DANRVAN

I agree with Catherine,  W-2'C showing total as reported and what should be reported.  If you are paper filing you can attach an explanation.

On 6/25/2019 at 6:57 AM, TaxmannEA said:

There was one W-3 that included the duplicate page of W-2 for 2 employees. The duplicates were included on the W-3 totals. 

If you don't mind a suggestion, a payroll reconciliation should have caught the error: W-3 = totals from 941's = total from year end payroll summary.

Not sure how that works, but by my thinking the system will only accept one W-2 per employee per employer.  Did W-3 include duplicates?   

Check with SSA for details

6 hours ago, schirallicpa said:

If the deceased had set up a beneficiary who would immediately take Ameriprise stock assets upon her death, then should those stock assets be included in her estate?  

As Old Jack indicated, that is a wide open question.  The TOD stock would be included in the estate for 706 purposes.

On 6/6/2019 at 9:19 AM, BLACK BART said:

Okay, thanks for the input, guys.  I've got the time to wait but don't think this customer would.  So, all things considered; think I'll try to reconstruct.  Appreciate your thoughts.

I make it a practice to review any open year tax return of a new client.  That includes reviewing the information used to prepare schedule C, E or F and related depreciation which has resulted in a number of 1040X's.

For this  fly-by-night prepared return you might dig up some treasures or unearth some land mines.

On 6/3/2019 at 1:18 PM, Possi said:

My client purchased a new "whole house generator" for $8500, and soon thereafter had to replace his HVAC for $7000.00.

Must I depreciate both of these items over 39 years, as is the child-care home office depreciation schedule? 

Thanks! I can't find this specific answer anywhere! 

The courts have held HVAC as personal property in cases where the primary purpose is to maintain the proper temperature and humidity of equipment.  

Such as in the case of Piggly Wiggly v Com. where primary purpose of HVAC was to meets the needs of refrigeration equipment instead of the comfort of customers and employees.

22 hours ago, Margaret CPA in OH said:

I'm pretty sure the income would be construed as gifts and not taxable  and also not deductible by any donor. 

I agree since they were made out of generosity and without full and adequate consideration.  Also not taxable as prizes, awards..

22 hours ago, Margaret CPA in OH said:

  Employer of daughter donated restaurant profits from that evening

When a gift is received from employer there can arise the question of wages or bonus.  But in this situation the money was clearly given out of generosity and not for compensation.

On 5/29/2019 at 7:16 PM, Edsel said:

Something else to think about, and it's not very professional.  I often wonder what an auditor would do

I don't see anything inappropriate with that.  When working in a gray area where the IRS might take a different view I think it is a good idea to estimate what an adverse ruling might  cost the client.  

If I am reading your last post correctly, it looks like you are taking a conservative approach by valuing the 1245 stuff at cost, so the maximum recap will be depr. allowed /allowable.

In regards to the H2O heater example above,  even though the asset might not have any salvage value,  it does have value to the buyer of the building.  While that value might not be  much by itself, accumulated with other items the value can be significant.  For example, say there are two equal buildings for sale except one needs a whole bunch of fixtures etc replaced. 

The building that has all the fixtures working is going to have more value even if they are fully depreciated, vs the building that needs thousands of dollars of new stuff to make it usable. That extra value comes from those depreciated assets.  I would not let the finger point at me when the question arises as to how the assets were given a zero value.

Now getting back to your question as to what the auditor is going to say.  That would depend on fact and circumstances and potential understatement of income.  The IRS will bring in their own experts when feasible as we see in tax court cases.

I see problems with allocating all assets based on original cost.

First of all, while the value of the real estate has more than doubled, the value of the other assets have most likely decreased.  Because of that, your client will end up with overstated 1245 gains and understated 1250 gains; to his disadvantage.

The question is how much is it worth to find the fmv of the personal assets?  If an appraisal is not feasible then work with the client to come up with values.  I am cautious as an accountant to never put on an appraiser's hat but will use my judgment on what is reasonable.

You can't have the best of both worlds. Since you depreciated as 1245 you recapture as 1245.

You allocated based on fmv.

5 hours ago, SaraEA said:

Sounds like the father has constructive ownership, and it seems like he has US income too.

On 5/19/2019 at 5:09 PM, GingerM said:

. I believe my client needs to report as a rental on his tax return. Am I correct?

 SaraEA got me back on track, I think you could have a strong case that father has equitable ownership and your client would not report rental income.

Case law has allowed taxpayers without legal ownership to deduct interest and property tax as equitable owners.  Now flip it over and use the same argument that the legal owner is not the equitable owner and therefore not required to report the income.

For example, look at TC MEMO 1997-551 and put your client in the place of the legal owner in the case. The case involved an unrecorded quit claim, if your client goes a step farther and records a quit claim deed it would help wash his hands of equitable ownership and pass it on to father.

I would work with a trusted real estate attorney to address the equitable ownership issue.

Then going forward, look at how  equitable ownership is applied to a residence converted to rental in TC SUMMARY 2008-84.

If father is not your client, then his United States income is not your concern, although it would not hurt if you were involved to see that it was properly reported.

I would also look to see how much extra tax your client would have if income and expenses were reported by him if and if worth the trouble of doing otherwise.

