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Maybe the states should protect investors with regulation for Roth conversions like they do with annuity replacements. While we add value to our tax prep with giving advice and suggestions, we can't be there when a broker, banker, or insurance agent calls trying to drum up business for themselves. I've seen more than one traditional IRA converted to a Roth and put into an annuity. One case was the clients' young broker son who sold his father an annuity (Roth conversion). I had to explain to him what a poor financial planning move this was, it was too late. I think he was just looking at the big commission. Parents were not happy when they saw their tax return. Best advice....like Rita said, just leave it alone.

The absolute WORST way to get any sort of financial planning advice is by watching a TV show !!! And that's not to blame the show, really, because they almost all do warn people at the end to talk to their tax advisor before following this advice. But the tax code is so complex that even if 5 clients have exactly the same amount of income, from the same sources, the odds are high that at least 3 of them [and probably all 5] are going to end up with different tax outcomes.

Because sole proprietors already own all the assets of the business, there is no tax consequence of property distributions from the Sch C to the owner. There is no sale in your client's case. Mark it as withdrawn for personal use so that depreciation ends on the date it stopped being used in the business. The basis carries over from your client to the sister.

I agree. I'm usually not in favor of increased regulation, but the financial advisor industry and their bank/financial services proxies should be held to a higher standard than they are. Any time a commission is involved, there's an incentive to give bad advice. 'It is difficult to get a man to understand something, when his salary depends on his not understanding it.' - Upton Sinclair

Absolutely drum in to client that they MUST insist that the Form 8594 be part of the deal. And strongly suggest that for any significant equipment they get a reputable appraisal in writing. But help them understand that the 8594 is how they establish that the price they agree on is the result of an arms-length transaction between buyer and seller, and thus, a "fair market price".

Unless you know the person's entire financial situation, making blanket proclamations can be very dangerous and why people get in trouble. They read somewhere that this is what you should do when in reality it was based upon assumptions that don't reflect their situation at all. Age of the client, their health, how assured they are tax laws or government entitlement programs will not change in the future, their pension or inheritance expectations and their total of assets are just a few of the factors that make blanket generalizations worthless at best, more likely dangerous to the uninformed who think they are informed.

Perhaps she took the advice from watching Ed Slott during her local PBS fundraising campaigns. I've heard him say to do this exact thing.

CPAacademy.com sent me emails for their webinars EVERY SINGLE DAY. The emails were huge, with dozens of lengthy links. Thankfully our email service plopped all of them into spam. I got so fed up I clicked the link to unsubscribe (hate to do that as it can bring you twice as much garbage because the email address is now verified as "live" and can be sold for more money.) It worked, and they stopped clogging my spam folder so I can see what's in there. Companies try to solicit business via email because it's so cheap, but do they really think sending people messages every day is going to make them want to sign up instead of thinking of them as stalkers and vowing never to do business with them?

I have a client with multiple IRAs who has repeatedly converted some to Roths, then recharacterized (sometimes only partial), then converted again, then converted others to Roths, recharacterized, etc. Accounts are mostly in different brokerages with different acct numbers when a conversion occurs and another new acct number when recharacterized. Each year some of the money is not returned to any type of an IRA and is a distribution (from which type of account?) She's done the same thing with her spouse's multiple IRAs. I literally keep maps to track the flow, but when I she takes distributions I get lost and have no idea if the 5-year rule applies to that particular acct. Even worse, she lives in a state that does not permit tax-free contributions to retirement accounts except 401ks--and therefore IRAs if rolled over (but doesn't tax the money on the way out). I think I have a handle on the federal taxable amts but so many of these accounts have changed character so many times I have no idea if the state amounts are correct. I decided we'll let the state figure it out if she's ever audited. She's doing this brilliant scheme all by herself--no advisor to blame. When I asked why, she said something about keeping her tax rate at 15% in the future, taking out plenty of money to live on but some of it was already taxed so her rate will be low. Guess what? She has never been in the 15% bracket and with her pension income alone likely will never be. I for one am thrilled with the new regs limiting conversions and recharacterizations to one per year per taxpayer, not per account! Too late for this client though.

