DANRVAN

And for whatever it is worth, I live in a non-com-prop-state and have never ever seen a 1065 prepared for a married jointly owned real estate rental; always on a single Schedule E.    The last audit I had involved a married couple with several jointly owned rentals, the issue never came up.

On 6/21/2025 at 5:13 PM, jklcpa said:

Dan, IRS information page on QJVs says it can't be held in a state-recognized entity such as an LLC. Are these IRS pages incorrect?

The code is the authority.   Per 761(f):

"(2)Qualified joint venture For purposes of paragraph (1), the term “qualified joint venture” means any joint venture involving the conduct of a trade or business if—

(A the only members of such joint venture are a husband and wife,

(B) both spouses materially participate (within the meaning of section 469(h) without regard to paragraph (5) thereof) in such trade or business, and

(C) both spouses elect the application of this subsection."

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Rev Proc 2002-69 is the IRS position: (tax courts are not bound by Rev Proc)

".02. Qualified Entity. A business entity is a qualified entity if: (1) The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or a possession of the United States; (2) No person other than one or both spouses would be considered an owner for federal tax purposes; and (3) The business entity is not treated as a corporation under § 301.7701-2.

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-The code does not make any reference to community property or an LLC.

-The RP refers to community property, but not to LLC's in contrast to the IRS webpage.

-In Argosy Technologies, LLC, T.C. Memo. 2018-35, the husband and wife owners asserted that their business was a single-member LLC in order to avoid a levy to collect the Sec. 6698 penalty for failure to timely file 2010 and 2011 partnership returns. The taxpayers lost. 

   - The determining factors in that case were the previous filing of 1065 by the plaintiffs and the failure to make an election under 761(f) as a QJV.

   - The facts that the plaintiffs resided in a non-community property state; and were an LLC were not mentioned in the opinion of the court.

   - Therefore it appears to me the court looked to the code for authority and was not bound by the RP stipulations.

In answering your question Judy, yes I believe the IRS page is an incorrect interpretation of the tax code.

On 6/21/2025 at 5:11 PM, Lee B said:

Has the LLC previously been filed as a 1065

If so, then they have failed to make the 761(f) election and must continue to file 1065.

An LLC has no bearing on tax reporting since it is the underlying entity that counts.

In this case the entity is a Joint Revocable Trust, which is also disregarded for tax purposes due to its grantor status.  Therefore the grantor is treated as the owner(s) for tax purposes.

Since the husband and wife are the actual owners for tax purposes, they meet the requirement of sec 761(f)(2)(a) for a QJV as I see it.

I don't see where community property state vs non comes to play under sec 761.

Based on that, I would report on Schedule E.

But we have always done it that way with Turbo-Tax.

Depreciation, what is that?

On 5/26/2025 at 9:30 PM, Corduroy Frog said:

can the LLC deduct the interest expense? 

No, the instructions to Schedule E line 12 would be good place to start your research.

No business purpose means no business (or rental) deduction under section 162.

3 hours ago, Corduroy Frog said:

a new loan, it smells like acquisition debt

Suggest you research the definition of "acquisition debt".

6 hours ago, Lee B said:

The DOR refers to OAR 150-314-0435

I am familiar with the OAR, it has been around for several years.  But it does not exclude out of state sourced income from Oregon taxable income,  regardless if the other state taxes income or not; it is still subject to Oregon tax per ORS 316.048.

15 hours ago, BulldogTom said:

The rule in CA is

What is CA's rule for preparing CA resident tax returns by out of state preparers?

15 hours ago, Lee B said:

Market Based Sourcing says that where the service is received is the key nexus location.

On 5/17/2025 at 3:37 PM, Lee B said:

these rules strongly suggest that if I prepare any tax returns for residents of Nevada or Washington (states with no income tax)

then that income would not be Oregon Income or subject to Oregon Tax

I agree that in your example your fee could be considered an out of state source of income.  However,  I do not see any authority which would exclude it from your Oregon taxable income under ORS 316.048.  Since the starting point is federal AGI, I am not aware of any provision to subtract it out for determining Oregon taxable income.

Also, I don't see any reason why income from non-income tax states would be treated differently from states with income tax for Oregon taxable income, since Oregon taxes all sources of income, but allows a credit for tax paid to another state.

On 5/17/2025 at 3:37 PM, Lee B said:

On the other hand, these rules strongly suggest that if I prepare any tax returns for residents of Nevada or Washington (states with no income tax)

then that income would not be Oregon Income or subject to Oregon Tax

 I think I follow what you are saying now.   For example you prepare a tax return for a Washington resident.  You are saying your fee is not subject to Oregon Income tax?   Your not talking about whether the client has Oregon sourced income but whether you do for your services?

I am still not following you on this 

On 5/17/2025 at 3:37 PM, Lee B said:

these rules strongly suggest that if I prepare any tax returns for residents of Nevada or Washington (states with no income tax)

then that income would not be Oregon Income or subject to Oregon Tax

Still subject to Oregon tax, but not subject to the Oregon Preparer rules as I see it.

3 hours ago, mcb39 said:

what is best for the client

There is no other reason!

Per the proposed rule notice:

NEED FOR THE RULE(S) The proposed new and amended rules were made necessary, among other things, by changes in the technology that may be used by tax preparation businesses for the preparation of personal income taxes. Oregon Tax Preparation Businesses, who take in more work than their trained preparers can handle have, more than occasionally, been found to be reaching out not to other Oregon Licensed tax practitioners for assistance but to tax preparation businesses located outside of the State of Oregon – businesses whose employees have no training or expertise in the preparation of Oregon personal income taxes and as such pose a significant consumer protection risk to unwitting Oregon taxpayers who thought they were turning their tax information over to an Oregon Licensed Tax practitioners for the preparation of their Oregon Personal Income Taxes.

