional stock on the dividend payment date. H and r block 1040x You also must report as dividend income any service charge subtracted from your cash dividends before the dividends are used to buy the additional stock. H and r block 1040x But you may be able to deduct the service charge. H and r block 1040x See chapter 28 for more information about deducting expenses of producing income. H and r block 1040x In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. H and r block 1040x If you choose to do this, you must report as dividend income the difference between the cash you invest and the fair market value of the stock you buy. H and r block 1040x When figuring this amount, use the fair market value of the stock on the dividend payment date. H and r block 1040x Money Market Funds Report amounts you receive from money market funds as dividend income. H and r block 1040x Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. H and r block 1040x Capital Gain Distributions Capital gain distributions (also called capital gain dividends) are paid to you or credited to your account by mutual funds (or other regulated investment companies) and real estate investment trusts (REITs). H and r block 1040x They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. H and r block 1040x Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. H and r block 1040x Undistributed capital gains of mutual funds and REITs. H and r block 1040x    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. H and r block 1040x You must treat your share of these gains as distributions, even though you did not actually receive them. H and r block 1040x However, they are not included on Form 1099-DIV. H and r block 1040x Instead, they are reported to you in box 1a of Form 2439. H and r block 1040x   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. H and r block 1040x   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. H and r block 1040x You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. H and r block 1040x Attach Copy B of Form 2439 to your return, and keep Copy C for your records. H and r block 1040x Basis adjustment. H and r block 1040x   Increase your basis in your mutual fund, or your interest in a REIT, by the difference between the gain you report and the credit you claim for the tax paid. H and r block 1040x Additional information. H and r block 1040x   For more information on the treatment of distributions from mutual funds, see Publication 550. H and r block 1040x Nondividend Distributions A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. H and r block 1040x You should receive a Form 1099-DIV or other statement showing the nondividend distribution. H and r block 1040x On Form 1099-DIV, a nondividend distribution will be shown in box 3. H and r block 1040x If you do not receive such a statement, you report the distribution as an ordinary dividend. H and r block 1040x Basis adjustment. H and r block 1040x   A nondividend distribution reduces the basis of your stock. H and r block 1040x It is not taxed until your basis in the stock is fully recovered. H and r block 1040x This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. H and r block 1040x If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first. H and r block 1040x   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. H and r block 1040x Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. H and r block 1040x See Holding Period in chapter 14. H and r block 1040x Example. H and r block 1040x You bought stock in 2000 for $100. H and r block 1040x In 2003, you received a nondividend distribution of $80. H and r block 1040x You did not include this amount in your income, but you reduced the basis of your stock to $20. H and r block 1040x You received a nondividend distribution of $30 in 2013. H and r block 1040x The first $20 of this amount reduced your basis to zero. H and r block 1040x You report the other $10 as a long-term capital gain for 2013. H and r block 1040x You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. H and r block 1040x Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. H and r block 1040x These distributions are, at least in part, one form of a return of capital. H and r block 1040x They may be paid in one or more installments. H and r block 1040x You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. H and r block 1040x For more information on liquidating distributions, see chapter 1 of Publication 550. H and r block 1040x Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. H and r block 1040x Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. H and r block 1040x Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. H and r block 1040x Taxable stock dividends and stock rights. H and r block 1040x   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. H and r block 1040x You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. H and r block 1040x The distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders. H and r block 1040x The distribution is in convertible preferred stock and has the same result as in (2). H and r block 1040x The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. H and r block 1040x The distribution is on preferred stock. H and r block 1040x (The distribution, however, is not taxable if it is an increase in the conversion ratio of convertible preferred stock made solely to take into account a stock dividend, stock split, or similar event that would otherwise result in reducing the conversion right. H and r block 1040x )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. H and r block 1040x If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. H and r block 1040x Preferred stock redeemable at a premium. H and r block 1040x   If you hold preferred stock having a redemption price higher than its issue price, the difference (the redemption premium) generally is taxable as a constructive distribution of additional stock on the preferred stock. H and r block 1040x For more information, see chapter 1 of Publication 550. H and r block 1040x Basis. H and r block 1040x   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. H and r block 1040x If you receive stock or stock rights that are not taxable to you, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550 for information on how to figure their basis. H and r block 1040x Fractional shares. H and r block 1040x    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. H and r block 1040x However, with the approval of the shareholders, the corporation may set up a plan in which fractional shares are not issued but instead are sold, and the cash proceeds are given to the shareholders. H and r block 1040x Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. H and r block 1040x Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. H and r block 1040x Enter your gain or loss, the difference between the cash you receive and the basis of the fractional shares sold, in column (h) of Schedule D (Form 1040) in Part I or Part II, whichever is appropriate. H and r block 1040x    Report these transactions on Form 8949 with the correct box checked. H and r block 1040x   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. H and r block 1040x Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). H and r block 1040x Example. H and r block 1040x You own one share of common stock that you bought on January 3, 2004, for $100. H and r block 1040x The corporation declared a common stock dividend of 5% on June 29, 2013. H and r block 1040x The fair market value of the stock at the time the stock dividend was declared was $200. H and r block 1040x You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. H and r block 1040x You figure your