DANRVAN

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.

The allowable loss is 45,000 - 30,000 = 15,000. Section 469 does not change the amount of step up in basis.

So is there going to be a closing statement showing who was the actual seller/owner of the property sold? If mom is compensated for fmv of her property, then the net tax result would be the same, although son would be the actual seller of the property mom deeded to him.

Attorney for sure, given the dollar amount involved she needs legal advice which we as CPA's cannot give out. Although a moot point now, why was that necessary? Was an attorney involved? The estate may or may not have any ownership depending on whether B held Joint Tenancy or Tenancy in Common, that is where legal advice is needed.

Actually the gift is only included in the estate if the decedent retained an interest in the asset or revocable power per section 2035.

If fmv of mom's property was greater than 170k, then partial sale and partial gift.

How much of that was for mom's property?

It is a part sale / part gift. See § 1.1015-4 for details.

per reg 1.911-3(a) Earned income is from sources within a foreign country if it is attributable to services performed by an individual in a foreign country or countries. The place of receipt of earned income is immaterial in determining whether earned income is attributable to services performed in a foreign country or countries.

That does not sound correct if the income was earned outside of the USA. The code or regs should clarify.

Judy I don't believe that applies in this case since the IRS reg's take a front loading approach to a partial gift/sale transaction (basis is first applied to the sale) versus the apportionment method. In this case, since the basis in hands of transferee is less than transferor, then carry over of character rules should not apply. I am sure that is spelled out and buried in the 1250 regs but don't have time now to look it up. If on the other hand the IRS had adopted the apportionment method, the basis would be split between the sale and gift. The gift portion would then retain the transferor's character.

A phone call won't work for a 990. You have to make a written request and show some reasonable cause such as change in directors. If the organization is run by volunteers that helps your case; as well as pointing out the financial impact of the penalty on the limited resources that would otherwise be used for charitable purposes. You also need to outline the measures that will be taken to prevent future late filings. It is a slow process.

Yes it is possible. They can be used to make a "back door" Roth contribution when income is a limiting Roth factor.

You are correct, a gift tax return is required. However, parents probably will not owe any gift tax.

Son will need to keep track of depreciation allowed or allowable by parents for any 1245 or 1250 gains.

That changes things. So son owned 50% all along and the remainder was gifted to him before parent died? If it was a complete and legal transfer then be takes parent's basis on date of gift since fmv was higher than basis. Parent will report income and depreciation from Jan 1 until date of gift on final tax return.

Two hours away, I think I will pass!

As I understand it, the child received 50% as gift and inherited the other 50%. The basis of the gift portion is 50% of parent's basis (assuming fmv is higher). The child can continue to use parent's holding period for depreciation or restart the clock; there is no authority that says it has to be done one way or the other that I am aware of. For the inherited portion, child gets step up basis and a new holding period for depreciation. In regards to the gift, you need to verify that a legal and complete transfer was made, otherwise child can take a full step up in basis. For 2019, income and depreciation is reported on final return for parent from Jan 1 until date of death. For the remainder of the year it is reported by child (or estate if there was one). Nothing to report. It appears parent retained a life estate in regards to the personal residence.

We took two different approaches to this and they are both correct, except I read the basis number wrong. In regards to the 300,00, he did not receive it, it went to the buyer, so it is was not realized in regards to the "exchange". From the perspective of the exchange, his new basis is the old basis plus what he paid in cash; or you can look at it as the 300,000 + 210,000 -22,500. Either way you come up with the same answer.

The amount realized for the 1031 is the fmv of the property received plus the cash received= 510,000 + 312,000 = 822,000 That is reduced by what he gave up: property with basis of 227,500 and cash paid 200,000 = 437,500 Therefore the realized gain is 822,000 less 437,000 = 384,000. As you mentioned he recognized gain in the amount of boot received = 312,000. That leaves a deferred gain of 384,500 - 312,000 = 72,500. The basis in the replacement property is 510,000 - 72,500 = 437,500 (or 227,500 + 210,000).

Legal transfer and documentation comes first.