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Scholarships in excess of tuition would be compensation. However, you'll need her bursar's statement to see the actual ins and outs. Colleges still report wrong much too often.

Reimbursements from healthcare sharing ministries are not taxable income. If they made excess HSA contributions then withdrew the excess, there's nothing to be concerned with. Why did the HSA even allow the deposits? One year my credit union ignored my instructions and recorded my April HSA contribution as a current year contribution instead of a prior year contribution. When I fully funded the HSA later that year for a current year contribution, the credit union called me and said I couldn't deposit over the limit. They eventually corrected their mistake and allowed the contribution, but the point is that they wouldn't make a deposit that exceeded the limit. Are you sure the account was a HSA?

As Danrvan said, the son assumes adjusted basis and tax attributes from the parents. I would add to that to note that if there are unused PALs, those unused PALs will increase the son's basis. Ref is Per Section 469(j)(6)(A). Son really needs the details of the depreciation allowed or allowable on parents return and how parent's adjusted basis was determined at the time of the gift so that if he sells the property, he can properly calculate the depreciation recapture.

If basis follows the same rules as everything else, it is cost minus depreciation allowed or allowable. Donee will have a lower basis to begin depreciation anew. As for filing the 3115, it depends. Was the property profitable or showing losses? Were the losses even useful or disallowed because of AGI? If the donors' tax bracket is low, how much will the additional $9k depreciation net them, if anything? You can let them decide if it will be worth your fee. (To those who like to do everything "by the books," the IRS isn't going to complain if landlords didn't take a deduction to which they were entitled.)

correct

I'd just add that if the excess was in the account long enough to earn interest, the interest is taxable.

Thank you! I did end up putting on line 7 of the M2. I also opened a case. I blew a half a day trying to get the program to do this properly. I also sent the service rep this link to try to explain to her what the issue was: support.cch.com/kb/solution/000119778/119778 ATX needs something like what here. A check box so that the program does this correctly. Thanks to all of you for helping me out. I'm a sole practitioner and I'm very grateful to have people like you supporting this community! Have a great tax season!

Yeah, sorry, I let every call go to voicemail unless it's a known number.

It's too bad the IRS couldn't create some process for this, as I'm sure it's common with unmarried and divorced parents. Some way for one parent to opt out and the other opt in. But at this point, not much we can do. If Congress ever gets its act together (ha!), and extends the ACTC, I hope they do so with a better process.

Agree wtih Slippery Pencil. Those funds should have been paid to the taxpayer but not put into the HSA. If the funds were all contributed to the HSA and have been spent so that there isn't enough left in the HSA to withdrawal the excess + earnings, then the taxpayer will owe the 6% excise tax until withdrawn or designated in each future period until that excess+earnings is fully used as designated contributions.

TP does not recognize any taxable income on transfer unless son assumes liabilities. In that case you have a partial sale / gift. Also no depreciation recapture, son assumes the basis and tax attributes of parents. But you need to file form 3115 on parents return to pickup the omitted depreciation as a 481a adjustment.

I think that is the way it works.

At this point, I'm frankly surprised that recorded colonoscopies aren't available on pay-per-view, for the person of your choice.

The Equifax hack exposed about 50 % of all the SSNs in the US for everyone older than 18. I agree that our SSN s should be private but given all of the other hacks in the last 4 years it no longer is private. The odds are better than 50/50 that your SSN is available for sale somewhere out in the dark web.