gain or loss as follows: Fair market value of old stock $200. H and r block 1040x 00 Fair market value of stock dividend (cash received) +10. H and r block 1040x 00 Fair market value of old stock and stock dividend $210. H and r block 1040x 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. H and r block 1040x 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. H and r block 1040x 76 Total $100. H and r block 1040x 00 Cash received $10. H and r block 1040x 00 Basis (cost) of stock dividend − 4. H and r block 1040x 76 Gain $5. H and r block 1040x 24 Because you had held the share of stock for more than 1 year at the time the stock dividend was declared, your gain on the stock dividend is a long-term capital gain. H and r block 1040x Scrip dividends. H and r block 1040x   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. H and r block 1040x The certificate is generally nontaxable when you receive it. H and r block 1040x If you choose to have the corporation sell the certificate for you and give you the proceeds, your gain or loss is the difference between the proceeds and the portion of your basis in the corporation's stock allocated to the certificate. H and r block 1040x   However, if you receive a scrip certificate that you can choose to redeem for cash instead of stock, the certificate is taxable when you receive it. H and r block 1040x You must include its fair market value in income on the date you receive it. H and r block 1040x Other Distributions You may receive any of the following distributions during the year. H and r block 1040x Exempt-interest dividends. H and r block 1040x   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. H and r block 1040x Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. H and r block 1040x Information reporting requirement. H and r block 1040x   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. H and r block 1040x This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. H and r block 1040x Alternative minimum tax treatment. H and r block 1040x   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. H and r block 1040x See Alternative Minimum Tax (AMT) in chapter 30 for more information. H and r block 1040x Dividends on insurance policies. H and r block 1040x    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. H and r block 1040x However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. H and r block 1040x    If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. H and r block 1040x Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. H and r block 1040x Report any taxable distributions on insurance policies on Form 1040, line 21. H and r block 1040x Dividends on veterans' insurance. H and r block 1040x   Dividends you receive on veterans' insurance policies are not taxable. H and r block 1040x In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. H and r block 1040x Patronage dividends. H and r block 1040x   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. H and r block 1040x   Do not include in your income patronage dividends you receive on: Property bought for your personal use, or Capital assets or depreciable property bought for use in your business. H and r block 1040x But you must reduce the basis (cost) of the items bought. H and r block 1040x If the dividend is more than the adjusted basis of the assets, you must report the excess as income. H and r block 1040x   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. H and r block 1040x Alaska Permanent Fund dividends. H and r block 1040x    Do not report these amounts as dividends. H and r block 1040x Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. H and r block 1040x How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. H and r block 1040x Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. H and r block 1040x Report qualified dividends on line 9b of Form 1040 or Form 1040A. H and r block 1040x If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. H and r block 1040x See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. H and r block 1040x If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. H and r block 1040x You cannot use Form 1040EZ if you receive any dividend income. H and r block 1040x Form 1099-DIV. H and r block 1040x   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. H and r block 1040x Even if you do not receive Form 1099-DIV, you must report all your dividend income. H and r block 1040x   See Form 1099-DIV for more information on how to report dividend income. H and r block 1040x Form 1040A or 1040. H and r block 1040x    You must complete Schedule B (Form 1040A or 1040), Part II, and attach it to your Form 1040A or 1040, if: Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or You received, as a nominee, dividends that actually belong to someone else. H and r block 1040x If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. H and r block 1040x   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. H and r block 1040x If your securities are held by a brokerage firm (in “street name”), list the name of the brokerage firm shown on Form 1099-DIV as the payer. H and r block 1040x If your stock is held by a nominee who is the owner of record, and the nominee credited or paid you dividends on the stock, show the name of the nominee and the dividends you received or for which you were credited. H and r block 1040x   Enter on line 6 the total of the amounts listed on line 5. H and r block 1040x Also enter this total on line 9a of Form 1040A or 1040. H and r block 1040x Qualified dividends. H and r block 1040x   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. H and r block 1040x The amount in box 1b is already included in box 1a. H and r block 1040x Do not add the amount in box 1b to, or substract it from, the amount in box 1a. H and r block 1040x   Do not include any of the following on line 9b. H and r block 1040x Qualified dividends you received as a nominee. H and r block 1040x See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. H and r block 1040x Dividends on stock for which you did not meet the holding period. H and r block 1040x See Holding period , earlier under Qualified Dividends. H and r block 1040x Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. H and r block 1040x Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. H and r block 1040x Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. H and r block 1040x   If you have qualified dividends, you must figure your tax by completing the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 or 1040A instructions or the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions, whichever applies. H and r block 1040x Enter qualified dividends on line 2 of the worksheet. H and r block 1040x Investment interest deducted. H and r block 1040x   If you claim a deduction for investment interest, you may have to reduce the amount of your qualified dividends that are eligible for the 0%, 15%, or 20% tax rate. H and r block 1040x Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. H and r block 1040x This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. H and r block 1040x For more information about the limit on investment interest, see Investment expenses in chapter 23. H and r block 1040x Expenses related to dividend income. H and r block 1040x   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). H and r block 1040x See chapter 28 for general information about deducting expenses of producing income. H and r block 1040x More information. H and r block 1040x    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. H and r block 1040x Prev  Up  Next   Home   More Online Publications
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Trusts

