J.K. Lasser's Your Income Tax 2021, Professional Edition by Lasser, J.K. -- Read -- Imperial Library of Trantor

Index

Cover Table of Contents Title Page Copyright How To Use the Professional Edition of Your Income Tax 2021 What’s New for 2020

Key Tax Numbers for 2020 Tax-Saving Opportunities for 2020 Expiring Provisions

PART 1: Filing Basics

CHAPTER 1: Filing Status

1.1 Which Filing Status Should You Use? 1.2 Tax Rates Based on Filing Status 1.3 Filing Separately Instead of Jointly 1.4 Filing a Joint Return 1.5 Nonresident Alien Spouse 1.6 Community Property Rules 1.7 Innocent Spouse Rules 1.8 Separate Liability Relief for Former Spouses 1.9 Equitable Relief 1.10 Death of Your Spouse in 2020 1.11 Qualifying Widow/Widower Status for 2020 If Your Spouse Died in 2019 or 2018 1.12 Qualifying as Head of Household 1.13 Filing for Your Child 1.14 Return for Deceased 1.15 Return for an Incompetent Person 1.16 How a Nonresident Alien Is Taxed 1.17 How a Resident Alien Is Taxed 1.18 Who Is a Resident Alien? 1.19 Certificate of Tax Compliance for Alien Leaving the United States 1.20 Expatriation Tax

PART 2: Reporting Your Income

CHAPTER 2: Wages, Salary, and Other Compensation

2.1 Salary and Wage Income 2.2 Constructive Receipt of Year-End Paychecks 2.3 Pay Received in Property Is Taxed 2.4 Commissions Taxable When Credited 2.5 Unemployment Benefits 2.6 Strike Pay Benefits and Penalties 2.7 Nonqualified Deferred Compensation 2.8 Did You Return Wages Received in a Prior Year? 2.9 Waiver of Executor’s and Trustee’s Commissions 2.10 Life Insurance Benefits 2.11 Educational Benefits for Employees’ Children 2.12 Sick Pay Is Taxable 2.13 Workers’ Compensation Is Tax Free 2.14 Disability Pay and Pensions 2.15 Stock Appreciation Rights (SARs) 2.16 Stock Options 2.17 Election to Defer Income on Qualified Equity Grants from Private Companies (Section 83(i) election) 2.18 Restricted Stock

CHAPTER 3: Fringe Benefits

3.1 Tax-Free Health and Accident Coverage Under Employer Plans 3.2 Health Savings Accounts (HSAs) and Archer MSAs 3.3 Reimbursements and Other Tax-Free Payments From Employer Health and Accident Plans 3.4 Group-Term Life Insurance Premiums 3.5 Dependent Care Assistance 3.6 Adoption Benefits 3.7 Education Assistance Plans 3.8 Company Cars, Parking, and Transit Passes 3.9 Working Condition Fringe Benefits 3.10 De Minimis Fringe Benefits 3.11 Employer-Provided Retirement Advice 3.12 Employee Achievement Awards 3.13 Employer-Furnished Meals or Lodging 3.14 Minister’s Housing or Housing Allowance 3.15 Cafeteria Plans Provide Choice of Benefits 3.16 Flexible Spending Arrangements 3.17 Company Services Provided at No Additional Cost 3.18 Discounts on Company Products or Services

CHAPTER 4: Dividend and Interest Income

4.1 Reporting Dividends and Mutual Fund Distributions 4.2 Qualified Corporate Dividends Taxed at Favorable Capital Gain Rates 4.3 Dividends From a Partnership, S Corporation, Estate, or Trust 4.4 Real Estate Investment Trust (REIT) Dividends 4.5 Taxable Dividends of Earnings and Profits 4.6 Stock Dividends on Common Stock 4.7 Dividends Paid in Property 4.8 Taxable Stock Dividends 4.9 Who Reports the Dividends 4.10 Year Dividends Are Reported 4.11 Distribution Not Out of Earnings: Return of Capital 4.12 Reporting Interest on Your Tax Return 4.13 Interest on Frozen Accounts Not Taxed 4.14 Interest Income on Debts Owed to You 4.15 Reporting Interest on Bonds Bought or Sold 4.16 Forfeiture of Interest on Premature Withdrawals 4.17 Amortization of Bond Premium 4.18 Discount on Bonds 4.19 Reporting Original Issue Discount on Your Return 4.20 Reporting Income on Market Discount Bonds 4.21 Discount on Short-Term Obligations 4.22 Stripped Coupon Bonds and Stock 4.23 Sale or Retirement of Bonds and Notes 4.24 State and City Interest Generally Tax Exempt 4.25 Taxable State and City Interest 4.26 Tax-Exempt Bonds Bought at a Discount 4.27 Treasury Bills, Notes, and Bonds 4.28 Interest on United States Savings Bonds 4.29 Deferring United States Savings Bond Interest 4.30 Minimum Interest Rules 4.31 Interest-Free or Below-Market-Interest Loans 4.32 Minimum Interest on Seller-Financed Sales

