· 786 | J.K. Lasser’s Your Income Tax 2014 Index adjustments and preferences for, 464– 467...

J.K. Lasser’s Your Income Tax 2014 | 785

Index

INDEX

Symbols

0% capital gain rate, 99, 1012% AGI fl oor, 402, 403, 40415% capital gain rate, 99, 10128% capital gain rate, 10228% Rate Gain Worksheet, 102, 10539-week test for employees, 301–30250% limit

contributions to organizations with, 332–333

on entertainment costs, 431–432on meal costs, 431–432on T&E expense deductions, 428

78-week test for self-employed persons and partners, 302

90% current year test, 50090-day letter. See Notice of Defi ciency401(k) plans, 781

corrective distributions from, 172one-person, 664Roth contributions to, 176salary deferrals to, 36, 174–175saver’s credit and, 487SIMPLE, 218tax benefi ts, 173–174withdrawals from, 175–176withholdings for, 34

403(b) plans, 176–177, 487457 plans, 4872011 Standard Deduction, 277–292

A

Abandonments, 555–556, 686Abode test, 444Absences, 24

ownership/use tests and, 515Accelerated cost recovery system

(ACRS), 779. See also Modifi ed ACRS (MACRS) depreciation

Accelerated depreciation, 779

Accountable reimbursement plans, 779about, 436–437mileage allowance, 439–440non-accountable plans and, 440per diem allowance, 437–439

Accounting methods, 638–640, 779, 780Accrual-basis accounting, 639, 779Achievement awards, 64, 273Acknowledgment, of charitable

contributions, 329Acquisition debt, 779Acquisition discounts, 87Acquisition premiums, 84Acquisitions, 649, 677. See also Home

acquisitionACRS. See Accelerated cost recovery

system (ACRS)Active participation

in employer IRA plans, 193–196, 196–197

rental real estate loss and, 247test of, 779

Actual knowledge test, 17Additional taxes, 504–510, 739–740Additions, MACRS depreciation

for, 684Address, 5–8, 726Adjusted Basis of Home Sold, 525Adjusted basis of property, 123–124,

381, 467, 522, 523, 779Adjusted gross income (AGI), 295–303,

360, 7792% AGI fl oor, 402, 403, 404claiming deductions from gross

income, 296–299deductible moving expenses, 299–300,

300–301, 301–302, 303elderly or disabled tax credit and, 591fi guring, 296

Administrative tasks, home offi ce for, 649

Administrators of wills, 22, 25

Adopted children, medical expenses of, 369

Adoption benefi ts, 35, 59–60Adoption credit, 59, 475, 485–486ADS. See Alternative depreciation

systemAdvance payments, 638Advance rentals, 228Advances, against commissions, 38Advance valuation of art, 325, 332AFR. See Applicable federal rateAge 30 duration rule, 577Age 59½ (persons under), 170–172,

175, 204–207Age 65 (persons over), 3, 306, 308, 309Age 70½ (persons over), 163, 191, 192,

217, 221, 668Age test, 444Aggregate treatment of activities, 250,

253–254AGI. See Adjusted gross incomeAgreements. See specifi c typesAides (school), 404Air Force Academy, 577Airline Deregulation Act (1978), 39Airline pilots, 422–423Airplanes, 61, 62, 323Aliens. See Nonresident aliens;

See Resident aliensAlimony, 779

3rd year recapture for drops in, 617–618

cash payments of, 615child support payments vs., 616–617death of payee-spouse and, 615–616minimum payment period for, 617payments, 615taxable, as compensation, 191

Allowable Credit for 2012, 479–490Alternative depreciation system

(ADS), 682Alternative minimum tax (AMT), 461–

468, 779

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786 | J.K. Lasser’s Your Income Tax 2014

Index

adjustments and preferences for, 464–467

avoiding, 468depreciation, 682on Form 6251, 462–464and intangible drilling costs, 241interest on tax-exempt securities

and, 541ISOs and, 46kiddie tax and, 470–471miscellaneous deductions, 402for private activity bonds, 89recovered deductions and, 279state tax refunds and, 276tax credit from regular tax, 468tax credits against, 467–468and tax rate, 11

Alternative trade adjustment assistance (ATAA) program, 487

Amended returns, 734, 736, 739, 779Amended U.S. Individual Income Tax

Return. See also Form 1040XAmerican Opportunity credit, 571, 573,

576, 578American Taxpayer Relief Act, 10, 62,

310Amortization

of bond premium, 82–83of computer soft ware, 688of intangible assets, 674, 687–688of loans from retirement plans, 173of bond premium, 779of intangibles, 779of song rights, 688of start-up costs, 648

AMT. See Alternative minimum taxAnnual contributions, to Roth

IRAs, 220–221Annualized Estimated Tax

Worksheet, 500Annualized income method, 500Annualized rate, 779Annuities, 779

employee cost of, 187for employees of tax-exempt

organizations and schools, 176–177

endorsement of annuity check for another annuity, 152

from endowment policies, 184life expectancy tables for, 183–184partial exchanges of contracts, 153pre-age 59½ penalty, 205, 206–207reporting, 184–185for surviving spouses, 167–168taxable part of, 178–183, 185–186tax-sheltered, 784withdrawals from retirement plans

before start date of, 187withholdings and, 36, 496

Annulments, 615Anti-churning restriction, 686–687Apartment, cooperative. See Cooperative

apartmentsAppeals, 745Appliances, depreciation for, 229Applicable federal rate (AFR), 94, 96,

779Application for an Employer

Identifi cation Number. See Form SS-4

Appraisalsdeductions for, 412–413for disaster relief, 390of donated property, 325, 330–332fees for, 319reasonable cause exception for relying

on, 332of rental property, 232

Appreciated fi nancial positions, 535–536

Appreciated property, 319, 323–324, 335, 625, 779

Arbitrage transactions, 533Archer Medical Savings Accounts

(MSAs), 35, 54, 57, 299, 671–672, 779

Are Your Fringe Benefi ts Tax Free?, 51–71

Are Your Meals and Lodging Tax Free?, 66–71

Armed Forces Health Professions Scholarship and Financial Assistance Program, 60, 568

Armed Forces personnel, 594–600“away from home” test, 422in combat zones, 597–598, 599in contingency operations, 598–599

deductions for, 597as dependents, 448diff erential wages of, 492extensions for tax payment by

new, 599–600overnight travel costs, 297ownership and use test for, 516refund claims by, 735Reservists, 600taxable pay and benefi ts, 595

Artists, expenses of, 647Art objects, 324–326Assessment (term), 779Assets. See also specifi c types

estimating value of, 628–629in service before 1987, 684transfers of, 20

Assignments, 423–424, 779ATAA program. See Alternative trade

adjustment assistance programAthletes, professional, 422Athletic stadium tickets, 316, 329At-risk limits, 267–268, 268–269,

269–271, 658, 779Attorneys, 36, 281, 299, 616, 747Audits, 412–413, 737–748, 779Authorization, for return processing

discussions, 740Authors, expenses of, 647Automatic fi ling extensions, 723Automobiles. See also Car and truck

expensescharitable donations of, 323damage to, 386inclusion amount for leased, 781license fees, 357mileage allowance, 439–440recapture of fi rst-year expensing

for, 706tax credits for fuel cell and plug-in

electric, 489–490Auxiliary units, 313Average cost method, 566Average daily domestic production, 243Avoiding tax, 20, 30, 468Awards, 64, 273, 414, 568, 610“Away from home” test, 421–422, 583,

597, 779


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B

Backup withholdings, 497Bad debts, 384Balloon payment, 779Bank deposit losses, 384–385Bankruptcy, 81, 283Bargain sales, 323–324Basis, 779

adjusted, 381, 467, 522, 523, 779adjustment, 256and annual deduction ceiling, 324for contingent payment sales, 130for depreciation, 675for suspended tax credits, 265for mutual funds, 563–565, 565–566overvaluing, 742for property, 118–119, 150, 551,

556–557, 625for stocks and bonds, 288–289, 530,

531, 534, 535for vehicles, 697

Beginning date, retirement income, 169Below-market-interest loans, 93–95Benefi ciaries

basis of property for, 117death of, 214estates as, 211income from estates/trusts for, 289individual and non-individual as, 214IRA, 208, 212–214life insurance proceeds for, 290–291partly-taxable distributions to, 226pre-age 59½ penalty and, 205retirement income payments for, 169–

170retirement plan distributions for, 158,

161–162RMDs received by, 211–212rollovers by, 165, 211special needs, 576surviving spouses as, 216–217

Benefi ciary’s Single Life Expectancy Table, 215

Benefi ts. See specifi c types, e.g.: Fringe benefi ts

Benefi t tickets, 315Bicycles costs, 62

Bingo games, 315Blind persons, 306, 308, 309. See

also Standard Deduction of 65 or Older or Blind

Blocked currency, 610Boats, charitable donations of, 323Bond premiums, 82–83, 84, 779Bonds. See also specifi c types

amortization and, 83cost basis of, 82discount on, 83–84, 85–86, 86–87interest on, 80, 81, 88–89partial principal payment on, 86sale of, 81, 88of tax-exempt organizations, 540–541Treasury bills, notes and, 90

Bonuses, 433, 689Books, production costs of, 240Boot, 133, 142–144, 151, 779Borrowed funds, 572. See also LoansBreast pumps, 361Bribes, 647Brokerage commissions, 189Buildings, 122, 549, 552, 645, 686Bullion, 152Burial companies, nonprofi t, 314Business activities, 245, 247, 253Businesses, related, 243Business expenses

carryover of, 653clients’ expenses as, 646of home offi ce, 653medical expenses as, 375of ministers, 67–68owed to related parties, 639of self-employed persons, 648–649taxes as, 358

Business income, 638–640, 653–654. See also Self-employed income

Business interests, 263–265, 266–267, 648–649

Business interruption insurance, 713Business lunches, 646Business premises test, 64Business property sales, 704–710

corporate liquidation and, 709–710depreciable property, 706–707

depreciation recaptured as ordinary income, 705–706

disaster grants for losses on, 382involuntary conversions/tax-free

exchanges and, 707property with personal and business

use, 708–709proprietorships, 707recapture of fi rst-year expensing

for, 706Section 1231 assets, 707–708and trading in business

equipment, 709Business tax credits, 660–661Business trips

“away from home” test for, 421–422business-vacation trips, 425–426local lodging costs for, 421spouse and dependents on, 428types of, 420–421

Business useallocating car and truck expenses

to, 693allocating home offi ce expenses

to, 653personal use and, 392–393, 676, 697,

708–709sale of property with, 514in separate area of dwelling, 524of vehicles, 701, 703

Business-vacation trips, 425–426Business vehicles, 701–702, 703Bus transportation, 61Buyers. See also First-time home-buyers

default by, 556–557of options, 539

C

Cab fare, 63Cafeteria plans, 68Calculators, 409Callable bonds, 83Calls, 539–540Camps, workers in, 609Canceled Debts, Foreclosures,

Repossessions, and


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Abandonments. See IRS Publication 4681

Cancellationof debt, 281–285, 553, 780of leases, 550–551straddle losses due to, 538

Capital, 73, 780, 783Capital assets, 106–112, 780Capital expenses, 780Capital gains, 780

on conversion transactions, 539distribution of, 780dividends and, 74–75donation of property with, 321lump-sum distributions from

retirement plans as, 161ordinary income and, 11on property sales, 98, 99–102, 548regular income tax liability and, 459on REITs, 561on Section 1231 assets, 708Section 1237 and, 548short-term, 784

Capital improvements, 695Capitalization, 780Capital losses, 657, 780

and amortizing premium, 82carryover of, 780on passive interests, 263on personal-use assets, 98on property sales, 98, 103, 104–105short-term, 784

Car and truck expenses, 690–703for business vehicles, 702, 703depreciation of cars, trucks, and vans

annual ceilings, 694–695MACRS rates, 695–699aft er recovery period ends, 701restrictions on, 693–694straight-line method, 699–700in year vehicle is disposed of, 700

as educational expenses, 583expense allocations for, 693standard mileage rate, 691–692trade-ins of business vehicles, 701–

702of volunteer workers, 317

Care providers, 478

Carryback, 780of foreign tax credit, 611of net operating losses, 658–659of straddle losses, 537

Carryforward, 780Carryover, 103, 279

of basis, 117, 120of business expenses, 653of capital loss, 780of foreign tax credit, 611of losses over at-risk limits, 271of net operating losses, 657, 659of excess contributions, 334of excess donations, 335of mortgage interest credit, 488

Cashas boot, 142–144charitable contributions of, 329gift s of, 333meal and lodging allowances, 66small transactions in, 641

Cash-and-carry transactions, 538Cash-basis accounting, 638, 780Cash-basis investors, 87Cash call, 270Cashing out of annuities, 168Casualty losses, 780

bank deposit losses, 384–385damage to car, 386damage to trees and shrubs, 385disaster losses, 381–383excess living costs paid by

insurance, 394–395in excess of income, 395fl oors for personal-use property

losses, 389–390on Form 4864, 390–392insurance reimbursements for, 393nondeductible, 388–389by property owners, 383–384for property with personal and

business use, 392–393proving, 386–400repairs and, 393Section 1231 assets and, 708sudden event test for, 378–380timing of deduction for, 380–381

Ceilings

charitable contributions, 332–334deduction, 324, 334depreciation, 694–695

Cell phones, 62, 409Cemeteries, 314Certifi cate of compliance, 30Certifi ed historic structures, 552, 553Character, of gains, 556Charitable contribution

deductions, 312–335, 593. See also Donated property

benefi ts from contributions and, 315–317

business inventory and, 328carryover for excess donations, 335ceiling on contributions, 332–334deductible contributions, 313–314for donations through trusts, 328election to reduce fair market value by

appreciation, 335for life insurance policies, 327–328nondeductible contributions, 314–315records for substantiating

contributions, 329–330for support of students in your

home, 318for unreimbursed expenses of

volunteer workers, 317–318Charitable organizations, 313–314,

332–333, 783Charitable remainder trusts, 328Charitable split-dollar insurance

plans, 42Charities

acknowledgment from, 329disclosure statement from, 330IRAs and, 199, 214transfer of U.S. savings bonds to, 93

Chauff eur services, 61Checking account fees, 412Checklist of Taxes, 353–358Child and dependent care credit, 780Childbirth classes, 364Children

alimony reductions and ages of, 616claiming of American Opportunity

credit by, 573dependent care credit and age of, 480


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educational benefi ts for employees’, 42–43

educational expenses paid by, 573EIC for married, 483fi ling returns for, 24–25, 470–471kiddie tax for multiple, 473net investment income of, 91QDRO distributions to, 168Social Security benefi ts for, 586U.S. savings bonds registered in names

of, 91wages paid by parents to, 24withholdings on wages paid to, 496

Child support, 616–617Child tax credit, 475, 477Child Tax Credit Worksheet, 476, 477Chronically ill persons, 376Citizenship, 30Citizen tests, 452City government, 314Civil disorders, 388Cleaning, of work clothes/uniforms, 405Clear business setting test, 429Closely-held corporations, 149,

