jainen

>>In later years, as Wayne said, it's mainly a matter of making sure you do not share anything from one side to the other, just as with any two unrelated clients<< I think problems are far more likely with family members than unrelated taxpayers. And once a problem does arise, it may be impossible to resolve ethically. For example, suppose your client wants to claim 12 months alimony paid, but you already know that three months were missed. Under Circular 230 you MUST resolve the inconsistent information you have, but you can't divulge such information without violating the other client's rights. And you can't even get permission, except in an unenforceably general way, without confidentiality problems!

>>a qual intermediary must broker the third party exchange<< There is absolutely no requirement in the code or the regs to use a qualified intermediary. It is simply one of several safe harbors, popular and convenient, but by no means the ONLY valid way to do a multi-leg exchange.

>>Are you able to stay dry<< We went on water restrictions more than a month ago. California coast. Weird weather, to be sure. But it's not just global warming -- Mars currently has a planet-wide dust storm that is so dense the solar batteries on the rovers have run down. There's just no where to hide!

>>Take either or both antidotes repeatedly until WORK has been completely eliminated from your system.<< It's actually kind of like chicken pox. I was exposed to it as a child, and it immunized me for the rest of my life!

>>what I expected<< I don't understand your numbers. There was no question of liability, only of the amount of damages. So how come she is claiming a loss that is 25% higher than the insurance adjuster? You would think as a lawyer she could prove the higher amount if it were legitimate.

>>Why should the SFR prepared for them start the statute clock?<< The bulletin makes it clear that the statute of limitations is not started by an SFR. The purpose of the ruling is to allow the IRS to assess penalties and interest and take collection actions as if an actual return had been filed. I don't think it expands the delinquent taxpayer's rights in any way.

>>Is there anything else that he can do to delay the tax on the sale of the property??<< Since he is not ready to acquire replacement property, he doesn't need the money yet. He could lease the field, or option it in some way, or trade it for a triple-net (that is, don't call me for anything except the rent payment) on commercial property in town which he can later exchange for something else, or he do an installment sale, or if the buyer is really motivated he can charge 15% more and just pay the tax.

>>So this strategy appears to run afoul of this code section<< I think this means you can't deduct it as investment income expense if you are pulling out all the equity in that way. But qualified mortgage interest is an exception that overrides the interest rules. There still is the problem of the low yield and the comparatively high mortgage payment. There might be some combination of details that works, but generally I can't see borrowing money to put into an investment that you immediately withdraw. Sure the policy will repay the life insurance loan, but how do you repay the mortgage loan? With the money you borrow from insurance? It doesn't make sense to me. But then, I'm not trying to sell you life insurance!

>>taking deductions for purchasing life insurance<< The deduction is for interest paid on a qualified home equity loan of up to $100,000. The use of the funds is irrelevant to that deduction. As an investment strategy life insurance has always seemed a poor bargain to me, because the yield is so low, in the 1 - 3% range. It makes no sense to pay 6% on a mortgage to get a 3% return, but if the insurance element itself is worthwile then the technique makes sense. Either way, it is legal.

>> I provided assistance as an employee of a company<< Then follow your employer's instructions. Apparently you ARE being paid for your analysis, so it is especially important that your conclusions include a referral for the additional expertise that they need. It doesn't have to be anything more detailed than, "The issues can be very technical and affect other tax years and taxing agencies, so we highly recommend that you engage competent representation."

>>If property not located within the 180 days<< There are several things wrong with your description. A 1031 exchange must be a true trade, not simply a sale with funds held in escrow. Typically a qualified intermediary acts as the trading partner. The replacement property must be identified within 45 days, not 180 days. The longer period is only to complete the acquisition, not to locate it. It is not clear from your post that the hayfield is business or investment property, which is a requirement for the replacement property as well.

>>I looked over the return and pointed out ... << Look at this from their point of view. They showed you the return because you are a professional in the field of taxation. You agreed to review it, you analyzed it, and you advised them about how the IRS was probably interpreting it. That makes you responsible! If you do not follow through with a conclusion and recommendation about how to handle this, you are suggesting there is nothing wrong with what they are doing. Even from what little you have posted, it seems to me possible that this company did some things improperly. Maybe they can explain it. Maybe they will have large tax liabilities (for which your friend might be personally liable under the 100% penalty). Maybe somebody will go to jail. Who knows? You accepted the engagement. It may have been informal and unpaid, but you should still treat it professionally. Write the letter.

