Margaret CPA in OH

Is this to be simply a not for profit or tax-exempt organization? IRS approval is primarily for those wanting tax exemption (see Pub. 1023 and instructions). First step would be to incorporate as a not for profit in the given state then do research on the type of nfp desired - the business purpose, as it were. To receive tax-exempt status is not inexpensive these days so be sure to follow the steps. Besides the IRS publications and information (click on IRS. gov and click on Charities and Non-Profits), a great resource I have used for beginning steps and subsequent record keeping and filing is "Tax Planning and Compliance for Tax-Exempt Organizations" by Jody Blazek.

I think you may be misunderstanding. The client spoke at a conference; this was an honorarium, not a paycheck, per se. I believe the T4A-NR is in Canadian dollars and the stub from the City of Vancouver clearly shows US dollars. I believe the forms represent the same transaction, just in different denominations. My question was the need to file a Canadian return as tax was withheld, there is a reciprocal treaty and I am taking a foreign tax credit on her US return. I don't think Canada would provide a refund, though. Thanks for your reply, I'll look further after my run. It's so beautiful outside now in Cincinnati!

Extended client has Form T4A-NR showing gross income of 3,702.60 with income tax deducted of 555.39. She also has a check stub showing gross income of 3600.00 with deductions of 540.00 and 40.00 nonresident withholding tax and net amount of 3060.00. The stub also shows a reimbursement amount of 829.29 for a cheque total of $3889.29 US. So I think I am safe in inputting the check amounts as US dollars not on a 1099 but am not sure if I need to file a Canadian return. No, I haven't done the research yet, just hoping someone will know already and point me in the right direction. Currently my brain is on the Chicago marathon I'm running Sunday, definitely not on tax! Thanks!

Eric, thanks, I tried the theme change and that does make a difference. At least I can read everything on one screen. Some of the option buttons are not there but I can manage much easier. I will try those other things you mentioned, too. Thanks again - you ARE the BEST!

Eric, you are always working so hard to constantly improve our experience here and it is much appreciated. Having said that, I fear that I am going to have to leave the forum because it gets increasingly hard for me to manage. The heading at the top takes up about a third or more of my screen (with existing task bars that I use) and now the text spreads completely across the screen. Because of my aging eyes, I have to have slightly larger print size on my 17" monitor. No, I can't get yet a larger one because of limited desk space with 2 monitors. If you have any suggestions that might be useful, please share. I tried to reduce the type and could barely read it. You know, getting older isn't all it's cracked up to be! Thanks for ALL you efforts!

Heartiest congratulations, indeed, to you both! I confess envy as I am still hoping for my first grandchild. The babies are just beautiful, too, surely a reflection of beautiful parents. I especially love the photo of them sleeping in each other's arms. May they always be so close...

Thanks for futher responses. The biggest difference between investment and inventory as you know is ordinary or capital treatment. I am of the opinion that this is ordinary but will reconfirm with the clients. However, capital assets are not inventory held mainly for sale to customers in a trade or business or depreciable property used in a trade or business or real estate used in a trade or business or as rental property. The note treatment is one that I have done with some S-corp clients and was inclined to show repayments against the money that the LLC owes them (unpaid interest from prior years which has been reported on their personal returns). Sigh... retirement looks better all the time. Thanks again, OldJack. So glad you are on the board this evening!

OldJack, the house purchases are intended to be for rehabbing and resale according to the LLC purpose. So I think it would be inventory but just wanted to check with others. They really don't want to hold these for investment purposes and didn't yet sell the other two only because they would have lost money. On this property they knew it would have a profit. The LLC is deemed a partnership, the default. As I wrote, the early cash infusions were in large amounts and were expected to be repaid fairly quickly when the properties sold. The market wasn't so friendly. I'm just wondering about these smaller amounts several times over the course of the year when utilities or insurance is due and rental income is insufficient. It just seems painful to treat each as a separate loan with fmr interest, etc. Thanks again for nudging in the right direction!

Clients formed LLC a few years ago to purchase, rehab and sell properties for low income housing. They are really "do good" folks with 6 foster children, all minorities and mostly health challenged. He is a physician, she is a nurse practioner. The first 2 houses they completed just when the market decline began and decided to rent until things turned around. This third house was bought in late 2010, rehabbed and sold sometime early in 2011. I am working on extended 2010 returns. The buyers are son and daughter in law (does that matter?). I think all expenses are capitalized as this third house would be inventory, wouldn't it? Because the business purpose is to rehab and sell, I think the houses wouldn't be investment properties, or would they? The second question relates to member infusions of cash to complete rehabbing because rental income is insufficient for the entity. Members want these to be loans, not capital contributions. The first couple of times they were significant amounts, in the multiple thousands, and at least one was repaid when they were able to get a Line of Credit on one house. But what about the $200, $500, etc. smaller amounts? Thanks for comments and steering me on the right course.

Thanks, Joan. I have had successful contact via email with my German friend and the legal clerk in Germany. The document actually states that the loss can only offset German passive income (like here) so is suspended until then. Well, he will not have any passive German income so cannot use it. He didn't expect to anyway, so I think that's where it stands. I will definitely keep you and your contact in mind, though, as I will have these clients for quite a while. They are pretty loyal - I like that! Thanks again to all for suggestions and help! Now on to the remaining extensions - ugh, the LLC with multiple rentals and less than perfect records, know what I mean? Have a great weekend -

Oh right! I think that's the idea I had in the way back part of my brain recalling something about issues when an estate is closed. And I looked over the documents again and found an email address of what appears to be someone at the law firm that handled the estate. I asked if there was an English translation available. I also made copy with names whited out and sent to a native German woman who used to work for me. Unfortunately she lacks knowledge in technical legal terms but I thought it worth trying. Anyway, I think you are correct that the best scenario is Sch A deduction. The only problem is that there would not be a matchup with a 1041 K-1. We'll see what the German ladies come up with. Thanks so much, Joan!

