DANRVAN

Sounds like form 2555 should apply.

Are you sure he qualifies for EIC? No EIC if filing form 2555 for foreign earned income exclusion.

The bill is full of exemptions from special interest lobbyist including: real estate, auto dealerships (goodwill), timber, agriculture and other "small business". There is a $250,000 general exemption. Sounds like the main target will be sales of stock, bonds,...etc. I have a few Washington clients that were former Oregon residents, most likely they will not feel the 7% sting.

I agree. You have to look at the "origin of claim test" to determine if the legal cost are related to the capital asset or operational expenses. I believe a case could be made that by reducing the amount of interest paid, the taxpayer is attempting to cut expenses and increase the profitability of the activity. In that case, the origin of claim goes to back to operational expenses and is currently deducted. If on the other hand the legal fees were incurred to defend the title of the property, the origin would be capital in nature. That quote sounds like it was made in reference to section 212, which basically applies to investment expenses which are itemized deductions currently suspended by TCJA.

I would not be concerned about what the Articles of Org say, they have no bearing on the actual facts and circumstance. Clearly does not rise to the level of a trade or business. Therefore section 195 does not apply for start up: no $5,000 or 15 year amort. Treat is as you would any other rental. The only catch I see here is $1,000 paid by brother. Did he actually live there full time? I question if there is anyway to justify Schedule E income and expense for 6 months 2020? It would not be reasonable to charge fmv rent during remodel and for overseeing contractor, but how much? Who paid for utilities? Did brother continue to rent in 2021? Not in the sense of an active trade or business.

GVWR is the recommended loaded weight.

Yes, transporting over water, asset class 00.28 See table B-1 in pub 946. Yes, asset class 00.21 or 00.242 if actual unloaded weight is over 13,000.

Is head of household an option for him?

The term ordinary income can be confusing since it comes in different types and flavors In the broadest sense, it is any source of income taxed at ordinary rates which basically distinguishes it from capital gains. Ordinary income is then broken down into different class types such as rental, interest, dividends....and so on. These classes can have different characters: such as passive, active, investment, earned, SE.....etc. Your clients share of the income/loss is reported on his K-1 as ordinary "business" income since it is his share of the ordinary operations of the business. Since he is a limited partner, his income is of passive character, therefore his losses are either suspended or used to offset passive income. The only way he would have SE income would be for services provided to the business. For example, if he decided to spend his lunch hour busting tables and received compensation, that would be classed as Guaranteed Partner Wage subject to SE tax.

Since it appears surviving spouse has cashed the check and doesn't care about the withholdings, then why not? In that case, it's probably not worth filing a 1041 to deduct the $600 exemption, additional tax prep fees and income distribution back to surviving spouse. I would be tempted to report other income at net, as that is all she received. Curious how that would work. CP 2000 to deceased and letter to explain it was reported by surviving spouse?

That was my question. No, I was not implying that she kept any legal ownership. The quitclaim would transfer legal ownership, but it is possible she retained a beneficial interest until death. In that case the house would pass through her estate.

A beneficiary has equitable ownership. An equitable owner who makes the payment is entitled to deduct mortgage interest, so why not?

If mom held a beneficial interest then there is a incomplete gift per case law. If that is the case then house is considered part of mom's estate and step up basis kicks in. I read into this that house was sold after mom's death, was that the case?

Looks like a gift from the parents since they inherited the condo.

Might have case there. But why fight over it when she expected zero payment to begin with?

I had that thought, but where would you draw the line? Although she might have set up to due this on a volunteer basis, once she accepted the $$,$$$, it became a payment for her services. The excess over reasonable was a big fat bonus.

Yes. The presumption of former employee rule would not apply here, since she is not performing the duties for the former employer.

Possible life estate due to beneficial interest? Did mom live in house "rent free" until death? Did she pay property taxes, pay for upkeep? Those are factors tax court looks at in determining if the residence is included in the decedent's estate. Living rent free is a big one.

Does she know that will count as unqualified use if she eventually uses it has her personal residence and later claims section 121 exclusion?

I am not sure that is quite right. There are two separate tax year rules here. First is the greater than 1/2 year residency test specifically for a taxpayer without a child under 32(c)(1)(A)(ii). Secondly is the full year test for all taxpayers under 32(e) which you mentioned. I have been under the impression that 32(e) does not apply to 32(c)(1)(A)(ii). That appears to be the position taken by the IRS. The wording of question 4 of step 4 of the EIC question worksheet refers to the entire calendar year.

I have never heard of a situation like this addressed before. I can't think of a case to compare it to. I thought about that, but at first was thinking more along the line of a "nonprofessional" fiduciary or PR. However, there is a difference here since the former employee was paid for her professional skills, whereas a PR can do very little for big $$$. I can see factors against SE including: 1. she did not expect to get paid, therefore no profit motive. 2. it was a one time sporadic activity. 3. she did not make any billings, track her hours or otherwise carry on the activity in a business like matter. But on the other hand it could be argued that: 1. after three months the activity was conducted in a continuous manner. 2. although there was not an agreement, it was likely she entertained the possibility of some compensation for performing work of critical importance to the company. 3. in the end she was rewarded for her professional skills. I am not sure how likely the $50,000 will trigger an IRS letter, but I would sure document the facts and circumstances regardless of what position the taxpayer chooses to take. It seems crazy that the company would pay out $50,000 and not issue a 1099. It is hard to imagine that the payment was not deducted on their end, but that is beside the point. I would not hesitate to report it as other income after explaining and documenting the SE aspect to the the client.

That sounds right but I can't say for sure how it works in NJ. For an Oregon citizen living abroad and qualifying for the Earned Income Exclusion, his Oregon based investments are not taxed by Oregon.

There is no entry for fmv, just show distribution at BV.

The distribution is reported on K-1 at book value, basis to the partnership immediately before the distribution. IRS suggest, but does not require FMV on K-1.

Wow! A case could be made for either of those; but I would lean towards other income. She was not in the business of "offering to help out" and did not have a profit motive that would subject her to SE tax. So I see an argument against NEC. There is certainly not an issue of an employee gift vs bonus here. However, while there is an element of gratuitousness, the payment was in recognition of her efforts for the company in charge of the winding down process. Since the payment was made in recognition of her efforts; at a minimum I would call it other income with out further research.