Margaret CPA in OH

Thanks Jack and KC. I'm just a bit confused by your answer, though, Jack. "You must report the rental as a sale. Using the amount of the debt forgiven as the sales price. Recapture of depreciation as normal. This may produce a taxable gain. 1099-A is NOT debt cancellation. It is a sales document and must be treated as such. FMV has NO place in these entries. Form 982 is NOT proper here. This is NOT debt forgiveness." In large bold type you state 'using the amount of debt forgiven... then go on to say, "This is NOT debt forgiveness." So, if this is NOT debt forgiveness, how can I use "the amount of debt forgiven as the sales price?" Clearly I am missing something here. I did use the figures as I think intended and as I first input before deciding I was wrong. It came out to be the same $13,651 capital gain. What are the chances of him receiving a 1099-C now? I'm still now sure how these work together - or not - despite reading and rereading about this. Thanks for your help!

Client abandoned a rental property in mid-2013. It sold at auction in March 2014. He received a 1099-A but not 1099-C. Balance outstanding was $109,861, FMV of property was $40,000 and that's what it sold for at sheriff's sale. I've input details on Fixed Assets (abandonment, date, allocation of sale price, etc.). Result is loss of $21,045. I input into 982 the total amount of discharged indebtedness on Part I line 2. Pub. 544 says lender should provide 1099-A and "'if lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only." If there is only 1099-A, is that discharge/cancellation of debt? Or do we wait until or if a 1099-C arrives? Is it not discharge of indebtedness? On 982 I'm not sure what to put on lines 4 and 5 in Part II - the difference between the $109,861 unpaid balance and the FMV/selling price on 4 and accumulated depreciation on 5? I did one of these in 2013 but it went very smoothly because, in part, there was a 1099-C, not 1099-A. I don't see how he can take a big loss without showing somewhere the unpaid debt. I don't see where the unpaid debt is included in income anywhere. Should the basis of the rental be reduced by the unpaid debt amount? My brain is just not working with this and I'm fretting about an ACA issue, too. Thanks for any input.

Oh my! So very sorry, Gail! Obviously my brain and fingers were not coordinating on that one. Lion, I then take it that you agree as well? Hey, we're all friends here, one big, mostly happy, family. I know my mother constantly called me by my sister's name. I think it happens in larger families like this one.

Thanks, Lion. I love it when someone else agrees with my thinking. He qualifies on all counts. It's just that he's 50. No 4 year degree but had some secret type job in the air force so kind of technical. With 2 sons also in college now, every little bit helps!

Client (nephew) is retired military who has an associate's degree from Community College of the Air Force obtained in 1996. Upon being downsized recently from a civilian job, he obtained a small grant/scholarship to return to school (regular university) to complete his undergraduate degree. The Comm College is a federally chartered degree granting institution. He never took any deductions for education expenses (I think this preceded same). I think he still qualifies for AOC for at least 2 tax years or would it be up to 4 if it takes him that long? The grant helped a lot but there were still expenses that could fall under AOC. Lifetime Learning works but I think AOC is better. Comments?

Thanks, Jack. I forwarded that to the clients, too. It will be a mess.

Thanks, Judy. I tried several search terms, particularly Identity Verification Service, and got squat. I never thought to look in the Newsroom! Anyway, that number is great. I will email them. This is a first for me in over 20 years practice. Guess my (client's) luck finally ran out!

Client just received a letter from IRS. LTR 5071C, requesting additional information before processing the 2014 return. GOOD THING! I haven't prepared it yet. They can go online (I looked at the first couple of screens) or call "a toll-free IRS telephone number" without providing said phone number. I went to IRS website to try to find some more about this and a number to call (NOT 1-800-529-1040) but found nothing. I think it's pretty clear we have identity theft here but a good number to call would be helpful. Got Number? They have a complicated return and an LLC and this will be a fine mess, Ollie!

Gail, I agree that the variety of permutations on reporting forms is enough to make me cry sometimes. However you know what a fuss there would be if it was mandated as another intrusion of government regulations on businesses. At least we have consistent reporting forms for 1099s.

Rich, I don't yet know exactly the source of the funds, how much from whom. I don't yet know whose credit card it is. The client is NOT a partner, his decision, his choice, hence the payment of $2300 as 'general contractor.' I suspect it has something to with the foreclosure of a rental property last year in his name. It's possible there was a thought that it might 'tarnish' further transactions but I don't know that for fact. In my opinion, why go to all the trouble to create the LLC then not title the house, truck, utilities, etc, in that name and treat it like a business from the beginning? I don't think the utility companies put the accounts in the wrong name, I don't think they even knew there was an LLC involved. To me, until the property is titled as XXX LLC, it isn't LLC property nor is the truck. As of now, I think there are only organizational costs that properly belong to the LLC, but I want to see the cash flow. The bank statements would be nice or clear documentation as to who paid how much for what. For some reason they have answered questions about their personal returns but not about the LLC as yet. I especially want to see the payments made to the contractors.

I have a cat that talks almost exactly like that! I wonder if it's the same language? It's so funny to listen and wonder just what they are trying to communicate.

