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It is treated as investment property and covered by a sect 266 election. Since the returns for those years have never been filed, you might be in luck. Reg 1-266-1(c) states that the election has to be made with an original tax return, there is no reference that the return must be timely filed. Pub 535 also state the election must be made with an original return or if an original return has been filed, the election can be made with an amended return filed within 6 months of the due date without regards to extensions. So it appears that since your client's partnership has never filed any tax returns, those years are all open and original returns can be filed to make the election. However, you need to consider the effect of TCJA for years beginning after 2017. An election for sect 266 only covers otherwise deductible expenses. That limits the election to $10,000 of property taxes for years after 2017; and also eliminates the election for carry charges subject to the suspension of misc itemized deductions. Unless I am overlooking something, it looks like you can file a 1065 to make the 266 election for each open year and increase the basis (subject to TCJA for 2018 and 2019). $100,000 increase in basis should be well worth your fee for some basic returns to make the election per the reg and IRS pub. In situations where the election was omitted on original returns, PLRs have ruled favorably for taxpayers that were not advised of the 266 election, but that does not appear to be the case here.

Dan, I was thinking the same thing. File the returns to make the election. I'd also put a statement on the return that indicates the partnership had no activity that actually required a return be filed so that the IRS doesn't try to assess late filing penalties. ILLMAS, if you, or anyone else, would like a more complete reading of this under sec 266, this article from The Tax Advisor is a pretty good one. It also reminds us that with more people claiming the higher standard deduction, this election should be considered because the taxpayer can still benefit by adding real estate taxes and interest to basis that would otherwise be lost.

Since the house was never rented, it is treated as investment property for tax purposes. Operating expenses are never capitalized. For individuals, real estate taxes can be capitalized but an election to do so must be made each year. If the rule is the same for partnerships, the best they can do is deduct any RE tax paid at the closing in 2019. Their basis is $200k, period.

I started with Parsons too ! And I also have been fairly happy with it. Too late now to start thinking of changing. I hoping for only 5 more years and then I can retire.

I am going to say an a yearly election was never made, plus the house was never a rental, don't know if that makes a difference now? Thanks

Is capitalizing expenses an election?

Frog, if you're looking at it for an employer, the IRS does have the 15-series of Pubs and offers a spreadsheet that's not bad for small employers. Employers could have a combination of old and new W-4s from their employees. If you're looking at it for an employee. He doesn't have to redo his old W-4 if it's accurate for him. For a new job or to change his withholding with his employer, he does need to use the new W-4 now. The IRS's online withholding calculator is improving. And, your software may have a good W-4 planning worksheet.

Drake software has a worksheet that does a nice job of figuring out the W-4 allowances.

Thank you Lion, I think you mean the W-4. And indeed this happened (in fact they've been messing with the W-4 for a couple years - actually had a version which asked how much your spouse made). No one will have their 2020 tax liability changed because the W-4 was redesigned, but somehow they might expect someone to wish executing a new W-4. Like the ancient text from the Bible "straining at a gnat and swallowing a camel." All of us, including the IRS, would be better off spending time opening their mail which has been piling up. Thank you Lion and Catherine for your interest in this wacky subject. This group is wonderfully helpful.

You can also do a Coverdell ESA in addition to the QTP.

I find no federal deduction. As best I can determine they can contribute to a Virginia 529 plan. Each parent would need to establish an individual plan into which the max contribution is $2,000. This money plus accrued interest could then be withdrawn tax free to fund the child's private school tuition. How soon after setting up the plan the funds can be withdrawn I do not know and the parents will need to carefully review the plans with their fiduciary to iinsure no slippage in the rules.

I think they can use a 529 plan for those expenses, but that is just off the top of my head. You would have to research it more to be sure. I don't think there are any federal tax credits allowed for home school expenses. Tom Modesto, CA

Surprised that TaxSlayer was not considered part of the Big 7. I had it at one time, and although it is inferior to Drake and some of the others, it was quick, direct, and seemed to be a perfect fit for a large chain tax prep store. Cheap, fast, slick, and great support. Developed in Augusta GA, so state programs for GA and SC were flawless, but when you got into other states, especially entities other than individuals, it became weak. I was happy with it until encountering govt contracting clients with operations in several states.

I agree Yardley, but I still remember the 2012 year and it is not a fond memory.

Happy to see ATX had a decent showing. I've been using the program for many years, back to the days of Parsons Technology, and it has treated me well. That's not to say there isn't the occasional hiccup, but overall I'm very pleased with the product.