CHAPTER 5: Reporting Property Sales

5.1 General Tax Rules for Property Sales 5.2 How Property Sales Are Classified and Taxed 5.3 Capital Gains Rates and Holding Periods 5.4 Capital Losses and Carryovers 5.5 Capital Losses of Married Couples 5.6 Losses May Be Disallowed on Sales to Related Persons 5.7 Special Treatment of Gain on Sale of Small Business Stock or Qualified Opportunity Zone Investment 5.8 Reporting Capital Asset Sales on Form 8949 and on Schedule D 5.9 Counting the Months in Your Holding Period 5.10 Holding Period for Securities 5.11 Holding Period for Real Estate 5.12 Holding Period: Gifts, Inheritances, and Other Property 5.13 Calculating Gain or Loss 5.14 Amount Realized Is the Total Selling Price 5.15 Finding Your Cost 5.16 Unadjusted Basis of Your Property 5.17 Basis of Property You Inherited or Received as a Gift 5.18 Joint Tenancy Basis Rules for Surviving Tenants 5.19 Allocating Cost Among Several Assets 5.20 How To Find Adjusted Basis 5.21 Tax Advantage of Installment Sales 5.22 Figuring the Taxable Part of Installment Payments 5.23 Electing Not To Report on the Installment Method 5.24 Restriction on Installment Sales to Relatives 5.25 Contingent Payment Sales 5.26 Using Escrow and Other Security Arrangements 5.27 Minimum Interest on Deferred Payment Sales 5.28 Dispositions of Installment Notes 5.29 Repossession of Personal Property Sold on Installment 5.30 Boot in Like-Kind Exchange Payable in Installments 5.31 “Interest” Tax if Sales Price Exceeds $150,000 With Over $5 Million Debt 5.32 Worthless Securities 5.33 Tax Consequences of Bad Debts 5.34 Four Rules To Prove a Bad Debt Deduction 5.35 Family Bad Debts

CHAPTER 6: Tax-Free Exchanges of Property

6.1 Like-Kind Exchanges of Real Property Used for Investment or Business 6.2 Receipt of Cash and Other Property—“Boot” 6.3 Time Limits and Security Arrangements for Deferred Exchanges 6.4 Qualified Exchange Accommodation Arrangements (QEAAs) for Reverse Exchanges 6.5 Exchanges Between Related Parties 6.6 Property Transfers Between Spouses and Ex-Spouses 6.7 Tax-Free Exchanges of Stock in Same Corporation 6.8 Joint Ownership Interests 6.9 Setting up Closely Held Corporations 6.10 Tax-Free Exchanges of Insurance Policies

CHAPTER 7: Retirement and Annuity Income

7.1 Retirement Distributions on Form 1099-R 7.2 Lump-Sum Distributions 7.3 Lump-Sum Options If You Were Born Before January 2, 1936 7.4 Lump-Sum Payments Received by Beneficiary 7.5 Tax-Free Rollovers From Qualified Plans 7.6 Direct Rollover or Personal Rollover 7.7 Rollover of Proceeds From Sale of Property 7.8 Distribution of Employer Stock or Other Securities 7.9 Survivor Annuity for Spouse 7.10 Court Distributions to Former Spouse Under a QDRO 7.11 When You Must Begin Receiving Required Minimum Distributions (RMDs) 7.12 Payouts to Beneficiaries 7.13 Penalty for Distributions Before Age 59½ 7.14 Restrictions on Loans From Company Plans 7.15 Tax Benefits of 401(k) Plans 7.16 Limit on Salary-Reduction Deferrals 7.17 Withdrawals From 401(k) Plans Restricted 7.18 Designated Roth Account Within 401(k), 403(b), or Governmental 457 Plans 7.19 403(b) Plans (tax-sheltered annuity plans) for Employees of Tax-Exempts and Schools and Ministers 7.20 Government and Exempt Organization Deferred Pay Plans 7.21 Figuring the Taxable Part of Commercial Annuities 7.22 Life Expectancy Tables 7.23 When You Convert Your Endowment Policy 7.24 Reporting Employee Annuities 7.25 Simplified Method for Calculating Taxable Employee Annuity 7.26 Employee’s Cost in Annuity 7.27 Withdrawals From Employer’s Qualified Retirement Plan Before Annuity Starting Date 7.28 Coronavirus-Related Distributions 7.29 Qualified Disaster Distributions