It is a common misconception that trusts, or trust funds as they are commonly called, are only useful for wealthy people. When set up properly, trusts can be appropriate for people with minor children or those who want to avoid having their estate go through probate upon death. These are basic facts about trusts – but, be sure to consult a licensed attorney experienced with estate planning and trust matters before making any final decisions about if one is right for you.

How Trusts Work

Creating a trust (or trust fund) establishes a legal entity that holds property or assets for the person who created it. The person who creates the trust can be called a grantor, donor, or settlor. When the grantor creates the trust he or she appoints a person or entity (like the trust department of a bank) to manage the trust. This person or entity is called a trustee. The grantor also chooses someone who will ultimately benefit from the trust, this person is the beneficiary. In some situations the grantor, trustee, and beneficiary are all the same person. In this case, the grantor should also appoint a successor trustee and beneficiary in case he or she dies or becomes incapacitated. A trust is a helpful estate planning tool because after death a trust doesn’t go through the probate process like a will does.

Reasons To Set Up A Trust

Some common reasons for setting up a trust include:

  • Providing for minor children or family members who are inexperienced or unable to handle financial matters
  • Providing for management of personal assets should one become unable to handle them oneself
  • Avoiding probate and immediately transferring assets to beneficiaries upon death
  • Reducing estate taxes and providing liquid assets to help pay for them
  • The terms of a will are public while the terms of a trust are not so privacy makes a trust an attractive option

Types of Trusts

Trusts can be living (inter vivos) or after-death (testamentary). A living trust is one that a grantor sets up while still alive and an after-death trust is usually established by a will after one’s death. Living trusts can be irrevocable (can’t be changed) or revocable (can be changed) although revocable trusts don’t receive the same tax shelter benefits as irrevocable ones do. The most popular type is the revocable living trust. If there’s a specific purpose in mind for the trust, dozens of different options exist. Some examples include charitable trusts, bypass trusts, spendthrift trusts, and life insurance trusts. New laws have even established a trust that will care for a pet after one’s death.

Setting Up A Trust

Once you’ve decided to set up a trust it is important to remember that a trust, by design, can be very flexible and a grantor has the right – and should take advantage of this right - within the law, to tailor it to meet the anticipated the needs of the beneficiary. Working with an experienced attorney that specializes in estate and trust issues and knows the specific state regulations can help get the maximum benefit from the trust.
Some things to consider when setting up the trust include:

  • The grantor has the right to specify exactly how the money in the trust is invested. The grantor and the trustee might have very different ideas about investment strategies, so make sure this gets clearly defined.
  • The grantor has the right to specify exactly how the assets should be divvied up down to details like including an annual cost of living adjustment for the beneficiary or paying for travel expenses for others to visit the beneficiary in the case of illness.
  • Always be sure to include a “trustee removal clause” – trusts that don’t have this clause take away the beneficiary’s right to fire the trustee if unsatisfied with the service being provided. Remember that the grantor can always add a provision that requires the beneficiary to select a new trustee from legitimate bank trust departments. Contact your state Department of Financial Institutions to get a list of licensed trust departments.
  • If the grantor wants to ensure that upon death any assets that remain outside of the trust are transferred to it, he or she should consider having a “pour-over” will to accomplish this.

Upon establishment of the trust the grantor must complete the process of setting up the trust by transferring his or her assets into the trust. Failure to do this properly makes the trust null and void. This means that upon the grantor’s death the state will decide who gets the assets and cares for minor children.

Protect Yourself From Trust Scams and Fraud

If someone approaches you to set up a trust be very cautious. Before signing any papers to create a living trust, will or other kind of trust make sure to explore all options and shop around for this service just as you would for any other. Also:

  • Avoid high-pressure sales tactics and high speed sales pitches.
  • Avoid salespeople who give the impression that AARP is backing or selling the product – AARP does not endorse living trust products.
  • Do your homework and get information about local probate laws from the Clerk or Register of Wills.
  • If someone tries to sell a living trust to you ask if they are an attorney. Some states restrict sales of living trusts by licensed attorneys.
  • If you buy a trust in your home or another location that is not the seller’s permanent place of business remember you are entitled to take advantage of the Cooling Off Rule and cancel the transaction within 3 business days.

