DANRVAN

There are two options. The default method is to prorate based on the number of days of ownership. You can also make a section 1377 election to close the books on date of death and allocate per the actual time period of ownership. You need to determine which method will result in the least amount of tax. If the S Corp has assets which will be liquidated (especially real estate) the liquidation of assets and dissolution of the Corp need to be coordinated in the same tax period of the shareholder. Otherwise you might end up with a gain in one year and loss from stock in the next year.

I refrained from making any comments about holding real estate in an S- Corp.

Since the suspended loss occurs at the shareholder level, I don't see why you would change anything at their level. For example, if the individual had a $50,000 prior years suspended loss from the Sub S, it would remain on his/her K-1 input sheet for ATX and continue to flow to form 8582 as such, regardless of the exchange of property within the corp. At the shareholder's level, the S-Corp is the passive activity that is limited on form 8582, so there is no change in this situation. If there was a change, you would make it on the K-1 input sheet for the individuals personal income tax return. Does that make since or am I missing something here?

Correct, the release of the suspended loss would offset the recognized gain from the boot.

Also use that tab if you have a new client with suspended loss.

There is an input tab for Schedule E to enter the loss limitations. It will carry over to form 8252.

No, but have worked with a public charity that had to be reclassified as a PF, and have researched the issues to convert back to a public charity. I am curious to what criteria you are using to establish the organization has met the requirements of a public charity since the date of incorporation?

The amount on line 13 of the K-1 is netted with the amounts in box 1 and 2 of the K-1 and should flow to Schedule E page two as a lump sum. That is correct.

If that is the case she is in the zero percent capital gains tax bracket. It is not taxed at ordinary rates.

Since it is a capital gain, the unrecaptured amount is combined with all the 1231 gains on form 4797 and carried over to schedule D in one lump sum. However, when it comes to the capital gains tax computation; the 1250 gain is segregated to determine any amount that might be taxed at the 25 rate. It is especially important to understand the unique tax aspects of section 1250 in the planning stages.

The difference between ordinary gains and capital gains is anything but trivial, as well as the tax planning consequences. Section 1250 is probably one of the most commonly misunderstood sections of the tax code.

Unrecaptured 1250 gains are included in the computation of adjusted net capital gains per sec 1(h)(3)(A)(1). Therefore they are reported on schedule D (flows from 4797) and the related Capital Gains TAX worksheet. From a practical and planning standpoint they are capital gains and offset capital losses.

I think you meant to say where it is taxed at capital gain rates. 1250 gains are a hybrid; ordinary gains taxed at capital gain rates with a max rate of 25%. The special tax treatment comes from the strong lobby arm of the real estate industry.

How can he still receive payments if the contract was paid off? Just because attorney decided it should be? How can you convert an installment contract to a note and consider it paid off....and seller still holds a deed of trust? Forgive me if I am overlooking something here and jumping to conclusions; but this guy sounds like a predator.

Thanks for pointing that out, so it appears legal ownership did not pass to the buyer. And there is still an installment contract in place?

That is a good point. My thinking is substance over form, but certainly need to look at the legal aspect of the transaction. So now who hold legal title to the property? Does taxpayer have any security?

Looks to me like the TP is in the same position he started in, except he now holds full title to the contract instead of joint and incurred a bunch of legal fees. How is that possible if the terms and amounts never changed? Looks to me like there is still a contract that includes principal and interest.

That raises the possibility of a step of basis of growing crops on date of death if deceased spouse was a farmer, or material participating landlord, per RR 58-436. If that were the case, crop insurance received after DOD would be income to estate, not IRD. That depends. If all assets passed to wife and there was not any legal cost to deduct by estate; the 1041 would be a wash by reporting income to estate and deducting as distribution to wife. Also depends on who 1099's were made out to.

Not sure why you are asking. My position is that I am unaware of any authority which states an appraisal of the timber is necessary if a reasonable method is used to determine the DOD value.

Yes, if there was not a significant change in the market price from date of death to the date it was logged. Subtract the basis of the timber sold from the basis of the land. If you are dealing with a short time period, you don't have to account for the increase in volume due to the growth rate of the trees from date of death to harvest. I have worked with timber consultants in cases where several years have passed to determine the volume and market price of the harvested timber on date of death.

The 8283 attachment has been available in ATX for several years now, I was surprise 8453 would pop up.

In ATX you attach either 1098-C or a copy of the contemporaneous written acknowledgment directly to 8283. The input gives you a choice of check box for 1098-C received or check box for contemporaneous written acknowledgment. Not sure why 8453 would have popped up.

Kind of hard to tie this all together. He received a CP2000 and then under examination (audit)? If under audit should have received a 30 day letter before the 90 day letter. Should still be good if in fact a 90 day letter and clock is still ticking.

Tell him if it is mix use he will need a to keep a log of time spent on rental projects vs personal use as he would other listed property, like a car. Then you depreciate based on percent used for the rental. So probably not much in yearly tax savings. Also point out no section 121 if he ever decides to sell. Since most rental repairs are done on site, I can't imagine him doing much related to the rental in a workshop.

You still need to provide some more detail: -cash received -amount of loan paid off (70,000?) -exchange expenses You indicated $50,000 to fix up new property that came out of exchange funds. That was not part of the exchange, so it is treated as cash received, boot. Also the loan payoff is treated as boot. So at this point it looks like at least 120,000 in boot which is taxable gain.