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I don't think that tracing would come into play. The code is clear on what the inherited basis of this rental would be under this client's scenario. There is nothing to be gained by this transaction. It would cost the client money in terms of transfer taxes and legal fees to gift to the father, and then more in legal and probate fees to settle the estate for the solely owned rental to pass back to the son...all to end up with the virtually the same basis as before. The code section this falls under is IRC sec 1014(e). It requires that the donee survive for at least one year after the transfer and limits tax-free transfers to a terminally ill person and the step-up. IRS also ruled that this applies to property in a joint revocable trust funded with assets that were held by the grantors as tenants by the entireties. Some history: 2001 - EGTRRA repealed sec 1014, and a carryover basis position was implemented under IRC sec 1022. This applied to decedents passing after December 31, 2009. Sec 1022 treated basis of property received from a decedent as if a gift with basis equal to the lesser of the decedent’s adjusted basis of the fair market value as of the date of death. 2010 - TRA reinstated the estate tax and fair market value basis at death provisions, and repealed the IRC Section 1022 carryover basis for decedents passing after 2009.

IRS could invoke the Step Transaction Doctrine. Tax Advisor has a nice article on it - https://www.thetaxadviser.com/issues/2021/may/step-transaction-doctrine.html If you don't like links (like me) here is a brief overview. The IRS may apply the step-transaction doctrine, a rule of substance over form, in a variety of taxpayer circumstances to deny tax benefits derived from a series of transactions that should more properly be treated as a single transaction. The courts have developed three tests to analyze whether the step-transaction doctrine applies to a series of transactions: the end-result test, the interdependence test, and the binding-commitment test. Under the end-result test, if the separate transactions were component parts of a single transaction intended from the outset to produce the ultimate result, the step-transaction doctrine would apply. Tom Longview, TX

"Appreciated property" is defined as “any property if the fair market value of such property on the day it was transferred to the decedent by gift exceeds its adjusted basis.”

Owner of a rental property wants to sell and will have a hefty tax bill. The son wants to gift the property to his father (there doesn't appear to be any gift tax issues other than filing the return). The father has a terminal illness and is not expected to live for more than 6 months. The father gets the son's cost basis and reports the rental income/expenses on his tax return. The property is then willed back to the son when the father passes, and the son gets the stepped up basis. Son then sells property, possibly at a loss when the selling expenses are factored in. There is no other purpose of this transaction other than avoiding the tax. This doesn't pass the smell test to me. Can the IRS disallow the step up in basis? Any other issues with this scenario?

Dividing up marital assets in a divorce is NOT buying an asset at FMV from your soon-to-be ex.

You can take the class for credit at the link provided. Since Tax Practice Pro is using this as an online offering, I do not think it would be appropriate for me to giving it out on my own to anyone.

This year's addition of bulk 1040 extensions was a huge timesaver, too.

Yes, the macros are a fabulous tool. Highly recommended.

Thank you for all your hard work for us!

Not questioning the settlement per se, but rather if there is something IN the settlement where, for example, his larger share of investments was designated as because she was getting the house. If there is wording specifically stating the house as his reason for getting more investments, that could be a de facto purchase of his part of the house, increasing her basis. TIA to all for answers; I'm just going to tell her she gets to exclude $250k, their joint basis from purchase, plus any major upgrades done while they/she owned the house.

Dad got back to me; situation is different from what I understood from grandfather. BB Yacht Club scholarship (even though check was written by BB Church). Family is NOT members of the Yacht Club. Offered annually to all graduating seniors in the DEHS Band. Essay contest with 3 prizes in the form of a check. My client won 1st place of $5,000. Check was made out to him personally with the memo " A BB Yacht Club Member's Name Scholarship." (Member wanted to support HS music.) No other paperwork. No mention, verbal or written, on a restriction on the use of funds. Knowing this family, though, it was no surprise that they worked the DD Tech to split the funds between 1st and 2nd semesters, applied to student's account via cashier's check. Dad did keep photos documenting all the process, if I need them. I think dad is saying the funds were used for tuition.

It was called a scholarship but was paid to the student for whatever he wanted. The student has no relationship to the specific scholarship/person whose name in on the scholarship. However, the student attends the church that has the scholarship fund; only church members received scholarships. Grandfather hires me to prepare his grandkids tax returns; he's an investment banker and has invested monies for them since they were born. I talk to the dad once/year to get his return info for Kiddie Tax on his kids' returns. I'll check with dad/church member, but grandfather thinks there was no application nor essay or anything. Grandfather thinks what ever committee at that church just picks a few recipients out of their HS graduates. I'm trying to confirm or get details from dad. Prizes & Awards and taxable? Gift and not taxable?

Sounds great.

A few things I had done some country blocking with .htaccss on the old server, but never felt confident that I had a complete list of IP ranges The new server is running nginx, so no .htaccess Cloudflare keeps the traffic from even seeing the website, since they manage DNS and issue the challenge before a request to the server is made Aside from the country blocking, they're doing other bot detection magic, plus I'm adding custom web application firewall rules that are specific to the forum app. I'm a fan of doing as much of this as possible at the proxy, but I also have nginx rules set up for anything that gets through.

I tested cloudflare. Did not offer me anything I could not get from htaccess country allow. Still plenty of bots in the us which is why I added the ip testing service.

I switched and have had no issues that couldn't be resolved with a quick phone call. I did the practice returns when I first tried it and by the time tax season started for the most part I was up and running at about the same speed as ATX. It just gets a little getting use to, but overall I am very pleased.

How did the Trust determine who the $5,000 would be awarded to? Any relationship between the student and the trust? Did the scholarship specify what the money could be used for?

I'm using CloudFlare to manage DNS and as a proxy in front of the site. If I set up the rules to block traffic from outside of the US at that level, they won't even hit the web server. My only worry is that if a forum member is blocked for some reason, they're not going to have any way to let me know they can't get in. Since enabling the captcha 30 minutes ago (click the checkbox to prove you're not a robot), out of 910 challenges only 4 were solved. It may not be necessary to block the traffic completely if the challenge is effective against the type of traffic I'm trying to prevent.

Avoids issues with not meeting the EU cookie type warnings. I block my site from non desired countries for the same reason. I also use a bot/vpn/proxy testing service too. It really cuts down on the non desired access. In my case, especially for blocking access to my order form from those who use VPN to try to test card numbers (almost always actually outside the US, but using a VPN). If you are interested in what I do, send me a direct email.

I've just set up rules to issue a captcha challenge for any visitor not from the US or Canada to help with the bots and spammers. I'm interested to know if anyone on the forums gets caught up in those--if not, I may block traffic from outside North America entirely. I wouldn't normally do something like that, but this is a very US-specific site. Can anyone think of a reason not to?

You are welcome! I ironed out and documented the process yesterday, and everything went smoothly this morning.

Wow! Quick work, Eric. We appreciate your knowledge and hard work to make this move and to continue to monitor it for us. Thank you!!

Alright, everything is moved and at first glance, things appear to be working normally. A lot has changed behind the scenes--more than I'd normally like to change all at once, so please report any issues or broken features you encounter.