The H And R Block 1040x

H and r block 1040x 1. H and r block 1040x   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. H and r block 1040x Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. H and r block 1040x Reseller statement. H and r block 1040x Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. H and r block 1040x Deep-draft ocean-going vessels. H and r block 1040x Passenger vessels. H and r block 1040x Ocean-going barges. H and r block 1040x State or local governments. H and r block 1040x Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. H and r block 1040x Gasoline, including aviation gasoline and gasoline blendstocks. H and r block 1040x Diesel fuel, including dyed diesel fuel. H and r block 1040x Diesel-water fuel emulsion. H and r block 1040x Kerosene, including dyed kerosene and kerosene used in aviation. H and r block 1040x Other Fuels (including alternative fuels). H and r block 1040x Compressed natural gas (CNG). H and r block 1040x Fuels used in commercial transportation on inland waterways. H and r block 1040x Any liquid used in a fractional ownership program aircraft as fuel. H and r block 1040x The following terms are used throughout the discussion of fuel taxes. H and r block 1040x Other terms are defined in the discussion of the specific fuels to which they pertain. H and r block 1040x Agri-biodiesel. H and r block 1040x   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. H and r block 1040x Approved terminal or refinery. H and r block 1040x   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. H and r block 1040x Biodiesel. H and r block 1040x   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. H and r block 1040x Blended taxable fuel. H and r block 1040x   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. H and r block 1040x This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. H and r block 1040x Blender. H and r block 1040x   This is the person that produces blended taxable fuel. H and r block 1040x Bulk transfer. H and r block 1040x   This is the transfer of taxable fuel by pipeline or vessel. H and r block 1040x Bulk transfer/terminal system. H and r block 1040x   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. H and r block 1040x Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. H and r block 1040x Cellulosic biofuel. H and r block 1040x   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. H and r block 1040x Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). H and r block 1040x For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. H and r block 1040x Also see Second generation biofuel below. H and r block 1040x Diesel-water fuel emulsion. H and r block 1040x   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. H and r block 1040x The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. H and r block 1040x Dry lease aircraft exchange. H and r block 1040x   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. H and r block 1040x Enterer. H and r block 1040x   This is the importer of record (under customs law) for the taxable fuel. H and r block 1040x However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. H and r block 1040x If there is no importer of record, the owner at the time of entry into the United States is the enterer. H and r block 1040x Entry. H and r block 1040x   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. H and r block 1040x This does not apply to fuel brought into Puerto Rico (which is part of the U. H and r block 1040x S. H and r block 1040x customs territory), but does apply to fuel brought into the United States from Puerto Rico. H and r block 1040x Fractional ownership aircraft program and fractional program aircraft. H and r block 1040x   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. H and r block 1040x Measurement of taxable fuel. H and r block 1040x   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. H and r block 1040x Other fuels. H and r block 1040x   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. H and r block 1040x Pipeline operator. H and r block 1040x   This is the person that operates a pipeline within the bulk transfer/terminal system. H and r block 1040x Position holder. H and r block 1040x   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. H and r block 1040x You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. H and r block 1040x A terminal operator that owns taxable fuel in its terminal is a position holder. H and r block 1040x Rack. H and r block 1040x   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. H and r block 1040x Refiner. H and r block 1040x   This is any person that owns, operates, or otherwise controls a refinery. H and r block 1040x Refinery. H and r block 1040x   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. H and r block 1040x However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. H and r block 1040x For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. H and r block 1040x Registrant. H and r block 1040x   This is a taxable fuel registrant (see Registration Requirements, later). H and r block 1040x Removal. H and r block 1040x   This is any physical transfer of taxable fuel. H and r block 1040x It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. H and r block 1040x However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. H and r block 1040x Renewable diesel. H and r block 1040x   See Renewable Diesel Credits in chapter 2. H and r block 1040x Sale. H and r block 1040x   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. H and r block 1040x For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. H and r block 1040x Second generation biofuel. H and r block 1040x   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. H and r block 1040x S. H and r block 1040x C. H and r block 1040x 7545). H and r block 1040x It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. H and r block 1040x It is not alcohol of less than 150 proof (disregard any added denaturants). H and r block 1040x See Form 6478 for more information. H and r block 1040x State. H and r block 1040x   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. H and r block 1040x An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. H and r block 1040x Taxable fuel. H and r block 1040x   This means gasoline, diesel fuel, and kerosene. H and r block 1040x Terminal. H and r block 1040x   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. H and r block 1040x It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. H and r block 1040x A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. H and r block 1040x Terminal operator. H and r block 1040x   This is any person that owns, operates, or otherwise controls a terminal. H and r block 1040x Throughputter. H and r block 1040x   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). H and r block 1040x Vessel operator. H and r block 1040x   This is the person that operates a vessel within the bulk transfer/terminal system. H and r block 1040x However, vessel does not include a deep draft ocean-going vessel. H and r block 1040x Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. H and r block 1040x A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. H and r block 1040x For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. H and r block 1040x The returns are due the last day of the month following the month in which the transaction occurs. H and r block 1040x Generally, these returns can be filed on paper or electronically. H and r block 1040x For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. H and r block 1040x Publication 3536 is only available on the IRS website. H and r block 1040x Form 720-TO. H and r block 1040x   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. H and r block 1040x Each terminal operator must file a separate form for each approved terminal. H and r block 1040x Form 720-CS. H and r block 1040x   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. H and r block 1040x Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. H and r block 1040x See Form 637 for other persons who must register and for more information about registration. H and r block 1040x Persons that are required to be registered. H and r block 1040x   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. H and r block 1040x Persons that may register. H and r block 1040x   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. H and r block 1040x Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. H and r block 1040x However, they must be registered to file claims for certain sales and uses of fuel. H and r block 1040x See Form 637 for more information. H and r block 1040x Taxable fuel registrant. H and r block 1040x   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. H and r block 1040x The term registrant as used in the discussions of these fuels means a taxable fuel registrant. H and r block 1040x Additional information. H and r block 1040x   See the Form 637 instructions for the information you must submit when you apply for registration. H and r block 1040x Failure to register. H and r block 1040x   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. H and r block 1040x Gasoline and Aviation Gasoline Gasoline. H and r block 1040x   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. H and r block 1040x Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. H