CHAPTER 8: IRAs

8.1 Starting a Traditional IRA 8.2 Contribution Limit for Traditional IRAs 8.3 Contributions to a Traditional IRA If You Are Married 8.4 Restrictions on Traditional IRA Deduction for Active Participants in Employer Plans 8.5 Active Participation in an Employer Plan 8.6 Nondeductible Contributions to Traditional IRAs 8.7 Penalty for Excess Contributions to Traditional IRAs 8.8 Distributions From Traditional IRAs 8.9 Partially Tax-Free Traditional IRA Distributions Allocable to Nondeductible Contributions 8.10 Tax-Free Direct Transfer or Rollover From One Traditional IRA to Another 8.11 Transfer of Traditional IRA to Spouse at Divorce 8.12 Penalty for Traditional IRA Withdrawals Before Age 59½ 8.13 Required Minimum Distributions (RMDs) From a Traditional IRA 8.14 Beneficiaries of Traditional IRA Owners Who Died Before 2020 8.15 Beneficiaries of Traditional IRA Owners Who Die After 2019 8.16 SEP Basics 8.17 Salary-Reduction SEP Set Up Before 1997 8.18 Who Is Eligible for a SIMPLE IRA? 8.19 SIMPLE IRA Contributions and Distributions 8.20 Roth IRA Advantages 8.21 Annual Contributions to a Roth IRA 8.22 Recharacterizing a Traditional IRA Contribution to a Roth IRA and Vice Versa 8.23 Converting a Traditional IRA to a Roth IRA 8.24 Conversions Made After 2017 to a Roth IRA Cannot Be Recharacterized 8.25 Distributions From a Roth IRA 8.26 Distributions to Roth IRA Beneficiaries 8.27 Coronavirus-Related IRA Distributions and Qualified Disaster Distributions

CHAPTER 9: Income From Real Estate Rentals and Royalties

9.1 Reporting Rental Real Estate Income and Expenses 9.2 Checklist of Rental Deductions 9.3 Distinguishing Between a Repair and an Improvement 9.4 Reporting Rents From a Multi-Unit Residence 9.5 Depreciation on Converting a Home to Rental Property 9.6 Renting a Residence to a Relative 9.7 Personal Use and Rental of a Residence During the Year 9.8 Counting Personal-Use Days and Rental Days for a Residence 9.9 Allocating Expenses of a Residence to Rental Days 9.10 IRS May Challenge Loss Claimed on Temporary Rental of Residence Before Sale 9.11 Reporting Royalty Income 9.12 Production Costs of Books and Creative Properties 9.13 Deducting the Cost of Patents or Copyrights 9.14 Intangible Drilling Costs 9.15 Depletion Deduction 9.16 Oil and Gas Percentage Depletion 9.17 Qualified Business Income Deduction for Real Estate Activities

CHAPTER 10: Loss Restrictions: Passive Activities and At-Risk Limits

10.1 Rental Activities Generally Treated as Passive 10.2 Rental Real Estate Loss Allowance of up to $25,000 10.3 Real Estate Professionals 10.4 Business Participation May Avoid Passive Loss Restrictions 10.5 Classifying Business Activities as One or Several 10.6 Material Participation in a Business 10.7 Tax Credits of Passive Activities Limited 10.8 Determining Passive or Nonpassive Income and Loss 10.9 Passive Income Recharacterized as Nonpassive Income 10.10 Working Interests in Oil and Gas Wells 10.11 Partners and Members of LLCs and LLPs 10.12 Form 8582 and Other Tax Forms 10.13 Suspended Losses Allowed on Disposition of Your Interest 10.14 Suspended Tax Credits 10.15 Personal Service and Closely Held Corporations 10.16 Sales of Property and of Passive Activity Interests 10.17 At-Risk Limits 10.18 What Is At Risk? 10.19 Amounts Not At Risk 10.20 At-Risk Investment in Several Activities 10.21 Carryover of Disallowed Losses 10.22 Recapture of Losses Where At Risk Is Less Than Zero

CHAPTER 11: Other Income

11.1 Prizes and Awards 11.2 Lottery and Sweepstake Winnings 11.3 Gambling Winnings and Losses 11.4 Gifts and Inheritances 11.5 Refunds of State and Local Tax Deductions 11.6 Other Recovered Deductions 11.7 How Legal Damages Are Taxed 11.8 Cancellation of Debts You Owe 11.9 Schedule K-1 11.10 How Partners Report Partnership Profit and Loss 11.11 When a Partner Reports Income or Loss 11.12 Partnership Loss Limitations 11.13 Tax Audits of Partnerships 11.14 Stockholder Reporting of S Corporation Income or Loss 11.15 How Beneficiaries Report Estate or Trust Income 11.16 Reporting Income in Respect of a Decedent (IRD) 11.17 Deduction for Estate Tax Attributable to IRD 11.18 How Life Insurance Proceeds Are Taxed to a Beneficiary 11.19 A Policy with a Family Income Rider 11.20 Selling or Surrendering Life Insurance Policy 11.21 Jury Duty Fees 11.22 Foster Care Payments 11.23 Government Benefits Related to COVID-19

