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J.K. Lasser’s Your Income Tax 2018 | 971

INDEX

Symbols0% capital gain rate, 1052% AGI fl oor, 422, 423, 42414-day/10% test, 25115% capital gain rate, 10528% capital gain rate, 10628% Rate Gain Worksheet, 106, 11039-week test for employees, 319–32050% limit

contributions to organizations with, 351on entertainment costs, 451–452on meal costs, 451–452on T&E expense deductions, 448

60-day rollover deadline, 21360% exclusion for empowerment zone business

stock, 11078-week test for self-employed persons and

partners, 32090% current year test, 52690-day letter. See Notice of Defi ciency120-day rollover period, 214183-day substantial presence test, 29401(k) plans, 787

corrective distributions from, 179one-person, 694Roth contributions to, 183–185salary deferrals to, 38, 182saver’s credit and, 508Section 457(b) plans vs., 186SIMPLE, 231tax benefi ts, 181–182withdrawals from, 182–183withholdings for, 36

403(b) plans, 183–185, 185–186, 186, 508457 plans, 183–185, 5082016 Standard Deduction, 294

AAbandonments, 577–578, 716ABLE Account Contribution Information.

See Form 5498-QAABLE accounts. See Achieving a Better Life

Experience accountsAbode test, 464Absences, 25

ownership/use tests and, 539Accelerated cost recovery system (ACRS), 785.

See also Modifi ed ACRS (MACRS) depreciation

Accelerated depreciation, 785Accountable reimbursement plans, 785

about, 456–457

mileage allowance, 459–460non-accountable plans and, 460per diem allowance, 457–459

Accounting methods, 668–670, 785, 786Accrual-basis accounting, 669, 785Achievement awards, 66–67, 289Achieving a Better Life Experience (ABLE)

accounts, 595, 620, 655, 785Acknowledgment, of charitable

contributions, 347Acquisition debt, 785Acquisition discounts, 90Acquisition premiums, 87Acquisitions, 680, 707. See also Home

acquisitionACRS. See Accelerated cost recovery system

(ACRS)Active participation

in employer IRA plans, 202–205, 205–206rental real estate loss and, 263test of, 785

Actual knowledge test, 18Additional Medicare taxes

on earnings, 530–531on higher-income taxpayers, 740and net investment income tax, 480,

531–534Additional taxes, IRS assessment of, 765–766Additions, MACRS depreciation for, 716Address, 5–8, 757Adjusted base amount, 611Adjusted Basis of Home Sold, 551Adjusted basis of property, 130–131, 400, 487,

546, 547–548, 785Adjusted gross income (AGI), 313–321, 379,

7852% AGI fl oor, 422, 423, 424claiming deductions from gross

income, 314–317deductible moving expenses, 317–319,

319–320, 321elderly or disabled tax credit and, 617fi guring, 314mortgage insurance premium deduction

and, 361Adjusted qualifi ed expenses (AQHEE), 600Administrative tasks, home offi ce for, 680Administrators of wills, 23, 26Adopted children, medical expenses of, 387Adoption benefi ts, 37, 62Adoption credit, 62, 495, 506–507Adoption taxpayer identifi cation number

(ATIN), 496ADS. See Alternative depreciation system

Advance payments, 513, 668Advance rentals, 244Advances, against commissions, 40Advance valuation of art, 343, 350Aff ordable Care Act, 54, 379, 652, 653AFR. See Applicable federal rateAFSP. See Annual Filing Season ProgramAfter-tax retirement contributions, direct

rollover of, 170Age 30 duration rule, 601Age 59½ (persons under), 177–179, 183,

215–219Age 65 (persons over), 3, 324, 326, 327Age 70½ (persons over), 169, 200, 202, 209,

229, 698Age test, 464Aggregate treatment of activities, 266,

268–270, 679AGI. See Adjusted gross incomeAgreements. See specifi c typesAides (school), 424Air Force Academy, 600Airline Deregulation Act (1978), 41Airline pilots, 442Airplanes, 64, 65, 341Aliens. See Nonresident aliens; See Resident

aliensAlimony, 785

3rd year recapture for drops in, 644–645cash payments of, 642child support payments vs., 643death of payee-spouse and, 642–643deduction for, 316minimum payment period for, 644payments, 642taxable, as compensation, 200

Allowable Dependent Care Credit, 502–515Alternative depreciation system (ADS), 712Alternative minimum tax (AMT), 481–488,

647adjustments and preferences for, 484–487avoiding, 488depreciation, 712for farmers and fi shermen, 480on Form 6251, 483–484and intangible drilling costs, 258interest on tax-exempt securities and, 562ISOs and, 48kiddie tax and, 490–491miscellaneous deductions, 422for private activity bonds, 92recovered deductions and, 296state tax refunds and, 293tax credit from regular tax, 488

COPYRIG

HTED M

ATERIAL

972 | J.K. Lasser’s Your Income Tax 2018

Index

tax credits against, 488and tax rate, 12

Alternative trade adjustment assistance (ATAA) program, 513

Amended returns, 760, 762, 765, 785Amended U.S. Individual Income Tax Return.

See Form 1040XAmerican Opportunity credit, 594, 597, 600,

602Amortization

of bond premium, 85–86, 785of computer software, 719of intangible assets, 704, 717–718, 785of loans from retirement plans, 180of research and experimentation costs, 719of start-up costs, 679

AMT. See Alternative minimum taxAnnual contributions, to Roth IRAs, 232–235Annual Filing Season Program (AFSP), 767Annualized Estimated Tax Worksheet, 526Annualized income method, 526Annualized rate, 785Annuities, 785

employee cost of, 196for employees of tax-exempt organizations

and schools, 185–186endorsement of annuity check for another

annuity, 159from endowment policies, 193life expectancy tables for, 192–193partial exchanges of contracts, 160pre-age 59½ penalty, 216, 217–219reporting, 193–194for surviving spouses, 175taxable part of, 187–192, 194–196tax-sheltered, 790withdrawals from retirement plans before

start date of, 196withholdings and, 38, 522

Annulments, 641Anti-churning restriction, 717Apartment, cooperative. See Cooperative

apartmentsAppeals, 771Appliances, depreciation for, 245Applicable federal rate (AFR), 97, 99, 785Appraisals

deductions for, 432for disaster relief, 410of donated property, 343, 348–350fees for, 337reasonable cause exception for relying

on, 350of rental property, 249

Appreciated fi nancial positions, 560Appreciated property, 337, 341–342, 353,

655, 785

Apps, mileage tracking, 733AQHEE. See Adjusted qualifi ed expensesArbitrage transactions, 560Archer Medical Savings Accounts (MSAs), 37,

56, 59–60, 317, 702, 785Are Your Fringe Benefi ts Tax Free?, 53–74Are Your Meals and Lodging Tax Free?, 69–74Armed Forces Health Professions Scholarship

and Financial Assistance Program, 62, 591

Armed Forces personnel, 621–627“away from home” test, 442in combat zones, 624–625, 626in contingency operations, 625–626deductions for, 624as dependents, 468diff erential wages of, 517extensions for tax payment by new, 626–627moving costs of, 318overnight travel costs, 315ownership and use test for, 540refund claims by, 761Reservists, 627taxable pay and benefi ts, 622

Artists, expenses of, 678Art objects, 342–344Assessment (term), 785Assets. See also specifi c types

estimating value of, 658–659in service before 1987, 714transfers of, 20

Assignments, 443–444, 785ATAA program. See Alternative trade

adjustment assistance programAthletes, professional, 442Athletic stadium tickets, 334, 347ATIN. See Adoption taxpayer identifi cation

numberAt-risk limits, 284, 286–287, 688, 785Attorneys, 38, 298, 317, 643, 774Audits, 304, 431–432, 763–774, 785Authorization, for return processing

discussions, 766Authors, expenses of, 678Automatic fi ling extensions, 753Automobiles. See also Car and truck expenses

charitable donations of, 341damage to, 405inclusion amount for leased, 787license fees, 376mileage allowance, 459–460recapture of fi rst-year expensing for, 736tax credits for plug-in electric, 514–515

Auxiliary units, 331Average cost method, 588Average daily domestic production, 259Avoiding tax, 20, 488

Awards, 66–67, 289, 434, 591, 637“Away from home” test, 441–442, 607, 624,

785

BBackup withholdings, 522Bad debts, 143–145, 403Balloon payment, 785Bank deposit losses, 403–404Bankruptcy, 84, 226, 300Bargain sales, 341–342Base amount, 611Basis, 785

adjusted, 272, 400, 487, 546, 547–548, 785and annual deduction ceiling, 342for contingent payment sales, 137–138for depreciation, 705for suspended tax credits, 281for mutual funds, 585–587, 587–589overvaluing, 769for property, 124–126, 157, 573, 579, 655,

769for stocks and bonds, 305, 554, 555, 558,

559for vehicles, 727

BBA. See Bipartisan Budget Act of 2015Beginning date, retirement income, 176–177Below-market-interest loans, 97–99Benefi ciaries

basis of property for, 124death of, 227estates as, 224income from estates/trusts for, 306individual and non-individual as, 227IRA, 219, 225–227life insurance proceeds for, 307–308pre-age 59½ penalty and, 216qualifi ed tuition program, 595retirement income payments for, 177retirement plan distributions for, 165,

168–169RMDs received by, 224–225rollovers by, 172–173, 223special needs, 600surviving spouses as, 229

Benefi ciary’s Single Life Expectancy Table, 225, 226

Benefi ts. See specifi c types, e.g.: Fringe benefi tsBenefi t tickets, 333Bicycle commuting, 65Bingo games, 333Bipartisan Budget Act of 2015 (BBA), 304Blind persons, 324, 326, 327, 619. See

also Standard Deduction of 65 or Older or Blind

Blocked currency, 637


Index

Boats, charitable donations of, 341Bond premiums, 85–86, 87, 785Bonds. See also specifi c types

amortization and, 86cost basis of, 85discount on, 86–87, 88–89, 90interest on, 83, 92partial principal payment on, 89sale of, 84, 91of tax-exempt organizations, 561–562Treasury bills, notes and, 93

Bonuses, 453, 719Books, production costs of, 257Boot, 141, 149–151, 158, 785Borrowed funds, 595. See also LoansBreast pumps, 380Bribes, 678Brokerage commissions, 198Building permit, failure to obtain, 398Buildings, 130, 571, 574, 676, 705, 716Bullion, 159Burial companies, nonprofi t, 332Business activities, 261, 263, 269Business associates, travel expenses of, 447Businesses, related, 259Business expenses

carryover of, 684clients’ expenses as, 676of home offi ce, 684medical expenses as, 393–394of ministers, 70owed to related parties, 669of self-employed persons, 679–680taxes as, 377

Business income, 668–670, 684–685. See also Self-employed income

Business interests, 279–281, 283–284, 679–680

Business interruption insurance, 743Business lunches, 677Business premises test, 67Business property sales, 734–740

corporate liquidation and, 739–740depreciable property, 736–737depreciation recaptured as ordinary

income, 735–736disaster grants for losses on, 401involuntary conversions/tax-free exchanges

and, 737property with personal and business

use, 738–739proprietorships, 737recapture of fi rst-year expensing for, 736Section 1231 assets, 737–738and trading in business equipment, 739

Business tax credits, 691Business trips

“away from home” test for, 441–442business-vacation trips, 445–446local lodging costs for, 441spouse and dependents on, 447–448types of, 440–441

Business useallocating car and truck expenses to, 722allocating home offi ce expenses to, 684personal use and, 412, 706, 727, 738–739sale of property with, 538in separate area of dwelling, 549of vehicles, 732, 733

Business-vacation trips, 445–446Business vehicles, 732, 733Buyers. See also First-time home-buyers

default by, 578–579

CCab fare, 66Cafeteria plans, 71Calculators, 429Callable bonds, 86Calls, 559Camps, workers in, 636Canceled Debts, Foreclosures, Repossessions,

and Abandonments. See IRS Publication 4681

Cancellationof debt, 299–302, 575, 785of leases, 572–573

Cannibis businesses, 677Capital, 77, 785, 789Capital assets, 102, 111, 786Capital expenses, 786Capital gains, 786

distribution of, 786dividends and, 77–78donation of property with, 339on ETFs, 589lump-sum distributions from retirement

plans as, 166–168ordinary income and, 12on property sales, 102, 104–107, 570regular income tax liability and, 479–480on REITs, 583on Section 1231 assets, 738Section 1237 and, 570short-term, 790

Capital improvements, 725Capitalization, 786Capital losses, 688, 786

and amortizing premium, 85carryover of, 786on passive interests, 280on personal-use assets, 102on property sales, 102, 107, 108–109

short-term, 790Car and truck expenses, 720–733

for business vehicles, 732–733, 733depreciation of cars, trucks, and vans

annual ceilings, 724–725MACRS rates, 725–729after recovery period ends, 731restrictions on, 723–724straight-line method, 729–730in year vehicle is disposed of, 730–731

as educational expenses, 607expense allocations for, 722–723standard mileage rate, 721–722trade-ins of business vehicles, 732of volunteer workers, 335

Care providers, 499Carryback, 786

of foreign tax credit, 638of net operating losses, 689

Carryforward, 786Carryover, 107, 296

of basis, 123, 126–127of business expenses, 684of capital loss, 786of foreign tax credit, 638of losses over at-risk limits, 287of net operating losses, 687, 689of excess contributions, 352of excess donations, 353of fl exible spending account funds, 72–74of mortgage interest credit, 513

Cashas boot, 149–151charitable contributions of, 347gifts of, 351meal and lodging allowances, 69small transactions in, 671tax payments in, 755wellness program rewards, 71

Cash-basis accounting, 668, 786Cash-basis investors, 90Cash call, 287Cashing out of annuities, 175Casualty losses, 786

bank deposit losses, 403–404damage to car, 405damage to trees and shrubs, 404–405disaster losses, 401–403excess living costs paid by insurance, 413–

414in excess of income, 415fl oors for personal-use property losses, 409–

410on Form 4864, 410–412insurance reimbursements for, 413nondeductible, 408–409by property owners, 403


Index

for property with personal and business use, 412

proving, 405–420repairs and, 413Section 1231 assets and, 738sudden event test for, 397–399timing of deduction for, 399–400

C corporation, 109Ceilings

charitable contributions, 350–353deduction, 342, 352–353depreciation, 724–725

Cell phones, 65, 429Cemeteries, 332Certifi cate of tax compliance, 31Certifi ed historic structures, 574, 574–575Character, of gains, 578Charitable contribution deductions, 330–353,

619. See also Donated propertybenefi ts from contributions and, 333–335business inventory and, 346carryover for excess donations, 353ceiling on contributions, 350–353deductible contributions, 331–332for donations through trusts, 346election to reduce fair market value by

appreciation, 353for life insurance policies, 346nondeductible contributions, 332–333records for substantiating

contributions, 347–348for support of students in your home, 336for unreimbursed expenses of volunteer

workers, 335–336Charitable organizations, 331–332, 351, 789Charitable remainder trusts, 346Charitable split-dollar insurance plans, 44Charities

acknowledgment from, 347disclosure statement from, 348IRAs and, 227transfer of U.S. savings bonds to, 96

Chauff eur services, 63Checking account fees, 432Checklist of Taxes, 372–377Child and dependent care credit, 786

credit percentage, 502–503for disabled individuals, 619fi guring, 500–503limits on eligible expenses, 500–503qualifying for, 498–500