and r block 1040x Gasoline also includes gasoline blendstocks, discussed later. H and r block 1040x Aviation gasoline. H and r block 1040x   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. H and r block 1040x Taxable Events The tax on gasoline is $. H and r block 1040x 184 per gallon. H and r block 1040x The tax on aviation gasoline is $. H and r block 1040x 194 per gallon. H and r block 1040x When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. H and r block 1040x 141 per gallon. H and r block 1040x See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. H and r block 1040x Tax is imposed on the removal, entry, or sale of gasoline. H and r block 1040x Each of these events is discussed later. H and r block 1040x Also, see the special rules that apply to gasoline blendstocks, later. H and r block 1040x If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. H and r block 1040x See Refunds of Second Tax in chapter 2. H and r block 1040x Removal from terminal. H and r block 1040x   All removals of gasoline at a terminal rack are taxable. H and r block 1040x The position holder for that gasoline is liable for the tax. H and r block 1040x Two-party exchanges. H and r block 1040x   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. H and r block 1040x A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. H and r block 1040x The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. H and r block 1040x The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. H and r block 1040x The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. H and r block 1040x The transaction is subject to a written contract. H and r block 1040x Terminal operator's liability. H and r block 1040x   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. H and r block 1040x   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. H and r block 1040x The terminal operator is a registrant. H and r block 1040x The terminal operator has an unexpired notification certificate (discussed later) from the position holder. H and r block 1040x The terminal operator has no reason to believe any information on the certificate is false. H and r block 1040x Removal from refinery. H and r block 1040x   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. H and r block 1040x It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. H and r block 1040x It is made at the refinery rack. H and r block 1040x The refiner is liable for the tax. H and r block 1040x Exception. H and r block 1040x   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. H and r block 1040x The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. H and r block 1040x The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. H and r block 1040x The removal from the refinery is by railcar. H and r block 1040x The same person operates the refinery and the facility at which the gasoline is received. H and r block 1040x Entry into the United States. H and r block 1040x   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. H and r block 1040x It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. H and r block 1040x It is not made by bulk transfer. H and r block 1040x The enterer is liable for the tax. H and r block 1040x Importer of record's liability. H and r block 1040x   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. H and r block 1040x   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. H and r block 1040x The importer of record has an unexpired notification certificate (discussed later) from the enterer. H and r block 1040x The importer of record has no reason to believe any information in the certificate is false. H and r block 1040x Customs bond. H and r block 1040x   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. H and r block 1040x Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. H and r block 1040x   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. H and r block 1040x The position holder is liable for the tax. H and r block 1040x The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. H and r block 1040x However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. H and r block 1040x Bulk transfers not received at approved terminal or refinery. H and r block 1040x   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. H and r block 1040x No tax was previously imposed (as discussed earlier) on any of the following events. H and r block 1040x The removal from the refinery. H and r block 1040x The entry into the United States. H and r block 1040x The removal from a terminal by an unregistered position holder. H and r block 1040x Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). H and r block 1040x   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. H and r block 1040x However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. H and r block 1040x The owner is a registrant. H and r block 1040x The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. H and r block 1040x The owner has no reason to believe any information on the certificate is false. H and r block 1040x The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. H and r block 1040x The operator is jointly and severally liable if the owner does not meet these conditions. H and r block 1040x Sales to unregistered person. H and r block 1040x   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. H and r block 1040x   The seller is liable for the tax. H and r block 1040x However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. H and r block 1040x   The seller is a registrant. H and r block 1040x The seller has an unexpired notification certificate (discussed later) from the buyer. H and r block 1040x The seller has no reason to believe any information on the certificate is false. H and r block 1040x The buyer of the gasoline is liable for the tax if the seller meets these conditions. H and r block 1040x The buyer is jointly and severally liable if the seller does not meet these conditions. H and r block 1040x Exception. H and r block 1040x   The tax does not apply to a sale if all of the following apply. H and r block 1040x The buyer's principal place of business is not in the United States. H and r block 1040x The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. H and r block 1040x The seller is a registrant and the exporter of record. H and r block 1040x The fuel was exported. H and r block 1040x Removal or sale of blended gasoline. H and r block 1040x   The removal or sale of blended gasoline by the blender is taxable. H and r block 1040x See Blended taxable fuel under Definitions, earlier. H and r block 1040x   The blender is liable for the tax. H and r block 1040x The tax is figured on the number of gallons not previously subject to the tax on gasoline. H and r block 1040x   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. H and r block 1040x See Form 720 to report this tax. H and r block 1040x You also must be registered with the IRS as a blender. H and r block 1040x See Form 637. H and r block 1040x   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. H and r block 1040x Notification certificate. H and r block 1040x   The notification certificate is used to notify a person of the registration status of the registrant. H and r block 1040x A copy of the registrant's letter of registration cannot be used as a notification certificate. H and r block 1040x A model notification certificate is shown in the Appendix as Model Certificate C. H and r block 1040x A notification certificate must contain all information necessary to complete the model. H and r block 1040x   The certificate may be included as part of any business records normally used for a sale. H and r block 1040x A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. H and r block 1040x The registrant must provide a new certificate if any information on a certificate has changed. H and r block 1040x Additional persons liable. H and r block 1040x   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. H and r block 1040x Gasoline Blendstocks Gasoline blendstocks may be subject to $. H and r block 1040x 001 per gallon LUST tax as discussed below. H and r block 1040x Gasoline includes gasoline blendstocks. H and r block 1040x The previous discussions apply to these blendstocks. H and r block 1040x However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. H and r block 1040x 001 per gallon or are not subject to the excise tax. H and r block 1040x Blendstocks. H and r block 1040x   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. H and r block 1040x   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. H and r block 1040x Not used to produce finished gasoline. H and r block 1040x   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. H and r block 1040x Removals and entries not connected to sale. H and r block 1040x   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. H and r block 1040x Removals and entries connected to sale. H and r block 1040x   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. H and r block 1040x The person has an unexpired certificate (discussed later) from the buyer. H and r block 1040x The person has no reason to believe any information in the certificate is false. H and r block 1040x Sales after removal or entry. H and r block 1040x   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. H and r block 1040x