DANRVAN

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?

I agree, it was a gift. Distribution taxable to him under constructive income doctrine.

Sounds to me like the partnership was dissolved on 7/13 and your client received all the assets in a liquidating distribution. Then he contributed those assets to S. Corp.

You elect the a 12/31 year end by filing the return with a 12/31 year end date. In fact, for the fist year, you can chose any short period less than 12 months, that is powerful planning tool that can be used for timing income and expenses of the estate and distributions to the beneficiaries. Another planning consideration is the option to choose an accrual accounting method. Good luck.

I agree.

Catherine I don't think it would be a 481(a) adjustment on form 3115 which allows the taxpayer to switch from an impermissible method of depreciation to a permissible method. That would involve changing to a correct method (such as straight line); changing to a correct convention; or changing to a correct recovery period (such as for property that was never placed in service). In the case of a rental that had never been depreciated, you are changing from an incorrect recovery period of zero years to a correct period of 27.5 years. In the case of property that was undervalued you aren't changing from a impermissible method to a permissible method of depreciation. I don't know of any other section of form 3115 where that would fit in.

That crossed my mind, but off the top of my head I am not sure if a change in valuation is considered a change in accounting method as would be the case if the property was never depreciated.

That might depend on the facts Cathy which have not been revealed to us in this post. The consistent basis rules would apply if a federal or state inheritance tax return is filed. If that was the case an amended 706 is possible; if worth the trouble. If no 706 filed then the consistent basis rule is not a problem. So where in the tax code does it say the return prepared in the year property was placed in service cannot be amended to recognize the fair market value? Just shooting of the top of my head here....so then why can't taxpayer amend subsequent returns (maybe forfeiting refunds in closed years) to bring accum. depr. on FMV up to date? Tax law says basis = FMV. Tax law is not tied to probate law. I can't think of any reason why returns could not be amended if beneficial to your client in the long run.

I have some situations where I had to override the form to make it work.

Still not clear what the issue is. (I overlooked fact that this is inherited property in your OP). Your concern is about depreciation of inherited property that is about to go on the market? So basis was estimated on sale of neighbor's property and depreciation was taken. Sounds like a 706 was not filed or required?

I disagree. You can amend a return after 3 years but you can't claim a refund.

That is not true. If a section 2032A election is made for estate tax purposes then the heirs use that same basis. There is no exception under the consistent treatment rules of section 1014(f) or prop. reg. 1.1014.10.

They will have a two part basis. First the 1/3 basis of the property distributed from the partnership. Plus the purchase price of the other 2/3.

What is being appraised and for what purpose (depreciation, donation)?

From what you are saying, the transaction happened outside the partnership; the exchange is between the siblings. The partnership did not or will not receive payments from purchasing sibling. That sounds like a case where you could treat the property as a distribution of undivided interest to three siblings. Then report the sale of property from 2 siblings to 1 because that is what effectively happened. Then there is no gain to report at partnership level and none to allocate to partners.

Have you seen the sales agreement David? Is the partnership listed as the seller? I don't see any other way than to allocate the gain according to each partner's share if the partnership received a check and/ or note for the sale price. How did the partnership acquire the property? Are you the preparer for the partnership and the partners?

Maybe property could have been distributed to three partners with undivided interest. Then purchasing partner buys interest of the other two. Section 704(c) could still be lurking.

Maybe that could have been avoided if the sale had been structured differently. However this sounds like a done deal and now your picking up the pieces in order to file the tax return. Maybe it's not to late to remedy the situation if all the partners are on board.

Why? David indicated it was an outright sale of partnership property to a "purchasing member" at what sounds like fair market value. Maybe I am missing something, but why would that be treated a partial distribution instead of a legit sale? David also indicated the purchasing member will remain a partner in the partnership which will continue renting other property. So unless there is a 704(c) issue related to contributed property, then why would you not treat is as a sale from partnership to partner and allocated gain 1/3 each?

If the payment is really alimony then client needs to report it as such. Also report and back out of C to prevent the IRS letter. You can spend a lot of time and money trying to get ex to correct it.

Terry it looks like you have proof of the actual basis, so why not go back and amend 2016? In regards to the uncollected $3,000, he can not write if off since it was a capital contribution and not a loan. Smells like a lot of bad blood developed in the deal, were they friends to start with?

Qualified education expenses paid by a 3rd party for the dependent of a taxpayer are considered paid by the taxpayer.