DANRVAN

4 hours ago, jklcpa said:

Is the same true for those with rental real estate NOT relying on the safe harbor but that DOES qualify as a trade or business?  Do I have to have a signed statement attached?

Judy,  The  attachment referred to in Section 3.06 of Notice 2019-7 is specifically for the safe harbor.  If you are not relying on the safe harbor the attachment is not needed.

Actually, I don't think intent is a factor in this situation.  As long as the rental portion was never used as personal the conversion rule does not apply.

19 hours ago, cbslee said:

The Box 14 codes for the Oregon  Statewide Transit Tax are "STTW" for Statewide Transit Tax Wages

and "STTT" for Statewide Transit Tax Tax . I have seen a number of smaller businesses' W - 2's which show nothing in Box 14.

also big companies like Les Schwab Tire have ignored it. 

On 3/30/2019 at 1:01 PM, bbstacker said:

I appreciate your insight to the possible deduction.

The STTT tax is .1 % of wages paid after June 30 2018,  how does that compare to the amount shown in box 14?

As preparer you report it as is and let them hash it out.

agree

On 3/28/2019 at 11:23 AM, Margaret CPA in OH said:

I believe the value is going to be the fmv at time of rental being way lower than the costs.  An appraisal was done just prior to renting to

It depends.  If the intent from the beginning was to rent a portion of the building then I would say use cost basis.  Otherwise, if the intent was to use it as personal and later decided to rent it out, then the conversion rule of reg 1.168(i)-4 might apply.  

But in this case where the rental portion was never used for personal purposes I would use cost basis regardless of the appraisal.  Reg 1.168(i)-4 only apples when there is a change in use.

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.

3 hours ago, ode923 said:

 bought another $5,000 in tools/equipment. He wants me to depreciate it all.

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.

28 minutes ago, PapaJoe said:

I agree with Lion. I'd treat it as a reimbursement or offset to renovation cost which will reduce depreciable basis.

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

17 hours ago, ode923 said:

Thank you cbslee and DANRVAN. 

I have reluctance applying this grant as income on a Schedule E. On Schedule E you report rental income. The IRS defines rental income as:

1) Rent

2) Payments to cancel a lease

3) Expenses paid by tenant

4) Property or services received as rent

5) Security deposits kept if tenant doesn't live up to terms of the lease

That's it. 

In this case, it's a grant that was awarded to the client for revitalizing a dilapidated property that they rent out.

Farm Income (Schedule F) is far more broad and includes a whole bunch of possible categories. Schedule E is quite narrow in comparison--rents, and royalties, and that's about it.

Does that change your answer at all?

 

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.

17 hours ago, Lion EA said:

It still has to do with the rental. Does it subtract from the basis? Reimburse for renovation costs? Reimburse for repairs &/or maintenance. Is it a contra-account of an expense account? Would he have received the grant if he didn't rehabilitate the property on his Schedule E?

 I don't believe you could make a basis adjustment since there was not a disposition of property.

On 3/24/2019 at 8:18 PM, BLACK BART said:

That's a brilliant idea.  But...there's a setback.  Discussing it with my client, I realized that I had misunderstood him.

He was not interested in paying social security -- instead, he simply wanted to get the deduction for self-employed health insurance only.  I had previously advised

other landlords are clueless, my client's gullible, and I'm barring the door with ethics (likely known as "that tax guy who doesn't know what you can write off").   

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.

3 hours ago, Pacun said:

So, I am a student and for my birth day, I get a car. That's not support, that's a gift. 

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)?

On 3/14/2019 at 5:24 PM, GGRNY said:

 

 

1. Do you request to see the corporate (black) book when interviewing a new corporate client?
2. Do you verify the corporate details against what's on past corporate returns filed by another accountant?
3. When, or if, you incorporate a client, do you just send them off to legal zoom or a lawyer and leave it up to them the corp in order?  Do you ever check the book for accuracy?

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.

7 minutes ago, FDNY said:

I would save a copy of the 7004 to desktop then from e file tab select attach pdf then scroll to the state section and at the bottom click on paperclip "other" then find the saved desktop item and attach.

Worked great, thank you!!!

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

23 minutes ago, jasdlm said:

Do you think I should just apportion the sales price at the same percentage as the county appraisal and then take off $$ for a 1/2 acre of land (figured proportionately)?

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.

On 3/11/2019 at 8:14 PM, WITAXLADY said:

so this year - no AMT but what about the AMT from prior years - whenever I do a 8801 - it always shows -0- credit.. shouldn't they be able to get a credit for the AMT paid earlier?

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.

8 hours ago, DANRVAN said:

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.

 

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.