Margaret CPA in OH

Hmmm, you might want to post that on the ATX blog site, see if you get a reaction.

Thanks for the replies. I did have to wait a few days after preparing for the efile form to be approved and updated but am surprised that the ack is still in the transmitted stage. I will look at synching or maybe wait a few more days. I just don't want to be in the position of not having efiled by the deadline. Jan. 18 should be in plenty of time.

Elrod, thanks for this and for continuing to be part of this group! We're so happy you couldn't stay away or leave us!

I sent two 1099's on Jan. 18, one for MISC and one for INT. They both still say Transmitted to EFC. I really don't want to have to keep checking these, especially the MISC as they are required now by Jan. 31. I thought only 1040 efiling began today but others would be accepted by now. I saw where someone has even received an ack by now!

Not sure if this was ever answered. Go to the Master 1040 Efile form and put an X in the No box, save the form. I love being able to change some of these things in the Master Forms.

Thanks for the reply, Judy. As I have been electing to have gains recognized by the beneficiary, I was fairly certain that the distribution of some of the assets would not trigger any gain until the bene sold with the original carryover basis to the trust. I just couldn't find a cite on point but likely was not using the correct search terms. Bottom line is that the bene has been responsible for cap gains tax on any sales to date and that would continue whether sales were in the trust or distributed to her. The next issue is processing paperwork with her brokerage firm to get this accomplished. Oh well, I'll just see what they send and deal with it then.

I would certainly think so. I cannot imagine any reason for a change. The basis was established on the deaths of the grantors, grandparents, as they were transferred into a family trust then distributed to the sub-trusts. To date, the sales have resulted in some amount of gain but not outrageously so. The first grandparent passed in 2010, the second in 2013.

Thanks, DANRVAN. That's what I was thinking. She will pay tax on the gains when she sells whether in the trust (as I've been electing) or out of the trust after distribution or transfer. Just wanted a second on that. The trust is a sub-trust set up by deceased grandparents. For the first 5 years, bene is permitted to withdraw no more than 50% of assets but does receive all income annually. This bene, one of 5, wants to take out half now and put into her own non-trust, account so as to minimize contact with me and reduce aggravation and time delays when she wants withdrawals. She has not been very nice so I am happy to do this but wanted her to know the ramifications. Thankfully, the five years is up September 2018.

The beneficiary of a trust may, according to trust terms, have distributed up to 50% of the adjusted trust assets within the first 5 years of the trust and receive the balance at 5 years. As trustee, I have elected/filed statement annually to have the cap gains thus far incurred in stock sales taxed to the beneficiary. If stock is distributed (within the allowed amount) to the beneficiary's personal stock account, I am assuming that taxation would occur when she sells it from that account and not at the time of 'distribution' to her personally. I cannot, however, find any substantiation for taxing either when she sells from her personal account or upon transfer to that account. It seems very logical that only when sold would any gains be taxed. Opinions?

And I thought I had problems with my client's issues with IRS! I do not envy you with this. People can really be so ugly...

Thanks again for weighing in on this. I will certainly take your recommendation under advisement. We shall see what the final determination is for 2014 and whether the TA has any input and/or advice at all.

As I mentioned, if IRS claims client is required to follow the court order (claim child in odd years) instead of IRS Form 8332, it seems reasonable to amend 2013 (still open) and 2015 when client did NOT claim child per IRS Form 8332. The problem with claiming the child for 2016 is that IRS has refused to acknowledge their own signed Form 8332 whereby custodial parent relinquished claiming the child. Recall that this 2014 audit denied client's claim for exemption. As client has rental properties and K-1 coming from another entity, it will not be possible to file quickly. Due to uneasy relations between client and ex, it may not be possible to discern her plans. It seems to me a definitive resolution from IRS must be made before filing 2016. And IF IRS decides to go with court document (odd years), I think it entirely appropriate to amend 2013 and 2015 and attach IRS determination to ignore it's own required document. We shall see what happens in March with advocate. Oh, I tried to get to an appeals officer but was denied. I tried to get to the examiner but was denied direct contact or return call. I tried to contact examiner's supervisor but was denied direct contact or return call. I finally sent in 12203 as last ditch effort but client then decided to try tax court although probably a day late. I don't know his decision as to mailing the tax court form or signing the waiver and making a payment. Guess I will find out eventually! Thanks to all who chimed in here. This is the first time I've ever had a client with issues like this even after 25 years+ of practice. Never to late to learn!

Thanks, DANRVAN, noncustodial parent did not receive notice of revocation at any time. I have written to IRS and to Taxpayer Advocate about client meeting IRS reg requirement. First notice to examiner did not cite this reg, just provided 8332. Examiner still disallowed exemption hence 12203. With no response from 12203, contacted Taxpayer Advocate. You are correct that the client is responsible, penny wise, etc. He understands that now and yet may lose this 2014 exemption. We are still left with whether to amend 2013 and 2015 if IRS stands on court document instead of their own required Form 8332 (or the like) per their own regulations. And we don't know how to file 2016 as 8332 relinquishes mother's claim but IRS didn't accept it for 2104. The TA promises to get back to us by mid-March but we still may not know IRS decision. I'm going diving April 6-15. Guess an extension is already in the cards!

