DANRVAN

So you are probably dealing with this after the fact, but how did they determine the allocation of the proceeds with out a valuation of the remainder interest? Since the property was deeded with a life estate there was an uncompleted gift. Maybe a partial gift has now been made.

In a liquidation of partner interest, partnership would record payments as non deductible distributions or as guaranteed payments as agreed upon. Partnership would not incur a loss.

David, it looks to me like this situation is a case where partner A buys out partner C based on the fact that A put up the money in order to obtain a 2/3 partnership interest. If that is the case, the transaction should be recorded as purchase from partner to partner rather than a liquidation of partner C's interest by the partnership and the two remaining partners would have 50/50 ownership. Although the transaction should have taken place outside the partnership, the partnership in effect acted as a facilitator by taking the money from A and passing it to to C, the financial position of the company did not change as a result. Record the $18,000 check from A as a credit to an account such as "Payable to C from sale of Capital to A". Then debit same account when company writes check to C which will zero that account out. Final entry will debit Capital-C and credit Capital-A for $6,000 which will be reported as distribution on K-1. If on the other hand, the partnership was liquidating the interest of partner C, you would need to allocate the $18,000 between 736(a) and 736(b) payments. Basically, 736(b) payments are made for the fmv of the partnership interest and are recorded as a distribution by the partnership and reported as capital gain by partner of amount in excess of basis. The 736(a) payments are usually treated as guaranteed payments taxable as SE to partner. In professional firms there is usually an agreement which spells out how the payments will be allocated to the retiring partner between 736(a) and 736(b) payments.

So how are the sales proceeds divided between mom and children? Are children on deed along with mom as having life estate?

Does mom still live in house? Will mom continue to live in house after sold? To unrelated party?

So COOP has a fiscal year beginning in 2017, for example July 1 2017 and ending on June 30 2018. Assume farmer sold $800,000 of milk in 2018, $400,000 before and after July 1. So coop is including DPAD on 1099 PATR based on fiscal year milk purchased from farmer including $400,000 in 2018? Will coop also elect to include milk sales for purposes of 199-A for year ending 6/30/2019? If not, then I believe farmer could include the remaining $400,000 as QBI for 2018 and include related deductions determined under a "reasonable method." In regards to the calf sales and other income unrelated to coop sales, you would include as QBI and also allocate deductions related to those activities as determined by a 'reasonable method".

There are two possible ways the termination of the partner's interest can be treated: as a purchase by one or more remaining partner or as a liquidation of the partner's interest. In either case a section 754 election should be considered. If treated as a purchase, the outgoing partner basically sells his interest to one or more remaining partner. Under the liquidation method the partnerships buys back the outgoing partner's interest. In this situation, it sounds like a partner put up $18,000 to purchase the interest of the out going partner so you should consider a 754 election and record accordingly.

Had other business to take care of along the way so that part would not be wasted. Congressman needs to hear how TJCA impacts his voters (and my clients) negatively, public forum is perfect setting.

Disagree

I was hoping to go to a near by town hall meeting today and express to congressman about negative impact of TCJA on clients, but won't be able to make the three hour round trip drive.

Not sure what you are asking, can't use both DPAD and QBID that I know of. DPAD is gone.

I think it has been clear from the get go that congress intended to include 1231 gains in section 199-A computation. The proposed regs contained some language that was intended to distinguish between 1231 and 1245 gains. However, some found that reference confusing so it was dropped in the final regs. As I read it, section 199-A includes all items of gain or loss attributed to the taxpayer's business except for capital gains or losses. Capital gains are not included since they receive tax preference outside of 199-A. The following is from page 56 of the recent IRS release: To avoid any unintended inferences, the final regulations remove the specific reference to section 1231 and provide that any item of short-term capital gain, shortterm capital loss, long-term capital gain, or long-term capital loss, including any item treated as one of such items under any other provision of the Code, is not taken into account as a qualified item of income, gain, deduction, or loss. To the extent an item is not treated as an item of capital gain or capital loss under any other provision of the Code, it is taken into account as a qualified item of income, gain, deduction, or loss unless otherwise excluded by section 199A or these regulations.

This document has been submitted to the Office of the Federal Register (OFR) for publication and is currently pending placement on public display at the OFR and publication in the Federal Register. The version of the final rule released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document. [4830-01-p] DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [Treasury Decision XXXX] RIN 1545-BO71 Qualified Business Income Deduction AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final Regulations. SUMMARY: This document contains final regulations concerning the deduction for qualified business income under section 199A of the Internal Revenue Code (Code). The regulations will affect individuals, partnerships, S corporations, trusts, and estates engaged in domestic trades or businesses. The regulations also contain an antiavoidance rule under section 643 of the Code to treat multiple trusts as a single trust in certain cases, which will affect trusts, their grantors, and beneficiaries. This document also requests additional comments on certain aspects of the deduction.

Decedents would get the step up in basis under the 1.1014-4 uniformity of basis rules. Looks like you have two choices, report by estate and k-1 sons, or report on 1041 and back out since the property actually belonged to son at time of sale.

Marie is correct, CRP payments are included on F but excluded on SE. Other ag payments not excluded from SE.

go for it

I have won a similar situation on appeal by proving dependents spent the most nights with my client. Final document to appeal officer was 33 pages. If you get to that point I will gladly help you organize for appeal.

Does this activity rise to the level of a trade or business under sect 162? Also advice the kid not to go over the threshold for SSTB exclusion!

So instead of reporting $1.5m as income from crops he is reporting as crop insurance income? Then why not? Was the payment for damages to trees or vines instead of the actual crops?

per final reg: (xiv) Meaning of trade or business where the principal asset of such trade or business is the reputation or skill of one or more employees or owners. For purposes of section 199A(d)(2) and paragraph (b)(1)(xiii) of this section only, the term any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners means any trade or business that consists of any of the following (or any combination thereof): (A) A trade or business in which a person receives fees, compensation, or other income for endorsing products or services, (B) A trade or business in which a person licenses or receives fees, compensation, or other income for the use of an individual’s image, likeness, name, signature, voice, trademark, or any other symbols associated with the individual’s identity, (C) Receiving fees, compensation, or other income for appearing at an event or on radio, television, or another media format.

It's a waste of time to battle over 1099's. As JohnH suggested report the full amount and back out any excess.

And a windfall for those already invested.

Both the prop reg released in August and the final version released last week are well written and have excellent examples. I took the time a couple months ago to read through the proposed reg and work through the examples. Working through the examples was a great learning tool for me. The real meat of the final reg are the operational rules starting on page 156. There is a table of contents starting on page 151 which makes it easy to navigate through the operational rules.

Terry, The TCJA BLUE BOOK and the proposed reg specifically stated that sec 162 will be used in defining a trade or business. That was clarified by the final reg which specifically states on page 14 that section 469 will not be used. I would ask your CPE instructor where he came up with his 469 statement.

Judy I believe a partnership is a disregarded entity described in 301.7701-3. § 301.7701-3 Classification of certain business entities. (a)In general. A business entity that is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal taxpurposes as provided in this section. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or apartnership, and an eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.