Christian

A client has come in with three properties he is buying directly from the owner. He plans setting them up as rentals and ,of course, wants to deduct his expenses even though he has not received any rental income as yet. As these payments are made to private individuals do we as practitioners have to attach a statement listing the individuals name and social security number with the amount of interest paid to each ? Is this required for him to claim the interest payments on his Schedule E forms and if not included will the Service simply disallow the amounts claimed as interest ?

That is what I too suggested. Take a loan and repay it.

A client may have to withdraw money from his account to pay some medical expenses.The expenses will likely exceed ten percent of his AGI. Does the medical exception then allow all the money withdrawn to pay medical expenses avoid the ten percent penalty or only the amount above the ten percent threshold?

I once had a client who farmed on the side. He kept excellent records. After fifteen years or so of losses he got audited. He never even called me coming in the following year to say he had been audited. In astonishment I asked him how it went. He advised a nice young lady had come down from Richmond staying a couple of hours and left and sent him a REFUND check for $54.00 dollars for gasoline used on the farm. He had an onsite tank which he never told me about and that was that.

One of my least favored tax forms is the 1041 which I rarely have to deal with. A client's father died last year. One of the items falling into his estate is an annuity payment of some $180,000 or so. Of this amount about $30,000 is indicated as taxable. in reviewing the instructions for the 1041 I note this should be reported on the other income line of the return. My reading is I need report ONLY the taxable amount on this line since when passed to the sole heir he will be responsible for paying the tax on this income. Or should the entire amount be reported showing the taxable amount in brackets ? Either way the amount shown on the heir's Schedule E from his K-1 should be only the taxable amount of the annuity. Any comments will be appreciated.

This is pretty much what I had in mind. It seems to me you could enter the brokerage summary in each box which would carry to Schedule D while attaching photocopies of the brokerage statement. Should a Service employee have any questions they will have the relevant data in front of them.

Thanks for replying but 2nd row from the top 6th item to the right on what form ?

Well another successful season. Thankfully ATX resolved most of their issues. A client of mine had some sixty plus stock trades which took forever to enter. I am wondering if we could not simply photocopy the brokerage statement which provides all the relevant information entering only the totals on Form 8949 for the respective boxes and attach same to the return. I also assume you would need to do do the same on Schedule D but it might transfer automatically. This would surely save a huge amount of time to say the least. Your thoughts ?

A long time client passed on last year leaving an IRA account with a sizable balance. instead of leaving it to her progeny she made it payable into her estate with the balance after payment of all bills divided equally among her three children. Somewhere in the dim past I recall reading or was told that an IRA left in this manner was treated as totally distributed into her estate by the Service and subject to tax on the fiduciary return at estate rates. Is this the case or is the balance left distributed to the heirs with tax paid by them?

A client now in a nursing home has been placed on Medicaid this year. On preparing her 2013 return I was informed by her individual with power of attorney that since she was placed on Medicaid she was informed she no longer was required to file a return. After reviewing her sources of income for the current year I can see she will exceed the amount required to file a return. All of this income will go to the home but it would appear she will still meet the requirements of having to file. Does anyone know of any exemption from filing based on receiving Medicaid benefits ?

I rather suspect the mother will get a CP-2000 notice which I told her daughter may occur. If so, sometime next year I will receive a summer call telling me "Mama got a notice from the IRS ! " and will need to file a return for her after all.

Due to a change in the law awhile back a few of my older clients no longer owe any tax on their returns because it is dividend and or capital gain income. A daughter of one client decided not to file a return for her mother pointing out she had owed no tax in two prior years and her situation had not changed materially. I am sure she would have owed no tax but question (to myself) if she might not receive a CP-2000 down the road. What do y'all think ?

My mistake. I was deleting the rejected efile and then creating a new one. You leave it in place and the new efile will delete the rejected one.

After recreating an efile in order to generate a new SID I find ATX reissuing the same number which generates the same reject code namely duplicate SID number. Anyone else having this problem?

I tend to agree Gail as he does record profits in some of his trades. This of itself would likely require filing as his profits in some years would require it if not for other losses. I simply cannot see a situation in which an individual showing stock trades in excess of one million dollars would not have to file a return substantiating the trades even though brokers now must report basis and loss or gain which in his case means the reporting of all his trades with gain or loss reported.

A client is a devoted albeit poor stock trader. He retired some time ago and has no reportable income but apparently put some money in a brokerage account from wich he makes short term margined stock trades. He has accumulated a sizeable ongoing loss and once again lost money last year. Technically you could argue he does not need to file a return but I have always held he needs to file to show the trades with cost basis and loss or gain. As all his trades are fully reported with basis and gain or loss by his broker it occurs to me he may in fact not be required to file. Any input would be appreciated. Of course, if he does not file he will need to keep the tally of his total losses himself against the possibility he may show a gain in some year.

A client died in 2012 leaving a son the family farm along with a number of depreciated farm machinery items some of which have unused remaining depreciation. The farm also has an nol from prior years which was not used up. Does the son use the depreciated basis for the machinery items or are they revalued since his parent is deceased? Also, is the nol carried over or is it more likely simply lost ?

Thanks guys & gals. My thinking was he would have to go back to the timber's original basis. Since the family can use the stepped up basis the heirs will owe no tax. Secondly I agree with KC. It can be reported as inheritance on Schedule D. I have reported inherited assets that way and have seen it so reported by a couple of local CPAS as well.

I'll need to do a bit of reading. Pencil if it passes to the heirs as ordinary income they will owe regular income tax on it. Really bad news. The mother had held it as investment property.

A client came in whose mother had just passed away. She has three heirs and left a parcel of land with standing timber in equal parts to them. Ever eager to get their hands on mom's money the estate executor has already sold the timber. The proceeds from the sale will be paid to the mother's estate. Down the road I am going to be asked to prepare a Form 1041 for him. My question involves the tax on this sale. Technically the heirs were selling inherited property. My thinking is to pass the sale proceeds through the estate giving each heir a K-1 and let them pay any tax due which ought to be none as the lady died a matter of weeks ago. Your input will be appreciated.

One year a newly widowed lady whose husband had always handled the family financial maters came in. I looked up from the material I was reading and to my astonishment there she came lugging a small suitcase. About the time she reached my desk the latch on the suitcase released and my office floor was covered by every type of bill known to human kind. The fact she did not return the next year was a relief.

​A client has come in whose wife (age 62) has received a large social security disability payment for some $20,000 plus. Apparently the disability award took some time and this is a payment for back time. I've not encountered this before and even though the payment is for social security disability my thought is to add it into gross income on line 20a. However, in reading this board over time I recall someone advising this income can somehow be prorated and would appreciate any info on this subject.

I note that on some of my efiled client letters the wording still indicates the federal or state return is to be mailed. Is there a fix ?

Thanks to all of you. I finally turned it over to the client and his employer simply advising to provide me a correct deductible amount if any as the coded DD amount is NOT deductible.

That is why i come to this board. For enlightenment . Aieeeeeeeeeeeeee chi wah wah !