DANRVAN

I am not sure what you are saying here FDNY. But if you are saying the example in 25.2511-1 (h)(4) does not apply because an existing account was involved instead of a new account, then I disagree. The example given is just that; an example. Regardless of whether it was an existing account or a new account a completed gift has not occurred because donor has not relinquished control and no actual transfer has taken place between A and B. Since it is a joint account, "A" could draw out the entire amount, so then what happens to the 'gift" to B? It would be different if there was a transfer of an interest of real estate. In that case "B" would have title and right of ownership in his name. In the case of the joint bank account he has the ability to draw out the funds, but until that point, he does not have control over any given portion of the funds. On the other hand, "A" has does not give up anything until "B" draws the money out. Reg § 25.2511-2(b) discusses how control or reserve of control relates to gifting.

Clearly the equipment used for the catering and the area of the building used were placed in service as defined by the code as "The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function". The IRS is likely to argue that the rest is not ready and available due to the permit which has not been issued. Although specific to power plants, Rev-Rul 76-256 and PLR 14589-02 refer to the fact that all necessary permits and licenses were obtained at the time the assets were considered placed in service. The IRS might also argue the rest of the assets were not placed in service since the business was not open by the end of the year. A district court in Louisiana did rule otherwise in the case of Stine v the IRS (for what that is worth). So what is it worth to depreciate a portion of the building for a few days? Say you allocate 50% of $1 million, 39 years, mid month conv. = $534 by my calculation.

You mean only the client has access to the money and not the original account holder?

There is no gift until money is drawn out by the individual whose is name is placed on the account for his / her own personal use. So you can put kid's name on a million dollar account, but there is no reportable gift unless the kid draws out over $14,000 for his own use. See Reg. § 25.2511-1(h)(4).

Also adjust for depreciation allowed or allowable. Since this a farm, there are most likely depreciable assets. It is not clear if the brother was a life tenant of the farm or a beneficiary of the trust. If he was a life tenant, he would be allowed the depreciation per Section 1.167(h)-1. Then, after the farm reverts back to the trust, the adjusted basis of the assets in the hands of the brother would go to the trust per the Uniform Basis Rule of Section 1.1014-4.

Peace on Earth, and Goodwill to all on this board! Dan

I don't believe the issue here is how to report income from an incorrect 1099, I think we all know how to handle that in order to prevent a CP2000. The question I see is whether the IRS could use the assignment of income doctrine to tax the income at the individual level instead of at the corporate level. Case law says yes: unless there is a "contract or similar indicium recognizing the corporation's controlling position" between the corporation and the third party (Mary Kay). That is actually the 2nd step. The 1st step requires that the shareholder be a valid employee of the corporation and under control of the corporation. In the 8th circuit case of Haag v Com, Haag was a doctor who was a shareholder and employee of his corporation. Haag prevailed. First, there was an employment agreement between Haag and the corporation. Secondly, the court recognized agreements for services were effectively between the corporation and the third parties. In comparison, reference was made to the case of Roubic v Com in which a group of radiologist formed a corporation. In that case, the agreements with the third parties were held by the individual shareholders, so income was held to be that of the shareholder's, and not the corporation's. In another case, Sargent v Com, The 8th circuit court reversed a Tax Court ruling of assignment of income and Sargent prevailed. Sargent was a professional hockey player who set up a corporation. He entered into an employment agreement with the corporation. (step 1) The corporation in turn signed a contract with the team. (step two). The key is to obtain an employment contract as well as a contract (or similar indicium) which recognizes the corporation's controlling position. (See your business attorney for details.)

It is possible. Case law indicates a two part test must be met: "A two-part test must be satisfied before the corporation, rather than its service-performing agent or shareholder, will be considered to control the earning of the income. First, the service provider must be the employee of the corporation, whom the corporation has the right to direct and control in some meaningful sense. Second, there must exist between the corporation and the service recipient a contract or similar indicium recognizing the corporation's controlling position. Haag v. Commissioner, 88 T.C. 604, 611 (1987), affd. without published opinion 855 F.2d 855 (8th Cir. 1988); Johnson v. Commissioner, supra at 891; see also Leavell v. Commissioner, 104 T.C. 140, 151-152 (1995)."

