Leaderboard

When I first got into taxes back in 2005 I was on a board like this. Any time a question like this would come up, the same poster would declare something to the impact of "If the client refused to get a full appraisal on every item and didn't deliver it to me in a timely manner, I would immediately fire them." There was usually a part added on about legal liability he had surmised if his demands weren't met. Always wondered if he was trolling or had 2 clients left. Same guy always declared every small business tax return he did had to have a full audit of their accounting by him or he wouldn't sign the return. Somewhere he'd determined that by signing the return we were guaranteeing to the IRS the validity of everything the client provided us.

I allocate sales price percentages across all assets, according to their original cost basis percentages.

I see problems with allocating all assets based on original cost. First of all, while the value of the real estate has more than doubled, the value of the other assets have most likely decreased. Because of that, your client will end up with overstated 1245 gains and understated 1250 gains; to his disadvantage. The question is how much is it worth to find the fmv of the personal assets? If an appraisal is not feasible then work with the client to come up with values. I am cautious as an accountant to never put on an appraiser's hat but will use my judgment on what is reasonable.

Because you need relative values, percentages to allocate, can you use the depreciation values, the original cost basis, to compute the percentages? I'd rather have sales values, but I'd rather the client do the research or pay an appraiser! How much will your client pay you? Is it enough to research current FMVs? Do you even have the time without shorting your other clients?

You can't have the best of both worlds. Since you depreciated as 1245 you recapture as 1245. You allocated based on fmv.

And don't forget the vet bills & food for the "security cat" that guards the Salon. That's a deduction I was told one time by a multi-level marketer that is often overlooked.