151–152, 265–266Closing costs, 522Closing of estate, 25Clothing, charitable donation of, 322Club dues, 430–431, 436Coaches, 422Co-owners, 516Coast Guard, 596Coast Guard Academy, 577COBRA coverage, 52Code Section 274(m)(2), 583Coins, exchanges of, 152Collectibles, 102, 189College employees, 60Combat pay, 190, 221Combat-related injuries, 45Combat zones, 14, 597–598, 598–599Commercial annuities, 496Commercial buildings, 645Commissions, 38, 41, 229Commodities, holding period for, 113Common law, 16

Common stock, dividends on, 76Community chest, 313Community income, 15, 780Community property, 15–16, 120, 149,

161, 368, 595Commuting, 28, 63, 416–417Company cars, 60–62, 62Company eating facilities, 63Company planes, 61, 62Company stock, 76Compensated Work Th erapy (CWT)

program, 596Compensation. See Salary or wage

income (compensation)Compensation-related loans, 95Compulsory home leave, 608Computers, 408–409, 682–684Computer soft ware, 683, 688Condemnation, 397, 514, 517–518, 551,

780Condemnation awards, 399Condominiums, 346Conduit IRAs, 159, 163Conservation contributions, 326, 327,

333Construction, 229, 340–342, 522Constructive receipts, 37, 145, 780Constructive sales of appreciated

fi nancial positions, 535–536Constructive stock dividends, 77Consumer debt, 340Consumer interest, 780Contingency operations, 598–599Contingent fees, 36, 281, 414Contingent payment sales, 129–130Continuing care facilities, 592–593Continuing coverage for group health

plans, 52Contract price, 126Contracts, investment in, 781Convenants, release of restrictive, 552Convenience fee (credit cards), 411Convenience of employer test, 64Conventions, 426–427, 428, 780Conversion transactions, 537, 539Convertible bonds, 83, 535

Convertible stock, 151, 535Cooperative apartments

depreciation on, 232gain/loss on sales of, 522home mortgage interest on, 345–346,

346offi ces in, 656ownership/use tests for, 516“points” on, 346real estate tax deduction for, 355

Co-owners, 92Copiers, 409Copyright costs, 240–241Corporate bonds, 88Corporate dividends, 74–75Corporate mergers, 86Corporations. See also S corporations

closely-held, 151–152, 265–266organizational costs for, 648personal service, 265–266

Corrections, tax return, 674Cosmetic surgery, 55, 365Cost basis, 82, 320, 563, 564Cost depletion, 242Co-tenants, 230Counselors, 372, 404Covenant not to compete, 99, 688Coverdell Education Savings Accounts

(Coverdell ESAs), 569, 571, 575–576, 579, 780

Creative properties, 240Credit, 780Credit cards, 281, 284, 411, 434, 501Creditors, property returned to, 553–

554Credits. See Tax creditsCruises, 420–421, 428Currency, blocked, 610Custodial accounts, 80, 626–627Customer-based intangibles, 687CWT program. See Compensated Work

Th erapy program

D

Day-care services, 481, 651Deadlines


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Archer MSA contributions, 672for combat zone personnel, 598–599Coverdell ESA contribution, 575donation acknowledgment, 329, 332equitable relief requests, 20for fi ling returns, 6–8foreign earned income

exclusion, 608–609FSAs, 69IRA contribution, 219, 221IRA recharacterizion, 223IRA rollover, 202, 203, 204Keogh plan set-up, 664, 665realized securities gains/losses, 529RMD, 208separate liability relief, 17SEP plan set-up, 665SIMPLE IRA set-up, 218

Dealers, 125, 543–544Death

of benefi ciary, 214in combat zone, 599fi ling returns for decedents, 25–26of IRA owner, 214–216of passive interest owner, 265of spouse, 16, 21–22, 103, 120, 122,

518, 615–616transfers at, 93, 132

Death benefi ts, 596Debt(s). See also specifi c types

cancellation of. See Cancellation, of debt

as deductible contributions, 313home equity loan to pay, 340property over $150,000 plus $5 million

in debt, 134–138for tax-exempt obligations, 348restructuring of, 554–555withholding of refunds to cover, 736

Decedent(s), 120Decendent(s), 21, 25–26, 369, 735, 781.

See also Income in respect of a decedent (IRD)

Declining balance method, 696, 780Decrees of support, 615Deductible Medical Expenses, 362Deductible Travel and Transportation

Expenses, 418–440

Deducting Car and Truck Expenses, 692–703

Deduction phaseout rulesfor adoption credit, 486for American Opportunity credit, 574IRA deductions and, 194–196of itemized deductions, 310for Lifetime Learning credit, 575and MAGI for Roth IRAs, 220for married persons fi ling

separately, 192for maximum loss allowances, 248for nonparticipant spouses, 192for spouses fi ling jointly, 192for student loan interest

deduction, 580for U.S. savings bond tuition

programs, 569Deduction Record Keeper, 730–731Deductions, 780. See also specifi c

deductions; See also specifi c typesof decedents, 25erroneous, 19for expenses of looking for a new

business, 648–649for Armed Forces personnel, 597foreign earned income and, 608from gross income, 296–299of IRA contributions, 190for Keogh plans, 668MAGI and limits on, 193–194in net operating losses, 657–658for professionals, 645–646for rental real estate income, 229–230for returned wages, 41for SEP plans, 668

Deduction Worksheet for Self-Employed, 665, 666

Default, 146, 556–557Defense of Marriage Act (DOMA), Deferred compensation, 34, 39–40, 780

possible duplicate, 34Deferred exchanges of property, 144–

147Deferred interest, 80Deferred payment sales, 131Deferred pay plans, 178

Defi ciency, 644, 780. See also Notice of Defi ciency

Defi ned-benefi t plans, 197, 780Defi ned-contribution plans, 197, 665,

780Deliquent child support, 616–617De minimus foreign taxes, 611De minimus fringe benefi ts, 63Demolition, 515, 686Demonstration cars, 61Departure permits, 30Dependency status, 309Dependent care assistance, 59Dependent care benefi ts, 34Dependent care credit, 70, 475, 478–

479, 480, 481–482Dependent care FSAs, 70Dependents, 780

blind, 309citizen and resident tests for, 452dependent care by, 481disabled, 364fi ling tests for, 4–8group-term life insurance for, 58joint returns by, 452medical expenses of, 368–369parents as, 23QDRO distributions to, 168Social Security numbers for, 453standard deduction for, 306, 309student loan interest deduction

for, 579as survivors of workers abroad, 608T&E expenses of, 428tuition/fees deduction and, 578

Depletion deduction, 241–242, 243, 467, 780

Deposits, 80Depreciable property, 129, 260, 780Depreciation, 233–243, 685–689

accelerated, 779and allowance for standard mileage

rate, 691, 692and business use of home, 524of cars, trucks, and vans, 693–694,

695–699, 700, 701and conversion of home to rental

property, 232–233


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fi rst-year expensing and, 676of home offi ce expenses, 652–653like-kind exchange of property

and, 140of offi ces in cooperative

apartments, 656of property received as a gift , 118–120recapture of, 126, 705–706, 780

Depreciation and Amortization. See Form 4562

Depreciation deductions, 673–689150% rate election for, 681and amortization, 687–688, 688for assets in service before 1987, 684bonus depreciation, 689computer soft ware and, 688demolition of buildings, 686fi rst-year expensing deduction, 675–

677for leasehold improvements, 686for listed property, 682–684MACRS depreciation, 677–678,

678–679, 680, 684, 686–687mid-quarter convention for, 680–681property for, 674–675real estate, 684, 686for straight-line depreciation, 681–682on tax returns, 675

Destruction of home, 514, 517–518Diagnostic tests, 361Diff erential wages, 492, 595Direct deposit-refund option, 724Directly related test, 429–430Direct rollovers, 163–164, 202, 313Disability coverage, 52Disability, determinations of, 596Disability payments, 57Disability pensions, 44–45, 185Disability retirement pay, 596Disabled persons

dependent care credit and, 480earned income credit for, 483elderly or disabled tax credit for, 590–

591, 591–592estimated tax penalty for, 500impairment-related work

expenses, 404lifetime care of, 364

pre-age 59½ penalty for, 205refund claims by, 735schooling for, 371–372

Disallowance rule, 237, 310–311Disaster areas, 381, 552Disaster losses, 381–383, 780Disaster Relief Act, 39, 382Disaster relief payments, 382Disclosure, 330Discount bonds, 83–84, 86, 89–90Discounts. See specifi c typesDiscriminatory plans, 56–57, 58–59Disposal, 688, 696, 700Disposition, of interests, 264, 267Disputes, 674, 745–746, 747Disregard of IRS rules/regulations, 742Distance test, 300–301Dividends, 780

capital gains rates for, 74–75distribution not out of earnings, 78–

79of earnings, 76from estates, 75as interest, 73, 75–76mutual-fund distributions and, 73ordinary income and, 11parents’ reporting of child’s, 473–474from partnerships, 75of profi ts, 76in property, 76–77real estate investment trust, 75regular income tax liability and, 459reinvestment of, 76responsibility for reporting, 77–78from S corporations, 75from trusts, 75

Divorce. See also Former spouses (ex-spouses)

alimony and, 613amended returns and, 734community property rules and, 15–16dependents’ medical costs, 368and fi ling separate returns, 307IRAs and, 204, 206and residence sales, 519rollover of distribution received

under, 165

stock redemptions and, 149Doctors, malpractice insurance for, 645DOMA. See Defense of Marriage ActDomestic partners, 16Domestic production activities

deduction, 660Domiciles, 606Donated property, 316

art objects, 324–326bargain sales of appreciated

property, 323–324cars, motor vehicles, boats, and

airplanes, 323clothing, 322easements as, 552Form 8283 and, 330–332free use of, 315interests in real estate, 326–327mortgaged realty, 558penalty for substantial overvaluation

of, 332types, 318–322

Donationsdeductible, 313–314to foreign charities, 314projecting income for, 335for right to buy athletic stadium

tickets, 329of services, 315through trusts, 328year-end, 313

Donor-advised funds, 314Drilling costs, 241Drilling expense prepayments, 241Drought damage, 379Drugs, 360Drywall, Chinese corrosive, 379Dual status aliens, 27, 28Dual-status aliens, 306Dues, 315, 404

E

Earmarking, 348–350of stock lots, 529–530

Earned commissions, 38Earned income, 484, 780


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Earned income credit (EIC), 475, 482–484, 485, 622, 736, 780

Earned Income Credit (EIC) Table, 749, 769–778

Earned income tests, 480Earnings

additional Medicare taxes on, 505–507dividends and, 76, 78–79IRA contributions and, 190–191Section 409A plan deff erals and, 40Social Security benefi ts and, 589,

589–590Easements, 326, 551–552Eating facilities, company, 63EATs. See Exchange accommodation

titleholdersEducational benefi ts, 42–43Educational funding, 91Educational grants, 42, 568Educational tax benefi ts, 567–584

Coverdell ESAs, 575–576deductions, 578–579, 580–581education tax credits, 572–573Fullbright awards, 568qualifi ed tuition programs, 570–571scholarships and grants, 568tuition reductions for college

employees, 568U.S. savings bond tuition plans, 568–

569work-related costs, 580–581, 581–582,

583–584Education assistance programs, 60, 63Education-related deductions, 578–579,

580–581Education savings accounts.

See Coverdell Education Savings Accounts (Coverdell ESAs)

Education tax credits, 572–573Educator expenses, 297, 404Eff ective tax rate, 10, 11EFTPS. See Electronic Federal Tax

Payment SystemEIC. See Earned income creditEIC Table. See Earned Income Credit

TableEIN. See Employer identifi cation

number

Elderly or disabled tax credit, 590–591, 591–592

Electing out of installment sales, 128Electronic Federal Tax Payment System

(EFTPS), 725, 780Electronic fi ling, 725, 726Electronic payments, 501Embezzlement losses, 387Emergency distributions, 178Emotional distress, 279Employee achievement awards, 64, 273,

433Employee leave-sharing plans, 37Employee stock purchase plans

(ESPPs), 46, 113Employer contributions, 35, 219

possible duplicate, 35Employer convenience test, 693Employer-fi nanced adoption

benefi ts, 35Employer-fi nanced housing costs, 605Employer identifi cation number

(EIN), 623Employer-sponsored health

coverage, 34Employment agency fees, 406Employment discrimination cases, 299Employment status, 620Employment tax, 644Empowerment zone stock, 102Endowment policies, 184Entertainment costs, 41, 429–430,

431–432Entertainment facilities, 430–431Equipment trade-ins, 709Equitable relief, 20–21Errors, 19, 722ESAs. See Coverdell Education Savings

Accounts (Coverdell ESAs)Escrow, 130–131, 146–147ESPPs. See Employee stock purchase

plansEstate plans, 631–632Estate(s)

as benefi ciaries, 211as benefi ciaries of IRAs, 214dividends from, 75

possible insolvency of, 22probate, 783prompt closing of, 25reporting benefi ciaries’ income, 289on Schedule K-1, 285taking inventory of, 628–629

Estate tax, 26, 93, 289, 414, 627, 628, 629–630

Estimated tax payments, 26, 492, 498–503, 734–735, 781

Estimated Tax Worksheet for 2013, 500ETFs, distributions from, 722Excess contributions, 198, 221, 334, 668Excessive refund claims, 725

penalty for, 736, 743Exchange accommodation titleholders

(EATs), 147Exchange rates, 610Exchanges of property. See Tax-free

exchanges of propertyExchange-traded stock, 113Exclusive and regular use test, 649, 650Ex-dividend date, 77Executives, discriminatory plans

for, 56–57Executors, 22, 25, 41, 120Exemptions, 26, 781Exempt-person exception, 28Exercise, of stock rights, 531Exercise programs, 361Expatriates, 30, 514Expenses for Business Use of Your

Home. See Form 8829Expiration, stock rights, 531Ex-spouses. See Former spousesExtensions, 599–600, 608, 723–724,

739–740

F

Faculty lodging, 66Fair market rent, 229Fair market value, 273, 319, 320, 335,

558, 781Fake injury claims, 365–367False Claims Act, 281Family and Medical Leave Act

(FMLA), 70


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Family income riders, 291Farmers

debt cancellation, 285depreciation of property, 674estimated tax payments for, 501estimated tax penalty for, 500installment method for, 125installment payments by, 501–502involuntary conversions, 396regular income tax liability for, 459–

460remainder interest for, 326retired, and material

participation, 256Schedule F for, 636self-employment tax for, 713

Farm optional method (self-employment tax), 716

FAVR. See Fixed and variable rate allowance

Fax machines, 409FBAR. See TD F 90-22.1Federal crime investigators, 423Federal False Claims Act, 414Federally guaranteed obligations, 89Federal subsidy, residence sales and, 515Federal tax withholdings, on Form

