DANRVAN

Are you saying the company pays 5,000 and e'e an additional 1,500 for total of 6,500? Or are you saying total premium is 5,0000: split 3,500 company and 1,500 e'e? If neither taxpayer or spouse is eligible for an employer health plan, then the net amount paid or reimbursed by the Sub-S qualifies for the SEHI deduction. So if company paid a net of $3,500, that is the taxpayer's deduction.

It depends on the purpose of the payment. There is a lot of case law in regards to gifts to employees vs compensation. Since the pastor is a former employee, there should be a clear line as to whether the payment was compensation for services; or an act of charity. As Pacun mentioned, the intend of the church is the key. The payment could be classified as compensation If it was an enticement for future services or if he had not been fully compensated in the past. The reason for his termination could shed some light on the case. So for example, if he had fallen upon hard times, the church could make a gift out of concern for his welfare. In defining gifts, courts have used terms like affection, pity, generosity....

I have rolled over a few returns and fixed assets were there.

Mine rolled over. I think you need to first roll over a client file with with the preparer info on it.

Are you saying the entire loan was paid or a portion? Reduce his share only by the amount that was paid by other partners.

Apply basic partnership tax rules: -Partners share of losses are limited to basis at the end of tax year, you do not go back and amend. -Reduction of partner's share of liabilities is treated the same as a cash distribution. (sec 752(b)). -Distributions in excess of basis are income to partner.

Peace on Earth and Goodwill to All Ye on this Board!

Even if not paid until next year, I believe the all events test of sec 461(h) are met. Also, since this accrual is not subject to the recurring item exception of reg 1.461-5, the 8 and 1/2 month rule does not apply.

That is a question for the estate attorney, do they have one? Sounds like this might be a good engagement to stay away from.

If this is the first return filed for the estate, then you have the option to choose the accrual method. The accrual method option and ability to chose a short first year are two important planning tools for an estate to match deductions with income. Are they past the window for the 65 day deemed distribution rule?

Good catch!

Withholding ss and medicare for ordained clergy is not correct in any situation, regardless of whether form 4361 has been filed. Ordained clergy are "duel status"; they are considered employees for income tax purposes but are self-employed for social security. Their earnings are reported on 941 line 2 as wages, but are not reported as as social security or medicare wages. They instead report there wages on form SE of their tax return unless they have filed form 4361. (There are situations where clergy are considered contractors instead of employees, but that does not appear to be the case here) If this has been an ongoing situation, then the remedy depends on how the priest has been reporting on his tax return. -if he has not been reporting his wages on form SE and the church as been withholding ss and mc, then leave it be 2020 and do it correctly in the future. -if he has been reporting on SE or has filed 4361 then the church needs to amend all incorrect 941's previously filed; and reimburse him for ss and mc withheld.

Awhile back I worked with a cheapskate PR who drug her feet in hiring an appraiser for $150,000 of equipment in her dad's $2 million estate, ended up costing only $850.

And we get an extra 9% from state for a big night out on the town.

For that amount, I would request an appraisal for a number of reasons. Just curious if the EOV was done by XXXX Business Services who came up with the goodwill in your other thread concerning this case? The business service showed a complete lack of competence by assigning goodwill in that case, so the CPA for the estate should have reservations about accepting any valuations from XXXX . Unlike goodwill which requires an appraised value under one of three prescribed methods, there is no regulatory requirement that the fmv of the equipment be determined by a certified appraiser. However, the CPA needs to take a reasonable position that the assets have been properly valued. It is a matter of professional judgment whether an EOV or appraisal is appropriate. An EOV is merely an estimate where as an appraisal includes documentation as to what similar assets are actually selling for. The executor or PR has a fiduciary responsibility to to account for the assets of the estate. For an estate of that sized the cost of an appraisal is well justified.

That is correct. I find hard to believe that a competent appraiser would find any goodwill in this case where continuing success of the business was dependent on the deceased sole proprietor. I would ask to see an accounting of the business and the estate, including a date of death value and current value of the assets. Also ask how long before the estate is expected to close. If your client then has major concerns you would advise her to see an attorney. Other than that, she waits to see what flows from the estate until it closes.