On 5/17/2025 at 3:37 PM, Lee B said:

On the other hand, these rules strongly suggest that if I prepare any tax returns for residents of Nevada or Washington (states with no income tax)

then that income would not be Oregon Income or subject to Oregon Tax.

I am not following you on this.  If they have Oregon source income what has changed?  They can have their returns prepared out of state, but still subject to Oregon tax as I  see it.

On 5/16/2025 at 10:19 AM, jklcpa said:

Do you know if a final PY return for a taxpayer that moved from OR be considered a "resident" return for this purpose?

The proposed rule 800-002-0000 states "(1) An out-of-state unregistered tax preparation business whose employees or contractors are not exempt from licensure under ORS 673.610 may not contract to, and may not solicit or advertise to, prepare Oregon Personal Income Tax Returns for Oregon residents, or maintain a physical or electronic Oregon drop box location for delivery and pick up of materials pertaining to preparation of Oregon Personal Income Tax Returns for Oregon residents, unless the out-of-state tax preparation business registers with the Board and maintains an Oregon Licensed Resident Tax Consultant(s) on its payroll who is assigned to supervise the preparation of all Oregon personal income tax returns. ¶

So it in that situation is sounds to me that since the taxpayer is no longer an Oregon resident the rule would not apply; even if he/she had been a full time resident for the tax year, but moved out of state and were nonresidents at the time of filing.

On 5/14/2025 at 11:35 AM, Corduroy Frog said:

A John Deere purchased for $20,000 will easily be worth $20,000 when the same model now costs $50,000.

You are in a different world.  $50,000 for new will not buy much of a tractor for an average operation in my area, and will not hold it's original value for the amount of use it will receive.

In any case, the original cost is a moot point in determining fmv at DOD, it needs to be done by an independent third party.

On 5/8/2025 at 12:55 AM, Corduroy Frog said:

So we don't have an 8332 and we go ahead and file electronically without one

And how did you answer form 8867?

52 minutes ago, Lion EA said:

No matter what, he needs to identify the custodial parent first.

I assumed OP already made that determination; and return was filed, or to be filed without 8332 (So we don't have an 8332 and we go ahead and file electronically without one.)

His question was: "Will the IRS hold up processing the return?  Researching to see whether "Jack" has claimed Toddler?"

Answer is, IRS does not track who custodial parent is from year to year.  They are not going to hold up the return while they research "to see whether "Jack" has claimed Toddler".

So even if the return is filed by non-custodial parent without 8332, the dependent will go to noncustodial parent if custodial parent has not claimed.

I know many of us have had to file an appeal for custodial parent when ex beat them to the punch and claimed dependents without permission.

28 minutes ago, Lion EA said:

If she's the non-custodial parent, she can request an 8332 from the custodial parent, again per the OP in even years, and hope her ex doesn't also claim the child in even years.

To clarify, if custodial parent signs 8332 and also claims the child, then IRS will disallow the claim by custodial parent and allow to noncustodial parent per the signed release.  

The noncustodial parent needs to be proactive and request the 8332 for not only the current year in part I, but also for future years in part II.

The noncustodial parent also needs to be aware that custodial parent can revoke for future years  by filing an additional 8332 and filling in part III.  In that case, the custodial parent must attach a copy of the 8332 as proof of the revocation.

8 hours ago, Lion EA said:

then she gives Form 8332

But the custodial parent is not required by IRS to provide 8332; that is strictly between the two parties or legal system.

On 4/26/2025 at 8:55 PM, Corduroy Frog said:

The market will almost always support original cost of farm equipment

 Not in the world I live in.  Original cost certainly does not reflect DOD fmv of farm equipment.
 

On 4/29/2025 at 8:14 AM, mcbreck said:

 I do a Schedule C and declare I've paid the full amount to the c-corp (which I do) and then the C-corp reports the income and pays me via a W2. The only reason we do it that way is to pay our flat firm fees (rent, phones / internet, quote fees, research and so forth that we all share as a percentage of revenue...).

So aren't you taking the same position as Fleischer v. Commissioner?  Assignment of income to the Corp.

Why doesn't the firm become RIA and follow the code?

On 5/8/2025 at 12:55 AM, Corduroy Frog said:

we don't have an 8332 and we go ahead and file electronically without one

You are filing an incomplete and inaccurate tax return.  Filing form 8332 (or similar statement)  for noncustodial parent is a requirement, not an option.

7 hours ago, schirallicpa said:

She's an investment advisor. 

Make sure you are familiar with Fleischer v. Commissioner, Tax Court Memo 2016-238 before you consider an S-Corp for an investment advisor.

7 hours ago, Abby Normal said:

With a service business, the IRS is going to want to see almost 100% of profit being taken as salary and not distributions.

And in the case of Fleischer it came back to bite him as assignment of income to his S-Corp.

On 4/11/2025 at 3:47 PM, Margaret CPA in OH said:

led us into some interesting rabbit holes (just in time for Easter)!

2 hours ago, BulldogTom said:

asking if the 5405 is still a valid form for this and if there is a penalty or interest that needs to be calculated when they pay back the remaining balance due.

I think you only use 5405 in year of disposition.

You could calculate interest and penalty and include with the unpaid balance due.