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DANRVAN

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Everything posted by DANRVAN

  1. Terry, if your decision is to treat this as personal use property I disagree. Did the heir use it for personal use or entertainment? I would treat it in the same manner as a personal residence that was inherited and put on the market without being used personally or as a rental. It has been held by case law that type of property is investment property.
  2. I have dealt with that situation. The cost of logging can take a out a huge chunk of change when timber is in rugged terrain and a long haul from the mill. In reality, the heir has no economic loss for netting less than the standing value on date of death due to logging cost.
  3. 1 year rule is under section 1014(e). That basically applies where property is gifted to donee and then donee bequest back to donor. That prevents the donor from receiving stepped up basis through death of donee. Section 2035(a) requires certain assets transferred within three years of death to be included in estate. Those assets include certain transfers with retained life estate, revocable transfers and certain transfers of life insurance policies.
  4. You inherit stock. If you inherit controlling interest you are entitled to all the Big Macs you can eat for life.
  5. When the estate passes the property to the heir you follow uniformity of basis rule (treas. reg 1.1014-4). FMV and basis of decedent are not factors.
  6. If you are a sole proprietor your business assets go into your estate and get a step up basis.
  7. Thank you Jack and Judy!
  8. Is 2015 open for e-file or is it just 2016 and 2017? Thanks, Dan
  9. Yes, that is what has been suggested, but there is no reason to issue 1099's from trust to beni's.
  10. No, all decedent's assets go into estate on date of death.
  11. Even though the trust was not closed out, the property was transferred out of the trust so the income and expenses go to the beni's per the assignment of income doctrine.
  12. Mostly agree with you Judy but the expenses paid after transfer would not be treated as distribution if paid from rent that was received after transfer. In this situation, the trust collected rent and paid expenses on behalf of beni's. So anything paid out of rent earned by beneficiary's would not really be a distribution from the trust assets. Also I question whether 1099 from trust is appropriate. I would advise trustee to furnish beni's with a statement showing their share of rent and expenses including mortgage interest that flowed through the trust bank account. Also provide beni's with information on their share of basis on date of transfer per treas. reg 1.1014-4 (Uniformity of basis).
  13. I overlooked that part as the real issue here was how to report the income and expense after transfer.
  14. The amount paid back is not taxable regardless of what SSA reports. Code Sec. 86(d)(2)(A).
  15. I agree with Abby Normal. After the house was transferred to beni's the income and expenses are theirs, including depreciation. The trust bank account in effect served as a conduit to collect rent and pay expenses for the joint owners.
  16. In above post I overlooked the fact that the truck was wrecked on DOD. Assume salvage value was $10,000 and S-corp receives $40,000 insurance claim. I believe the fmv of the stock on DOD would include the $40,000 insurance claim S-corp was entitled to, although not yet filed or determined. Therefore the basis of stock to estate would be $50,000 ($10,000 + $40,000) in this example. So estate would also report $50,000 gain from K-1 on disposal of asset and $50,000 loss from stock liquidation.
  17. 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. Here's how it works. Assume only asset is truck with fmv of $50,000 on DOD and fully depreciated. So basis of stock to estate is $50,000. Next truck is sold for $50,000 so gain of $50,000 is passed through to estate and increases basis of stock to $100,000 ($50,00 + $50,000) Then S-corp is liquidated in the same tax year and estate receives $50,000 for stock with basis of $100,000. So capital loss of $50,000. On tax return, estate reports capital gain of $50,000 and offsetting capital loss of $50,000. Hope this helps!
  18. As a foot note to my above post, the client is ultimately responsible for the estimate, that needs to be communicated and documented. Several years ago I had a new client who had sold some timber on his ranch. Previous CPA had deducted a generous basis from timber sold on a prior tax return, so I asked for calculation of his basis. Turns out prior CPA must have looked up to the ceiling and pulled out a number. The ranch had been gifted through multiple generations for over a century so basis was basically zero.
  19. Sorry but I have to disagree with those three statements. The amount available to cut is not a factor. I have used standard growth rates and historical timber prices to determine basis in many situations, often with expertise of a professional forester. In the western united states, timber land is used for summer livestock grazing.
  20. Even thought you do not have exact measurements or values, I believe you can still make a reasonable estimate of the basis which the tax courts would allow under the Cohan Rule. First of all, we can assume that timber the was sold at FMV or less (most likely less which will make the estimate conservative). You need to determine three things: (1) price per mfb on date of death, (2)price per mfb date of sale, and (3) growth rate of the timber. For example assume the following (1)$300, (2) $250, and (3) 5%. (I am not familiar with walnut but would pick a growth rate on the high side to be conservative.) Estimated volume sold = $14,000 / $300 = 47 mfb (rounded). Working backwards with 5% growth rate estimated volume of the timber sold was 40 mbf on date if death. Estimated basis of timber = 40mfb * $250 = $10,000. Now you need to reduce the basis of the land by $10,000. Hope this helps!
  21. I am not sure what your question is Deb. Are you asking if the dependent exemption provision of the divorce agreement is still valid?
  22. The IRS letter specifically mentioned situations where the employee/contractor is performing different roles for the company. That makes sense. For example an individual might work as a employee during regular business hours and also have a part time janitorial business which contracts out to the same company after hours. On the other hand, Edsel stated that the individual would be performing the same duties as an employee and as a contractor. In my opinion, the answer is clearly no, he is either one or the other. Besides that, I believe your proposal is crossing the line of legal vs. tax advice. When the federal agency smells a rat guess who the client is going to point his finger at.
  23. Now that I have read the instructions it makes sense to put original numbers for husband in column A. Since column C contains the correct joint amounts, column B will net out as plug numbers. Those number will actually equal the amounts from the wife's original returns plus the difference between both original returns and the correct joint return. That is true since you are jumping from original filed by husband to correct joint filing, the difference will fall out in column B. I would still run the numbers on a spreadsheet to double check and to confirm the correct figures are on lines 16 through 22. So in Pacun's case, I would prepare a correct joint return and open 1040x. The correct amount will be in column C lines 1 -15. Then input the amount from original husband return in column A. Program will fill in Column B. The next step is to put in the combined amounts from the both original returns on line 16 and 18. The final step is to make sure the amount of refund or payment due nets out from the amounts on the corrected return and two original return.
  24. Okay, when all else fails follow the instructions. However the method I posted has worked for me in the past. It appears both methods yield the same numbers in columns B and C. In the method I used columns A and B net out to column C. Column C is the most important since that is the correct filing for the joint return. Also important are lines 20 - 22 which shows the adjusted amount due or refund to the client.
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