W-2, 34Federal unemployment (FUTA)

taxes, 623FICA taxes. See Social Security and

Medicare taxesFiduciary(-ies), 781FIFO method. See First-in, fi rst-out

methodFiguring Your Taxable Benefi ts, 587Filing returns, 721–732

applying for extensions, 723–724basics, 1–8for children, 470–471deadlines for, 6–8electronic, 726address for, 5–8getting refunds, 724–725for gift tax, 626interest on underpayments, 726–727notifying IRS of address changes, 726paying taxes due, 725–726

penalties for late fi ling and payments, 727–732

preparation for, 722–723recordkeeping for, 722situations requiring, 4

Filing status, 9–30and fi ling returns for an incompetent

person, 26–27determining, 10and expatriation tax, 30and fi ling returns for children, 24–25and fi ling returns for decedents, 25–26head of household, 22–24joint returns

and death of spouse in 2013, 21–22community property rules, 15–16equitable relief on, 20–21fi ling, 13–14fi ling separate returns vs., 12–13innocent spouse rules, 16–17nonresident alien spouse

election, 14–15separate liability relief for former

spouses, 17–20nonresident aliens, 27, 30qualifying widow or widower, 22resident aliens, 27–30separate returns, 12–13tax rates based on, 10–11

Final maturity,savings bond, 542Final returns, 26Financial institutions, insolvent, 203Fines, 646Fire department, 316First-in, fi rst-out (FIFO) method, 113,

566First-time home-buyers, 204, 206, 226,

490First-year elections, 29, 691First-year expensing, 126, 675–677, 694,

706, 781, 783Fiscal year, 501, 781Fishermen, 459–460, 500, 501, 501–502Fishing trips, 430Fixed and variable rate allowance

(FAVR), 440Fixed operating costs, car/truck, 691Flat price, 81Fleet vehicles, 691

Flexible spending arrangements (FSAs), 68–70, 781

FMLA. See Family and Medical Leave Act

Foods, special, 361Foreclosures, 125, 282, 357, 553,

557–558Foreign accounts, 79Foreign charity(-ies), 314Foreign children, adopting, 486Foreign countries, real estate

exchanges, 141Foreign cruises, 428Foreign earned income, 484, 601–611,

715Foreign earned income exclusion, 602,

604–605, 606–607, 608–609, 781Foreign Earned Income Tax

Worksheet, 459, 602, 749Foreign fi nancial assets, 743Foreign governments, 28, 388Foreign residence test, 606Foreign Service, 490, 515, 516, 596Foreign tax credit, 563, 605, 610–611,

781Foreign taxes, 358, 611Forfeitures, 48, 82Form 656, 726, 746Form 673, 606Form 843, 733Form 870, 745Form 911, 739Form 941, 621Form 944, 621Form 982, 282, 554Form 1040. See also Specifi c schedules

409A plan deferrals on, 40accrued interest on, 80adjusted gross income on, 332adooption credit on, 485AGI fl oor and, 404alimony deduction on, 612, 613, 617amortized premium on, 83AMT liability on, 461annuity payments on, 184Archer MSAs on, 54at-risk losses on, 658


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bank deposit losses on, 384bond redemption or retirement on, 88capital losses and carryovers, 103charitable contributions on, 312child tax credit on, 476community property on, 15compensation on, 36dealer sales on, 125death in combat zone and, 599deductions on, 296, 313, 402, 730, 731dependent care credit on, 478dividends on, 73, 74, 78domestic production activities

deduction on, 659dual tax status on, 29, 30early withdrawal of CD on, 82education expense deduction on, 297EIC on, 483, 484elderly or disabled tax credit on, 590employer stock/securities distributions

on, 167excess withholdings on, 496farm/fi shing income on, 459FICA taxes on, 620fi ling, 5–8, 723fi rst-time homebuyer credit on, 490foreclosures and voluntary

conveyances on, 553foreign earned income on, 602, 606,

611forfeited interest on, 82Form 2439 and, 563Form 4797 and, 702Form 8889 and, 54, 57, 669, 671Forms 1040A and 1040EZ vs., 8gain or loss from residence sales

on, 522gambling winnings, 273general business credit on, 661health insurance premium deduction

on, 365household employment on, 621income from hobbies on, 647income on, 458, 728, 729for incompetent person, 26intangible drilling costs on, 241interest on, 79, 80IRA loss on, 202itemizing on, 304, 307

“kiddie tax” on, 470, 473, 474loss deductions on, 237lottery and sweepstakes winnings, 273mandatory IRA dsitributions on, 208medical expenses and, 360, 366mortgage interest credit on, 488mortgage interest tax credit, 337mutual-fund distributions on, 562net capital gains on, 100net operating losses on, 656, 658nondeductible IRA contributions

on, 189penalty for early withdrawal on, 205for performing artists, 297property donations on, 319, 330recapture tax on, 515refunds and, 26, 724rental real estate, 227, 229, 231rental real estate and, 250, 258for reservists, 600retirement plans and, 156, 203, 664,

665, 668, 670return processing problems on, 740royalty income on, 240self-employed income on, 636, 642self-employement tax and, 358self-employment tax and, 711, 714Social Security and Medicare taxes

on, 35, 57, 505standard deduction on, 306student loan interest deduction

on, 579substitute payments on, 75tax credits on, 732tax-exempt bond funds on, 561tax-exempt interest on, 79tips on, 494, 495tuition and fees deduction on, 578unemployment benefi ts on, 38, 39wage repayments on, 41

Form 1040Aallocated tips and, 34AMT on, 461annuity payments on, 184child tax credit on, 476compensation on, 36death in combat zone and, 599deductions on, 296, 730

dependent care credit on, 478dividends on, 73, 74, 78EIC on, 483elderly or disabled tax credit on, 590employer stock/securities distributions

on, 167excess withholdings on, 496fi ling, 5, 723Forms 1040 and 1040EZ vs., 8income on, 728, 729interest on, 79, 80IRA contributions on, 189“kiddie tax” on, 470, 473mutual fund distributions on, 563mutual-fund distributions on, 562refunds and, 26, 724retirement plans and, 156, 203return processing problems on, 740standard deduction on, 306student loan interest deduction

on, 579taxable income on, 458tax credits on, 732tax-exempt bond funds on, 561tips on, 495unemployment benefi ts on, 38

Form 1040-C, 30Form 1040-ES, 493, 500, 501, 732Form 1040EZ, 470

allocated tips and, 34compensation on, 36death in combat zone, 599elderly or disabled tax credit on, 590excess withholdings and, 496fi ling, 5, 723Forms 1040 and 1040A vs., 8income on, 728interest on, 79mutual fund distributions and, 563refunds and, 724refunds on fi nal returns, 26reporting of child’s dividends/interest

by, 458reporting tips on, 495return processing problems on, 740standard deduction on, 306tax credits on, 732unemployment benefi ts on, 38


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Form 1040NR, 27, 29, 30Form 1040NR-EZ, 29, 30Form 1040-V, 723, 725Form 1040X, 473, 537, 599, 659, 733,

734, 735, 736Form 1041, 25, 729Form 1041-ES, 26Form 1045, 537, 656, 657, 658, 735Form 1065, 261, 285–286, 286, 298, 729Form 1096, 78, 84Form 1098, 337, 342, 731Form 1098-C, 312, 313, 323, 329Form 1098-E, 579Form 1098-T, 572Form 1099, 33, 75, 77, 79, 722, 728, 732Form 1099-A, 553Form 1099-B, 98, 106, 497Form 1099-C, 282, 553, 554Form 1099-DIV, 73, 74, 75, 78, 410, 459,

547, 560–561, 562, 563, 728, 729, 731, 732

Form 1099-G, 33, 38, 728, 729Form 1099-H, 488Form 1099-INT, 79–80, 80, 82, 84, 90,

92, 548, 728, 729, 730, 731Form 1099-K, 642Form 1099-LTC, 376Form 1099-MISC, 37, 40, 75, 431, 497,

640, 728, 729Form 1099-OID, 80, 82, 83, 84–85, 87,

548, 728, 729Form 1099-Q, 570, 571Form 1099-R, 36, 156–157, 159–161,

164, 166–167, 172, 176, 198, 200, 205, 641, 728

Form 1099-S, 357, 514, 522, 524Form 1116, 562, 563, 605, 609, 610, 611,

732Form 1120-S, 288Form 1120S, 729Form 1128, 640Form 1310, 26, 599Form 2063, 30Form 2106, 297, 403, 404, 405, 409, 415,

420, 431, 435, 436, 580, 600, 675, 690, 694, 703, 730, 731

Form 2106-EZ, 403, 404, 405, 409, 415, 420, 431, 435, 580

Form 2120, 730Form 2210, 499Form 2210-F, 500Form 2350, 608Form 2439, 562, 563Form 2441, 59, 70, 478, 479, 732Form 2555, 459, 602, 604, 606, 749Form 2555-EZ, 459, 602, 749Form 2848, 14, 741Form 3115, 639Form 3468, 552, 660Form 3800, 552, 553, 661Form 3903, 404, 730Form 4070, 494, 728Form 4136, 661Form 4137, 494, 495Form 4506, 721Form 4506-T, 722Form 4562, 227, 229, 241, 409, 648, 675,

676, 678, 681, 682, 687, 689, 690, 694

Form 4563, 609Form 4684, 377, 389, 400, 410, 708, 731Form 4797, 97, 99, 124, 126, 128, 140,

262, 263, 288, 377, 400, 524, 539, 541, 544, 553, 653, 654, 702, 705, 706, 707

Form 4810, 25Form 4835, 263Form 4864, 390–392Form 4868, 473, 608, 723Form 4952, 101, 263, 346, 347, 465Form 4972, 159–161, 161, 161–162Form 5213, 648Form 5304-SIMPLE, 218, 219Form 5305, 189Form 5305-A, 189Form 5305-SEP, 668Form 5305-SIMPLE, 218, 219Form 5329, 169, 172, 183, 198, 205, 208,

571Form 5330, 668Form 5405, 490Form 5498, 200

Form 5498-SA, 730Form 5500, 668Form 5500-EZ, 641, 668Form 5500-SF, 668Form 5695, 488, 489, 732Form 5754, 495Form 5884, 661Form 5884-B, Form 6198, 268, 347Form 6251, 11, 458, 461, 462–464, 465,

466, 467, 602, 661, 696, 732Form 6252, 124, 126, 128, 707Form 6765, 660Form 6781, 537, 538, 539Form 8275, 742Form 8275-R, 742Form 8282, 332Form 8283, 312, 319, 325, 330–332Form 8283-V, 327Form 8308, 286Form 8332, 451, 452, 730Form 8379, 724, 736Form 8396, 337, 488Form 8453, 323Form 8582, 244, 247, 262–263, 467, 675,

722, 728Form 8582-CR, 249, 256, 553Form 8586, 552, 660Form 8594, 707Form 8606, 189, 191, 197, 198, 200, 211,

222, 224, 225Form 8609, 552Form 8609-A, 552Form 8615, 24, 458, 469, 471, 472, 474,

729Form 8716, 287Form 8752, 287Form 8801, 732Form 8810, 266Form 8812, 477, 732Form 8814, 469, 471, 473, 729Form 8815, 569Form 8820, 660Form 8822, 726Form 8824, 117, 140, 142–144, 148, 550Form 8826, 660


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Form 8828, 337, 515Form 8829, 409, 650, 652, 653, 654, 656,

675Form 8832, 636Form 8835, 660Form 8839, 59, 485–486Form 8843, 28Form 8845, 660Form 8846, 660Form 8847, 660Form 8853, 54, 376, 672Form 8854, 30Form 8857, 13, 16, 17, 19, 20Form 8860, 505Form 8862, 483Form 8863, 572, 574, 575, 732Form 8864, 660Form 8874, 660Form 8880, 188, 487, 732Form 8881, 660, 664, 669Form 8882, 660Form 8885, 487Form 8886, 743Form 8888, 724Form 8889, 54, 57, 669, 670, 671, 730Form 8896, 660Form 8898, 609Form 8899, 322Form 8900, 660Form 8903, 659, 730Form 8906, 661Form 8907, 660Form 8908, 660Form 8909, 660Form 8910, 489, 660Form 8911, 660Form 8917, 578, 730Form 8923, 661Form 8931, 661Form 8932, 661Form 8936, 489, 661Form 8938, 743, 744Form 8939, 120Form 8941, 661, 672

Form 8949, 76, 98, 99, 102, 103, 105, 106–112, 114, 115, 128, 262, 514, 518, 524, 544, 553, 561, 563, 564

Form 8958, 15Form 8959, 505, 507Form 8960, 507–510, 508Form 9465, 726Form 12203, 745Form 13844, 726Former employees, 57Former spouses (ex-spouses)

basis of property received from, 117lump-sum distributions from

retirement plans to, 159retirement income distributions

for, 168separate liability relief for, 17–20tax-free exchanges of property

between, 148–150transfer of installment notes to, 132

Form I-9, 620Form RRB-1099, 586Forms 1099, 721, 740Form SS-4, 621, 623Form SS-5, 24Form SSA-1099, 586, 587, 729Form TD F 90-22.56, 641Form W-2, 493, 495, 621, 740

409A plan deferrals on, 40active particpation status on, 196adoption benefi ts on, 60Archer MSA contributions on, 54automobile benefi ts on, 61combat pay on, 598and death in combat zone, 599deductions and, 730, 731dependent care assistance on, 59disability coverage premiums on, 52domestic production activites

deduction and, 660employee achievement awards, 273employer reimbursements for

dependent care on, 478, 481FICA taxes on, 621fi ling returns, 723foreign earned income on, 608Form 1099 and, 33FSA contributions on, 68

gain or loss from residence sales on, 522

grants on, 568health insurance premiums on, 288for household employees, 623life insurance premiums on, 57lodging on, 66name and SSN on, 620non-accountable plans

reimbursements on, 440nonstatutory stock options on, 47payroll deduction contributions

on, 329, 330per diem allowance on, 438recordkeeping on, 728retirement plan box on, 193salary or wage income (compensation)

on, 36salary-reduction contributions

on, 218SEP contributions on, 217of statutory employees, 642tax credits and, 732transcripts of, 722Understanding Your Form W-2 for

2013 Wages and Tips, 34–49Form W-2G, 495, 729Form W-2P, 200Form W-3, 623Form W-4, 25, 478, 491, 492, 493, 494,

622Form W-4P, 496Form W-4S, 43, 492Form W-4V, 494, 586, 732Form W-7, 485Form W-7A, 485Form W-9, 80Form W-10, 478Fortune tellers, 388Foster care payments, 292Foundations, 42, 313, 321Founder’s fee, 364Fractional interest, 325, 326Fractional Rate Worksheet for Self-