Childbirth classes, 381Childless earned income credit, 505Children

alimony reductions and ages of, 643claiming of American Opportunity credit

by, 596

dependent care credit and age of, 499–500educational benefi ts for employees’, 44–45educational expenses paid by, 596EIC for married, 504, 798fi ling returns for, 25–26, 490–491kiddie tax for multiple, 493net investment income of, 95QDRO distributions to, 176Social Security benefi ts for, 610U.S. savings bonds registered in names of, 94wages paid by parents to, 26withholdings on wages paid to, 521

Child support, 643Child tax credit, 495, 497–498Child Tax Credit Worksheet, 496, 497Chronically ill persons, 395Citizenship, 31–32Citizen tests, 472City government, 332Civil disorders, 408Cleaning, of work clothes/uniforms, 425Clear business setting test, 449Closely-held corporations, 156, 158–159,

282–283Closing costs, 547Closing of estate, 26Clothing, charitable donation of, 340Club dues, 450–451, 456Coaches, 442Co-owners, 540Coast Guard, 623Coast Guard Academy, 600COBRA coverage, 54, 513Code Section 165(i), 401Code Section 274(m)(2), 608Code Section 280E, 677Code Section 1031, 147Coins, exchanges of, 159Collectibles, 106, 198College employees, 62–63Combat-Injured Veterans Tax Fairness Act, 47Combat pay, 199Combat-related injuries, 47Combat zones, 14, 624–625, 625–626Commercial annuities, 187–192, 522Commercial buildings, 676Commissions, 40, 43, 245Commodities, holding period for, 119Common law, 16Common stock, dividends on, 79Community chest, 331Community income, 16, 786Community property, 15–16, 126, 156, 168,

386, 622Commuting, 29, 66, 436–437Company cars, 63–65, 65Company eating facilities, 66

Company planes, 64, 65Company stock, 79Compensated Work Th erapy (CWT)

program, 623Compensation. See Salary or wage income

(compensation)Compensation-related loans, 98Compulsory home leave, 635Computers, 428–429, 712–714Computer software, 713, 718–719Condemnation, 417, 538, 541–542, 573, 786Condemnation awards, 419Condominiums, 365Conservation contributions, 344Conservation easements, 692Consistency requirement, 127Construction, 245, 359–361, 547Constructive receipts, 39, 152, 786Constructive sales of appreciated fi nancial

positions, 560Constructive stock dividends, 80Consumer debt, 359Consumer interest, 786Contingency operations, 625–626Contingent fees, 38, 298, 434Contingent payment sales, 137–138Continuing care facilities, 618–619Continuing coverage for group health

plans, 54Contract price, 133Contracts, investment in, 788Convenants, release of restrictive, 574Convenience fee (credit cards), 432Convenience of employer test, 68Conventions, 446–447, 448, 786Conversion transactions, 561Convertible bonds, 86, 559Convertible stock, 158, 559Cooperative apartments

depreciation on, 249gain/loss on sales of, 547home mortgage interest on, 358, 365offi ces in, 686ownership/use tests for, 540“points” on, 365real estate tax deduction for, 374

Co-owners, 95Copiers, 429Copyright costs, 257Corporate bonds, 91Corporate dividends, 77–78Corporate mergers, 89Corporations. See also S corporations

C, 109closely-held, 158–159, 282–283organizational costs for, 679personal service, 282–283


Index

Corrections, tax return, 704Cosmetic surgery, 57, 381Cost basis, 85, 338, 585, 586Cost depletion, 258Co-tenants, 246Counselors, 390, 424Covenant not to compete, 104, 718Coverdell Education Savings Accounts

(Coverdell ESAs), 592, 595, 599–600, 602, 786

Creative properties, 257Credit, 786Credit cards, 299, 300, 432, 454, 526Creditors, property returned to, 575–576Credits. See Tax creditsCruises, 440–441, 448Currency, blocked, 637Custodial accounts, 83, 656–657Custodial parent, 471, 499Customer-based intangibles, 718CWT program. See Compensated Work

Th erapy program

DDamages, 296–298Day-care services, 500, 682Deadlines

60-day rollover, 213Archer MSA contributions, 702for combat zone personnel, 625–626Coverdell ESA contribution, 599disaster loss claim, 401donation acknowledgment, 347, 350for fi ling returns, 6–8for fi rst required minimum distribution, 219foreign earned income exclusion, 635–636FSAs, 72IRA contribution, 232, 233–235IRA recharacterizion, 236, 238IRA rollover, 212, 214–215qualifi ed retirement plan set-up, 694, 695realized securities gains/losses, 553separate liability relief, 18SEP plan set-up, 695SIMPLE IRA set-up, 231

Dealers, 132, 564–565Death

of benefi ciary, 227in combat zone, 626fi ling returns for decedents, 26–27of IRA owner, 228of passive interest owner, 281of spouse, 16, 22–23, 108, 128, 129–130,

542, 642–643transfers at, 96, 139–140

Death benefi ts, 623

Debt(s). See also specifi c typescancellation of. See Cancellation, of debtas deductible contributions, 331home equity loan to pay, 359property over $150,000 plus $5 million in

debt, 141–145restructuring of, 576–577for tax-exempt obligations, 367withholding of refunds to cover, 762

Decedent(s), 23, 26–27, 126–127, 387, 761, 787. See also Income in respect of a decedent (IRD)

Declining balance method, 726, 786Decrees of support, 642Deductible Medical Expenses, 382Deductible Travel and Transportation

Expenses, 438–460Deducting Car and Truck Expenses, 722–733Deduction phaseout rules

for adoption credit, 507for American Opportunity credit, 597for mortgage insurance premiums, 361IRA deductions and, 203–205itemized deductions, 328for Lifetime Learning credit, 599and MAGI for Roth IRAs, 233for married persons fi ling separately, 202for maximum loss allowances, 264for nonparticipant spouses, 201for spouses fi ling jointly, 201for student loan interest deduction, 604for U.S. savings bond tuition

programs, 592–593Deductions, 786. See also specifi c deductions;

See also specifi c typesof decedents, 27erroneous, 20for expenses of looking for a new

business, 679–680for Armed Forces personnel, 624foreign earned income and, 635from gross income, 314–317of IRA contributions, 199MAGI and limits on, 203in net operating losses, 688–689for professionals, 676–677for qualifi ed retirement plans, 698for rental real estate income, 245–246for returned wages, 43for SEP plans, 698

Deduction Worksheet for Self-Employed, 695, 696

Default, 153, 578–579Defense Department (DOD), 47Defense of Marriage Act (DOMA), 10Deferred compensation, 36, 41–42, 786Deferred exchanges of property, 152–154

Deferred interest, 82Deferred payment sales, 139Deferred pay plans, 186–187Defi ciency, 675, 786. See also Notice of

Defi ciencyDefi ned-benefi t plans, 206, 786Defi ned-contribution plans, 206, 695, 786Deliquent child support, 643De minimis safe harbor, 247De minimus foreign taxes, 638De minimus fringe benefi ts, 66Demolition, 539, 716Demonstration cars, 63Departure permits, 31Dependency exemption, 643Dependency status, 327Dependent care assistance, 61Dependent care benefi ts, 36Dependent care credit, 73Dependent care, employer-fi nanced, 501Dependent care expenses, allocating, 501Dependent care FSAs, 73Dependents, 786

blind, 327citizen and resident tests for, 472disabled, 381fi ling tests for, 4–8group-term life insurance for, 60joint returns by, 472medical expenses of, 386–387parents as, 25QDRO distributions to, 176Social Security numbers for, 473standard deduction for, 324, 327student loan interest deduction for, 603as survivors of workers abroad, 635T&E expenses of, 447–448tuition/fees deduction and, 602

Depletion deduction, 258, 487, 786Deposits, 83, 213Depreciable property, 137, 276, 704–705, 786Depreciation, 704–705, 715–719, 786

accelerated, 785and allowance for standard mileage rate, 721,

722and business use of home, 548of cars, trucks, and vans, 723–724, 725–729,

730–731, 731and conversion of home to rental

property, 249–250fi rst-year expensing and, 706of home offi ce expenses, 683like-kind exchange of property and, 147of offi ces in cooperative apartments, 686of property received as a gift, 125–127recapture of, 133, 735–736, 786


Index

Depreciation and Amortization. See Form 4562

Depreciation deductions, 703–719150% rate election for, 711and amortization, 717–718, 719for assets in service before 1987, 714bonus depreciation, 719computer software and, 718–719demolition of buildings, 716fi rst-year expensing deduction, 705–707for leasehold and retail improvements, 716for listed property, 712–714MACRS depreciation, 707–708, 708–709,

710, 714, 717mid-quarter convention for, 710–711property for, 704–705real estate, 714, 717for straight-line depreciation, 711–712on tax returns, 705

Destruction of home, 538, 541–542Diagnostic tests, 380Diff erential wages, 517, 622Diffi culty-of-care payments, 309Direct deposit-refund option, 754Directly related test, 449Direct Pay!, 755Direct rollovers, 169, 170–171, 212Disability coverage, 54Disability, determinations of, 623Disability payments, 59–60Disability pensions, 46–47, 193Disability retirement pay, 623Disabled persons

ABLE accounts for, 620combat vets, 47earned income credit for, 504elderly or disabled tax credit for, 616estimated tax penalty for, 525impairment-related work expenses, 424lifetime care of, 381pre-age 59½ penalty for, 216refund claims by, 761schooling for, 390–391special tax rules for, 619

Disallowance rule, 254, 328–329, 597Disaster areas, 400Disaster losses, 401–403, 786Disaster Relief Act, 41, 401Disaster relief payments, 401Disclosure, 348Discount bonds, 86–87, 89, 92–93Discounts. See specifi c typesDiscriminatory plans, 58–60, 60–61Disposal, 718, 726, 730–731Disposition, of interests, 283Disputes, 704, 771–772, 773–774Disqualifi ed lump-sum distributions, 166

Disregard of IRS rules/regulations, 768Distance test, 319Distributions from ABLE Accounts. See Form

1099-QADividends, 786

capital gains rates for, 77–78distribution not out of earnings, 81–82of earnings, 78–79from estates, 78from ETFs, 589as interest, 76, 78–79mutual-fund distributions and, 76–77ordinary income and, 12parents’ reporting of child’s, 493–494from partnerships, 78of profi ts, 78–79in property, 79–80real estate investment trust, 78regular income tax liability and, 479–480reinvestment of, 79responsibility for reporting, 80–81from S corporations, 78from trusts, 78

Divorce. See also Former spouses (ex-spouses)alimony and, 641amended returns and, 760and child and dependent care credit, 499community property rules and, 15–16dependents’ medical costs, 386and fi ling separate returns, 325IRAs and, 215, 217and residence sales, 543rollover of distribution received under, 173stock redemptions and, 156

Doctors, malpractice insurance for, 676DOD. See Defense DepartmentDOMA. See Defense of Marriage ActDomestic partners, 16Domestic production activities deduction, 690Domiciles, 633Donated property, 334

art objects, 342–344bargain sales of appreciated property, 341–

342cars, motor vehicles, boats, and

airplanes, 341clothing, 340easements as, 574Form 8283 and, 348–350free use of, 333interests in real estate, 344–345mortgaged realty, 580penalty for substantial overvaluation of, 350types, 336–340

Donationsdeductible, 331–332to foreign charities, 332

for right to buy athletic stadium tickets, 347of services, 332through trusts, 346year-end, 331

Donor-advised funds, 332Drilling costs, 257–258Drilling expense prepayments, 258Drought damage, 398Drought, livestock sales due to, 692Drugs, 380Drywall, Chinese corrosive, 398Dual status aliens, 28, 30, 324Dues, 333, 424–425

EEarmarking, 367–369, 553–554Earned commissions, 40Earned income, 505, 786Earned income credit (EIC), 495, 503–505,

619, 762, 649, 798Earned Income Credit (EIC) Table, 503, 798Earned income rule, 500Earnings

additional Medicare taxes on, 530–531dividends and, 78–79, 81–82IRA contributions and, 199–200Section 409A plan deff erals and, 42Social Security benefi ts and, 615, 616

Easements, 344, 573–574Eating facilities, company, 66EATs. See Exchange accommodation

titleholdersEducational benefi ts, 44–45Educational funding, 94Educational grants, 44, 591Educational institutions, 596Educational tax benefi ts, 590–608

Coverdell ESAs, 599–600deductions, 602–603, 604–605Fullbright awards, 591qualifi ed tuition programs, 593–595scholarships and grants, 591tuition reductions for college employees, 591U.S. savings bond tuition plans, 591–593work-related costs, 604–605, 605–607,

607–608Education assistance programs, 62–63, 65Education-related deductions, 602–603,

604–605Education savings accounts. See Coverdell

Education Savings Accounts (Coverdell ESAs)

Educator expenses, 315, 424EFTPS. See Electronic Federal Tax Payment

SystemEIC. See Earned income credit


Index

Elderly or disabled tax credit, 616Electing out of installment sales, 135–136Electronically-tracked slot machine play, 291Electronic Federal Tax Payment System

(EFTPS), 755, 786Electronic fi ling, 753, 755Electronic payments, 526Embezzlement losses, 406Emergency distributions, 187Emotional distress, 296Employee achievement awards, 66–67, 289,

453Employee leave-sharing plans, 39Employee stock options, 559Employee stock purchase plans (ESPPs), 49,

120Employer contributions, 37, 231Employer convenience test, 723Employer-fi nanced adoption benefi ts, 37Employer-fi nanced dependent care, 501Employer-fi nanced housing costs, 632Employer identifi cation number (EIN), 650Employer-sponsored health coverage, 36Employment agency fees, 427Employment discrimination cases, 317Employment status, 648Employment tax, 675Empowerment zone property, 706Empowerment zone stock, 106, 110Endowment policies, 193Entertainment costs, 43, 449, 451–452Entertainment facilities, 450–451Equipment trade-ins, 739Equitable owners, family members as, 357Equitable relief, 21–22Errors, 20, 752ESAs. See Coverdell Education Savings

Accounts (Coverdell ESAs)Escrow, 138–139, 154ESPPs. See Employee stock purchase plansEstate plans, 661–662Estate(s)

as benefi ciaries, 224, 227dividends from, 78possible insolvency of, 23probate, 789prompt closing of, 26reporting benefi ciaries’ income, 306on Schedule K-1, 302taking inventory of, 658–659

Estate tax, 27, 96, 306, 434, 657, 658, 659–660, 769

Estimated tax payments, 27, 517, 523–528, 760–761, 787

Estimated Tax Worksheet for 2015, 526ETFs, distributions from, 752

Excess contributions, 207–208, 208, 235, 352, 698

Excessive refund claims, 755penalty for, 762, 770

Exchange accommodation titleholders (EATs), 154

Exchange rates, 637Exchanges of property. See Tax-free exchanges

of propertyExchange-traded funds, 589Exchange-traded stock, 119Exclusive and regular use test, 680, 681Ex-dividend date, 80Executives, discriminatory plans for, 58–60Executors, 23, 26, 43, 126–127Exemptions, 27, 787Exempt-person exception, 29Exercise, of stock rights, 555Exercise programs, 380Expatriates, 31–32, 539Expenses for Business Use of Your Home.

