DANRVAN

Thank you for your response Pacun. I found some case law that supports the argument for temporary absence for the boyfriend. My big concern is to get over the hurtle of resident alien which is new to me. Looks like "The Substantial Presence Test" will be met.

This is new one for me and would appreciate your input. Taxpayer is in US under DACA (C33). She has SS# and works at bank. I believe she would qualify for EIC under the Substantial Presence Test since she has been in US for over three years. She has 2 sons, one born in the US and one born before she came here, they both have SS numbers. Boy friend (also client) is the father and they have lived together except while he was detained by immigration for over 6 months in 2017, then went back to work. He made $16,000 and she made $23,000. The want to file to maximize tax benefits. In this case, it appears she can file as HHH, claim 2 dependents, EIC, CTC and credit for child care while he will file single. Can anyone see if I am overlooking anything? Thanks.

The client needs an attorney who is experienced in this matter. Reg 1.170A-14 is a good source for the qualifications. Also if client is a qualified farmer or rancher per sect 2032A(e)(5) he might be able to deduct up to 100% of his contribution base.

You just input the cost of sale on line 1b of Schedule F, there is nowhere to input the beginning and ending inventory.

That sounds right.

Depends. If there is stored wheat or calves raised by the farmer they would be a section 481(a) adjustment. If there are calves purchased for resale he would continue to treat as inventory under the cash method.

In some cases, I have prepared both the 1065 and 706. In other cases there was no 706 to file. In any case, the preparer needs to ensure that the estate is informed of the election and how it works. In regards to the depreciation aspect, I would never trust ATX. I use a separate depreciation program and input back into tax program.

That would be true if he was required to report at office by employer or actually did some work there. The only other way to deduct would be if he was temporarily working outside his "metro" area.

In my opinion, any tax preparer who does not understand the concept and importance of maintaining both inside and outside partnership basis should stay clear of preparing 1065's. A missed 754 election can be costly to the client and leave the door of litigation open to the preparer. However, there is relief. First automatic relief may be available under Regs. Sec. 301.9100-2. Under this regulation, a taxpayer is granted an automatic extension of 12 months. If that time period has passed then the only recourse is to seek relief under Regs. Sec. 301.9100-3 as a PLR. In that case, the tax payer must have reasonably relied on a qualified tax professional and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will not be considered to have reasonably relied on a qualified tax professional if the taxpayer knew, or should have known, that (1) the professional was not competent to render advice on the regulatory election, or (2) the professional was not aware of all relevant facts.

The additional standard deduction for the elderly and the blind has not changed. The House bill would have eliminated it, but the Senate amendment and Conference agreement saved it.

Look at the sect. 163(j)(7)(A). Also, per section 163(j)(7)(A)(ii). an "electing real property trade or business" is not considered a "trade of business" for the interest expense limitation. An "electing real property trade or business" is one that is described in sect. 469(c)(7)(C) as a real estate prof. and makes an irrevocable election to use ADS. So as with the new section 199A deduction, it looks to me that case law and sect. 469(c)(7)(C) will determine whether a real estate rental is a trade of business in regards to the business interest expense limit, unless we hear otherwise from a rev. ruling or tech. corrections.

The code uses the terms "paid to" and "payment...to". Therefore if there were no payments made, then I don't see any reasonable compensation paid in respect to 199A.

I don't see how reasonable compensation could be attributed to an amount which never drawn out by the sole proprietor. Also, in regards to a partnership in which a partner never took out any guaranteed payments or draws, I don't see where 199A (c)(4) would come into play at this point.

No. Actually It is an unrecaptured section 1250 gain that is taxed at a maximum "capital gains" rate of 25%.

In general, I don't believe real estate rentals will qualify unless the taxpayer can rise to the level of a real estate professional. Otherwise they do not meet the trade or business requirement of section 199A. Since "trade of business" is not further defined by TCJA or 199A, case law will prevail in definition. On the other hand, in regards to the business interest limitation, both the TCJA and revised code 163(j) specifically refer to section 469(c)(7)(C) in defining real estate professionals who are exempt from the limitation as a trade or business. So it appears to me that any rental activity that can clear the 469(c)(7)(C) hurdle gets the 199A deduction.

The bill and code don't clearly define trade or business. As I understand it, in the final negotiations, congress extended deduction to include rentals to gain support of the bill by a couple of hold outs (who just happened to be owners of rental property). Per section 199A (d) (1) In general. The term “qualified trade or business” means any trade or business other than— (A) a specified service trade or business, or (B) the trade or business of performing services as an employee

For sure.

Need to put emphasis on "should be" or change to "might be". 199A (c)(4) specifically refers to " reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business" and guaranteed payments. However, it is possible reg's or technical correction could extend that to include draws by sole proprietor in amount considered reasonable compensation.

First of all, stay away from giving any advice in regards to corporation vs LLC, that is legal advice for lawyers to handle. LLC'S are a creature of state law and have nothing to do with tax law. It looks to me like he should file as sole proprietor, Schedule C. The income would then be taxed at 24% vs 22% at the corporate level according the information in your post. Even if he goes with C. corp, he will need to pay a reasonable salary which will come back to him at 24%. A reasonable salary would probable eat up most of the $30,000 profit anyway. Also, as a sole proprietor, he should be eligible for the new section 199A deduction. As I read the code, a sole proprietor is not required to reduce Qualified Business Income by a reasonable salary. Also, per 199A (d)(3), he should fall below the threshold amount for service income.

The change in bonus depreciation allows for 100% deduction of new or used qualified property placed in service after September 27 2017. Not a big deal for equipment but allows property such as land improvements and farm buildings to be wrote off 100%.

That appears to be the case under section 199A(c) as added by the tax reform act of 2017.

My clients have been advised in writing. They have also been advised they are not required to check the box due to an executive order and IRS notice. (for further discussion see the thread on this forum "What's the latest on the silent tax return regarding health insurance". It looks like the executive order providing relief from the health care coverage penalty is not only executive order the IRS is taking seriously (per Notice 2017-38, 2017-30 IRB, 07/07/2017, IRC Sec(s). 7805.). I am hearing complaints from taxpayers who were not informed of their options under the executive order providing relief from the health care penalty.

(retracted my response)

Partnership is terminated. Remaining partner becomes a sole proprietor. For details see Rev. Rul. 99-6, 1999-1 CB 432, 1/15/1999, IRC Sec(s). 708.

Are you sure he is allowed to make a partial donation of his partnership interest? I think you will find that restriction deep within the bowels of section 170. I don't have time to look it up, headed out the door.