The seller is liable for the tax. H and r block 1040x However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. H and r block 1040x The seller has an unexpired certificate (discussed next) from the buyer. H and r block 1040x The seller has no reason to believe any information in the certificate is false. H and r block 1040x Certificate of buyer. H and r block 1040x   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. H and r block 1040x The certificate may be included as part of any business records normally used for a sale. H and r block 1040x A model certificate is shown in the Appendix as Model Certificate D. H and r block 1040x The certificate must contain all information necessary to complete the model. H and r block 1040x   A certificate expires on the earliest of the following dates. H and r block 1040x The date 1 year after the effective date (not earlier than the date signed) of the certificate. H and r block 1040x The date a new certificate is provided to the seller. H and r block 1040x The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. H and r block 1040x The buyer must provide a new certificate if any information on a certificate has changed. H and r block 1040x   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. H and r block 1040x Received at approved terminal or refinery. H and r block 1040x   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. H and r block 1040x The person is a registrant. H and r block 1040x The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. H and r block 1040x The person has no reason to believe any information on the certificate is false. H and r block 1040x Bulk transfers to registered industrial user. H and r block 1040x   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. H and r block 1040x An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. H and r block 1040x Credits or Refunds. H and r block 1040x   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. H and r block 1040x For more information, see chapter 2. H and r block 1040x Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). H and r block 1040x However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. H and r block 1040x Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. H and r block 1040x A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. H and r block 1040x A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. H and r block 1040x However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. H and r block 1040x Diesel fuel does not include gasoline, kerosene, excluded liquid, No. H and r block 1040x 5 and No. H and r block 1040x 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. H and r block 1040x An excluded liquid is either of the following. H and r block 1040x A liquid that contains less than 4% normal paraffins. H and r block 1040x A liquid with all the following properties. H and r block 1040x Distillation range of 125 degrees Fahrenheit or less. H and r block 1040x Sulfur content of 10 ppm or less. H and r block 1040x Minimum color of +27 Saybolt. H and r block 1040x Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. H and r block 1040x Kerosene. H and r block 1040x   This means any of the following liquids. H and r block 1040x One of the two grades of kerosene (No. H and r block 1040x 1-K and No. H and r block 1040x 2-K) covered by ASTM specification D3699. H and r block 1040x Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). H and r block 1040x See Kerosene for Use in Aviation, later. H and r block 1040x   However, kerosene does not include excluded liquid, discussed earlier. H and r block 1040x   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. H and r block 1040x Diesel-powered highway vehicle. H and r block 1040x   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. H and r block 1040x Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. H and r block 1040x For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. H and r block 1040x 2) in chapter 2. H and r block 1040x Diesel-powered train. H and r block 1040x   This is any diesel-powered equipment or machinery that rides on rails. H and r block 1040x The term includes a locomotive, work train, switching engine, and track maintenance machine. H and r block 1040x Taxable Events The tax on diesel fuel and kerosene is $. H and r block 1040x 244 per gallon. H and r block 1040x It is imposed on the removal, entry, or sale of diesel fuel and kerosene. H and r block 1040x Each of these events is discussed later. H and r block 1040x Only the $. H and r block 1040x 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. H and r block 1040x If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. H and r block 1040x See Refunds of Second Tax in chapter 2. H and r block 1040x Use in certain intercity and local buses. H and r block 1040x   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. H and r block 1040x A claim for $. H and r block 1040x 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. H and r block 1040x An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. H and r block 1040x The bus must be engaged in one of the following activities. H and r block 1040x Scheduled transportation along regular routes regardless of the size of the bus. H and r block 1040x Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). H and r block 1040x A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. H and r block 1040x Removal from terminal. H and r block 1040x   All removals of diesel fuel and kerosene at a terminal rack are taxable. H and r block 1040x The position holder for that fuel is liable for the tax. H and r block 1040x Two-party exchanges. H and r block 1040x   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. H and r block 1040x A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. H and r block 1040x The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. H and r block 1040x The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. H and r block 1040x The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. H and r block 1040x The transaction is subject to a written contract. H and r block 1040x Terminal operator's liability. H and r block 1040x   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). H and r block 1040x   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. H and r block 1040x However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. H and r block 1040x The terminal operator is a registrant. H and r block 1040x The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. H and r block 1040x The terminal operator has no reason to believe any information on the certificate is false. H and r block 1040x Removal from refinery. H and r block 1040x   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. H and r block 1040x It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. H and r block 1040x It is made at the refinery rack. H and r block 1040x The refiner is liable for the tax. H and r block 1040x Exception. H and r block 1040x   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. H and r block 1040x The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. H and r block 1040x The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. H and r block 1040x The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. H and r block 1040x Entry into the United States. H and r block 1040x   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. H and r block 1040x It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. H and r block 1040x It is not made by bulk transfer. H and r block 1040x The enterer is liable for the tax. H and r block 1040x Importer of record's liability. H and r block 1040x   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. H and r block 1040x   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. H and r block 1040x The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. H and r block 1040x The importer of record has no reason to believe any information in the certificate is false. H and r block 1040x Customs bond. H and r block 1040x   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. H and r block 1040x Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. H and r block 1040x   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. H and r block 1040x The position holder is liable for the tax. H and r block 1040x The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. H and r block 1040x However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. H and r block 1040x Bulk transfers not received at approved terminal or refinery. H and r block 1040x   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. H and r block 1040x No tax was previously imposed (as discussed earlier) on any of the following events. H and r block 1040x The removal from the refinery. H and r block 1040x The entry into the United States. H and r block 1040x The removal from a terminal by an unregistered position holder. H and r block 1040x Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). H and r block 1040x   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. H and r block 1040x However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. H and r block 1040x The owner is a registrant. H and r block 1040x The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. H and r block 1040x The owner has no reason to believe