See Form 8829Expiration, stock rights, 555Ex-spouses. See Former spousesExtensions, 626–627, 635, 753–754, 765–766

FFaculty lodging, 69Fair market rent, 245Fair market value, 289, 337, 338, 353, 580,

787Fake injury claims, 383–385False Claims Act, 298Family and Medical Leave Act (FMLA), 73Family income riders, 308Family members, as equitable owners in

home, 357Farmers

debt cancellation, 301depreciation of property, 704estimated tax payments for, 527estimated tax penalty for, 525installment method for, 131installment payments by, 527involuntary conversions, 415regular income tax liability for, 480remainder interest for, 344retired, and material participation, 272Schedule F for, 666self-employment tax for, 743

Farm optional method (self-employment tax), 746

FAVR. See Fixed and variable rate allowanceFax machines, 429Federal crime investigators, 443Federal False Claims Act, 434

Federally guaranteed obligations, 92Federal public safety offi cers, 47Federal subsidy, residence sales and, 539Federal tax withholdings, on Form W-2, 36Federal unemployment (FUTA) taxes, 500,

651–653Fiduciary(-ies), 787FIFO method. See First-in, fi rst-out methodFiguring Your Taxable Social Security Benefi ts

Worksheet, 611, 612Filing returns, 751–758

address for, 5–8applying for extensions, 753–754basics, 1–8for children, 490–491deadlines for, 6–8getting refunds, 754–755for gift tax, 656identity theft and, 756–757interest on underpayments, 757notifying IRS of address changes, 757paying taxes due, 755–756penalties for late fi ling and payments, 758preparation for, 752–753recordkeeping for, 752situations requiring, 4

Filing status, 9–32determining, 10and expatriation tax, 31–32and fi ling returns for children, 25–26and fi ling returns for decedents, 26–27and fi ling returns for an incompetent

person, 28head of household, 24–25joint returns

community property rules, 15–16and death of spouse in 2017, 22–23equitable relief on, 21–22fi ling, 14–15fi ling separate returns vs., 12–13innocent spouse rules, 17nonresident alien spouse election, 15separate liability relief for former

spouses, 18–21nonresident aliens, 28, 31qualifying widow or widower, 23resident aliens, 29–31separate returns, 12–13tax rates based on, 11–12

Final maturity, savings bond, 563Final returns, 27Financial Crimes Enforcement Network, 770Financial institutions, insolvent, 213Financial transactions, sophisticated, 560FinCEN Report 114, 770Fines, 677Fire department, 334First-in, fi rst-out (FIFO) method, 119, 588


Index

First-time home-buyers, 214, 217, 515First-year elections, 30, 721First-year expensing, 133, 705–707, 716, 724,

736, 787, 790Fiscal year, 527, 787Fishermen, 480, 525, 527Fishing trips, 449Five-year holding test, 240Fixed and variable rate allowance (FAVR), 460Fixed operating costs, car/truck, 721Flat price, 84Fleet vehicles, 721Flexible spending arrangements (FSAs), 71–73,

787FMLA. See Family and Medical Leave ActFoods, special, 380Foreclosures, 132, 299, 376, 575, 579–580Foreign accounts, 82Foreign charity(-ies), 332Foreign children, adopting, 506Foreign countries, real estate exchanges, 148Foreign cruises, 448Foreign earned income, 506, 628–638Foreign earned income exclusion, 629,

631–632, 633–634, 635–636, 787Foreign Earned Income Tax Worksheet, 480,

629Foreign fi nancial assets, 769Foreign governments, 29, 408Foreign residence test, 633Foreign Service, 539, 540, 623Foreign tax credit, 585, 632, 637–638, 787Foreign taxes, 377, 638Forfeitures, 50, 84–85Forgiveness, student loan, 603Form 656, 756, 773Form 656-L, 773Form 673, 633Form 706, 659Form 843, 759Form 870, 771Form 911, 765Form 941, 649Form 944, 649Form 982, 299, 577Form 1040, 777. See also Specifi c schedules

409A plan deferrals on, 42accrued interest on, 83adjusted gross income on, 350adoption credit on, 506AGI fl oor and, 424alimony deduction on, 639, 640, 644amortized premium on, 86AMT liability on, 481annuity payments on, 193Archer MSAs on, 56at-risk losses on, 688

bank deposit losses on, 403bond redemption or retirement on, 91capital losses and carryovers, 107charitable contributions on, 330child and dependent care credit on, 498child tax credit on, 496community property on, 15compensation on, 38dealer sales on, 132death in combat zone and, 626deductions on, 314, 331, 422dividends on, 77, 80domestic production activities deduction

on, 690dual tax status on, 30, 31early withdrawal of CD on, 85education expense deduction on, 315EIC on, 503, 505employer stock/securities distributions

on, 174excess withholdings on, 521farm/fi shing income on, 480FICA taxes on, 648fi ling, 5–8, 753fi rst-time homebuyer credit on, 515foreclosures and voluntary conveyances

on, 575foreign earned income on, 629, 633, 638forfeited interest on, 85Form 2439 and, 585Form 4797 and, 733Form 8889 and, 56, 59, 700, 701gain or loss from residence sales on, 546gambling winnings, 289general business credit on, 691health coverage credit on, 513health insurance premium deduction

on, 388household employment on, 649income from hobbies on, 678income on, 478for incompetent person, 28intangible drilling costs on, 257interest on, 82, 83IRA loss on, 211itemizing on, 322, 325“kiddie tax” on, 490, 493, 494loss deductions on, 254lottery and sweepstakes winnings, 289mandatory IRA dsitributions on, 219medical expenses and, 379, 384mortgage interest credit on, 356, 513mutual-fund distributions on, 584net capital gains on, 105net operating losses on, 686, 689nondeductible IRA contributions on, 198penalty for early withdrawal on, 216

for performing artists, 315property donations on, 337, 348qualifi ed charitable distribution on, 209recapture tax on, 539refunds and, 27, 754rental real estate and, 243, 245, 248, 266,

274for reservists, 627retirement plans and, 163, 694, 695, 698return processing problems on, 766royalty income on, 256self-employed income on, 666, 672self-employment tax and, 377, 741, 744Social Security and Medicare taxes on, 37,

60, 530standard deduction on, 324student loan interest deduction on, 603substitute payments on, 78tax-exempt bond funds on, 583tax-exempt interest on, 82tips on, 519, 520tuition and fees deduction on, 602unemployment benefi ts on, 40, 41wage repayments on, 43

Form 1040Aallocated tips and, 36AMT on, 481annuity payments on, 193child and dependent care credit on, 498child tax credit on, 496compensation on, 38death in combat zone and, 626deductions on, 314dividends on, 77, 80EIC on, 503employer stock/securities distributions

on, 174excess withholdings on, 521fi ling, 5, 753interest on, 82, 83IRA contributions on, 198“kiddie tax” on, 490, 493mutual-fund distributions on, 584, 585qualifi ed charitable distribution on, 209refunds and, 27, 754retirement plans and, 163return processing problems on, 766standard deduction on, 324student loan interest deduction on, 603taxable income on, 478tax-exempt bond funds on, 583tips on, 520tuition and fees deduction on, 602unemployment benefi ts on, 40

Form 1040-C, 31Form 1040-ES, 518, 525, 526Form 1040EZ, 490


Index

allocated tips and, 36child’s dividends/interest on, 478compensation on, 38death in combat zone, 626excess withholdings and, 521fi ling, 5, 753interest on, 82mutual fund distributions and, 585refunds and, 27, 754reporting tips on, 520return processing problems on, 766standard deduction on, 324unemployment benefi ts on, 40

Form 1040NR, 28, 30, 31Form 1040NR-EZ, 30, 31Form 1040-V, 753, 755Form 1040X, 401, 493, 626, 689, 759, 760,

761, 762Form 1041, 26Form 1041-ES, 27Form 1045, 686, 688, 689, 761Form 1065, 277, 302, 303, 316Form 1095-A, 512Form 1096, 80, 88Form 1098, 355, 362, 374Form 1098-C, 330, 331, 341, 347Form 1098-E, 603Form 1098-T, 595, 596, 602Form 1099, 35, 77, 80, 82, 751, 752Form 1099-A, 575Form 1099-B, 102, 112, 522Form 1099-C, 299, 575, 576Form 1099-DIV, 76–77, 77, 78, 80, 430, 479,

569, 582–583, 584, 585Form 1099-G, 35, 40Form 1099-INT, 82–83, 85, 87, 93, 95, 570Form 1099-K, 672Form 1099-LTC, 395Form 1099-MISC, 39, 42, 78, 451, 522, 670Form 1099-OID, 82, 85, 86, 87–88, 90, 570Form 1099-Q, 593, 594Form 1099-QA, 620Form 1099-R, 38, 163–164, 166, 172, 174,

179, 184–185, 208, 210, 216, 671Form 1099-S, 376, 538, 546, 549Form 1116, 584, 585, 632, 636, 637, 638Form 1120-S, 305Form 1128, 670Form 1310, 27, 626Form 2016-EZ, 624Form 2063, 31Form 2106, 315, 423, 424, 425, 429, 435,

440, 451, 455, 456, 604, 624, 627, 705, 720, 724, 733

Form 2106-EZ, 423, 424, 425, 429, 435, 440, 451, 455, 604

Form 2120, 470

Form 2210, 525Form 2210-F, 525Form 2350, 635Form 2439, 584, 585Form 2441, 61, 73, 498, 500, 501Form 2555, 480, 629, 631, 633Form 2555-EZ, 480, 629Form 2848, 14, 766, 767Form 3115, 567, 669Form 3468, 574, 691Form 3800, 574, 575, 691Form 3903, 424Form 3921, 48Form 4070, 519Form 4136, 691Form 4137, 519, 520Form 4506, 751Form 4506-T, 752Form 4562, 243, 245, 258, 429, 679, 705,

706, 708, 711, 712, 717, 719, 720, 724

Form 4563, 636Form 4684, 396, 401, 406, 407, 420, 430,

738Form 4797, 101, 104, 131, 133, 135, 147,

278, 279, 305, 396, 420, 549, 562, 566, 575, 684, 733, 735, 736, 737, 738

Form 4810, 26Form 4835, 279Form 4864, 410–412Form 4868, 493, 635, 753Form 4952, 105, 279, 365, 366, 485Form 4972, 166–168Form 5213, 679Form 5304-SIMPLE, 231Form 5305, 198Form 5305-A, 198Form 5305-SEP, 698Form 5305-SIMPLE, 231Form 5329, 176, 179, 192, 207–208, 216,

219, 594Form 5330, 698Form 5405, 515Form 5498, 210, 213Form 5498-QA, 620Form 5498-SA, 700Form 5500, 698Form 5500-EZ, 671, 698Form 5500-SF, 698Form 5695, 514Form 5754, 520Form 5884, 691Form 6198, 284, 366Form 6251, 12, 478, 480, 481, 483–484, 485,

486, 487, 629, 691, 726Form 6252, 131, 133, 135, 737Form 6765, 691

Form 8275, 768Form 8275-R, 768Form 8282, 350Form 8283, 330, 337, 343, 348–350Form 8283-V, 345Form 8308, 303Form 8332, 471, 499Form 8379, 755, 762Form 8396, 356, 513Form 8453, 341Form 8582, 260, 263, 278–279, 487, 705,

752Form 8582-CR, 265, 272, 575Form 8586, 574, 691Form 8594, 737Form 8606, 198, 200, 207, 210, 223, 237,

239, 240Form 8609, 574Form 8609-A, 574Form 8615, 25, 478, 489, 491, 492, 494Form 8716, 303Form 8752, 303Form 8801, 488Form 8810, 282Form 8812, 497Form 8814, 489, 491, 493Form 8815, 592Form 8820, 691Form 8822, 757Form 8824, 123, 147, 149–151, 155, 572Form 8826, 691Form 8828, 356, 539Form 8829, 429, 681, 683, 684, 685, 686,

705Form 8832, 666Form 8835, 691Form 8839, 62, 506–507Form 8843, 30Form 8845, 691Form 8846, 691Form 8847, 691Form 8853, 56, 395, 702Form 8854, 31Form 8857, 14, 17, 18, 19, 20Form 8860, 530Form 8862, 503Form 8863, 595, 597, 599Form 8864, 691Form 8867, 598Form 8874, 691Form 8880, 197, 508Form 8881, 691, 694Form 8882, 691Form 8885, 513Form 8886, 344, 769Form 8888, 564, 754Form 8889, 56, 59, 700, 701


Index

Form 8896, 691Form 8898, 636Form 8899, 340Form 8900, 691Form 8903, 690Form 8906, 691Form 8908, 691Form 8910, 514, 691Form 8911, 691Form 8917, 315, 602Form 8923, 691Form 8932, 691Form 8936, 514, 515, 691Form 8938, 769, 771Form 8939, 126Form 8941, 691, 702Form 8949, 79, 102, 104, 106, 107, 109,

111–118, 120, 122–145, 135, 278, 538, 542, 549, 565, 566, 575, 583, 585, 586

Form 8958, 15Form 8959, 530, 531Form 8960, 532, 532–534Form 8962, 509Form 8965, 651Form 8971, 126, 127, 769Form 9465, 756Form 12203, 772Form 13441-A, 513Form 14039, 756Former employees, 60Former spouses (ex-spouses)

basis of property received from, 123lump-sum distributions from retirement

plans to, 165retirement income distributions for, 175–

176separate liability relief for, 18–21tax-free exchanges of property between, 155–

157transfer of installment notes to, 139

Form I-9, 648Form RRB-1099, 610Forms 1099, 766Form SS-4, 649, 650Form SS-5, 26Form SSA-1099, 610, 611Form TD F 90-22.56, 671Form W-2, 518, 520, 649

409A plan deferrals on, 42active particpation status on, 206adoption benefi ts on, 62Archer MSA contributions on, 56automobile benefi ts on, 63combat pay on, 625and death in combat zone, 626dependent care assistance on, 61

disability coverage premiums on, 54domestic production activities deduction

and, 690employee achievement awards, 289employer reimbursements for dependent care

on, 501FICA taxes on, 648fi ling returns, 753foreign earned income on, 635Form 1099 and, 35FSA contributions on, 71gain or loss from residence sales on, 546grants on, 591health insurance premiums on, 305for household employees, 650life insurance premiums on, 60lodging on, 68name and SSN on, 648non-accountable plans reimbursements

on, 460nonstatutory stock options on, 50payroll deduction contributions on, 347, 348per diem allowance on, 458retirement plan box on, 202salary or wage income (compensation) on, 38salary-reduction contributions on, 231SEP contributions on, 229of statutory employees, 672transcripts of, 752Understanding Your Form W-2 for 2017

Wages and Tips, 36–51Form W-2G, 290, 520Form W-2P, 210Form W-3, 650Form W-4, 26, 499, 516, 518, 519, 649Form W-4P, 521Form W-4S, 45, 517Form W-4V, 519, 610Form W-7, 506Form W-7A, 506Form W-9, 83Form W-10, 499Fortune tellers, 408Foster care payments, 309–310Foundations, 44, 331, 339Founder’s fee, 381Fractional interest, 343, 344Fractional Rate Worksheet for Self-

