Leaderboard

Maybe I am missing something, but if they are rental units the basis will be depreciated beginning when the assets are placed in service, right? Does having them out of the country complicate this? So unless you are doing cost segregation, this seems pretty straight forward compared to some things. Or like I said, I missed something. This has been a heckuva October.

I am with Gail on this. I don't see any of it being deductible this year. It is all capital transactions so far, and when the property is ready to be used to generate income, the cost will begin depreciating. Are you overthinking this one Catherine, or are Gail and I missing some important point? Tom Newark, CA

When you receive a state or local tax refund of taxes that were included in Sch A in the prior year and were also subject to AMT, you recompute that prior year's income tax liability with the deduction reduced on Sch A by the amount of the refund you received. If the resulting recomputed tax is lower or is unchanged, there was no tax benefit. If the resulting recomputed tax is higher, as it is in your client's case, then the difference between the amount of total tax on the return as filed and the recomputed tax liability is the amount of the tax benefit that was derived by the deduction on that prior year's return, and is the amount of the refund that is taxable. Example with made up numbers: Client's 2013 Sch A included $68K in state taxes paid. Client's total tax liability for 2013 including AMT is $180,000. In 2014 $61K of state tax is refunded. Recompute tax with only $7K of the state tax on Sch A (the 68K tax paid minus the refunded portion) and now total tax liability as recomputed is $180,018. Because the resulting tax would have been $18K higher, the client received a tax benefit of $18K on the 2013 return as a result of that state tax deduction that was refunded in 2014, and therefore in this example, $18K of the state refund is taxable in 2014.

Anyway, I see the solution is to amend the Corporate returns, then the client gets no deduction for the sales tax payments.

Not in service. Don't worry about these assets until they are on the market to be rented. #fagettaboutit

That's also why we use computers!!!

That's what you get for choosing big numbers and not making the math easy on yourself.

Late night brain fail.

Can he be reimbursed for trust expenses and let the trust deduct them?

Tom, Here is a couple ideas for Ya.....

Thanks, you two. I searched, but used too many words with composite. That was my own question from earlier this year. I hadn't run into the problem this season. I hate that my memory is failing me as I get older.