I agree about TV and radio. I think the absolute best financial planning advice is found at this site: https://www.bogleheads.org/forum/index.php The quality of the discussion on that site is amazing. Nothing even closely compares to it, including one-on-one sit-down sessions with the majority of financial planners. But it does require spending some time to learn the basics of investing, which really are not very complicated once one cuts through all the noise & nonsense that passes for advice.

And the recipient needs to understand that, as a gift, the tax basis is the basis from the giver. Best that this information is in writing, and signed by both. This is for the recipient's protection, not the giver's. And remind your client that, while there is no tax effect on the business, there might, if the value of the building is significant, be a gift tax issue.

The struggle then becomes the allocation of the sales price, because they buyer wants more allocated to equipment so he can 179 it or depreciate it over a few years instead of 15 years for goodwill, but the seller wants less allocated to equipment and more to goodwill because goodwill sale is capital gains and equipment is probably mostly ordinary income. Both buyer and seller must attach form 8594 to their returns with the agreed upon allocation.

That is why debt *never* goes away. He bought it at .004 on the dollar. It was a gift to whoever he bought it from. How did he forgive the debt? Did he send a letter to all the debtors stating that as of June 1st, 2016 the following debts would no longer be collected and removed from your record? Did he send something to the local courthouses clearing the lien, if any? Its a nice publicity stunt. But is reality, what did he really do? Rich

Sometimes reconversions are wise, but it's almost always when the investment has changed drastically in value in the months following the Roth conversion. The other situation might involve intentionally over-converting and then topping off by reconverting enough to stay just inside in the 15% bracket. This is commonly done when income is subject to fluctuations. Doesn't sound like your client is being that precise with alll this back & forth activity. She would probably benefit greatly by adopting a reasonable asset allocation, consolidating the accounts into a single holiding for Roth and a single holding for qualified money, and then setting up a simple 2-fund or 3-fund portfolio that's mirrored in each holding. Chances are she's spinning her wheels while deluding herself into thinking she's engaging in some high finance dealings. A "set-it-and-forget-it" long term strategy works, but she doesn't sound like the type who has that sort of financial discipline. I think a good rule of thumb is to aim for 25-40% in Roth and the remaining 75-60% in qualified money - for that subset of people who can really benefit from the balancing act in retirement. But there are exceptions, especially if the Roth conversion can be done at a true 15% net, which almost always means doing them before beginning to draw Social Security benefits.

Great point. When people pose a tax question to me, I usually tell them that if a tax preparer answers with anything but "Well, it depends...", then the tax preparer probably misunderstood their question.

I have one who also just did this. He didn't ask my advice, just called and asked me why the bank kept insisting he decide whether he was withdrawing or recharacterizing. Me: "You are converting. It's a conversion. Can I run some numbers for you..." Client: "That's exactly right, it's a conversion. I have read everything there is to read on this. Thank you. No, I've got it figured out." Click. OK, you probably didn't read EVERYTHING there was to read... And using a bank for your investment broker is another thing you might reconsider...

$69 for shipping is beyond ridiculous. I would prefer that they label the increase in price as what it is, not label it as something else. I despise deception. I like shopping at Dollar General stores because they price merchandise as $2.00, not $1.95.

I don't understand why they can sell the same product to one client cheaper than to another person. I don't like to deal with companies that don't deal fairly with everyone. In my opinion for whatever it is worth, they should determine what they feel is a fair price and one that they can deal with and sell it to everyone for that price. They are saying by their policy that they are going to stick you for whatever they can. I'm glad that I don't deal with them anymore.

Adding to my post above, we aren't lawyers. Your client should call her attorney to determine the status of the transaction.

I think you have a completed sale in 2015. The only things missing are formality of transferring the stock certificates and signatures on the documents that should read effective this date _________in 2015. It seems to me that all of the main elements of a completed contract are here: offer, acceptance, consideration, intent, certainty, and capacity. You can't have an installment sale because that requires payments in more than one tax year, and you have a payment only in 2015.