Employed, 665Fractional shares, 76Fractional Worksheet for Self-

Employed, 667


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Franchises, 687Fraternal organizations, 314, 427Fraud, 387–388, 483, 739, 743Freelance work, 712Free use of property, 315Fringe benefi ts, 50–71

adoption benefi ts, 59–60cafeteria plans, 68company services at no cost, 70de minimus, 63dependent care assistance, 59discounts on products or services, 71education assistance programs, 60employee achievement awards, 64employer-furnished meals and

lodging, 64–67employer-provided retirement

advice, 64excluded from taxable wages, 622fl exible spending arrangements, 68–70foreign earned income from, 603on Form W-2, 35group-term life insurance

premiums, 57–59health and accident plans, 52, 53, 54,

55, 56–57minister’s rental or housing

allowance, 67–68transportation benefi ts, 60–62working condition, 62–63

Frivolous court action, 746, 748Frivolous tax returns, 743Frozen accounts, 80FSAs. See Flexible spending

arrangementsFuel cell vehicles, 489–490Fuel-related tax credits, 661Fullbright awards, 568, 610Full reporting method, 128Fully-tax free exchanges of

property, 549Furniture, depreciation of, 229FUTA taxes. See Federal unemployment

taxesFutures contracts, 537

G

Gain(s)deadlines for realizing, 529on futures contracts, 537on stock, 532traders’ reporting of, 544nonqualifi ed use of residences

and, 517–518on property sales, 527on residence sales, 514, 522

Gain (or Loss), Exclusion, and Taxable Gain, 525

Gain(s). See also Capital gainscharacter of, 556on foreclosures, 553on ISOs, 46on property sales, 105–106, 115, 119recognized, 783on repossessions, 553, 556on short sales of real estate, 553on stock, 105–106unrecaptured Section 1250, 784

Gambling winnings, 273–275, 495Garnished IRAs, 200Gasoline taxes, 354Gas percentage depletion, 242–243Gas wells, 261GDS. See General Depreciation SystemGeneral business credit, 661General Depreciation System

(GDS), 681Generally related test, 429General sales taxes, 354–355Generation-skipping transfer (GST)

tax, 631Gift loans, 94, 95Gift s

annual exclusion on, 625of appreciated value, 625as income, 275basis for property received as, 625of depreciable business property, 706–

707from employers, 37of income interests in trust, 328of installment notes, 132

losses on residence sales acquired as, 527

mutual fund shares as, 565of passive interests, 264sponsorship, 593strike benefi ts as, 39taxable, 625unadjusted basis of property recieved

as, 118–119U.S. savings bonds as, 91

Gift tax, 118, 570, 625, 626–627, 627–628, 781

Going-concern value, 687Golden parachute arrangements, 37Goodwill, 142, 687Goodwill entertainment, 430Government employees, 178, 297, 603Government payments,withholdings

on, 494Government services, assessments

for, 356Graduate assistants, 568Graduated payment mortgages, 343Grantors, option, 539Grantor trusts, 628, 781Green card, 27Groceries, employer-furnished, 66Gross income, 3, 296–299, 447, 781Gross profi t, 126, 127Gross receipts, 642–645, 781Ground rents, 343Group-term life insurance, 34, 41,

57–59, 781GST tax. See Generation-skipping

transfer taxGuam, 609Guaranteed salaries, 286Guardians, returns by, 26–27Gulf Opportunity Zone, 541, 552Gulf Opportunity Zone property, 705

H

Half-year convention (MACRS depreciation), 678, 680, 696–699

Hardship distributions, 175–176, 178Hardship waiver, of penalty, 500


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HDHPs. See High deductible health plans

Head of household, 22–24, 308, 781Health and accident plans, 52, 53, 54,

55, 57Health-care FSAs, 69Health coverage credit, 487–488Health fl exible spending arrangements

(HFSAs), 600Health insurance premiums, 286, 298,

361, 364–365, 642Health problems, residence sales due

to, 520Health reimbursement arrangements

(HRAs), 52, 55, 781Health savings accounts (HSAs), 53,

669, 781deductible contributions to, 297, 670distributions from, 57, 670–671employer contributions to, 35

Heavy trucks, depreciation on, 695. See also Car and truck expenses

Herbal supplements, 361HFSAs. See Health fl exible spending

arrangementsHigh-deductible health plans

(HDHPs), 53, 781Higher education expenses, 205Higher-income taxpayers, deductions

for, 310–311Highly compensated employees, 70Historic structures, 327, 552, 553Hobbies, 411, 647–648Hobby losses, 240, 781Holding periods, 98, 99–102, 113–114,

225, 226, 534, 535, 563, 781Holidays, business-vacation trips

over, 426Holocaust restitution payments, 281Home. See also Tax home; See

also Vacation homesadjusted basis for, 523converting, to rental property, 232–

233, 526–527distributions for acquisition of, 172donation of, 316gain on sale of, 507maintenance of home test, 23–24

remainder interest in, 326support of students in, 318

Home acquisition loans, 338–340Home construction loans, 340–342Home entertaining, 430Home equity debt, 340, 781Home improvement loans, 342Home improvements, 373–374Home mortgage interest, 782. See

also Mortgage interest deductionfor condominiums, 346for cooperative apartments, 346as expense, 237home acquisition loans, 338–340home construction loans, 340–342home equity loans, 340home improvement loans, 342interest on refi nanced loans, 343–344payment rules, 342–343records of, 722from retirement plan loans, 173

Home offi ceallocation of expenses, 653business income and, 653–654deduction for, 416, 649–652depreciation of, 656of investors, 411–412job expenses for, 409–410in principal residence, 524sideline business, 654–656

Homeowner’s association, 356Hospitalization, 598Household employees, 620, 621Household employment taxes, 619–623Household items, casualty loss of, 392Household requirement (EIC), 483Housekeepers, 478Housing allowance, minister’s, 67–68Housing costs, foreign earned income

and, 605–606How Your Medical Expense Deduction

Is Reduced by the 7.5% Floor, 363

HRA. See Health reimbursement arrangement

HRAs. See Health reimbursement arrangements

HSAs. See Health savings accountsHUD-1 (Uniform Settlement Statement)

form, 357Hunting trips, 430

I

Illnesses, job-related, 43Impairment-related work expenses, 404Improvements

adjusted basis and, 523allocation of basis and, 123to business vehicles, 695home improvement loans, 342leasehold, 675, 686MACRS depreciation for, 684to principal residence, 345on real estate aft er 1986, 686to rental property, 115repair vs., 230–231to restaurants, 675to retail property, 675by tenants, 228

Imputed interest, 94, 781Imputed interest rules, 146–147Inaccurate returns, 742–743Incapacitated homeowners, 516Incentive stock options (ISOs), 45, 46,

466, 781Income, 272–292. See also specifi c

types, e.g.: Partnership incomecasualty/theft losses and, 395debt cancellation and, 281–285, 553from estates, 285, 289fi rst-year expensing and, 676foster care payments, 292gambling winnings and losses, 273–

275gift s and inheritances, 275jury duty fees, 292legal damages, 279–281from life insurance policies, 290–291,

291–292lottery and sweepstakes winnings, 273on market discount bonds, 85–86prizes and awards as, 273projecting, for substantial

donations, 335


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recovered tax deductions and, 278–279

refunds of state and local income tax, 275–278

regular income tax liability and, 458for S corporations, 285, 288–289taxable, 784from trusts, 285, 289, 628tuition and fees deduction and, 578

Income in respect of a decedent (IRD), 21, 25, 26, 289–290, 781

Income interests in trust, gift s of, 328Income Record Keeper, 728–729Income tests (EIC), 484Incompetent persons, 26–27, 480, 586Independent contractors, 640, 781Index options, 539–540Indian tribal government, 314Individual retirement accounts

(IRAs), 188–226, 781. See also specifi c types, e.g.: Roth IRAs

combat pay and, 598fees of, 189records of contributions, 722replacement shares and, 533self-directed, 189Social Security benefi ts and, 588transfers to charity from, 313transfers to HSAs from, 54withholdings on distributions, 496

Infant formula, 364Information base, amortizing, 687Inheritances

depreciable business properties, 706–707

holding periods for, 114HSAs in, 671income from, 275residences acquired as, 527traditional IRAs as, 211–217unadjusted basis of property, 119–120

Initiation fees, union, 404Injuries, 43, 44, 45, 56–57Innocent spouse rules, 13, 16, 16–17Insolvency, 22, 203, 284Installment payments, 125–128, 273,

278, 322, 501–502, 725Installment sales, 781

depreciable property, 707dispositions of notes, 131–132electing out of, 128fi rst-year expensing and, 706for investors in real estate, 548passive interests, 265to relatives, 128–129repossessions and, 132–133Section 1231 assets, 708tax advantage of, 124–125

Instructors, 404Insurance. See also specifi c types

chronically/terminally ill persons use of, 376

excess living costs paid by, 394–395premiums for, 78, 229proceeds from, as rental income, 228reimbursements from, 382–383, 393tax-free exchanges of, 152–153

Intangible assets, 674, 687–688, 779, 781Intangible drilling costs, 241Intangible property, 142, 261, 319Intellectual property, 322Intelligence offi cers, 516Interest. See also specifi c types

abatement of, 745on back taxes, 600on bonds, 80, 81on business tax defi ciency, 644on deferred payment sales, 131dividends and, 73, 75–76on escrow accounts, 146–147estate tax paid on, 93on frozen accounts, 80for late payments, 724on marital property settlements, 149on penalties, 743premature withdrawal and, 82on refunds, 725rental property and, 237–238on savings bonds, 542on seller-fi nanced sales, 95–96state and city interest on bonds, 88–89on taxes owed by reservists, 600on tax-exempt securities, 541on tax returns, 79–80on tax underpayments, 726–727timing of reporting of, 96

on U.S. savings bonds, 91–92, 92–93for U.S. savings bond tuition

programs, 569on vehicle loans, 691, 693

Interest expense deductions, 336–351. See also Home mortgage interest deduction; See also Investment interest

deferral of, 85home construction loans, 340–342home mortgage interest

from retirement plan loans, 173limitation on, 87, 91passive activity and, 258“points”, 344–345, 346prepaid interest, 351for sales of subdivided land, 548time period for claiming, 350

Interest income, 80, 473–474Interest payment dates, 80, 81Interest tax, 134–138Inter vivos trusts, 781Inventory, 328, 392, 628–629, 638, 652Investment

in collectibles, 189personal property held for, 141–142

Investment expenses, deductible, 410–412

Investment income, 24, 91, 471–472, 507–510. See also “Kiddie tax”

Investment interest, 346–347, 348–350, 465

Investment in the contract, 781Investment losses, 384Investors

cash-basis, 87computers used by, 683overcoming status of, 254

Investors in mutual funds, 559–566Investors in real estate, 546–558

abandonments, 555–556cancellation of leases for, 550–551foreclosure on non-purchase money

mortgages, 557–558foreclosure sales to third parties, 558granting of easements for, 551–552mortgage debt restructuring by, 554–

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property returned to creditors by, 553–554

sales of options for, 551sales of subdivided land by, 548–549self-employment income of, 712seller’s repossession aft er buyer’s

default and, 556–557tax credits for, 552–553tax-free exchanges by, 549–550timing of real property sales by, 550transfers of mortgaged real estate

by, 558types of ventures for, 547–548

Investors in securities, 528–545, 529, 539

bonds, 540–541, 541–542, 543constructive sales of appreciated

fi nancial positions by, 535–536home offi ce use by, 656options, 533–535, 536–538, 539–540stock, 529–530, 531–533, 533–535,

541tax treatment of dealers vs., 543–544traders, 543–544, 544–545

Involuntary conversions, 782basis of property acquired with

proceeds of, 118of business property, 707casualties as cause of, 400deferring gain from, 395election to defer gain for, 396holding periods for, 114qualifying types of, 395–400recapture for, 705replacement property for, 397–398,

398–399special assessments and severance

damages for, 400IRAs. See Individual retirement accountsIRD. See Income in respect of a decedentIRS. See also Practice before the IRS

advance valuation of art from, 325, 332

audit extensions for, 739–740denial of earned income credit by, 483fi guring of estimated tax penalty

by, 499levies by, 206meal allowance of, 419–420

notifying, of address changes, 726notifying, of related party

transfers, 129regrouping of activities by, 253release of lien by, 748reporting of basis for redeemed shares

to, 564reporting payments and receipts of

self-employed persons, 640–641review of Form W-4 by, 494seizure of IRA by, 200unauthorized collection lawsuits

against, 748waiver of estimated tax penalty by, 500withholding of refunds by, 736

IRS Publication 3, 599IRS Publication 54, 610IRS Publication 78, 313IRS Publication 463, 696, 703IRS Publication 502, 361IRS Publication 505, 499, 500IRS Publication 514, 605, 610, 611IRS Publication 519, 27, 29, 30IRS Publication 523, 517, 524IRS Publication 534, 686IRS Publication 535, 298IRS Publication 536, 658IRS Publication 538, 639, 640IRS Publication 544, 706IRS Publication 550, 103, 537IRS Publication 555, 16IRS Publication 570, 609IRS Publication 590, 207, 222, 588IRS Publication 901, 610IRS Publication 915, 587, 588IRS Publication 926, 623IRS Publication 939, 179, 183IRS Publication 946, 681, 682, 684IRS Publication 972, 477IRS Publication 1212, 84, 85, 87IRS Publication 1542, 438IRS Publication 1546, 739IRS Publication 4681, 284IRS regulations, 742IRS regulation Section 15A.453-

1(c), 130

IRS Tax Table, 22, 749–767ISOs. See Incentive stock optionsItemized deductions, 26, 305–311,

464, 738, 782. See also specifi c deductions

Itemized Deductions and the Standard Deduction for 2013, 305–311

J

January 1, 1936 (persons born aft er), 159, 161

January 2, 1936 (persons born before), 159

Job changes, 519, 581, 582Job expenses

cell phones, calculators, copiers, and fax machines, 409

computers bought for work, 408–409dues and subscriptions, 404employee’s home offi ce, 409–410expenses of looking for a new

job, 406–407local transportation costs, 407not subject to 2% AGI fl oor, 404small tools, 409subject to 2% AGI fl oor, 403telephone costs, 410uniforms and work clothes, 405–406unusual, 407–408

Job-hunting costs, 649Job placement assistance, 63Job-related illnesses, 43Job-related injuries, 43Job searches, 406–407Job skills, 581Job transfers, 301Joint accounts, 73, 79Joint and Last Survivor Expectancy

Table, 213Joint Life and Last Survivor Life

Expectancy, 207Joint ownership, 78, 151, 522Joint returns, 782

and 39-week test for moving costs, 301

carryovers from, 103community property rules, 15–16


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and death of spouse, 21–22by dependents, 452direct deposit of refunds on, 724elderly or disabled tax credit on, 591equitable relief on, 20–21fi ling, 13–14innocent spouse rules, 16–17“kiddie tax” and, 471nonresident alien spouse election, 14–

15relief from liability on, 16Schedule C for, 636, 642separate liability relief and, 17–20separate vs., 12–13signing, 14, 22Social Security numbers for, 443

Joint tenacy, 782Joint tenancy, 120–122Joint ventures, 712Jury duty fees, 292, 299

