DANRVAN

As cbslee mentioned, you need to be careful about giving out legal advice. Maybe you can help them find legal assistance for low income or elderly. Your state bar association might have a program. On the tax side of it, they can gift the entire house in a single year without paying gift taxes since the value is well below the exclusion amount. However, they will have to file a gift tax return. You can also advise them that if it is done right, they can retain a life estate and their heirs will received a stepped up basis in the property. Good luck in helping them out.

I It depends on fact and circumstances. There are black and white cases; and those that fall in the middle. The original question here was not about which form to report on but the depreciation life of the building.

It is schedule C since grandmabee said client provides substantial services. Therefore it is subject to SE tax per reg 1.1402(a)-4(c). 27.5 years is for a residential property. In this case, nobody "resides" there as Gail in Virginia pointed out. If you hire somebody to prepare breakfast you are still providing the services, same as changing sheets and daily cleaning. We stayed in an ABnB where there was no food service (there was a well stocked refrigerator and pantry) no daily cleaning or bed changes (which was fine with us). That would be a schedule E activity with 39 year depreciation.

There is both. Section 2301 is the credit and section 2302 is the deferment.

I see no choice but to file for 2016. It is not worth putting your professional credentials on the line for someone else's irresponsible actions. At least beneficiaries won't be complaining about paying tax at their level.

I understand your position Catherine. But the return needs to be filed based on the facts and circumstances regardless of how beneficiaries react to it.

One way or another the trust will pay tax on the income, whether it be for 2016 or 2019 since no distribution was made in the year payment was received. Constructive receipt takes place at the entity level of the payee; whether it be corporate, trust...etc. So whether it was by disagreement of trustee's or shareholders, the funds were available for deposit; but not made because of an internal disagreement. What is the difference between reporting for 2016 or 2019 at trust level? Interest and penalties should be waived upon request. Was a 1099 issued for either year? Worse case scenario, you get a CP2000 for 2016 and have to go back and file for that year?

Then he and the company are the same entity for tax purposes.

and in this case they had the first 65 days in 2017 to distribute the income to the beneficiaries and claim it in 2016. No exception to the constructive receipt rule for internal bickering, that I know of.

And a little voice says something about tax avoidance transaction.

Catherine, my concern would be signing as a complete and accurate tax return for year 2016 Look at it this way, say a corporation received a check on Dec 31 2016, but the board of directors fought over it for three years, would you have constructive receipt?

Sounds like there was constructive receipt. I don't think the fact the check was not cashed is going to change anything.

Trust pays tax if there was taxable income.

A simple trust must distribute all of its income annually and that does not sound like your case.

Are you saying husband owns corporation and wife owns the rental? I see complications. There would have to be a Section 351 transfer to avoid tax by wife upon transfer. I believe wife would then have to own 80% of stock immediately after transfer. Also any debt assumed by the Corporation could be considered boot paid to wife subject to tax. I would have to think long and hard about it.

So no funds used for educational purposes in the past? Agree earnings fully taxable and subject to 10 penalty. Also your calculation of distributions taxed at your state level is consistent with treatment in my state.

That is a whole different department, and I believe the process is basically automated.

Form 3115 would be used if you were to claim the additional deduction in a later tax year; 2020 on. Good luck on a 1040X, sounds like it might be awhile before it even gets opened up by the IRS.

It depends where you read. Section 1106 of CARES ACT just says nonprofit organization in regards to PPP; no mention of 501(c)(3) or otherwise. Section 1110 only mentions "private nonprofit organizations" in regards to the EIDL Grants. But then the "Intern Final Rule" for PPP says only 501(c)(3) and 501(c)(19).

Of course there could be flip side to this that can work to the sole proprietors advantage. Let's say the year of loss was 2018 and $50,000 of income that was expected in 2018 came in January of 2019. The extra income from the prior year and less expenses for 2019 yields a profit on Schedule C of $125,000. Of that amount, $50,000 was used to payoff the 2018 operating line, $25,000 to pay off an equipment loan and $50,000 was actual draws. In that situation PPP becomes $25,000 thanks to timing of income; and regardless of the fact that only $10,417 was attributed to his 2019 draw. $25,000 divided by 8 weeks means $3,125 can go towards owner's pay per week. Enjoy!

All sorts of possibilities: cyclical business; large repairs; income from major contract tied up in ligation and received in the next year....... Those are just made up numbers. The point is, if the sole proprietor had a loss or low income year, he still had to take out draws to provide for himself, whether that came from cash reserves or an operating loan. The revised "Interim Final Rule" does not take that into consideration.

Under the new guidance of the revised "Interim Final Rule', it appears sole proprietors are not on equal footing with a sole corp owner. The new guidance basically says no SE income + no employees = Zero PPP. Here is an example where a sole shareholder would be better off a. business has 2019 $1,000 loss operating as sole proprietor, no employees and owner takes $50,000 in draws. PPP NOT ALLOWED. b. Same business but sole shareholder paid $50,000 in wage plus $3,800 federal payroll taxes. PPP= 53,800/12*2.5=$11,208. Maybe I am over looking something here but it appears the PPP cards are stacked against the sole proprietor as long as SE earnings are less than what a reasonable wage would be.

The question that came up was how to report ending inventory on Schedule C if the sale of inventory upon liquidation of the business was reported on 4797. IF that were the case, ending inventory would be reported on Schedule C. Otherwise it would be deducted twice: first as cost of sales and secondly as basis on 4797.

That is wonderful for taxpayers who cannot e-file because ex-spouse wrongfully claimed dependent and related tax benefits.

Here is a situation. Partner receives $10,000 of inventory in liquidating distribution of partnership. He in turns sales it lock stock and barrel to a liquidator. It is ordinary income but not SE income, or as reg 1.735-1 says "gain or loss from the sale or exchange of property other than a capital asset". The sale was not to customers in the ordinary course of business, therefore not subject to SE tax. Also consider inventory received by shareholder of corporation. The issue becomes ordinary income vs capital gain, and case law has held that in some situations capital gain or loss was the proper treatment by the shareholder. Going back to TAG's post, I believe there is a case for reporting on 4797 as Catherine mentioned instead of Schedule C. Say the sale of the business was to take effect at midnight on 1/31/18. At that point former owner is no longer in the business of selling inventory to customers. Instead he his is liquidating his remaining inventory in a lump sum. Consider the tax treatment for a client who was forced to close a business due to the pandemic. For example after sitting idle for a couple of months, inventory is sold to a liquidator. Is that transaction in the ordinary course of business? As I see it, there is a parallel in treating the sole proprietor the same as the partner who receives inventory in a liquidation and then turns around and sales it.