jainen

>>No amount of regulation or required education and/or certification can stop a crook from being a crook<< Tomlinson didn't start out as a criminal. She went to a good school and worked at legitimate companies. As I understood her reasoning, it was BECAUSE nobody was watching her or validating her education or holding her to ethical standards, that she thought she could get away with crimes that other professionals could not. In fact, she even argued that she SHOULD get away with the crimes for those very reasons. So I do think regulation would have prevented this particular mindset leading to fraud.

>>most voters will have forgotten who she is, if they ever knew<< We the voters know there are a lot of things wrong. What we are looking for are some positive ideas, not just complaining about the other side.

>>John never received a letter from the IRS for the mortgage interest that was not under his name or ss#<< Investment loans don't always generate a 1098, so if the mortgage seems reasonable for the property and the rest of the return looks good the IRS might let it go. On the other hand, you said this went on for "a couple of years" and they're just getting started on the 2011 audits.

U.S. vs. Tomlinson First she said you couldn't prove she signed the return herself, because nobody was watching. Then she said you couldn't prove she knew the law well enough for errors to be intentional, her MBA and years of experience notwithstanding. Then she said she had no legal obligation to be truthful because Circular 230 only applied to CPAs, EAs, attorneys.

>>Jill agreed to assume the 100% of the loan<< I thought you said Jill was already the 100% borrower? It doesn't sound like they set it up correctly. Co-ownership does not necessarily constitute a partnership as such, but the unequal distribution looks like they didn't treat it as co-owners. So I suggest you pretend it was a partnership all along. In that case Jack's basis in his 50% interest is no more than his 50K contribution since neither he or the partnership had any liability. Adjust that for net income and expenses he claimed over the years, which will determine gain/loss for the retiring partner. I don't think the loan balance or FMV are relevant (unless Jack wants to be taxed on $185K relief of liability). Jill should continue the depreciation schedule already in place and hope the IRS doesn't go snooping around.

>>Have we all now been pun-ished sufficiently?<< It's a tough world--you gotta have grit. Too bad we can't just all get along in hominy.

Amaizing!

>>And the other improvements<< I'm confused as to whether there are non-restaurant improvements. The building must be more than 50% restaurant to get the 15-year write off. But if it is (or became so), some improvements may be eligible for Section 179 starting in 2010. Make sure the corporation actually paid for the improvements and equipment. If he didn't use a separate checking account or credit card every time, it might look more like a taxable dividend. Be very careful about assumptions and shortcuts in documenting your decisions. You don't want to get blamed if something doesn't add up in this complicated, multi-year related party scenario with lousy records. Verify dates placed-in-service with work orders and occupancy permits, as well as contract and payment dates. Be as thorough in researching the facts as you have already been in researching the law. Don't forget the engagement letter and retainer, both custom-made for this client.

>>we need to shelter as much as possible to minimize penalty<< Failure to file is just the beginning; you need to start planning for an audit. IRS may wonder how a startup business could pull out a half million in cash to improve the shareholder's building. They might ask for financial records, not just bank statements but also accounts payable, paystubs, shift schedules, all sorts of things. Study and act on the audit guide at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Retail-Industry-ATG---Chapter-4:-Examination-Techniques-for-the-Food-and-Beverages-Industries-%28Restaurants-and-Bars%29. Within the limits of your engagement letter and RETAINER of course--you already know he doesn't submit paperwork or pay what he owes. If this non-filer won't work with you on a professional level, refer him to a lawyer.

>>If CA is similar to the feds, does that mean in place of the deceased spouse (husband) we should indicate in the signature section "filing as surviving spouse?"<< Isn't she actually signing Form FTB 8453? The instructions for THAT form say, "Indicate next to your signature that you are the surviving spouse/RDP. Also, print “Deceased” and the date of death next to the name of the deceased taxpayer." Call tech support if the software isn't working.

>>what else am I missing?<< You are missing the instructions, where all this is covered. Page 20 of the 540/540A booklet explains how to prepare the return, which is generally similar to the federal. Page 23 of FTB Pub 1345 explains what hard copy needs to be retained when e-filing.

>the sole legitimate purpose of government is to secure our rights... not dependent upon any government<< The rights mentioned are life, liberty, and the pursuit of happiness. (I believe the right to property was specifically removed from mention.) Then it says that people agree to government so they can secure these rights. In our country, we do the agreeing in a certain formal way, called elected representatives. And those representatives secure those rights by passing laws. And the laws embrace a social compassion, based in part on a long-standing philosophy that faith without good deeds is dead.. Other forms of government also use public resources to make sure everyone has those rights, but most of us think our way is best. From time to time we consider whether we should avoid compassion as a society and require staunch individualism, but that hasn't worked out very well in the matter of good deeds.

>>The IRS site says they will come up with guidance<< 25 days is the normal time for a Supreme Court ruling to take effect. It will be substantially longer for the IRS to provide interpretation and guidance because that will also be subject to dispute. Remember, the Supreme Court did NOT say gay marriages are legal. It said (in one case) the federal government can't over-rule states, and (in the other case) it said the federal government can over-rule states. Here's one example of the big problems still to be worked out. A couple get legally married in California, then move to Alabama where the marriage is not legal. Anybody want to guess?