PART 3: Claiming Deductions

CHAPTER 12: Deductions Allowed in Figuring Adjusted Gross Income

12.1 Figuring Adjusted Gross Income (AGI) 12.2 Claiming Deductions from Gross Income 12.3 Moving Costs Are Deductible Only by Qualifying Members of the U.S. Armed Forces

CHAPTER 13: Claiming the Standard Deduction or Itemized Deductions

13.1 Does Your Standard Deduction for 2020 Exceed Your Itemized Deductions? 13.2 Basic Standard Deduction 13.3 Spouses Filing Separate Returns 13.4 Standard Deduction If 65 or Older or Blind 13.5 Standard Deduction for Dependents 13.6 Prepaying or Postponing Itemized Expenses 13.7 Itemized Deductions No Longer Reduced for Higher-Income Taxpayers

CHAPTER 14: Charitable Contribution Deductions

14.1 Deductible Contributions 14.2 Nondeductible Contributions 14.3 Contributions That Provide You With Benefits 14.4 Unreimbursed Expenses of Volunteer Workers 14.5 Support of a Student in Your Home 14.6 What Kind of Property Are You Donating? 14.7 Cars, Clothing, and Other Property Valued Below Cost 14.8 Bargain Sales of Appreciated Property 14.9 Art Objects 14.10 Interests in Real Estate 14.11 Life Insurance 14.12 Business Inventory 14.13 Donations Through Trusts 14.14 Records Needed To Substantiate Your Contributions 14.15 Form 8283 and Written Appraisal Requirements for Property Donations 14.16 Penalty for Substantial Overvaluation of Property 14.17 Ceiling on Charitable Contributions 14.18 Carryover for Excess Donations 14.19 Election To Reduce Fair Market Value by Appreciation

CHAPTER 15: Interest Expenses

15.1 Deduction for Home Mortgage Interest 15.2 Home Acquisition Loans 15.3 Home Equity Loans 15.4 Home Construction Loans 15.5 Mortgage Insurance Premiums and Other Payment Rules 15.6 Interest on Refinanced Loans 15.7 “Points” 15.8 Cooperative and Condominium Apartments 15.9 Investment Interest Limitations 15.10 Debts To Carry Tax-Exempt Obligations 15.11 Earmarking Use of Loan Proceeds For Investment or Business 15.12 Year To Claim an Interest Deduction 15.13 Prepaid Interest

CHAPTER 16: Deductions for Taxes

16.1 Overall Limit on Deduction for State and Local Taxes 16.2 Nondeductible Taxes 16.3 State and Local Income Taxes or General Sales Taxes 16.4 Deducting Real Estate Taxes 16.5 Assessments 16.6 Tenants’ Payment of Taxes 16.7 Allocating Taxes When You Sell or Buy Realty 16.8 Automobile License Fees 16.9 Taxes Deductible as Business Expenses 16.10 Foreign Taxes

CHAPTER 17: Medical and Dental Expense Deductions

17.1 Medical and Dental Expenses Must Exceed AGI Threshold 17.2 Allowable Medical and Dental Care Costs 17.3 Nondeductible Medical Expenses 17.4 Reimbursements Reduce Deductible Expenses 17.5 Expenses of Your Spouse 17.6 Expenses of Your Dependents 17.7 Decedent’s Medical Expenses 17.8 Premiums for Health Insurance 17.9 Travel Costs May Be Medical Deductions 17.10 Schooling for the Mentally or Physically Disabled 17.11 Nursing Homes 17.12 Nurses’ Wages 17.13 Home Improvements as Medical Expenses 17.14 Costs Deductible as Business Expenses 17.15 Long-Term Care Premiums and Services 17.16 Life Insurance Used by Chronically ill or Terminally ill Person

CHAPTER 18: Casualty and Theft Losses and Involuntary Conversions

18.1 Casualty or Theft Losses for Personal-Use Property Must be Due to a Federally Declared Disaster 18.2 When To Deduct a Casualty or Theft Loss 18.3 Prior-Year Election for Disaster Losses 18.4 Gain Realized From Insurance Proceeds for Damaged or Destroyed Principal Residence 18.5 Who May Deduct a Casualty or Theft Loss 18.6 Proving a Casualty Loss 18.7 Theft Losses 18.8 Floors for Personal-Use Property Losses 18.9 Figuring Your Loss on Form 4684 18.10 Personal and Business Use of Property 18.11 Repairs May Be a “Measure of Loss” 18.12 Excess Living Costs Paid by Insurance Are Not Taxable 18.13 Do Your Casualty or Theft Losses Exceed Your Income? 18.14 Defer Gain from Involuntary Conversion by Replacing Property 18.15 Involuntary Conversions Qualifying for Tax Deferral 18.16 How to Elect to Defer Gain 18.17 Types of Qualifying Replacement Property 18.18 Time Period for Buying Replacement Property 18.19 Cost of Replacement Property Determines Postponed Gain 18.20 Special Assessments and Severance Damages from Condemnation