Employed, 695Fractional shares, 79Fractional Worksheet for Self-Employed, 697Franchises, 717Fraternal organizations, 332, 447Fraud, 406–408, 504, 765, 769Freelance work, 742Free use of property, 333Fringe benefi ts, 52–74

adoption benefi ts, 62cafeteria plans, 71company services at no cost, 74de minimus, 66dependent care assistance, 61discounts on products or services, 74education assistance programs, 62–63employee achievement awards, 66–67employer-furnished meals and lodging, 67–

69employer-provided retirement advice, 66excluded from taxable wages, 650fl exible spending arrangements, 71–73foreign earned income from, 630on Form W-2, 37group-term life insurance premiums, 60–61health and accident plans, 54, 55, 56, 57, 59minister’s housing or housing allowance, 70transportation benefi ts, 63–65working condition, 65

Frivolous court action, 772, 774Frivolous tax returns, 770Frozen accounts, 83Frozen deposits, 213FSAs. See Flexible spending arrangementsFuel-related tax credits, 691Fullbright awards, 591, 637Full reporting method, 135–136Fully-tax free exchanges of property, 571Furniture, depreciation of, 245Futures contracts, 561

GGain (or Loss), Exclusion, and Taxable

Gain, 551Gain(s). See also Capital gains

character of, 578deadlines for realizing, 553on foreclosures, 575on futures contracts, 561on ISOs, 48nonqualifi ed use of residences and, 541–542on property sales, 109–110, 121–122, 125,

550recognized, 789on repossessions, 575, 578on residence sales, 538, 546–547on short sales of real estate, 575on stock, 109–110, 556traders’ reporting of, 565unrecaptured Section 1250, 790

Gambling winnings, 289–291, 520Gasoline taxes, 373Gas percentage depletion, 259Gas wells, 277GDS. See General Depreciation System


Index

General business credit, 691General Depreciation System (GDS), 711Generally related test, 449General sales taxes, 373–374Generation-skipping transfer (GST) tax, 661Gift loans, 98Gifts

annual exclusion on, 655of appreciated value, 655as income, 292basis for property received as, 655of depreciable business property, 736–737from employers, 39of income interests in trust, 346of installment notes, 139losses on residence sales acquired as, 550–

551mutual fund shares as, 587of passive interests, 281sponsorship, 619strike benefi ts as, 41taxable, 655unadjusted basis of property recieved

as, 124–126U.S. savings bonds as, 94

Gift tax, 124, 593, 655, 656–657, 657–658, 787

Going-concern value, 718Golden parachute arrangements, 39Goodwill, 149, 717Goodwill entertainment, 450Governmental 457(b) plans, 187Government employees, 186–187, 315, 630Government payments, withholdings on, 519Government services, assessments for, 375Grace period, for FSA fund use, 72Graduate assistants, 591Graduated payment mortgages, 362Grantor trusts, 658, 787Grants, 591Green card, 29Groceries, employer-furnished, 68Gross income, 3, 314–317, 467, 787Gross profi t, 133, 134Gross receipts, 672–676, 787Ground rents, 362Group-term life insurance, 36, 43, 60–61, 787GST tax. See Generation-skipping transfer taxGuam, 636Guaranteed salaries, 302Guardians, returns by, 28Gulf Opportunity Zone, 562

HHague Adoption Convention, 507

Half-year convention (MACRS depreciation), 708, 710, 726–729

Hardest Hit Fund, 355, 374Hardship distributions, 183, 187Hardship waiver, of penalty, 525, 653HCTC. See Health coverage tax creditHCTC Monthly Registration and Update

Form. See Form 13441-AHDHPs. See High deductible health plansHead of household, 24–25, 326, 787Health and accident plans, 54, 55, 56, 57,

59–60Health care premium tax credit, 316, 509–512Health Coverage Exemptions. See Form 8965Health coverage tax credit (HCTC), 513Health fl exible spending arrangements

(HFSAs), 71, 627Health Insurance Marketplace, 513Health insurance premiums, 302, 316, 380,

388, 672Health problems, residence sales due to, 544Health reimbursement arrangements

(HRAs), 54, 57, 787Health savings accounts (HSAs), 55, 699–700,

787deductible contributions to, 315, 700distributions from, 59–60, 701employer contributions to, 37

Heavy trucks, depreciation on, 725. See also Car and truck expenses

Heirs, reporting property values to, 659Herbal supplements, 380HFSAs. See Health fl exible spending

arrangementsHigh-deductible health plans (HDHPs), 55,

787Higher education expenses, 216Higher-income taxpayers

additional Medicare taxes for, 740deductions for, 328

Highly compensated employees, 74Historic structures, 345, 574, 574–575Hobbies, 431, 678–679Hobby losses, 257, 787Holding periods, 102, 104–107, 119–120,

242, 559, 585, 787Holidays, business-vacation trips over, 446Holocaust restitution payments, 298Home. See also Tax home; See also Vacation

homesadjusted basis for, 547–548converting, to rental property, 249–250,

549–550distributions for acquisition of, 179donation of, 334gain on sale of, 532maintenance of home test, 24–25

remainder interest in, 344support of students in, 336

Home acquisition loans, 356–359Home construction loans, 359–361Home entertaining, 450Home equity debt, 359, 787Home improvement loans, 361Home improvements, 392–393Home mortgage interest, 788. See

also Mortgage interest deductionfor condominiums, 365for cooperative apartments, 365as expense, 253home acquisition loans, 356–359home construction loans, 359–361home equity loans, 359home improvement loans, 361interest on refi nanced loans, 362–363payment rules, 361–362records of, 752from retirement plan loans, 181

Home offi ceallocation of expenses, 684business income and, 684–685deduction for, 436, 680–682depreciation of, 686incidental personal use of, 680of investors, 431job expenses for, 429in principal residence, 548sideline business, 685–686

Homeowner’s association, 375Hospitalization, 625Household employees, 647–648, 649Household employment taxes, 647Household income, 651, 652, 787Household items, casualty loss of, 412Household requirement (EIC), 504Housekeepers, 499–500, 500Housing allowance, minister’s, 70Housing costs, foreign earned income

and, 632–633HRAs. See Health reimbursement

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

form, 376Hunting trips, 449

IIdentity Protection Personal Identifi cation

Number (IP PIN), 756Identity theft, 756–757Identity Th eft Affi davit. See Form 14039Illnesses, job-related, 46Immediate relative (IR) visas, 507


Index

Impairment-related work expenses, 424Improvements

adjusted basis and, 547allocation of basis and, 130to business vehicles, 725home improvement loans, 361leasehold, 716MACRS depreciation for, 714, 716, 719to principal residence, 364on real estate after 1986, 717to rental property, 121repair vs., 246–248by tenants, 244to restaurants, 716to retail property, 716

Imputed interest, 98, 787Imputed interest rules, 154Inaccurate returns, 768–770Incapacitated homeowners, 541Incentive stock options (ISOs), 48, 486, 787Income, 288–310. See also specifi c types, e.g.:

Partnership incomecasualty/theft losses and, 415debt cancellation and, 299–302, 575from estates, 302, 306fi rst-year expensing and, 706foster care payments, 309–310gambling winnings and losses, 289–291gifts and inheritances, 292household, 651, 652, 787jury duty fees, 309legal damages, 296–298from life insurance policies, 307–308,

308–309lottery and sweepstakes winnings, 289on market discount bonds, 88–89prizes and awards as, 289recovered tax deductions and, 295–296refunds of state and local income tax, 292–

293regular income tax liability and, 478for S corporations, 302, 305taxable, 790from trusts, 302, 306, 658tuition and fees deduction and, 602

Income in respect of a decedent (IRD), 23, 27, 306–307, 787

Income interests in trust, gifts of, 346Income tests (EIC), 505–506Incompetent persons, 28, 610Independent contractors, 670, 787Indian tribal government, 332Individual responsibility penalty, 651,

652–653Individual retirement accounts (IRAs), 197–

242, 787. See also specifi c types, e.g.: Roth IRAs

combat pay and, 625fees of, 198records of contributions, 752replacement shares and, 558self-directed, 198Social Security benefi ts and, 611transfers to HSAs from, 56withholdings on distributions, 522

Individual taxpayer identifi cation number (ITIN), 496

Infant formula, 381Information base, amortizing, 718Inheritances

basis of redeemed shares, 586depreciable business properties, 736–737holding periods for, 120HSAs in, 701income from, 292residences acquired as, 550–551traditional IRAs as, 223–229unadjusted basis of property, 126–127

Initiation fees, union, 425Injuries, 46, 47, 59Innocent spouse rules, 14, 16, 17Insolvency, 23, 300Insolvent fi nancial institutions, 213Installment payments, 132–135, 289, 295,

340, 527, 756Installment sales, 788

depreciable property, 737dispositions of notes, 139–140electing out of, 135–136fi rst-year expensing and, 736for investors in real estate, 570passive interests, 281to relatives, 136–137repossessions and, 140–141Section 1231 assets, 738tax advantage of, 131–132

Instructors, 424Insurance. See also specifi c types

chronically/terminally ill persons use of, 395excess living costs paid by, 413–414premiums for, 81, 245proceeds from, as rental income, 244reimbursements from, 402–403, 413tax-free exchanges of, 159–160

Intangible assets, 704, 717–718, 785, 788Intangible drilling costs, 257–258Intangible property, 149, 277, 337Intellectual property, 340Intelligence offi cers, 540Interest. See also specifi c types

abatement of, 772on back taxes, 627on bonds, 83on business tax defi ciency, 675

on deferred payment sales, 139dividends and, 76, 78–79on escrow accounts, 154estate tax paid on, 96on frozen accounts, 83for late payments, 754on marital property settlements, 156on penalties, 770premature withdrawal and, 84–85on refunds, 755rental property and, 254–255on savings bonds, 563on seller-fi nanced sales, 99–100state and city interest on bonds, 92on taxes owed by reservists, 627on tax-exempt securities, 562on tax returns, 82–83on tax underpayments, 757timing of reporting of, 99on U.S. savings bonds, 94–95, 95–96for U.S. savings bond tuition

programs, 592–593on vehicle loans, 721, 723

Interest expense deductions, 354–370. See also Home mortgage interest; See also Investment interest

deferral of, 88home construction loans, 359–361limitation on, 90, 94passive activity and, 274“points”, 364, 365prepaid interest, 369–370for sales of subdivided land, 570time period for claiming, 369

Interest income, 83, 493–494Interest payment dates, 83Interest tax, 141–145Inter vivos trusts, 788Inventory, 346, 412, 658–659, 668, 682Investment

in collectibles, 198personal property held for, 148–149

Investment expenses, deductible, 430–431Investment income, 25, 95, 480, 491–492,

526, 531–534. See also “Kiddie tax”Investment interest, 365–366, 367–369, 485Investment in the contract, 788Investment losses, 404Investors

cash-basis, 90computers used by, 713overcoming status of, 270

Investors in mutual funds, 581–589Investors in real estate, 568–580

abandonments, 577–578cancellation of leases for, 572–573


Index

foreclosure on non-purchase money mortgages, 579–580

foreclosure sales to third parties, 580granting of easements for, 573–574mortgage debt restructuring by, 576–577property returned to creditors by, 575–576sales of options for, 573sales of subdivided land by, 570–571self-employment income of, 742seller’s repossession after buyer’s default

and, 578–579tax credits for, 574–575tax-free exchanges by, 571–572timing of real property sales by, 572transfers of mortgaged real estate by, 580types of ventures for, 569–570

Investors in securities, 552–567, 553bonds, 561–562, 563–564, 564constructive sales of appreciated fi nancial

positions by, 560home offi ce use by, 685–686options, 557–559stock, 553–554, 555–557, 557–559, 562tax treatment of dealers vs., 564–565traders, 564–565, 566–567

Involuntary conversions, 788basis of property acquired with proceeds

of, 124of business property, 737casualties as cause of, 420deferring gain from, 415election to defer gain for, 416holding periods for, 121qualifying types of, 415–420recapture for, 735replacement property for, 416–418,

418–419special assessments and severance damages

for, 420IP PIN. See Identity Protection Personal

Identifi cation NumberIRAs. See Individual retirement accountsIRD. See Income in respect of a decedentIRS

advance valuation of art from, 343, 350audit extensions for, 765–766denial of earned income credit by, 504fi guring of estimated tax penalty by, 525levies by, 217meal allowance of, 439–440notifying, of address changes, 757notifying, of related party transfers, 136questioning of self-certifi cation by, 213regrouping of activities by, 269release of lien by, 774reporting of basis for redeemed shares

to, 586

reporting payments and receipts of self-employed persons, 670–671

review of Form W-4 by, 519seizure of IRA by, 209–210unauthorized collection lawsuits against, 774waiver of estimated tax penalty by, 525withholding of refunds by, 762

IRS Fact Sheet 2016-3, 757IRS Publication 3, 626IRS Publication 54, 637IRS Publication 78, 331IRS Publication 463, 726, 733IRS Publication 502, 380IRS Publication 505, 524, 526IRS Publication 514, 632, 637, 638IRS Publication 519, 28, 30, 32IRS Publication 534, 717IRS Publication 535, 316IRS Publication 536, 689IRS Publication 538, 669, 670IRS Publication 544, 736IRS Publication 550, 85, 107IRS Publication 570, 636IRS Publication 590, 219, 237IRS Publication 590-A, 613IRS Publication 901, 637IRS Publication 915, 611, 615IRS Publication 926, 650IRS Publication 939, 188, 192IRS Publication 946, 711, 712, 714IRS Publication 972, 497IRS Publication 1212, 89, 91IRS Publication 1546, 765IRS Publication 4524, 757IRS Publication 4681, 300IRS Publication 4895, 120IRS regulations, 768IRS regulation Section 15A.453-1(c), 138IRS Tax Table, 23IR visas. See Immediate relative visasISOs. See Incentive stock optionsItemized deductions, 27, 323–329, 484, 485,

764, 788. See also specifi c deductionsItemized Deductions and the Standard

Deduction for 2017, 323–329ITIN. See Individual taxpayer identifi cation

number

JJanuary 1, 1936 (persons born after), 166–168January 2, 1936 (persons born before), 168Job changes, 544, 605, 606Job expenses

cell phones, calculators, copiers, and fax machines, 429

computers bought for work, 428–429

dues and subscriptions, 424–425employee’s home offi ce, 429expenses of looking for a new job, 426–427impairment-related, 619local transportation costs, 427not subject to 2% AGI fl oor, 424small tools, 429subject to 2% AGI fl oor, 423telephone costs, 430uniforms and work clothes, 425–426unusual, 427–428

Job-hunting costs, 680Job placement assistance, 65Job-related illnesses, 46Job-related injuries, 46Job searches, 426–427Job skills, 605Job transfers, 320Joint accounts, 77, 82Joint and Last Survivor Expectancy Table, 222Joint Life and Last Survivor Life

Expectancy, 218Joint ownership, 80, 158, 547Joint returns, 788

and 39-week test for moving costs, 320carryovers from, 108community property rules, 15–16and death of spouse, 22–23by dependents, 472direct deposit of refunds on, 754elderly or disabled tax credit on, 617–618equitable relief on, 21–22fi ling, 14–15innocent spouse rules, 17“kiddie tax” and, 491nonresident alien spouse election, 15relief from liability on, 16Schedule C for, 666, 672separate liability relief and, 18–21separate vs., 12–13, 14signing, 14–15, 23Social Security numbers for, 463

