DANRVAN

But the passive active participation rules do not apply here per Reg. Section 1.469-1T(e)(3)(ii)(A) since; the average rental period is 7 days or less. Instead, the losses can only be deducted under the material participation rules of Reg. Section 1.469-5T(a).

It is not a rental activity for the passive activity rules per Reg. Section 1.469-1T(e)(3)(ii)(A). You would only report it on Schedule C if services are provided and and subject to SE tax per Reg. Section 1.1402(a)-4(c)

Because the law does not allow it. Seems obvious mom did not meet material participation rules.

Correct. Reg. Section 1.1402(a)-4(c) As an activity with an average rental of sevens days or less, it does not qualify for the $25,000 passive loss allowance per Reg. Section 1.469-1T(e)(3)(ii)(A). In order to deduct the loss, the taxpayer must meet the material participation requirements of Reg. Section 1.469-5T(a).

The $25,000 loss allowed for active participation does not apply where the average rental period is seven days or less, per the reg.

The real question here is whether the source of the donated stock can be traced to taxable income and allowed as a deduction; or whether it came from corpus and not allowed as a deduction.

Agree with that. If the amounts received match the amounts on the 1099 they need to report those amounts regardless.

I believe that is true in some but not all cases. For example, a simple trust in the final year makes a distribution of corpus so it is treated as a complex trust. However I don't believe a trust that allows a charitable contribution, whether made or not, can be treated as a simple trust in any year per Section 651(a): In the case of any trust the terms of which— (1) provide that all of its income is required to be distributed currently, and (2 do not provide that any amounts are to be paid, permanently set aside, or used for the purposes specified in section 642(c) (relating to deduction for charitable, etc., purposes), It is my understanding that is not allowed by a simple trust, and if so allowed the trust is a complex trust.

It is not required for tax purposes. It is obvious taxpayer has not elected to use it and probably not practical for this business. That is only your opinion only, after the fact.

That should have been established over the many years the preparer has worked with the client. The 12/31/23 inventory is an accumulation of purchases less COS over the years. If purchases have been correctly accounted for over the years, the 12/31/23 inventory could only be overstated if COS has been understated in the past; which means income has been overstated in the past. OP has not expressed any concerns about inventory value.

That is reconciled on a yearly basis with Schedule C through cost of sales. OP has filed the returns for many years so should be comfortable with inventory numbers. I agree it would be helpful to document the physical disposal, sounds like a dumpster full. It is hard to imagine $100,000 of used clothing hauled around to swaps and flea markets, but I really have no idea and that is not the point of OP discussion.

Whoa right there! Simple trust cannot have charitable distribution deduction.

So it should be well established by now that activity is a trade or business; but a good time to review and document the 9 factors. In regards to factor six, one of my favorites cites: "Abandoning an activity after indications that the activity will be unprofitable signifies that the taxpayer engaged in the activity for profit. Canale v. Commissioner, T.C. Memo. 1989-619" That came from Morrissey, John E., et ux. v. Comm. famous case of full time banker and weekend drag racer.

Take care and be sure to stay hydrated.

Sounds like obsolete inventory which needs to scrapped and written off; ending value = zero.

I don't see where it would make any difference.

The husband that keeps on dying So which one was the typo.

A trust does not pass through charitable contributions. The donations must be authorized by the trust instrument. The donation must be made from the trust’s gross taxable income, or traceable to gross taxable income. Therefore, if the stock was purchased with trust income it is deductible by the trust. If the stock was contributed to the trust, it is not deductible since it came out of corpus.

There are two special rules, that one if for the replacement of breeding stock sold on account of drought under sec 1033. If they are not replaced under the prescribed period, then the original return must be amended. The second special rule falls under sect 451. That allows for a one year deferral of livestock that normally would not be sold until the follow year due to a federally declared drought.

It is not really income averaging, it is actually tax bracket averaging. You have to play around with the elected amount to determine the optimal amount. Also input any LTCG over STCL and unrecap 1250 gains on lines 2b and 2c that were included in the elected amount so they will not be included.

The gift is a reduction of the fmv sale price. Show it as an adjustment on column f of 8949 and use code O.

My first thought was a second / vacation home with an actual transfer of deed with a written life estate; vs an implied life estate which is common for a personal residence. Your second post indicates there might not have been a legal transfer with a life estate; but mom did live in the second home rent free until death. Either way you need documentation of the facts to support a transfer per section 2036 and 20-2036-1.

If it mom truly retained a life estate it would be included in her gross estate and receive stepped up basis.

The "High-Lite" of my morning!

Good point. In reviewing George and Myrsini Stotis v. Commissioner, the case did not specify that there was a lease vs rent, but maybe that was implied. My first impression was that there was nothing more than a rental agreement The case also referred to Commissioner v. McCue Bros. & Drummond where lease had expired but an interest was held by New York emergency rent control laws resulting; in a capital gain. I am restating this to say "depends on facts and circumstances", do your research.