Steve M

Sorry I came back in this late; I couldn't find the thread and thought no one had answered. Obviously that's not the case. the client has not decided what to do with the property yet; it may depend upon what the tax consequences are. Other than a deductible there would be no loss to claim on 4684 and that will not meet the threshold. If he sells just the land, my assumption would be that the insurance proceeds would be included in the sale price plus depreciation less the deductible. But if he rebuilds and sells, I would think his basis would be the original basis plus depreciation. But if he claims the sale this year (even though he doesn't sell this year) What happens tax wise if he sells it next year for the same amount. If he is issued a 1099 for the sales price in a future year, IRS will think it is a second sale. Even if the new basis and sales price are the same, it would still appear as a second sale. Thanks for your help anyhow.

Client was selling rental house. 2 weeks before closing, house burned down. Insurance covered the loss. He asked me for advice and I want to be sure that I am correct. There will be no tax consequences until he sells the property if ever? Yes or no? When he sells, he will add the insurance proceeds and property value together and that will be his selling price. He then adds in his depreciation taken to get a final selling price. Is that the correct way to handle it or am I missing something else. smacica

Thanks for your response. I did find the credit in CT; it helps a little.

Doing a favor return for a client. Her daughter lived in both NY and Ct for 2011. All income comes from CT. When I fill out NY IT-203 allocation of income worksheet, col D asks for income earned during residency in NY state, even though not earned in NY. This person is paying taxes to CT for entire year; does NYS give a credit for taxes paid there? Do you really pay NYS income tax on earnings from outside the state? Do you pay taxes to both states. Something is not right and I can't find it. Would appreciate some input. Thanks, Steve M

I do agree and have been filing for my clients, even though I feel guilty because I am not sure they need to. In this particular case, there were about $200K of stock sales on the 1099-B and only $1900 short term gains (no long term). That 1900 along with 600 in dividends is this persons total income without social security. Oh yes, and the management fee was 10K. (the broker must be happy). I guess I will file to keep the IRS away from her, but I just wanted to be sure I was doing the ethical thing. Thanks for all your help and opinions. Steve M

I have looked for other filing criteria in the 1040 Tax Facts but can find nothing on total sales amount. Do you have some reference that I can check. I tend to agree that a return should be filed if only to show the IRS that there is no taxable income, but I cannot find anything in writing to that effect. If you have a reference it would be greatly appreciated. SteveM

I have had several clients who are now retired whose only steady income is SS. But they have brokerage accounts which have had a lot of activity but little in the way of taxable gains- certainly not enough to meet the filing requirement threshhold. If I don't file a return for them, will the IRS request a return because they have lengthly 1099-B's? And if I don't file, what about the one's who have carry-over capital gain losses. Do you just suspend and track their losses (or increase them if they have a yearly loss) even though they are not filing? Thanks, Steve M

Just answered my own stupid question. Please ignore me- I deserve it! Steve M

This year I do not have a list of existing payors quick entry as I have had in past years. I don't know why they were not automatically rolled over with the rollover manager. Have to fill in complete info. ATX has a 30-40 wait- can anyone offer some suggestions? Steve M

Last year I used fee collect for this client. This year it is just direct deposit. I have set up the e-file info correctly, but I get a message telling me that Error: The account number entered in bank information section must be a account number for the lending bank, not the tax payers bank. Hit the restore button to return to the standard bank account. I have switched to direct deposit and do not see any reset button. Any one have any ideas. I have tried 3 times to access customer service and the webpage is down as well. This reminds me of years past when the service was non-existant. I wonder what's going on with ATX? Steve M

I had a similar situation. The IRS told me to go back to the first year and then go forward. Any loss that is not used in the year that is too far out for a refund can be used in the following years. Depends on the size of the loss and the income of the individual. smacica

True enough, but LTC premiums are not pre-tax. At any rate, I think you are correct that since the cost has been reimbursed, it cannot be claimed, but just wanted another opinion. Thanks, SteveM

My client has been in a nursing home. His long term care policy reimbursed his LTC in the amount of $25000. It is not taxable income since it is a reimbursement - used form 8853 Just want to confirm whether or not he can claim the $25K as a medical expense on Sch A. I think not, but just wanted to be sure. Thanks, SteveM

My client has been in a nursing home. His long term care policy reimbursed his LTC in the amount of $25000. It is not taxable income since it is a reimbursement - used form 8853 Just want to confirm whether or not he can claim the $25K as a medical expense on Sch A. I think not, but just wanted to be sure. Thanks, SteveM

Thanks jainen, To answer some of your questions, he was acting as an individual, the corporation had been previously closed and he acted on his own behalf. There were no assets. He was not sued, but signed a document stating that he would pay and he did. It seems to me it is a personal liability since the corp was long gone and I really don't think there is any way he can expense it. But I thought I'd ask. Thanks again, Steve M

