DANRVAN

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.

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.

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!

Agree, 1031 basics.

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.

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.

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!

I am not sure what your question is Deb. Are you asking if the dependent exemption provision of the divorce agreement is still valid?

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.

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.

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.

I believe the correct way is to file one 1040x. Show the combined amounts for both original returns in the first column. The amount of refund or amount due will net out from the differences. Attach a copy of both original returns and a spread sheet that shows the combined amounts reported in the first column of 1040x.

If you are using the fixed assets module of ATX it will ask you what type of disposition so you choose installment sale. Works the same if "bulk" sale. For most of my clients I use a depreciation schedule outside of ATX so I just go straight to the input sheet for form 6252.

A charge from a card with a "bipartate" agreement is never currently deductible because it does not involve a third party as in the case of a" tripartate" agreement. This is supported by years of case law, why are you still digging?

Well it could fall under an accountable plan, but it would net out the same on Schedule C.

I don't think that makes any difference. Case law has established a general rule that an expense charged to a credit card is treated as paid with borrowed money. Rev rul 78-38; Granan v. Com; and other cases confirm this. Your client is borrowing from Citibank to pay Home Depot so go ahead and take the deduction.

He must issue 1099 misc if paid "cash" to individual who is in the business of catching fish.

I would not. Consignors are selling goods, not services. Actually the shop owner is the one providing the service. Filing unneeded 1099's can cause recipients headaches and issuer extra cost of preparing them. On second thought, there is one situation I am aware of where 1099-misc is issued for purchase of goods. If taxpayer is in the business of buying fish for resale.

Depends on how the timber was treated on the tax return. If treated as ordinary income then DPAD. However if treated as capital gain, such as in the case of a Section 631(a) election, then considered sale of real property and not a DPAD.

Well first of all extension until you get time to sort this out. You are doubting depreciation schedules, so is this client new to you? Offhand I can't think of anything your missing, but then again it's past my bedtime. How about schedule J, farm income averaging? The sale of farm equipment qualifies as elected farm income. Schedule J helps if taxpayer was in lower tax bracket in 3 previous years.

There are two things to keep in mind. For the first year the estate can chose a short year for any number of months it choses. Secondly, the estate can adopt an accrual method of accounting. Those are powerful tools in timing income, expenses, and distributions to beneficiaries!

Even if you did make it final, and it turns out not to be final, the IRS will still except a 2018 return.

That doesn't make any difference. The LLC is a disregarded entity for tax purposes. They don't become personal assets unless they are used as such, otherwise loss allowed on 4797.

From what I understand you are saying, I would file 1041 which reports the 1099 amount on Schedule E and then back to out as other expense with an appropriate title.

I don't follow what you are saying Sara. As I see it, he will not get the benefit of the depreciation which lowered his basis and increased gain unless he takes the 481(a) adjustment. The suspended losses recognized In the year of sale will not reflect the allowed depreciation. So how will he offset the increased gain from the allowable depreciation?