SaraEA

Just transfer the records as long as you have the authorization. The client wants to go to someone else, so let them. They won't be happy if they're forced to stay with you because you won't let their records go. Clients move on for all sorts of reasons--maybe they found someone closer to them, think your prices are too high, decided to try someone a friend or colleague swears by, whatever. I get really angry when a new Sch C or E client can't get depreciation schedules from their former accountant. Why make their lives (and mine) miserable? They've already left you and aren't coming back. Be the grown up, act like a professional, and help with the transition. If that's how you conduct yourself, new clients will soon take the place of the former ones. I never withhold depreciation schedules, NOL worksheets, claim of rights histories, or anything except my own research and notes. What's the point?

I wish I could be lazy. Work is still there. I've been tackling lots of returns on extension (many brought in on April 10 or later), doing them to the point where I know what info is still needed. And how many of those clients have delivered the info? You guessed it. They'll wake up October 10. Except, of course, those clients who suddenly need to refinance their business or home or whatever. They show up will all the missing info and start calling the next day to see if their return is done. I keep repeating to myself "your problem is not my problem." I refuse to let them stress me outside of tax season. There's also the estate and trust returns with their own deadlines. The gift tax returns where no tax is due so being a little late doesn't matter that much. I do find that the clients I'm working on at this time of year tend to be disorganized and their returns are complex. I just finished one who had NINE LLCs (each with its own issues), two with foreign income exclusions, one whose "Quickbooks accounting" consists of nothing but his bank statements, a couple theft losses (internet scams, had four others during the season), a partnership that just dissolved, etc. Good thing it's off season so there's time to do the research. Oh, and lots of amendments--everything from really late corrected brokerage statements (or corrections to the corrected ones) to people suddenly finding yet more student loan interest or property taxes. What's nice, though, is that the pace is so much different. Hours 9 to 5, no 7 days a week (actually trying to do four). Coming home, having a real dinner, and then being interested in booting up the computer. During tax season I have no interest in my personal computer after staring at one all day and half the night. Like others here, I too am behind in so many things that just got pushed aside during tax season. I will not stress, I will get to them when I get to them, and who wants to bet how many of them actually get done by the time 2014 filing season is here? Is it just me?

Cathy, as I recall the refund cycle chart was eliminated because the IRS had implemented numerous new filters to detect fraudulent returns before refunds were issued. Many of these filters were to sniff out identity theft. Those who changed marital status, addresses, or added dependents would surely get delayed by these filters. Since there are an awful lot of taxpayers in those situations, the agency decided not to get anyone's hopes up and did away with the chart. Remember at the start of this season they announced that refunds would take 2-3 weeks? Those who didn't have any changes in critical data got their money much sooner, but then it was a pleasant surprise. As ID theft for tax purposes continues to grow like a wildfire, expect yet more filters and more delays. I see it as financial protection of taxpayer money, not political motive. A comment I neglected to make last night in my anger over the stupidity of the CNS news article concerns their criticism, "That policy, made those many years ago, not only determined that the IRS would treat illegal aliens the same as legal immigrants and U.S. citizens, but also that the IRS would not hand over to federal immigration authorities information about employers who appeared to be hiring large numbers of illegal aliens and about illegal aliens who filed false documents with the IRS." Teach your blood-thirsty reporters to read the Code!!! Many years ago, the IRS was prohibited from sharing ANY tax information on ANY taxpayer, businesses included, with ANYONE. You could list your occupation as smuggler for a Mexican cartel, and the IRS wasn't (and still isn't) allowed to tell a soul. The Patriot Act enacted after 9/11 made a single exception, that the IRS could share tax data of suspected terrorists with Homeland Security. Since then, they have been allowed to share names and SS#s with state prison officials (nothing else) to head off fraudulent returns that had become a prison pasttime. (Congress had to permit them to do this, but only did so after the agency endured heaps of public criticism for issuing refunds to the prison population. Congress let the IRS take the blame when Congrress was the one who prohibited them from doing otherwise.) I have sat through many seminars given by IRS officials. They have mentioned how when they build cases against taxpayers, they cannot invite any other gov't agencies into the discussion because tax info cannot be disclosed. On the other hand, they are often invited by other agencies to help build their cases because the IRS is so good at "following the money." Paper trails can be daunting to unwind, and the IRS is really good at it. That's why so many indictments of publict officials, crime figures, etc. note that charges were brought by X ageny and the IRS. I am not denying that the IRS has made a lot of mistakes, all well-documented by the media in recent weeks. But we as tax professionals, who know a heck of a lot more about how the agency works and the IRC it must uphold than reporters looking for a headline, have to resist joining the herd. We know better. Blame the IRS for expensive junkets, but not for doing things it legally has to do (or for not doing things it legally cannot do).