The business is valued at the fmv on date of death, that is what a unrelated buyer would pay for it. There are two types of goodwill, personal and business. The personal goodwill was tied to the sole owner, so it is gone. There could be some value to the customer list, and as mentioned key employees; if under an employment contract and non-compete agreement. But in this case the foreman left and two remaining employees ended up doing odd jobs. So I am curious how business goodwill was valued. Since the valuation was made at the estate level which you were not involved in, then it is probably not a concern for you how it was valued. I just question the competency of the appraiser, but a moot point for you. If the estate was liable for inheritance taxes that would be a concern. Before you can move forward, you need to know what the current structure of the business is and what exactly your client has ownership in.

In that situation, case law would say that goodwill was personal vs business and died with the owner, unless there were some key employees under contract and noncompete agreement. Suppose it could have come from long term construction contracts, if they were rock solid; not likely. A partnership or corporation with ownership going to heirs? The appraisal included date of death goodwill on a sole proprietor's construction business? Out of curiosity, I would ask for a copy of it to see what method was used to make the business valuation. That does not sound right, have you talked to the accountant and asked why a second restructure is needed? At this point what does your client have ownership in? Shares in a worthless partnership or corporation created by the estate? Ownership in equipment? Stolen from the estate?

That article covers a different topic. It addresses issues with allocating existing goodwill to newly admitted partners in profit sharing. Appears the discussion is purely from an accounting standpoint.

The key here is proper allocation of the contributed goodwill. If that has been done then gain will properly flow from from the basis of partnership capital accounts upon sale/liquidation of the partnership, or sale of the contributed asset. There is no special tax rule for contributed goodwill, it is treated like any other 704(c) property which the amortization or depreciation is allocated to the partners under reg 1.704-3(b) in respect to a Built in Gain. The allocation is made to prevent disparity between the book and tax capital accounts of the non-contributing partner as well as to prevent shifting of tax attributes among partners. Basically, the contributing partner recognizes the built in gain over the remaining life of the asset through a reduction in the amount of amortization or depreciation allocated to him. Here is a basic example where A and B form a 50/50 partnership. A contributes goodwill with fmv of 10,000 and basis of 5,000 = BIG of 5,000. B contributes 10,000 in cash. The built in gain is reflected in the difference of A's book capital account of 10,000 and tax capital account of 5,000; while B has a 10,000 balance in both book and tax capital accounts. Now assume the contributed asset has 10 years remaining life. Therefore the book amortization is 1,000 and tax amortization is 500 for the partnership. The book amortization is allocated 50/50; therefore each partner receives 500 in book depreciation. However, under the reg, the tax amortization is allocated first to the non-contributing partner B in an amount equal to his book amortization of 500. Therefore in this case, B is allocated the entire 500 of tax amortization and A receives zero. Now look at the effect on A's capital accounts. His book capital account has been reduced from 10,000 to 9,500 by amortization while his tax account remains at 5,000 since he was not allocated any amortization for tax purposes. So now the amount of BIG reflected in the difference between A's book and tax capital account has been reduced to $4,500. If you fast forward the calculations to 5 years his BIG will be reduced in half to 2,500 and at the end of the ten year life of the asset, he will have recognized 100% of the BIG through his reduced allocation of amortization. While that was a simple example it can get a lot more complicated and additional rules kick in. For example there might be not be enough income to cover partner B's amortization; or there might not be enough tax amortization to cover B's book depreciation. Those situations are covered in the reg. Now in answer to your question, when the partnership is sold, any remaining BIG will be recognized by the contributing partner as a difference in book/tax capital accounts; provided amortization or depreciation has been properly allocated. If not you have "BIG" PROBLEMS to resolve. That is the correct answer!

There is not enough information given. Was an FMV assigned to the goodwill on date of transfer eight years ago greater than basis of contributing partner? If so, was amortization properly allocated per reg 1.704-3(b)? Assume post 1993 transfer. No related parties?

Happy Thanksgiving to all on this forum!

Form 4684 section B since it is property used in a business and does not meet the inventory exception.

If that were the case you would have income for the amount of withholding. Let's say the gross was 2,000 and 200 was withheld for federal (disregard any medicare w/h) leaving 1,800 to deposit in the bank. If 1,800 was returned and 200 left as credit for decedent, then reporting would be income 200 and federal withholding 200.

I am not sure if I am following you on this. If SS was deposited in decedent's bank account and then returned to SSA, then why would estate have a claim on withholding.