Terry D EA

Well here is the answer. I think we all can agree this is a gray area but here is what I found. As it reads at the end, the roof replacement is an expenditure that is a restoration and therefore must be capitalized. This article mentions s manufacturing building but I cant' see where residential real estate would be treated any differently. Agree?? Example 14. Replacement of major component or substantial structural part; roof K owns a manufacturing building. K discovers several leaks in the roof of the building and hires a contractor to inspect and fix the roof. The contractor discovers that a major portion of the decking has rotted and recommends the replacement of the entire roof. K pays the contractor to replace the entire roof, including the decking, insulation, asphalt, and various coatings. Under paragraphs (e)(2)(ii) and (k)(2) of this section, an amount is paid to improve a building if the amount is paid to restore the building structure or any building system. The roof is part of the building structure as defined under paragraph (e)(2)(ii)(A) of this section. Because the entire roof performs a discrete and critical function in the building structure, the roof comprises a major component of the building structure under paragraph (k)(6)(ii)(A) of this section. In addition, because the roof comprises a large portion of the physical structure of the building structure, the roof comprises a substantial structural part of the building structure under paragraph (k)(6)(ii)(B) of this section. Therefore, under either analysis, K must treat the amount paid to replace the roof as a restoration of the building under paragraphs (k)(1)(vi) and (k)(2) of this section and must capitalize the amount paid as an improvement under paragraph (d)(2)

Keeping in mind the new regs on repair and maintenance. I have a client who is planning on putting a new roof on his rental home. Here is the question(s): 1. Does a new roof increase the value or the property? Personally, I say no. It stabilizes the value and is clearly a maintenance item. But... the 5,000.00 safe harbor thing so capitalize or expense? What about 179 Expense?

Got it, thank Joan. I haven't used ATX for several years now and after your post I see where the problem is. Sorry but I can't be of any assistance with this.

The master form folks are talking about is in ATX. At least I think that is what they are referring to. In OLT or OneDesk, you can't change the forms. In this situation all you can do is check the box "entered by ero" The master form issue is one of the features about ATX that I greatly miss.

Judy I don't have the answers to some of those questions and they are good ones that I am wondering about as well. Here is what I do know, there are children involved. One is under 17 and the other is 17. The wife (former wife) has a child from a previous marriage as well. He has rental property that was his prior to the marriage. There very well may need to be decisions made regarding the itemized deductions as they have itemized for the last several years. All of this is why I am concerned. Other questions, can they get along? How long have they been separated? Do they have a legal separation agreement? I'm sure there are more. The wife is a very nice gal whom I feel would be fair and cooperative. Problem is, he is too. From what I have seen on FB he maybe the jerk involved not that it matters when it comes to preparing the return. I have seen some of the nicest folks become very bitter in these situations even to the point that fairness and common sense is off the table. So, I guess we'll see. If I approach this from the angle that I would like to help both of them and can only do so by them understanding that I cannot discuss the other's return and if they can't or don't agree with me then let them choose who stays and who goes somewhere else. I hate this as I said they have been very good friends of ours for a number of years.

Same here, dependent student returns I do pro-bobo unless the student has all of those documents mentioned earlier. Then there is a small charge. I do show the full load on the invoice as well using the family discount line. It is neat to see how many here are on the same page. Great minds think alike right??? I'm just saying.

Cathy I am a little confused. I read your post a couple of times and it seems as if you are doing as the instructions state, then all should be well. I am unclear as to what you asking or are you just posting this for informational purposes.

A couple has been coming to me for tax preparation for several years. The husband was first, then he got married and obviously I have been preparing the joint return. I'm sure you see where this story is going. Now, they are separated. The wife has contacted me asking for an appointment to do her taxes. The husband has also spoken with me and awaiting a K-1 to get his done. I think this topic has been tossed around this board a few times but because they are separated is there some type of conflict of interest if I prepare the taxes for both of them. I realize I cannot discuss any details of the return(s) with either one of them. To complicate things a bit, both of them have been very good friends. Where do I draw the line if one has to be drawn?

I agree with Jack. I would group them together and enter them. They have their detail should they get questioned. Well, at least they should have and better have if I was preparing the return.

<<<<<<<Doesn't the property have to be in the LLC's name in order for the asset, depreciation, rental income/expenses, etc. to be reported on 8825? I thought if rental property was titled in individuals' names then it had to be reported on Sch E with each person's % owenership.>>>>>>>>> No, just as Roberts said, report it all on the 1065 and 8825. You will show the percentages of ownership on form 8825 as well. Again, no legal protection. Go with the consistency idea. I have clients who do this and have been filing this way for a few years now. I have had zero problems and no IRS notices. <<<<<In each case, the TPs main reason for setting up an LLC was to get legal protection. For instance if someone falls and hurts themself will they still get the legal protection?>>>>> This will fall under their homeowner (landlord's) insurance. Has nothing to do with the legal protection under the LLC umbrella. The home is in their name(s) they provide the insurance. If the home is in the LLC name, then the LLC provides the insurance.

I do the same as Jack stated. There is not an input for information from the 1099K. I would not just randomly decide to use the 1099MISC instead. My software allows detail of where the income is from. I use the gross proceeds from cash/check sales on Sch C line 1 and the line for other income to show the amounts from the 1099K. Prints out a nice statement that transmits with the return.

