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I can't answer for the 2010 program, but I just tested this for you in the 2011 and 2012 and the 4562 input screen's first box has selections for A,C,E,F, 2106, 4835, Auto, 8829, K1P, and K1S. Selecting K1P does carry the depreciation to pg 2 of Sch E as UPE. Be sure to click on the drop down to look at all of the choices for that first box because maybe what's written as the description of the box isn't showing all the choices that are available.

Theft of a/c units isn't uncommon at all. Thieves have even been stealing the industrial sized units from commercial buildings and churches. The easier ones to steal are the apartment complexes where the units might all be in one location. Sometimes the whole unit is stolen, but sometimes only the coil is removed and the copper and aluminum is turned in for the scrap metal price. It's been an ongoing problem for a while now.

Check out this link to IRS manual for its auditors, specifically 4.11.7.5 Shareholder's Gain or Loss. If a series of payments are received, the basis is fully recovered first before reporting the gain, or if a loss then it is not allowed until the final amounts are received. In your case, you'd apply basis up to the amount distribution for 2012, and the remainder of the basis would be applied against the amount in 2013. Something was bugging me about the installment sale issue, so I looked a little further. It's still a cap gain transaction though. http://www.irs.gov/irm/part4/irm_04-011-007.html From Pub 550 - Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. These distributions are, at least in part, one form of a return of capital. They may be paid in one or more installments. You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock. After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain. Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock. See Holding Period in chapter 4. Stock acquired at different times. If you acquired stock in the same corporation in more than one transaction, you own more than one block of stock in the corporation. If you receive distributions from the corporation in complete liquidation, you must divide the distribution among the blocks of stock you own in the following proportion: the number of shares in that block over the total number of shares you own. Divide distributions in partial liquidation among that part of the stock redeemed in the partial liquidation. After the basis of a block of stock is reduced to zero, you must report the part of any later distribution for that block as a capital gain. Distributions less than basis. If the total liquidating distributions you receive are less than the basis of your stock, you may have a capital loss. You can report a capital loss only after you have received the final distribution in liquidation that results in the redemption or cancellation of the stock. Whether you report the loss as a long-term or short-term capital loss depends on how long you held the stock. See Holding Period in chapter 4.

Google "asset sale vs stock sale C corp" and you'll get lots of good info, but not specifically about the box 8 handling. The double tax is why the seller prefers a stock sale because it's one tax at the shareholder level at cap gain rates. Asset sales are what the purchaser wants so they get the step up in basis of depreciable assets, and they usually don't assume the debt or have the potential headaches of issues like product liability and warranty issues, contract disputes, and employee lawsuits.

That's the double taxation problem with C corps when a sale is structured as an asset sale, and the income is taxed as ordinary income, usually at the highest rate. And then when the funds are distributed in payment of the owner's stock, it's taxed again as the capital gain. That's why I asked what happened to his stock, how it was disposed of. It sounds like this was really an asset sale where the cash went into the corp, the corp recognized the sale of assets being sold on 4797, and then the corp paid the shareholder the cash to liquidate/redeem the shares. Is that what happened? >>as a Sch D to the extent of basis<< No, the total liquidating distribution is treated just like proceeds of sale of stock sold through a broker. The amount in box 8 does not belong on Sch B, and it is not nontaxable if you were thinking it is the same as a return of capital. In your case because the stock was owned since the 1990s, the excess over basis will be a long term cap gain. If all of the funds were received in one year, you'd report the full amount as proceeds and the full cost/basis on Sch D. In this case, I agree with Michael that you'll have to decide about either reporting it as an installment sale over the 2 periods, or you'll allocating basis to be applied against the amounts received in each year.

Yes, that's what I was trying to say last night, at some point the shareholder has to recognize gain on the sale/liquidation of his shares. Cap gain treatment is why a stock sale of a C corp is more desirable from the seller's point of view rather than selling the assets. Just as an example because I'm not sure if this is what happened in Catherine's case, even if a corp does a tax free exchange of its stock for stock in the purchaser's new corp so that purchaser gets a step up on the assets, and then sells those shares in new corp, the shareholder's basis remains the same and cap gain is the proper treatment on the shareholder's return.