CHAPTER 19: Other Itemized Deductions

19.1 Only a Few Expenses Are Allowed as “Other” Itemized Deductions 19.2 Deductions for Job Costs and Other Miscellaneous Expenses No Longer Allowed

CHAPTER 20: Travel and Meal Expense Deductions

20.1 Who May Deduct Travel and Transportation Expenses 20.2 Commuting Expenses 20.3 Overnight-Sleep Test Limits Deduction of Meal Costs 20.4 IRS Meal Allowance 20.5 Business Trip Deductions 20.6 When Are You Away From Home? 20.7 Tax Home of Married Couple Working in Different Cities 20.8 Deducting Living Costs on Temporary Assignment 20.9 Business-Vacation Trips Within the United States 20.10 Business-Vacation Trips Outside the United States 20.11 Deducting Expenses of Business Conventions 20.12 Restrictions on Foreign Conventions and Cruises 20.13 Entertainment Expenses Generally Not Deductible 20.14 Business Meals Are Generally Deductible 20.15 50% Cost Limitation on Most Deductible Meals 20.16 Substantiating Travel Expenses 20.17 Employee Reporting of Unreimbursed Expenses 20.18 Are You Reimbursed Under an Accountable Plan? 20.19 Per DiemTravel Allowance Under Accountable Plans 20.20 Automobile Mileage Allowance 20.21 Reimbursements Under Non-Accountable Plans

PART 4: Personal Tax Computations

CHAPTER 21: Dependents

21.1 No Exemption Deductions Are Allowed 21.2 How Many Dependents Do You Have? 21.3 Qualifying Children 21.4 Qualifying Relatives 21.5 Meeting the Support Test for a Qualifying Relative 21.6 Multiple Support Agreements 21.7 Special Rule for Divorced or Separated Parents 21.8 Reporting Social Security Numbers of Dependents

CHAPTER 22: Figuring Your Regular Income Tax Liability

22.1 Taxable Income and Regular Income Tax Liability 22.2 Using the Tax Table 22.3 Tax Computation Worksheet 22.4 Tax Calculation If You Have Net Capital Gain or Qualified Dividends 22.5 Foreign Earned Income Tax Worksheet 22.6 Income Averaging for Farmers and Fishermen 22.7 Tax Credits 22.8 Additional Medicare Tax and Net Investment Income Tax

CHAPTER 23: Alternative Minimum Tax (AMT)

23.1 Computing Alternative Minimum Tax on Form 6251 23.2 Adjustments and Preferences for AMT 23.3 Tax Credits Allowed Against AMT 23.4 Regular Tax Credit for Prior-Year AMT 23.5 Avoiding AMT

CHAPTER 24: Computing the “Kiddie Tax” on Your Child’s Unearned Income

24.1 Filing Your Child’s Return 24.2 Children Subject to “Kiddie Tax” for 2020 24.3 Computing “Kiddie Tax” on Child’s Return 24.4 Parent’s Election To Report Child’s Dividends and Interest

CHAPTER 25: Personal Tax Credits Reduce Your Tax Liability

25.1 Overview of Personal Tax Credits 25.2 Child Tax Credit for Children Under Age 17 25.3 Figuring the Child Tax Credit and Additional Child Tax Credit 25.4 Credit for Other Dependents 25.5 Qualifying for the Child and Dependent Care Credit 25.6 Figuring the Child and Dependent Care Credit 25.7 Qualifying Tests for EIC 25.8 Income Tests for Earned Income Credit (EIC) 25.9 Qualifying for the Adoption Credit 25.10 Claiming the Adoption Credit on Form 8839 25.11 Eligibility for the Saver’s Credit 25.12 Figuring the Saver’s Credit 25.13 Premium Tax Credit 25.14 Health Coverage Credit 25.15 Mortgage Interest Credit 25.16 Residential Energy Credits 25.17 Credit for Qualified Plug-in Electric and Fuel Cell Vehicles 25.18 Repayment of the First-Time Homebuyer Credit 25.19 Recovery Rebate Credit

CHAPTER 26: Tax Withholdings

26.1 Withholdings Should Cover Estimated Tax 26.2 Income Taxes Withheld on Wages 26.3 Low Earners May Be Exempt From Withholding 26.4 Are You Withholding the Right Amount? 26.5 Voluntary Withholding on Government Payments 26.6 When Tips Are Subject to Withholding 26.7 Withholding on Gambling Winnings 26.8 FICA Withholdings 26.9 Withholding on Distributions from Retirement Plans and Commercial Annuities 26.10 Backup Withholding