Damn I can't believe I did it too. Now let me justify by admitting I typed without thinking about what I was typing. Geez. I don't get the zero basis thing either. She had to pay something for it. As I said earlier, their basis is mom's basis as the time of the quit claim/gift. Again to determine this is, follow the post from SaraEA.

Thanks Joan for posting this. The CA NR hadn't crossed my mind. Wouldn't it be a toss up as to which State the person would be a non-resident of? The OP stated 6 mo in Illinois and 6 mo in CA. What is CA's criteria that establishes residency? Wouldn't it be better to file CA as a resident and Illinois as a part year or non-resident due to the fact the tax payer made CA their permanent residence? I'm probably messing this up and in no way am I suggesting it should be done this way. Iinquiring minds want to know.

Why is this any different than a shareholder of an S-Corp or managing member of an LLC guaranteeing a loan? Most new companies can't demonstrate credit worthiness upon startup and it usually takes some time for them to stand on their own. Yes the S-Corp and LLC are designed to give some protection. As I see this, the managing members of the LLC would transfer the property to the LLC once it is paid for. No, the managing members will not get the protection for those loans they personally guarantee. Regardless whether you are using Sch E or form 8825 for the LLC, the bottom line effect is the same for the members. Because these folks are indeed acting as a partnership form 1065 should be used with the rental activities being reported on form 8825. Operating expenses will flow thru to the members as well as the rental income/loss. Rental income/loss is shown on line 2 of the K-1 which goes to Sch E page 2 for the 1040. When you calculate the partner's basis part of the calculation includes recourse and non-recourse debt.

It has been a while but I think CA will only tax the portion of the income earned in CA. you may have to report the total and show credit for taxes paid to Illinois. Not sure of what schedule to use. Maybe Tom or KC will chime in here to straighten us both out.

Okay just bumping this up. I think my original post was confusing. Anyway, I will report the casualty/loss on form 4684. All of the insurance proceeds were used to purchase replacement properties and this does become and involuntary conversion which also is reported as a sale due to the insurance proceeds exceeding the original cost minus accumulated depreciation. I think this should be reported on form 4797 and not Sch D simple because it is investment property transaction. This is confusing at best and as I muddle my way thru, I'll post what my findings are. Any suggestions will be helpful.

I wonder if this applies to Al Sharpton? Or, is he exempt too. Moron.

I agree

I would think his basis would be the result of the total of his mother's basis divided four ways. Wasn't the mother alive at the time of the quitclaim? I'm not sure i FMV at the time the deed transferred is correct.

One of my rental property clients experienced a total loss of one multi-family building due to a fire. He has purchased three separate properties with the insurance proceeds and after all of the calculations, he has no gain from the insurance proceeds to report. Should I still fill out the 4684 or is the worksheet I created for the replacement properties sufficient. Does the disposition of the remaining depreciation of the lost property have to be reported on form 4797? I've not dealt with total losses too many times as you can tell.

Did exactly that. The The TP said he had no problems but it is his wife that is questioning everything. I even gave him a year over year comparison to show her. So, it's his problem now.

I like Judy don't have the ATX program so I cannot look at the entry. It sounds as though you are using the right process so it would lead to an entry problem. Sometimes, I have to walk away for a while and then come back to the program and then input seems to hit me in the face. Either I am getting old (no doubt), or working too hard when this happens. Wish I could help you more.

You are correct, they can do with it whatever they want. The other tax preparer must provide them with the reason(s) their return or balance due is less. If those reasons are due to anything other than a calculation error or entry error, I have the right to review prior to issuing a refund. If they present other documents, then so sad too bad. I feel very confident I will get a call telling me to transmit the return. This guy's wife complained last year and I was right so I am not worried or the least bit concerned this year. If I did, and I doubt it, make a mistake, I am man enough to take my lumps and fix it.

Thanks Yardley CPA and I will let everyone know the outcome. Last year, I had several clients who were using up my Kleenex's when they found out what they owed. I did offer of the estimates and have explained how tax planning is paramount in our current times. Even with all the changes in NC that is costing everyone and with the affect of the ACA, none of those folks have taken me up on the planning offer. They hate "I told you so and to call me but you didn't" This is the exact case. I have a Sch C client who I have asked three or four times to allow me to run estimates so they can make the estimated payments and reduce the paid in April. You guessed it, no contact. The guy owes 15K this year plus penalties, go figure. If I held my breath each time someone said, "great idea I'll contact you in June" I would have been dead long ago. Yes the return is on hold meaning it is not transmitted and I agreed not to do so until I hear from them. There is a marker in my software that I use that I label the return status. Helps me remember.

Ken, Judy had no intentiion of offering up any offense in her response. Since you have such an ugly opinion of "tax professionals" I fail to understand why you would want our advice. "Tax Professionals" are a wide range of individuals. A CPA, EA, Attorney, RTRP or one who participates in the annual filing season program can be a 'tax professional". This board is made up of those individuals and not what one would call the average run of the mill tax preparer. Since you may question a response from one of us because we are 'tax professionals", I thought I would just give you a link below from a public website that would appear to answer your question. It is your call as to whether you trust this opinion or not. https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/How-to-Report-a-Foreclosed-Rental-House-on-Your-Taxes/INF14839.html