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In the title of the post, he is under 59 1/2. Terry, you will need to complete form 8606, part III for the distribution. Afaik, custodians don't complete box 2 for the taxable portion of ROTH IRAs. Instead, it is up to the taxpayer and preparer to figure that amount.

Terry, your client ending up with the home and ex with the mortgage may have all been part of the divorce settlement. If that is the case, sec 1041 says that a transfer “incident to a divorce” is one that occurs within one year of the divorce and not more than six years from the divorce. Existing basis would shift to the person ultimately holding the property, and because your client owns 100% of the home, then she would report 100% of the sale, basis, and gain. She would also be entitled to the full $250K exclusion if she meets all of the requirements in sec 121.

In general lenders don't rewrite terms because of transactions like divorce or contributing encumbered property to an LLC. Are you sure it wasn't handled through the divorce with an assumption of the mortgage by one and release of liability of the other? The other way would have been to refinance in only the one name.

Exactly!

For 2023, the widow can't file as QSS because the TP died during that year. Her choices for 2023 are MFS or MFJ, but joint is only available with permission from executor of his estate. I would suggest she continue as MFS so not to open up the possibility of her becoming liable for his tax debts. QSS is available to a widow that meets the requirements in the two tax years subsequent to TP's year of death: 2024 & 2025. I have never dealt with CNC status and do not know if that would remove the protection from TP's tax debts that MFS has afforded her since he is now deceased. His tax debt would become a debt of his estate, and any assets should be used to satisfy that debt before she gets anything.

Well, if the estate wasn't cash poor and had enough to pay the tax prior to final distributions, it would have been paid from estate's liquid assets prior to heirs receiving the property and they would have received the net value. They will end up in the same position once they sell, if they sell, the property. From form 706 instructions

No, this inheritance tax is NOT a deductible expense on the estate's income tax form 1041. If form 706 had been required, it could have been a deduction there against the gross estate, but not on the 1041. It also is NOT added to the basis of property. If form 706 is not required, then the basis of the property to the heirs is the appraised value at date of death that is used to calculate the inheritance tax. In the case above, the $440K value will be split between the 10 heirs.

Is this fee the 1% Foreign Estate Fee charged to MD nonresidents owning property in MD, meaning the property in question was worth $4.4 million. Is that correct? If so, this is a fee charged by MD Register of Wills that allows the estate to convey title to that MD property when it is sold or bequeathed. To me, that sounds like a probate fee or fee that allows similar probate-type authority granted by MD Reg of Wills, and I would probably treat it as such. You should do some more research as this is just my opinion. Maybe some of our MD preparers will chime in on this too.

Do you have any PPC guides? If you have the one entitled "Preparing Financial Statements," it covers the various categories and handling of debt securities including its opinion on classifications and handling of sales in the "held to maturity" category.

Yes, upon termination the unused losses of the trust or estate will pass to the beneficiaries via the final 1041 Sch K-1.

Marie, please see the instructions for form 8582 under "who must file," "rental activities", "special allowance for rental real estate activities," and the 5 "Exceptions" under "Rental activities" beginning on page 3 to determine if you should be checking the box on the sch E input for "active participation". As you read, keep in mind that there are differences in the definitions of "active" and "material" participation. If you check the box A as "active" participation, it will not allow any of the loss and should show -0- in col G and generate the 8582 worksheet with 8582 line 1d being -0- and 8582 line 3 being the -50K. Then the bottom of that is the lesser of 1d or 3, allowing -0- loss. Right now I think you have it allowing the default of Sch E, box D, and it is allowing the full $50K loss to show up in col i on pg 2 of Sch E as nonpassive.

Also, is this showing up on Sch E, page 2, UNDER PASSIVE LOSS IN COL G?

That depends. Again, did you include 8582 in the return? Does the partner have other passive income? Does he have other income or gain from this partnership that is allowing that loss in full?

I have questions rather than answers - Is this one partnership? If one, how is there SE income if it has a loss? Is income subject to SE on the K-1? Are the activities separately reported and then aggregated into one K-1? What boxes are checked for participation, active or passive? Did you include form 8582 in the return? Is there some other income or gain related to this partnership during the year that is allowing the higher loss? Was it disposed of during the year?

Here in DE also.

Length of stay, extent of services provided, and material participation are all criteria. Depending on these factors, it could still be passive. I don't place much relevance on mgmt co providing a flat amount each month. That could be a partial amount set in the contract so that owner has a steady income flow, and then settled up periodically.

I agree. The rule that proceeds must be used to "buy, build, or improve" would apply. It is possible that some may be deductible if the owner used some of the funds for renovations, for example to make the property more livable during aging, handicap accessible, or for upgrades/modernization. Also, the lender may have required some improvements be made in order to qualify for the loan too.

There is the question about not having felony drug conviction by year's end for the AOTC education credit.

Well, I have no idea what you think is not correct. Is it the wording of the ATX warning you are questioning, or is it the form 8889 instructions for line 2? The form's instructions are clear on the handling of pre-tax funds contributed through an employer's cafeteria plan.

I know there are the usual questions regarding ownership and foreigners, but I don't recall seeing any questions specific to the BOI reporting on the 1040, 1120, 1120S or 1065 forms. I pulled up each of those forms for 2023 and searched for "beneficial" and didn't come up with anything. What am I missing?

What would be the need for proof of filing, as a courtesy reminder if they haven't? Will there be questions on the returns that requires us to know this? I did just make 2 reminder phone calls for 3 clients all using the same law firm. The first one has his own LLCs for real estate and also has authority to make decisions for parents' LLC. He received an information package for his own reporting but parents have not. The other client didn't even receive any package for his C corp.

I'll be filing only for my own corporation later this year.

In this scenario, DO NOT ENTER ANYTHING ON LINE 2 OF THE 8889. That would definitely be an error. The taxpayer's benefit is via the W-2 box 1 wages having been reduced.

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Drake has had this for years. You just need to turn it on in the settings and set up the app with Drake through your phone.