Rich, ATX has always had the ability to customize the return manager. I had columns set up similar to what you've described for return tracking, and ATX also allows the user to delete any of the predefined columns too. With the return manager open, click on the "Options" menu at the top and choose "Customize Fields". A box will open with columns currently displayed with check marks. It should be self-explanatory. In that same box, scroll down to the bottom and you'll see where you can add more columns and name them anything you wish. ATX also allows the columns to be rearranged in a different order also. Sorry for the slight hijack, Jack.

The amount in box 8 can be taxable and treated like a sale or redemption of the owner's stock if the amount received exceeds the basis, and then it is taxed as a capital gain on Schedule D. What happened to the owner's stock?

It would depend on the language of the agreement, I suppose. I didn't look up to provide you links, if the payment is truly for property damages, it would reduce the basis in the property, and if that payment exceeds the basis, then the basis in the water lines & pipes would be reduced to zero and the excess would be taxable income. Any part that is a punitive damage and not specific to the property damage would be taxable. You should do research of property damage awards and settlements to document your handling for your files. Are you the preparer of the partnership return?

The increase in shareholder loan and APIC doesn't affect the AAA at all, they only affect the shareholder's basis. To be sure that I'm completely in balance, I always opened the "Options" tab in the 1120S form of ATX and checked the box to force completion of the balance sheet and M-1 so that I could view it on the screen, do my final review, sometimes would print pg 4 of the 1120S for my file, and then uncheck the box before filing. Unless you are keeping the books on the tax basis of accounting and not GAAP, it is entirely possible, and not even unusual, to have a different AAA for tax than AAA per books because of temporary timing differences. Those are the same as for C corps (tax vs book deprec, bad debts, acc'd shareholder distribs, sec 263 inventory adjustments, accr'd shareholder salaries, accr'd vacation pay, cap lease amort and interest, rent adjustment under sec 267, and accumulated timing diffs from prior years that haven't yet reversed. Permanent differences arising from nontaxable income and nondeductible expenses are on Sch K and flow through to M-1 and M-2, and these do not cause differences in the AAA and retained earnings. Joan, I think you are missing that ATX does have a worksheet to record the timing differences, if any, because ATX does allow for this. If you click on a line in the balance sheet on pg 4 it takes you to the balance sheet input. On that screen, you will note that the ending retained earnings line is white and doesn't allow for input, but it has an arrow that will "jump" to another worksheet where these timing differences can be entered. I hope this helps, and I hope you are really in balance at this point, but your statements about the change in shareholder loan and APIC have me wondering.

>>the suffering uninformed<< Yes, hopefully with the range of testers across a variety of configurations, ATX will receive very useful feedback that will enable them to put out a stable product, and that the testers will be able to give enough details to satisfy skeptical, wary customers without breaking the nondisclosure terms that were agreed to. Welcome to the "unofficial" forum, Jerry.

Catherine's story sounds pretty bad. I'll tell a quick story of how it could be thought that I'd made mistakes like that if another preparer were to follow me on one particular client. This is one of my largest business clients, C corp, a retailer with multiple store locations, larger # of vendors, uses QuickBooks and has a full time bookkeeper. Bookkeeper is pretty good and calls me when she doesn't know how to post. This client gets a review financial statement because of large line of credit with the bank. One thing bookkeeper & QuickBooks did that threw prior year numbers out of whack for a/p, retained earnings, several cost of sales accounts, and net income was the way she was entering vendor credits issued many months after year-end. Some of the company's vendors allow very generous terms where payments are spread over 6 months or more, and company always has purchases from these vendors just before their year end because of a large trade show held shortly before that date. The vendor credits occurred after I've completed my work and issued the statement and tax return, and the credits offset a portion of the unpaid balance on invoices for purchases prior to the year end I'd completed. The bookkeeper entered the invoice number to be offset and QuickBooks put that credit in the prior year because I believe that QB defaulted to the original invoice date when the original invoice number was used to enter the credit. A year went by and I arrived to start the next year's review work. I pulled my hair out to find why the opening retained earnings in the company's general ledger no longer tied to the ending retained earnings in my workpapers for the prior year. Bookkeeper and I have resolved this, but once in a while something like this occurs in QuickBooks where a date might be input wrong when entering. If another preparer had picked up this job and printed reports from the company's system, it would have definitely looked like I issued the report and tax return using incorrect figures. I love the flexibility that QuickBooks allows, and in the right hands it can be a wonderful tool. Used incorrectly, or by someone inexperienced or not paying attention, it can create a lot of headaches.

