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They weren't disposed of. He still owns them. Nothing until a final disposition happens. You can use the ATX disposition code, 'removed for personal use,' to get the 2022 depreciation correct, BUT that will remove the asset from the fixed assets system and you'll lose track of the assets and the accumulated depreciation. What I like to do is, use that code 'removed for personal use' and note the depreciation amount. Then clear out the disposition tab, override the current depreciation, and leave myself a note for next year to set the business use % to zero, by entering 0.001 in the business use percentage screen. I do this because I want to keep the assets in the tax software. It's way too easy to forget about that old depreciation many years down the road. If only ATX had a 'removed from service' date field so this could be more easily handled.

sounds like an employee

@Tax Prep by Deb It is facts and circumstances. Does it rise to the level of a business? How much time does she spend managing the apartment complex and what percent of her income does the payment represent? Does she hold herself out as a professional at managing apartments? Keep separate bank accounts for the payments? Derive any amount of enjoyment from the activity? Only you can ask the questions and then apply the facts to the taxpayer's situation. Just be ready to defend to the IRS when you come to your decision. Tom Longview, TX

Thanks for all the feedback and good ideas. In this situation, I think this is my best way forward.

As an extra incentive, you can inform them that if they fail to designate a "PR", the IRS can appoint one for them under reg 301.6223-1. The PR does not have to be a partner.

If you haven’t already done so, you need to inform your clients of the BBA audit rule implications. Then let them decide whether to make the election or not. Partnerships with trust as partners cannot make the election, but an election can be made if the partner is an estate of a deceased partner. I prepared a generic letter that included the following: For partnerships that elect out of the BBA audit rules, any IRS audits will be conducted at the individual partner level. Any resulting assessments will also be made at the individual partner level. If a partnership makes a valid election out, the applicable statute of limitation for assessment of tax will be determined at the partner level and is further determined separately for each partner. If the election out is not made, the applicable statute of limitation for assessment of tax is instead determined at the partnership level.

Might this partnership consider electing out, and therefore would not need to designate a representative? This blog has a brief explanation of why a partnership may want to consider this, especially this one with A & B having divorced last year. https://www.yeoandyeo.com/resource/why-an-eligible-partnership-should-elect-out-of-the-centralized-partnership-audit-regime

Personally I would flow it to schedule C.

I prefer it all in one place, and I don't want to risk making a data entry error. Also, it's a lot more work to have a separate, non-integrated fixed assets system.

The 600/300 rule is just for not including the 1116. You still have to prepare the 1116 to do the calculations, then check a box to say you're just using the 1116 for the calculations.

ATX largely automates the 1116. If the taxes are on long-term capital gains, there are entries you need to make on a worksheet, but if it's just dividends, then ATX should get it right.

ATX does not make the form intuitive. The concept is pretty straight forward, the income was double taxed. The US will grant a credit for the taxes paid to the other country, but only to the extent the taxpayer pays taxes on that money in the US. That is what the form is trying to do. There are more nuances to what the form does, but if you follow through the logic, it is pretty straightforward. Tom Longview, TX

For sure go for the 990-N. Check with your state to see what they require. Nothing special to e-file it, there's a 887-EO form. The only pain is there's 2 different sections on that, and I never remember, year to year, which one to use until ATX tells me I used the wrong one, lol. In 2025, you'll still hopefully be able to file the 990-EZ. It's work, but nothing too complex. Breaking up the income into different categories, and there's a section where you describe the different programs/activities, and give a total of the expenses for each. Just take a look at the first couple pages of the EZ and you'll see what I mean, it's really not bad if you're keeping the books for them.

Thanks for the replies and suggestions.

That is one of the reason I keep most depreciation schedules on a separate program (EasyACCT) so I am not relying on ATX for permanent records.

Interesting, I used to be that arrangements like this were handled as reduced or free rent.

According to The Tax Book comparison chart there is no recapture of the Special Depreciation Allowance unless it's listed property whose use falls below 50%.

The ways of God and computers is strange, and not for mortal man to comprehend, @BulldogTom. Be grateful you found a work-around that did not include sacrificing a goat.

I have thought about the "conflict of interest waiver " too. Perhaps I need to call my Professional Liability Insurance carrier.

Sad, but you have to do what you have to do. CYA at all costs. Not sure it is needed in this case but a conflict of interest waiver comes to mind.

This has been a Monthly Write Up/Payroll/Tax Returns client for 29 years. My annual fees are in the 5 digits. I have already let them know, that If I run into significant problems that they will have to find another accountant. Since the divorce became final in November, I have been taking things step by step watching for any"red flags." After giving it some thought, I have decided to ask all 3 members to sign a letter designating one of them to be the "Partnership Representative."

Couldn't you send an e-mail to all and tell them that they need to all agree who will be the Rep? I personally would disengage from this account as quickly as possible. If two of the partners can't be civil enough with each other to handle business, they will likely try to put you in the middle of things. Not worth it IMO.

I told my own son and daughter-in-law to have their partnership prepared by someone else for 2022, because they are divorcing. I think I could do a better job, and could make sure my son's interests are protected, but I don't think I'm getting the full business story from DIL. So, I don't want to sign my name on their 1065. For that reason and similar reasons, I'm encouraging my son to file MFS, but my DIL is pushing for MFJ. If my son chooses to file MFJ with his estranged wife, I'm not sure if I'll be their preparer.