Joint tenancy, 127–130, 788Joint ventures, 742Jury duty fees, 309, 317

KKeogh plans, 788Key employees, life insurance for, 60–61Key Numbers for 2017, xxix–xxxiKickbacks, 40, 678“Kiddie tax”, 25, 106, 489–494, 647Kidnapping ransom, 408Know-how, amortizing, 718


Index

LLactation supplies, 380Land, 130, 538, 570–571, 705Landlord’s expenses, 244Last year of residence (resident aliens), 31Late fi ling, 758, 760–761Late payments, 362, 754, 758Laundering, of work clothes/uniforms, 425Lawsuits, 774Leasehold improvements, 716Leases

computer, 714residential, 244, 246, 572–573vehicle, 721, 723, 733

Leave-sharing plans, 39Legal costs, 245, 296, 298, 432–434, 645Legal damages, 296–298Legal form of business, 666Legal guardians, returns by, 28Legally required educational courses, 606–607Legal representative, of decedents, 26Legal separation, 16, 325, 386, 499, 641, 788Lenders, interest in activities by, 286Length of service awards, 453License fees, automobile, 376Liens, release of, 774Life-care fee, 381Life expectancy rule, 242Life expectancy tables, 192–193Life income plans, 346Life insurance policies, 60–61, 787

benefi ts from, 43–44, 395, 658charitable contribution deductions for, 346dividends on, 77, 81with family income riders, 308selling or surrendering, 308–309taxes on proceeds from, 307–308

Lifetime Learning credit, 594, 597, 600, 602, 604

Lifetime trusts, 788Light trucks, depreciation on, 724. See

also Car and truck expenses“Like-class” test, 148Like-kind exchanges of property, 104,

141, 147–148, 540, 788, 789. See also Tax-free exchanges of property

Limited entrepreneurs, 270Limited liability, for oil or gas wells, 277Limited partners, 268, 270, 278, 287Line-of-credit mortgages, 358Lines of business, companies with multiple, 74Liquidation, 240, 739–740Listed property, 712–714, 736Livestock sales due to drought, 692Living costs, 413–414, 443–444, 607LLC members, 278, 743

LLP members, 278Load charges, 585Loan Repayment Assistance program, 299Loans. See also specifi c types

assumptions of, 99to continuing care facilities, 99earmarking proceeds from, 367–369imputed interest rule and, 98, 98–100interest-free, 97–99minimum interest rules for, 96from retirement plans, 179–181, 211, 212

Local bonuses, for Armed Forces personnel, 623

Local lodging costs, 65, 441Local offi cials, business expenses of, 315Local taxes, 37, 292–293, 373Local transportation costs, 427Lockout benefi ts, 41Lodging, 67–69, 389, 441, 636Lodging as condition of employment test, 68Long-term care insurance policies, 54,

394–395Long-term care services, 394–395Long-term contracts, 670Loss deduction, 254Losses

deadlines for realizing, 553on exchanges of property, 149fi rst-year expensing and, 706on foreclosures, 575on gambling, 289–291on like-kind exchange of property, 147on liquidation of Roth IRAs, 240in partnerships, 302–303, 303–304on QTP investment, 595on regulated futures contracts, 561on repossessions, 575on residence sales, 546–547, 549, 549–550on sale of ISOs, 48and sales of property, 121–122, 125of S corporation stockholders, 305on Section 197 intangibles, 718securities investors’ planning for, 553self-employment tax and, 746on short sales of stock, 556, 559on temporary rental of residence, 255–256traders’ reporting of, 565on wash sales, 107, 558

Lost deposits, 83Lotteries, 289, 333Low earners, 201, 233, 518Low-income housing credit, 574Low-income years, self-employment tax

for, 746Lump-sum distributions from retirement

plans, 165, 166–168, 168–169, 173, 193, 788

Lump-sum payment election, Social Security, 614–615

Lunches, business, 677

MMACRS. See Modifi ed ACRSMACRS Deduction: Half-Year

Convention, 729MACRS Deduction: Mid-Quarter

Convention, 729–733MACRS Depreciation Rates, 709–719MAGI. See Modifi ed adjusted gross incomeMailing returns, 753Maintenance of home test, 24–25Maintenance, on residence, 245Malpractice insurance, 676Management expenses, 245Management fees, 274Managers (sports), 442Managing executives, business-vacation trips

of, 445–446Manufacturer sales, plug-in electric motor

vehicle, 515Marital deduction, 788Marital property settlements, 156, 645Marital status, 687Market discount, 89, 93, 788Market discount bonds, 86, 88–89Mark-to-market election, 31, 566–567Marriage penalty, 10Married couples. See also Joint returns; See

also Spouse(s)amended returns by, 760capital losses on property sales for, 107–108earned income rule for, 500elderly or disabled tax credit for, 616estimated tax payments for, 527–528itemized deductions on separate

returns, 325–326joint returns, 12–13marriage penalty for, 10principal residence exclusion for, 542–543self-employment income for, 742tax home for couples in diff erent cities, 443traditional IRA contributions by, 200–202

Married dependents, 472, 504Material participation, 266, 270–272, 282,

788Material participation tests, 270–272Maturity, savings bond, 563Maximum Depreciation Deduction for

Cars, 728Maximum Depreciation Deduction for Trucks

and Vans, 728–733MBA courses, 606Meal allowance, 439–440


Index

Meal charges, 68Meal costs

50% limitation on, 451–452directly related test, 449IRS meal allowance, 439–440at nursing homes, 391overnight-sleep test for, 437–439restrictive test for, 448–449while traveling for medical treatment, 389

Meal money, 66Meals, 67–69, 452, 636Medicaid, diffi culty-of-care payments and, 309Medical care costs, allowable, 380–381Medical conferences, 389Medical exception, resident alien, 30Medical expense deductions, 378–395

AGI threshold and, 379allowable medical care costs, 380–381for decedent’s expenses, 387for dependents’ expenses, 386–387for disabled individuals, 619fees for continuing care facilities, 618health insurance premiums, 388home improvements as, 392–393life insurance used by chronically/terminally

ill persons, 395long-term care premiums and services, 388,

394–395and medical expenses as business

expenses, 393–394nondeductible expenses, 381–383nurses’ wages, 391–392nursing homes, 391refundable entrance fees for continuing care

facilities, 618reimbursements for expenses and, 383–385schooling for mentally/physically disabled

persons as, 390–391for spouse’s expenses, 385–386travel costs as, 388–390

Medical expensesAMT adjustments for, 485as business expenses, 393–394of decedents, 27and dependent care credit, 501pre-age 59½ penalty and, 216tax-free reimbursements of, 57

Medical insurance, pre-age 59½ penalty and, 216. See also Health insurance

Medical plans, for self-employed persons, 58–60, 694, 699–700, 700, 702

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

Medicare Part B, 619Medicare Part D, 619Medicare, premiums for, 610. See also Social

Security and Medicare (FICA) taxes

Medicare taxeson earnings, 530–531on higher-income taxpayers, 740and net investment income, 480and net investment income tax, 531–534

Medicine, 380Member-of-household test, 25Membership benefi ts, 335Membership dues, 65Merchant Marine Academy, 600Merchant transactions, 670Mergers, 89Mid-month convention (depreciation), 714Mid-quarter convention (depreciation), 710–

711, 726–729Midwestern disaster area bonds, 562Mileage rate, 721–722, 790Mileage-tracking apps, 733Military action, 47, 626Military service. See also Armed Forces

personnelMinimum Interest Rate for Seller

Financing, 100Minimum interest rules, 96Minimum standards for job, educational

courses required for, 605Mining, 487Ministers, housing or housing allowance

for, 70Minors, custodial accounts for, 83, 656–657Miscellaneous expenses, 421–434. See

also Job expenses2% AGI fl oor on, 422, 423, 424contingent fees paid out of awards, 434investment expenses, 430–431legal costs, 432–434tax preparation and audit costs, 431–432

Miscellaneous itemized deductions, 788Missing status (Armed Forces personnel), 626Mobile offi ces, 682Model custodial account agreement. See Form

5305-AModel trust. See Form 5305Modifi ed ACRS (MACRS) depreciation, 788

accelerated, 723, 725and AMT, 486anti-churning restriction, 717half-year convention, 710rates for, 708–709, 725–729for real estate placed in service after

1986, 714recovery periods, 707–708

Modifi ed adjusted gross income (MAGI), 203, 233, 235, 264–265, 532, 597, 788

More-than-50%-business-use test, 723, 724, 725

Mormon missionaries, 333

Mortgage debt, restructuring, 576–577Mortgaged property, 122, 156, 339, 580Mortgage insurance premiums, 361Mortgage interest credit, 485, 513Mortgage interest deduction, 70, 245,

355–356, 513Mortgage revenue bonds, 92Mortgages, 578–579, 579–580Mortgage subsidies, 513Moving expense deductions, 424

39-week test for employees, 319–32078-week test for self-employed persons and

partners, 320about, 317–319claiming, 320–321distance test for, 319overseas, 635

Moving expense reimbursements, 37, 321, 630MSAs. See Archer Medical Savings Accounts

(MSAs)Multiple support agreements, 470–471Multi-unit residences, 248–249Municipal bond funds, 561Mutual funds, 76–77, 107, 122, 367, 583,

752. See also Investors in mutual funds

MyRA accounts, 242

NNAE method. See Non-accrual experience

methodName, on tax returns, 472National Guard members, 315, 627National Health Services Corps Loan

Repayment Program, 299National Health Services Corps Scholarship

Program, 62, 591National Housing Act, 362National Oceanic and Atmospheric

Administration, 540, 617, 623Naval Academy, 600Negative taxable income, 293Negligence of IRS rules/regulations, 768Net capital gains, 12, 366, 479–480Net interest income, 275Net investment income, 95, 480, 526,

531–534, 569Net investment income tax (NIIT), 269, 480,

526, 531–534, 538Net operating losses (NOLs), 788

about, 686–687and AMT, 486carryback of, 689carryover of, 689farm-related, 692losses and deductions in, 688–689


Index

and real estate allowance, 265recapture of, 738reporting, 688–689for self-employed persons, 666, 743

News Release IR-2017-63, 219New York Liberty bonds, 562NIIT. See Net investment income taxNOLs. See Net operating lossesNominee distributions, 77, 88Nominees, dividends received by, 80Non-accountable plans, 460Non-accrual experience (NAE) method, 670Nonbusiness bad debts, 144Noncare services, child and dependent credit

and, 502Noncitizen spouses, 661Nondepreciable assets, 704Nonfarm optional method (self-employment

tax), 746Nongift loans, 98Non-governmental 457(b) plans, 187Nonpassive income, 273, 275–277Nonperiodic distributions, 788Nonperiodic payments, retirement plan, 522Nonprofi t organizations, 331, 332Nonqualifi ed deferred compensation, 41–42,

156Nonqualifi ed plan distributions, 36Nonqualifi ed use of residence, 541–542, 548Nonqualifi ying rental activities, 267Nonrecourse fi nancing, 285, 299, 575, 788Nonrefundable tax credits, 499, 598Nonresident aliens, 15, 28, 31, 504, 611, 616Nonspouse benefi ciaries, 173, 177, 223Nonstatutory stock options, 37, 50, 156Nontaxable distributed stock rights, 555Nontaxable pensions, 617Nonworking spouses, 202, 233Northern Mariana Islands, 636Notes, 91, 93, 139–140Notice 797, 649Notice 2007-34, 44Notice 2010-33, 770Notice 2014-7, 310Notice 2014-54, 171Notice 2015-77, 355, 374Notice 2017-10, 344Notice of Defi ciency, 772Nursery schools, 500Nurses, wages of, 391–392Nursing homes, 391Nutritional supplements, 380

OObligations, 91, 92, 93, 340

Off ers in compromise (OIC), 756, 772–773. See also Form 656

Offi cers, in combat zones, 624Off shore Voluntary Disclosure Program

(OVDP), 770OIC. See Off ers in compromiseOID. See Original issue discountOil percentage depletion, 259Oil wells, working interests in, 277Olympic medals, 289, 317One-person 401(k) plans, 694Operating expenses, traders’, 672Options, 557–559, 573Ordering rules, Roth IRA distribution, 240Ordinary and necessary requirement, 788Ordinary income, 12, 735–736, 788Ordinary income property, donation of, 337Ordinary losses, 562, 738, 788Organizational costs, 679Original issue discount (OID), 86, 87–88, 89,

93, 788Overnight-sleep test, 437–439Overnight travel, 627Overseas, moving, 318, 635Overtime work, 66Overvaluation, of donated property, 350Owners. See also Co-owners

casualty loss deductions for, 403depreciation of cooperative apartments

by, 686IRA, 219, 228

Ownership, 15. See also Joint ownershipOwnership tests, 539–542

PPaid-up life insurance, 193Paralympic games, 289, 317Parents, 25, 26, 333, 471, 471–472, 493–494Parking, 63–65Partial blindness, 326Partial disposition of passive interests, 279, 280Partially rented homes, 550Partially tax-free distributions, 210–211Partially-tax free exchanges of property, 572Partial payments, 89Partners

78-week test for, 320as at-risk, 285distributions from partnerships to, 737fi rst-year expensing for, 706meals and lodging for, 69passive activities for, 278reporting of income and losses by, 303self-employment tax for, 743

Partnership income, 27

reporting of partnership profi t and loss, 302–303

tax audits for, 304Partnerships, 789

debt cancellation, 301disposition of, 283distributions to partners from, 737dividends from, 78domestic production activities deduction

for, 690elections made by, 302, 416foreign earned income from, 630grouping of business activities by, 270holding periods for property of, 120like-kind exchanges of interests, 148loss limitations for, 303–304organizational costs for, 679and partners’ income and loss, 303profi t and loss of, 302–303rental real estate interests held by, 267retirement plans, 182on Schedule K-1, 302tax audits for, 304transfers of interest, 303

Part-year employees, 501, 518Passenger cars, depreciation on, 724. See

also Car and truck expensesPassive activities

aggregate vs. separate treatment of, 268–270for closely-held corporations, 282–283on Form 8582, 278–279interest expense and, 365for LLC and LLP members, 278material participation tests for

businesses, 270–272net operating losses and, 687for partners, 278passive loss restrictions and, 268for personal service corporations, 282–283and property loss reimbursements, 413rental activities, 261–263, 263–265,

266–268sales of property and business interests, 283–

284sales of subdivided land and, 570–571suspended losses on business interest

and, 279–281tax credits and, 272, 281–282tax-shelter farm activities, 487working interests in oil/gas wells and, 277

Passive activity deductions, 305Passive equity-fi nanced lending, 275Passive income, 257, 273–274, 275–277Passive interests, 281Passive losses, 268, 274, 282, 284, 487, 666,

789Patents, 257, 340


Index

PATH Act. See Protecting Americans from Tax Hikes Act of 2015

Patronage dividends, 789Pay. See also Salary or wage income

(compensation)assignment of, 38of government employees in foreign

countries, 630of Armed Forces personnel, 622, 623,

624–625property received as, 39–40

Payment period, 137, 524, 644Payments. See also specifi c types

over $10,000, 670of clients’ expenses, 676donations as, 347from health and accident plans, 59home mortgage interest and, 361–362for independent contractors, 670for insurance premiums, 60, 346for itemized expenses, 328for prior installment sales, 131for reservists, 627self-employed persons’ reporting of, 670–

