jainen

>>I never said anything about her wages<< Sorry, I misunderstood your response to kc's statement that even as a Colorado resident he still has California source income. In my understanding of the original post, the only California source income involved was the wife's wages; the question is whether any of that is allocated to the out of state husband. The answer under California law is yes. His Colorado wages are also fully taxable to California if he is still a California resident. That's a different question, whether he is a California resident. Under California (and every state) law, he retains his domicile until it is established elsewhere. But he can be resident of one state while domiciled in another, or he can be a resident of both states at the same time because each state defines residency according to their own separate laws. In my opinion, the information included so far in this thread does not support the conclusion that he is no longer a California resident. If he were my client, I would include a lot more information. In fact, the original post does not even take the position that he is no longer a California resident.

>>does not make his CO income subject to CA tax<< His California-source income is his community property share of HER wages. Even though he lives in a non-community property state, that's the way California law works regarding earnings of the resident spouse. It doesn't make a difference on a joint return, but if they file MFS he will be taxed on all of his own earnings plus half of hers, potentially reaching a higher tax bracket, triggering AMT, or taking other hits. That would apply to his federal return as well.

>>limit the use of the color orange<< You can deny it all you want, infidel, but the Great Pumpkin is real!

>>you can use the information from the HUD 1<< In my opinion only the HUD-1 (or comparable settlement statement) will give you enough information. For one thing, the 1098 might not report additional points paid to a broker or a second lender. On the other hand, it may improperly include points actually paid by the seller or real estate agent. Even if the number is correct, it won't show that the borrower brought in at least that much in cash, a requirement to avoid having to amortize. The HUD-1 has been improved this year, and now shows amounts paid outside of escrow, rebated, paid by the lender to the broker, and other important facts.

>>Are any of the gains short term?? << Yes (assuming there were gains over two weeks). As written, the property was owned by the partners, not the partnership. Was that a trick question?

>>short-term on his<< Oh frabjous day! I finally caught kc making a mistake! Property transferred incident to divorce carries over the holding period as well as the basis.

>>Do I simply change the number<< There is nothing simple about this. You must be ready to defend your position that he was not a California resident, when his wife still lived here and even his employer treated him as a California resident. He can't say he didn't know about the employer, since his paystubs showed it. And he will have a devil of a time proving he has cut all ties to California while maintaining a family home and joint bank accounts and so on. Where is his doctor? Did he register to vote in Colorado, join a new church, change address on ALL his bills and subscriptions, get new drivers license within the required 30 days? Did he never visit his wife after he moved? And by the way, he unquestionably has California-source income under the community property laws unless he had a pre-nup agreement or something, so don't even think about filing MFS. Don't be cavalier or listen to people who say they've "never had a problem with it." California is very aggressive about people moving out of state. But yes, on Schedule CA (540NR) you would show total federal income in columns A and D and California source income in column E.

>>the power to change << I would eliminate refundable credits, (but only to deprive conservatives of one of their favorite arguments). I would exclude the first $15,000 of W-2 wages (minimum wage), and ALL wages that currently qualify for the Domestic Producer Deduction. I would eliminate standard and itemized deductions but lower tax brackets a revenue-neutral amount, and then give an above the line deduction for charity up to 10% of modified AGI. I would tax self-employment income at the same rate as long term capital gains. I would make all government employees at all levels contribute to Social Security, but offset benefits with any government pension received (except from Veteran's Administration).

>>They come to the appointments together so everything is discussed in the open.<< In my opinion, that is not good enough. Even though you have permission to disclose, you still don't have the right to suggest, for example, that the twins go on one return--that would damage your other client's interest by increasing her tax. Furthermore, "in the open" requires a leap of faith that in my experience is hard to make concerning family relationships. So I repeat my advice. I would not act on the new story without documentation. You are not an auditor, but it is still required under Circular 230 when information is inconsistent. Let her go elsewhere to amend her return, and paper file the rejected one which is apparently what she expected all along.

>>I really just want to prepare both returns<< Why do you want that? You have an obvious conflict of interest since they both want to take the same exemptions. That is exasperated by the inability (putting it nicely) to provide accurate income information. I suggest you decline to amend the return, with the friendly excuse that it would be unethical for you to take exemptions away from your client G. In fact, confidentiality prevents you from even discussing it, so there will be no discussion.

>>start the depreciation of his old basis over<< Acquiring the second half of the ownership will not change the depreciation schedule of the first half. Henceforth you will have to show the house as two assets, just like you do when they add basis by remodeling. However, you can combine the two land percentages if you happen to track them on the depreciation schedule for non-deductible convenience.