K

Keogh plans, 664–665, 665–668, 669, 782

Key employees, life insurance for, 58–59Key Numbers for 2012, , xxix–xxxiKey to Option Terms, 538Kickbacks, 38, 647“Kiddie tax”, 24, 101–102, 469–474, 782Kidnapping ransom, 388Know-how, amortizing, 687

L

Lactation supplies, 361Land, 122, 514, 548–549Landlord’s expenses, 228Last year of residence (resident

aliens), 29Late fi ling, 727–732, 734–735Late payments, 343, 724, 727–732Laundering, of work clothes/

uniforms, 405Lawsuits, 748Leasehold improvements, 675, 686Leases

computer, 684residential, 228, 230, 550–551vehicle, 691, 693, 703

Leave-sharing plans, 37Legal costs, 229, 279, 281, 413–414, 618Legal damages, 279–281Legal form of business, 636Legal guardians, returns by, 26–27Legally required educational

courses, 582Legal representative, of decedents, 25Legal separation, 15, 307, 368, 482, 613,

782Lenders, interest in activities by, 269Length of service awards, 433Leverage, 540License fees, automobile, 357Liens, release of, 748Life-care fee, 364Life expectancy rule, 226Life expectancy tables, 183–184Life income plans, 328Life insurance policies, 57–59, 781

benefi ts from, 41–42, 376, 628charitable contribution deductions

for, 327–328dividends on, 73, 79with family income riders, 291selling or surrendering, 291–292taxes on proceeds from, 290–291

Lifetime Learning credit, 571, 573, 576, 578, 580

Lifetime trusts, 781Light trucks, depreciation on, 695. See

also Car and truck expenses“Like-class” test, 141Like-kind exchanges of property, 99,

133, 140–141, 516, 782, 783. See also Tax-free exchanges of property

Limited entrepreneurs, 254Limited liability, for oil or gas wells, 261Limited partners, 252, 254, 262, 270Line-of-credit mortgages, 339Lines of business, companies with

multiple, 70Liquidation, 225, 709–710

Listed property, 682–684, 706Living costs, 394–395, 423–424, 583LLC members, 262, 713LLP members, 262Load charges, 563Loan agreements, 93Loan Repayment Assistance

program, 282Loans. See also specifi c types

assumptions of, 96to continuing care facilities, 95earmarking proceeds from, 348–350imputed interest rule and, 94, 95–96interest-free, 93–95minimum interest rules for, 93from retirement plans, 172–173, 200,

203Local bonuses, for Armed Forces

personnel, 596Local lodging costs, 62, 421Local offi cials, business expenses of, 297Local taxes, 35, 275–278, 354–355Local transportation costs, 407Lockout benefi ts, 39Lodging, 64–67, 370, 421, 609Lodging as condition of employment

test, 65Long-term care insurance policies, 52,

375–376Long-term care services, 375–376Long-term contracts, 640Looking Ahead to 2013, Loss deduction, 237Losses

deadlines for realizing, 529on exchanges of property, 142fi rst-year expensing and, 676on foreclosures, 553on gambling, 273–275on like-kind exchange of property, 140on liquidation of Roth IRAs, 225in partnerships, 285–286, 287on QTP investment, 571on regulated futures contracts, 537on repossessions, 553on residence sales, 522, 524–525,

526–527


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on sale of ISOs, 46and sales of property, 115, 119of S corporation stockholders, 288–

289on Section 197 intangibles, 688securities investors’ planning for, 529self-employment tax and, 716on short sales of stock, 532, 535traders’ reporting of, 544on wash sales, 103, 534

Lost deposits, 80Lotteries, 273, 315Low earners, 493Low-earners, 192, 220Low-income housing credit, 552Low-income years, self-employment tax

for, 716Lump-sum distributions from

retirement plans, 158, 159–161, 161–162, 166, 184, 782

Lump-sum payment election, Social Security, 588

Lunches, business, 646

M

MACRS. See Modifi ed ACRSMACRS Deduction: Half-Year

Convention, 698MACRS Deduction: Mid-Quarter

Convention, 699–703MACRS Depreciation Rates, 679–689MACRS Real Estate Depreciation, MAGI. See See Modifi ed adjusted gross

income; See Modifi ed adjusted gross income

Mailing returns, 723Maintenance of home test, 23–24Maintenance, on residence, 229, 231Malpractice insurance, 645Management expenses, 229Management fees, 258Managers (sports), 422Managing executives, business-vacation

trips of, 425–426Marginal production, 243Marital deduction, 782

Marital property settlements, 149, 618Marital status, Market discount, 85, 86, 89, 782Market discount bonds, 83, 85–86Mark-to-market election, 30, 537,

544–545Marriage penalty, 10Married couples. See also Joint returns;

See also Spouse(s)amended returns by, 734capital losses on property sales

for, 103earned income test for, 480elderly or disabled tax credit for, 591estimated tax payments for, 502itemized deductions on separate

returns, 307–308joint returns, 12–13marriage penalty for, 10principal residence exclusion for, 518–

519same-sex, 16self-employment income for, 712tax home for couples in diff erent

cities, 423traditional IRA contributions by, 191–

192Married dependents, 452, 483Material participation, 250, 254–256,

266, 782Material participation tests, 254–256Maturity, savings bond, 542Maximum Depreciation Deduction for

Cars, 697Maximum Depreciation Deduction for

Trucks and Vans, 697–703MBA courses, 583Meal allowance, 419–420Meal charges, 65Meal costs

50% limitation on, 431–432directly related test, 429–430IRS meal allowance, 419–420at nursing homes, 372overnight-sleep test for, 417–419restrictive test for, 429while traveling for medical

treatment, 370

Meal money, 63Meals, 64–67, 609

employer-furnished, 432Medical care costs, allowable, 360–364Medical conferences, 370Medical exception, resident alien, 28Medical expense deductions, 359–376

AGI threshold and, 360allowable medical care costs, 360–364for decedent’s expenses, 369for dependents’ expenses, 368–369fees for continuing care facilities, 592health insurance premiums, 364–365home improvements as, 373–374life insurance used by chronically/

terminally ill persons, 376long-term care premiums, 364long-term care premiums and

services, 375–376and medical expenses as business

expenses, 375nondeductible expenses, 365nurses’ wages, 373nursing homes, 372refundable entrance fees for

continuing care facilities, 593reimbursements for expenses

and, 365–367schooling for mentally/physically

disabled persons as, 371–372for spouse’s expenses, 367–368travel costs as, 370–371

Medical expensesof decedents, 26and dependent care credit, 482pre-age 59½ penalty and, 205tax-free reimbursements of, 55

Medical insurance, pre-age 59½ penalty and, 205. See also Health insurance

Medical plans, for self-employed persons, 56–57, 664, 669, 670, 671–672

Medical savings accounts. See Archer Medical Savings Accounts (MSAs)

Medicare Part B, 593Medicare Part D, 593


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Medicare, premiums for, 586. See also Social Security and Medicare (FICA) taxes

Medicine, 360Membership benefi ts, 317Membership dues, 63Merchant Marine Academy, 577Merchant transactions, 640Mergers, 86Mid-month convention

(depreciation), 684Mid-quarter convention

(depreciation), 680–681, 696–699

Midwestern disaster area bonds, 541Mileage rate, 691–692, 784Military action, 45Military action, death in, 599Military service, 44. See also Armed

Forces personnelMinimum Interest Rate for Seller

Financing, 96Minimum interest rules, 93Minimum standards for job, educational

courses required for, 581Mining, 467Ministers, housing or rental allowance

for, 67–68Minors, custodial accounts for, 80,

626–627Miscellaneous expenses, 401–414. See

also Job expenses2% AGI fl oor on, 402, 403, 404contingent fees paid out of

awards, 414investment expenses, 410–412legal costs, 413–414tax preparation and audit costs, 412–

413Miscellaneous itemized deductions, 782Missing status (Armed Forces

personnel), 599Mixed straddle contracts, 538Model custodial account agreement.

See Form 5305-AModel trust. See Form 5305Modifi ed ACRS (MACRS)

depreciation, 782

accelerated, 694, 695and AMT, 466anti-churning restriction, 686–687half-year convention, 680rates for, 678–679, 695–699for real estate placed in service aft er

1986, 684recovery periods, 677–678

Modifi ed adjusted gross income (MAGI), 193–194, 220, 248–249, 507, 574, 782

More-than-50%-business-use test, 694, 695

Mormon missionaries, 315Mortgage debt, restructuring, 554–555Mortgaged property, 116, 149, 321, 558Mortgage interest credit, 464, 488Mortgage interest deduction, 67, 229,

337–338, 488Mortgage revenue bonds, 89Mortgages, 556–557, 557–558Mortgage subsidies, 488Moving expense deductions, 404

39-week test for employees, 301–30278-week test for self-employed persons

and partners, 302about, 299–300claiming, 302distance test for, 300–301overseas, 608

Moving expense reimbursements, 35, 303, 603

MSAs. See Archer Medical Savings Accounts (MSAs)

Multiple support agreements, 450–451Multi-unit residences, 231–232Municipal bond funds, 540Mutual funds, 73, 102, 116, 348, 561,

722. See also Investors in mutual funds

N

NAE method. See Non-accrual experience method

Name, on tax returns, 452–453National Guard, 600National Guard members, 297

National Health Services Corps Loan Repayment Program, 282

National Health Services Corps Scholarship Program, 60, 568

National Housing Act, 343National Oceanic and Atmospheric

Administration, 516, 591, 596Naval Academy, 577Negative taxable income, 276Negligence of IRS rules/regulations, 742Net capital gains, 11, 459Net interest income, 259Net investment income, 91, 507–510Net operating losses (NOLs), 782

about, 656–657and AMT, 465carryback of, 658–659carryover of, 659farm-related, 662losses and deductions in, 657–658and real estate allowance, 249recapture of, 708reporting, 657–658for self-employed persons, 636, 713

New York Liberty bonds, 541New York Liberty Zone real

property, 705NOLs. See Net operating lossesNominee distributions, 73, 84Nominees, dividends received by, 78Non-accountable plans, 440Non-accrual experience (NAE)

method, 640Noncitizen spouses, 631Nondepreciable assets, 674Nonfarm optional method (self-

employment tax), 716Nongift loans, 94Nonpassive income, 257, 259–261Nonperiodic distributions, 782Nonperiodic payments, retirement

plan, 496–497Nonprofi t organizations, 313, 314Nonqualifi ed deferred

compensation, 149Nonqualifi ed deferred compensation

plans, 39–40


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Nonqualifi ed plan distributions, 34Nonqualifi ed use of residence, 517–518,

523Nonqualifi ying rental activities, 251Nonrecourse fi nancing, 269, 553, 782Nonrefundable tax credits, 478, 485,

574Nonresident aliens, 14–15, 27, 30, 484,

587, 590Nonspouse benefi ciaries, 165, 170, 211Nonstatutory stock options, 35, 47, 149Nontaxable distributed stock rights, 531Nontaxable pensions, 591Nonworking spouses, 192, 220Northern Mariana Islands, 609Notes, 88, 90, 131–132Notice 797, 622Notice 2007-34, 42Notice 2010-33, 743Notice 2011-70, 20Notice 2012-8, 21Notice of Defi ciency, 745Nursery schools, 481Nurses,wages of, 373Nursing homes, 372Nutritional supplements, 361

O

Obligations, 88, 89, 90, 322Off ers in compromise (OIC), 726,

746–747. See also Form 656Offi cers, in combat zones, 597OIC. See Off ers in compromiseOID. See Original issue discountOil percentage depletion, 242–243Oil wells, working interests in, 261One-person 401(k) plans, 664Operating expenses, traders’, 642Options, 533–535, 536–538, 539–540,

551Ordering rules, Roth IRA

distribution, 225Ordinary and necessary

requirement, 782Ordinary income, 11, 539, 705–706, 782

Ordinary income property, donation of, 319

Ordinary losses, 541, 708, 782Organizational costs, 648Original issue discount (OID), 83,

84–85, 86, 89Original issue discount (OID)

bonds, 782Overnight-sleep test, 417–419Overnight travel, 600Overseas moving expenses, 608Overtime work, 63Overvaluation, of donated property, 332Owners. See also Co-owners

casualty loss deductions for, 383–384depreciation of cooperative apartments

by, 656IRA, 208, 214–216

Ownership, 15. See also Joint ownershipOwnership tests, 515–518

P

Paid-up life insurance, 184Parents, 23, 24, 315, 451–452, 473–474Parking, 60–62Partial blindness, 308Partial disposition of passive

interests, 264Partially rented homes, 526Partially tax-free distributions, 200–202Partially-tax free exchanges of

property, 550Partial payments, 86Partners

78-week test for, 302as at-risk, 269distributions from partnerships

to, 707fi rst-year expensing for, 676meals and lodging for, 67passive activities for, 262reporting of income and losses by, 287self-employment tax for, 713

Partnership income, 26reporting of partnership profi t and

loss, 285–286

unifi ed tax audits for, 287–288Partnerships, 782

debt cancellation, 284disposition of, 267distributions to partners from, 707dividends from, 75domestic production activities

deduction for, 660elections made by, 286, 396foreign earned income from, 603grouping of business activities by, 254holding periods for property of, 114like-kind exchanges of interests, 141loss limitations for, 287organizational costs for, 648and partners’ income and loss, 287profi t and loss of, 285–286rental real estate interests held by, 252retirement plans, 174on Schedule K-1, 285transfers of interest, 286unifi ed tax audits for, 287–288

Part-year employees, 481, 493Passenger cars, depreciation on, 694.