671taxable part of, 132–135to third parties, 642

PayNearMe option, 755PBGC. See Pension Benefi t Guaranty

CorporationPeace Corps workers, 69, 540Pell grants, 591Penalty(-ies)

for 2017 payments, 524–525deductible, 677for excess IRA contributions, 208for excessive refund claims, 755, 762, 770for failure to report tips, 520for frivolous court action, 772, 774for frivolous tax returns, 770interest on, 770for IRA withdrawals, 215–219for late fi ling and late payments, 671, 754,

758marriage, 10for not reporting foreign fi nancial

accounts, 770–771for reportable transactions, 769single, 10for substantial overvaluation of donated

property, 350for understating tax on inherited

property, 127Pension Benefi t Guaranty Corporation

(PBGC), 513Pension plans, 38. See also Simplifi ed

employee pension (SEP) plans

Pensionsdisability, 46–47, 193nontaxable, 617self-employed income and, 671

Percentage depletion, 258, 789Per diem travel allowance, 457–459Performing artists, 315, 424Periodic interest, 88Periodic payments, retirement plan, 521Permanent life insurance, 61Permanently and totally disabled person, 504,

619Permits, departure (sailing), 31Personal creative works, donating, 342Personal exemptions, 461–474

citizen and resident tests for dependents, 472and joint returns by dependents, 472number of, 462–463phaseout of, 473–474qualifying children, 463–465, 471–472qualifying relatives, 465–467, 467–470,

470–471and Social Security numbers of

dependents, 473spouse, 463, 472

Personal injury settlements, 383–389, 434. See also Legal damages

Personal interest, 789Personal property, 148–149, 263, 735Personal rollovers (retirement plan), 169,

171–172personal rollover, 169

Personal service corporations, 282–283Personal tax credits, 495–515

adoption credit, 506–507child and dependent care credit, 498–500child tax credit, 497–498earned income credit, 503–505health coverage credit, 513mortgage interest credit, 513overview, 496for permanently disabled, 619for plug-in electric vehicles, 514–515premium tax credit, 509–512residential energy credits, 514saver’s credit, 508

Personal usewith business use, 548–549capital losses on assets with, 102losses on, 549vehicles with, 722, 732

Personal-use days for residence, 252–253Personal-use property

and imputed interest rule, 99with business use, 706, 738–739losses on, 409–410, 412

rental of, 147, 251–252, 252–253, 253–255, 263

with business use, 727Personal-use test for residence, 251–252Phaseout of IRA Deduction Limit for 2017

Worksheet, 205Phaseout of Roth IRA Contribution Limit for

2017 Worksheet, 233–234Phaseout Range for Deduction Limit on 2017

Returns, 205Phaseout rules. See Deduction phaseout rulesPhaseout threshold, 203Physical presence test, 634Pilots, 442Placed in service (term), 789Pledge rule, 135Plug-in electric vehicles, 514–515, 691“Points”, 364, 365, 546, 789Ponzi schemes, 407Portability election (estate tax), 659–660Portfolio income, 273Postmarks, for returns, 753Pre-1936 buildings, 574Pre-1974 participation in retirement

plans, 166–168Premature distributions, 789Premium tax credit, 316, 509–512, 583Prepaid expenses, 328, 595Prepaid interest, 369–370Pre-tax retirement contributions, direct rollover

of, 170Primary purpose determination, educational

program, 44Principal residence, 364, 374, 548, 789Principal residence exclusion, 538–539,

539–542, 542–543, 543–546Principal residence indebtedness, 300Principals (school), 424Prior law deferral rules, 124Prior law rollover rules, 547Private activity bonds, 92, 486Private letter ruling, 789Private non-operating foundations, 339Private schools, 390Prizes, as income, 289, 317Probate estate, 789Production activities, 690Production costs, 257Products, discounts on, 74Product testing, 65Professional gamblers, 290Professionals, deductions for, 676–677Professional sports players, 442Profi t presumption, 679Profi ts. See also Gross profi t

dividends of, 78–79in partnerships, 302–303


Index

of property sales, 108–109, 550from sole proprietorships and

partnerships, 630Profi t-sharing plans, 59–60, 789Promissory notes, 130Property. See also specifi c types, e.g.:

Community property; See also Tax-free exchanges of property

adjusted basis of, 130–131alimony and transfer of, 640basis of, 122cost of, 122for depreciation deductions, 704–705dividends paid as, 79–80free use of, 333listed, 712–714overvaluing, 769ownership of separate, 15pay received as, 39–40pledges of other, as at-risk investment, 285repossession of, 578–579returns of, to creditors, 575–576

Property management, 430Property sales, 101–145. See also Business

property sales; See also Residence salesadjusted basis of property, 130–131amount realized for, 122boot for like-kind exchanges of property, 141capital losses on, 107, 108–109carryovers, 107classifi cation and taxation of, 102–104contingent payment sales, 137–138cost of property, 122deferred payment sales, 139and escrow, 138–139Form 8949 and Schedule D entries for, 111–

118gains on, 104–107, 109–110, 121–122general rules, 102holding periods, 104–107, 119–120of inherited property, 126–127installment sales, 131–132, 132–135,

136–137, 139–140, 140–141losses on, 121–122over $150,000 plus $5 million in debt, 141–

145as passive activities, 273, 283–284real estate sales, 375–376of real property, 572restricted, 51and rollovers of retirement plans, 173of subdivided land, 570–571to third parties, 580unadjusted basis of property, 122–124,

124–126, 127–130, 130Proprietorships, 630, 737

Protecting Americans from Tax Hikes Act of 2015 (PATH Act), 232, 373

Proving a Casualty Loss, 406–420Provisional income, 611, 789PTPs. See Publicly traded partnershipsPublic Health Service, 540, 617, 623Public Health Service Act, 300Publicly traded partnerships (PTPs), 277Publicly traded securities, 110, 131Public safety employees, 47Puerto Rico, 332, 636, 742Punitive damages, 298Purchased stock rights, 555Purchase money mortgages, 579–580Purchase price adjustment, 301Puts, 560

QQCD. See Qualifi ed charitable distributionQDRO. See Qualifi ed domestic relations orderQEAAs. See Qualifi ed exchange

accommodation arrangementsQJV. See Qualifi ed joint ventureQSB stock. See Qualifi ed small business stockQSEHRAs. See Qualifi ed small employer

health reimbursement arrangementsQTPs. See Qualifi ed tuition programsQualifi ed charitable distribution (QCD), 208,

209Qualifi ed charitable organizations, 789Qualifi ed conservation contributions, 344Qualifi ed disability expenses, 620Qualifi ed disclaimer, 226Qualifi ed distributions, IRA, 184, 239Qualifi ed dividends, 479–480, 582, 789Qualifi ed Dividends and Capital Gain Tax

Worksheet, 12, 102, 104, 105, 106, 111, 584

Qualifi ed domestic relations orders (QDROs), 165, 173, 175–176, 215, 789

Qualifi ed education expenses, 596, 600, 602, 603

Qualifi ed employer retirement plans, 522Qualifi ed exchange accomodation arrangements

(QEAAs), 154–155Qualifi ed improvements, 719Qualifi ed intermediary, default by, 153Qualifi ed joint interest rule, 128, 129–130Qualifi ed joint venture (QJV), 244, 742Qualifi ed longevity annuity contracts

(QLACs), 219Qualifi ed plan (term), 789. See also Qualifi ed

retirement plansQualifi ed retirement plans

choosing, 694–702

deductible contributions, 695–698distributions, 619, 699

Qualifi ed small business (QSB) stock, 110Qualifi ed small employer health reimbursement

arrangements (QSEHRAs), 36, 58Qualifi ed tuition programs (QTPs), 593–595,

602, 655, 789Qualifying children, 463–465, 471–472,

504–505, 505Qualifying relatives (personal

exemptions), 465–467, 467–470, 470–471

Qualifying testsfor adoption credit, 506and care of qualifying persons, 499–500for Armed Forces personnel in combat

zones, 624for child and dependent care credit, 498–500for EIC, 503–505for head of household, 24–25for innocent spouse relief, 17for reduced maximum exclusion, 544for resident aliens, 29for U.S. savings bond tuition

programs, 592–593for work-related costs of education, 605–607

Qualifying widows or widowers, 23, 789

RRabbi trusts, 42Railroad Retirement benefi ts, 521, 610, 617Railroad Retirement Tax Act (RRTA), 521Ransom, 408Rate Table for Self-Employed, 695, 697Ready availability tests, 64Real estate

business, 301, 576charitable donations of, 344–345donation limit for, 351exchanges of U.S. and foreign country’s, 148fair market value deduction for, 337holding periods for, 120losses, 575. See also Losses, on residence

salesrecaputure of depreciation for, 735–736Section 1250 gain on, 107in service after 1986, 714in service between 1980 and 1987, 717tax credits for real estate activities, 272types of ventures, 569–570

Real estate investment trusts (REITs), 78, 569, 583, 789

Real estate mortgage investment companies (REMICs), 88, 569–570

Real estate professionals, 266–268, 789Real estate taxes, 245, 253, 374, 375–376Real property, 263, 572, 789


Index

Reasonable cause exception, 350Recapture

of American Opportunity credit, 597of business vehicle deductions, 732–733for computers/listed property, 713of deduction for appreciated tangible personal

property, 338of deductions for fractional interests, 344of depreciation, 133, 147, 735–736, 786for drops in alimony, 644–645for exchanges/involuntary conversions, 735of federal subsidies, 539fi rst-year expensing and, 133, 707, 736of Lifetime Learning credit, 597of MACRS depreciation, 724of mortgage subsidies, 513of net ordinary losses, 738of tuition and fees deduction, 603

Receipts, 670–671, 672–676. See also Constructive receipts; See also Gross receipts

Recertifi cation, for EIC, 503Recharacterizations, of IRAs, 214, 236,

237–239Recklessness, denial of EIC due to, 504Recognized gain, 789Recognized loss, 789Record date, dividend, 80Recording, of audit examination, 768Recordkeeping

on adjusted basis for property, 548of business use for business vehicles, 733of deductible losses, 413on fair market value of property, 580for fi ling returns, 752for substantiating contributions, 347–348of rental property improvements, 121for Section 1244 stock, 562on self-employed income, 666standard mileage rate and, 721for T&E expense deductions, 454

Recourse debt, 575–576Recovered tax deductions, 295–296Recovery, of tax dispute costs, 773–774Recovery period

for cars, trucks, and vans after, 731for home offi ce, 683MACRS, 707–708, 726straight-line depreciation over, 711

Recovery property, 789Recreational purposes, travel for, 336Recreational vehicles, 682Red Cross personnel, 625Redeemed shares (mutual fund), 585–587Redemptions, interest received from, 84Reduced Maximum Exclusion, 546

Reduced principal residence exclusion, 543–546

Reemployment trade adjustment assistance (RTAA) program, 513

REEP credit. See Residential energy effi cient property credit

Refi nanced loans, 362–363Refi nanced mortgages, 363Refi ners, oil/gas percentage depletion, 259Reforestation expenses, 317Refundable entrance fees, continuing care

facility, 618Refundable tax credits, 497–498, 789Refund claims

interest paid on, 761penalty for excessive, 755, 762quick, 761stating reasons for, 761time limits for, 619, 760–761withholding of refunds by IRS, 762

Refundsdeliquent child support and, 643estimated tax and, 373, 526fi ling to obtain, 4on fi nal returns, 27for disabled combat vets, 47getting, 754–755income and, 292–293

Registration, U.S. savings bond, 96Regular business employees, of self-employed

persons, 649Regular income tax liability. See Tax liabilityRegular tax, 488Regulated futures contracts, 561Rehabilitation of buildings, 574, 716Reimbursements

for casualty/theft losses, 413dependent care credit and, 73, 501foreign earned income as, 630from health and accident plans, 57medical expense deductions and, 383–385moving expense deductions and, 321of moving expenses, 630standard mileage rate and, 721for T&E expenses, 451, 455–456, 456–457,

457–459, 459–460wellness program, 71

Reinvestment plans, 582REITs. See Real estate invesment trustsRelated businesses, daily exemption rate

for, 259Related parties

acquisitions from, 707business expenses owed to, 669capital losses on sales to, 108resale of property by, 108–109tax-free exchanges of property between, 155

Relationship test, 464, 465–467Relatives. See also specifi c types, e.g.: Children

capital losses on sales of property to, 108–109

and daily exemption rate, 259installment sales of property to, 136–137renting residences to, 250–251

Religious beliefs, 473Remainder interest, 344, 538REMICs. See Real estate mortgage investment

companiesRental activities

about, 261–263grouped with business activities, 269loss allowance for, 263–265nonqualifi ying, and rental loss

allowance, 267for real estate professionals, 266–268

Rental days (for residence), 252–253, 253–255Rental losses, 244, 273–274Rental property

14-day/10% test, 251depreciation on, 245, 249home offi ce in, 682improvements to, 121with insubstantial depreciable basis, 276personal use of, 251–252, 252–253,

253–255, 263as rental income, 244residence converted to, 249–250, 263,

549–550safe harbor for like-kind exchange of, 147short-term vacation home rentals, 261

Rental real estate income, 569, 630deductions for, 245–246, 430depreciation on rental property and, 249–

250from multi-unit residences, 248–249personal use and rental of residence, 251–

252, 252–253, 253–255renting residences to relatives, 250–251repair vs. improvements and, 246–248reporting expenses and, 244

Rental use of property, 538, 548, 549Rent, below fair market, 245Rented rooms, 248Reorganizations, 84, 89Repairs, 246–248, 413, 547Repayments, 41, 200, 515Replacement property, identifying, 152Replacement shares, 558Reportable transactions, 768Reporting Mutual Fund Distributions for

2017, 584–589Repossession, 140–141, 299, 575, 578–579Request for Appeals Review. See Form 12203


Index

Request for Taxpayer Advocate Service Assistance. See Form 911

Required minimum distributions (RMDs), 184, 220–223, 228, 237, 789

Resale of property, 108–109, 550, 670Research and experimentation costs, 719Research assistants, 591Reservists, 200, 217, 623, 627Residence interest, 788, 789Residence(s). See also Home; See

also Principal residenceconverting, to rental property, 249–250,

549–550depreciation on rented, 249domiciles vs., 633insurance proceeds for damaged/

destroyed, 402–403personal use of, 251–252, 252–253,

253–255, 263, 548–549, 549rental of, 253, 261, 263reporting changes to, 636vacant, 249

Residence sales, 537–551adjusted basis for home, 547–548gains on, 546–547losses on, 546–547, 549, 549–550loss on temporary rental before, 255–256personal use of home, 548–549, 549principal residence exclusion, 538–539,