I don't audit my new clients, but try to review their open year tax returns as part of my service to them. It gives me a better understanding of their situation and sometimes end up amending for a refund, most commonly in business returns. Omitted expenses are one example. If you put three year's of schedule C's side by side you can quickly see patterns and obvious omissions. Several years ago I amended a return for a rancher from Idaho who sold out and bought a smaller place nearby. The CPA in Idaho incorrectly calculated a multi asset 1031. He also failed to take section 179 in the year the client was in a high tax bracket due to the sale of his ranch. My guess was the CPA did not know that 1245 gains count as business income for the section 179 limits. He also overlooked the fact the client had omitted some obvious expenses on his quick books and their were miles of fence on the new property to write off. The 1040X netted a refund of $20,000 plus. Client had no problem paying me to "audit" his return.

That is correct, you cannot amend the original return to take the 454(a) election. However, since it is a regulatory election, section 9100 relief is possible, but probably not worth the price of a private letter ruling in this situation.

Don't worry about the 2015 1041 checked final. Report and file for 2016 and check final.

Your clients need to know if they are due a refund or face a potential tax liability. You are looking out for the interest of your new clients. If you are straight forward with them and sensitive to the situation (which you obviously are), they will respect you for it.

Have you tried webinars? I don't know about your state but they are counted as live courses by the Oregon Board of Accountancy. I currently subscribe to CPE Solutions and have subscribed to Checkpoint Learning in the past.

I don't see any problem with that. There are a lot of services that offer discounts to new subscribers that I have taken advantage of in the past.

I agree, it depends on the client. For example I recently had a very good longtime client who ran in to hard times both personally and in business. I was glad to help her out.

I agree, that is how I do it. However, there is another layer to this. That is the depreciation from the first of the year to date of death using the original basis and asset lives. Then from DOD on you will have the split basis as Terry described. I don't keep permanent record of depreciation on ATX, I use the depreciation module on EasyACCT. That makes it a lot easier in situations like this.

Why?

I used Checkpoint Learning for several years and subscribed to their unlimited CPE that offers online classes as well as webinars. Most of the webinar presenters were great and you could type in a question and they would respond to you on a first name basis. Last year I switched to CPE Solutions which also offer online courses and webinars. Some of their webinar presenters are also outstanding. Another feature I like is they record the webinars and they are available on demand at a later date. That is great if you miss one you are really interested in. My state also has the 80 / 20 requirement and I'll confess I am usually catching up as the June 30 reporting date comes around. Trying to keep more current this year. I subscribe to Checkpoint Research for daily updates and research of tax issues but no CPE for that.

Report on form 8971, which is to be filed within 30 days of filing form 706. If 706 is not required, then 8971 is not required.

Or if they live in a state like Oregon that has a lower exemption for inheritance taxes.

Any chance she owed back taxes or there was any other lien with the IRS?

I believe the IRS could care less if a deduction was omitted and more tax was owed. But on the other hand, if the omission was to create less tax or a higher refund such as EIC, they could come knocking on your door. Same for the taxpayer who wants to inflate income to max EIC. I turned one of those away a couple years ago, funny how his income from odd jobs put him right at the EIC peak.

"Repair escrows" are setup to fund repairs needed at the time of closing. Sometimes they are required by the lender to insure that the property is brought up to it's fair market value. The terms of the escrow will usually set a time line for repairs and specify who will get the unspent portion. I believe you will record the amount as selling expense since the repairs will occur after ownership has passed. You might also have a potential refund to account for.

Looks like the judge was following the directives of the divorce papers, so her choices were to sign or be in contempt of court. The bottom line is she signed the form so the dependents go to her ex.

Basically the remaining partner gets 1/2 of the remaining basis of the assets plus the amount allocated from the buyout. In this case it appears he paid $11,000 for his partner's share of the business. The $11,000 is allocated among the 1/2 interest assets he bought just as if he had bought a business outright. It is unclear what the intention was of paying $4,000 to the departing partner. It appears to be a distribution from the partnership unless it can be established that it was paid out after the transition and was part of the payoff. Was there a written agreement? I don't see any issue with 179 recaptures since business use did not change at the partnership level. I would not take any depreciation for 1 day. The business probably did not even operate that day and effectively closed on 12/31/14. On the remaining partners depreciation schedule he would have a split basis for each asset; his 1/2 basis from the partnership and the 1/2 basis allocated from the buyout whether it be $11,000 or $15,000.