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About SaraEA

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    ATXaholics Anonymous

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  1. brother buys sibling share of home

    If the house is sold before Mom dies, the children's basis is the same as hers was. The implied life estate generates step-up basis only when she dies while still using the house. Since that is the case, the children who sold might have a loss if the value increased and they only got $30k. They can't take the loss because the sale was to a related party. A stay in a nursing home is considered "temporary" up to a certain amount of time, so if she entered a home for a few months before death step-up rules still apply. The only ones who will have to do tax reporting are the sellers IF they received 1099-S forms.
  2. Conservation easement charitable deduction?

    Stay away from giving advice on this one. The client needs an attorney. The IRS is aware that this is a loophole and contests these transfers all the time (and wins).
  3. Estate - Sale of Home

    The house must have been in the estate but was eventually re-titled to the beneficiaries as they are the ones who apparently owned it when it was sold (they are the ones who got the 1099S forms). If the estate had no income in 2017 and no expenses, no 1041 is needed. The depreciation "allowed or allowable" is the estate's problem but I wouldn't do anything about it at this point. With depreciation, the estate would have had lower income and now the heirs will have higher income = a wash (except theirs is cap gains income, while the estate might have had ordinary gain/loss, but the IRS is getting paid one way or another). The 2016 $300 loss could have passed through to the beneficiaries if the estate return was marked "final." It might be too late now, but cap gains tax of 15% on each person's share of the loss = $15 (or $24 if they are high income) and isn't worth fretting over. Handle the sale on the individual returns. The heirs got the 1099S forms and the IRS computers will be looking for that $100k on their 1040s. Your basis calcs are correct, but add any expenses of the sale (realtor, title transfer, attorney, etc.). You can file a 1041 if the estate had expenses in 2017, e.g., the cost of transferring the title to the heirs as well as your tax prep fee for that return--yes, you can deduct it even if not yet paid. Then you can mark it as final. With three beneficiary packages, I would charge at least $750 for the 1041. Whatever you charge, make sure it is divisible by three so each can pay the same amount.
  4. Tragedy causes young child to get 1099r

    Thanks for educating me everyone--I had not realized that 1099R income was considered unearned for kiddie tax purposes. Just wait until 2018 when the kiddie tax as we know it goes away and the child is taxed at the highest rate on unearned income above $12,500. Be sure to set up estimated payments.
  5. afraid to get EA

    The study time of course depends on how much time you have to devote to it. I studied relentlessly for six months (I'm an academic bookworm anyway). I studied so hard that I vowed that I HAD to pass all four parts (back then) the first time because I was never going to study that hard ever again. I succeeded. Many didn't, and they just kept trying until they passed. The world doesn't come to an end if you don't do it on the first shot. Unlike very few things in life, on the SEA you get a second chance, and maybe a third or more. There was one guy in my EA prep course who took the exam over 10 times and failed, and here he was trying again. We all respected him. I warn you against feeling "I'm sure I'll do fine on the individual portion." In my prep course at H&R, we all felt that way until we took the first practice exam. We all fell fifteen notches when we scored in the 70 percents and lower. Part of the study process is to learn how to approach the questions. As you know, the IRS is big on double negatives. (You cannot not do this or that.) We also learned that if a question addresses something you never heard of, just pick any ole answer and don't waste time on it. Came in handy when I encountered a question on the optional method of calculating Social Security income. Also examine your motives for wanting to be an EA. The designation may confer some approbation in the tax professional community, but so do your years of experience. You do get to represent clients before the IRS, but do you really want to do that? IRS audits are no fun, and I have encountered some auditors from hell who were especially no fun. If you just want to prove to yourself that you can do it, give it a shot. If you tell yourself that you are just doing it as an experiment, knowing that it may or may not work and really doesn't change your life, the test anxiety level should be minimized. You'll still be the exact same knowledgeable, experienced person the next day. Nothing gained, nothing lost.
  6. brother buys sibling share of home

    This is clearly an "implied" life estate. Mom continued to live in the home, paid the bills and taxes, just like she always did. I don't have the legal sources with me right now, but an implied life estate is included in her estate and beneficiaries receive full step-up basis because of that.
  7. Etax, have a little empathy. Do you realize how much work this entails? IRS has to rewrite software, forms, instructions, and pubs. They have to change a zillion linked pages on their website, FAQs, etc. This was thrown in their lap one week ago. They have reduced staff due to budget cuts and are sort of busy administering 2017 filing season right now. I would be amazed if they could pull it off in one month. We won't be doing any amendments until after tax season anyway--too busy with first runs. New returns that are affected by the extenders can be entered, checked, and put on hold until the time comes. Tell any impatient clients to complain to their congress members (and remember their names come November).
  8. 3115 at the sale of rental property?

    I would do the 3115. Missed depreciation is an automatic acceptance so no need to fill out all 100 pages. The reason is that they should have taken more depreciation in prior years, so claimed higher income than they should have. In the year of sale you have to deduct depreciation allowed or allowable from basis, so they will pay higher cap gains even though they never got the benefit of the higher depreciation. Missed depreciation can be taken on Sch E all at once, so their income will be reduced in the year of sale.
  9. How many times per day

    Except by April 1 or so some of us do not feel very "knowledgeable and enthusiastic." This year it might happen by March 1.
  10. Back to back IRS audit

    Any audit that reveals more than $10k unreported income will automatically open up succeeding years. The taxpayer probably kept reporting morning trips to the coffee place as "meals and entertainment," family vacations as "travel," had no logs to substantiate mileage, put the whole family's cell phone bill on the business, made $4k in noncash contributions every year, you get the picture. Reason why he kept doing it is he wasn't caught yet. Once IRS went back and discovered the crap, they had reason to just keep on auditing.
  11. Partnership step-up basis

    While the partnership does not determine the step-up basis, only the partnership can make the 754 election, which triggers the 743(b) adjustment. Apparently in this case that did not happen. If within the time frame, the election can still be made for the recently deceased partner. I don't know if the other partner for whom the election was not in effect is out of luck.
  12. How many times per day

    Timing out after a period of inactivity is an invention of the Security Summit. I personally think that using a hotkey defeats the security. In UltraTax, you don't time out if you are actively using another program. When I am working on a client's books or eating lunch, I keep email on the screen and periodically click on any message so I don't time out. I also type in the password in the morning verrrrry sloooooowly so I don't mess up and have to prove I'm not a robot.
  13. new laws - what are you doing?

    Your clients actually read the transmittal letter?
  14. States who Itemize - 2018

    Connecticut has AMT (along with gift and inheritance tax, $2mm exclusion).
  15. new laws - what are you doing?

    What's affecting us in addition to the extenders is that the 2018 ES vouchers aren't ready yet. At first I couldn't believe it because all IRS has to do is change the date from 2017 to 2018, but then someone pointed out that there's a whole booklet that goes along with the form, and I imagine that has to be recalculated to conform to the new tax rates and lack of exemptions. All I can think of to do is make a list of clients who need their vouchers and mail/email them when available. Why oh why did policymakers do this to us, to the IRS, to zillions of taxpayers at the last minute??? This tax season is going to be a disaster in terms of our own client service, but likely nothing as bad as next filing season when those $2000 refunds turn into $40 ("but you already got the money in your paycheck" isn't going to cut it).