DANRVAN

3 hours ago, TimElevation said:

This is just a discussion draft and not law, correct?

Right.  But even though act has stalled out, it shows congress is aware of the oversight which allows two deductions for the same transaction.  

It might someday become law and amended returns might be in order for those who choose to take them both.

18 hours ago, Catherine said:

There should be a way to force it to long-term; inherited assets are always considered long term.

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

4 hours ago, ILLMAS said:

, before death the property had zero basis.

Curious how they got zero basis.

As LION and Max pointed out your answer will depend on the type of trust.  

Max, as I understand it, the QTIP will move the assets from the estate of the decedent to that of surviving spouse.

However, I don't know if reg 1.121-1(c)(3)(i) will apply since the house was not owned by a grantor's trust at the time of sale,  maybe an attorney can help. 

I hope your client appreciates the digging and scratching you are doing for them.

So as long as you are using the fmv on date of death as basis for estate and showing as long term gain then you should be okay.

36 minutes ago, WITAXLADY said:

How do you show that in ATX  - separately on the 4797 when sold?

Are you asking how to report the sale of the assets by the estate? If they were used in a business of the estate they would go on 4797, otherwise report as sale of capital asset.

39 minutes ago, WITAXLADY said:

that is what I did - and is it stepped up basis or FMV?

The estate gets a stepped up basis which is the FMV at date of death, if that is what you are asking.

You do not show a sell of assets on the 1040 of the deceased.  Assets go to estate at stepped up basis.

Hope this helps.

The discussion draft of the "Tax Technical and Clerical Corrections Act" released in January contains a provision that eliminates a duel deduction for both DPAD and 199A.

The only trust eligible for the exclusion is a grantor trust.  see reg 1.121-1(c)(3)(i)

I believe it would have been allowed under a provision of  the EGTRRA of 2001, but that was subject to sunset.

32 minutes ago, DANRVAN said:

See reg 1.1336-2(b)(2). 

That should be 1.1366-2(b)(2)

The ordinary loss c/f will offset ordinary income next year.

When assets are sold ordinary gain will be recognized up to the amount of depreciation taken.

9 minutes ago, mircpa said:

My worry is if this business is sold next year

You are talking about selling assets vs stock?

It is not clear what your are asking.  Are you talking about final sale of partnership assets?

1 hour ago, Abby Normal said:

They will also be allowed when the entire entity is disposed of.

Only to the extent of basis.  Otherwise permanently disallowed since the share holder was never at risk for the amount.

See reg 1.1336-2(b)(2). 

12 hours ago, Edsel said:

Most of the farm equipment (but not all) was fully depreciated because of s.179 treatment.

Was that disallowed by the IRS?  If ultimately there was no tax benefit then I would not report on 4797. 

23 hours ago, Catherine said:

Hawaii is a common state to establish domicile for expats.  Florida is another one.  Or any state with no income tax, really.

Oregon is very generous.  Oregon residents living in a foreign country may be taxed as foreign nonresidents if they meet the “physical presence” test or
the “bona fide residence” test.  In which case their foreign income is not taxed by Oregon.

As Catherine and Gail mentioned be sure to get advise on state taxes,  some preparers of federal foreign taxes are not familiar with individual state taxes.

1 hour ago, Max W said:

1. Should the house at the time of her death been retitled to include her trust.?   If that didn't happen, then the proceeds of sale of the house would have all gone to the survivor's trust - CA being a Com. Prop. state.

The estate attorney should have taken care of funding the bypass trust (B trust).  It may not be to late.  I was recently involved in an estate where it took three years from date of death to close the estate and fund the bypass trust.   The funding date goes back to date of death.  If not funded, the purpose of the bypass trust is defeated.

1 hour ago, Max W said:

2. If this was the case, does the B trust get stepped up basis, or does the basis remain as the FMV at time of death?

The bypass trust gets stepped up basis on date of first spouse to die.  If it was never funded you need to talk to estate attorney.

