Christian

The client called the Service at the number provided and advised the Service associate he had contacted the fiduciary and requested a change. I expect no change so will continue attaching the Form 5329.

His broker's back office advised his advisor that for legal liability reasons the code could not be changed. Go figure.

This very much parallels what a client of mine got as noted in my post today. they must be upgrading the system or something.

A client who takes a uniform payout from his IRA account has for two years gotten a Form 1099-R from his fiduciary showing Code 1 in box 7 of the form. When he set up his plan I contacted the brokerage he deals with asking that the code be changed to code 2 which is the correct code for his situation. They refused so each year since he started taking his payment I have attached a Form 5329 indicating the correct code. About two weeks ago he received a notice from the Service stating he may need to file an amended return for 2022 in which they showed a copy of his Form 1099-R for that year. They had made no changes or adjustments to his return and advised he may choose not to file an amended return adding it may mean a possible penalty down the road. The notice further advised that if he wanted to effect a change to the code on his Form 1099-R he needed to contact his fiduciary and request it. He contacted his broker receiving the same negative response. I advised him to call the provided IRS response number and inform the associate that he had called them and told they could not change the code. They did advise that if he received a penalty notice they would handle it. In the meantime I will continue to include the Form 5329 with his annual filing. I find this really strange as a simple call to the broker sending my Form 1099-Rs would have changed it promptly.

Well they all mostly have come in now. With the Service delaying filling until the last week in January it has become a moot point.

I understood that I would need to submit a Form 3115 with the return. It looks a bit complicated but I'll need to do some reading for sure.

I cannot recall our state tax forms being so slow to become available but maybe I am mistaken.

Not having ever had to deal with this let me say this. An allowance for formerly unused depreciation going back fifteen or so years would be a deduction for 2023 right ? Of course, it would also reduce his basis and he would pay a resulting larger capital gain tax. And yes Danrvan a receipt with no date is essentially worthless as I have no date to assign for depreciation.

In a word "Good Grief". i will need to start on it now and hope it's done by April 15th.

I took on a client some ten years back who had some four rental houses. Three had established schedules for depreciation set up by his former wife. One did not and on asking him "Where is the schedule for this one?" there was none or my wife did not set one up. Now he is selling the house and recalls he paid some $17,00 for it and added $60,000 in improvements over time. I thought we had settled on the house having been fully depreciated but no it apparently was not. I am having him go back and find when he bought it and will simply add his improvements to arrive at a cost as he kept no records of when he made the improvements. He realized no benefit from the depreciation and would look to me to simply have lost it. My thought is to simply take the year of purchase using his $17,00 cost plus improvements and arrive at what would have been the depreciation over that time period arriving at a depreciated basis which I will deduct from the received amount he gets and he pays capital gains tax on that. Frankly I know of no other way to handle this as in point of fact I have never run into it in my years of practice. If he gets checked by the Service he will simply have to pay on the full amount which I will clearly explain to him. He has a check he paid for the house for years back and a number of receipts for cash payments he made on improvements with no darn date on them. I will make copies of it all. It is not a large sale so it likely will pass muster. He will pay tax on about 87% of the received price.

Well I stand corrected. She will likely book before yearend anyway.

A long time client now seventy years of age, single, and in my judgement weak of mind has taken in his unemployed much younger girlfriend as a resident in his home. She has lived with him over six months this year so in picking up his extended return today asked if he could claim her on his 2023 return. I see no problem so long as she has no income which exceeds the dependent allowance which the last time i looked was around $4,700 or so but likely more now.

He came to me some years back from an H&R Block office. The associate there had set the rental up in 2011 using SL/GDS with a 27.5 year schedule. I will need to take some time to review the form I used and get back to you pointing out everything done. Well no I did not add the depreciation back. I used the second page of the Form 4797 lines 20 through 24. This took the original costs of his property and deducted his total depreciation which produced his adjusted basis which was then subtracted from what he got from the sale. Looking at this retrospectively it now looks to be correct after all. In a word he subtracted the depreciated basis of the house from what he got for it. I did not in fact recapture any of the depreciation which comports perfectly with my review I just finished.

I am doing my annual client review and need to revisit a sale one of them made. He set up a former residence as a rental in 2011 using SL/GDS. After rereading any tax due on his gain I added back his prior depreciation to calculate it only to discover now this was likely a mistake and I need to provide him an amended return. After reviewing recapture rules I am reading that 1250 property set up after 1986 under SL is not subject to recapture so his tax was due on the difference between the depreciated value of the house and what he got for it. This being so I have some work to do to get this addressed.

Well it is now resolved. In standard quarter or semester, VA measures training as follows: 12 credits or more are full-time. 9-11 credits are ¾ time. 6-8 credits are ½ time. She has enough credits to take care of the requirement. It is unlikely her mom can get the education credit as her tuition and related expenses are fully covered.

All this stems from my annual client reviews which I do in an attempt to make certain all is according to Hoyle.

The half time student requirement comes from the AOC qualifier. I am safe for those first two years but going forward she will be a single gal.

Lion you have put your finger on the issue going forward. The daughter was enrolled in a local community college in a two year degree program or so i was given to understand. She did not pass enough work to get the degree. I am assuming while in the degree program she was shown as a half time student which likely ended in June of this year. This being so her mom can hang onto the dependent status for this year. If the fact she did not get her degree disqualifies her as a dependent I will need to research. I expect mom will be unable to keep her after this year as a dependent in any case. As you are well aware a parent hates to loose those dependents and like a dog with a bone tries to hold on tenaciously to them.

Her tuition has largely been covered even receiving an allowance from the state. I don't think she is going to have enough credit hours to qualify as a half time student. She is earning like $10,000 to $12,000 + working as a waitress so I will need to monitor this very carefully.

A client has a twenty year old daughter who entered the local community college upon graduating from high school. She lives with mom and works as a waitress at a local restaurant. She did not get her associates degree from the college in June. Her mother tells me she is now enrolled in the six year degree program whatever that is. My question going forward is at what age can she no longer be shown as a student on her mother's return as a six year degree will carry her well beyond what appears as the cutoff age for carrying her as a student.

You are in an affluent area likely. Average fee of $218.00 would terminate my business although I have myself raised fees.

After discussing their options they decided to go ahead and file MFS even though he will pay a larger tax. Most likely they will take my advice and file jointly next year. Her retaining her former name was not the issue so things worked out ok. Better than some outcomes I have run into over the years.

Thanks for the input. I'll discuss this possibility with them to see if they want to do that. Many thanks.

Now that they have filed separately can they file a 1040-X and change this down the road ?

Rarely ever do I file one of these. An older client remarried last year. She advised she wanted to file separately and retained her prior name electing not to use her new husband's last name. Her income was limited and as a result no tax was due and no payments refunded. She later called and requested I prepare her new husband's return which I am giving him today. To my surprise there is a distinction between a couple who live together using this filing status and those couples who at no time during the tax year live together. Both of these folks draw social security. As a result of the above noted distinction he will owe tax on 85% of his benefit which was not the case when he filed as a single man. I find this really surprising and have advised them to file jointly next year.