DANRVAN

Karla, sounds like you need to explain to them that in this situation with 50/50 partners, GP does not change the amount of taxable income at the partner's level. While the GP is reported as income to the partner, an equal amount is recognized as an expense by the partnership and passed through to the partner. For example, if partnership income / loss is zero, $100,000 GP will reduce it to $(100,000). Then each partner will report $50,000 GP and a loss of $50,000, which nets out to zero on their K-1's. They can also call it a draw with zero effect on taxable income to partner. So then you have two separate transactions to record, the loan from uncle and the GP to partners. What they need to be concerned about is how GP or draw will effect capital accounts.

$150,000. The transfer from Zel is a part purchase and part gift of Zel's basis of $75,000 ($15,000 + $60,000).

Tom , the OP said paid to take care of mother and did not mention paying for her living expenses. There is not enough info given to discuss support, caregiver's husband could be earning $xxx,xxx. If the payments are strictly for her efforts in taking care mom, then it is not excluded under the code. As mentioned, a written agreement would be helpful.

https://www.irs.gov/businesses/small-businesses-self-employed/family-caregivers-and-self-employment-tax The IRS takes the position that there is not a trade or business if the taxpayer only cares for a single family member, therefore report as other income. In Q-3 there is SE tax since taxpayer "operates a sole proprietorship adult day-care business for multiple clients, including her grandmother".

I can see a case for SE but also a case for other income. She did not quit her job to take up a new profession like the doctor that became a lawyer. She is not really working for the siblings. They recognize her need for financial support but that does not make it employment or a business. It is more like unemployment income since they are compensating her for wages she would have otherwise earned. In regards to the suggestion of Max of gifting, I suppose there could also be a case for that depending on the facts. For instance if after she quit her job and took care of mom for awhile, sibling got together and said this is not fair and voluntarily started kicking in $$$$.

I don't see how you can call it a gift regardless of how favorable it would be to the client. A gift is given without the expectation of anything given back in return. In this case siblings are paying client with expectation that she will take care of mother in return. It sounds like she has informally or formally entered into a caregiver agreement with siblings. "You take care of mom and we will pay your $$$$ per month". I would not report it on Schedule C since she is not in the trade or business of being a caregiver. If she does not have a written agreement, it might be in her best interest to get one.

That should have read 2002-39.

As Max pointed out the form is 1128. In your case you will complete the section asking for a ruling request. You must also attache a statement explaining the legal basis for the change in fiscal year. The form also refers to the user fee. Your research should have taken you to RP 2009-39 which emphasizes the need for a business purpose; and the reality that permission is granted "only in rare and unusual circumstances."

Off the top of my head I will say that you need to prove there is a business purpose for change, other than to save a bunch of taxes. Also the short year has to be annualized. Have you tried researching this procedure? There are special forms to file and possible user fee.

Case law looks at the origin of the claim to determine if it is related to the trade or business of the taxpayer (or in this case rental activity) and therefore deductible. If the origin of the claim is instead related to personal actions of the taxpayer, the deduction is not allowed. So it depends on facts and circumstances.

Welcome to our board Dhawk. I have not used ATX for mixed use vacation homes but hopefully someone here can help you.

That is a good point. One of the factors in rr 72-86 is that the director expects compensation for his work. I would also lean towards SE tax based on the information provided but would have a few more questions to ask.

They would then have to rise to the level of a trade or business per section 162 as determined by case law.

Yes, forgiveness of non-business loan is a gift, whether it be to son, daughter, charity or next door neighbor.

Put full depreciation on Schedule F of spouse (a), then back out 1/2 and override same amount for spouse (b). Or as Abby Normal suggested, report 100% income and expenses for spouse (a), then allocate 1/2 as a single line entry to spouse (b).

In that case I would consider filing form 1065. In a similar situation, I worked with the attorney to back date the effective date of capital contributions.

That sound right if the property is held outside of the partnership. Any 1099's received?

Thank you for the reminder Judy.

That is not right. The server's reported tips are reduced by the amount paid to the bartender. The bartender in return reports his share. That is explained in pub 531: "If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Don't report to your employer any portion of the tips you receive that you pass on to other employees. However, you must report tips you receive from other employees." Also see RR 76-231.

If she eventually sales or closes the business, the loss in value could be a 165(i) loss.

That is a big consideration. There might be such a back log that an e-filed 2020 return might get processed sooner!

I believe that is the route you would go. You would reduce the 2020 beginning inventory to prevent a double deduction per rev rul 77-94. Your post brings up an important consideration for 2019 tax returns that have not yet been filed.

Whether it is a schedule F or C, I use a spreadsheet to make the allocation and then input each schedule, takes a minimal amount of time.

Understand your concern, but active participation will not be disallowed solely on the fact that a fee was paid to find a renter if the owner was otherwise involved in the day to day management of the property. In regards to the finders fee, the property owner could still be active in the process of selecting tenant, negotiating terms of lease....etc.

If you are already deducting the expenses then it might be immaterial to make a minor allocation.