DANRVAN

The 30% tax can be a big hit so it is important to make the required distribution. They have 12 months after the end of the tax year to make the distribution. Excess distributions can be carried forward. You need to value any investments at fmv for the 5% rule. Subject to UBIT and self dealing rules. And of course important to determine if they are actually a PFD vs public charity. Sounds like you are getting it down. Is this a new organization you are dealing with?

A legal issue for sure!

Just got done working with a local scholarship organization that had been self reporting on 990 when if fact they are a Private Foundation, so switched over to 990-PF. Also explained to them that they are a nonoperating instead of an operating PF.

You did not provide enough information. Which means money spent for the charitable purpose it was setup for. That includes admin cost related to the charitable activities of the organization.

No! You need documentation to prove that a portion of the gain was not his. If you allocate 1/2 gain to wife that was not hers it can come back to haunt you. It sounds like the property was titled solely to him after the divorce was settled. If so, I don't see how she could have any legal ownership or a share of the gain at that point. That does not sound like part of divorce settlement since it happened after the fact. He might find relief under 1-1041-1T (b) as a transfer of property incident to divorce, but I believe the transfer would have to go back to her share of the property instead of the proceeds of the sale. Also she would have to agree that she was a party to the property sale and 1/2 the gain was hers. He would need to get a lawyer to straighten that out. Unfortunately, he decided to save on legal fees and look where it got him. Without legal documentation, he might have gifted away $34,000.

And for that reason, bonus depreciation is sometimes a better choice, more so now since it applies to used property per TCJA.

A short year can also be a powerful planning tool on the front end, especially in a complex estate that will be open for awhile. For example, say there was no activity in the estate until the $15,000 came in July. In that case you can file a short year ending on June 30 2021. That allows the estate a full 12 months to incur expenses to offset the income until June 30 2022. The estate can also elect accrual accounting to deduct additional expenses at that point.

Sounds like Income in Respect of Decedent if it was paid in 2021. Are there any legal fees, executor fees etc to deduct? Beneficiaries can ultimately pay the tax based on K-1's.

As I understand her post, the Roth contribution was recharacterized as a nondeductible traditional contribution. In that case, the original contribution is treated as going to the nondeductible traditional as if the roth contribution never happened.

Your post are a little confusing but I think I now understand your situation. Your client made a Roth contribution but income level was to high, so it was recharacterized to a nondeductible traditional IRA. Let's say for example the contribution was $6,000. Your client can now do a back door Roth by moving the $6,000 to a roth by a rollover or trustee to trustee transfer. That would be an irrevocable conversion once completed. If your client has made tax free traditional contributions he is subject to tax on the conversion due to the pro-rata rule.

If he made a contribution to a roth and then converted the contribution to traditional, he can change it back to a roth. If he converted an existing Roth balance to a traditional ira, then it cannot be changed back to a roth.

A recharacterized contribution can be reversed on or before the due date per 408A(d)(6)A whether it be from a traditional to roth or vice versa. 408A(d)(6)(B)iii prohibits the unwinding of a conversion of an account balance (rollover) from a traditional to roth or vice versa.

No basis - no deduction. Although an entirely different situation, I believe the net metering ends up in the same boat. Case law has held that most consumer "points", rewards etc.... are not taxable income, therefore there is no basis to deduct. In the case of the net metering, the taxpayer also does not recognize income by producing more energy than he/she produces but receives a credit instead. It sounds like the only options are: use it, lose it, or give it away. If the taxpayer had an option to receive cash, the excess electricity produced could generate taxable income and a 1099. In that case the taxpayer would have a basis to deduct. So it appears to me without a basis there is no deduction.

I did not catch that part, but not clear if OP is referring to the conversion of an account balance or recharacterize a contribution. Under TJCA you cannot unwind a conversion of a traditional IRA "account" to a Roth "account". The conversion is irrevocable per 408A(d)(6)(B)iii However, you can still recharacterize a traditional "contribution" to a Roth Contribution.

OP is not clear to me, is she talking about recharacterizing a contribution or converting an account? There is a difference .

That is correct, the conversion is irrevocable per TCJA.

House Ways and Means Committee has proposed putting a padlock on the back door.

Also applies to Schedule C and 1065 filers who have reduced their tax liabilities over the years with the magical section 179 deduction.

K-1 goes to deceased partner. If he died during the year then more than one K-1 is issued since the partnership tax year for the deceased ends on DOD.

That has also been my experience with Oregon Employment Dept., but auditor was happy to have it done by correspondence (email) vs 4 hour round trip to my home office.

The general rule is never let an auditor and client meet, especially for a form you prepared. How about requesting a correspondence audit?

But there are potential pitfalls that would not occur if a front door roth contribution was made. For a taxpayer with existing traditional IRAs, the recharacterization can become a significant taxable event due to the pro-rata rule. Also need to keep in mind the 5 year rule.

That would be a corporate liquidation where the shareholder exchanges his stock for remaining assets. So your client would have a capital gain equal to $20,000 less basis in stock per section 331(a). Technically, form 966 should be filed and 1099-div showing the $20,000 liquidating cash distribution in the specific box. Final paper work also needs to be filed with the state.

Looks like your are engaged in Client Advisory Services (CAS) at level II or level III. CAS is recognized as a specialized area of practice by the AICAP. It would be a violation of ethics for me to perform that level of CAS without proper training or experience. At a minimum, would need work with client for a year or two at level one before advancing to the next level and give out that kind of advice.

I think it would be hard to justify $0 rent as fmv from brother. How much time did he actually spend overseeing the project? I would probably draw the line on Jan 2021 for placed in service. Can she prove they were ordinary and necessary per sect 162 as well as percent used for the rental? So no rental write off due to PAL limitation.