539–542, 542–543, 543–546Residence test, 464Residency, 29, 30, 31Resident aliens, 29–31Residential energy effi cient property (REEP)

credits, 514Residential rental property, 789Residents (U.S.), 15, 29–31, 506Resident tests, 472Restaurants, 520, 716Restricted stock, 50–51Restrictive convenants, release of, 574Restrictive test, 448–449, 451Restructuring of mortgage debt, 576–577Retailers, oil/gas percentage depletion for, 259Retail property, improvements to, 716Retirees, 60, 272, 277, 318Retirement

of bonds, 91waiver of estimated tax penalty due to, 525

Retirement advice, 66Retirement benefi ts, 156, 615, 658. See

also Social Security benefi tsRetirement communities, 381Retirement income

401(k) plans, 181–182, 182, 182–183403(b) plans, 185–186

before annuity starting date, 196disability pay, 623distribution of employer stock/

securities, 173–175distributions before age 59½, 177–179on Form 1099-R, 163–164government and exempt organization

deferred pay plans, 186–187lump-sum distributions, 165, 166–168,

168–169from partnerships, 743payouts to benefi ciaries of, 177QDRO distributions of, 175–176required beginning date for, 176–177restrictions on loans from company

plans, 179–181rollovers of retirement plans, 169–170,

170–171, 172–173survivor annuities for spouses, 175withholdings on, 521–522

Retirement plan rolloversby benefi ciaries, 172–173direct rollover, 170–171from employer plan to Roth IRA, 237by nonspouse benefi ciaries, 223once-a-year rollover rule, 214personal rollover, 171–172proceeds from sale of property and, 173from Roth account to Roth IRA, 169, 185by surviving spouses, 229tax-free rollover, 169–170and transfers between traditional IRAs, 212–

215Retirement plans, 181. See also specifi c types

distributions from, 521–522, 623elective deferrals to, 36for self-employed persons, 671loans from, 179–181qualifi ed, 694–695, 695–698, 699, 789rollovers of, 169–170, 170–171, 172–173for self-employed persons, 694–695,

695–698, 699withdrawals from, before annuity starting

date, 196, 627withholdings for, 38

Retirement savers credit. See Saver’s creditReturned wages, 43Return of capital, 789Return of property to creditors, 575–576Revenue Procedure 99-17, 566, 567Revenue Procedure 2001-10, 668Revenue Procedure 2002-28, 668Revenue Procedure 2007-12, 538Revenue Procedure 2009-20, 407Revenue Procedure 2011-38, 160Revenue Procedure 2011-41, 120Revenue Procedure 2012-29, 51

Revenue Procedure 2015-32, 671Revenue Procedure 2016-53, 401Revenue rulings, 789Reverse exchanges, 152, 154–155Reverse mortgage loans, 362Reversionary interest, 344Revocable grantor trusts, 306Revocable trusts, 657, 789Revocation, 629Riots, 408Risk of forfeiture, 50RMDs. See Required minimum distributionsRobert T. Staff ord Disaster Relief and

Emergency Assistance Act, 401Rollovers, 789. See also Retirement plan

rolloversof Coverdell ESAs, 601–602of gain from QSP, 109of gain on residence sales, 547of QTP distributions, 595Section 529 plan, 595to SSBICs, 110

Roth accounts, 169, 184, 185Roth IRAs, 183–185, 789

advantages of, 232as alternative to traditional IRAs, 207annual contributions to, 232–235contributions to, after age 70½, 200contributions to traditional and, 233converting traditional IRAs and, 163,

236–237deductible IRA vs., 204direct rollover to, 170distributions to benefi ciaries from, 241–242myRA accounts, 242and once-a-year rollover rule, 214penalty for excess contributions to, 208qualifi ed distributions from, 239–241recharacterizations, 236, 237–239rollovers from 403(b) plan to, 186rollovers from Roth accounts to, 169, 185

Royalty income, 257, 258, 258–259, 259, 430, 630

RRTA. See Railroad Retirement Tax ActRTAA program. See Reemployment trade

adjustment assistance programRural Housing Service, 361

SSafe harbor, 147, 153, 668, 690

de minimis, 247for estimated tax payments, 526for Ponzi scheme investors, 407for slot machine players, 291for small taxpayers, 247

Safety awards, 453


Index

Sailing permits, 31Salary or wage income (compensation), 35–51

assignment of pay, 38for children and spouse(s), 521commissions, 40constructive receipt rule, 39deferred, 181, 182, 786diff erential wages, 517, 622disability pensions, 46–47and domestic production activities

deduction, 690educational benefi ts for employees’

children, 44–45employee leave-sharing plans, 39on Form W-2, 36–51fringe benefi ts excluded from taxable, 650gifts from employers, 39golden parachute arrangements, 39guaranteed salaries, 302life insurance benefi ts, 43–44nonqualifi ed deferred compensation

plans, 41–42nurses’ wages as medical expense, 391–392paid by parents to children, 26pay received in property, 39–40for personal services, 273as rental deductions, 245restricted stock, 50–51self-employed income and, 671self-employment tax and, 745sick pay, 45stock appreciation rights, 47–48stock options, 48–50strike and lockout benefi ts, 41taxable alimony as, 200taxable, IRA contributions based on, 199unemployment compensation, 40–41and waiver of executors’/trustees’

commissions, 43withholdings for retirement plans, 38withholdings on, 517–518, 518–519,

530–531workers’ compensation, 45–46

Salary-reduction SEPs, 36, 230Sales. See also specifi c types of sales

of appreciated fi nancial positions, 560of business interests, 283–284of ISOs, 48of bonds, 83–84, 91of life insurance policies, 308–309of options, 573on Schedule C, 672–676short sales of stock, 555–557of stock dividends, 554

Sales taxes, 373–374Salvage value, 790Same-sex marriage, recognition of, 10

Samoa, 636SARs. See Stock appreciation rightsSaver’s credit, 508, 789Saver’s Credit Based on AGI for 2017, 508Savings Bond Maturity Dates, 564–567Savings certifi cates, 82, 85Schedule 1, 77Schedule A, 12, 23, 43, 70, 86, 88, 126, 127,

211, 240, 248, 252, 254, 274, 289, 298, 305, 315, 322, 324, 325, 328, 331, 337, 379, 396, 404, 421, 422, 424, 430, 431, 435, 455, 456, 484, 485, 491, 583, 584, 585, 591, 595, 604, 605, 624, 627, 676, 678, 684, 688, 723, 724, 751, 769, 779

Schedule B, 77, 80, 82, 83, 84, 86, 87, 95, 305, 584, 770, 780

Schedule C, 39, 243, 256, 257, 290, 298, 314, 372, 377, 432, 435, 451, 455, 506, 565, 604, 605, 665, 666, 671–676, 679, 684, 694, 695, 697, 705, 720, 723, 724, 733, 734, 742, 781

Schedule C-EZ, 455, 665, 666, 671, 695, 720, 742

Schedule D, 77, 79, 81, 91, 93, 102, 104, 106, 107, 111–118, 120, 122–145, 131, 147, 166–168, 278, 305, 306, 314, 403, 420, 479, 548, 549, 565, 566, 575, 584, 585, 586, 684, 734, 738, 783

Schedule D Tax Worksheet, 12, 105, 106, 111, 584, 735

Schedule E, 243, 244, 245, 248, 251, 254, 256, 260, 263, 266, 271, 274, 279, 302, 305, 306, 314, 570, 705, 742, 744

Schedule EIC, 503Schedule F, 279, 432, 666, 667, 695, 697,

734, 742Schedule H, 649–650Schedule J, 480Schedule K-1, 78, 107, 277, 302, 305, 306,

316, 690, 694, 742Schedule Q, 570Schedule R, 616Schedule SE, 39, 316, 377, 505, 741, 742,

745, 746Scheduling, audit, 767Scholarships, 591Schools, 185–186, 390–391S corporations, 790

debt cancellation, 301disposition of, 283dividends from, 78domestic production activities deduction

for, 690fi rst-year expensing for, 706grouping of business activities by, 270rental real estate interests held by, 267

reporting stockholders’ income or loss, 305on Schedule K-1, 302

Second homes, 549. See also Vacation homesSecond lowest cost silver plan (SLCSP), 512Section 1.448-2T, 670Section 71, 640Section 83, 42, 51Section 121, 540Section 127 exclusion, 62Section 179 deduction, 705, 716, 729, 736,

787, 790Section 197, 257, 717–718, 719Section 215, 640Section 263A, 670, 678Section 274(m)(2), 608Section 409A, 37, 41–42, 48, 50Section 444, 303Section 453A, 141Section 453 (l), 132Section 457(b) plans, 186–187Section 457 plans, 790Section 460, 670Section 469(c)(7)(A), 267Section 475(f), 567Section 483, 99–100Section 529 plans, 593, 595, 620, 657Section 1041, 155, 157Section 1045 rollover, 109Section 1202 exclusion, 106, 110Section 1231 assets, 101, 572–573, 736,

737–738, 790Section 1237, 570Section 1244 stock, 104, 562Section 1245 property, 284, 287, 735Section 1250, 12, 102, 105, 107, 548, 584,

735, 790Section 1274, 99–100Section 1341, 43Section 2005(d)(3), 600Securities. See also specifi c types

as deductible contributions, 331donation limit for appreciated, 351holding periods for, 119–120purchase of, with custodial accounts, 657Treasury infl ation-indexed, 87worthless, 142–143year-end sales of, 131

Securities Investor Protection Corporation (SIPC), 407

Security arrangements, 138–139, 152–154Security deposits, 244Self-certifi cation, for 60-day IRA waiver, 213Self-charged interest, 274Self-charged management fees, 274Self-created intangibles, 718Self-directed IRAs, 198


Index

Self-employed income, 665–692. See also Home offi ce

accounting methods for, 668–670business tax credits and, 691deductions, 676–677, 679–680defi ned, 742–743domestic production activities

deduction, 690earned income credit and, 505expenses, 677–678, 679–680legal form of business and, 666Medicare tax on, 530and net operating losses, 686–687reporting, 666–667and reporting of payments/receipts to

IRS, 670–671on Schedule C, 671–676tax reporting year for, 670

Self-Employed or Employee?, 747–748Self-employed persons, 693–702, 790

78-week test for, 320additional Medicare taxes, 740Archer MSA premiums for, 702business-vacation trips by, 445–446determination of employees vs., 747–748health insurance premium deduction

for, 316, 388housing costs of, 633medical plans

Archer MSAs, 702deductible contributions, 700distributions from, 701health savings accounts, 699–700overview of, 694small business health tax credit and, 702with coverage for spouses, 58–60

regular business and household employees of, 649

reporting of payments and receipts by, 670–671

reporting of T&E expenses by, 455retirement plans, 230, 694–695, 695–698,

699Self-employment tax, , 741–748, 647

above-the-line deduction for, 316, 377defi nition of self-employment income, 742–

743determination of employees vs. self-employed

persons for, 747–748for low-income/loss years, 746for partners, 743Schedule E and, 744wages and, 745

Self-insured medical reimbursement plans, 58–60

Self-rental rule, 275Self-support test, 464Seller-fi nanced sales, 96, 99–100

Seller-paid points, 546Sellers, repossession of property by, 578–579Selling expenses, 122–145Selling price, 132, 134, 137, 546Senior citizens, 609–620. See also Social

Security benefi tselderly or disabled tax credit, 616Medicare Part B and Part D premiums, 619tax eff ects of continuing care facilities

for, 618–619tax rules favoring, 610

Separated couple, 499, 788Separate dwelling units, rented rooms vs., 248Separate household rule, 25Separate liability relief, 18–21Separate liability rules, 16Separate residences, married couples with, 543Separate returns, 790

American Opportunity credit and, 595carryovers from, 108community property rules and, 15fi rst-year expensing on, 706itemized deductions for married couples

with, 325–326joint vs., 12–13, 14for married dependents, 472medical expenses, 386Social Security benefi ts on, 611standard deduction restriction, 12student loan interest deduction and, 603

Separate structure, home offi ce in, 682Separation. See Legal separationSEPs. See Simplifi ed employee pension plansSeries E bonds, 95, 563Series EE bonds, 94, 563–564, 591–593Series H bonds, 95Series HH bonds, 95, 563–564Series I bonds, 94, 564Service Academy appointees, 600Service income, NAE for, 670Services

discounts on, 74donation of, 332for no additional cost, 74property obtained for, 123as rental income, 244

Services performed test, 449Settlement fees, 547Settlements, 304, 645Severance pay, 38Sex reassignment surgery, 383Shared-equity fi nancing agreements, 252Shared responsibility tax, 647, 651Shares, fractional, 79Short sales, 555–557, 559, 575, 790Short tax year, 790Short-term gains, 556, 790

Short-term losses, 556, 790Short-term obligations, 90Short-term vacation home rentals, 261Shrubs, damage to, 404–405Sick leave, 46Sickness, military service and, 47Sick pay, 36, 45Sideline businesses, 678–679, 681, 685–686,

694Signatures, 14–15, 23, 27Signifi cant participation, 275SIMPLE IRAs, 169, 699

converting to Roth IRAs, 237distributions from, 232elective salary deferrals to, 36eligibility for, 230–231employer contributions, 231rollovers to, 232setting up, 199withholdings for, 38

Simplifi ed employee pension (SEP) plans, 790basics of, 229–230claiming deductions for, 698converting to Roth IRAs, 237deductible contributions to, 695–698elective salary deferrals to, 36qualifying for, 698salary-reduction, 230self-employed persons, 695

Singles penalty, 10Skybox rentals, 452Slot machine players, 291Small business health care tax credit, 691, 702Small business stock, 104, 106, 109–110, 486,

562Small cash transactions, 671Small employer credit for retirement plan

startup, 694Small estates, portability election extension

for, 659Small tools, job expenses for, 429Smoking cessation programs, 380Social Security and Medicare (FICA) taxes

for children, 26dependent care credit and, 500estimated tax payments and, 526for household employees, 648–649for former employees, 60on Form W-2, 36for S corporation stockholders, 305for household employees, 499for low income earners, 518self-employment tax and, 745on tips, 37, 38, 519, 520withholdings for, 36withholdings on, 520–521

Social Security benefi ts


Index

computing taxable portion of, 611–614disability, 47, 619earnings and tax on, 616and IRA deductions, 205legal costs for claiming, 434lump-sum payment election, 614–615net, 611retirement benefi ts, 615taxable types, 610–611workers’ compensation and, 46

Social Security numbers (SSNs)for child’s tax return, 25of dependents, 462, 473of employees, 648for educational tax benefi ts, 597for personal tax credits, 496, 503of spouse, 463, 472

Software, computer, 713, 718–719Sole benefi ciary(-ies), 229Source income, expatriation tax on, 32Special allocations, 303Special foods, 380Special needs adoption, 507Special needs benefi ciaries, 600Specifi c identifi cation method, 588Split-dollar insurance arrangements, 44, 346Sponsorship gifts, 619Sports managers, 442Sports players, 442Spouse(s). See also Former spouses (ex-

spouses)as active plan participant, 202allocating tax liability between, 20Archer MSA contributions for, 702of Armed Forces personnel, 625as students, 500basis of property received from, 123in combat zone, 14death of, 16, 22–23, 128, 129–130, 542,

642–643disabled, 500elderly or disabled tax credit for, 617–618failure to fi le by, 14gifts to, 655health plan coverage for, 58–60innocent spouse rules, 14, 15, 17IRAs for, 200legal fees of, 645and lump-sum averaging, 166, 168lump-sum retirement distributions for, 165medical expenses of, 385–386noncitizen, 661nonresident alien spouse election, 15nonworking or low-earning, 201, 233personal exemptions for, 463, 472QJV fi led by, 244and RMD, 220

Social Security numbers for, 463surviving, 23, 175, 229, 318, 635suspicious tax reporting by, 12tax-free exchanges of property between, 155–

157T&E expenses of, 447–448, 450, 456transfer of U.S. savings bonds to, 96transfers of IRAs to, 215withholdings on wages paid to, 521