CNS News has clearly decided the IRS is wrong and is bending the facts to conform to its conclusion. I'm sure I'm not the only one on this board who remembers the controversy the year the CTC became refundable. Unlike the EITC, adoption credits, education credits, etc., there was NO requirement in the Code that the children have Social Security numbers. All of us looked it up, and looked it up again in disbelief, when the situation arose. Clarification from the IRS Chief Counsel or somewhere high up in the agency confirmed that the law, as written by Congress, did not require SS numbers. The IRS didn't just make "its own 'policy decision' to ’legalize’ illegal aliens.” It was merely following the law . To do otherwise would be breaking the law. There have been so many scandals plaguing the agency of late that I think the media are sniffing in corners to be the first to break the next big reason to hate the IRS. Too bad reporters don't know how to read the IRC or understand that Congress makes the laws that the IRS is charged with upholding. I have read many a court decision where the judges admonished Congress to make clear their intent because neither the taxpayers nor the IRS in the case being decided could be faulted for their interpretations of the nebulous meaning of the law as passed. The issue about overlooking possible fraud in approving ITIN applications is a bit different. Management clearly issued wrong directives. Still, I don't know what else the agency could have done in the face of budget cuts that reduced staffing and training at the same time the workload increased. (Remember that outside approval agents used to be able to review the paperwork before it got to the IRS but that practice ended so all the work ended up in the IRS's lap.) They probably should have followed the rules more carefully and just let the backlog of applications grow. When elected officials learned about the delays from constituents and complained, IRS managers could have made a good case for increased staffing. I guess what I'm saying boils down to the fact that the uneducated public (including the media) thinks the IRS is responsible for the incomprehensible tax code and makes up the rules as it pleases. Those of us in the business know that tax law originates in Congress, and except in those instances where the law mandates that the Secretary of the Treasury flesh out the details, the IRS and Treasury are beholden to the law as written. The IRS could no more deny someone claiming the additional CTC without the child having a valid SS# than it could refuse to issue you a refund because it doesn't like your middle initial.

When will it end? At least weekly the IRS is being publically exposed for some boondoggle or another. How many of us had to prod, cajole, and reassure clients that efile was safer than mail? How many times a tax season do we give the speech to wary clients that what goes to the IRS stays with the IRS, that no other agency in the federal gov't protects their privacy so securely. Well, now we look like fools. On a larger level, I am horrified at how one of the best-run agencies in the entire federal bureacuracy, with the best-trained employees, suddenly fell into such disrepute--targeting people for audits for political reasons (allegedly, with several officials pleading the Fifth), taking expensive junkets, and now releasing taxpayers' sensitive data. I know a lot of IRS agents, and find all of them to be dedicated, learned employees who are committed to upholding the tax code and respecting the taxpayers who pay them. Back when the Nixon administration imposed price controls, they borrowed heavily from the IRS labor pool because they were capable and well-trained in learning and upholding the law. I often defend the agency to my clients, explaining that it is not responsible for the mess of the tax code, it can only do what Congress tells it to do, etc. And now this. I think the fault has two levels. One is the practice of Congress to write social policies into the tax code. The IRS isn't just about collecting federal revenues anymore, but administering the nation's largest antipoverty program (EITC), stimulating housing, getting polluting cars off the road, encouraging business investment, helping people go to college, jointly administering labor and pension law, being burdened with a big chunk of Obamacare, etc. etc. These are political actions more than revenue-collection ones, and I guess the agency eventually had to succomb to politics in its operations. Second, Congress has greatly reduced the agency's budget while expanding its responsibilities. The Taxpayer Advocate herself recently detailed how reduced training funds have greatly impacted the effectiveness of her office. It is time to let the IRS return to its original purpose of collecting revenues, not administering social policies. Their staff should focus on Title 26, nothing else. They've been really good at it in the past and I believe can be so again, There are lots of federal agencies that focus on the poor, education, housing, health care, etc., so let these others do that work. Then the IRS can rebuild its former image as a respected (albeit hated) agency that does what it does well.

