jainen

>>Very decadent<< Sunday? I went to my son's engagement party! Last son--first daughter! Meeting the other parents is great fun, you know. They tried to tempt me with the margarita machine, but I saw that J. Lohr 2006 cabernet. In the end the result was the same anyway. Very decadent.

>><taxable year beginning after 2007 and before 2011< If your research shows that to be the final word, you'll have to request a private letter ruling or forego the election because the tax year in question is not before 2011.

>>over the line<< I may be, I admit. I don't know the individual circumstance. But I do know--and expect--that clients are very stressed by audit letters. Obviously since the issue is the preparer's work product, the client may question that in a stressful way. If a tax practice is not set up to handle audits, or a particular audit, the client should be referred to a qualified practitioner. In my opinion a client should NEVER be instructed to handle an audit on his own. In the original post, that is what happened and the ethnic comment came in response to that, not the other way around.

>>My clients all seem to love me.<< Well duh! If they didn't like you they would be someone else's client! This one trusted you for fifteen years, but apparently that was just data entry. When he really needed help you weren't there for him. Why not? If you think he might be a NYC resident then you have not done your job. Anything else, you should at least offer to help him (for appropriate fee, of course). Zaretsky is simply a name from eastern Europe, not indicative of religion. I can't guess what the reference is, and you say you don't know either. Maybe a recent personality in the news. In our industry we face fairly desperate taxing agencies with lots of fancy technology. Get used to it--they are going to cross-reference addresses and we need to protect our clients (and ourselves). Presumably you reported the NYC income and don't dispute that the wife works there, so I REALLY don't understand why you won't stand behind your work.

>>You are better off without him as a client<< Maybe, if he doesn't gossip about you. I get the feeling he will, though, and I think it would be better if he were telling his friends how you stood up for him. I don't know about the phone call but your letter sounded unreasonably defensive to me. Why should you take it personally like some kind of ethnic slur? I don't like the "same as last year" attitude in a tax professional any more than in a tax client. Pull out the book and find out what it says about residency.

>>What I find the most interesting is that H&R block has been transmitting the answers for questions 22-26 on Form 8863 in previous years.<< Nice, David! Very fine! (In my experience, sarcasm doesn't come across very well on this forum, especially in March. So if you didn't get his joke, here's the link. http://www.irs.gov/pub/irs-prior/f8863--2011.pdf)

>>I made a mistake with his address and I had to call NYS and fix it<< Tell him you will be happy to represent him. Of course they won't talk to you without a power of attorney, so he needs to come in to sign that. Also an engagement letter and a check for your retainer. Then do a good job for your long-term client! Department of Labor follows its own rules, unrelated to Department of Taxation laws. My guess is New York is looking for easy money from computer matches followed by computer letters, but won't put up much of a fight for an individual. Don't worry about your client's reaction to the letter. It's perfectly normal--taxing agencies work hard to foster such reactions, including blame-the-accountant. I mean, really--they're making a big deal because someone managed to hang on to a job in New York for three years? I always liked H&R Block's policy--examination is an ordinary and expected part of the tax system, but our clients have the advantage of professional representation.

>>They were lied to about the roof by the seller<< She was buying it as-is, so why not get an inspection to tell her how it was? It was not that she became ill or because the property deteriorated. All that was true before she acquired the property, and she should have known by exercising ordinary prudence. Anyway, fixing damage from a leaky roof is a common thing anybody has to do unrelated to medical condition. I'm not feeling sympathetic today. I think she just wants a tax subsidy to remodel her new vacation home.

>>They had asked about roof issues<< Let's see.. She bought a house for a specific medical purpose but didn't bother to inspect it for that purpose. Reminds me of the old vaudeville joke. "Doctor, it hurts when I do this." "So don't do that!"

>>I doubted you<< I'm not convinced yet. It seems like a very odd thing for a press officer to threaten a major corporation without reference to her own executives. The announcement says that Intuit itself identified the errors, but I use an Intuit product and the company has not mentioned MN in its daily alerts and updates. The announcement does not actually say the taxing agency has confirmed any specific problem. The letter lacks the footer that other news releases have, so it might be hacked.

>>Obviously the endorsement deal money and the NFL Players Association funds get taxed in the state of residence<< That's not so obvious to California. FTB Pub 1017 says, "If by contract an athlete or entertainer is required to perform services in California on behalf of a sponsor, the payments received on the contract are generally considered to be California source income." Examples of "services" include wearing a logo, using equipment, and being photographed.

>>eligible to participate<< KC, in another thread this morning you said, "the gov should only pay for those who TRULY need care and TRULY are unable to pay." Can you believe that there are good schools that agree with you, that are eligible but choose not to accept federal aid with all its rules? Perhaps this midwestern vocational school only wants motivated students who can forge their own success and pay their own way without handouts. Accreditation is not an official process; it is an undefined term for various private industry standards. According to Pub 970 as I quoted, "virtually all" schools are included. There is no requirement that a school actually submit paperwork to the U.S. Department of Education, if they are already regulated on the state level.

>>it does turn out that she has a desk<< No doubt some preparers would say this opens the door to everything, but in my opinion claiming an exclusive corner of an otherwise non-exclusive room is not a good faith position to take for de minimis usage. Are you saying she has a second desk that she uses for non-business bills and correspondence? The self-serving change in her story is just not credible to me. I'm not going to belabor the point, but I know that at least one taxpayer lost in tax court because the room where her desk was located had closets for non-business use. You might make a distinction in that she had claimed the whole room, but I still think you are reaching too far.