SSBIC, rollover to, 110Standard deduction, 790

and state tax refunds, 293basic, 324for blind persons, 324, 326claiming, 324–325for dependents, 327itemized deduction vs., 322for persons over 65, 324, 326rules and limitations, 323–329on separate returns, 12

Standard Deduction for Dependents in 2017, 327–329

Standard Deduction of 65 or Older or Blind, 326–329

Standard mileage rate, 721–722, 790Startup costs, 679, 694State bonuses, for Armed Forces

personnel, 623State government, donations to, 332State Housing Finance Agency (State

HFA), 355, 374State law, treatment of home mortgage debt as

nonrecourse fi nancing under, 299Statement of Person Claiming Refund Due a

Deceased Taxpayer. See Form 1310State offi cials, expenses of, 315State public safety offi cers, fallen, 45State short-term disability payments, 46State taxes

for Armed Forces personnel, 622deductions for, 373on Form W-2, 37income and refunds of, 292–293refund off set for, 762unemployment, 650

State unemployment tax, 650Statute of limitations

for additional taxes, 765for disability determinations, 623for gift valuation, 656

Statutory employees, 37, 672, 743, 790Stephen Beck Jr. Achieving a Better Life

Experience Act, 620Stock. See also specifi c types

devaluation due to corporate misconduct, 407

divorce-related redemptions of, 156

donation of, 339earmarking of stock lots, 553–554held by broker in street name, 80redemption of, 104sales of stock dividends, 554short sales, 555–557stock rights of investors, 554–555stripped coupon bonds and, 90–91tax-free exchanges of, 158theft losses, 406–408wash sales for, 557–559worthless securities, 142–143

Stock appreciation rights (SARs), 47–48Stock dividends, 79, 80, 554, 790Stockholders, 305, 706Stock lots, 119, 553–554Stock options, 48–50, 559, 787, 790. See

also Incentive stock options (ISOs)Stock rights, 79, 119, 554–555Stock splits, 79Stock subscriptions, holding period for, 119Storage of inventory, in home, 682Straddle losses, 561Straddles, 790Straight-line depreciation, 790

of cars, trucks, and vans, 729–730deductions for, 711–712and MACRS rate, 726for real estate, 717

Straight-Line Half-Year Convention, 729Straight-Line Mid-Quarter Convention, 730–

733Streamlined determinations of equitable

relief, 22Strike benefi ts, 41Stripped coupon bonds, 88, 90–91Stripped coupons, reporting OID for, 88Stripped tax-exempt obligations, 93Student loan cancellation, 299Student loan interest, 603–604Students, 29, 467, 500, 596Student test, 464Subdivided land, 130, 570–571Subscriptions, 65, 424–425Substantially equal payments, 178“Substantially identical” securities, 558Substantial risk of forfeiture, 50Sudden event test, 397–399Supplemental unemployment benefi ts, 41, 43Supplements, nutritional, 380Supplier-based intangibles, 718Support, 333, 336, 387, 642Support personnel (Armed Forces), 625Support test for qualifying relatives, 467–470Surrender, of life insurance policies, 308–309Surviving spouses, 23, 128, 172, 175, 177,

318, 635


Index

Surviving tenants, 127–130Survivor annuities for spouses, 175Suspended losses, 279–281, 283Suspended tax credits, 272, 281–282SUVs, depreciation on, 724–725. See also Car

and truck expensesSweepstakes winnings, 289Swimming pools, 393Syndicated conservation easement

promotions, 344

TTAA benefi ts. See Trade Adjustment Assistance

benefi tsTable of MACRS Depreciation Rates, 710Tangible personal property, 337, 338, 704,

790Taxable income, 790. See also Salary or wage

income (compensation)Taxable Income Brackets for 2017, 12Taxable income limit, 258, 259Taxable interest, 92Taxable Premiums for Group-Term Insurance

Coverage Over $50,000, 61–74Taxable Social Security benefi ts, 611–614Tax advice, 675Tax assessments, 375Tax attributes, 790Tax benefi ts, 12–13, 20Tax brackets, 11Tax Computation Worksheet, 12, 23, 479,

753, 797Tax Court

actual knowledge test in, 18appeals to, 17, 21, 22

Tax credits. See also Personal tax credits; See also specifi c credits; See also specifi c types

against AMT, 488erroneous, 20for gift tax, 656for investors in mutual funds, 583–585for investors in real estate, 574–575for passive activities, 272real estate allowance for, 265refundable, 789regular income tax liability and, 480from regular tax, 488for returned wages, 43

Tax deferral, 790Taxes paid, allocating vehicle expenses for, 723Tax-exempt bond funds, 583Tax-exempt bonds, 86Tax-exempt income, mutual fund, 367Tax-exempt interest, 82, 92, 486Tax-exempt obligations, debts for, 367

Tax-exempt organizations, 185–186, 561–562Tax-free distributions, 184Tax-free exchanges of property, 146–160

basis of property received in, 123between related parties, 155between spouses and ex-spouses, 155–157boot, 149–151business property in, 737closely-held corporations and, 158–159exchanges of coins and bullion, 159exchanges of insurance policies, 159–160exchanges of stock in same corporation, 158by investors in real estate, 571–572joint ownership interests and, 158like-kind property, 147–148personal property held for investment, 148–

149QEAAs for reverse exchanges, 154–155time limits and security arrangement for

deferred exchanges, 152–154Tax-free pay, 624–625Tax-free rollovers (retirement plan), 169–170Tax-free rule of common stock, 79Tax-free stock rights, 119Tax Guide for Individuals With Income From

U.S. Possessions. See IRS Publication 570

Tax home, 29–31, 441, 442, 443–444, 790Tax identifi cation number, 462, 666, 790Tax liability, 477–480

allocating, between spouses, 20of children, 490–491and child tax credit, 497elderly or disabled tax credit and, 618equitable relief for, 21–22for farmers and fi shermen, 480from Foreign Earned Income Tax

Worksheet, 480from Tax Computation Worksheet, 479and innocent spouse rules, 14, 16Lifetime Learning credit and, 599mortgage interest credit and, 513with net capital gain or qualifi ed

dividends, 479–480saver’s credit and, 509separate liability relief, 16, 18–21of surviving spouse, 23taxable income and, 478transfer of, 159understatement of, 768using Tax Table, 478

Tax matters partner (TMP), 304Taxpayer Guide to Identity Th eft, 757Taxpayer identifi cation number (TIN), 597Tax payment deductions, 371–377

and assessments, 375automobile license fees, 376

buying/selling real estate and, 375–376deductible taxes, 372foreign taxes, 377real estate taxes, 374and taxes as business expenses, 377and tenants’ payment of taxes, 375

Tax payments, 626–627, 755–756Tax preference items, 790Tax preparation costs, 431–432, 675Tax rates, 11–12, 28, 77–78, 648Tax Relief, Unemployment Insurance

Reauthorization, and Job Creation Act of 2010, 126

Tax return preparation costs, 245Tax returns

children’s investment income on parents’, 493–494

copies of, 752corrections to prior, 704depreciation deductions on, 705fi ling basics, 1–8identifying care provider on, 499inaccurate, 768–770mailing, 753name and social security number of spouse

on, 472recapture for alimony on, 644reporting foreign income on, 638

Tax-sheltered annuities, 790Tax-shelter farm activity, 487Tax Table, 12, 478, 753, 785Tax treaties, 30, 637Tax year, 670, 790Teachers, 29, 424, 605Teaching assistants, 591TEFRA audit rules, 304Telephones, 430, 754, 755. See also Cell

phonesTemporary assignments, 436, 443–444Temporary property rental, 255–256Tenancy by the entireties, 790Tenancy in common, 158, 790Tenants, 127–130, 244, 375, 788Terminally ill persons, 395Termite damage, 398Terrorist attacks, 47Terroristic action, death in, 626Testamentary trusts, 790Th eft losses

deductible, 406–408in excess of income, 415fl oors for personal-use property losses, 409–

410on Form 4864, 410–412insurance reimbursements for, 413nondeductible, 408–409


Index

for property with personal and business use, 412

proving, 408repairs and, 413and Section 1231 assets, 738

Th ird homes, mortgage interest on, 355Th ird parties, 157, 580, 596, 642Th reshold conditions for divorced/separated

parents, 471Th reshold conditions for equitable relief, 21Th rift Savings Plan (TSP), 186Tickets

athletic, 334, 347, 451benefi t, 333

Tie-breaker rules, 465Time limits, 152–154, 752Time test for foreign earned income, 633TIN. See See Taxpayer identifi cation numberTips, 36, 37, 38, 519–520TIPS. See Treasury infl ation-protected

securitiesTitle issues/disputes, 433TMP. See Tax matters partnerToken items, 334“Too good to be true” test, 769Top Hat plans. See Section 457(b) plansTotal blindness, 326Town government, donations to, 332Trade Act (1974), 41Trade Adjustment Assistance (TAA)

benefi ts, 513Trade-ins, 732, 739Trademarks, 717Trade names, 717Traders, 564–565, 566–567, 672, 743Traditional IRAs

active participation in, 202–205, 205–206contributions to, 199–200, 200–202,

206–207, 233converting Roth IRAs and, 163, 236–237distributions from, 208–210, 210–211,

219–223inherited, 223–229penalty for withdrawals before age

59½, 215–219recharacterizations, 236starting, 198–199transfers between, 212–215

Trainees, exempt-person exception for, 29Training exercises, Armed Forces, 626Transfers

of Coverdell ESA assets, 601–602of employer plan benefi ts, 215between IRAs, 212–215of IRAs, 56of mortgaged real estate, 580of partnership interest, 303

of property, 640Section 83, 42separate liability relief and, 20

Transfers in trust, 156Transfer taxes, 373Transit passes, 63–65Transportation benefi ts, 63–65Transportation costs, 427, 607–608Transportation industry workers, 452Travel

as education expense, 608to National Guard and Reserve

meetings, 627and payment extensions, 754

Travel allowance, on Form W-2, 36Travel and entertainment expense

deductions, 435–46050% limit on, 448business gifts, 453–454for business trips, 441–442, 447–448business-vacation trips, 445–446commuting expenses, 436–437for conventions, 446–447, 448entertainment costs, 449, 451–452meal costs, 437–439, 439–440, 449,

451–452proving, 454–455record-keeping requirements, 454reimbursements for, 455–456, 456–457,

457–459, 459–460reporting of, 455rules for, 436and tax home, 442, 443–444

Travel expensesdeductions for Armed Forces Reservists/

National Guard members, 315investment-related, 431for job search, 427medical expense deductions for, 388–390for recreational purposes, 336as rental deductions, 245repayment of disallowed, 43as work-related costs of education, 607–608

Travel restrictions, income from countries with, 631

Treasury bills, 93Treasury Department, 355, 374TreasuryDirect accounts, 564Treasury infl ation-indexed securities, 87Treasury infl ation-protected securities

(TIPS), 93Trees, damage to, 398, 404–405Trustees, waiver of commissions by, 43Trusts, 306, 790. See also specifi c types

additional Medicare taxes on, 534basis of property received by, 124charitable donations through, 346

deductible donations to, 331dividends from, 78gifts of income interests in, 346gift tax and, 657–658as IRA benefi ciaries, 227on Schedule K-1, 302transfer of U.S. savings bonds to, 96transfers of mortgaged property to, 156

TSP. See Th rift Savings PlanTuition, 62–63, 179, 315, 333, 591–593,

602–603Two-year resale rule, 136Two-year rule, 155

UUnadjusted basis of property, 122–124,

126–127, 130Unauthorized collection lawsuits, 774Underpayments (tax), 524, 757Underpriced award items, 67Understanding Your Form W-2 for 2017

Wages and Tips, 36–51Unearned commissions, 40Unemployed persons, 500Unemployment benefi ts, 40–41, 43, 317Unemployment taxes

dependent care credit and, 500for housekeepers, 499

Unforeseen circumstances, sales due to, 545Unifi ed Estate and Gift Tax Schedule for

2017, 660–661Uniform Lifetime Table, 220, 221Uniforms, 425–426, 627Uniform Transfers to Minors Act, 83, 289,

657Union costs, 425United States Estate and Generation-Skipping

Transfer Tax Return. See Form 706Unmarried co-owners of home, 357Unmarried head of household, 12–13, 24Unmarried joint tenants, 129Unrecaptured Section 1250 gain, 790Unrecaptured Section 1250 Gain

Worksheet, 107, 735Unreimbursed expenses, 335–336, 455Unused tax credits, 295Useful life, 704, 790Use-it-or-lose-it deadline, 72Use tests, 539–542U.S. Military Academy, 600U.S. Olympic Committee, 289, 317U.S. savings bonds, 94–95, 95–96, 156, 340U.S. savings bond tuition plans, 591–593U.S. Tax Guide for Aliens. See IRS Publication

519


Index

VVA. See Veterans AdministrationVacant land, 538Vacant residences, 249Vacation homes, 251–252, 344, 549Vacations, 445–446Vans, depreciation on, 724–725. See also Car

and truck expensesVan transportation, 64Vehicle loans, 721, 723Vehicles. See also Automobiles

business, 732, 733. See also Car and truck expenses

charitable donations of, 341Vesting, 51Veterans, 331, 623, 761Veterans Administration (VA), 47, 361, 617Virgin Islands, 636VISTA volunteers, 69Vitamins, 380Voluntary conveyances, 299, 575, 579Voluntary interest payments, 603Volunteers, 69, 335–336, 350

WW-2G, 520Wage 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, 525

Warrants, 558Wash sales, 107, 120, 557–559, 566, 585, 790Weekends, business-vacation trips on, 446Weight-reduction programs, 380Wellness programs, 71What’s New for 2018, xxv–xxviiWhat You Need To Substantiate Your

Donations, 349–353Whistleblower awards, 317Who Claims the Deduction for Real Estate

Taxes?, 374–377Widows or widowers. See Qualifying widows

or widowersWills, contesting, 433Winnings, 289, 289–291, 520Withdrawals

from 401(k) plans, 182–183of nondeductible IRA contributions, 207premature, 84–85by reservists, 627from Roth IRAs, penalties on, 241saver’s credit and, 508

Withholdings, 516–522, 633, 790additional Medicare taxes and, 530, 531for Armed Forces personnel, 622backup, 522for children, 26and child tax credit, 497to cover prior tax underpayments, 524estimated tax and, 517FICA, 520–521fi ling for refund of, 4for Armed Forces personnel, 47on Form W-2, 36on gambling winnings, 520on government payments, 519

for household employees, 649for housekeepers, 499–500on late-fi led original returns, 760–761on lump-sum distributions from retirement

plans, 165and retirement distributions, 521–522for retirement plans, 38on Social Security benefi ts, 610on tips, 519–520on wages, 517–518, 518–519, 622

Work camps, 636Work clothes, 425–426Workers abroad, 635Workers’ compensation, 45–46, 610, 619Workforce, amortization of, 718Working condition fringe benefi ts, 65Working interests, in oil and gas wells, 277“Workouts,” mortgage loan, 299Work-related costs of education, 604–605,

605–607Worthless securities, 142–143Wrongful death actions, 433Wrongful termination, 297

YYear-end benefi ts, 63Year-end dividends, 81, 583Year-end donations, 331Year-end purchases, 707Year-end sales, 120, 131Year-end securities transactions, 553

ZZero coupon bond discount, 91

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