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Nothing... the sub S account becomes frozen on the Corp books (still shown as AAA account) and a new account is established for the C-Corp. Remember if S status is terminated on any date other than the first day of the year you must file 2 tax returns one as 1120S and the other as1120. You can file your revoke and elect to make it effective on the first day of the year.

Naveen: When I bought a practice a few years back, I had to teach the new employee how to use the new tax software. I had her reinput the returns into the new software. During this process, a couple of errors were found. In one case, about a $12k refund to one client. (PAL Issue and incorrect prior year coding...) When you find an issue with one of your new clients, you just let them know what you found and how you found it. We would have never found the above listed error except by redoing the return completely. Offer to amend for free, welcome to the NEW firm for example. Try not to smear the former preparer to bad. I was pretty explicit with any clients I spoke about with issues that I found. "I do not think I would like someone to go thru *each* of my returns from scratch like I just did to former preparers returns, which I used as a training exercise, and then find various issues." I believe I have fairly good protocols to make sure that the right numbers get into the right places. But we ain't perfect. Rich

In my experience, only the final series of notices (the serious ones) are mailed to both spouses, usually certified. These are the Statutory Notice of Deficiency, Intent to Levy, etc. By the time taxpayers get these, they have usually successfully ignored the previous 10 notices.

I believe there is a box to check to tell it not to report gain/loss on 4797.

Yes. Believe it or not, parents income (MFJ) is lower based on FPL % than the kids (Single). Trying to get the mechanics of this form completion. Kids took "0" APTC.

Not as surprised as I was and it depends on what you call "several" years - these same people previously received a joint penalty notice (one bill-both names) on Nov. 11, 2013. Also, the original bill they just received (October 31, 2016) for non-payment of the 1040 tax was a joint notice (one bill-both names). Yeah, that's what I said in my above post - I was commenting on the sad state of affairs (no pun intended) nowadays; to wit: IRS deems it necessary to advise we can't trust our spouses.

This has been going on for several years, and I am surprised you haven't come across it before. Seems as though one or the other party on a MFJ return could claim "I never got the letter...." if it was addressed to just the primary SSN. So now each gets one (in separate envelope) and have been duly notified.

Yes, I would have helped them and yes I would take them back only because I know clients are not perfect. Once they return I would explain that they need to respond to your questions in a timely manner as tardiness interrupts the workflow process and could increase their price. Also I would definitely listen to your wife, they usually know better, just from their intuitive perspective, and it serves us well to obey, if we know what is good for us. I learned the hard way.

Well at least the offer will bring in more customers to share the misery when the program acts up. Misery loves company.

I agree, that is how I do it. However, there is another layer to this. That is the depreciation from the first of the year to date of death using the original basis and asset lives. Then from DOD on you will have the split basis as Terry described. I don't keep permanent record of depreciation on ATX, I use the depreciation module on EasyACCT. That makes it a lot easier in situations like this.

Terry has it correct. In a noncommunity property state, the husband would retain his basis that relates to his half, and then he gets the stepped up basis at 1/2 of the total FMV, and depreciation starts over from the beginning on the inherited portion. I think the code sec you are looking for here is 1.1250-3(b)(2), but check that for sure. I'm on my tablet right now and is not as easy to look up to verify. As far as ATX, I don't know that there is any easy way to handle this. You'd have to reduce each of the existing components' cost, accumulated depreciation and NBV by half, and then add in the other half of each component that is inherited. For the components that still have depreciation deduction available to take, you will probably have to override the calculations because the depreciation should be a full year's amount prorated for the period before the death. It would be an incorrect calculation to use a sale date if there are any assets using a half-year method, but those using mid-month would be closer to accurate. Also, for the inherited portion, check me on this, but I think you can use the DOD as the starting date to calculate the expense. However, if sold within a 12-month period, the taxpayer would get long-term treatment, so that is something to watch out for with that date of death in the system as the "acquisition" date. I think I'd attach a note of explanation of how and why the cost and accumulated depreciation were reduced by half due to the spouse's death and how the year's depreciation was calculated.

Pacun I respectfully disagree. Below is a section from Pub 551 Basis of Property. Yardley CPA, I see you are in PA and I am assuming the rentals are not in a community property State. I would take some time to research a bit further but everything I have looked at leads to the same example as in the pub. There are also examples of how to begin the depreciation on the new basis as well. Based on your statement of two properties being 20 years old, I am assuming they are not depreciated out. However, the depreciation taken before the death of the spouse will be used to determine the new basis. I have not used ATX for a number of years now so I can't help you with the proper way to handle it. Maybe Jack or someone still using ATX will chime in and help. Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. Example. John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. John furnished two-thirds of the purchase price and Jim furnished one-third. Depreciation deductions allowed before John's death were $12,000. Under local law, each had a half interest in the income from the property. At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000 Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property.