CHAPTER 27: Estimated Tax Payments

27.1 Do You Owe an Estimated Tax Penalty for 2020? 27.2 Planning Estimated Tax Payments for 2021 27.3 Dates for Paying Estimated Tax Installments for 2021 27.4 Estimates by Married Taxpayers 27.5 Adjusting Your Payments During the Year

CHAPTER 28: Additional Medicare Tax and Net Investment Income Tax

28.1 Higher-Income Taxpayers May be Subject to Additional Taxes 28.2 Additional 0.9% Medicare Tax on Earnings 28.3 Additional 3.8% Tax on Net Investment Income

PART 5: Tax Planning

CHAPTER 29: Tax Savings for Residence Sales

29.1 Avoiding Tax on Sale of Principal Residence 29.2 Meeting the Ownership and Use Tests for Exclusion 29.3 Home Sales by Married Persons 29.4 Reduced Maximum Exclusion 29.5 Figuring Gain or Loss 29.6 Figuring Adjusted Basis 29.7 Personal and Business Use of a Home 29.8 No Loss Allowed on Personal Residence 29.9 Loss on Residence Converted to Rental Property 29.10 Loss on Residence Acquired by Gift or Inheritance

CHAPTER 30: Tax Rules for Investors in Securities

30.1 Planning Year-End Securities Transactions 30.2 Earmarking Stock Lots 30.3 Sale of Stock Dividends 30.4 Stock Rights 30.5 Short Sales of Stock 30.6 Wash Sales 30.7 Convertible Stocks and Bonds 30.8 Stock Options 30.9 Sophisticated Financial Transactions 30.10 Investing in Tax-Exempts 30.11 Ordinary Loss for Small Business Stock (Section 1244) 30.12 Series EE Bonds 30.13 I Bonds 30.14 Trader, Dealer, or Investor? 30.15 Mark-to-Market Election for Traders

CHAPTER 31: Tax Savings for Investors in Real Estate

31.1 Real Estate Ventures 31.2 Sales of Subdivided Land—Dealer or Investor? 31.3 Exchanging Real Estate Without Tax 31.4 Timing Your Real Property Sales 31.5 Cancellation of a Lease 31.6 Sale of an Option 31.7 Granting of an Easement 31.8 Special Tax Credits for Real Estate Investments 31.9 Foreclosures, Repossessions, Short Sales, and Voluntary Conveyances to Creditors 31.10 Restructuring Mortgage Debt 31.11 Abandonments 31.12 Seller’s Repossession After Buyer’s Default on Mortgage 31.13 Foreclosure on Mortgages Other Than Purchase Money 31.14 Foreclosure Sale to Third Party 31.15 Transferring Mortgaged Realty 31.16 QBI Deduction for REIT Dividends

CHAPTER 32: Tax Rules for Investors in Mutual Funds

32.1 Timing of Your Investment Can Affect Your Taxes 32.2 Reinvestment Plans 32.3 Mutual Fund Distributions Reported on Form 1099-DIV 32.4 Tax-Exempt Bond Funds 32.5 Fund Expenses 32.6 Tax Credits From Mutual Funds 32.7 How to Report Mutual Fund Distributions 32.8 Redemptions and Exchanges of Fund Shares 32.9 Basis of Redeemed Shares 32.10 Comparison of Basis Methods 32.11 Mutual Funds Compared to Exchange-Traded Funds

CHAPTER 33: Educational Tax Benefits

33.1 Scholarships and Grants 33.2 Tuition Reductions for College Employees 33.3 How Fulbright Awards Are Taxed 33.4 United States Savings Bond Tuition Plans 33.5 Contributing to a Qualified Tuition Program (Section 529 Plan) 33.6 Distributions From Qualified Tuition Programs (Section 529 Plans) 33.7 Education Tax Credits 33.8 American Opportunity Credit 33.9 Lifetime Learning Credit 33.10 Contributing to a Coverdell Education Savings Account (ESA) 33.11 Distributions From Coverdell ESAs 33.12 Tuition and Fees Deduction 33.13 Student Loan Interest Deduction 33.14 Types of Deductible Work-Related Costs 33.15 Work-Related Tests for Education Costs 33.16 Local Transportation and Travel Away From Home To Take Courses