Thanks, KC and jmdaviscpa. My inclination is to, indeed, ignore the LLC until the title is transferred although I will surely hear about it. But how can I capitalize costs (which I would normally have done if the costs were not (except for the few invoices) charged to the LLC? Maybe it should all be to the wife (probably her credit card anyway). But the other invoices are for labor such as drywall repair, etc. Hard to capitalize that for something that isn't even in the LLC yet. I do have the question out as to whether a bank account exists and how the money traveled to the property seller and the client and others for payments. (I do know the client, of course, receives a 1099 and it goes on Schedule C. I think he may be surprised that the truck will, too.) As this is inventory (unless/until it's rented, there should be no depreciation on anything, I think (except his truck on Sch. C). When I see the funds flow, I think all the property except maybe the truck is put into the LLC as capital contribution from wife. I also have to see whose credit card paid for other stuff.... And then there was the foreclosure of one of their rental properties early last year. Sigh... At least when I did the review of the other rental properties, and I did look carefully at all, I see no issues regarding the repair and cap regs. Just an election going forward. I have another client that will be a real challenge - in case this one isn't enough! Last year for these folks - they are super nice and have the cutest kids ever but always a challenge. Time to cut bait.

Longtime client had bright idea that his wife and her mother (in another state) would form an LLC to flip properties. Client is good with remodeling so did most of the work and will receive 1099. However, property was purchased in the name of the wife, insurance was purchased in wife's name before date of filing with state or even property purchase, utilities are in the name of client and wife, not LLC, all materials to rehab are in personal credit card. At least some outside contractor receipts are billed to LLC but I think not paid out of LLC funds. Before I ask, I think mother in law came up with the money, wife is more or less figure head and client is the worker bee with the ideas. And this doesn't even get to the Repair and Cap regs yet! Before I would lump all together to place in service but now am not so sure. Oh, and it hasn't sold since completion a couple of months ago so now they are thinking of renting it out. Can I just quit now?

I found the discussion. It's titled Oh Crap! I forgot the election, Feb. 9, around page 6.

Ahh, if you made additional changes I think it still may be superseded. In my case, I only omitted the election, no other changes at all. I would prepare the updated return with all the changes, write 'SUPERSEDED' on top and mail. It wouldn't be helpful I should think to mail in the original without the changes and the election. Perhaps KC will chime in here. It was just a couple of weeks ago that this was discussed but I don't know how to link to it. My understanding is that a superseded return, if filed by April 15, will replace the originally filed return. Yes, mailing is the only option, I believe.

My understanding, such as it is, is that we 'should' begin filing the elections as of 2014 as Jan. 1, 2014, is when this is in effect. I have chosen to do this. You may choose otherwise. I am fairly well decided that I have no need to file any Forms 3115 but still have two clients with extensive properties that may have had repairs that need to be capitalized or vice versa. Even at that, I may just take advantage of this new relief and be done with it.

I did the same thing and KC alerted me to filing a 'superseded' return before the 15th, mark it boldly as such, and include the election. There is a discussion on this earlier and perhaps a moderator will reference it as I don't know how to include here. The key is that it is not an amended return.

Randall, how did you ever discover this? It's so amazing that it prints the history as well as the future. I just tried it on one rental building and it goes to 2039 and we aren't even there yet. Wonder why this isn't still available. Probably 'improvements'....

I've had several clients donate appreciated P&G stock over the years, most of which was part of the company stock purchase plans. They have provided me with the basis, I look up FMV date of gift, list on 8283. So far, knock wood, no surprises. Well, one surprise. A couple of years ago one gift had a lower FMV than the basis. I advised her that she look at the value in the future, realize losses first, if any, than donate. She never imagined it would happen.

Frazzled, needed hugs ((( ))) for you. That's too much for any one person. So glad you could share here and know we understand. I'm especially sorry for the loss of your friend. Do try for a little extra sleep.

Sorry, I guess I didn't understand what you meant by 'history.' The Detail Report shows lots of, well, detail including date in service, business use, Sec. 179, Recovery Basis and period, prior depreciation and current depreciation and more. To my mind that's a lot of history but clearly you are seeking something else. I hope you are able to find it then share the location for others.

Try 4562, Pages and Worksheets, Detail Report. That might be helpful

I think not only is there a lot more stuff in there, but I swear that my gray hair is a result of the interior little gray cells leaking out taking much valuable information.

Thanks for the link, Judy. I am forwarding to the client. Of course one would not wear a tux as street wear for everyday use. At least in my neck of the woods. ILLMAS, could he wear it to his wedding or a black tie event? I suppose he could but doubt that he would. Maybe that's why he got one for free - one for performances and one for strolling down the avenue. I will pursue with client further but still would like to know, in case, how to provide a life for a possibly depreciable asset.

Client is a professional musician, pianist for a well known local choral group. He had to purchase a new tux for performances. Lucky, he got a BOGO! So how does one depreciate a tux? He can use 179 but the total cost is $1029. I have to input some kind of life.