DANRVAN

Is the yard normally used personally or is it also available to the apartment renters and related interest and property taxes deducted on Schedule E?

I disagree. What grounds would the IRS have to classify a one time payment to find a renter as a management fee? A management fee is paid to third party to oversee the day to day operation of the rental on an ongoing basis. There is not enough information given here to address those issues which are based on facts and circumstances.

First I would ask if it is an ordinary and necessary expense. Assume it was or client would not have paid it. Then as Gail suggested look at the life of the lease to determine if the transaction created a future benefit and must amortized per 1.263(a)-4 (b)(iv) and exceeds the 12 month rule under paragraph (5) of the reg. The last step is to see if it falls under the $5,000 de minimis exception per 1.263(a)-4 (e)(4)(iii). That being the case it looks like you are good to deduct it.

There are a some options which can lead to very different results in the amount of income reported to the partners. The interim closing method is the default method where the books are basically closed upon entry and or exit of partners. As an alternative, the partners can chose to use the proration method where an allocation is made based on the number of days each partner held an interest for the year. Also there are exceptions which allow for use of any reasonable method under certain circumstances. See reg 1.706-4 for details.

As Sara pointed out, it is most likely deceased mom will be under the filing threshold. In that case there would not be any concern about a cp 2000. But if there was a concern you could report it and a back it out on mom's final Schedule B. Also agree with Sara that if the dividends are the only income from estate there is no need for a 1041.

I don't see any reason to decline the engagement.

Way to late for 645 election. The election would have to be made for the due date of the initial short year beginning in the year of death, regardless of whether or not a return was required. Why would you need a legal opinion? The point was how much interest and penalties would a request for abatement involve. If the trust received income by constructive receipt, then it had income for tax purposes.

My point is, the tax preparer has a duty to file a complete and accurate tax return, regardless of legal battle between trustees, officers, partners, spouses ..etc. Okay so we go ahead and file for 2019, the estate is closed; legal and accounting fees are paid; and all the money is distributed. Then a letter from the IRS turns up with a demand to file for 2016 that nobody happened to mention before. Now who are the fingers pointed at? It is not going to be me unless I have found a case law exception for constructive receipt due to failure of fiduciary duty and have been compensated for it. As joanmcq mentioned, the sibling have been fighting since 2008, so don't expect anything to change in that department. Some could be in it for the battle and could care less about the money.

Is this an ongoing operation? Would client recognize a capital loss from liquidation of the corp that could offset the gain from the rental? I do not practice in a community property state so could not tell you off the top of my head. My guess is that the rental and the corporation stock would still need to be under the ownership of the same spouse for a valid 351 transfer. I don't think gifting is appropriate in this situation, but would not say for sure without researching the issue.

There is still a transfer between two separate entities, resulting in a deemed sale unless it is structured under section 351. In that case, even if there was a valid 351 transfer, the liability assumed by the corp is considered boot and taxable under section 357(b)(1). Section 357(b)(1) kicks in where there is either a tax avoidance or a non-business motive. In this situation there is obviously both.

The issue is there are two separate legal entities involved; the taxpayer and the corporation. The transfer of the rental to the corp would be a taxable transaction unless it is done under section 351. Section 351 is most commonly used with the formation of a corp where the shareholder transfers assets in exchange for 80% or more of the stock. I don't think that will work in your client's situation.

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.