I don't know anything about this particular company, but nonetheless I'd advise your friend to run, not walk, far far away. Go to a place that works with the gov't HAMP or other programs to keep homeowners from foreclosure. Her own bank is the best place to start. Banks have had to pay billions in fines for not cooperating, plus the loss of image, so they are more willing than ever to work with distressed homeowners (plus the law says they have to). I've had a couple of clients burned by these third-party places (not by the one you mentioned). They take your money, give you bad advice (like stop paying your mortgage), and get you deeper in trouble and much poorer after their fees, plus you still lose your house. I've also had a couple of clients burned by the "pennies on the dollar" places that promise to get you out of IRS debt. Just this week I worked on a return with COD income. The clients went to a place that negotiated with the credit card companies to reduce their debt. They did get it reduced significantly, but the cost was astronomical ($400 + 35% of the debt cancelled + $50 a month for the 24 months they had to pay the agreed amount on their balances + a ton of misc fees). They could have paid off most of their balances in full with what they paid the negotiator. Tell your friend there is no such thing as a free lunch, that this company didn't contact her because they have her best interests at heart, only their own. There are a number of gov't programs in place to help her. If she doesn't qualify for any ot them she can't keep her house. An expensive third party is not going to help her qualify. It's a facts and figures criteria and you either meet the criteria or you don't. Applications to these programs are free to the best of my knowledge, so tell her to save her money.

Jack, I don't think a tiny percentage of the population was allowed to throw everyone into a frenzy. The Supreme Court case had nothing to do with same-sex marriages per se. My understanding is that it had to do with states' rights--an issue appropriately decided by our nation's highest court. The Constitution limits the powers of the federal government, ceding to the states authority to create most public policies and allowing the central government the power to do things the individual states can't (e.g., declare war, interstate commerce) . States have traditionally defined marriage and passed their own rules governing it. When I was a kid, it was popular for young couples to elope to Las Vegas, which didn't have the requirements for blood tests and waiting periods most other states did. George W Bush started a trend of usurping for the federal gov't powers that traditionally belonged to the states (Obama has certainly carried his torch). The Defense of Marriage Act defined marriage for federal purposes as between a man and a woman. The feds essentially took from the states their traditional power to regulate marriage. Today the Supreme Court said the feds can't do that. In my opinion, the federal gov't has been stepping on states' rights with the power of the purse. For example, public education has long been a state function. By giving the states a little bit of education money, with fat strings attached, the feds have essentially taken over local jurisdiction of education policy. Same with food stamps, medicaid, etc. Do it our way or don't get our financial help. Thus areas that have always been under state power have been handed over to the feds--who are setting state policies by telling them you can do whatever you want but if you wander from our desires you get no money. Most states have no choice but to comply. I live in a state where same-sex marriage is legal. Like other posters, I have to file them as single for the federal return and either MFS or MFJ for the state. I don't have a lot of these clients, and I'm going to wait for guidance before I start doing amendments. Yet I do applaud the Supreme Court for finally taking a stand that our Constitution does not permit the federal government unlimited powers.

