DANRVAN

6 hours ago, Oh Baby! said:

So lets say that the K1 shows capital gains of $3,000,000 (box 10) and there is an unrecaptured Section 1250 gain (box 9) of $1,000,000 the total capital gain reported is $3M?

To clarify, the total capital gain is $3m, and of that $1m is unrecaptured section 1250 gain.

8 hours ago, Roberts said:

, are you 100% sure that's the case for a C-corp?

It doesn't matter if a S or C corp, assignment of income still applies.

Also,  it does not matter what the motive is.  The income is reported by the person / entity that was legally entitled to it.

Unfortunately there does not appear to be a solution for your client's situation.

Here is a quote from Johnson v. Commissioner, supra at 891, that addresses your questions:

An examination of the case law from Lucas v. Earl hence reveals two necessary elements before the corporation, rather than its service-performer employee, may be considered the controller of the income.15 First, the service-performer employee must be just that—an employee of the corporation whom the corporation has the right to direct or control in some meaningful sense. See Vnuk v. Commissioner, 621 F.2d 1318, 1320-1321 (8th Cir. 1980), affg. a Memorandum Opinion of this Court; Vercio v. Commissioner, supra. Second, there must exist between the corporation and the person or entity using the services a contract or similar indicium recognizing the corporation's controlling position. See Pacella v. Commissioner, 78 T.C. 604 (1982); Keller v. Commissioner, 77 T.C. 1014, appeal filed (10th Cir., Apr. 2, 1982).16

14 hours ago, BrandonPruitt said:

"the return you selected cannot be opened. Please restore a previous version of the return and try again"

I have had that happen but can't remember why.  Are you trying to open up in a different program year than it was created in?  Maybe it had something to do with a return that was rolled over but not opened?  Might of had to go back and open in previous year and then roll over again?  

Unless they can get a contract between the paying company and the corporation, they are out of luck.

Case law is very clear when it comes to assignment of income to corporations.

First of all, there must be a contract between the corporation and the payer.

Secondly, there must be an employment contract which recognizes the corporation's controlling position.

To be straight forward with you Edsel, if your clients truly need or want (which I cannot Imagine)  financial information prepared in accordance with Generally Accepted Accounting Principles, then you need to refer them to someone who is both qualified and licensed to provide that information.

GAAP is huge and encompassing.  It has nothing to do with filling in a balance sheet on form 1065 or as you say "doing our job correctly".

But FYI, you do not report deferred taxes for a pass through entity.

20 minutes ago, Tax Prep by Deb said:

we don't go back to when the house was first purchased to establish non qualified days, we begin from January 1, 2009 correct?

The law went into effect 1/1/2009 so you do not go back further than that date.

Look at it this way, you can move out of your home and rent it before you sell it with out reducing the exclusion.

But, if you convert a rental to your personal residence your exclusion is reduced by the portion of time it was previously held as a rental.

It actually kind of makes sense.

16 hours ago, jklcpa said:

where I believe your client falls into the exception in sec 121(b)(5)(C)(ii)(I) .

I agree, the nonqualified use occurred after he used it as his personal residence so it meets the exception.  On the other hand, if he had rented it before it became his residence that would be nonqualified use.

22 hours ago, RitaB said:

I believe the Shared Responsibility Payment is zero for 2019, not gone

Congress effectively eliminated the penalty by setting it to zero.   

2017 was the only year IRS could fully enforce it.

******************************************************

Sec. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.

(a) IN GENERAL. Section 5000A(c) is amended—

(1) IRC in paragraph (2)(B)(iii), by striking “2.5 percent” and inserting “Zero percent”, and

(2) in paragraph (3)—

(A) by striking “$695” in subparagraph (A) and inserting “$0”, and

(B) IRC by striking subparagraph (D).

(b) EFFECTIVE DATE. The amendments made by this section shall apply to months beginning after December 31, 2018.

I sent the author an email and asked if he could clarify his position:

Roger McEowen <[email protected]>

Hi Daniel

You are correct if the crop passes to the surviving spouse then continues the farming business.  That's essentially the Backemeyer case from NE a few years ago.  

Roger

14 minutes ago, BLACK BART said:

Okay, thanks.  I don't see the box anywhere, so maybe we're home free.

Since the individual mandate penalty is repealed for 2019 I would not expect to see the full year coverage check box for 2019.

On 10/31/2019 at 7:28 PM, Chelsea said:

I can't find any option to get ATX to force a balanced return.

What are you trying to balance?

3 hours ago, Hahn1040 said:

so what is the name on the return:

The name on the return needs to match the name on the EIN.

Could also be a Qualified Domestic Relations Orders in which case the amount paid to ex are taxable to her.  You need find out exactly what the court order was and how much actually was paid to ex.