See also Car and truck expensesPassive activities

aggregate vs. separate treatment of, 253–254

for closely-held corporations, 265–266on Form 8582, 262–263interest expense and, 346for LLC and LLP members, 262material participation tests for

businesses, 254–256net operating losses and, 657for partners, 262passive loss restrictions and, 252for personal service

corporations, 265–266and property loss

reimbursements, 393rental activities, 245–247, 247–249,

250–252sales of property and business

interests, 266–267sales of subdivided land and, 548–549suspended losses on business interest

and, 263–265tax credits and, 256–257, 265


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tax-shelter farm activities, 467working interests in oil/gas wells

and, 261Passive activity deductions, 257, 288Passive equity-fi nanced lending, 259Passive income, 240, 257–259, 259–261Passive interests, 264, 265Passive losses, 252, 258, 266, 268, 467,

636, 782Patents, 240–241, 322Patient Protection and Aff ordable Care

Act (2010), 505Patronage dividends, 782Pay. See also Salary or wage income

(compensation)assignment of, 36of government employees in foreign

countries, 603of Armed Forces personnel, 595, 596,

597–598property received as, 37–38

Payment period, 129, 499, 617Payments, 481. See also specifi c types

over $10,000, 640of clients’ expenses, 646donations as, 329from health and accident plans, 56–57home mortgage interest and, 342–343for independent contractors, 640for insurance premiums, 57, 328for itemized expenses, 310for prior installment sales, 124for reservists, 600self-employed persons’ reporting

of, 640–641taxable part of, 125–128to third parties, 615

PBGC. See Pension Benefi t Guaranty Corporation

Peace Corps workers, 67, 516Penalty(-ies)

for 2012 payments, 499–500for late fi ling and late payments, 724,

727–732deductible, 646for excess IRA contributions, 198for excessive refund claims, 725, 736,

743

for failure to report tips, 495for frivolous court action, 746, 748for frivolous tax returns, 743on garnished IRAs, 200for inaccurate returns, 742–743interest on, 743for IRA withdrawals, 204–207, 225marriage, 10for not reporting foreign fi nancial

accounts, 744for reportable transactions, 743single, 10for substantial overvaluation of

donated property, 332Pension Benefi t Guaranty Corporation

(PBGC), 487Pension plans, 36. See also Simplifi ed

employee pension (SEP) plansPensions

disability, 44–45, 185nontaxable, 591self-employed income and, 641

Percentage depletion, 242, 782Per diem travel allowance, 437–439Performing artists, 297, 404Periodic interest, 84Periodic payments, retirement plan, 496Permanent life insurance, 59Permanently and totally disabled

person, 483Permits, departure (sailing), 30Personal creative works, donating, 324Personal exemptions, 441–454

citizen and resident tests for dependents, 452

and joint returns by dependents, 452number of, 442–443phaseout of, 453–454qualifying children, 443–445, 451–452qualifying relatives, 445–447, 447–

450, 450–451and Social Security numbers of

dependents, 453spouse, 443, 452–453

Personal injury settlements, 365–370, 414

Personal interest, 782Personal property, 141–142, 247, 705

Personal rollovers (retirement plan), 164–165

Personal service corporations, 265–266Personal tax credits, 475–490

adoption credit, 485–486child tax credit, 477dependent care credit, 478–479, 480,

481–482earned income credit, 482–484, 485fi rst-time homebuyer credit, 490for fuel cell and plug-in electric

vehicles, 489–490health coverage credit, 487–488mortgage interest credit, 488overview, 476residential energy credits, 488–489saver’s credit, 486–487

Personal usewith business use, 523–524capital losses on assets with, 98losses on, 524–525vehicles with, 693, 702

Personal-use days, 235–236Personal-use property

and imputed interest rule, 95with business use, 676, 708–709losses on, 389–390, 392–393rental of, 140, 234–235, 235–236,

236–238with business use, 697

Personal-use tests, 234–235Phaseout Range for Deduction Limit on

2013 Returns, 194Phaseout rules. See Deduction phaseout

rulesPhaseout threshold, 194Physical presence test, 607Pilots, 422–423Placed in service (term), 782Pledge rule, 127–128Plug-in electric vehicles, 489–490, 660“Points”, 344–345, 346, 522, 782Ponzi schemes, 387Portability election (estate tax), 629–630Portfolio income, 257Postmarks, for returns, 723Pre-1936 buildings, 552


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Pre-1974 participation in retirement plans, 161

Premature distributions, 782Prepaid expenses, 310, 572Prepaid interest, 351Primary purpose determination,

educational program, 42Principal residence, 345, 524, 782Principal residence exclusion, 514–515,

515–518, 518–519, 519–521Principal residence indebtedness, 282Principals (school), 404Prior law deferral rules, 117Prior law rollover rules, 523Private activity bonds, 88, 89, 465Private letter ruling, 783Private non-operating foundations, 321Private schools, 372Prizes, as income, 273Probate estate, 783Production activities, 659Production costs, 240Products, discounts on, 71Product testing, 63Professional gamblers, 273Professionals, deductions for, 645–646Professional sports players, 422Profi t presumption, 648Profi ts. See also Gross profi t

dividends of, 76in partnerships, 285–286of property sales, 104–105, 526rentals lacking profi t motive, 238–240from sole proprietorships and

partnerships, 603Profi t-sharing plans, 57, 783Promissory notes, 123Property. See also specifi c types, e.g.:

Community property; See also Tax-free exchanges of property

adjusted basis of, 123–124alimony and transfer of, 613basis of, 116cost of, 116for depreciation deductions, 674–675dividends paid as, 76–77

free use of, 315listed, 682–684overvaluing, 742ownership of separate, 15pay received as, 37–38pledges of other, as at-risk

investment, 269repossession of, 556–557returns of, to creditors, 553–554

Property management, 411Property sales, 97–138. See

also Business property sales; See also Residence sales

adjusted basis of property, 123–124amount realized for, 116and escrow, 130–131boot for like-kind exchanges of

property, 133capital losses on, 103, 104–105carryovers, 103classifi cation and taxation of, 98–99contingent payment sales, 129–130cost of property, 116deferred payment sales, 131Form 8949 and Schedule D entries

for, 106–112gains on, 99–102, 105–106, 115general rules, 98holding periods, 99–102, 113–114of inherited property, 119–120installment sales, 124–125, 125–128,

128–129, 131–132, 132–133losses on, 115over $150,000 plus $5 million in

debt, 134–138as passive activities, 257, 266–267real estate sales, 356–357of real property, 550restricted, 48and rollovers of retirement plans, 166of subdivided land, 548–549to third parties, 558unadjusted basis of property, 116–118,

118–119, 120–122, 122–123Proprietorships, 603, 707Proving a Casualty Loss, 386–400Provisional income, 783PTPs. See Publicly traded partnershipsPublic Health Service, 516, 591, 596

Public Health Service Act, 282Publicly traded partnerships

(PTPs), 261Publicly traded securities, 106, 125Puerto Rico, 314, 609Punitive damages, 281Purchased stock rights, 531Purchase money mortgages, 557–558Purchase price adjustment, 285Puts, 532, 539–540

Q

QCD. See Qualifi ed charitable distribution

QDRO. See Qualifi ed domestic relations order

QEAAs. See Qualifi ed exchange accommodation arrangements

QJV. See Qualifi ed joint ventureQSB stock. See Qualifi ed small business

stockQTPs. See Qualifi ed tuition programsQualifi ed charitable distribution

(QCD), 199Qualifi ed charitable organizations, 783Qualifi ed conservation

contributions, 326, 333Qualifi ed disclaimer, 212Qualifi ed distributions, IRA, 224Qualifi ed dividends, 459, 560, 783Qualifi ed Dividends and Capital Gain

Tax Worksheet, 11, 98, 99, 100, 101, 102, 106, 562, 749

Qualifi ed domestic relations orders (QDROs), 159, 165, 168, 204, 783

Qualifi ed education expenses, 572, 576, 578, 579

Qualifi ed employer retirement plans, 497

Qualifi ed exchange accomodation arrangements (QEAAs), 147

Qualifi ed intermediary, default by, 146Qualifi ed joint interest rule, 120, 122Qualifi ed joint venture (QJV), 228, 712Qualifi ed small business (QSB)

stock, 105


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Qualifi ed tuition programs (QTPs), 570–571, 579, 625, 783

Qualifying children, 443–445, 451–452, 484

Qualifying relatives (personal exemptions), 445–447, 447–450, 450–451

Qualifying testsfor adoption credit, 485for Armed Forces personnel in combat

zones, 597for dependent care credit, 478

and care of qualifying persons, 480expenses associated with care, 481–

482for EIC, 482–484for head of household, 23–24for innocent spouse relief, 16for reduced maximum exclusion, 519for resident aliens, 27–28for U.S. savings bond tuition

programs, 569for work-related costs of

education, 581–582Qualifying widows or widowers, 22, 783

R

Rabbi trusts, 40Railroad Retirement benefi ts, 496, 586,

591Railroad Retirement Tax Act

(RRTA), 496Ransom, 388Rate Table for Self-Employed, 665, 667Real estate

business, 285, 554charitable donations of, 326–327donation limit for, 333exchanges of U.S. and foreign

country’s, 141fair market value deduction for, 319holding periods for, 114losses, 553recaputure of depreciation for, 705–

706Section 1250 gain on, 102in service aft er 1986, 684in service between 1980 and 1987, 686

tax credits for real estate activities, 256types of ventures, 547–548

Real estate investment trusts (REITs), 75, 547, 783

capital gains from, 561Real estate losses, 228. See also Losses,

on residence salesReal estate mortgage investment

companies (REMICs), 84, 547–548

Real estate professionals, 250–252, 783Real estate taxes, 229, 237, 355, 356–357Real property, 247, 783

timing of, 550Reasonable cause exception, 332Recapture

of American Opportunity credit, 573of business vehicle deductions, 702for computers/listed property, 683of deduction for appreciated tangible

personal property, 320of deductions for fractional

interests, 326of depreciation, 126, 140, 705–706,

780for drops in alimony, 617–618for exchanges/involuntary

conversions, 705of federal subsidies, 515fi rst-year expensing and, 126, 677, 706of Lifetime Learning credit, 573of MACRS depreciation, 694of mortgage subsidies, 488of net ordinary losses, 708of tuition and fees deduction, 579

Receipts, 640–641, 642–645. See also Constructive receipts; See also Gross receipts

Recertifi cation, for EIC, 483Recharacterizations, of IRAs, 222–224Recklessness, denial of EIC due to, 483Recognized gain, 783Recognized loss, 783Record date, dividend, 77Recording, of audit examination, 741–

742Recordkeeping

on adjusted basis for property, 523

of business use for business vehicles, 703

of deductible losses, 393on fair market value of property, 558for fi ling returns, 722for substantiating contributions, 329–

330of rental property improvements, 115for Section 1244 stock, 541on self-employed income, 636standard mileage rate and, 691for T&E expense deductions, 434

Recourse debt, 553–554Recovered tax deductions, 278–279Recovery, of tax dispute costs, 747Recovery period

for cars, trucks, and vans aft er, 701for home offi ce, 653MACRS, 677–678, 696straight-line depreciation over, 681

Recovery property, 783Recreational purposes, travel for, 318Red Cross personnel, 598Redeemed shares (mutual fund), 563–

565Redemptions, interest received from, 81Reduced Maximum Exclusion, 521Reduced principal residence

exclusion, 519–521REEP credit. See Residential energy

effi cient property creditRefi nanced loans, 343–344Refi nanced mortgages, 344Refi ners, oil/gas percentage

depletion, 242Reforestation expenses, 299Refundable entrance fees, continuing

care facility, 593Refundable tax credits, 477, 783Refund claims

interest paid on, 735penalty for excessive, 725, 736quick, 735stating reasons for, 735time limits for, 734–735withholding of refunds by IRS, 736

Refundsdeliquent child support and, 616–617


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disaster losses and, 381estimated tax and, 354, 501fi ling to obtain, 4on fi nal returns, 26getting, 724–725income and, 275–278military disability determination

and, 44Registration, U.S. savings bond, 92Regular business employees, of self-

employed persons, 621Regular income tax liability. See Tax

liabilityRegular tax, 468Regulated futures contracts, 537Rehabilitation of buildings, 552, 686

tax credit for, 552Reimbursements

for casualty/theft losses, 393dependent care credit and, 70, 478,

481foreign earned income as, 603from health and accident plans, 55medical expense deductions and, 365–

367moving expense deductions and, 303of moving expenses, 603standard mileage rate and, 691for T&E expenses, 431, 435–436,

436–437, 437–439, 439–440Reinvestment plans, 560REITs. See Real estate investment trusts;

See Real estate invesment trustsRelated businesses, daily exemption rate

for, 243Related parties

acquisitions from, 677business expenses owed to, 639capital losses on sales to, 104resale of property by, 104–105tax-free exchanges of property

between, 148Relationship test, 444, 445–447Relatives. See also specifi c types, e.g.:

Childrencapital losses on sales of property

to, 104–105and daily exemption rate, 243dependent care by, 481

installment sales of property to, 128–129

renting residences to, 234Religious beliefs, 453Remainder interest, 326, 514REMIC. See Real estate mortgage

investment conduitREMICs. See Real estate mortgage

investment companiesRental activities

about, 245–247grouped with business activities, 253loss allowance for, 247–249nonqualifi ying, and rental loss

allowance, 251for real estate professionals, 250–252

Rental allowance, minister’s, 67–68Rental days (for residence), 235–236,

236–238Rental losses, 228, 257–259Rental property

depreciation on, 229, 233home offi ce in, 651improvements to, 115with insubstantial depreciable

basis, 260personal use of, 234–235, 235–236,

236–238as rental income, 228residence converted to, 232–233, 247,

526–527safe harbor for like-kind exchange

of, 140short-term vacation home rentals, 245

Rental real estate income, 603deductions for, 229–230, 411depreciation on rental property

and, 232–233from multi-unit residences, 231–232personal use and rental of

residence, 234–235, 235–236, 236–238

for rentals lacking profi t motive, 238–240

renting residences to relatives, 234repair vs. improvements and, 230–231reporting expenses and, 228

Rental use of property, 514, 524, 526Rent, below fair market, 229

Rented rooms, 232Reorganizations, 81, 86Repairs, 230–231, 393, 522Repayments, 39, 191, 490Replacement property, identifying, 145Replacement shares, 533Reportable transactions, 742Reporting Mutual Fund Distributions

for 2012, 562–566Report of Foreign Bank and Financial

Accounts. See TD F 90-22.1Repossesion, 282Repossession, 132–133, 553, 556–557Request for Appeals Review. See Form

12203Request for Taxpayer Advocate Service

Assistance. See Form 911Required minimum distribution

(RMD), 208–210, 214–216, 222Required minimum distributions

(RMDs), 783Resale of property, 104–105, 526, 640Research assistants, 568Reservists, 191, 206, 596, 600Residence interest, 781, 783Residence(s). See also Home; See

also Principal residenceconverting, to rental property, 232–

233, 526–527depreciation on rented, 233domiciles vs., 606insurance proceeds for damaged/

destroyed, 382–383personal use of, 234–235, 235–236,

236–238, 523–524, 524–525rental of, 236, 247reporting changes to, 609vacant, 233

Residence sales, 513–527adjusted basis for home, 523gains on, 522losses on, 522, 524–525, 526–527personal use of home, 523–524,

524–525principal residence exclusion, 514–

515, 515–518, 518–519, 519–521Residence test, 444Residency, 27, 28, 29


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Resident aliens, 27–30Residential energy effi cient property

(REEP) credits, 488–489Residential rental property, 783Residents (U.S.), 14–15, 27–30, 485Resident tests, 452Restaurants, 495, 675Restricted stock, 48–49Restrictive convenants, release of, 552Restrictive test, 429, 431Restructuring of mortgage debt, 554–