In regards to gift from a foreign country, although form 709 might not be required,  I believe your client would report on form 3520 any foreign gift received over $100,000.

17 minutes ago, grandmabee said:

or you could post on line 21 as" prior business expense" as a negative number.

Since it is a business expense, why not report on C where it would also factor into calculation of earned income,.. SE income... etc if any?

7 hours ago, Evan S. Golar said:

Why not have the client ask the prior preparer where the amount came from? On what basis was it put into the tax return?

Agree, client should get asset detail.  Sounds like preparer mistake, maybe put in wrong date asset was placed in service.

6 hours ago, Lion EA said:

So father "rents" home from son for mortgage payment cost only, so probably less than FMR. Then father sublets home on the open market.

Lion EA, I read this as an "assignment of income doctrine" issue vs sublease where father collects rent from unrelated tenant and turns it over to son (legal owner of property) to make payments.  Does dad even touch the rent or does son collect and make the payment?  Agree legal input is needed to sort this out.

Phase one of the arrangement is grayer where dad was 'gifting" payments in return for college student to live in the house.  Maybe not a gift since dad received a place for his son to live in exchange for providing cash to make payments.

On the other hand, if dad had bought the house and kept  client out of the transaction , there would be no tax consequence of allowing college age son to live there

16 minutes ago, DANRVAN said:

deduct interest and property tax

and depreciation.

3 hours ago, GingerM said:

The home was purchased as an investment and a place for his other son to live in while attending college and did not charge his son rent. He began renting it to an unrelated party. It is difficult to have a mortgage on real estate in the US when you are not a resident alien. That is why the loan and deed are in my client's name.

Sounds like your client is the owner and will need to report the rental income and deduct interest and property tax.  If the house is sold he will also have to report the sale since dad is not on the title.

Maybe dad will reimburse for resulting income taxes.

4 hours ago, scottmcfly said:

None of those expenses are ordinary and necessary in relation to being a financial consultant.  And moving expenses were eliminated by TCJA so my opinion is no. Apartment broker fee is a personal expense.

Agree, moving expenses for self-employed would have been deducted on form 3903; suspended by TCJA.  Broker fee is not a moving expense.

3 minutes ago, GingerM said:

Father has never lived in the home but his other son has. Buying real estate in the US with a mortgage is difficult when not a US citizen. I will ask about the quit claim deed.

Maybe some legal advice is needed.

Sounds to me like client is the owner of home purchased with gifted money.  Maybe intent was to someday quit claim deed to father?  Is father now living in house and covering  mortgage?

On 5/17/2019 at 3:12 PM, Edsel said:

Will this raise eyebrows??

Sounds to me like you have an ordinary and necessary business expense that will be paid after the business discontinues operations.  Deductible in year paid by cash basis taxpayer regardless of raising eyebrows.  

6 hours ago, BulldogTom said:

So now the question is how to make this happen in the ATX software.   

Any suggestions?

I have not dealt with this issue but it looks to me like you report wages on line 1 to include as earned income and subtract on line 21 to exclude from taxable income.

However,  IRS might revoke notice 2017-7 to eliminate the double tax benefit that they argued against in Feigh v C.

The court firmly held that that the IRS does not have the authority to deny EIC to the payments IRS excluded under Notice 2017-7.  The judge was critical of the IRS in it's drafting of Notice 2017-7.  The judge stated that Notice 2017-7 contradicted previous court ruling.

While it appears to me that the IRS has no grounds to appeal the Feigh case, it may very well follow the advice hinted by the court and rethink Notice 2017-7.  As the court clearly pointed out the IRS created the double tax advantage and it would be up the IRS fix it.

As far as amending returns to pick up EIC while excluding the payments, as of today that appears to be the law of the land.

The IRS can not take collection activity on the individual mandate penalty,  but as Max pointed out that has nothing to do with repayment of PTC.

In order to petition the tax court, you will need to dispute a notice of deficiency or determination.  It sounds like you have not got to that point and  are still in a cat and mouse game.

When you get to that point, the case is assigned to an appeals officer.  You do not need to be "admitted to practice before the tax court" to deal with the appeals officer.  I dealt with one a couple years ago.  Case was resolved in taxpayer's favor within 6 months of filing petition following several correspondence and final telephone conference.

8 hours ago, Edsel said:

IRS has completely botched up beyond recognition my taxpayer's 2014 and 2016 returns.  I have already charged the taxpayer $1200 in writing letters, telephone, and other attempts to fix the problem, which was created and perpetuated by the IRS.  They have been sitting on some $15,000 in refunds for those two years.  I have not been successful in drawing any more attention to this by the IRS.

Could you give some  detail?  How did the IRS botch those returns? 

8 hours ago, Edsel said:

What I propose doing:  File the taxpayer's 2018 return, showing the $15,000 as an estimated payment for 2018.  When the IRS figures out it hasn't been paid in, they will create a form letter, and this will draw attention to the problem.  Hopefully, someone will revisit the 2014-16 mess and straighten it out.

That might just create another letter and another problem, besides an inaccurate tax return.

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What I really did not catch was the need for immediate action vs long term resolution, which is beyond PPL.