Catherine's idea is about what I'd do too. I hate the plugs, but nothing else you can do short of amending. Hopefully, the errors don't include this person deducting losses that shouldn't have been allowed due to basis limitations. At least the balance sheet isn't required. If I had this, once I had all the returns and trial balances for the prior years, I'd go back and prepare a basis worksheet for each year too.

I did some brief reading and I think the COD is IRD that should be considered in determining whether an estate income tax return is required to be filed. I'd send that 1099-C on to the attorney handling the estate filings.

Re the NOL - No the widow can't carry it forward. It can only be used by the person who sustained the loss and must have enough income on their own to offset it in a carryback or carryforward year when marital status changes, including death. Check pub 536. I'm not sure about the COD. I'd have to research that because of the specific rules related to COD, but it seems like that would also be IRD, but I don't know.

You'll need those back year returns to pin down what is going on with that AAA. I know that you already know this, but for those others reading here, the AAA could be negative if from prior year losses, but distributions can only take it down to zero and can't create negative AAA. Sorry that none of my ideas helped. Is this a calendar year return that you are trying to complete by the extended deadline on the 16th?

It just gets worse and worse. I think what's been uncovered so far is just the tip of the iceberg.

Here are just a couple of quick thoughts that came to mind - Was this an S corp since inception? If not, the corp could have C corp earnings that aren't AAA. Are the books and balance sheet on tax basis also, or are they GAAP? Timing differences between book and tax? I was also going to say distributions in excess of AAA in earlier years that could have reduced R.E. but would only reduce AAA to zero, but then R.E. would be lower than AAA. Is last year's ending balance sheet actually in balance? TT could have been trying to automatically balance the balance sheet through a plug to R.E. Find out which figure matches last year's trial balance. Is everything being reported properly on Sch K and the reconciliation of AAA in M-2. With ATX in prior years I seem to recall some items from Sch K weren't automatically flowing to the M-2 and had to be entered on the M-2 itself separately. IIRC, these were adjustment type items like nontaxable income, nondeductible expenses and distributions that would affect M-2, lines 3, 5 & 7. ATX would arrive at an AAA figure and put that on the line for retained earnings on the balance sheet causing it to be out of balance. Is your balance sheet in balance? Can this client also provide a trial balance for each of these earlier years so you can pin this down?

Wow, that must have been a scare for everyone. I'm glad you are on the mend and continue on with no lasting effects.

Congratulations on being chosen, Jack. I know you will be thorough in your testing and won't hold back in voicing your opinion and concerns, and that is what is needed. It's a shame that so many of this forum's users are absent during this time of the year and probably won't see this. Is there a reason why you prefer the PMs and to not see suggestions posted here other than for expediency or to contain the emotions? Even though I'm not a current user, I'd kind of like to see suggested enhancements, and I might consider ATX again in future if the problems are worked out. It was an awesome program.

Form 4684 and Pub 547. You didn't say what the adjusted basis of the stolen property was or what type of entity this is. If this is an individual and is personal use property, use page 1 of 4684, income producing property (a rental) would be reported on page 2.

John brought back another memory for me. The firm I mentioned in my post above was a small firm where we prepared in pencil and photocopied. Thank goodness I missed those carbon days! I worked at a very large firm as a co-op during college that had every return prepared by pencil and then typed out, and this was after the copiers were on the scene. I think there were about 50 people that worked there, and they had typing and math checking departments (as well as separate depts. for tax, audit, bookkeeping). This firm liked the typed look better, and believe me that firm had the fanciest Xerox copier out. It took up one whole side of an office and would collate something like either 50 or 100 sets at a time. Boy was that thing noisy!

Jack, I agree with you on that in general. Personally, I don't post anything anywhere on the internet that I wouldn't announce to the public, no matter what privacy settings are selected. But there is something to complain about when a site violates its own privacy policy that was made in settlement with the FTC. People sign up with a certain understanding and expectation, and then what is happening is something different than was agreed to, free or not. If the policy is something different or has changed, it's simple enough for a site to post a revision and let users decide.

Yep, I remember those days too. I didn't have the pleasure of carbon paper, but I prepared many returns in pencil that were then photocopied and assembled.

You said users should "demand instant refund of all subscriptions fees and charges paid for using their social media site." It's free. I only skimmed the two posts and I took yours literally. Gee, sorry if I caused you to bang your head. [/sarcasm] *rolls eyes*