Parents never married. Original court order gave client (non-custodial parent) right to claim child born in 2003 as dependent in odd numbered years. In 2004, mother didn't claim child as it wouldn't help her or for some reason and allowed client to claim her. Client claimed in 2005, odd year. In 2006, mother offered to let client claim in even years so completed 8332 writing each even numbered year to relinquish right to claim. Client claimed in 2006, 2008, 2010, 2012 and 2014. Client was audited for 2014. Originally client and wife since 2004 were denied exemptions for their sons born in 2007 and 2010. Examiner requested support docs (school records, ssn cards, etc.) for all children. Sons were allowed, daughter was not despite signed 8332 for 2014. Return was timely filed (had to mail as e-file was refused, probably because mother claimed child which led to audit) and included Form 8332 which was sent again. Mother and client have been less than friendly for the last few years so she may have decided to 'stick it to him.'

Thanks. I keep at this because this is a 10 year client who tries to do the right thing. And I firmly believe he is in the right on this. I am doing this mostly without charge as I am semi-retired, have the time, and it's the first time this has ever happened to a client. I just hope he wins.

We have already submitted documentation to IRS and it has been denied based on the court document not Form 8332. The problem is, as mentioned, IRS regs say 8332 is necessary, not court document. Also, IRS accepted 8332 for even years for 2006, 2008, 2010, and 2012. If they now deny for 2014, do we amend 2013 and 2015 and send court document not 8332? And if they then accept this exemption for the odd years, do they recoup funds from mother? Doubt it!

DANRVAN, please see my entry on Dec. 2, Dependent Exemption Denied (sorry I don't know how to put in the link). Abby, I'm not sure how an amended return would be helpful or even possible given the circumstances. I am only hoping the advocate will agree with the client following Reg. Sec. 1.152-4(e)(1)(ii)(5) which states a court document does not dictate dependency exemption, only Form 8332 or equivalent qualifies. My client has this signed by custodial parent for even years although court document states odd years. I still cannot imagine or even believe that IRS doesn't accept their own document. Guess they can but am hoping the TA takes the taxpayer's side. We shall see what happens...

Thanks, Lynn and Judy. The due date stated is January 2 but that was a legal holiday. Today is Jan. 4th but I think the client wants to go ahead with it. The Taxpayer Advocate recommended to do that, too. She just happened to call this morning. If it gets rejected, so be it. It's been a mess since the beginning and with the holidays and my dive trip in November, along with the horrible lack of response from IRS to repeated calls, well, so be it. The big thing after this, if it is denied then IRS needs to decide whether to believe their own prescribed document (Form 8332) or the court document which Reg. Sec. 1.152-4(e)(1)(ii)(5) says they may not do. I really don't need this....

Client received a 90 day letter notice dated Oct. 4 and let me know in mid-November after trying to resolve himself. I got Taxpayer Advocate involved but they won't respond until Jan. 18 with final determination in March. Meanwhile, what exactly, is 90 days? Business days or calendar days? What about holidays when no mail was possible? I've found the form for simplified procedure as the amount is $1600. Is it too late to mail this? Ideas? The holidays and lack of quick response from IRS have wreaked havoc on this situation. I have placed at least 12 calls to the listed number and received not a single return call from the examiner, only letters.

Thanks, Abby. My home page is Chat. Think I will change it now. I don't want to miss anything!

I often forget to look at anything but General Chat. Today I looked at all the others and learned new things. Perhaps I'm the only one that doesn't check them all but wanted to remind others to do so. They are all great. I will be checking more often, my resolution for 2017!

Thanks so much, Judy! I was told that the shares were jointly owned having been bought with joint funds but I kinda, sorta doubt it. As noted, I have much reading to do before calling the corporate attorney which I've permission to do and the attorney has permission to speak. I'm 'back to work' tomorrow and think my new client got cheated in this settlement but, hey, did she ask any tax person's advice ahead of time? No. Does her attorney know anything about tax laws let alone 1244 stock. I sincerely doubt it. To boot, she has to pay her ex $12,000 per year as she 'makes' more money with her pension and Social Security so she has to sell stock every year. Sigh, it won't be her happiest year. I hope she can find some way to take this back to court. Thanks again!

What a timely discussion! I have a new client who received stock in a divorce settlement recently. I am now trying to determine whether 1244 (most likely) and then what to do when the ex states that most stock was purchased from joint funds but in his name and later stock was purchased for a higher basis. Much reading to do and soon! The tax ramifications are significant.

Free software is, of course, good. You might also check cmifixedassets.com. I've been using it for years. While free (what I use), there is an update fee annually when things change - as it seems they always do.

Thanks, SaraEA, for your thorough and thoughtful reply. I will ask about a possible revocation of 8332. I think that there are currently strained relations between the parents so this is possible. I would like to think IRS would mention this. I tried multiple times to speak with the examiner's supervisor - all those messages that were presumably passed along including hours and days I could be reached. No calls ever came. You are correct that I don't know fully both sides of the story. I do know that client and daughter have good relations as he has brought her here several times when she has stayed with him and family. But there may be other things going on, true. I do tend to believe him as the mother has repeatedly claimed the child every single year which is why we've mailed in 8332 in the even years. Yes, he is a long time client and has always paid, eventually. He's had some tough years with rentals and his real estate business but always made good on the bill. I will still likely make an adjustment because this was all post season so I had the time and it was a learning experience - I had never heard of 12203, for example. The decision about calling Taxpayer Advocate or pursuing Tax Court will be his. I have, as stated, recommended that he just forget trying to claim her as it is a challenge every time and this one was over the top. It is unpleasant every year and he would have only 2 more to go (unless she has revoked the 8332 and it now goes back to odd years - sigh, I don't even want to know). In my opinion, it isn't worth it as it continues to facilitate bad feelings and may affect his relationship with the child. The child at 18 will choose her sides, if needed. Thanks again, I will pass this along.