>>I'm not the representative<< No, but you seem to be the professional consultant. A few months from now, when they owe state & federal payroll taxes on 200 g's and the bookkeeper doesn't get to deduct her office-in-home anymore, they all might remember your relationship somewhat differently. I repeat -- "For your own protection you should formally advise them of the need to engage competent representation." That means in writing.

>>we have had conflicting views on this subject<< "File Form 1040X only after you have filed your original return." --page 1, Instructions for Form 1040X I expect it will work for you, as long as you aren't concerned about the statute of limitations. Remember that amending a return is simply an administrative convenience with little authority in the tax code. The IRS is perfectly free to accept, reject, or ignore Form 1040X whatever the circumstances.

>>I don't see a current original post from Pacun listed.<< Sorry, I should have said his thread, not post. It's called Real Estate Blessing (which I thought was a lovely title). Although the situation is a foreclosure, there is a rich background of tax planning and analysis, both economic and personal.

>>Look forward to getting some good discussion going.<< How about picking up Pacun's post from yesterday morning? JohnH made a very intriguing observation that even with the disaster of losing one's home in foreclosure, "you may find that financially he has lost less than it first appears."

>>you may find that financially he has lost less than it first appears<< John, I'm glad to see this unusual statement. We do our clients a disservice when our sympathies obscure the true facts. Obviously we don't know all the facts in this case, but it is important to consider economic issues such as the source of cash flow problems that led to defaulting on his payments. There are also non-economic issues such as the reasons he chose that house 18 months ago. These aren't always popular ways to evaluate what happened. But the same reasoning is often very attractive on the front end of the deal. Consider that he wasn't able to sell his house even though foreclosure takes several months. Is that because he paid a premium price, the housing market collapsed in his town, or he got in with very little equity? All of these reasons reflect well-known investment risks that he freely accepted, perhaps even sought out, whether for increased leverage or personal amenities.

>>They are usually more strict about that than the IRS<< States are not only more strict, they have DIFFERENT rules and it is usually very hard to win this kind of review. This is not something that should be handled by the regular company bookkeeper. For your own protection you should formally advise them of the need to engage competent representation. It could be extremely serious, because if they make a correction for this year they will almost automatically make it for EVERY year past and future. Then they notify IRS and the state income tax people. With penalty and interest it can get very expensive very fast.

>>giving out welfare & free medical assistance to illegal aliens<< I thought people immigrate to take advantage of our low capital gains tax rates.

>>Some cities in CA at least have their own minimum wage, called a 'living wage'<< The California state minimum wage is $7.50. That keeps business costs down but is a fraud on the American taxpayer because it encourages unreported cash earnings including crime. You have to feed and shelter your kids, and if you could find a full-time job at $15K a year it wouldn't even pay for housing. Living wage is a local ordinance which covers most companies that do business with the city or county. Such laws are not unique to California.

>>the minimum is $7.65<< In my city the "living wage" law requires $13.65.

>>what happened to you guys<< Who knows? Some were restricted, others apparently just moved on. I support any moderator's right to do whatever they want. I appreciate that THIS forum is the place to be now, after the original ATX shut down.

>>He doesn't have a bank account<< In that case, I recommend you take your fee in cash instead of a check! Seriously, don't bother with him at all. There is no point in a payment plan since he won't follow through on it anyway. I mean, is this guy really going to buy a money order every month for the next three years? He'll probably have a little withholding this summer and they will keep his refund and that's that. note to Oldjack. They are talking about us elsewhere. Clear your cookies and take a peek.

>> Let's say that your client owes 1K to the IRS and he will be paying $200 per month<< Are we talking about 2006? They will let the current year go (with only an increasingly threatening letter every month or so) for quite a while. Anything older, it's probably best to set up a schedule but you can put that off for some time too. Start getting more responsive when you receive the notice of intent to levy.

>>what would be needed to prove this amount<< Even a casual business needs to have at least minimal records of the activity. He might consider reconstructing invoices or receipts for his clients, mileage records, repair and supply receipts, bank deposit records, and all the normal things. Do you have any particular interest in helping this taxpayer who has already failed an IRS audit on the return and has a history of blaming his preparer for his own fraudulent claims? It isn't hard to recognize that the income he now claims will maximize EIC without children.