DANRVAN

Per IRS (also supported by case law):

Topic no. 414, Rental income and expenses

Security deposits – Don't include a security deposit in your income if you may be required to return it to the tenant at the end of the lease. If you keep part or all of the security deposit because the tenant breaks the lease by vacating the property early, include the amount you keep in your income in that year. If you keep part or all of the security deposit because the tenant damaged the property and you must make repairs, include the amount you keep in that year if your practice is to deduct the cost of repairs as expenses. To the extent the security deposit reimburses those expenses, don't include the amount in income if your practice isn't to deduct the cost of repairs as expenses. If a security deposit amount is to be used as the tenant's final month's rent, it is advance rent that you include as income when you receive it, rather than when you apply it to the last month's rent.

And on the other side of the transaction, since amount paid by buyer = seller's basis, then buyer's basis = same, per § 1.1015-4 as partial purchase / partial gift.

39 minutes ago, michaelmars said:

he did receive it and then gifted it back.

11 hours ago, DANRVAN said:

never actually got any money from the buyer other than the amount he purchased it for.

Amount realized = amount received.

Per 1.1001.1 (e)

"Where a transfer of property is in part a sale and in part a gift, the transferor has a gain to the extent that the amount realized by him exceeds his adjusted basis in the property."

OP implied that amount received = basis.

Substance over form.

21 hours ago, TAXMAN said:

The estate went past its year and has not made any distributions thus a 40 k tax liability (200k income)

I am curious is to how the estate made $200,000 in the first year given that any sale of assets should have been mostly offset by step up basis.

14 hours ago, TAXMAN said:

However the estate has paid out 10k in repairs and utilities to date. In the return for the estate(1041) I cannot see how we can take this as a deduction. The estate went past its year and has not made any distributions thus a 40 k tax liability (200k income) unless we can use this as a deduction?

I don't see how $10,000 is going to go very far in reducing $200,000 of income.

Although if $10,000 was paid after the transfer to heirs, then it might be considered a distribution in lieu of cash since it was to their personal benefit.

10 hours ago, Tracy Lee said:

. he has a gain of $44,886.00 even though he never actually got any money from the buyer other than the amount he purchased it for.  He wants to be able to add the $45,120.

If your are saying the amount realized = basis; then gain = zero.

He can't be taxed on consideration he never received.

36 minutes ago, Lee B said:

The best source I found was in The Tax Advisor

I don't see where the OP's issue is discussed in that article.  It really does not address the claim that any of the loan fees are nondeductible.

As I read it, the focus of the article is is on which fees are not considered interest expense subject to the Sec. 163(j) limitation.

If in fact the fees in the OP are not deductible, they would become part of the acquisition cost of the property (basis).

Without any authoritative cite, I  would amortize over the life of the loan.

12 hours ago, Tax Prep by Deb said:

My research shows this not to be deductible,

I am not familiar with this, can you share your source?

44 minutes ago, rich said:

Client's past accountant haven't took distribution of Income/ profit in past year and funds shows in 219K in AAA account.

I think I follow you now.

Show correct beginning balance and actual distributions for the year.

On 2/29/2024 at 10:04 AM, rich said:

Client is closing real estate S-Corp and sold last property, client haven't took income distribution

Sounds to me like there will be a liquidating distribution, which needs to be treated as payment in full for the exchange of shareholders stock.

On 2/29/2024 at 10:36 AM, Catherine said:

couple thousand dollars' payment from a state for an unclaimed property payment. Per the state document, most of it is "stock proceeds"

Does the estate have any other income to report?

A couple thousand dollars of stock  proceeds could easily be offset by attorney and PR fees; above any unknown basis.

On 2/28/2024 at 12:13 PM, Lion EA said:

financial advisor you love and trust

My wife!

On 2/29/2024 at 10:04 AM, rich said:

Is it right to take cash distribution on Schedule K Line 16D and that info roll overs to schedule M2 line8 to make zero balance? Its Final return though.

 I'm not completely clear as to what you are asking.

 If the distribution was taken in 2024 then I would not show it on the 2023 tax return,  since  there would be both a cash balance and retained earnings balance as of December 31 2023.

On 2/29/2024 at 8:32 AM, artp said:

their share of the taxes was credited back to A when the funds were dispersed.

This is still not clear.  How was the $79,000 accounted for?

I think you have stated 19,908 for legal fees;  back taxes of 8,398; amount paid to older brother 28,095.  Based on that, where did the remaining 22,599 go?

Who incurred the legal fees?   The county or the brothers?

Were there additional taxes that brother paid  and was credited for?

This is not a typical settlement statement since one party is both a buyer and seller,  so you really need to look at the substance of the transaction.

18 minutes ago, artp said:

After the tax settlement from his brothers his share was $34,731 less $6636 for attorney fees a net of $28,095.

It is still not clear.  So there were additional unpaid taxes after the sale?  And brother A paid them?

Were the legal fees incurred by the brothers?

12 minutes ago, artp said:

The total back taxes of $8398 was owed  by brothers B and C. Brother A had paid his share each year.

So there was cash paid above what was owed to the county for taxes and legal fees.

How much did brother A actually receive from the court ordered sale?

9 minutes ago, DANRVAN said:

he bought out brothers share by paying off their debt.

That is what it really boils down; to substance over form, even if some of the taxes were owed by him.

On 11/15/2023 at 7:50 AM, artp said:

My client paid for his share of the taxes each year, but the other sons did not pay their share.

So was the county sale to cover back taxes owed by the two other brothers and related legal expenses of the county?

If older brother did not owe anything to the county, then it sounds like he bought out brothers share by paying off their debt.

That would change my answer from previous post.

19 hours ago, artp said:

escrow settlement statement on the partition sale $ 79,00 for back taxes. There were legal fees on the settlement which I am deducting from the proceeds

Are you saying the sale price was $79,000, of that $19,908 went to attorneys, and the remaining $59,092 went to the county to cover back taxes per the settlement statement?

1 hour ago, BulldogTom said:

the funds are mostly US based

There are some exceptions.

Do they meet the holding period requirement?

On 2/19/2024 at 8:58 AM, schirallicpa said:

payments apparently didn't go to the CC company and the debt relief company cannot be found.

On 2/21/2024 at 5:07 AM, Pacun said:

My crystal ball tells me that no one was scammed in this case. 

Really?

On 2/21/2024 at 5:48 PM, BulldogTom said:

filing and then amend?  Bonus depreciation is what I am running into most. 

I discuss with clients and let them make the call in cases where Sect 179 does not fit or it can't be squeezed into 1.263(a) safe harbor.

Most decided not to wait for a ship that has not yet set sail, and potentially file amended returns.

Rev. Rul. 60-378, 1960-2 CB 38 -- IRC Sec(s). 117

Marc W. Spiegelman, 102 TC 394, Code Sec(s) 117; 1402, 03/08/1994

7 hours ago, schirallicpa said:

Do you guys consider this SE income?

It depends on the facts and circumstances.  I believe the key is who has ownership of the research.

I think in most cases the research is done independently and does not rise to the level of a trade or business.

I don't have a cite right at the moment, but you should find your answer in the Pubs or IRS website.

5 hours ago, Randall said:

their state equivalent of the Fed 1041 or any other forms. 

Oregon does not yet accept e-filed OR-41.

Oregon started accepting partnership returns e-filed in recent years and ATX followed through.