Page 222 - Individual Forms & Instructions Guide

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b. For services rendered as an em- Basis and Recordkeeping on Form 1099-DIV as ordinary divi-
ployee, or dends.
Basis is the amount of your investment
c. From the sale of stock in trade or in property for tax purposes. The basis Enter on Schedule D, line 13, the to-
other property included in inventory or of property you buy is usually its cost. tal capital gain distributions paid to you
held mainly for sale to customers. There are special rules for certain kinds during the year, regardless of how long
3. Depreciable property used in your of property, such as inherited property. you held your investment. This amount
trade or business, even if it is fully de- You need to know your basis to figure is shown in box 2a of Form 1099-DIV.
preciated. any gain or loss on the sale or other dis- If there is an amount in box 2b, in-
4. Real estate used in your trade or position of the property. You must keep clude that amount on line 11 of the Un-
business. accurate records that show the basis and, recaptured Section 1250 Gain Work-
if applicable, adjusted basis of your
5. A patent, invention, model, or de- property. Your records should show the sheet in these instructions if you com-
sign (whether or not patented); a secret purchase price, including commissions; plete line 19 of Schedule D.
formula or process; a copyright; a liter- increases to basis, such as the cost of If there is an amount in box 2c, see
ary, musical, or artistic composition; a improvements; and decreases to basis, Exclusion of Gain on Qualified Small
letter or memorandum; or similar prop- such as depreciation, nondividend distri- Business (QSB) Stock, later.
erty that is:
butions on stock, and stock splits.
a. Created by your personal efforts; If there is an amount in box 2d, in-
If you received a Schedule A to Form
b. Prepared or produced for you (in 8971 from an executor of an estate or clude that amount on line 4 of the 28%
Rate Gain Worksheet in these instruc-
the case of a letter, memorandum, or other person required to file an estate tax tions if you complete line 18 of Sched-
similar property); or
return, you may be required to report a ule D.
c. Received under circumstances basis consistent with the estate tax value
(such as by gift) that entitle you to the of the property. If you received capital gain distribu-
basis of the person who created the tions as a nominee (that is, they were
property or for whom the property was For more information on consistent paid to you but actually belong to some-
prepared or produced. See section basis reporting and basis generally, see one else), report on Schedule D, line 13,
1221(a)(3). Column (e)—Cost or Other Basis in the only the amount that belongs to you. At-
Instructions for Form 8949, and the fol- tach a statement showing the full
But see the TIP about certain musical lowing publications. amount you received and the amount
compositions or copyrights below. • Pub. 551, Basis of Assets. you received as a nominee. See the In-
6. A U.S. Government publication, • Pub. 550, Investment Income and structions for Schedule B to learn about
including the Congressional Record, that Expenses. the requirement for you to file Forms
you received: Short- or Long-Term Gain or 1099-DIV and 1096.
a. From the U.S. Government (or Loss Sale of Your Home
any governmental agency) for an
amount other than the normal sales Report short-term gains or losses in Part You may not need to report the sale or
exchange of your main home. If you
price, or I. Report long-term gains or losses in must report it, complete Form 8949 be-
b. Under circumstances (such as by Part II. The holding period for fore Schedule D.
gift) that entitle you to the basis of short-term capital gains and losses is
someone who received the publication generally 1 year or less. The holding pe- Report the sale or exchange of your
for an amount other than the normal riod for long-term capital gains and los- main home on Form 8949 if:
sales price. ses is generally more than 1 year. How- • You can't exclude all of your gain
ever, beginning in 2018, the long-term from income, or
7. Certain commodities derivative holding period for certain gains with re-
• You received a Form 1099-S for
financial instruments held by a dealer spect to “applicable partnership inter- the sale or exchange.
and connected to the dealer's activities ests” is more than 3 years. See Pub. 541
as a dealer. See section 1221(a)(6) and for more information. Any gain you can't exclude is taxable.
Generally, if you meet the following two
(b)(1). tests, you can exclude up to $250,000 of
8. Certain hedging transactions en- For more information about holding gain. If both you and your spouse meet
tered into in the normal course of your periods, see the Instructions for Form these tests and you file a joint return,
trade or business. See section 1221(a)(7) 8949. you can exclude up to $500,000 of gain
and (b)(2). Capital Gain Distributions (but only one spouse needs to meet the
9. Supplies regularly used in your These distributions are paid by a mutual ownership requirement in Test 1).
trade or business. fund (or other regulated investment Test 1. During the 5-year period ending
You can elect to treat as capital company) or real estate investment trust on the date you sold or exchanged your
TIP assets certain musical composi- from its net realized long-term capital home, you owned it for 2 years or more
tions or copyrights you sold or gains. Distributions of net realized (the ownership requirement) and lived in
exchanged. See Pub. 550 for details. short-term capital gains aren't treated as it as your main home for 2 years or more
capital gains. Instead, they are included (the use requirement).

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