Page 108 - Virtual Currencies

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Fileid: … tions/p544/2022/a/xml/cycle03/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
fair market value of your real property, plus the Partnership Interests Employees of Public Schools and Certain
$15,000 you paid, minus her $70,000 adjusted Tax-Exempt Organizations.
basis in the property). Exchanges of partnership interests do not qual-
However, because this was a like-kind ex- ify as nontaxable exchanges of like-kind prop- Cash received. The nonrecognition and non-
change and you received no cash or erty. This applies regardless of whether they taxable transfer rules do not apply to a rollover
non-like-kind property in the exchange, you rec- are general or limited partnership interests or in which you receive cash proceeds from the
ognize no gain on the exchange. Your basis in are interests in the same partnership or different surrender of one policy and invest the cash in
the real property you received is $80,000 (the partnerships. However, under certain circum- another policy. However, you can treat a cash
$65,000 adjusted basis of the real property stances, the exchange may be treated as a distribution and reinvestment as meeting the
given up plus the $15,000 you paid). Your sister tax-free contribution of property to a partner- nonrecognition or nontaxable transfer rules if all
recognizes gain only to the extent of the money ship. See Pub. 541, Partnerships. of the following requirements are met.
she received, $15,000. Her basis in the real 1. When you receive the distribution, the in-
property she received was $70,000 (the An interest in a partnership that has a valid surance company that issued the policy or
$70,000 adjusted basis of the real property she election to be excluded from being treated as a contract is subject to a rehabilitation, con-
exchanged minus the $15,000 received, plus partnership for federal tax purposes is treated servatorship, insolvency, or similar state
the $15,000 gain recognized). as an interest in each of the partnership assets proceeding.
In 2022, you sold the real property you re- and not as a partnership interest. See Pub. 541.
ceived to a third party for $220,000. Because 2. You withdraw all amounts to which you are
you sold property you acquired from a related entitled or, if less, the maximum permitted
party (your sister) within 2 years after the ex- U.S. Treasury Notes or Bonds under the state proceeding.
change with your sister, that exchange is dis- 3. You reinvest the distribution within 60 days
qualified from nonrecognition treatment and the Certain issues of U.S. Treasury obligations may after receipt in a single policy or contract
deferred gain must be recognized on your 2022 be exchanged for certain other issues designa- issued by another insurance company or
return. On your 2022 tax return, you must report ted by the Secretary of the Treasury with no in a single custodial account.
your $135,000 gain on the 2021 exchange. You gain or loss recognized on the exchange. See
must also report the gain on the 2022 sale on U.S. Treasury Bills, Notes, and Bonds under In- 4. You assign all rights to future distributions
your 2022 return. terest Income in Pub. 550 for more information to the new issuer for investment in the new
Additionally, your sister must report on her on the tax treatment of income from these in- policy or contract if the distribution was re-
2022 tax return $130,000, which is the vestments. stricted by the state proceeding.
$145,000 gain on the 2021 exchange, minus 5. You would have qualified under the nonre-
the $15,000 she recognized in 2021. Her adjus- Insurance Policies and Annuities cognition or nontaxable transfer rules if
ted basis in the property is increased to you had exchanged the affected policy or
$200,000 (its $70,000 basis plus the $130,000 No gain or loss is recognized if you make any of contract for the new one.
gain recognized). the following exchanges, and if the insured or
the annuitant is the same under both contracts. If you do not reinvest all of the cash distribution,
Two-year holding period. The 2-year holding • A life insurance contract for another life in- the rules for partially nontaxable exchanges,
period begins on the date of the last transfer of surance contract, or for an endowment or discussed earlier, apply.
property that was part of the like-kind ex- annuity contract, or for a qualified In addition to meeting these five require-
change. If the holder's risk of loss on the prop- long-term care insurance contract. ments, you must do both of the following.
erty is substantially diminished during any pe- • An endowment contract for an annuity con-
riod, however, that period is not counted toward tract or for another endowment contract 1. Give to the issuer of the new policy or con-
the 2-year holding period. The holder's risk of providing for regular payments beginning tract a statement that includes all of the
loss on the property is substantially diminished at a date not later than the beginning date following information.
by any of the following events. under the old contract, or for a qualified a. The gross amount of cash distributed.
• The holding of a put on the property. long-term insurance contract.
• The holding by another person of a right to • One annuity contract for another annuity b. The amount reinvested.
acquire the property. contract. c. Your investment in the affected policy
• A short sale or other transaction. • An annuity contract for a qualified or contract on the date of the initial
A put is an option that entitles the holder to long-term care insurance contract. cash distribution.
sell property at a specified price at any time be- • A qualified long-term care insurance con- 2. Attach the following items to your timely
fore a specified future date. tract for another qualified long-term insur- filed tax return for the year of the initial dis-
A short sale involves property you generally ance contract. tribution.
do not own. You borrow the property to deliver
to a buyer and, at a later date, buy substantially In addition, if certain conditions are met, no a. A statement titled “Election under
identical property and deliver it to the lender. gain or loss is recognized on the direct transfer Revenue Procedure 92-44” that in-
of a portion of the cash surrender value of an cludes the name of the issuer and the
Exceptions to the rules for related persons. existing annuity contract for a second contract, policy number (or similar identifying
The following kinds of property dispositions are regardless of whether the contracts are issued number) of the new policy or contract.
excluded from these rules. by the same or different companies. For more b. A copy of the statement given to the
• Dispositions due to the death of either rela- information on the applicable contracts, see issuer of the new policy or contract.
ted person. Revenue Procedure 2011-38, 2011-30 I.R.B.
• Involuntary conversions. 66, available at IRS.gov/irb/2011-30_IRB/
• Dispositions if it is established to the satis- ar09.html. Property Exchanged for Stock
faction of the IRS that neither the ex-
change nor the disposition had as a main If you realize a gain on the exchange of an If you transfer property to a corporation in ex-
purpose the avoidance of federal income endowment contract or annuity contract for a change for stock in that corporation (other than
tax. life insurance contract or an exchange of an an- nonqualified preferred stock, described later),
nuity contract for an endowment contract, you and immediately afterward you are in control of
Other Nontaxable Exchanges must recognize the gain. the corporation, the exchange is usually not tax-
able. This rule applies to transfers by one per-
For information on transfers and rollovers of
The following discussions describe other ex- employer-provided annuities, see Pub. 575, son and to transfers by a group. It does not ap-
ply in the following situations.
changes that may not be taxable. Pension and Annuity Income, or Pub. 571, • The corporation is an investment com-
Tax-Sheltered Annuity Plans (403(b) Plans) for pany.
Chapter 1 Gain or Loss Page 17