any information on the certificate is false. H and r block 1040x The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. H and r block 1040x The operator is jointly and severally liable if the owner does not meet these conditions. H and r block 1040x Sales to unregistered person. H and r block 1040x   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. H and r block 1040x   The seller is liable for the tax. H and r block 1040x However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. H and r block 1040x The seller is a registrant. H and r block 1040x The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. H and r block 1040x The seller has no reason to believe any information on the certificate is false. H and r block 1040x The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. H and r block 1040x The buyer is jointly and severally liable if the seller does not meet these conditions. H and r block 1040x Exception. H and r block 1040x   The tax does not apply to a sale if all of the following apply. H and r block 1040x The buyer's principal place of business is not in the United States. H and r block 1040x The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. H and r block 1040x The seller is a registrant and the exporter of record. H and r block 1040x The fuel was exported. H and r block 1040x Removal or sale of blended diesel fuel or kerosene. H and r block 1040x   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. H and r block 1040x Blended taxable fuel produced using biodiesel is subject to the tax. H and r block 1040x See Blended taxable fuel under Definitions, earlier. H and r block 1040x   The blender is liable for the tax. H and r block 1040x The tax is figured on the number of gallons not previously subject to the tax. H and r block 1040x   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. H and r block 1040x Generally, the biodiesel mixture must be diesel fuel (defined earlier). H and r block 1040x See Form 720 to report this tax. H and r block 1040x You also must be registered by the IRS as a blender. H and r block 1040x See Form 637 for more information. H and r block 1040x   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. H and r block 1040x Additional persons liable. H and r block 1040x   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. H and r block 1040x Credits or Refunds. H and r block 1040x   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. H and r block 1040x For more information, see chapter 2. H and r block 1040x Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. H and r block 1040x 001 per gallon LUST tax as discussed below, unless the fuel is for export. H and r block 1040x The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. H and r block 1040x The person otherwise liable for tax (for example, the position holder) is a registrant. H and r block 1040x In the case of a removal from a terminal, the terminal is an approved terminal. H and r block 1040x The diesel fuel or kerosene satisfies the dyeing requirements (described next). H and r block 1040x Dyeing requirements. H and r block 1040x   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. H and r block 1040x It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. H and r block 1040x 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. H and r block 1040x Is indelibly dyed by mechanical injection. H and r block 1040x See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. H and r block 1040x Notice required. H and r block 1040x   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. H and r block 1040x   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. H and r block 1040x   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). H and r block 1040x That seller is subject to the penalty described next. H and r block 1040x Penalty. H and r block 1040x   A penalty is imposed on a person if any of the following situations apply. H and r block 1040x Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. H and r block 1040x Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. H and r block 1040x The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. H and r block 1040x The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. H and r block 1040x   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. H and r block 1040x After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. H and r block 1040x   This penalty is in addition to any tax imposed on the fuel. H and r block 1040x   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. H and r block 1040x   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. H and r block 1040x   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. H and r block 1040x However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. H and r block 1040x The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. H and r block 1040x Exception to penalty. H and r block 1040x   The penalty under item (3) will not apply in any of the following situations. H and r block 1040x Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. H and r block 1040x Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. H and r block 1040x The alteration or attempted alteration occurs in an exempt area of Alaska. H and r block 1040x See Removal for sale or use in Alaska, later. H and r block 1040x Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. H and r block 1040x Alaska and Feedstocks Tax of $. H and r block 1040x 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). H and r block 1040x Undyed kerosene used for feedstock purposes. H and r block 1040x Removal for sale or use in Alaska. H and r block 1040x   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. H and r block 1040x The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. H and r block 1040x The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. H and r block 1040x In the case of a removal from a terminal, the terminal is an approved terminal. H and r block 1040x The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. H and r block 1040x   If all three of the requirements above are not met, then tax is imposed at $. H and r block 1040x 244 per gallon. H and r block 1040x   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. H and r block 1040x Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. H and r block 1040x Later sales. H and r block 1040x   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. H and r block 1040x The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. H and r block 1040x However, the sale is not taxable (other than the LUST tax at $. H and r block 1040x 001 per gallon) if all the following requirements are met. H and r block 1040x The fuel is sold in Alaska for certain nontaxable uses. H and r block 1040x The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. H and r block 1040x The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. H and r block 1040x Feedstock purposes. H and r block 1040x   The $. H and r block 1040x 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. H and r block 1040x The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. H and r block 1040x In the case of a removal from a terminal, the terminal is an approved terminal. H and r block 1040x Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. H and r block 1040x   If all of the requirements above are not met, then tax is imposed at $. H and r block 1040x 244 per gallon. H and r block 1040x   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. H and r block 1040x For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. H and r block 1040x A feedstock user is a person that uses kerosene for a feedstock purpose. H and r block 1040x A registered feedstock user is a person that has been registered by the IRS as a feedstock user. H and r block 1040x See Registration Requirements, earlier. H and r block 1040x Later sales. H and r block 1040x   The excise tax ($. H and r block 1040x 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. H and r block 1040x The tax is imposed at the time of the later sale and that seller is liable for the tax. H and r block 1040x Certificate. H and r block 1040x   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. H and r block 1040x The certificate may be included as part of any business records normally used for a sale. H and r block 1040x A model certificate is shown in the Appendix as Model Certificate G. H and r block 1040x Your certificate must contain all information necessary to complete the model. H and r block 1040x   A certificate expires on the earliest of the following dates. H and r block 1040x The date 1 year after the effective date (not earlier than the date signed) of the certificate. H and r block 1040x The date the seller is provided a new certificate or notice that the current certificate is invalid. H and r block 1040x The date the seller is notified the buyer's registration has been revoked or suspended. H and r block 1040x   The buyer must provide a new certificate if any information on a certificate has changed. H and r block 1040x Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. H and r block 1040x Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. H and r block 1040x Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. H and r block 1040x Any liquid other than gasoline, diesel fuel, or kerosene. H