CHAPTER 34: Special Tax Rules for Senior Citizens and the Disabled

34.1 Senior Citizens Get Certain Filing Breaks 34.2 Social Security Benefits Subject to Tax 34.3 Computing Taxable Social Security Benefits 34.4 Election for Lump-Sum Social Security Benefit Payment 34.5 Retiring on Social Security Benefits 34.6 How Tax on Social Security Reduces Your Earnings 34.7 Eligibility for the Credit for the Elderly or the Disabled 34.8 Figuring the Credit for the Elderly or Disabled 34.9 Tax Effects of Moving to a Continuing Care Facility 34.10 Medicare Part B and Part D Premiums for 2021 34.11 Special Tax Rules for Individuals with a Disability 34.12 ABLE Accounts

CHAPTER 35: Members of the Armed Forces

35.1 Taxable Armed Forces Pay and Benefits 35.2 Tax Breaks for Armed Forces Members 35.3 Deductions for Armed Forces Personnel 35.4 Tax-Free Pay for Service in Combat Zone 35.5 Tax Deadlines Extended for Combat Zone or Contingency Operation Service 35.6 Tax Forgiveness for Combat Zone or Terrorist or Military Action Deaths 35.7 Extension To Pay Your Tax When Entering the Service 35.8 Tax Information for Reservists

CHAPTER 36: How To Treat Foreign Earned Income

36.1 Claiming the Foreign Earned Income Exclusion 36.2 What Is Foreign Earned Income? 36.3 Qualifying for the Foreign Earned Income Exclusion 36.4 How To Treat Housing Costs 36.5 Meeting the Foreign Residence or Physical Presence Test 36.6 Claiming Deductions 36.7 Exclusion Not Established When Your Return Is Due 36.8 Tax-Free Meals and Lodging for Workers in Camps 36.9 U. S. Virgin Islands, Samoa, Guam, and Northern Marianas 36.10 Earnings in Puerto Rico 36.11 Tax Treaties With Foreign Countries 36.12 Exchange Rates and Blocked Currency 36.13 Foreign Tax Credit or Deduction for Foreign Taxes Paid

CHAPTER 37: Planning Alimony and Marital Settlements

37.1 Rules for Post-2018 Divorce and Separation Agreements 37.2 Rules for Pre-2019 Divorces or Separation Agreements 37.3 Decree or Agreement Required 37.4 Cash Payments Required 37.5 Payments Must Stop at Death 37.6 Child Support Payments Are Not Alimony 37.7 No Minimum Payment Period for Alimony 37.8 3rd Year Recapture If Alimony Drops by More Than $15,000 37.9 Legal Fees of Marital Settlements

CHAPTER 38: Other Taxes

38.1 Overview of Household Employment Taxes 38.2 Social Security and Medicare (FICA) Taxes for Household Employees 38.3 Filing Schedule H To Report Household Employment Taxes 38.4 Federal Unemployment Taxes (FUTA) for Household Employees

CHAPTER 39: Gift and Estate Tax Planning Basics

39.1 Gifts of Appreciated Property 39.2 Gift Tax Basics 39.3 Filing a Gift Tax Return 39.4 Gift Tax Credit 39.5 Custodial Accounts for Minors 39.6 Trusts in Family Planning 39.7 What is the Estate Tax? 39.8 Take Inventory and Estimate the Value of Your Potential Estate 39.9 Estate Tax for 2020 39.10 Planning for a Potential Estate Tax

PART 6: Business Tax Planning

CHAPTER 40: Income or Loss From Your Business or Profession

40.1 Forms of Doing Business 40.2 Reporting Self-Employed Income 40.3 Accounting Methods for Reporting Business Income 40.4 Tax Reporting Year for Self-Employed 40.5 Reporting Certain Payments and Receipts to the IRS 40.6 Filing Schedule C 40.7 Deductions for Professionals 40.8 Nondeductible Expense Items 40.9 How Authors and Artists May Write Off Expenses 40.10 Deducting Expenses of a Sideline Business or Hobby 40.11 Deducting Expenses of Looking for a New Business 40.12 Home Office Deduction 40.13 Write-Off Methods for Home Office Expenses 40.14 Allocating Expenses to Business Use 40.15 Business Income May Limit Home Office Deductions 40.16 Home Office for Sideline Business 40.17 Depreciation of Office in Cooperative Apartment 40.18 Net Operating Losses (NOLs) 40.19 How To Report a Net Operating Loss 40.20 Excess Business Losses 40.21 Business Credits 40.22 Filing Schedule F 40.23 Farming Expenses 40.24 Qualified Business Income Deduction

CHAPTER 41: Retirement and Medical Plans for Self-Employed

41.1 Overview of Retirement and Medical Plans 41.2 Choosing a Qualified Retirement Plan 41.3 Choosing a SEP 41.4 Deductible Contributions 41.5 How To Qualify a Retirement Plan or SEP Plan 41.6 Tax Credits for Setting Up a Retirement Plan 41.7 Annual Qualified Retirement Plan Reporting 41.8 How Qualified Retirement Plan Distributions Are Taxed 41.9 SIMPLE IRA Plans 41.10 Health Savings Account (HSA) Basics 41.11 Limits on Deductible HSA Contributions 41.12 Distributions From HSAs 41.13 Archer MSAs 41.14 Health Reimbursement Arrangements (HRAs) 41.15 Small Employer Health Insurance Credit