I think there are multiple definitions but I'd say for ownership change - the sale is completed when the primary paperwork agreement is completed and money is transferred. Conditions in the sale which may need to be met don't really delay a change of ownership. In a stock sale, ownership has changed hands either on the day of the trade or at least when the money changes hands. When you later determine there is a stop on the stock certificate - doesn't mean you now still own it. You just haven't completed all the conditions of the sale.

And yet, those articles and TV shows are out there every hour implying expertise. Everyone is under the impression they are informed if they read a little on the subject. Taxes, medicine, investments or financial planning, legal matters, foreign policy. The danger is that you don't know what you don't know. How many of us haven't complained about a client being uninformed in taxes because they didn't consider ALL the facts? Same is true in everything else yet a few articles almost always gets equated to full knowledge. There is an entire advertising campaign about this phenomena: Did you stay at a Holiday Inn Express last night? I do rather extensive backpacking trips in the wilderness. You'd be shocked how many people think they have a complete grasp of back country safety from 4-5 outings, a dozen webinars and having grown up in the country. The first true medical emergency when they are 200 miles from a road changes their understanding of the scope of that knowledge.

Me, too! Now that we're talking about it, I've never seen a 1099-C for cancellation of medical expenses, either, and I hear of our hospital writing off medical expenses for my clients frequently. I'm wondering what the difference is between free shoes and free medical care. Unless it's because we all just know that a Tylenol doesn't cost $40 (pssshhh), and the providers were shooting at the moon...

Roth conversions are highly beneficial to taxpayers who expect to be in the 15% or higher Fed bracket after retirement AND who are in the 15% bracket at the current time. It's also very important that they be done before beginning to draw Social Security in most cases. There are interesting tax management strategies for someone who has sufficient income in retirement to enable them to balance regular IRA/401(k) withdrawals with Roth withdrawals to meet their living expenses with the smallest tax haircut. Roth conversions at the right time and in the right amounts also help these taxpayers to avoid unnecessary taxes due to MRD's if they are not needed for living expenses. But having said all that, I can only think of a few very special situations in which someone should convert ALL their qualified money to Roth. Any financial advisor or banker who gives that sort of advice is way out of line.

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Have a client who's been doing this every year for 4-5 years. It's bizarre to watch. I also hate it but a lot of people are switching from traditional IRAs into Roths, paying the tax and the reality is they would have avoided most or all the tax anyway if they withdrew from the trad IRA over 10-20 years. Had a 60 year old client who did this - she only had about $150k for retirement. When I told her she likely wouldn't have paid anything in tax (or very little) when she slowly withdrew in retirement she got mad at me - not the broker who did it to her.

I was fascinated by the reasoning and the apparent IRS position on this. I've never run across a 1099-C for cancellation of medical expenses, but if I had I would not have not come to this conclusion. I would have assumed that the excludable portion of the forgiven debt under Section 108 would only have been the tax-deductible amount after the 10%/7.5% haircut, and then probably only if the client itemized. I would have been totally off base on several levels.

That's always my aim. Plus burying them in enough paperwork to satisfy their supervisor, make the agent think there is nothing else left to give, and thereby justify agreeing with me, fixing the problem, and closing the case.

It depends on the kinds of notice the IRS already sent. Has the client been issued a notice of deficiency? Has the time to respond passed? In that case, get your POA and call to explain the situation and ask what you need to do to fix it. Any corrected return you might have to file will not go through the normal channels but to a "reconsideration" unit, or something like that that handles cases where deadlines have expired. I'm not sure a corrected return is needed in this case, just proof that the income reported to the client actually belonged to the nonprofit. It boggles my mind how smart, rationale people can ignore IRS notices like so many do. Do they really think that the IRS will just go away? I've had many clients come to me (AFTER the IRS has attached their pay, took their bank account, filed liens) with a few IRS letters and you can tell just by the sequence numbers they have a whole drawer full more at home.

My general procedure is to drown them in paperwork and assume I am explaining the situation to a 8th-grader who doesn't give a flip (make it simple, make it easy to agree with your position, give them all the backup they need if their supervisor asks questions). As a result, I have a high percentage of requests granted.

That's what I was thinking I could do, but I didn't know if they would still accept it. thank you.