Cathy, at first I thought Joan's post was a little harsh too (although I agreed with every word). I think we are all getting frustrated with MsTabby because she hasn't absorbed a single word of all the well-meaning advice that so many posters have taken the time and trouble to offer. She titled this thread "seriously incompetent auditor" and has failed to see any light that we have all tried to shed that just maybe the auditor is right. Ms Tabby is coming across as a know-it-all who didn't really come here for advice but for sympathy for her position. She has fought all the good advice that was given her because it didn't agree with her preconceived notion that the auditor is wrong. If any good has come of this, it is that a number of other posters said they really learned a lot about the audit process, what it takes to prove a case, what to do and what not to do. Everyone who hasn't already done so should read Circular 230 (and even those who have, as a refresher), and pay attention in those mandatory annual ethics courses. Ms Tabby especially needs to do this. To clarify for the OP, the responses of many very knowledgeable posters to the issues you raised have led to the following conclusions: 1. An MBA QUALIFIES the taxpayer for a new position. The IRS and many courts have taken the position that the cost is therefore not deductible. It does not matter that he does not go and get a new position, just that he is qualified for one. 2. A scholarship that CAN be used for living expenses, educational materials, etc. is taxable income, regardless if it was actually used for tuition. (Even the pubs say this.) Was this fact perhaps in the 19 pages that were faxed to the auditor and unknown to the OP? 3. In an audit (unless a criminal case), the burden of proof is generally on the taxpayer. His or her representative must gather that proof. Dismissing the auditor as incompetent and relying on nothing but pubs (and not even reading them carefully enough to realize that they say "qualified" for a new position instead of "taking" a new position) avoids gathering the substantiation the taxpayer needs and hands the auditor an easy win. 4. Representation is a serious obligation. Know when you are over your head and hand the case to someone more qualified. This is not an admission that you are incapable. CPAs and EAs routinely do this when they sniff that something a client has done verges on criminal because they don't want to have to testify against their client (which they will have to, whereas communications with an attorney enjoy attorney-client privileges so they send the client there). 4. Don't ask rhetorical questions on a serious message board such as this one. Many people tried to help before they realized that the OP was convinced she was right and didn't really want any help. Doing so leads to the type of crtiticism voiced by Joan (and some will say me as well).

"If it comes to doing "legal research" or something out of my scope, I'll refer him to a tax attorney. I can only go by what the pubs say...and how I interpret it in regard to his situation.... I'm just a simple RTRP....I know when I'm out of my league." Ms TabbyKats, you are definitely out of your league. We should have picked this up when you said you just "knew" you were right and didn't need to research something you already knew, ignoring the advice of many posters to review case law. And then you cited IRS pubs to prove your point when these pubs have NO legal weight at all (except perhaps to reduce penalties if you can prove they misled you). When a tax pro takes a position on a return, s/he must be able to back it up with what the IRS calls "substantial authority" or face huge penalties. Code Section 1662-4(d)(3)(iii) defines substantial authority. It starts with the Internal Revenue Code and contains Regulations, Revenue Rulings and Procedures, congressional intent, case law (some courts carry more weight than others), letter rulings, etc. In my Master's program, we would get an automatic F on a paper if we cited a pub to prove a position. If you are the one who prepared this return, you can be in a heap of trouble for taking the position you did without having valid authority for doing so. In our office, whenever we encounter a grey area we create a list of all sources of authority that justify our position. If the IRS challenges it and our client loses, at least we will avoid those hefty fines for failing to meet what they call a "reasonable basis" standard. Your client needs a tax attorney, EA, or CPA to represent him in this matter. You may need an attorney yourself, but perhaps the dollar amount is not high enough for the IRS to pursue a fine against you. At any rate, I'd stop being so antagonistic toward the auditor or she might just decide to go after you for taking the questionable stance you did based on IRS pubs.

"No...I haven't read any cases. The clients is doing the same work in the same occupation he always did. Really....not much to read up on...since the deduction is allowed if he is staying in the same field. I like to use my time wisely. I don't need to read up on things that I know." Your client needs a new representative. You obviously know more than the courts and the auditor, but the fact is you have to deal with that auditor. My review of case law is that the deduction is NOT allowed in this case. You say it is, without having reviewed legal precedent. You may be right, but you have to prove it to the auditor. You refuse to do the work to establish proof because "I don't need to read up on things that I know." You prefer to blame the auditor. Please spend the weekend looking up these things you think you already know, keeping your contempt for the auditor out of the picture, and come back on Monday with some substantiation that you are absolutely right, might be right, or are completely wrong. You act as if the auditor is asking you to prove that the sky is blue. You refuse to offer any proof because you just know it's blue. That's not the way tax audits work. The burden of proof is on your client. The auditor already has a boatload of cases proving her position. You have to present a boatload disproving it. To you that may not seem like using your time wisely, but it's what representation is all about.

