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IRS Publication 544 – Sales and Other Dispositions of Assets

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IRS Publication 544 – Sales and Other Dispositions of Assets Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 8 Draft Ok to Print AH XSL/XML Fileid: … tions/P544/2020/A/XML/Cycle03/source (Init. & Date) _______ Page 1 of 42 14:47 - 16-Mar-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Publication 544 Cat. No. 15074K Contents Future Developments ............ 1 Department of the Sales and Other Important Reminders ............ 1 Treasury Internal Introduction .................. 2 Revenue Dispositions of Service Chapter 1. Gain or Loss .......... 2 Sales and Exchanges .......... 2 Assets Partial Dispositions of MACRS Property ................ 5 Abandonments .............. 5 Foreclosures and For use in preparing Repossessions ............ 5 Involuntary Conversions ......... 6 Nontaxable Exchanges ........ 11 2020 Returns Transfers to Spouse .......... 18 Gains on Sales of Qualified Small Business Stock ....... 18 Exclusion of Gain From Sale of DC Zone Assets .......... 19 Rollover of Gain From Sale of Empowerment Zone Assets .... 19 Special Rules for Qualified Opportunity Zone Funds (QOFs) ............... 19 Chapter 2. Ordinary or Capital Gain or Loss .............. 19 Capital Assets ............. 20 Noncapital Assets ........... 20 Sales and Exchanges Between Related Persons .......... 21 Other Dispositions ........... 22 Chapter 3. Ordinary or Capital Gain or Loss for Business Property ................ 26 Section 1231 Gains and Losses ... 26 Depreciation Recapture ........ 27 Chapter 4. Reporting Gains and Losses .............. 33 Information Returns .......... 34 Schedule D and Form 8949 ...... 34 Form 4797 ............... 36 How To Get Tax Help ........... 37 Index ..................... 40 Future Developments For the latest information about developments related to Pub. 544, such as legislation enacted after it was published, go to IRS.gov/Pub544. Important Reminders Dispositions of U.S. real property interests by foreign persons. If you are a foreign per- son or firm and you sell or otherwise dispose of a U.S. real property interest, the buyer (or other Get forms and other information faster and easier at: transferee) may have to withhold income tax on • IRS.gov (English) • IRS.gov/Korean (한국어) the amount you receive for the property (includ- • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) ing cash, the fair market value of other property, • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt) and any assumed liability). Corporations, part- nerships, trusts, and estates may also have to Mar 16, 2021 Page 2 of 42 Fileid: … tions/P544/2020/A/XML/Cycle03/source 14:47 - 16-Mar-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. withhold on certain U.S. real property interests Comments and suggestions. We welcome 908 908 Bankruptcy Tax Guide they distribute to you. You must report these your comments about this publication and sug- 4681 4681 Canceled Debts, Foreclosures, dispositions and distributions and any income gestions for future editions. Repossessions, and Abandonments tax withheld on your U.S. income tax return. You can send us comments through For more information on dispositions of U.S. IRS.gov/FormComments. Or, you can write to Form (and Instructions) real property interests, see Pub. 519, U.S. Tax the Internal Revenue Service, Tax Forms and Guide for Aliens. Also, see Pub. 515, Withhold- Publications, 1111 Constitution Ave. NW, Schedule D (Form 1040) Schedule D (Form 1040) Capital Gains ing of Tax on Nonresident Aliens and Foreign IR-6526, Washington, DC 20224. and Losses Entities. Although we can’t respond individually to 1040 1040 U.S. Individual Income Tax Return Foreign source income. If you are a U.S. citi- each comment received, we do appreciate your feedback and will consider your comments and 1040-X 1040-X Amended U.S. Individual Income zen with income from dispositions of property Tax Return outside the United States (foreign income), you suggestions as we revise our tax forms, instruc- tions, and publications. Do not send tax ques- must report all such income on your tax return 1099-A 1099-A Acquisition or Abandonment of unless it is exempt from U.S. law. This is true tions, tax returns, or payments to the above ad- Secured Property whether you reside inside or outside the United dress. 1099-C 1099-C Cancellation of Debt States and whether or not you receive a Form Getting answers to your tax questions. 