Instructions For Form 8697 - 2011 (Page 2 of 7) in pdf

taxable income from any such contract

during the election year and all later tax

Look-back interest owed is not

that is not a home construction contract

years, and may not be revoked without

subject to the estimated tax penalty.

and, therefore, must be accounted for

IRS consent. See Regulations section

See Regulations section 1.460-6(f)(2).

using the percentage of completion

1.460-6(j) for more details. If you timely

If Interest Is To Be Refunded

method for alternative minimum tax

filed your return without making the

purposes. See section 56(a)(3) for

election, you may make the election on

to You

details.

an amended return filed no later than 6

Do not attach Form 8697 to your

months after the due date of your tax

income tax return. Instead, file Form

Small Contract Exception

return (excluding extensions). Write

8697 separately with the IRS at the

“Filed pursuant to section 301.9100” at

The look-back method does not apply

applicable address listed below.

the top of the amended return.

to any contract completed within 2

•

Individuals:

years of the contract start date if the

Filing Instructions

Department of Treasury

gross price of the contract (as of

Internal Revenue Service

contract completion) does not exceed

Philadelphia, PA 19255-0001

the smaller of:

If You Owe Interest (or No

•

All others:

$1 million or

Interest Is To Be Refunded to

•

1% of the taxpayer’s average annual

Department of Treasury

You)

gross receipts for the 3 tax years before

Internal Revenue Service

the tax year of contract completion.

Attach Form 8697 to your income tax

Cincinnati, OH 45999-0001

return. The signature section of Form

See section 460(b)(3)(B) for details.

Complete the signature section of

8697 does not have to be completed by

Form 8697 following the instructions for

De Minimis Exception

you or the paid preparer.

the signature section of your income

You may elect not to apply the

For individuals, include any interest

tax return. If you file a joint return, the

look-back method in certain de minimis

due in the amount to be entered for

signature of both spouses is required

cases for completed contracts. The

total tax (after credits and other taxes)

on Form 8697. If additional Forms 8697

look-back method does not apply in the

on your return (for example, 2011 Form

are needed to show more than 2

following cases if the election is made.

1040, line 61). Write on the dotted line

redetermination years, sign only the

to the left of the entry space “From

1. In the completion year if, for each

first Form 8697.

Form 8697” and the amount of interest

prior contract year, the cumulative

File Form 8697 by the date you are

due.

taxable income (or loss) actually

required to file your income tax return

reported under the contract is within

For partnerships (that are not closely

(including extensions). Keep a copy of

10% of the cumulative look-back

held), write “From Form 8697” and

Form 8697 and any attached schedules

income (or loss). Cumulative look-back

include any interest due in the bottom

for your records.

income (or loss) is the amount of

margin of the tax return. Attach a check

taxable income (or loss) that you would

or money order for the full amount

Filing a Corrected Form

have reported if you had used actual

made payable to “United States

contract price and costs instead of

8697

Treasury.” Write the partnership’s

estimated contract price and costs.

employer identification number (EIN),

You must file a corrected Form 8697

2. In a post-completion year if, as of

daytime phone number, and “Form

only if the amount shown on Part I, line

the close of the post-completion year,

8697 Interest” on the check or money

6, or Part II, line 7, for any prior year

the cumulative taxable income (or loss)

order.

changes as a result of an error you

under the contract is within 10% of the

For S corporations that are not

made, an income tax examination, or

cumulative look-back income (or loss)

closely held, include any interest due in

the filing of an amended tax return.

under the contract as of the close of the

the amount to be entered for additional

most recent year in which the look-back

When completing Part I, line 1, of the

taxes (for example, 2011 Form 1120S,

method was applied to the contract (or

corrected Form 8697, follow the

line 22c). Write on the dotted line to the

would have been applied if the election

instructions on the form but do not

left of the entry space “From Form

had not been made).

enter the adjusted taxable income from

8697” and the amount of interest due. A

Part I, line 3, of the original Form 8697.

closely held S corporation would also

For purposes of item 2, discounting

When completing Part I, line 5 (or Part

follow these procedures following a

under section 460(b)(2) does not apply.

II, line 6), of the corrected Form 8697,

conversion from a C corporation for the

To make the election, attach a

do not include the interest due, if any,

contracts entered into prior to the

statement to your timely filed income

from Part I, line 10 (or Part II, line 11),

conversion. See the rules related to

tax return (determined with extensions)

of the original Form 8697 that was

Mid-Contract Change in Taxpayer,

for the first tax year of the election.

included in your total tax when Form

earlier.

Write at the top of the statement

8697 was filed with your tax return.

For closely held pass-through

•

“NOTIFICATION OF ELECTION

If both the original and corrected

entities, look-back interest is applied at

UNDER SECTION 460(b)(6).” Include

Forms 8697 show an amount on the

the owner level and not the entity level.

on the statement your name, identifying

line for interest you owe, file an

number, and the effective date of the

For corporations, include the amount

amended income tax return.

•

election. Also identify the trades or

of interest due on the appropriate line

If both the original and corrected

businesses that involve long-term

of Form 1120, Schedule J, Part I (for

Forms 8697 show an amount on the

contracts. Once made, the election

example, 2011 Form 1120, Schedule J,

line for interest to be refunded to you,

applies to all contracts completed

line 9c).

write “Amended” in the top margin of

-2-

Instructions For Form 8697 - 2011 Page 2

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