Mr. Pencil

Perhaps I should have appealed to the moderators, because I was personally offended and hurt by the insensitive treatment of disability. In my post, I tried to sidetrack it into non-negative comments about issues that, regardless of political opinion, we as tax professionals are required by law to deal with.

Thanks, KC. There's a lot of good ideas here. I hadn't really thought about how much more important income and above the line deductions are this year, in consideration of tax rates. One itemized deduction to add to the list is qualified IRA distributions for charity. That's 100% deduction for something they were going to pay anyway at 25%. But these next three months are the last chance.

Not exactly laugh of the day--trying to make a joke about a mental patient murdering someone. I am personally grateful for the Affordable Care Act. It requires insurance companies to bring mental health treatment up to parity with other illness. It guarantees new coverage for disabled unfortunates who are trying to become productive again. And it has already prevented unmeasurable tragedy by allowing parents to maintain insurance for their children from 18 to 26, the most common age for the onset of mental illness. And I am especially glad that the job has been given to IRS. For all its problems, IRS has remained by far the most consistent and reliable federal agency. And fiscally sound, too.

He can carry it back. It may not help as much as he hopes, because it can not reduce SE tax or penalty/interest. And of course no help at all on the California return, at least until 2013.. Also, since it's too late to file Form 1045, you have to use 1040X which opens up 2008 and 2009 to audit again.

Don't rely on how he filed two years ago. Read the treaty documents on the IRS web site. It makes a difference who he works for, what dates he was in Japan, etc.

This is a confusing post. I can't tell what the relationships are among the client, the LLC, the partner and partnership, and the contractor. It is not clear who suffered damage or in what amount, and the purpose of the K-1 distribution. If you want to explain things, start with the K-1 because that's what the IRS will do.

If the debt was cancelled because of death, this is income to the estate, not IRD even though the form has the decedent's SSN. Unless the estate is insolvent COD is taxable or must be distributed to the heir. In other words, if she inherited assets that could have paid the debt, COD is part of her deal. In practical terms, the IRS might not follow up if the amount is small.

No, you have to treat it as a casualty loss with insurance. Form 4684 is confusing, but read each line carefully. Very carefully. If the heater and air conditioner were being treated as part of the building, you don't have any gain or loss. Although a LOSS is the lower of basis or unreimbursed drop in Fair Market Value, FMV is ignored for a GAIN. It is only taxable when excess reimbursement exceeds the basis of the property. So just reduce basis by $3000. You really don't even have to put any of it on the tax return. On the other hand, heater and a/c are odd things to steal. Were they vandalized? If they were appliances instead of real estate, with no extra cost basis at purchase, the $3000 will end up on the last line and then go to Form 4797. No, I take that back. You have $10000 gain, and new depreciation on $7000.

The insolvency worksheet is mandatory. The previous post says something about a different Pub, maybe for a corporation, but I'm talking about Pub 4681 which is for individuals and says (middle column page 7) that real property business exclusion doesn't apply to the extent of insolvency. The basis adjustment doesn't affect capital gain because it only applies to NEXT year on whatever assets are left. Maybe just a personal home or car. You didn't say these were recourse loans so COD might not even be an issue. At least pull out the interest that would have been deductible as rental expense anyway.

I happen to know that divorce court counts the full pension, even if not vested. But bankruptcy court doesn't count any of it. Tax court is probably somewhere in between. Sometimes for an offer-in-compromise IRS lets you treat a pension as income instead of an asset. So do whatever is best for the client. That probably means only count the vested benefits that are available to offset debt, if the client understands that the IRS might argue about it. I don't know why people would say insolvency doesn't apply. You CAN'T take the real property business exclusion until after you use up insolvency. At least, that's what it says in that Pub 4681 they tell you to read.. Also you can't use it for the equity line or the interest or any part of the first mortgage that's not acquisition debt. Also, there are some ways to avoid reducing basis.