DANRVAN

Oregon has adopted the Uniform Disposition of Community Property Rights Act which generally recognizes community property status for assets moved from other states unless the title or rights have been altered. If an estate attorney was involve he/she can tell you for sure. When residents of community property states move to Oregon they should consult with an estate attorney to ensure the status is maintained. A community property trust can be setup which allows assets to transfer with in the trust and maintain community property status.

Might be a job for attorney.

File an extension with a reasonable estimate payment if needed. Explain to client return is a mess and do what you can after April 15 as you need to dig up prior returns or transcripts.

To simplify this response, assume the equipment had a five year life using straight line depr. Also assume he bought the equipment at the start of the project which took one year to complete. The "otherwise allowable depreciation" under that assumption would be $5,000 divide by five = $1,000 which is added to the basis of the rental property. The $1,000 is lumped into the cost basis of the building which is depreciated out over 27.5 years once the building is place in service. So in effect, the annual depreciation from the equipment will be $1,000 divided by 27.5 = $36. The remaining basis in the equipment is $5,000 less $1,000 allocated to the building = $4,000. He cannot directly depreciate any of it. All he can do is allocate a portion to the rental basis. Does he also use these tools and equipment in his carpenter work? Maybe works as employee and lost out on misc itemized deduction? $36 a year is not worth messing with.

Do you have a cite to back that up? I think case law would prove otherwise off the top of my head.

It is an unique situation and although it would benefit the client by reporting on E, off the top of my head I can't think of any justification for reporting the grant as rent. My gut instinct was to report it on E since it was directly related to the rental activity, As far as that goes, If the grant had been made to remodel a barn, I would think twice about putting it on Schedule F subject to SE tax. No clear answer that I can see. I don't believe you could make a basis adjustment since there was not a disposition of property.

Show him that the deduction is allowed under sec 162(l)(1) only if the taxpayer has earned income per sec 401(c), as defined as self employment under sec 1402(a) which is subject to self employment tax under sec 1402(b)!!! That is how it works.

per Rev. Rul. 77-282, 1977-2 CB 52, IRC Sec(s). 152, "If the parent had purchased the automobile as a gift for the youth and registered title in the youth's name, the parent thereby would have provided support, and the support so provided would likewise be measured by the fair market value of the automobile and would be included in support for the year of the gift."

Since the grant is directly related to a real estate rental activity, then why not report it on Schedule E and deduct the related grant expenses? As cbslee pointed out, if it involved a farming operation it would go on Schedule F, so why not E (real estate professional or not)?

I believe it is important to verify the balance sheet numbers you will be going forward with when taking on a corp or partnership. Just recently I took on S-corp in which balance sheet was a mess. Had a note receivable that shareholder was unaware of and prior CPA had no documentation of. Also some prior AAA had been co-mingled with capital stock, and there was additional paid in capital that nobody could explain. Accrued payroll liabilities seemed high and it turned out they had made incorrect journal entries so the liability kept growing as they added another layer to it every year. This came from a firm that has a poor history of quality control. Preparer basically said that was the way she found it when turned over by retired partner. Client got over $5,000 of bogus deductions over the years. Back to your post, you raise some good questions but as others have mentioned do not cross the line of handing out legal advice. Also I would not recommend legal zoom over reference to a reputable attorney.

The S-corp stock will go to his estate which will get a stepped up basis for the value of stock on date of death. Basically estate will report a gain from sale of assets by S-corp and offsetting loss from liquidation of S-corp. These two transactions must take place in the same tax year.

Most AMT comes from exclusion items, meaning they are deductions not allowed. On the other hand, deferral items are timing differences like depreciation where you will eventually get the deduction.

Worked great, thank you!!!

Can someone refresh me on how to pdf 7004 and attach for state filing?

1/2 vs 5 acres depends on facts and circumstances. But with a barn claimed for depreciation........

You can't exclude any of the land that was used for farming, including the land which the barn sits on so you need to make a reasonable allocation. Was there an appraisal on the house? How does the appraisal compare to property tax statements? From what I have seen for property taxes there is usually about a half acre included with the house. Curious as to where the $50,000 basis for the barn came from.

Keep in mind the credit is only available for deferral items, so not all prior AMT is a available for the credit.

No, but that is an interesting situation. Actually the reporting methods described by reg 1.671-4 are optional, so I don't see any reason why a 1041 could not be filed to report the income if that is what the client really wants to do. But as you indicate, that mom as grantor is the payee, so you might have an issue under the assignment of income doctrine by issuing k-1 to child.

Please disregard that last part, I made an edit that did not get saved. It should flow through the form. If the credit c/f is on line 21, reg tax on line 22, and AMT of zero on line 23, credit should flow to line 25 of 8801 and to schedule 3 of 1040.

SaraEA is basically correct, that is the general rule under reg 1.671-4 as it relates to grantor trust. There are also two alternatives per the reg. The first is the most common in which the grantor provides his/her ss number to the payers so the 1099's are reported under their ss number instead of the trust id #. Secondly, the reg allows the trust to issue 1099's to the grantor instead of reporting on form 1041, thus eliminating the need to file form 1041. It is by the authority of the reg that the grantor is allowed to use his/her ss# for income reporting of the revocable trust income.

You apply the credit to the amount reg tax exceeds AMT....if reg tax is 12,000 and AMT is 10,000 then credit = 2,000. If zero AMT then zero credit.

I would input directly to the tax form instead of messing with the worksheet. You can usually override the entries.

So if father is married, there is 24,000 of standard deduction to apply. Also a portion of the gain would receive zero capital gains rate! Son should be informed of how much could be saved if he was to pay dad's taxes (which could be minimal) vs gifting stock and increasing his own liability; provided he has basis left in the loan to convert. Sounds like there is land owned by the corp that buyer is interested in, most likely would buy the land from the corp instead of buying the stock? Also consider dad's health and age. If there is appreciated property in the corp son could receive a stepped up basis in dad's share of stock.

Are there suspended losses? With the history of losses it seems son would have taken losses against his basis in the loan. How would the overall tax picture look if son paid dad's taxes instead of increasing his tax liability. Maybe keep son in lower tax bracket and make best use of dad's deductions? Also might eliminate the need for filing a 709.

Has the son's debt basis been reduced by pass-though losses? Is the potential buyer looking at buying the corporation or the assets of the corporation?