and r block 1040x Generally, this back-up tax is imposed at a rate of $. H and r block 1040x 244 per gallon. H and r block 1040x Liability for tax. H and r block 1040x   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. H and r block 1040x In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. H and r block 1040x Exemptions from the back-up tax. H and r block 1040x   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. H and r block 1040x   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. H and r block 1040x Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. H and r block 1040x A reduced tax rate of $. H and r block 1040x 198 per gallon is imposed on a diesel-water fuel emulsion. H and r block 1040x To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. H and r block 1040x If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. H and r block 1040x 244 per gallon. H and r block 1040x Credits or refunds. H and r block 1040x   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. H and r block 1040x Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. H and r block 1040x 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). H and r block 1040x For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. H and r block 1040x 219. H and r block 1040x The rate of $. H and r block 1040x 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. H and r block 1040x The airport terminal does not need to be a secured airport terminal for this rate to apply. H and r block 1040x However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. H and r block 1040x For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. H and r block 1040x 044 per gallon. H and r block 1040x For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. H and r block 1040x 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. H and r block 1040x See Terminal located within a secured area of an airport, later. H and r block 1040x In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. H and r block 1040x For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. H and r block 1040x 001. H and r block 1040x There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. H and r block 1040x The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. H and r block 1040x See Terminal located within a secured area of an airport, later. H and r block 1040x In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. H and r block 1040x The position holder is liable for the $. H and r block 1040x 001 per gallon tax. H and r block 1040x For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. H and r block 1040x 141 per gallon applies. H and r block 1040x Certain refueler trucks, tankers, and tank wagons treated as terminals. H and r block 1040x   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. H and r block 1040x Such terminal is located within an area of an airport. H and r block 1040x Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. H and r block 1040x Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. H and r block 1040x The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. H and r block 1040x Information reporting will be required by terminal operators regarding this provision. H and r block 1040x Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. H and r block 1040x Terminal located within a secured area of an airport. H and r block 1040x   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. H and r block 1040x This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. H and r block 1040x Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. H and r block 1040x 044 per gallon. H and r block 1040x However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). H and r block 1040x For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. H and r block 1040x For the aircraft operator to be liable for the tax $. H and r block 1040x 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. H and r block 1040x Commercial aviation. H and r block 1040x   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. H and r block 1040x However, commercial aviation does not include any of the following uses. H and r block 1040x Any use exclusively for the purpose of skydiving. H and r block 1040x Certain air transportation by seaplane. H and r block 1040x See Seaplanes under Transportation of Persons by Air in chapter 4. H and r block 1040x Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. H and r block 1040x For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. H and r block 1040x Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. H and r block 1040x For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. H and r block 1040x Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. H and r block 1040x See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. H and r block 1040x Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. H and r block 1040x 141 per gallon. H and r block 1040x The fractional ownership program manager is liable for the tax. H and r block 1040x The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. H and r block 1040x If the surtax is imposed, the following air transportation taxes do not apply. H and r block 1040x Transportation of persons by air. H and r block 1040x Transportation of property by air. H and r block 1040x Use of international air travel facilities. H and r block 1040x These taxes are described under Air Transportation Taxes, later. H and r block 1040x A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. H and r block 1040x Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. H and r block 1040x Fractional program aircraft. H and r block 1040x   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. H and r block 1040x S. H and r block 1040x   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. H and r block 1040x In such situations, the flight is not commercial aviation. H and r block 1040x Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. H and r block 1040x Fractional owner. H and r block 1040x   Any person owning any interest (including the entire interest) in a fractional program aircraft. H and r block 1040x Dry lease aircraft exchange. H and r block 1040x   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. H and r block 1040x Special rule relating to deadhead service. H and r block 1040x   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. H and r block 1040x More information. H and r block 1040x   See section 4043 for more information on the surtax. H and r block 1040x Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. H and r block 1040x Certificate. H and r block 1040x   The certificate may be included as part of any business records normally used for a sale. H and r block 1040x See Model Certificate K in the Appendix. H and r block 1040x   A certificate expires on the earliest of the following dates. H and r block 1040x The date 1 year after the effective date (not earlier than the date signed) of the certificate. H and r block 1040x The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. H and r block 1040x The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. H and r block 1040x   The buyer must provide a new certificate if any information on a certificate has changed. H and r block 1040x   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. H and r block 1040x Exempt use. H and r block 1040x   The rate on kerosene for use in aviation is $. H and r block 1040x 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. H and r block 1040x An exempt use includes kerosene for the exclusive use of a state or local government. H and r block 1040x There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. H and r block 1040x Flash title transaction. H and r block 1040x   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. H and r block 1040x In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. H and r block 1040x In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. H and r block 1040x Reseller statement. H and r block 1040x   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. H and r block 1040x Credits or Refunds. H and r block 1040x   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). H and r block 1040x A claim may be made by a registered ultimate vendor for certain sales. H and r block 1040x For more information, see chapter 2. H and r block 1040x Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. H and r block 1040x Other Fuels include alternative fuels. H and r block 1040x Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. H and r block 1040x Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. H and r block 1040x Qualified methanol and ethanol fuels. H and r block 1040x   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. H and r block 1040x The tax rates are listed in the Instructions for Form 720. H and r block 1040x Partially exempt methanol and ethanol fuels. H and r block 1040x   A reduced tax rate applies to these fuels. H and r block 1040x Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. H and r block 1040x The tax rates are listed in the Instructions for Form 720. H and r block 1040x Motor vehicles. H and r block 1040x   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. H and r block 1040x They are propelled by a motor. H and r block 1040x They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t