My client was a shareholder in an S-Corp which is defunct. There was a dispute with a vendor who claimed the corp owed her $10K. My client signed an agreement for payment and ultimately paid the $10K-after the corp was terminated. He is now asking me if he can write off the 10K and I told him no. But just want to be sure that I am not wrong. Any opinions are appreciated. Steve M

Regarding qualifying relative, IRC 152 (d) states that individual is a member of household for entire year or relationship test plus gross income and support. Both dependents meet these tests. However, after reading your posts, I found a site on IRS that states Qualifying child for Child tax credit is actually a relative. The reason I posed the question in the first place is because the 2009 quickfinder on page 12-5 states that a qualifying child for the tax credit is the same as that for a dependency exemption except for age and citizenship. It is incorrect. That was what caused the confusion. Thanks Steve M

Client lives with woman and her son in Arizona. He is their sole means of support; woman has no income and child is 4 years old. Woman and child are U. S. citizens. They have lived together for 3 years and child is not the client's birth son and is not adopted. Arizona does not recognize common law marriages initiated within the state. Therefore client claims head of household and claims the woman and child as dependents. Now for the question. Can he claim a child tax credit? IRC 24 states that qualifying child for the child tax credit is same as dependency exemption + citizenship. However, when I input in dependent worksheet for ATX dependents relationship "other", no child tax credit is given. However, if I change relationship to stepchild, a child tax credit is given. Is this a quirk of ATX? According to tax code, the child qualifies for the credit, but according to ATX worksheet, child only qualifies if a relative of client. What do you all think? Steve M

Thanks everyone for the responses. Never thought about using paypal, but that is a winner! Also like the 10 day letter to the IRS; that is a great idea as well. Have a great summer and fall. I have an idea that this year will be very strenuous on all of us, so enjoy while you can. Steve M

Hi Everybody. All the years I have been doing taxes, I have never been stiffed by more than one person a year. This year, I must have 15 non-payers; must be the economy. I'm wondering what some of you do when this happens. It sounds almost impossible to pursue these people unless they write a bad check. Anyone have any suggestions? Also, anyone use the ATX software option of having your fee taken from the refund and mailed to you? I haven't done it because of the $15 cost, but this year I am thinking about either not giving them their returns until payment is received or charging them the $15 and getting my fee from the refund. I did the merchant account route for awhile, but hated all the fees and regs. Would love to hear what some of you do. Hope you all have a great summer. Steve M

My client has a position in a Canadian utility and his brokerage (or the company) withheld taxes on a dividend he received. He is a U.S. citizen and lives in the U.S. How is this handled at tax time. Does he file a canadian tax return, or can he claim a foreign tax credit on his U.S. Taxes? Does Canada get to keep the taxes regardless? Befuddled! Anyone else had this situation? Suggestions on how to handle? Thanks, Steve M

Sorry to cause all this confusion, but it's nothing compared to the IRS confusion. I did one very similar last year; a client actually had several rental properties that he received 1099C's for. I filled out the 982 because he was insolvent just prior to relinquishing the properties. I did a 1045 to reclaim prior year taxes and the IRS corrected my return and gave him an additional $2000 refund on top of the $140K refund I had already calculated for him. I know they checked that return over pretty carefully. I had not reduced his basis in the tax attributes because of the following par. in Pub 908: "Bankruptcy and insolvency reduction limit. The reduction in basis for canceled debt in bankruptcy or in insolvency cannot be more than the total basis of property held immediately after the debt cancellation, minus the total liabilities immediately after the cancellation. This limit does not apply if an election is made to reduce basis before reducing other attributes. This election is discussed later". So he walked away with over $400K in rental cancellations with no tax liability, received back $142K of prior taxes paid and the IRS put their stamp of approval on it. Now I have this similar situation and the IRS still can not give me a straight answer. And Deb, if you are right about no cancellation of debt for non-recourse loans, then his return just shows the rental as a sale on 4797 with a capital loss. It just doesn't seem right, but who am I to say? Thanks for your input. Steve M

Yes, Deb, I am holding the 1099-C and it states in box 5 - are you personally liable for repayment, and the answer is no. That is a non recourse loan.

I have a client who is insolvent. He has a rental income property that he received a 1099-C for $250,000. The bank stated that the FMV was $155,000. (non-recourse) My understanding is that if I put the $250,000 in box 5 of Part II, Form 982, that reduces his basis in the property by $250,000, which also happens to be his original purchase price. Am I correct in understanding that by doing so, I am reducing his basis in the property sale on Form 4797 to $0 and he has to pay income tax on a profit of $250,000 (not including depreciation)? If so, what is the advantage of cancelling the debt in the first place? Is there a tax benefit? I have spent over an hour on the phone with IRS, but they're not very helpful and could not explain. Steve M

Since the house was still in the estate, why would it get "stepped up basis"? Isn't that only after it gets transferred to heirs? And if it does get stepped up basis, would it still be included on a 1041 sch. D? SteveM