>>stretching my memory back to the late 90s<< No, Oldtimer, you didn't dream it. You may want to take an update class, though. In 1990 Tax Court ruled that a home office was a "regular" place of business even if it was not a "qualified home office." IRS hit back four years later with Rev. Rul 94-47. They stated specifically that such commute was only deductible if "a taxpayer's residence is the taxpayer's principal place of business within the meaning of Section 280A©(1)(A)." That means it MUST meet all the requirements for a deductible office in home.

>>accredited with the Dept of Professional Regulations<< That is an Illinois state office. According to Pub 970, "An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution." There is no standard definition for accreditation. Since IRS says to ask the school, I would go by whatever the school tells you. Document who said what when, get the tax i.d. number and other required info, and take the credit if otherwise eligible.

>>Does the admin test only apply with OIH?<< Yes. "Principal place of business" has a specific meaning in this context. Pub 587 explains that not only must it be the only fixed location, it must be used "exclusively and regularly for administrative or management activities." You can not meet this test by storage (which does not apply to supplies and equipment anyway). So in my opinion your client's travel from home to local jobs is non-deductible commute. You can help her plan for 2013 if she has a way to set up an EXCLUSIVE home office.

>>math will hold true no matter how you start<< I wish it were that simple, but numbers like any other facts start with assumptions. What fair rental value do you give the amenities of a parents' home that would never in reality be rented? Does the apartment mean the absence is not temporary? How do grants and loans fit into this? No, the IRS Pubs do not "dictate;" they are not the law. But they are widely-accepted interpretations of the law, and unless you are in Tax Court it is very difficult to avoid the IRS position. On the other hand, it is difficult for the IRS to get around YOUR assumptions. So who would benefit most is often not very far from who should benefit.

>>As I understand it, an amendment for section 179 cannot be made without “Commissioners consent”.<< That would have required a Private Letter Ruling. However, the regs did change quite a while ago. The 2011 version of Pub 946 says, "For property placed in service in 2011, file Form 4562 with either of the following. "Your original 2011 tax return, whether or not you file it timely. "An amended return for 2011 filed within the time prescribed by law. An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income."

>>trade in the old auto<< Do you mean these are 100% business vehicles subject to Section 1031? If so, his new basis is $19000--the $8000 carryover basis, plus the $14000 extra that he paid, minus the $3000 deferred gain. Otherwise, it's $25,000--the $11000 value of his old car plus the extra 14.

>>How would I report this rental?<< Form 1065.

>>look at the student's status (what the University classified the student) at the beginning of the tax year<< That is right. "Four years" has two separate meanings. First, it means whatever the school considers to be the first four years. The regs can't be more specific because different schools may be on quarters or semesters, set up internships, etc. Students might attend a community college full or part time for many years, but obviously can never get beyond the sophomore level in a two-year college. The second meaning is that the AOC (new name for the Hope credit) can only be claimed a maximum of four times. In the original post, the student is already a junior so she might only get two years of AOC. MN dhawk suggests amending to pick up those missed credits. However, they wouldn't be very big credits because community college is cheap and she was only taking a few classes at a time. Now that she is full time at university she might figure it will take more than two years to get all the courses she needs in the right order, especially if she is working on a double major. In that case she can still claim AOC for four expensive years as a junior and senior!

>>how to treat depreciation for the short year<< You will have to do calculations by hand if your software does not include the feature. For MACRS real estate with mid-month convention, depreciation is exactly the same. For half-year or mid-quarter convention, you must count days or months to get the mid-point. Pub 946 tells you how. Unfortunately it's not as well-written as some other guides. "For a short tax year not beginning on the first day of a month and not ending on the last day of a month, the tax year consists of the number of days in the tax year. You determine the midpoint of the tax year by dividing the number of days in the tax year by 2. For the half-year convention, you treat property as placed in service or disposed of on either the first day or the midpoint of a month. If the result of dividing the number of days in the tax year by 2 is not the first day or the midpoint of a month, you treat the property as placed in service or disposed of on the nearest preceding first day or midpoint of a month."

>>Given the info presented, he will have to pay it ALL back<< You must have had a tough day, kc--you don't usually give up so easily! The Instructions for Form 5405 say you repay the credit "with the tax return for the tax year in which the sale is completed." Also, "the repayment in the year of sale is limited to the amount of gain on the sale as determined in Part III of Form 5405." Therefore, I think the taxpayer has another whole year to read those instructions in detail.

>> I don't think I can use housing cost at home because he didn't come home<< First of all, you can't use housing cost at all, only fair rental value. It's pretty easy to think a room in a nice home might go for $1000 a month. When you ignore the scholarship, that's well over half. Second, a child does not have to EVER live there to be claimed as a dependent. He can be a qualifying relative, and his room still counts as support even if it's just storage (because everything counts as support). Third, there's a longstanding ruling about the definition of "temporary absence." The relative moved to a nursing home (special circumstance, just like education is) but still remained a dependent for years. Rev. Rul 66-28 concludes, "The possibility or probability that death might intervene before the dependent returns to the taxpayer's household is not sufficient to make such absence permanent."

>>a) has a long-term capital gain of $10k, and his basis of the machinery is $0,<< Sounds right, assuming the distribution was not part of the partner's distributive share of income. Other than potentially affecting the retiring partner's basis, the distribution would be treated as a separate transaction from the sale of his partnership interest.