jainen

>>is it really a change in agreement if an agreement was never signed or filed? << Is it really a partnership if there was never any agreement, never any activity, and never any anything except $5000 lost directly and indirectly in a failed investment? I presume he kept all the last G himself, and didn't give his buddy any of that. So, in my opinion, it sounds like a short-term capital loss going nowhere but Schedule D. Assuming, of course, that the "promotional event that never occurred" was something legitimate, which is too big an assumption to make from here.

>>He has just been including the gross amount without taking any offsetting expenses.<< If you believe that, I've got a great investment for you--a golden bridge here in California. You'll get $6.00 for every car that crosses! In my experience, it's just the opposite (all the expenses without the income). So in my opinion, you were probably not talking to a prospective client, but a prospective competitor.

>>It would be much easier to file with just his info, so I like your suggestion that he file file with just his income after they split<< It might be easier to file that way, but he might find it more difficult to pay the tax. Why not split his income? It's a one-way split since (presumably) she doesn't have any income to allocate back to him. Anyway, Pub 555 at http://www.irs.gov/pub/irs-pdf/p555.pdf says she can't split her income unless she tells him about it by the due date for filing the return (including extensions). Here in California the community ends when the spouses separate permanently. But in Texas, as I understand it, the community continues until the marriage is legally ended. So in my opinion you should give his ex-lover a copy of the W-2 on October 15 and only count half on your client's return.

>>her basis could be higher than the current FMV<< I don't see how that could be. Although IRA's have always had an income phaseout for taxpayers with a pension, the maximum contribution in the 80s and 90s was only $2000. If she now faces a $20,000 tax bill in the 25% bracket, there must be at least $80,000 in the account. I don't see how it could be that much just based on contributions with a net loss instead of any growth.

>>unlike that other forum that seems to have alot of inexperienced preparers who are asking simply basic questions that any professional tax preparer should know.<< You are very kind and we welcome your participation. However, as real professionals we never think ANYTHING is too basic to ask about here. Just the last day or two we have discussed filing status and dependents and signing the return and whether a return is even required, not to mention what's for lunch, all of which any professional tax preparer should know!

>>She may need a frikkin' college degree for that << In my opinion, she's going to one of the best frikkin' colleges and working on just about the most important frikkin' thing in the whole world. One of the disadvantages of our business is seeing all the heartbreak within families, especially the ones who can't help their own children. Best wishes and thanks for her choosing such a great service career!

>>honors college at Kent State University... Early childhood Education with specialization in special needs (mental/physical disabilities) children. << Yeah, yeah, I mean that's great 'n' all, but can she put together a frikkin banana cream pie?

>>I really wanted my 1000th post to be brilliant or a snappy comeback to one of Jainen's posts.<< That was #999, a past repast rehash about the Spidell dinner. Now that you are an ATX Master, you can do your own thing--don't have to answer to nobody!

>>w-2 included these wages<< How do you know that, since you NOW say he never even got a W-2? I'm with kc on this--there's more to the story.

>>wondered if they had a loss they could take on their taxes<< Definitely--contact the county assessor for an immediate adjustment.

>>Didn't anyone go to Spidell?<< I went last week at the San Jose Doubletree. Tired of chicken, I figured to give the vegetarian entre a try. The chicken came on a small patty of polenta with something similar to wet broccoli and the tiniest whole carrot in the world. The veggie plate was exactly the same, without the chicken!

>>Banana cream!<< Oh boy! Lunch time already? Hey, no way--it's not even 11:30 yet.

>>just add the income in line 21<< As I read them, the instructions to Form 1040 say to report ALL wages on Line 7 whether or not they are shown on a W-2. In your case, since you have accurate numbers I recommend you use a Form 4852 Substitute W-2. I mean 2009 only, the year received. And if he does not otherwise make estimated payments, I would request abatement of any underpayment penalty, citing the employer's mistake as reasonable cause. Also put together a response package while you have all the facts in mind, because you will almost certainly get IRS letters for 2007 and 2008 within a year or so. It's probably not worth the hassle for $1500, but in my opinion you should also check whether your client has a problem with Social Security quarters. All this is of great value to your client, so be sure to include it on your invoice.

>>Yes, I do understand the deferred interest issue and this interest was not reported annually. And I do know that I can report it in the decedent's final return which is what I will be doing and I expect to hear some correspondence from the IRS<< Okay, then what exactly is your question? In my opinion advance disclosure might head off those letters, but if your clients are prepared to deal with them it's just as well.

>>Seems like an awfully vague focus; read that as wide, WIDE latitude in audit and enforcement potential<< I presume you mean the proposal in Announcement 2010-9, not a new reg as such. The IRS is considering whether to require large corporations to disclose uncertain tax positions. "Uncertain tax position" is a long-standing accounting term with a pretty particular meaning under generally accepted accounting standards. The announcement defines it in terms of those standards, "a tax position relating to a specific federal tax return for which a taxpayer is required to reserve an amount under FIN 48." It goes on to include the books of "a related domestic or foreign entity" that is not subject to FIN 48 but follows similar rules such as International Financial Reporting Standards (IFRS) or country-specific rules. The proposal apparently is directed only at large corporations, over ten million dollars. I doubt any of them consider it to be even a little bit vague. In my opinion, this is more restrictive than Circular 230 currently allows, because it uses the "more likely than not" (one out of two) standard, rather than "realistic possibility" (one out of three). My understanding is that this refers only to the technical merits of the position based on published authority. It seems to me the new proposal is looking at situations in which a corporation could take a more aggressive position on its tax return than it would in its own books. That's not against the law, but the IRS is suggesting a bit of disclosure concerning it. As I said, there's nothing vague about it--the big corporations know exactly what this means.