1 hour ago, Max W said:

3. I don't think that a 645 election can be made as that would have had to be done sometime after her death.  Is that right?

There is 2 year window to make the election.  The B trust is not a Qualified Revocable Trust so the election does no apply.

Hope this helps.

1 hour ago, Max W said:

1. As I calculate, the deadline for election and extension is Sep. 15. Is this correct.

Yes,  the year end for estate is May 31, 2019, due date 9/15/19.

1 hour ago, Max W said:

2. Does the conversion to the Estate require a new EIN?

That depends.  If there is both an estate and trust then EIN for both.  If there is no estate and you are electing to file the QRT as an estate then use EIN for the trust obtained after DOD.

On 8/16/2019 at 7:00 AM, Roberts said:

The attorney's know this but are supposedly moving the farmland out of the corp before selling it which I believe is a problem.

In this particular situation I don't think it is a problem as long as the S-corp is dissolved in the same tax year as the asset transfer.

The transfer to shareholder is a deemed sale of the asset.  

S-corp recognizes gain and passes through to shareholder (estate).

Estate now has a basis equal to FMV on date of transfer to offset future sale of the property.

Since the farm property was the only asset held by the S-corp,  basis of stock held by estate = fmv on date of death.

Estate will recognize loss on liquidation of S-corp which should offset gain on transfer of property.

On 8/25/2019 at 5:22 PM, Casper said:

Is this the correct recording?  Is there any recording required for the market value of the property in excess of cost or basis on the date of transfer?

IRS partnership rules say property and capital accounts are recorded at FMV.   However, the contributing partner has a basis in the partnership equal to his basis in the contributed asset,  that is also the basis of the asset in the hands of the partnership.

As a result, you have tax vs book differences that are accounted for under section 704(c) in order to allocate the built in gain to the contributing partner and depreciation to non contributing partner.

However, in your situation there is really no issue since both husband and wife made an equal contribution.  The classic 704(c) situation is where partner A contributes cash and partner B contributes appreciated or depreciated property.

By the way, welcome to the forum Casper.

On 7/25/2019 at 10:31 AM, Abby Normal said:

Wouldn't these gifts be clawed back into the estate?

Are you referring to gifts made with in 3 years of death?  They are generally not included unless the decedent retained a life estate, made a revocable transfer or the transfer was effective upon death.

Claw back is a concern when there is an increase in basic exclusion subject to sunset.   For example taxpayer gifts $10 million in 2019 excluded under TCJA but dies in 2026 when exclusion reverts to $5 million.  IRS has proposed rule to resolve that issue.

On 6/26/2019 at 10:38 AM, schirallicpa said:

I would have them create a sub-s if "partnering " is what they do. 

I think you need to have a thorough discussion with the client to determine what is the best arrangement and choice of entity.

-who will be compensated and for how much

-who is going to be in control

-who will provide capital and financing

-how will profits and losses be divided

-who will assume liabilities

-the list goes on.

I am curious why you would choose Sub S over partnership?  Partnership is less complex in formation and operation.  Also more flexible.

8 hours ago, FDNY said:

I'm hearing that it depends on who is looking at the return, so may be luck of the draw.  

If they don't accept it appeal it, you have the ammo to back it up.

12 minutes ago, grandmabee said:

Now I am thinking maybe he meant he was going to disallow the depreciation because it wasn't exclusive use at that time.

That would depend in facts and circumstances  Were they also living in the house while it was B & B?

12 minutes ago, grandmabee said:

.  If I do the 3115 the only place I can put it is on line 21 because no Schedule C since 2013. 

I believe the proper place to report expenses for a closed business in on Schedule C and would offset any other income of the same character: like SE,  earned income......etc. 

In the same regard if there was a positive adjustment it would also go on C.

5 hours ago, ILLMAS said:

would I include the access deprecation on Sch E or line 21?

I would put on E so it retains the same character as originally reported.