>>The point is that it happens over and over again<< Yes, that is my point too. Your link in the original post says, "endless political scandals aren’t just quirks of the Obama administration, but are rather symptoms of any big government in action." But the headline says "Scandalmania," suggesting widespread malfeasance instead of business as usual. My observation on the 10 things was that the culture was not suddenly transformed on January 20, 2009. On the other hand, those ten things are a mixed bag. $140 for lunch seems like a lot to me, but I'm not negotiating with international executives in Washington. It's hard to judge without genuine context, but when they put it with cheap party favors the listing itself looks more ridiculous than the items on it. That's ordinary stuff in large organizations, on the theory that it builds teamwork and employee morale at little cost.

<<Is the Capital Gains rate the same in 2013 the same as 2012?<< Yes, for most taxpayers. There is a new upper tax bracket of 39.6%, and those taxpayers face a maximum LT capital gains rate of 20%. Plus, they will be subject to the 3.8% Medicare surcharge, so the total rate is 23.8%. The Medicare surcharge is based on AGI, so taxpayers in a lower bracket because of a lot of itemized deductions might see LTCG rate of 18.8%.

>>ridiculous items<< This report, http://www.treasury.gov/tigta/auditreports/2013reports/201310056fr.pdf, was released by Obama's own Treasury inspectors. The time period studied started in the Bush administration.

>>is this an ATX problem or an IRS problem?<< Start by pulling the return transcript through e-services or 1-800-908-9946. Client can get it for you immediately if you haven't filed P.O.A. yet.

>>I do applaud the Supreme Court for finally taking a stand that our Constitution does not permit the federal government unlimited powers.<< Well, there were TWO rulings today. Besides DOMA, there was California Proposition 8, which was passed by a majority of voters and outlawed gay marriage. When one court over-ruled the voters, the state government refused to defend the election so private citizens appealed. The Supreme Court did not even talk about marriage; they just said private citizens can't do that. So in that case the Supremes supported the power of government over individual citizens and the democratic process.

>>I am speechless at the lack of professionalism<< Relax, Jack. MsTabbyKats never claimed to be a tax professional. In fact, he has mocked and denigrated our profession before. But this time he out-did himself; we dour numberlings have never faced such a troll. Five pages--isn't that a record, Eric? Dancing away from our objections, a hint of racism to get us mad, then a couple of days off to cool us down, he never gave a straight answer 'bout nothin'. Just a weird story, playing so close to our reality we half believed it. Masterful!

>>Please send me everything<< Lovely words. I HAVE heard them before, and in my opinion the appropriate answer is, "Thank you. I've got everything ready for as soon as the 90-day letter is rescinded."

>>Can this conversion be a return of capital?<< Under Section 311(b ), the corporation would probably recognize gain for distributing appreciated property to a shareholder. I think this taxpayer might need to be referred to someone with more specific training or experience. He has important planning issues as well as questions about reporting on the tax return. Transactions between an S-corp and its sole shareholder can be a nuisance to figure out, and they often are not very well documented in the corporate minutes or the shareholder's basis. Since you are posting rather general questions, I wonder if you have an engagement letter limiting your role and setting a fee schedule. You need one! At a minimum, you need to decide if the corporation or the shareholder is your client. It can be and probably is both, but then you have to be clear about the inherent conflict of interest. Creditors sometimes get uptight about that when a business is selling and giving stuff away.

>>the voluntary nature of the income tax<< Some in the tax protester movement are greedy fools who don't appreciate the freedoms we enjoy in America. But most are greedy cynics taking advantage of the greedy fools.

>>Anyone who breaks a law is a criminal.<< Well, that's a goofy thing to say. Not all laws are criminal laws. A person in your profession ought to know, for example, that the Internal Revenue Code is not enforced by the F.B.I. >>I do NOT see is any Government attempt to enforce the current laws about illegal immigrants that are on the books now.<< That's another goofy thing to say, although it may very well be true in your case. I guess you don't know anybody doing police work, or you would have heard them complain about how over-zealous I.C.E. is. Many a true criminal escapes jail by submitting to Immigration's civil code hearings and taking a free ride back home.

>>What are the checkpoints at border crossings for?<< To make sure the paperwork is in order. Almost everyone crossing at the checkpoints is legally authorized to, tens of thousands of people per day. But even if they aren't, or if they cross someplace else, it is not a criminal act, any more than underpaying taxes is. It's an administrative or civil violation, subject to due process and appropriate penalty, but don't compare them to robbers any more than your clients are robbers. To persist in doing so is what I consider being blinded by political thoughts and rhetoric. It does not help the discussion; it only blocks understanding of the real problem. In my opinion, those who mischaracterize and dehumanize the people who are coming here illegally are a big part of the real problem. But it's a common tactic of politicians serving certain economic interests,

>>The word 'illegal' here is being associated with the act, not the person, per se. << No. In that phrase, illegal modifies the person. If you want to associate it with an action, that would be a different phrase. People who look but don't buy are not illegal shoppers, although some particular ones might steal something. I say that in response to your comparison to robbers, every single one of whom is committing a criminal act per se. But again, entering the U.S. without a visa is almost NEVER a criminal act. This is a simple fact, not my opinion. So let's not compare immigrants to criminals. How about comparing them to taxpayers in the spirit of this forum? Failing to pay taxes, even deliberately or fraudulently, is almost never considered a crime. We don't like tax cheats, but that's because of their actions. We don't color the public discussion with prejudicial terms like "illegal taxpayers." We understand that being a taxpayer per se is not illegal, even when particular actions are.