I had to chuckle despite some close to home hits. Thanks!

I just checked that form, too. The client is the sole heir of his sister's estate not a partner so the form does not apply. The meeting I attended today was with a small group of sole practitioners. I raised the question with them. No one had the precise answer but some did raise the question of economic benefit and basis. I think (dangerous) that the estate owned the property after death of owner/sister of client and continued to rent until tenant moved out. Estate sold property and part of the inheritance included a probable gain on the sale. The German document related to distribution from the estate does not specify character of proceeds. He did pay German tax on his proceeds (they have an inheritance tax) but I don't think he gets a tax benefit in US because the proceeds weren't taxed here. The loss on the rental would be like the final K-1 of an estate. He never owned the property, the estate did. What happens here in a similar situation? I don't have a K-1 to input, just this German document. Maybe he doesn't get any benefit from the loss at all. My brain hurts... The client is willing to not claim the loss which may be correct. But if he is entitled to it, I want to do the right thing, whatever it is.

Thanks for replies and my apologies for not being clear. The letter is to document the operating loss on the rental as a rental, not as a sale. The gain/loss on the sale flowed through to the estate. This loss covers the time that the estate was the owner and rented until the tenant moved and the property could be sold to wrap up the estate. There will be no further letters. The client paid a small amount of inheritance tax to Germany on his share of the inheritance. I didn't think that it would be deductible on his US return because there would not be a tax on the US estate. He is not expecting it to be deductible. Doug, I will look at the 8865 later today. Off to a meeting now - thanks for the replies!

I have read the treaty with Germany and gleaned nothing but a headache. Client is an heir to sister's estate in Germany (they were born there but client is US citizen). There is no issue with inheritance so far as I can tell (not so much anyway), but there was a rental property in play. It incurred a loss between date of death and date of sale. Client received a letter akin to a K-1, I believe, showing about 13,000 euro loss. I cannot figure out whether or even how to include on the US return. Any ideas? Thanks in advance!

Federal Unemployment Rate Change effective July 1, 2011 Congress has announced that the 0.2% FUTA surcharge will not be extended before June 30, 2011. Employers have been required to pay a flat rate of 6.2% on the first $7,000.00 of each employee’s annual wages for FUTA. The 6.2% FUTA rate included a temporary 0.2% surcharge that was first added in the 1970’s. The FUTA rate will be reduced from 6.2% to 6.0% effective July 1, 2011. Employers will still receive the 5.4% credit for paying state unemployment on time, reducing the FUTA rate to .6% on wages paid up to the annual FUTA limit of $7,000.00. The IRS is currently revising Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) to accommodate the two different FUTA rates for calendar year 2011. I will begin to calculate the 0.6% rate effective July 1, 2011, and will continue to monitor this issue closely and send additional communication as necessary. To read more about this change, view Section 14 in the IRS Employer’s Tax Guide.

My wariness is when there is a sole S-corp shareholder with a home office. Obviously the sh is an employee and there can be issues with the home office expenses and deductions. I have no problem with a home office for an employee in general. But when one of my S-corp sh/employees wanted everything deducted, well, my research would not suffice so he toddled along to another firm - okay by me!

I have been taking home office for several years using my entire former living room. Last year one part time employee retired as of June 30 so I literally downsized my office in half. For 2010, I entered 1/12 space for home office instead of 1/8 and for 2011 until I retire, it will be 1/16. I did not have to override anything. I am always leery of the home office of an employee of a company, too, depending on S or C. I think the acccountable reimbursement plan Joan has suggested is the better option.

Wow, Jack! In what part of Ohio are you? Here in Cincinnati we just had high winds, heavy rain and a sprinkling of sporadic hail. Oh, and power outage for a while, but nothing that those rocks!

Wow! For no discernable reason other than sheer kindness, some elderly clients just dropped off a loaf of bread still warm from the oven. I am finishing my third piece already (the first was a double sized piece). I love (most of) my clients!

Congratulations, indeed, to the family and especially to your son for this wonderful accomplishment. It's always so gratifying to see young folks these days who are truly motivated and determined to achieve lofty goals!

Thanks, I just signed up. Then I read the article - great spread, Rita. Good for you and continued success. You and I have many similarities in our practices, too. I have used fx in other offices but can't justify the expense - yet! Maybe another year although I am kind of winding down even though 2 new clients this year are in that preferred category. I have an MBA with Taxation specialty and am a CPA so do prefer harder over easier except when sleep deprived! Thanks again for sharing!

I hope they do allow you share what you would share with the additional 5 copies they have already agreed to provide. I don't believe anything you post here for us should be construed as 'commercial purposes' any more than sharing a copy with your friends, family and colleagues in your office. Let's hope they agree!

Congratulations, Lion! For those of us who do not receive this publication, perhaps you could scan and upload so we can read all about you!

Heart and hugs to you Linda. Next year must be better. Hang out here at least occasionally and let us know how you are managing. I find this group a great resource for tax info, certainly, but also comfort, cheer, solace, humor, whatever is needed throughout the year. Hold on....