jainen is correct that it is very hard to prove that an MBA does not qualify a person for a new job. There is a lot of case law on this issue, most of it supporting the auditor's argument that tuition for an MBA is not deductible as an employee business expense. Read it before you try to defend this deduction. The fact that your client left work to pursue his degree will make your argument less plausible. And the validity of the deduction, I think, is the only real issue in this situation. It is just stupid to add a scholarship from a previous year to a different year's income--UNLESS the 2011 1098T showed adjustments in boxes 4 and 6 (to prior year information). In this case, 2010 has to be recalculated and the adjustment made in 2011 as a "recovery." Have you seen the 2010 and 2011Ts? The auditor may be right. You are obviously well-trained in what tax pros are supposed to do--protect their client's best interests. Sometimes, however, it pays to play devil's advocate. See what the other side is seeing. They may have a point. If they don't, you're a hero. If they do, you just made a fool out of yourself.

"Clients should open their mail" says it all. I've had quite a number of new clients in the past few years who showed up because (a) their paychecks were attached for back taxes, (b ) liens were placed on their property and now they wanted to sell, or (c ) their bank accounts were "burglarized." There was also one (d) IRS showed up at his house. Most come in with a handful of IRS notices, but you can tell by the dates and progression that they have a few dozen more at home somewhere. The one thing they all have in common is they think that if they ignore the letters the problem will go away. Of course gov't attaches bank accounts with no notice (other than multiple ones saying you owe $X and need to pay up). What are they supposed to do? Send a warning that on Monday June 10 they will drain your account? Undoubtedly you'll be the one to drain it before that day dawns. I seriously doubt that race has anything to do with it. I have never used tax software that required me to enter a taxpayer's race, or gender either for that matter.

If Mr Dellinger is one of the "most respected authors on tax subjects" around, then the English-speaking nations are in deep trouble. People who are respected as authors generally know things like grammar, sentence structure, verb tense, verb tense agreement, proper use of pronouns--you know, things kids are supposed to learn in elementary school and practice in high school. His written communications skills are so poor that I have a hard time grasping his points. Because his writing skills are so sloppy, it makes me think the same of his critical thinking skills. He discredits his entire thesis. I will wait to draw my conclusions until I read what people who know what they are talking about (and know how to talk in proper English) have to say.

Joan, I wouldn't hold so much hope that your assistant will be able to do "itemized deduction returns, and probably Sch C & E too." I think you underrate the need for knowledge and experience. Sure, HRB's tax course might be good (at least it used to be), but even that outfit doesn't allow new preparers to do Schs C and E if they can help it. We had a new assistant this year who had an accounting degree and really picked up data entry fast. We couldn't criticize her for the many mistakes she made because SHE DIDN't KNOW TAX. Client would give us a 1098 for mortgage interest and taxes and she'd put it on Sch A, not realizing that they had an office in home or lived in the rental property. Same with auto expenses that had to be entered on Sch C instead of A. She really blew the family day care providers because she entered their expenses in the wrong places. And while we couldn't blame her for these errors, it took a lot of time when we checked the returns to track down where the heck she entered the numbers so we could delete and put them in the proper place. For those of you considering UltraTax, I've used it for years and it's an amazing workhorse. It's not perfect, and some of the changes this year made it cumbersome at times. For example, it would try to help you by "remembering" data that it would automatically plug in. Well, stick in "Cli" and it would autofill "Clifton TX" and some Zip code. Well, you might have wanted Clinton CT, or Clifton might have more than one zip so you'd have to stop and check if the one in there was correct. It wasted so much time. The Sch D entries used to be on one line that was so long it was hard to tell if you were on the right entry. I guess responding to complaints, each enry now occupies THREE lines and you have no idea where you are or what the running totals are. I don't trust the tax projection worksheets, especially for the states, but I've never found a really good tax projection progrm that considered all the moving parts. Outside of these annoyances and a few bugs, though, the program is remarkably accurate and has excellent diagnostics. When we do outside states or forms that we pay for individually, we just add the software cost to the client's bill. We gave up on ATX for the few workstations that had it in January and just added those features to UltraTax. With the cost, though, we're thinking of using our QuickBooks for W2s, 1099s, etc next year.

