jainen

>>a couple of clients<< Come on, the debate is over. Electronic filing is vastly superior on so many levels, including taxpayer protections. Tell them that you now electronically file all returns as required by law. All preparers are subject to the same law, so if the client doesn't like it he can either find someone with a minimal sideline practice or he can do it himself. Or just tell them you have to charge $100 extra for special hand processing.

>>any reason not to do that?<< Would you care to deem her free rent as taxable income? In my opinion, she can't have it both ways. She could pay rent to the estate, and the estate could deduct expenses. Or the estate could distribute the property to the heirs, and she could deduct the expenses directly. But in my opinion, if she does neither, she gets neither.

>>you are treated for tax purposes as if whatever part of the year you lived was a "full year"<< I agree with that, but caution that the calendar year W-2's and 1099's will probably be incorrect if they include payments made after the close of the decedent's tax year, that is, after death. It doesn't matter when it was earned, just when it was paid. Since both earned and unearned income affect EIC, due diligence means the income must be carefully allocated to the decedent and estate or heirs.

>>the daughter could not file for the mother under a POA<< In my opinion, the daughter can NOT use a Power of Attorney to file the decedent's return. I think her POA is now void for all purposes. I think the tax return can only be filed by the executor or personal representative acting as such and following IRS instructions to verify the authority. Nor, in my opinion, can the daughter "claim the credit;" it goes to the estate. And I'm very uncomfortable about the closing revelation in the original post that "it changed from a loan to a gift." Perhaps that is just worded wrong, but to me it sounds like something that might not qualify for the credit.

>>I win, I win, I win, I win !!!!<< No you didn't--you came in second to last!

>>How? << Oh, well, I can think of a number of ways to "get the money" without filing a return. Amending the prior year is so obvious it doesn't even count as thinking. By how about taking a lesson from the IRS itself: reduce withholding by the credit amount so one gets the money in the paycheck? Or why not let a co-buyer claim 100% of the credit on an early return, and then share? (That method is suggested by the IRS itself.) Or, in the normal course of events one would calculate the credit at the time of filing an extension, and so could pay oneself the $8500 that would otherwise be sent to the IRS. There might also be non-tax methods to financially benefit from the credit, such as in a loan app or other transaction using cash expectations. Of course, no one could use all of these techniques without considering other factors. But with appropriate planning for the credit, the money is indeed available separately from the actual tax return filing.

>>1099 in question was issued to the deceased<< My understanding was that the 1099 was issued with the deceased's SSN because the IRA can not be rolled over to a non-spouse beneficiary's own IRA. But it reported a distribution that happened after death, and nothing that happens after death goes on the final tax return. This is similar to a W-2 which is of course issued in the wage earner's name--any wages earned but not received prior to death would be allocated to the estate or recipient, not reported on the decedent's return.

>>The IRA was rollover to her mother.<< I assume the 1099 in question refers to this distribution after death. It must be reported on the recipient's tax return. The IRS knows that it is common to include income in respect of a decedent under the original SSN, so if they send a letter just respond with the simple facts. Isn't the distribution code "G" anyway? By the way, I also assume you don't really mean the rollover went "to" a non-spouse beneficiary, as that would be a taxable distribution rather than a rollover.

>>I threw it away. << I'm not sure I understand--what exactly did you throw away?

>>Is it possible to get the money for the first time homebuyer credit without filing a tax return?<< Yes.

>>Is it possible to get the first time homebuyer credit before you file your tax return? << Yes.

>> it will accept a settlement statement if it is complete and valid << In other words, "We don't know what to tell you. Congress made the rules so tough that it is technically impossible for anyone to comply, so just do the best you can and we'll work with you on it." Now, that's MY kind of bureacracy! [kc, long links like that don't pick up properly so we have to copy and paste to get the whole thing. But if you use the My Link feature, it works nifty!]

>>e-filing would not be affected<< The bureacracy rolls on....

>>the taxable portion could be shown on Line 36<< In my opinion, the repayment of less than $3000 income previously included can ONLY be reported as a miscellaneous itemized deduction (subject to 2% of AGI limitation). In my further opinion, each $1200 should be prorated for the original taxable portion, but I could also understand an argument that you repay the entire taxable portion first.

>>Form 2555EZ and the CA Form 540NR<< California does NOT allow the Foreign Earned Income Exclusion. Therefore you would simply add back the amount of the federal exclusion (line 18 on the 2555EZ) in the addition column of Line 7 on Schedule CA(540NR).

>>she'll have to go back to the VITA site<< I recommend she give up on those guys. In my opinion, she should get financial aid advice from the experts in the college Financial Aids office.

>>How does he always make the right assumptions<< Nothing is what they say it is.

>>a great alternative fuel to me<< Nuttin' alternative about it! Cars have had flex fuel lines for decades. That's how they can bend around corners without kinking.

>>One in 2008 and the 2nd in 2009<< Did the taxpayer report the foreclosure as a sale in 2008?

>>she hasn't foreclosed nor has the house been sold<< I would ask her title insurance company to investigate this.

>>she has 88% of their income<< Unfortunatly, jmallard, MFS will not work for this California couple. If they need to do this through the tax return, their only hope is the injured spouse procedure, which ignores community property laws. But instead maybe they could set up a payment plan for the student loan to resolve the delinquent status, move the unpaid balance to a credit card, or take other non-tax actions to deal with the debt.

>>It is a profit motivated venture.<< In my opinion, this property was not acquired or held with a profit motive. According to the original post there was never any hope that rents could cover costs. It was in fact being purchased and used as a family home. Now, I have no hope of convincing anyone on that point, but I daresay the representations would be different if the question concerned the exclusion of capital gain rather than C.O.D. Since even the owner did not read the contract, we can't know what happened in the mortgage office. We do know the borrower had sufficient assets, so I would guess the value of the collateral no longer secured the full amount and the lender reduced the debt to avoid foreclosure when the owner threatened to walk away from the property. In that scenario, the exception for qualified real property business indebtedness might apply. But certainly it is not a reduction in price, as the seller dropped out of the picture years and years ago. [After Tom's post, I edited this concerning the exception for qualified real property business indebtedness.]

>>a problem with a pipe << What sort of problem? For tax purposes, the definition of casualty is an identifiable event that is sudden, unexpected, or unusual. In my opinion, if the pipe got corroded or blocked or jiggled loose over time, that would not be a casualty loss. If the water in the basement caused internal supports to collapse pulling down the pipe, then okay.

>>it seems strange that the house could get re tittle in her name only when there was a lien on the house. << The mortgage is the key to understanding this. Since she could not afford the payments, the bank would not release the lien so she could not get clear title. Nor could she pay her ex for his share, and since neither spouse wanted to live there the plan was obviously to sell the house. Because of market conditions or some other reason, that was delayed while the gentleman was charged with maintaining the property economically, which he had the income for. It kind of sounds like he took advantage of her in this matter, but at any rate she got the house with the agreement that he would get paid later. When the stars finally lined up, they were able to finish their business . Even though it was a few years later, the payoff to him was still only the non-taxable division of marital assets.

>>WD-40 AND DUCT TAPE<< In my opinion, these are the second and third basic foundations of Western Civilization. Number One is the Vise-Grip.