>>ones that work hard and have a decent income<< This kind of sounds to me like you are blaming low income people for being lazy. That is an attitude that has never stood up to evidence, though a lot of very motivated people have tried. In fact, poor people have to work harder than wealthy people. How about you--are you wealthy or lazy?

>>He would sign her name and the word “by” his name “POA”. << A power of attorney does NOT give the right to sign somebody else's name. He must sign his own name "as attorney-in-fact." I don't know if he can claim a refund as an agent for the surviving spouse. I would recommend getting legal counsel on that point. $3600 is likely to attract attention, and not just from the IRS. By the way, why can't the spouse herself sign? Unless it is a Durable Power of Attorney, which is a different document from a Power of Attorney, it is not valid after she becomes incompetent.

>>try to beat the tax laws over a few quarters of SS earnings<< Take another look, kc. Note the insistance that the ONLY person for this job is her mother who just happens to be a few quarters short of full retirement benefits with lifetime medical care. They only have to pay $5000 a year to buy those quarters, and can claim a 20% tax credit for those payments. Isn't that exactly what the law was changed to prevent, 42 years ago? But why not double or triple the pay? Do you think a bit of math could come up with no tax liability, and grandma claiming maximum EIC and refundable child tax credit in addition to the retirement benefits? Of course, that would be for housework, not childcare, but then maybe there's another kid who grandma could hire for the 2441. Of course she will want to return all the money as "shared expenses," except for funding the teenager's Roth.

>>Why can this Grandmother not be allowed to accept payment for carring for the baby<< As I said previously, she can certainly be hired for the job. She can be paid, and report the income accordingly. (As described it would be W-2 wages, not self-employment.) However, such family employment is not subject to Social Security taxes and does not generate Social Security credits. I am emphasizing that fact because FICA was one of the main goals of the plan.

>> payments for childcare credit << The original post was about the employee's Social Security taxes. My response comes from page 5 of Pub 926, which OldJack cited. The employer's Child and Dependent Care Credit is an entirely different matter. The rules for that are in Pub 503.

>>Our tax code is nuts!<< This is not in the tax code. It dates back to 1968, when there was still a Congressman or two with a brain. It was just after Medicare started and our parents realized they could get the government to pick up support obligations for THEIR parents--just pretend to pay Mom enough to qualify for Social Security without reaching the income tax brackets! The loophole was quickly closed, except for single parents who had a legitimate need for grandma to help. By 1988 our generation was trying several variations of the same thing, and got the rule that we can't earn Social Security credits within the family unless there is a bona fide business. The earlier exception was retained.

>>Do I report this as a gain on Schedule D<< Yes. >>still has the mutual fund... reduce basis<< Yes.

>>she can't hire her mom << She can certainly hire her mother to take care of the baby in her own home. However, such family employment is not covered by Social Security unless she is a widow or unmarried divorcee, or has a disabled spouse.

>> mom can continue contributing to her FICA << She can either take care of the baby or pay into FICA, but not both.

>> Block filed them for HOH in similar circumstances.<< Have you all noticed how many folks have "similar circumstances." Grown-up kids who work a little to pay for their weed, and accidentally trigger a W-2 along the way. Too bad--the only tax benefit is the parents can deduct medical bills. I've got one in my own garage.

>>how do I deduct all of the costs (or can I)<< Does the professor do a lot of this kind of thing? Because it seems to me there is no question of SE tax. He took the commission in a non-profit setting with the upfront understanding that he could not recover all his costs. Report the $16,000 on line 21 and deduct $16,000 on Schedule A.

>> it can be important to distinguish joint, filer and spouse<< Geez, everybody whines about how complicated California taxes are, and also about how mixed up California marriages are. Well let me tell you, we don't do that what's-mine-is-mine stuff. What's the point of being married if you don't want to share? I remind my wife about that every other Friday.

>>I since deleted everything I said<< And obviously OldJack likewise changed what he said. So now that we are all one big happy family again, let's not start it all over with accusations. OldJack did not "slip up." He offered an unusual interpretation based on cleverly parsing the actual text of the code. But as I said, he was teasing. We do that here from time to time.

>> banning him from posting << Maybe instead you should just close this thread, which seems to have covered the original point well enough. Bees Knees expressed his conservative point of view fairly. Perhaps his own forum is still as rough and tumble as it used to be, and he needs a bit of time to learn the tone of the ATX Community.