A 1041 can be e filed through UltraTax. The state that goes with it isn't ready yet, but that's a state problem and not UT's. I am SO glad we switched last year. I have been pained reading through all the pain many on this board have experienced. I could not have imagined what it would be like to head into filing season with clients waiting and software that doesn't work. Panic attack. I give you all credit for keeping your heads. UT has worked flawlessly so far. I just did a return for a gal who makes enough to get hit by all three new taxes next year. I did the tax projection worksheet, and I never did trust ATX's tax projections (or those of other software companies I have used, to be fair), so I didn't know what to expect. Mama Mia! Not only did it calculate the new "hospital tax," higher rates on capital gains, and phase out of exemptions and itemized deductions, but had worksheets showing how each was calculated. I don't think the state projection was right, but I'll take what I can get. While UT is way too expensive for a small practice, this year ATX is way too unreliable for any practice.

I can address #4. In CT, if refund is less than $5000 you can only get direct deposit or a debit card.

I implore everyone not to take seriously any rumors, news reports (unless official from the CT State Police), "knowledge" gleaned from the internet, or anything else regarding this unimaginable tragedy. I live close to Newtown CT and I cannot tell you what life around here is like right now--daily life made much more difficult by all the crap floating around out there. There were two days of "facts" like the shooter's mother worked at the school (not so), to hints that she was going to institutionalize him on the West coast (not verified), to he was a "gamer" hooked on violent video games (who knows?). When I saw the first headlines they were all over the place, so I decided to exit the screen and revisit it later to learn what really happened. In the days that followed, the information oozing out of everywhere has been even less reliable. Have clear heads, people. We cannot fathom this horrendous slaughter, and it's human nature to seek reasons and explanations that can help us get our heads around it. At the moment, no one knows--but that's a truth we can't accept as we struggle to understand why this happened. I cannot describe the heartfelt pain and sorrow of everyone I see in these days that are supposed to be the happiest of the year. Our local paper had to add a full page to the local section the past few days just to fit all the obituaries (many with pictures that were surely the class photos taken this fall). PLEASE, PLEASE, stop trying to extract meaning from any but official statements. Right now, we just don't know. What we do know is that these families have had their hearts torn from them. The entire community is in mourning for them. At the moment let's give up the quest to be rational. It's based on unconfirmed information or misinformation. Focus that energy instead on the victims' families and on the community. We are in such pain.

The donor should be able to deduct FMV! See Pub 526 for property that has appreciated in value. There are some restrictions, like if the donor chooses to go with 50% AGI limit instead of 30%. If you could only deduct basis, why would there be so much advice out there to donate, for example, stocks that have gone up? If the amount is over $5k, an appraisal is needed. The donees by law cannot declare a value (which is why all those Goodwill receipts are filled out by the donor). Say I found in my ancestors' attic an original copy of the Declaration of Independence, given to my Great great great uncle by Thomas Jefferson himself. The house was gifted to the younger generations over the years, so the giftors' bases just passed on to the relatives (no step-up). Now I give that copy to the Smithsonian. Is the value of my gift really zero? I could have sold that copy for millions, so that's what my deduction is worth. Same with your client, provided of course that the museum is a charitable org.

