DANRVAN

Basically it works like this: Joe needs $100,000 to start a business, let's say to buy a franchise. He sets up a C corp. which initially has no assets. The corp. sets up a 401(k) plan which specifically allows the plan to invest in employer stock. Joe rolls over $100,000 from his retirements account to the 401(k) plan. The 401 purchases 100 shares of the corp. stock with a par value of $1,000. The corp. now has $100,000 available to purchase the franchise. Then after several years of losses as in the case of David's client, the corp. dissolves leaving the plan with the worthless stock of the corp. They have been around for awhile and are legit as long they are properly structured and executed. There are tax court rulings against some who were not. I mentioned franchise because some work with promoters to encourage ROBS.

Here is a link to a discussion of that issue. https://www.bna.com/require-continuous-health-n57982085507/

I agree with Tom and Rita there are cases where individuals might wait until they are sick to buy insurance, but I believe for most people it is a matter of economics. The problem I see with the surcharge is a one size fits all solution. Unlike the individual mandate, there are not exemptions for hardships like loss of employment. With the risk of sounding political while discussing potential financial impact on clients, I am surprised to see the surcharge as part of the AHCA proposal. As you might recall, the individual mandate was at the heart of the case before the supreme court to repeal the ACA in 2012. The argument was made that congress did not have the authority to impose the penalty. Chief Justice Roberts shot that argument down as he construed the "penalty" was in fact a "tax" imposed on those who do not have health insurance; and, since congress had the authority to impose a "tax", that made it OK. Now there is a proposed 30% penalty that is called a surcharge which will go into the pockets of insurance providers. So individuals who are struggling to get ahead enough to purchase insurance will have an additional 30% to pay for up to 12 months. However, it comes as no surprise that the health insurance industry is a strong supporter of the surcharge.

That was the law prior to 1999 (Soliman, supreme court 1993). Tax Relief Act of 1997 relaxed Code Sec. 280A(c)(1). : "For purposes of subparagraph (A) , the term “principal place of business” includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business."

David, The bottom line is that the plan ends up owning the worthless C corp stock. No tax consequence, except they won't have to worry about paying tax on the retirement money they otherwise would have received. By any chance did this corporation buy into a franchise? There are some out there that lure individuals to use a ROBS to buy in.

I don't thing you are crossing the political line Tom. The House version would remove the enforcement of health care cover off the shoulders of tax preparers. That is significant, but I won't make any comments on what I think is fair in regards to the surcharge.

I am aware of the process Judy. I write a weekly column and a lot of the readers are interested in hearing about what's going on in Washington as it relates to taxes and health care since the two have been so closely tied together. Some actually write to their congressman and attend town hall meetings.

Call it what you want. I am wasting my time responding to you.

https://www.govtrack.us/congress/bills/115/hr1628/text In digesting the text of the American Health Care Act passed by House of Representatives, I see that the individual mandate would be repealed retro to tax years beginning after 12/31/15 (section 205). However, section 133, "Continuous health insurance coverage incentive", would create a new penalty in the form of a 30% surcharge added to the cost of a policy for those who have previously been without insurance for 64 days or more. It appears the penalty would be calculated by multiplying the premium by the number uninsured months (not to exceed 12) times 30%. So for example if a married couple had a 12 month period in which they were not insured and their premium is going to be $1,000 per month; the surcharge would be 12*30%*$1,000=$3,600. It appears the surcharge would begin in the year 2019 and for "enrollments during a special enrollment period, beginning with plan year 2018". I am curious if anyone has a different interpretation or has seen a published analysis of it. Dan

You have three choices. 1. Write a letter to the issuer and point out the penalties under section 6721 for failure to file a correct 1099. 2. Follow the accountant's advice and wait for your client to receive a CP 2000 for you to respond to. 3. Report the incorrect amount and back it out of the tax return. For example, if the client is an independent contractor, report the correct amount on his schedule C. Then open up a second schedule C where you report the incorrect amount as income and as an other expense to zero it out. Option 1 will not only add cost to your client, but possibly ill will to one of his clients. Option 2 also adds extra cost and the potential coronary by your client when he receives the CP 2000. Option 3 allows you to file a correct tax return and disclose the incorrect 1099.

I don't believe there is individual ownership in a trust unless it is a REIT (real estate investment trust) which is a publicly traded investment. Do they really have a trust? Have you seen the trust document? Was the property titled to the trust? Assume there was a trust bank account which income was deposited to and expenses paid from. So if it truly is a trust, the purchase would be from the trust to the individual beneficiary. What happens next depends on the trust document. Most likely the trust will distribute the cash to the beneficiary's then income will be allocated on K-1. If the sole purpose of the trust was to hold the property until purchased by beneficiary, then trust language should call for termination at that point.

