DANRVAN

Just bumped this up as a reference for your current thread.

Agree. You can still submit information to the IRS and they will consider it. But you do not have the option to appeal.

I don't think the IRS will budge on the deadline since it is statutory. I would not rely on the advice of the Taxpayer Advocate in regards to filing the petition after the due date. I am not saying its not worth a try but I don't believe it will go through. Lynn mentioned that only an attorney or a Tax Court qualified non-attorney may prepare and file the petition on behalf of the taxpayer. However, the petition does not need to be signed by anyone but the taxpayer (enter that door at your own risk) and you can represent your client before the appeals officer. You mentioned a form 8332 involved, any other details you can share with us?

90 days is 90 days including weekends and Holidays, but I believe the 90 days cannot end on a weekend or Holiday. The final date is usually on the notice. The notice was dated Oct. 4? By my math 90 days would = 27 days in Oct; 30 days in Nov; 31 days in Dec and 2 days in Jan. January 2nd was a Holiday so January 3rd was the due date.

Sorry I overlooked that part in my previous post. You will run into the Constructive Ownership rule found in section 267.. The abandonment could be treated as a sale to a related party, the corporation.

I believe your client should treat it as an abandonment per Reg 1.165-5 (I)(1) "To abandon a security, a taxpayer must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for the security." Reg 1.165-5(a)(1) defines a security as "A share of stock in a corporation". Reg 1.165-5 (I)(1) Also states that an abandoned security is treated the same as a worthless security In that "the resulting loss is treated as a loss from the sale or exchange, on the last day of the taxable year, of a capital asset."

Didn't dawn on me you are dealing with Qualified Restaurant Property. Now it makes sense.

I agree with Sara, and in some states it makes sense to gift. In Oregon the inheritance exemption is only one million and there is no gift tax.

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?