555Retailers, oil/gas percentage depletion

for, 242Retail property, improvements to, 675Retirees, 57, 256, 262Retirement

of bonds, 88waiver of estimated tax penalty due

to, 500Retirement advice, 64Retirement benefi ts, 149, 589, 628. See

also Social Security benefi tsRetirement communities, 364Retirement income

401(k) plans, 173–174, 174–175, 175–176

403(b) plans, 176–177before annuity starting date, 187disability pay, 596distribution of employer stock/

securities, 166–167distributions before age 59½, 170–172on Form 1099-R, 156–157government and exempt organization

deferred pay plans, 178lump-sum distributions, 158, 159–

161, 161–162from partnerships, 713payouts to benefi ciaries of, 169–170QDRO distributions of, 168required beginning date for, 169restrictions on loans from company

plans, 172–173rollovers of retirement plans, 162–163,

163–164, 165survivor annuities for spouses, 167–

168

withholdings on, 496–497Retirement plan rollovers

by benefi ciaries, 165direct rollover, 163–164from employer plan to Roth IRA, 222by nonspouse benefi ciaries, 211personal rollover, 164–165proceeds from sale of property

and, 166by surviving spouses, 216tax-free rollover, 162–163and transfers of traditional IRAs, 202–

204Retirement plans, 174. See also specifi c

typesdistributions from, 496–497, 596elective deferrals to, 34for self-employed persons, 641loans from, 172–173qualifi ed, 783rollovers of, 162–163, 163–164, 165for self-employed persons, 664–665,

665–668, 669withdrawals from, before annuity

starting date, 187, 600withholdings for, 36

Retirement savers credit. See Saver’s credit

Retroactive military disability determination, 44

Returned wages, 41Return of capital, 783Return of property to creditors, 553–

554Revenue Procedure 99-17, 545Revenue Procedure 2001-10, 638Revenue Procedure 2002-28, 638Revenue Procedure 2007-12, 514Revenue Procedure 2008-24, 153Revenue Procedure 2009-20, 387Revenue Procedure 2011-26, Revenue Procedure 2011-34, 251Revenue Procedure 2011-38, 153Revenue Procedure 2012-29, 49Revenue rulings, 783Reverse exchanges, 145, 147Reverse mortgage loans, 343Reversionary interest, 326

Revocable grantor trusts, 289Revocable trusts, 627, 783Revocation, 602Riots, 388Risk of forfeiture, 48RMDs. See Required mandatory

distributions; See Required minimum distributions

Robert T. Staff ord Disaster Relief and Emergency Assistance Act, 382

Rollovers, 783. See also Retirement plan rollovers

of Coverdell ESAs, 577–578of gain from QSP, 105of gain on residence sales, 523to SSBICs, 106

Roth IRAs, 176, 783advantages of, 219–220as alternative to traditional IRAs, 197annual contributions to, 220–221contributions to, aft er age 70½, 191contributions to traditional and, 221converting traditional IRAs and, 156,

221–222deductible IRA vs., 195direct rollover to, 163distributions to benefi ciaries

from, 226penalty for excess contributions

to, 198qualifi ed distributions from, 224–226recharacterizations, 222–224rollovers from 403(b) plan to, 177

Royalty income, 240–241, 241–242, 242–243, 411, 603

RRTA. See Railroad Retirement Tax Act

S

Safe harbor, 140, 146, 638, 659for estimated tax payments, 501

Safety awards, 433Sailing permits, 30Salary or wage income

(compensation), 33–49assignment of pay, 36for children and spouse(s), 496commissions, 38constructive receipt rule, 37


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deferred, 173, 174–175, 780diff erential wages, 492, 595disability pensions, 44–45and domestic production activities

deduction, 660educational benefi ts for employees’

children, 42–43employee leave-sharing plans, 37on Form W-2, 34–49fringe benefi ts excluded from

taxable, 622gift s from employers, 37golden parachute arrangements, 37guaranteed salaries, 286life insurance benefi ts, 41–42nonqualifi ed deferred compensation

plans, 39–40nurses’ wages as medical expense, 373paid by parents to children, 24pay received in property, 37–38for personal services, 257as rental deductions, 229restricted stock, 48–49self-employed income and, 641self-employment tax and, 715sick pay, 43stock appreciation rights, 45stock options, 45–48strike and lockout benefi ts, 39taxable alimony as, 191taxable, IRA contributions based

on, 190unemployment compensation, 38–39and waiver of executors’/trustees’

commissions, 41withholdings for retirement plans, 36withholdings on, 492–493, 493–494,

505–507workers’ compensation, 43–44

Salary-reduction SEPs, 34, 217Sales. See also specifi c types of sales

of appreciated fi nancial positions, 535–536

of business interests, 266–267of ISOs, 46of bonds, 81, 88of life insurance policies, 291–292of options, 551on Schedule C, 642–645

short sales of stock, 531–533of stock dividends, 530

Sales taxes, 354–355Salvage value, 783Same-sex married couples, 16Samoa, 609SARs. See Stock appreciation rightsSaver’s credit, 486–487, 783Savings Bond Maturity Dates, 542–545Savings certifi cates, 80, 82Schedule 1, 73Schedule A, 41, 67, 83, 85, 200, 202, 225,

231, 234, 237, 258, 273, 281, 288, 297, 304, 306, 307, 310, 313, 319, 354, 360, 377, 384, 401, 402, 404, 410, 412, 415, 435, 436, 464, 465, 471, 561, 562, 563, 568, 571, 580, 600, 645, 647, 654, 657, 693, 694, 721, 730, 731

Schedule A (Form 1040), 12, 22Schedule B, 73, 78, 79, 80, 81, 83, 84, 92,

288, 562, 744Schedule C, 37, 227, 240, 241, 274,

281, 296, 353, 358, 412, 413, 415, 431, 435, 484, 544, 580, 635, 636, 641–645, 645, 648, 653, 664, 665, 667, 675, 690, 693, 694, 703, 704, 712, 728, 730

Schedule C-EZ, 435, 635, 636, 641, 665, 690, 712

Schedule D, 73, 74, 76, 78, 88, 90, 98, 99, 102, 103, 106–112, 114, 115, 124, 140, 161, 262, 288, 289, 296, 384, 400, 459, 524, 537, 544, 553, 562, 563, 564, 653, 704, 708, 728

Schedule D Tax Worksheet, 11, 101, 102, 106, 562, 705, 749

Schedule E, 227, 228, 229, 231, 235, 237, 240, 244, 247, 250, 255, 258, 263, 286, 288, 289, 296, 548, 675, 712, 714, 729

Schedule EIC, 483, 732Schedule F, 263, 412, 636, 665, 667, 704,

637Schedule H, 621–623Schedule J, 459Schedule K-1, 75, 102, 261, 285, 288,

289, 298, 660, 664, 712, 729Schedule Q, 548Schedule R, 590, 732

Schedule SE, 37, 298, 358, 484, 711, 712, 715, 716, 730, 732

Scheduling, audit, 740Scholarships, 568Schools, 176–177, 371–372S corporations, 783

debt cancellation, 285disposition of, 267dividends from, 75domestic production activities

deduction for, 660fi rst-year expensing for, 676grouping of business activities by, 254rental real estate interests held by, 252reporting stockholders’ income or

loss, 288–289on Schedule K-1, 285

Second homes, 524–525. See also Vacation homes

Section 1.448-2T, 640Section 1.860G-1(a)(3), 536Section 71, 613Section 83, 40, 48–49Section 121, 516Section 127 exclusion, 60Section 179 deduction, 675, 699, 706,

781, 783Section 197, 241, 687–688Section 215, 613Section 263A, 640, 647Section 274(m)(2), 584Section 409A, 35, 39–40, 45, 47Section 444, 287Section 453A, 134Section 453 (l), 125Section 457 plans, 178, 783Section 460, 640Section 469(c)(7)(A), 251Section 475(f), 545Section 483, 95–96Section 529 plans, 570Section 1041, 148, 150Section 1045 rollover, 105Section 1202 exclusion, 102, 105Section 1231 assets, 97, 550–551, 706,

707–708, 783Section 1233, 533


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Section 1237, 548Section 1244 stock, 99, 541Section 1245 property, 268, 271, 705Section 1250, 11, 98, 101, 102, 524, 562,

705unrecaptured, 784

Section 1256 contracts, 536, 537, 538Section 1274, 95–96Section 1341, 41Section 2005(d)(3), 577Section 7872, 93, 94Securities. See also specifi c types

as deductible contributions, 313donation limit for appreciated, 333holding periods for, 113–114purchase of, with custodial

accounts, 627Treasury infl ation-indexed, 84year-end sales of, 125

Security arrangements, 130–131, 144–147

Security deposits, 228Self-charged interest, 258Self-charged management fees, 258Self-created intangibles, 688Self-directed IRAs, 189Self-employed income, 635–662. See

also Home offi ceaccounting methods for, 638–640business tax credits and, 660–661deductions, 645–646, 648–649defi ned, 712–713domestic production activities

deduction, 659earned income credit and, 484expenses, 646–647, 648–649legal form of business and, 636and net operating losses, 656–657reporting, 636–637and reporting of payments/receipts to

IRS, 640–641on Schedule C, 641–645tax reporting year for, 640

Self-Employed or Employee?, 717–718Self-employed persons, 663–672, 783

78-week test for, 302Archer MSA premiums for, 672business-vacation trips by, 425–426

determination of employees vs., 717–718

health insurance premium deduction for, 298, 365

housing costs of, 606medical plans

Archer MSAs, 671–672deductible contributions, 670distributions from, 670–671health savings accounts, 669overview of, 664small business health tax credit

and, 672with coverage for spouses, 56–57

regular business and household employees of, 621

reporting of payments and receipts by, 640–641

reporting of T&E expenses by, 435retirement plans, 217, 664–665,

665–668, 669Self-employment tax, 711–718, 783

above-the-line deduction for, 298, 358defi nition of self-employment

income, 712–713determination of employees vs. self-

employed persons for, 717–718for low-income/loss years, 716for partners, 713Schedule E and, 714wages and, 715

Self-insured medical reimbursement plans, 56–57

Self-rental rule, 260Self-support test, 444Seller-fi nanced sales, 93, 95–96Seller-paid points, 522Sellers, repossession of property

by, 556–557Selling expenses, 115Selling price, 125, 127, 129, 522Senior citizens, 585–593. See also Social

Security benefi tselderly or disabled tax credit, 590–591,

591–592Medicare Part B and Part D

premiums, 593tax eff ects of continuing care facilities

for, 592–593tax rules favoring, 586

Separated couple, 782Separate dwelling units, rented rooms

vs., 232Separate household rule, 23Separate liability relief, 17–20Separate liability rules, 16Separate residences, married couples

with, 519Separate returns, 783

American Opportunity credit and, 572

carryovers from, 103community property rules and, 15fi rst-year expensing on, 676itemized deductions for married

couples with, 307–308joint vs., 12–13for married dependents, 452medical expenses, 368Social Security benefi ts on, 588standard deduction restriction, 12student loan interest deduction

and, 579Separate structure, home offi ce in, 651Separation. See Legal separationSEPs. See Simplifi ed employee pension

plans; See Simplifi ed employee plans

Series E bonds, 91, 92, 542Series EE bonds, 91, 541–542, 568–569Series H bonds, 92Series HH bonds, 91, 542Series I bonds, 91, 543Service Academy appointees, 577Service income, NAE for, 640Services

discounts on, 71donation of, 315for no additional cost, 70property obtained for, 117as rental income, 228

Services performed test, 429–430Settlement fees, 522Settlements, 287, 618Severance pay, 36Sex reassignment surgery, 365


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Shared-equity fi nancing agreements, 236

Shares, fractional, 76Short sales, 531–533, 535, 536, 553, 783Short tax year, 784Short-term gains, 532, 784Short-term losses, 532, 784Short-term obligations, 86–87Short-term vacation home rentals, 245Shrubs, damage to, 385Sick leave, 43Sickness, military service and, 44Sick pay, 34, 43Sideline businesses, 647–648, 650,

654–656, 664Signatures, 14, 22, 26Signifi cant participation, 259SIMPLE IRAs, 669

converting to Roth IRAs, 222distributions from, 219elective salary deferrals to, 34eligibility for, 218employer contributions, 219setting up, 190withholdings for, 36

Simplifi ed employee pension (SEP) plans, 784

basics of, 217claiming deductions for, 668converting to Roth IRAs, 222deductible contributions to, 665–668elective salary deferrals to, 34qualifying for, 668salary-reduction, 217self-employed persons, 665

Singles penalty, 10Skybox rentals, 432Slot machine players, casual, 274–275Small business health care tax

credit, 661, 672Small business stock, 99, 102, 105–106,

466, 541Small cash transactions, 641Small employer credit for retirement

plan startup, 664, 669Small tools, job expenses for, 409Smoking cessation programs, 361

Social Secuity and Medicare (FICA) taxes

for former employees, 57Social Security and Medicare (FICA)

taxesadditional, 504–510for children, 25dependent care credit and, 481estimated tax payments and, 501for household employees, 620–621on Form W-2, 34for S corporation stockholders, 288for household employees, 478for low income earners, 493self-employment tax and, 715on tips, 35, 36, 494, 495withholdings for, 34withholdings on, 495–496

Social Security benefi tscomputing taxable portion of, 588disability, 45earnings and tax on, 589–590and IRA deductions, 196legal costs for claiming, 414lump-sum payment election, 588net, 587retirement benefi ts, 589taxable types, 586–587workers’ compensation and, 44

Social Security numbers (SSNs)for child’s tax return, 24of dependents, 442, 453of employees, 620of spouse, 443, 452–453

Soft ware, computer, 683, 688Sole benefi ciary(-ies), 216–217Song rights, amortization of, 688Source income, expatriation tax on, 30Special allocations, 286Special foods, 361Special needs adoption, 486Special needs benefi ciaries, 576Specifi c identifi cation method, 566Split-dollar insurance arrangements, 42,

328Sponsorship gift s, 593Sports managers, 422

Sports players, 422Spouse(s). See also Former spouses (ex-

spouses)as active plan participant, 193allocating tax liability between, 19Archer MSA contributions for, 671of Armed Forces personnel, 598basis of property received from, 117in combat zone, 14death of, 16, 21–22, 120, 122, 518,

615–616disabled, 480elderly or disabled tax credit for, 591failure to fi le by, 14gift s to, 625health plan coverage for, 56–57innocent spouse rules, 13, 15, 16–17IRAs for, 190legal fees of, 618and lump-sum averaging, 161lump-sum retirement distributions

for, 158, 159medical expenses of, 367–368noncitizen, 631nonresident alien spouse election, 14–

15nonworking or low-earning, 192, 220personal exemptions for, 443, 452–453QJV fi led by, 228and RMD, 209Social Security numbers for, 443as students, 480surviving, 22, 167–168, 216–217, 608suspicious tax reporting by, 12tax-free exchanges of property

between, 148–150T&E expenses of, 428, 430, 436transfer of U.S. savings bonds to, 92transfers of IRAs to, 204withholdings on wages paid to, 496

SSBIC, rollover to, 106SSN. See Social Security numbersStandard deduction, 784

and state tax refunds, 276basic, 306for blind persons, 308claiming, 306–307for dependents, 309


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if over age 65 or blind, 306itemized deduction vs., 304for persons over 65, 308rules and limitations, 305–311on separate returns, 12

Standard Deduction for Dependents in 2013, 309–311

Standard Deduction of 65 or Older or Blind, 308–311

Standard mileage rate, 691–692, 784Start-up costs, 648Startup costs, 664, 669State bonuses, for Armed Forces

personnel, 596State government, donations to, 314Statement of Person Claiming Refund

Due a Deceased Taxpayer. See Form 1310

State offi cials, expenses of, 297State taxes

for Armed Forces personnel, 595deductions for, 354–355on Form W-2, 35income and refunds of, 275–278refund off set for, 736unemployment, 623

State unemployment tax, 623Statute of limitations

for additional taxes, 739for disability determinations, 596for gift valuation, 626

Statutory employees, 35, 642, 713, 784Stock. See also specifi c types

devaluation due to corporate misconduct, 388

divorce-related redemptions of, 149donation of, 321earmarking of stock lots, 529–530held by broker in street name, 77redemption of, 99sales of stock dividends, 530short sales, 531–533stock rights of investors, 530–531stripped coupon bonds and, 87tax-free exchanges of, 151wash sales for, 533–535

Stock appreciation rights (SARs), 45Stock dividends, 76, 77, 530, 784

Stockholders, 288–289, 676Stock lots, 113, 529–530Stock options, 45–48, 47, 781, 784.

