DANRVAN

Sounds like a bypass trust was setup so husband's assets would not go into wife's estate.  Did you prepare the 706?  Have you seen the trust documents?

Correct, no basis to the gifted portion.

The sale price is the amount of consideration given,  offset by basis to determine gain (no loss allowed).

The difference between fmv and consideration = gift. 

Suggest you review reg 1.1001-1(e)

Have you seen a copy of the sales contract?  Could be some sort of rent with option to buy. Best to get the whole picture before you jump in. Why is seller still paying property taxes and original mortgage?

Are you sure box 9 is also included in box 7? Does that agree with the amount of income per taxpayer's records? Pub 225 has details on how to report market gain.

35 minutes ago, easytax said:

Am I correct using the $212,000 sales price or should I be thinking differently? Child and spouse already own $113,000 (from gift) with no gain to sellers (parents) and are buying property for $212,000 as I see it.

   Appreciate input as always ! THANKS

 

$212,000 sale price plus $113,000 gift = $325,000 FMV. That sound right.

1 hour ago, peggysioux5 said:

So does the gift of $50,000 play into the calculations when determining the capital gain on the sale or is gain strictly based on listed sale price less original purchase price plus any improvements?    

-The first thing you have to do is find you what the fair market value is.

-From that you deduct the actual consideration to determine the actual amount of the gift.

-The amounts on the Closing Statement only reflect what was agreed upon by the two parties and may differ from FMV.

10 hours ago, Max W said:

I think this topic has run off the road. If it is personal use, which it seems to be, there is no depreciation.  By his own words, it was purchased to save money on hotels.  

A deduction was allowed for that very reason in Austin Otology Associates v Commissioner (but for only one month). 

The deduction is allowable under section 162(a)(2). Substantiation is critical.

1 hour ago, JoeB said:

On the other hand, if an "excess farm loss" exists (Farm losses capped at $300,000 if receiving applicable subsidies), this excess loss is carried forward to the subsequent tax year and treated as a deduction from that year.  In the case of an excess farm loss, how does the group reflect the excess farm loss on the return for the subsequent year?

Great topic!

I have never had to apply the $300,000 limit rule. The instructions to Schedule F indicate it goes on line 32 as other expense. There are several worksheets to use depending on your situation.

Welcome to the Board.

Since it is listed property, he should keep a record of business use vs. personal use.

You might consider "Certain

On ‎03‎/‎06‎/‎2016 at 7:16 AM, Abby Normal said:

http://cs.thomsonreuters.com/ua/fixa/cs_us_en/ass_life_tbl/hid_help_asset_lives.htm#

Could be considered "Personal Property With No Class Life", which is assigned 7 years.

Also note that a trailer used for farm worker housing is 7 years (or 15 years with the wheels removed)  per pub 225.

56 minutes ago, RINGERS said:

 

Part-time work. If you work part-time, you generally must figure your expenses for each day. However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Any day when you work at least 1 hour is a day of work.

-Remember the pub is not the final authority. The examples given are not all inclusive. It says you generally figure your expense for each day.

-Then is says if  you have to pay for the days you don't have to work along with the days you do work, you can include all the days and gives the following examples:

　Example 1. You work 3 days a week. While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. You can pay the center $150 for any 3 days a week or $250 for 5 days a week. Your child attends the center 5 days a week. Your work-related expenses are limited to $150 a week.

Example 2. The facts are the same as in Example 1 except the center does not offer a 3-day option. The entire $250 weekly fee may be a work-related expense

-So if your situation falls under example two the IRS is generously allowing all five days to be claimed although only three days were spent working.

-In the example, the IRS is allowing  all the expense where the majority of the days are spent working.  It does not give an example where the parent is only working one day a week, or one day a month.

-I believe you need look to the tax code and ask yourself and your client if an entire year's worth of child care is a necessary expense for working only a handful of days; or if a proration is needed.

That might be a good point KC, but that would not qualify the expense under section 21(b)(2) since it is really a personal reason.

If not necessary for employment, no credit allowed.

Have your tried reading the tax code?

§ 21 Expenses for household and dependent care services necessary for gainful employment.

"only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:"

I agree with Judy, FMV less actual consideration = gift.

The gift portion is fmv less the amount of full and adequate consideration. Ask your client how they came up with the sale price on the closing statement and why so far off from the appraisal.

5 hours ago, Richcpaman said:

 

The property can be carried on Sch E, it just has to be rented at FMV, or within 80% of FMV, which the IRS has allowed as a reasonable discount for a family member

 

Rich, are you referring to Bindseil vs c, TC Memo 198-411?  I am not sure how much authority that case would hold since Bindseil lost. (He argued the case himself). 

From his cross examination of the IRS expert witness came the conclusion by the judge that a 20% discount was reasonable for tenants who would take "unusually good care of the property" and the fact he would save by no paying a management fee.

Unfortunately, Bindseil had rented to his parents for a 30% discount and lost the case.

Back to Terry's post, I am not aware of any 80% general rule by the IRS, but you might have a case if your situation is similar and rent within 80% fmv. A key fact in the Bindseil case was that the tenant parents spent over $2,000 in repairs. How much work will your client's daughter be doing?

Bindseil also lost the related issue "whether in renting the house to his parents petitioner was engaged in an activity for profit within the intendment of section 183."

I believe that requires him to report on line 21 of 1040 as instructed in chapter 4 of IRS pub 517.

4 hours ago, MAMalody said:

Traveling evangelists are entitled to a housing allowance exclusion if they maintain a permanent home and have local churches in which they conduct religious meetings declare, in advance, a portion of thier compensation as a housing allowance.  See RR 64-326.

That was a great reference Mike. Your expertise in Clergy Tax a is great Blessing to this board!

Per Rev. Rul. 64-326 :
A day or two before concluding his services, B meets with authorized
officers of the host church to determine the amount of compensation he will
receive. It is customarily agreed at that time that a portion of B's
remuneration will be designated as a `rental allowance.'

If rent is below FMV, report on line 21 of 1040. 

Deduct mortgage, mortgage insurance, and property tax on Schedule A.

On ‎02‎/‎13‎/‎2016 at 1:28 PM, Possi said:

 I don't think they will be looking for SE tax on that little ol' 1099, right Rita? I'd blow it in there and not be concerned.

I would not count on it. Save your client the anxiety and expense of receiving an IRS letter by reporting it as both income and expense on schedule C, and line 21 of course.

It would be a partial gift / partial sale. The amount of consideration is the loan balance assumed of $45,000. 

The amount of the gift is $55, 000, (FMV less consideration).

There is no recognized loss since the amount realized is less than the adjusted basis.

Son would determine basis under reg 1.1015-4(a)

Got it working!

I get the following message and then the program shuts down. Problem started before I updated and update did not change.

"Data from last year's program was not automatically detected"

Thanks for any suggestions you might have. 

Transfer of partnership interest by gift, bequest, or inheritance will not trigger a technical termination.