Tom, your idea of embedding SS numbers into software for efile is creative but has a few holes. One is that the preparers might just bypass efile and produce paper returns. Another is that SS numbers seem to be a dime a dozen and only have to be bought or stolen. Then some poor victim of identity theft will get in trouble for filing zillions of fraudulent returns on top of their other woes. At a seminar last year a gal from the IRS discussed how the agency is working to identify "ghost preparers." She would not say what they were doing, but they were aware of the problem and apparently doing something about it. I don't think much can happen on this front until the day when everyone has to take the test and the IRS can start advertising to the public the importance of using only those with PTINs (no longer provisional). They say they won't do that until everyone comes under testing requirements, a date they keep delaying. So now many tax pros have to pay for PTINs and tests but do not get the national publicity that was promised. To me, that is where the good idea of registration went bad. I too have seen lots of returns marked "self-prepared" that were done by someone for pay, usually done wrong. I also keep seeing clients come in whose long-time preparer retired and last year's return was done by hand. Some of these had years of depreciation schedules, on green accounting paper, and accurate! Others were still using 18 year depreciation (retired with ACRS), salvage value (before my time), the old HOH rules where a widow could use that status if her 40 year old son who made $60k a year lived with her, and they obviously hadn't taken an update course in 10 years. The price of the return was often $100. No wonder the old guy retired, who could meet expenses with that?

The 3 out of 5 year opinion is a common belief but it is no hard and fast rule. Treasury Reg 1.183–2 lists a slew of indicators that an activity is engaged in for profit or not. Substantial income from other sources is certainly one of them (like making $60k at an IT job and $150 from the business). Others concern whether the activity is run in a business-like manner, e.g., state registration, sales tax #, advertising, separate business checking account, written business plan, consult with experts for ideas on how to be profitable, and changing things around in an effort to turn a profit after losing money. The indicator that often lands these activities in court is the element of personal pleasure or recreation involved. Rich people who like to build and race fast cars, and physicians who turn some land into vineyards to make wine, are typical of those who have some 'splaining to do in courts. Maybe some of you folks who have been in this business for a long time will know where the 3 out of 5 misconception came from. I know an older preparer who reclassified as a hobby a storage rental business that had lost money for over 3 years. The owner bought land, constructed storage units, put in security systems, ran ads, etc. and had no other job. I bet he didn't find any amount of pleasure in sitting in the office chasing people who hadn't paid their monthly rent.

Be careful with that election. It means that if any one property is sold or taken out of service, gain or loss is not recognized until ALL the properties are sold. Suspended losses remain suspended until that time. Be sure your clients aren't planning on disposing of any of their holdings until they exit the landlord business altogether.

I think the key to answering this question is what does "joint custody" mean? If the child actually lives with each parent roughly half the time, then it's fine for each parent to claim the exemption and child care credit every other year. As long as both parents don't claim the child and care expenses at the same time, the IRS isn't going to go demanding signed 8332s. What your client is trying to do is get around the $3k limit on child care expenses on which the credit is based. If both parents claimed $3k for the same child, they'd effectively be raising the limit to $6k (which still isn't enough for quality care, but congress has been reluctant to adjust this amount for inflation). If the child actually lives with one parent more than with the other, then only that parent can claim child care. Think about it. If your child doesn't live with you, you really don't need child care. You can go to work (or school, or look for work) as you please without having to think about what you're going to do with the kid while you're away. In this case only one parent qualifies as the custodial parent and is entitled to child care expenses, even though it's the other parent's turn to claim the dependent. F8332 will be required.

You can only use average cost for mutual funds. Stocks are FIFO unless specific lots are identified at the time of sale.

Of course the ages of everyone involved will matter for the final determination. Many responses thusfar mention support, but that really shouldn't have anything to do with it. For a qualifying child, the only support rule is that the child can't provide more than half of his or her own support. For EITC, the only rules are age, relationship, and residency (and no joint return)--support is not part of it. Are some of you thinking of the old rules when you had to provide more than half the child's support to claim the exemption? I think the "trick" in this question is whether the mother can revoke the 8332. She sure can. Part 3 of the form itself is used for the revocation. The other trick is that the wages were for a prior year. Well, she's getting paid for them this year so they should count as wages. This is not unlike those who get paid every other week. If the calendar works out that the pay is doled out the first week in January, that incomes counts for the following year even though one week of it was earned in the prior year, does it not?

A partner's basis can never go below zero. The capital account can, but not basis. A gift tax return is in order. The federal unified estate/gift tax exemption will apply, so likely no federal gift tax will be due. The state may be another story.