IRS Publication Party Game

Apr 6, 2012 by

IRS writers partying

Candid Shot of IRS Writers Toasting an Especially Impenetrable Paragraph

If you’ve prepared your own tax return, you’ve likely read an IRS Publication or two. Preparation of our tax return has recently become too complex for me confidently to take on, but I prepared our taxes for many years. I always began by downloading IRS Publication 17—”Your Federal Income Tax”—strangely titled as if to transfer responsibility to the taxpayer for the existence of the income tax. But I’ll confess to you: I enjoyed reading Publication 17. And I rather enjoy reading IRS Publications generally. I suspect they titillate the numbers and detail wonks inside of me.

IRS Writers

I’ve always wanted to meet someone who writes IRS Publications. I carry in my mind a vivid image of an IRS writer, and if I were to meet one at a party, I’d be set for the evening. No need to feign interest in the personal coach or brand marketer; this person writes for the IRS! Moreover, I’d feel sure we two nerds could carry on a two-way conversation for the entirety of the party virtually uninterrupted.

Party Game

To continue my fantasy, I imagine orchestrating a party game involving Members of Congress. I would read an excerpt from an IRS Publication, and the partygoers would compete, Jeopardy-style, to be the first to explain the excerpt’s meaning. I’d award bonus points to any Member of Congress able to identify the Publication from which the excerpt was drawn. To assure engagement, the game’s losers would be required to live in the real world, with the rest of us, beginning at the party’s end.

I’m guessing I could host such a bash monthly for the rest of my life and never run out of quiz material. Here are just a few examples of party questions, with citations. While you’re reading these, visualize the look of panic (at the prospect of being compelled to live in the real world) on tax-writing House Ways & Means Committee Chair Representative David Camp’s or Senate Finance Committee Chair Max Baucus’s face.

Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. If you did not deduct any depreciation, decrease the basis by the amount you could have deducted.

If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year.

If you deducted the incorrect amount of depreciation, see Publication 946.

From the 34-page IRS 2011 Publication 587, “Business Use of Your Home”, page 10. (And can you imagine meeting the person who actually wrote this?)

If you received an overpayment of unemployment compensation in 2011 and you repaid any of it in 2011, subtract the amount you repaid from the total amount you received. Enter the result on line 19. Also, enter “Repaid” and the amount you repaid on the dotted line next to line 19. If, in 2011, you repaid unemployment compensation that you included in gross income in an earlier year, you can deduct the amount repaid on Schedule A, line 23. But if you repaid more than $3,000, see Repayments in Pub. 525 for details on how to report the repayment.

From the 100-page IRS 2011 Instructions for Form 1040, page 25.

A taxable exchange is one in which the gain is taxable or the loss is deductible.

From 302-page IRS 2011 Publication 17, “Your Federal Income Tax”, page 98.

If you were entitled to deduct depreciation on the part of your home used for business, you cannot exclude the part of the gain equal to any depreciation you deducted (or could have deducted) for periods after May 6, 1997. This means that when figuring the amount of gain you can exclude, you must reduce the total gain by any depreciation allowed or allowable on the part of your home used for business after May 6, 1997.

If you can show by adequate records or other evidence that the depreciation you actually deducted (the allowed depreciation) was less than the amount you were entitled to deduct (the allowable depreciation), the amount you cannot exclude (and must subtract from your total gain when figuring your exclusion) is the amount you actually deducted.

You do not have to reduce the gain by any depreciation you deducted (or could have deducted) for a separate structure for which you cannot exclude the allocable portion of the gain.

From 34-page IRS Publication 587, “Business Use of Your Home”, page 15.

The lump-sum payment you receive under the alternative annuity option generally has a tax-free part and a taxable part. The tax-free part represents part of your cost. The taxable part represents part of the earnings on your annuity contract. Your lump-sum credit (discussed later) may include a deemed deposit or redeposit that is treated as being included in your lump-sum payment even though you do not actually receive such amounts. Deemed deposits and redeposits, which are described later under Lump-sum credit, are taxable to you in the year of retirement. Your taxable amount may therefore be more than the lump-sum payment you receive. 
You must include the taxable part of the lump-sum payment in your income for the year you receive the payment unless you roll it over into another qualified plan or an IRA. If you do not have OPM transfer the taxable amount to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. See Rollover Rules, later, for information on how to make a rollover.

From 31-page IRS 2011 Publication 721, “Tax Guide to U.S. Civil Service Benefits”, page 8.

If you dispose of low-income housing property that has two or more separate elements, the applicable percentage used to figure ordinary income because of additional depreciation may be different for each element. The gain to be reported as ordinary income is the sum of the ordinary income figured for each element.

The following are the types of separate elements:

– A separate improvement (defined later).

– The basic section 1250 property plus improvements not qualifying as separate improvements

– The units placed in service at different times before all the section 1250 property is finished. For example, this happens when a taxpayer builds an apartment building of 100 units and places 30 units in service (available for renting) on January 4, 2010, 50 on July 18, 2010, and the remaining 20 on January 18, 2011. As a result, the apartment house consists of three separate elements.

From the 41-page IRS 2011 Publication 544, “Sales and Other Dispositions of Assets”, page 32.

What About You?

Okay, so I’ve had a little fun at the IRS’ expense. In reality, its writers are doing an outstanding job, given what they have to work with: A hopelessly convoluted tax code, thanks to decades of political manipulation.

Has it become nearly impossible for most Americans to prepare their own tax returns? Do you prepare your return? Have you tackled comprehending IRS Publications? How did you fare?

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