CHAPTER 42: Claiming Depreciation Deductions

42.1 What Property May Be Depreciated? 42.2 Claiming Depreciation on Your Tax Return 42.3 First-Year Expensing Deduction 42.4 MACRS Recovery Periods 42.5 MACRS Rates 42.6 Half-Year Convention for MACRS 42.7 Last Quarter Placements—Mid-Quarter Convention 42.8 150% Rate Election 42.9 Straight Line Depreciation 42.10 Listed Property 42.11 Assets in Service Before 1987 42.12 MACRS for Real Estate Placed in Service After 1986 42.13 Demolishing a Building 42.14 Qualified Improvement Property 42.15 Depreciating Real Estate Placed in Service After 1980 and Before 1987 42.16 Amortizing Goodwill and Other Intangibles (Section 197) 42.17 Amortizing Research and Experimentation Costs 42.18 Bonus Depreciation

CHAPTER 43: Deducting Car and Truck Expenses

43.1 Standard Mileage Rate 43.2 Expense Allocations 43.3 Depreciation Restrictions on Cars, Trucks, and Vans 43.4 Annual Ceilings on Depreciation 43.5 MACRS Rates for Cars, Trucks, and Vans 43.6 Straight Line Method 43.7 Depreciation for Year Vehicle Is Disposed Of 43.8 Depreciation After Recovery Period Ends 43.9 Trade-in of Business Vehicle 43.10 Recapture of Deductions on Business Car, Truck, or Van 43.11 Keeping Records of Business Use 43.12 Leased Business Vehicles: Deductions and Income

CHAPTER 44: Sales of Business Property

44.1 Depreciation Recaptured as Ordinary Income on Sale of Personal Property 44.2 Depreciation Recaptured as Ordinary Income on Sale of Real Estate 44.3 Recapture of First-Year Expensing 44.4 Gifts and Inheritances of Depreciable Property 44.5 Involuntary Conversions and Tax-Free Exchanges 44.6 Installment Sale of Depreciable Property 44.7 Sale of a Proprietorship 44.8 Property Used in a Business (Section 1231 Assets) 44.9 Sale of Property Used for Business and Personal Purposes 44.10 Should You Trade in Business Equipment? 44.11 Corporate Liquidation 44.12 Additional Taxes on Higher-Income Taxpayers

CHAPTER 45: Figuring Self-Employment Tax

45.1 What Is Self-Employment Income? 45.2 Partners Pay Self-Employment Tax 45.3 Schedule SE 45.4 How Wages Affect Self-Employment Tax 45.5 Optional Method If 2020 Was a Low-Income or Loss Year 45.6 Self-Employment Tax Rules for Certain Positions 45.7 Deferring a Portion of Self-Employment Tax for 2020

PART 7: Filing Your Return and What Happens After You File

CHAPTER 46: Filing Your Return

46.1 Keeping Tax Records 46.2 Getting Ready to File Your Return 46.3 Applying for an Extension 46.4 Getting Your Refund 46.5 Paying Taxes Due 46.6 Handling Identity Theft 46.7 Notify the IRS of Address Changes 46.8 Interest on Tax Underpayments 46.9 Tax Penalties for Late Filing and Late Payment

CHAPTER 47: Filing Refund Claims, and Amended Returns

47.1 Filing an Amended Return 47.2 When to File a Refund Claim 47.3 Stating the Reasons for Refund Claim 47.4 Quick Refund Claims 47.5 Interest Paid on Refund Claims 47.6 Refunds Withheld to Cover Debts 47.7 Amended Returns Showing Additional Tax 47.8 Penalty for Filing Excessive Refund Claim

CHAPTER 48: If the IRS Examines Your Return

48.1 Odds of Being Audited 48.2 When the IRS Can Assess Additional Taxes 48.3 Audit Overview 48.4 Preparing for the Audit 48.5 Handling the Audit 48.6 Tax Penalties for Inaccurate Returns 48.7 Penalties for Not Reporting Foreign Financial Accounts 48.8 Agreeing to the Audit Changes 48.9 Disputing the Audit Changes 48.10 Offer in Compromise 48.11 Recovering Costs of a Tax Dispute 48.12 Suing the IRS for Unauthorized Collection

PART 8: 2020 Tax Forms PART 9: Tax Law Authorities PART 10: Citations of Authority PART 11: Practice Before the IRS GLOSSARY INDEX END USER LICENSE AGREEMENT

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