See also Incentive stock options (ISOs)

Stock rights, 76, 113, 530–531Stock splits, 76Stock subscriptions, holding period

for, 113Storage of inventory, in home, 652Straddle losses, 536–538Straddles, 784Straight-line depreciation

of cars, trucks, and vans, 699–700deductions for, 681–682and MACRS rate, 696for real estate, 686

Straight-line depreciation method, 784Straight-Line Half-Year

Convention, 699Straight-Line Mid-Quarter

Convention, 700–703Streamlined determinations of equitable

relief, 21Strike benefi ts, 39Stripped coupon bonds, 84, 87Stripped coupons

reporting OID for, 84Stripped tax-exempt obligations, 90Student loan cancellation, 282Student loan interest, 298, 579–580Students, 28, 447, 480Student test, 444Subdivided land, 122, 548–549Subscriptions, 63, 404Substantially equal payments, 170“Substantially identical” securities, 534Substantial risk of forfeiture, 48Sudden event test, 378–380Supplemental unemployment

benefi ts, 39, 41Supplements, nutritional, 361Supplier-based intangibles, 687Support, 315, 318, 369, 615Support personnel (Armed Forces), 598Support test for qualifying

relatives, 447–450

Surrender, of life insurance policies, 291–292

Surviving spouses, 22, 120, 165, 167–168, 169, 608

Surviving tenants, 120–122Survivor annuities for spouses, 167–168Suspended losses, 263–265, 267Suspended tax credits, 256, 265SUVs, depreciation on, 695. See also Car

and truck expensesSweepstakes winnings, 273Swimming pools, 374

T

TAA benefi ts. See Trade Adjustment Assistance benefi ts

Table of MACRS Depreciation Rates, 680

Tangible personal property, 319, 320, 784

Taxable income, 784. See also Salary or wage income (compensation)

Taxable Income Brackets for 2013, 11Taxable income limit, 242, 243Taxable interest, 89Taxable Premiums for Group-Term

Insurance Coverage Over $50,000, 58–71

Tax advice, 644Tax assessments, 356Tax attributes, 784Tax benefi ts, 12–13, 19Tax brackets, 10, 11Tax Computation Worksheet, 11, 22,

459, 723, 749Tax Court

actual knowledge test in, 17appeals to, 17, 20, 21

Tax Credit Record Keeper, 732Tax credits. See also Personal tax credits;

See also specifi c credits; See also specifi c types

against AMT, 467–468erroneous, 19for gift tax, 626for investors in mutual funds, 561–

563


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for investors in real estate, 552–553for passive activities, 256–257real estate allowance for, 249refundable, 783regular income tax liability and, 460from regular tax, 468for returned wages, 41

Tax deferral, 784Taxes paid, allocating vehicle expenses

for, 693Tax-exempt bond funds, 561Tax-exempt bonds, 83Tax-exempt income, mutual fund, 348Tax-exempt interest, 79, 88–89, 465Tax-exempt obligations, debts for, 348Tax-exempt organizations, 176–177,

540–541Tax-free exchanges of property, 139–

153basis of property received in, 117between related parties, 148between spouses and ex-spouses, 148–

150boot, 142–144business property in, 707closely-held corporations and, 151–

152exchanges of coins and bullion, 152exchanges of insurance policies, 152–

153exchanges of stock in same

corporation, 151by investors in real estate, 549–550joint ownership interests and, 151like-kind property, 140–141personal property held for

investment, 141–142QEAAs for reverse exchanges, 147time limits and security arrangement

for deferred exchanges, 144–147Tax-free pay, 597–598Tax-free rollovers (retirement

plan), 162–163Tax-free rule of common stock, 76Tax-free stock rights, 113Tax Guide for Individuals With Income

From U.S. Possessions. See IRS Publication 570

Tax home, 28–30, 421, 422–423, 423–424, 784

Tax identifi cation number, 442, 636, 784Tax liability, 457–460

allocating, between spouses, 19of children, 470–471and child tax credit, 477elderly or disabled tax credit

and, 591–592equitable relief for, 20–21for farmers and fi shermen, 459from Foreign Earned Income Tax

Worksheet, 459from Tax Computation

Worksheet, 459and innocent spouse rules, 13, 16Lifetime Learning credit and, 575mortgage interest credit and, 488with net capital gain or qualifi ed

dividends, 459saver’s credit and, 487separate liability relief, 16, 17–20of surviving spouse, 22taxable income and, 458using Tax Table, 458–459transfer of, 152understatement of, 742

Tax matters partner (TMP), 287Tax payment deductions, 352–358

and assessments, 356automobile license fees, 357buying/selling real estate and, 356–

357deductible taxes, 353foreign taxes, 358general sales taxes, 354–355real estate taxes, 355state and local taxes, 354–355and taxes as business expenses, 358and tenants’ payment of taxes, 356

Tax payments, 599–600, 725–726Tax preference items, 784Tax preparation costs, 412–413, 644Tax rates, 10–11, 27, 74–75, 621Tax Relief, Unemployment Insurance

Reauthorization, and Job Creation Act of 2010, 120

Tax return preparation costs, 229

Tax returnschildren’s investment income on

parents’, 473–474copies of, 722corrections to prior, 674depreciation deductions on, 675fi ling basics, 1–8identifying care provider on, 478mailing, 723name and social security number of

spouse on, 452–453recapture for alimony on, 617reporting foreign income on, 611

Tax-sheltered annuities, 784Tax-shelter farm activity, 467Tax Table, 11, 458–459, 723Tax treaties, 28, 610Tax year, 640, 784TCM. See Tax Court Memorandum

DecisionsTeachers, 28, 404, 581Teaching assistants, 568Telephone, 724, 725Telephones, 410. See also Cell phonesTemporary assignments, 416, 423–424Temporary property rental, 239–240Tenancy by the entireties, 784Tenancy in common, 151, 784Tenants, 120–122, 228, 356, 782Terminally ill persons, 376Termite damage, 379Terrorist attacks, 45Terroristic action, death in, 599Testamentary trusts, 784Th eft losses

deductible, 387–388in excess of income, 395fl oors for personal-use property

losses, 389–390on Form 4864, 390–392insurance reimbursements for, 393nondeductible, 388–389for property with personal and

business use, 392–393proving, 388repairs and, 393and Section 1231 assets, 708


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Index

Th ird homes, mortgage interest on, 337Th ird parties, 150, 558, 573, 615Th reshold conditions for equitable

relief, 20Th rift Savings Plan, 178Tickets

athletic, 316, 329, 431benefi t, 315

Tie-breaker rules, 444–445Time limits, 144–147, 722Time test for foreign earned

income, 606Tips, 34, 35, 36, 494–495TIPS. See Treasury infl ation-protected

securitiesTitle issues/disputes, 414TMP. See Tax matters partnerToken items, 316“Too good to be true” test, 742Total blindness, 308Town government, donations to, 314Trade Act (1974), 39Trade Adjustment Assistance (TAA)

benefi ts, 487Trade-ins, 701–702, 709Trademarks, 687Trade names, 687Traders, 543–544, 544–545, 642, 713Traditional IRAs

active participation in, 193–196, 196–197

contributions to, 190–191, 191–192, 197–198

contributions to Roth and, 221converting Roth IRAs and, 156,

221–222distributions from, 198–200, 200–202,

208–210inherited, 211–217penalty for withdrawals before age

59½, 204–207starting, 189–190transfers of, 202–204

Trainees, exempt-person exception for, 28

Training exercises, Armed Forces, 599Transfers

of Coverdell ESA assets, 577–578of employer plan benefi ts, 204

of IRAs, 54, 199, 202–204, 313of mortgaged real estate, 558of property, 613Section 83, 40separate liability relief and, 20

Transfers in trust, 149Transfers of partnership interest, 286Transfer taxes, 354Transit passes, 60–62Transmittal of Wage and Tax Statement.

See Form W-3Transportation benefi ts, 60–62Transportation costs, 407, 583–584Transportation industry workers, 432Travel

as education expense, 583–584to National Guard and Reserve

meetings, 600and payment extensions, 724

Travel allowance, on Form W-2, 34Travel and entertainment expense

deductions, 415–44050% limit on, 428business gift s, 433–434for business trips, 421–422, 428business-vacation trips, 425–426commuting expenses, 416–417for conventios, 426–427, 428entertainment costs, 429–430,

431–432meal costs, 417–419, 419–420,

429–430, 431–432proving, 434–435record-keeping requirements, 434reimbursements for, 435–436,

436–437, 437–439, 439–440reporting of, 435rules for, 416and tax home, 422–423, 423–424

Travel expensesdeductions for Armed Forces

Reservists/National Guard members, 297

investment-related, 411for job search, 406medical expense deductions for, 370–

371for recreational purposes, 318as rental deductions, 229

repayment of disallowed, 41as work-related costs of

education, 583–584Travel restrictions, income from

countries with, 604Treasury bills, 90Treasury Decisions (TDs), 230Treasury infl ation-indexed securities, 84Treasury infl ation-protected securities

(TIPS), 90Trees, damage to, 379, 385Trustees, waiver of commissions by, 41Trusts, 289, 784. See also specifi c types

additional Medicare taxes on, 508basis of property received by, 117charitable donations through, 328deductible donations to, 313dividends from, 75gift s of income interests in, 328gift tax and, 627–628as IRA benefi ciaries, 214on Schedule K-1, 285transfer of U.S. savings bonds to, 92transfers of mortgaged property

to, 149Tuition, 60, 172, 297, 315, 568–569,

578–579Two-year resale rule, 128Two-year rule, 148

U

Unadjusted basis of property, 116–118, 119–120, 122–123

Unauthorized collection lawsuits, 748Underpayments (tax), 499, 726–727Underpriced award items, 64Understanding Your Form W-2 for 2013

Wages and Tips, 34–49Unearned commissions, 38Unemployed persons, 480Unemployment benefi ts, 38–39, 41, 299Unemployment taxes

dependent care credit and, 481for housekeepers, 478

Unforeseen circumstances, sales due to, 520

Unifi ed Estate and Gift Tax Schedule for 2012, 630–631


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Index

Uniform Lifetime Table, 208, 210Uniforms, 405–406, 600Uniform Transfers to Minors Act, 80,

273Union costs, 404Unmarried co-owners of home, 338Unmarried head of household, 12–13,

23Unmarried joint tenants, 121Unrecaptured Section 1250 gain, 784Unrecaptured Section 1250 Gain

Worksheet, 102, 705Unreimbursed expenses, 317–318, 435Unused tax credits, 278U.S. Citizenship and Immigration

Services Form I-9, Employment Eligibility Verifi cation. See Form I-9

Useful life, 674, 784Use-it-or-lose-it deadline, 69Use tests, 515–518U.S. Military Academy, 577U.S. savings bonds, 91–92, 92–93, 149,

322U.S. savings bond tuition plans, 568–

569U.S. Tax Guide for Aliens. See IRS

Publication 519

V

VA. See Veterans AdministrationVacant land, 514Vacant residences, 233Vacation homes, 326, 524–525Vacations, 425–426Vans, depreciation on, 695. See also Car

and truck expensesVan transportation, 61Vehicle loans, 691, 693Vehicles, business, 701–702, 703. See

also Automobiles; See also Car and truck expenses

Vehicles, charitable donations of, 323Vesting, 48Veterans, 313, 596, 735Veterans Administration (VA), 45, 591Virgin Islands, 609

VISTA volunteers, 67Vitamins, 361Voluntary conveyances, 282, 553, 557Voluntary interest payments, 579Volunteers, 67, 317–318, 332

W

Wage and Tax Statement. See Form W-2Wage income. See Salary or wage income

(compensation)Waiver of Restrictions on Assessment

and Collection of Defi ciency in Tax and Acceptance of Overassessment. See Form 870

Waivers, 500Warrants, 534Wash sales, 103, 114, 533–535, 538, 563,

784Weekends, business-vacation trips

on, 426Weight-reduction programs, 361What’s New for 2012, , xxv–xxviiWhat You Need To Substantiate Your

Donations, 331–335Whistleblower awards, 299Who Claims the Deduction for Real

Estate Taxes?, 355–358Widows or widowers. See Qualifying

widows or widowersWills, contesting, 414Winnings, 273, 273–275, 495Withdrawals

from 401(k) plans, 175–176of nondeductible IRA

contributions, 198premature, 82by reservists, 600from Roth IRAs, penalties on, 225saver’s credit and, 487

Withholdings, 491–497, 606, 784additional Medicare taxes and, 507for Armed Forces personnel, 595backup, 497for children, 25and child tax credit, 477to cover prior tax underpayments, 499

estimated tax and, 492FICA, 495–496fi ling for refund of, 4on Form W-2, 34on gambling winnings, 495on government payments, 494for household employees, 622for housekeepers, 478on late-fi led original returns, 734–735on lump-sum distributions from

retirement plans, 158and retirement distributions, 496–497for retirement plans, 36on Social Security benefi ts, 586on tips, 494–495on wages, 492–493, 493–494, 595

Work camps, 609Work clothes, 405–406Workers abroad, 608Workers’ compensation, 43–44, 587Workforce, amortization of, 687Working condition fringe benefi ts, 62–

63Working interests, in oil and gas

wells, 261“Workouts,” mortgage loan, 282Work-related costs of education, 580–

581, 581–582Wrongful death actions, 414Wrongful termination, 280

Y

Year-end benefi ts, 61Year-end dividends, 78, 561Year-end donations, 313Year-end purchases, 677Year-end sales, 114, 125Year-end securities transactions, 529

Z

Zero coupon bonddiscount, reporting, 87

Zero coupon bond discount, 87


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· 786 | J.K. Lasser’s Your Income Tax 2014 Index adjustments and preferences for, 464– 467...

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Transcript of · 786 | J.K. Lasser’s Your Income Tax 2014 Index adjustments and preferences for, 464– 467...