Good point.

No gain or loss on trade. Disregard the trade in value. Remaining basis of old is added to basis of new.

You can check the box on 1040x. It has two boxes, one for yes and one for no. A one sentence explanation as well might help.

Your role is to advise him on the tax consequences of the proposed transaction. Sounds like things might start moving fast and you should as well.

I am not on the hook for anything. My clients have the "right to remain silent" in regards to discloser of health coverage. Furthermore, the IRS will "ACCEPT" the return as being compete as a result of the executive order. Then, after accepting the return with out requiring the taxpayer to make a disclosure in regards to health care coverage, the IRS can certainly make a written inquiry but they cannot access any penalties for failure to check a box the taxpayer wasn't required to check. Also, under Code Sec. 5000A(g)(2) and Reg. § 1.5000A-5(b), a taxpayer is not subject to any criminal prosecution or penalty for failure to timely pay the individual mandate penalty, and IRS can’t file a notice of lien with respect to any property of a taxpayer because of his failure to pay the individual mandate penalty or levy on any property of a taxpayer with respect to that failure. But IRS may offset any liability for the shared responsibility payment against any overpayment due the taxpayer, in accordance with Code Sec. 6402(a) and its regs. And even if they do throw me in the slammer, I am not the least bit concerned since I made a pact with Rita and she will bust me out.

While the law concerning the SRP penalty has not changed, taxpayers are allowed to file without indicating whether or not they have coverage. That means a correct and accurate return can be filed without checking the box. The taxpayers need to know what their rights and possible consequences are. I have filed one that way after a thorough oral and written explanation I drafted was signed by the client. I can not force them to check a box they which they are not required to check.

Not clear what your question is. Sounds like you are wondering if it is okay to file the 2016 and claim the activity as a business while the activity has been reclassified as a hobby during audit of previous years?

It depends on the facts and circumstances. The courts have based decisions on how active the landlord is in managing the property., For example in DURBIN, the land was farmed by sharecropper but court found landlord exercised no personal control or management of the farm land. Therefore held land was not used in trade or business so ruled it was a capital loss. On the other hand, in GOOD, court found landlord was active in management of property leased to shareholder and therefore used in a trade or business. In that case an ordinary loss was allowed.

Sounds like you are on the right track. I don't think I saw your question posted. If beginning A/R was $10,000 and beginning A/P was $6,000, you would have a positive adjustment of $4,000. Hope that helps.

No, as my dad used to say the only stupid question was the one that was never asked. Per Section 642(c), the charitable contribution is only allowed to the extent of income and as directed by the governing instrument. So the excess is a distribution of corpus that is deducted on form 706. I am not sure what your asking about waste. You could deduct the admin expense of the estate on 706 and take more charitable on the 1041, but I believe it would all wash out the same.

A letter from the school won't cut it. She needs attendance records.

Did someone else claim the kids? Sounds like you are headed towards an appeal.

Budget cuts have limited the resources of IRS to provide "customer service". Don't expect it to get better anytime soon.

It's sounds to me like you are handling this in a prudent and professional manner. I see no compelling reason why you should "Fire" her. Regardless of what you know about her ex husband's intent, you should determine if she is entitled to claim any of the dependents. That is your responsibility and maybe was overlooked before her return was completed. You do not want to be in a position of allowing her to claim any of the dependents (or related credits) and then have them disallowed after the refund check is spent. In regards to your concern about preparing ex husband's return, see section 10.29 (authority for circular 230) for what is allowable when you have conflict of interest, esp.(b)(3). You might not even have one. Conflict of interest is more of an issue during the divorce process. Here are a couple of articles you might want to look at: https://www.aicpastore.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2010/Wealth/DivorcingClients.jsp http://www.thetaxadviser.com/issues/2011/nov/tpr-nov11.html I have some excellent CPE material on this subject but unable to post a link. You are the best judge of this situation and should follow your instinct and professional judgment. As the AICPA article implies, why "fire" a loyal client who seeks your trusted advice unless there is some compelling reason to do so. ************************************************************* § 10.29 Conflicting interests. (a) Except as provided by paragraph (b) of this section, a practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest. A conflict of interest exists if - (1) The representation of one client will be directly adverse to another client; or (2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner. (b) Notwithstanding the existence of a conflict of interest under paragraph (a) of this section, the practitioner may represent a client if - (1) The practitioner reasonably believes that the practitioner will be able to provide competent and diligent representation to each affected client; (2) The representation is not prohibited by law; and (3) Each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the practitioner. The confirmation may be made within a reasonable period after the informed consent, but in no event later than 30 days. (c) Copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients, and the written consents must be provided to any officer or employee of the Internal Revenue Service on request.