1099 from the foreign payor. If you have a tax question not answered by this 4797 4797 Sales of Business Property Photographs of missing children. The Inter- publication or the How To Get Tax Help section 8824 8824 Like-Kind Exchanges nal Revenue Service is a proud partner with the at the end of this publication, go to the IRS In- 8949 8949 Sales and Other Dispositions of National Center for Missing & Exploited teractive Tax Assistant page at IRS.gov/ Capital Assets Children® (NCMEC). Photographs of missing Help/ITA where you can find topics by using the children selected by the Center may appear in search feature or viewing the categories listed. See How To Get Tax Help for information about this publication on pages that would otherwise Getting tax forms, instructions, and pub- getting publications and forms. be blank. You can help bring these children lications. Visit IRS.gov/Forms to download home by looking at the photographs and calling current and prior-year forms, instructions, and 800-THE-LOST (800-843-5678) if you recog- publications. Sales and Exchanges nize a child. Ordering tax forms, instructions, and A sale is a transfer of property for money or a Introduction publications. Go to IRS.gov/OrderForms to mortgage, note, or other promise to pay money. order current forms, instructions, and publica- An exchange is a transfer of property for other You dispose of property when any of the follow- tions; call 800-829-3676 to order prior-year property or services. Property sold or ex- ing occurs. forms and instructions. The IRS will process changed may include the sale of a portion of a • You sell property. your order for forms and publications as soon MACRS asset (discussed later). The following • You exchange property for other property. as possible. Do not resubmit requests you’ve discussions describe the kinds of transactions • Your property is condemned or disposed already sent us. You can get forms and publica- that are treated as sales or exchanges and ex- of under threat of condemnation. tions faster online. plain how to figure gain or loss. • Your property is repossessed. • You abandon property. Sale or lease. Some agreements that seem to • You give property away. be leases may really be conditional sales con- This publication explains the tax rules that tracts. The intention of the parties to the agree- apply when you dispose of property, including ment can help you distinguish between a sale when you dispose of only a portion of certain and a lease. property. It discusses the following topics. 1. There is no test or group of tests to prove • How to figure a gain or loss. what the parties intended when they made the • Whether your gain or loss is ordinary or agreement. You should consider each agree- capital. ment based on its own facts and circumstan- • How to treat your gain or loss when you Gain or Loss ces. For more information, see chapter 3 in dispose of business property. Pub. 535, Business Expenses. • How to report a gain or loss on your tax re- Topics turn. Cancellation of a lease. Payments received This chapter discusses: by a tenant for the cancellation of a lease are This publication also explains whether your treated as an amount realized from the sale of gain is taxable or your loss is deductible. • Sales and exchanges property. Payments received by a landlord (les- This publication does not discuss certain • Abandonments sor) for the cancellation of a lease are essen- transactions covered in other IRS publications. • Foreclosures and repossessions tially a substitute for rental payments and are These include the following. • Involuntary conversions taxed as ordinary income in the year in which • Most transactions involving stocks, bonds, • Nontaxable exchanges they are received. options, forward and futures contracts, and • Transfers to spouse similar investments. See chapter 4 of Pub. • Rollovers, exclusions, and deferrals of Copyright. Payments you receive for granting 550, Investment Income and Expenses. certain capital gains the exclusive use of (or right to exploit) a copy- • Sale of your main home. See Pub. 523, right throughout its life in a particular medium Selling Your Home. Useful Items are treated as received from the sale of prop- • Installment sales. See Pub. 537, Install- You may want to see: erty. It does not matter if the payments are a ment Sales. fixed amount or a percentage of receipts from • Transfers of property at death. See Pub. the sale, performance, exhibition, or publication Publication 559, Survivors, Executors, and Administra- of the copyrighted work, or an amount based on tors. 523 523 Selling Your Home the number of copies sold, performances given, Note. Although the discussions in this publi- or exhibitions made. Also, it does not matter if 537 537 Installment Sales cation refer mainly to individuals, many of the the payments are made over the same period rules discussed also apply to taxpayers other 547 547 Casualties, Disasters, and Thefts as that covering the grantee's use of the copy- than individuals. However, the rules for property righted work. 550 550 Investment Income and Expenses held for personal use will usually not apply to If the copyright was used in your trade or taxpayers other than individuals. 551 551 Basis of Assets business and you held it longer than a year, the Page 2 Chapter 1 Gain or Loss Page 3 of 42 Fileid: … tions/P544/2020/A/XML/Cycle03/source 14:47 - 16-Mar-2021 The type and rule above prints on all proofs including departmental reproduction proofs.
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