>>can we pass the test?<< What do you think of the proposal in an earlier post that "Thomas is not his dependent because Mark provided 0 for his support but Thomas is his qualifying child because he lived with him all year"?

>>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.<< Even if it seems to be a big name school, the extension courses and similar arrangements may not be a part of the actual accredited institution.

>>Now who is ASSUMING, Jainen?<< Now be fair--I said, "For example." Anyone should expect the actual numbers to be different. For all we know, it may well be that the property is worth MORE without the building in the way, in which case obviously there was no loss of FMV. Similarly, if insurance reimbursement was zero, that's the actual number to use. I was trying to suggest an alternative interpretation. If I had wanted to make assumptions, they would be that the owners themselves set up the "enterprising young man" for a share of the profits, then tried to collect insurance on an unsaleable property, and finally wanted a tax deduction too!

>>let's assume for the sake of the exercise that all persons involved here are U.S Citizens.... Why we are deviating from the original question.<< You can't have it both ways, my friend. >>she is in the US<< Now you tell us! I thought when you said FL you meant Furstentum Liechtenstein, like the license plate on that snobby Beemer down the street. Anyway, just crossing the border, as you say, isn't enough. One has to be a U.S. citizen, resident alien or national, or a resident of Canada or Mexico. >>he had a qualifying child living with him in 2009<< Who, Thomas? No, Thomas is too old unless he's in school or disabled--more info you didn't give us. Anyway he can ONLY be a qualifying child of his parents--new law this year, remember? Heck, I figured the whole forum would at least get THAT point, after jainen had to admit being wrong in the thread about that stupid flowchart [useful Flowcharts for Dependancy rules]. Yeah, I see you trying to say "Mark had more income than one of the parents," but hey, you gotta account for BOTH parents. >>Based on what I have said, can we constructely discuss this situation?<< How about constructively discussing it based on what JAINEN has said, Pacun?

>>no, the house was not income producing<< In my opinion, a casualty loss can be claimed on any capital asset, even if it is not income-producing. The amount of deduction is limited to the lower of loss in FMV or adjusted basis. For example, assume they paid $25,000 for the home and made another $25,000 in improvements over the years, and the FMV of the building was $125,000 before it was destroyed. In my opinion they could claim a casualty loss of $50,000 (reduced by insurance reimbursement, $100/$500 floor, and 10% of AGI). The demolition would then increase the basis back up to $6000.

>>What part of "Mark supported his mother 100% in 2009. She was in a nursing home in FL the whole year and Mark paid everything for the nursing home... everything." is not clear?<< An elderly parent in a nursing home in Florida with no Social Security or Medicaid is a common scenario for an illegal alien, and the original post did not even hint that the individual is a U.S. citizen, resident alien or national, or a resident of Canada or Mexico. Nor did it establish that she is unmarried or did not file MFJ. And it curiously dodged around the issue of gross income, only mentioning certain types of income. That makes me wonder what might have been left out of even "supported his mother 100%." In my opinion, these requirements are every bit as important as support. If the answers are known, why leave them out? If they are not known, let's wait until we have all the facts.

>>Mother had 0 savings at the beginning of the year and 0 savings at the end of the year. Again no gifts, loans, inheritance or found a bag full of money. Mother didn't have any social security or retirement income.<< Just to be thorough, I'll mention that in my opinion this fine rendering of destitution does NOT meet all the requirements for claiming a dependent. Therefore, in my opinion, you have not established eligibility for Head of Household.

>>Can he still get refund for 2005<< In my opinion the statute of limitations has run on claims with an original 2005 federal return, unless he had reasonable cause such as a medical problem. But he may have until April 2010 for the state. I suppose it's possible he sent some money in for 2005 within the last two years, perhaps in response to an IRS letter, and that would be still available for refund.

>>is this depreciation recaptured at time of sale in spite of loss?<< Probably not, but you have to be careful about allocating the sales proceeds to the personal and the rental uses. In some cases there could be a personal loss and a business gain, or a loss on some assets or improvements at the same time as a gain on others. If there were Section 1245 assets such as furniture, those are subject to recapture to the extent of gain. Section 1250 real property is only subject to recapture for any special depreciation allowance. However, any gain attributed to Section 1250 depreciation would be taxed at a maximum rate of 25%, not 15%. Generally professional software will set this up for you, but in my opinion you need to closely review Form 4797 and Schedule D with any worksheets to make sure your entries achieved the result you expected.

>>the carried over (unclaimed) deductions...they are lost, right?<< Yes, such expenses remain subject to the income limitation, so no income, no deduction. But I think you've got things backwards, and I don't know what you should do about it now. In my opinion, expenses for mixed use property must be deducted in a certain order. Basis adjustments are LAST, so I don't see how you could have any depreciation to recapture if there wasn't enough income to cover all the operating expenses.