DANRVAN

As Judy stated, looks like their is some stepped up basis involved.

From what I can tell, the house was appraised at $450,000. Client did a partial sale of $400,000 and gift of $50,000. Results in gain of $25,000.

I am confused as to who is involved in this transaction? Client, son, ailing parent, community spouse, marital house? How much actual consideration did client receive for the house?

No, because he and the business are the same entity. LLC has no meaning for tax purposes.

Who had title to the car when it was taken to repair shop and who's name was on repair invoice?

What about SE tax if showing a profit? The right way is the only way.

In order to compute the basis of new truck you need to know how much compensation was given; down payment, loan...

I agree with Catherine, don't rely on software. You should understand NOL computation upside down and backwards before proceeding.

Not sure what your question is.

Hey that reminds me of a post a couple years ago where a member here was spotted in a photo while snoozing at a live seminar. Personally, I prefer webinars so I can snooze at my own desk.

It does not matter how decedent used the property. For example in Marx(5 TC 173) court determined a yacht willed from husband to wife was investment property where wife put it up for sale after death of husband and was loss was allowed. The fact that she never used it for personal use proved her profit motive under section 165(c)(2). In another case, Watkins (TC MEMO 1973-167) husband was willed personal residence from wife. The court ruled property was held for investment since heir / husband decided to put it up for sale within a week of wife's death. Therefore he proved his profit motive per section 165(c)(2). It did not matter that the house had been his residence while wife was alive. It also did not matter that he lived in it for a short period of time after it was bequeathed to him. What mattered was that he was able to prove his intent was to sale it and was allowed to deduct loss. So in the case of your client, it appears his thought was "heck I might as well sale this junk and make a little money off of it". There is your profit motive per section 165(c)(2).

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.

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.

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.

You inherit stock. If you inherit controlling interest you are entitled to all the Big Macs you can eat for life.

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.

If you are a sole proprietor your business assets go into your estate and get a step up basis.

Thank you Jack and Judy!

Is 2015 open for e-file or is it just 2016 and 2017? Thanks, Dan

Yes, that is what has been suggested, but there is no reason to issue 1099's from trust to beni's.

No, all decedent's assets go into estate on date of death.

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.

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).

I overlooked that part as the real issue here was how to report the income and expense after transfer.

The amount paid back is not taxable regardless of what SSA reports. Code Sec. 86(d)(2)(A).