Saw Judy's post under e-file, Thank you.

Does anyone know if e-filing ends this year for 1040's on November 15 for ATX?  How about 1041's?

1 hour ago, schirallicpa said:

under court-ordered apportionment. "

Alimony? 

On 11/1/2019 at 9:40 AM, TaxPreparer said:

Thank you,

Is it the same being there is no estate and it will be given to the wife and put on the joint tax return?

There might be a difference in how the income is reported on form 1041 by estate and Schedule F by surviving spouse who is now engaged in the business of raising and harvesting of crops.  In your case,  it appears the surviving spouse made a contribution of the unharvested crops to her farm operation and should recognize ordinary income in amount above the stepped up basis. 

She will also claim depreciation from stepped up basis of depreciable assets.

You will prepare two schedule F's, one for deceased husband and one for wife.  As mentioned previously, case law allows deduction for inventory items such as fuel, fertilizer and seed  at DOD on both returns.

1 hour ago, Edsel said:

Report farm income and expenses on a joint return as if the decedent were still alive.  Easy.  Yes, I know technically an estate was created but even the IRS would appreciate not having to fool with creating a pass-through entity which does nothing for revenue or taxes.

If that is the case, you are not filing an accurate and complete tax return. 

You might also miss out on deductions for depreciation and items held as inventory on DOD as a result of stepped up basis.

Also incorrect reporting of SE income.

It sound like your numbers are correct. 

On 11/1/2019 at 2:20 PM, ILLMAS said:

have also prepared two forms 8824 and wanted to see if I need to divide the $700K evenly with the two forms or it makes no differences how I distribute it just as long as the new basis matches?

When an exchange involves multiple properties you report it on a single form 8824. (see instructions).  You leave lines 12-18 blank and attach a worksheet to show how you arrived at those individual amounts and the net is reported on lines 19-25. An excel spreadsheet works great when multiple properties are involved.

On 10/31/2019 at 8:43 AM, TaxPreparer said:

would this be considered an inherited asset sale on the Schedule D?

Although there are articles such as 3rd link above posted by bbstacker that suggest the surviving spouse in you situation is entitled to capital gains treatment,  I do not see the authority that allows it.  Reference is given to 1223(9) which refers to the holding period of inherited property but does not mention character of the income.

Although it is clear that capital gains treatment is allowed in cases where the crop is sold along with land, that is not the situation here.

In your situation, it appears wife is continuing the operation and is in the business of raising and selling crops.  I think there is a strong case that the IRS would include the sale on her Schedule F, offset by the stepped up basis at date of death.  However, I do not have an authoritative reference to back that up.

If on the other hand surviving spouse was to discontinue the operation by lease  or sell of the land I believe there would be a case for capital gains treatment.

On 11/1/2019 at 9:40 AM, TaxPreparer said:

Is it the same being there is no estate and it will be given to the wife and put on the joint tax return?

The term estate has different meaning, but in this case I believe the term applies to the assets and liabilities of the deceased and the distribution to heirs, which passed to surviving spouse.

Something else to keep in mind is that supplies ( seed.fertilizer, fuel etc) purchased  and held as inventory on date of death also get a stepped up basis and are deductible by surviving spouse if used in the farming operation and also deducted on the final Schedule F of husband.  See Backemeyer vs com.

On 10/12/2019 at 9:55 AM, DANRVAN said:

allocation of GST.  For example  if the life insurance policy expires while in trust there is a possible of waste of GST.

That should read "GST exemption" in both sentences.

It should be reported on part 3 since a trust that has both skip and non-skip beni's is considered an indirect skip as defined in sect 2632(c).

In regards to the 2632(c) election, that would cause a taxable termination on the death of the trust beni.

There are cases where the 2632(C) election is made out of the auto allocation of GST.  For example  if the life insurance policy expires while in trust there is a possible of waste of GST.

That might not be a concern depending on the size of the estate.  The estate attorney should be consulted if there is a concern.

I have worked with small landowners and ranchers with occasional timber sales.  In these cases, I have taken the position that the taxpayer is not in the business of raising and harvesting timber and have reported on Schedule D.

On 10/3/2019 at 11:34 AM, Tracy Lee said:

His basis for the timber in 2018 is 86,000.00

I find it odd the basis equals sales, unless the land was recently inherited.  I have seen cases where tax preparers pull a number out of the hat to determine basis.  It can be tricky but using timber growth rates, and historical market prices a reasonable estimate is possible.

When dealing with timber keep in mind the $10,000 above line deduction for reforestation cost.

13 minutes ago, DANRVAN said:

You can force it to part III of 4797 on the input tab.  Then it should flow to Schedule D as long term

To clarify, the non recaptured portion of the gain would show as LT capital gain.

I would also note in the description that the asset was inherited.