DANRVAN

That is an interesting twist. They are making monthly payments like a lease with an option to buy but not living in the house. Do they have a contract?

I believe that originally would go on form 4797.

He just cut his basis way down, so far as I can see. Nothing reportable now.

I agree, 1/2 of the basis went with the exclusion.

I don't see anything in the regs that would require the gain to be recognized.

If he comes home to sleep then no deduction.

If you are talking about unrecaptured 1250 gains they go on 4797 and flow to the K-1's.

This was a return rolled over from 2012. My first thought was maybe the auto-save was turned off but it was still on. I don't know what caused it, but I put a sticky pad reminder on my monitor to save often!

This happened after I updated. The program closed as I was preparing to print. When I reopened, the data was gone. Auto save was set for 5 minutes and at least that amount of time had passed. Luckily it was a simple return and it only took 10 minutes to put the data back in.

This really sounds twisted. Her name is on the deed but not on the mortgage? And they were splitting the rent 50/50? And now she lives on the property? So maybe the $20,000 was for his future loss of income?

It would be treated as a reduction in the property basis if the development right decreases the FMV.

Rev Rul 77-414, 1977-2 CB 299.

Look at the substance of the transaction. It looks to me like the purchase was made for the education of the taxpayer's child and for no other reason.

From what you are saying it sounds like short term. The clock starts ticking the day he purchased them.

And subject to SE as well. Just as Lion said.

Yes, that is where she loses out on the deal, paying more than her share of tax.

Please let us know your clients outcome.

Yes, I will. Client will pick up the return and mail it off today.

It really goes on line 7 and the client needs to be aware of that. Of course the client needs to be aware of the potential consequences of taking action against her employer. But on the other hand, it might be a book keeping error and the owner and or management not aware it. The client needs to know the dollar amount she is losing on this deal.

I never celebrate Pi day. But if was Pie day that would be different.

I believe you are thinking of square root day, the last one was on 3/3/09. The next one will be on 4/4/16.

PS, you changed your original post. There is only one per year 3/14.

In any event, the divorce decree will have no bearing on anything other than trying to keep the parents honest.

I believe that was made very clear in the statement to the IRS.

Thanks for your response.

Pacun I am following your advice and will attach a statement explaining the situation along with a detailed list of custody dates. I have pasted a rough draft of the statement.

Based on your experience, can you tell me what action to expect from the IRS?

Thanks,

Dan.

STATEMENT OF CUSTODY

My federal income tax return for the year 2013 was electronically filed and rejected. The rejection message indicates my ex wife claimed my two children for whom I am entitled to claim per Internal Revenue Code Sec. 152(e)(4)(A).

I am the parent that had custody of the children for the greater portion of the calendar year. The attached worksheet shows that I had custody of the children for 194 nights for the tax year 2013.

My ex wife and I separated in 2012. She moved to a location over three hours away. The children were with me for the first week of January 2013. From then until June 15th the children spent every other weekend with me as well as a week during spring vacation. The children were also with me from June 15 to June 28.

The children were then with me from July 6 to August 26. That included a time period my ex wife was ordered by the court to have no physical contact with the children. On August 23 I was awarded custody of the children by the court.

From that date until the end of the year, my ex wife was allowed to have the children every other weekend and for five days during Thanksgiving. Those dates are also reflected on the attached worksheet. I have also attached a copy of the court papers as support of the amount of time the children spent with me after the court date.

I believe the above statements to be true and accurate.

________________________ _________

JOHN X DOE DATE

I'd be inclined to leave this one off the return and deal with the CP2000 when or IF one appears. No sense waving a red flag in front of the bull at the outset. If IRS has questions, they know how to get in touch.

I disagree. That is a common practice and I have never heard of any IRS inquiries because of it. Why waste time and money dealing with a CP 2000, and not to mention a possible coronary arrest when you client sees that IRS letter in the mail.

It's better to grab the bull by the horns and throw him out of the corral now.

Sorry for the user name confusion. My original user name on some other boards was Ranger. That was taken by another user (who seldom posted) on the original ATX board so I became DANRVAN there and I carried that over to this board. Then I started using Ranger which (was not taken on this board) to be consistent between the boards. I have not been consistent here and one is remembered on my laptop so they got crossed when I used it instead of the desktop.

I will try to delete one of the usernames to prevent further confusion.

There is no doubt the father is entitled to the claim the kids and mother cannot legally claim them.

Pacun, you mentioned an IRS investigation. How long does that process usually take?

Thanks for all your comments.

Trailers are listed under Asset Class .26. The recovery period is 5 year GDS or 6 year ADS. I believe that is regardless of whether it is big trailer or little trailer.

In regards to construction machinery, the recovery periods are still 5 GDS and 6 ADS per Asset Class 15.0.

The IRS doesn't consider what you estimate the useful life to be. There are trailers out on the road which are over 20 years old.

Client was granted custody and rights to claim the children. But ex wife claimed them anyway and client's return was rejected.

Can someone tell me how the process works to straighten this out. I know the next step is to file a paper return, but then what happens.

Thanks for any suggestions you might have.

Dan

Here are some references to my earlier post. This would apply in the situation where taxpayer works by day as branch manager at Hooterville First National Bank and then drives over to Bugsville to referee.

Please note that the facts and circumstances in Rev. Rul. 54-147 do not apply in this situation. But there are some general statements that do.

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Rev. Rul. 54-147, 1954-1 CB 51 -- IRC Sec. 23(a)

"Where a taxpayer is engaged in more than one trade or business and such businesses require a division of his time between two distant cities, he may deduct his traveling expenses incurred in discharging his duties at that city which is removed from his principal post of duty. Walter F. Brown v. Commissioner, 13 B. T. A. 832, acquiescence, C. B. VIII-1, 6 (1929); Joseph W. Powell v. Commissioner, 34 B. T. A. 655 (appealed on other issues); Joseph H. Sherman, Jr. et ux. v. Commissioner, 16 T. C. 332, acquiescence, C. B. 1951-2, 4. In other words, where a taxpayer has more than one place of business or employment his principal place of business or employment constitutes his “home” to serve as the point of origin for determining his deduction for traveling."

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Section 23(a)(1)(A), of the Internal Revenue Code provides that in computing net income there shall be allowed as deductions:

(a) Expenses.—

(1) Trade or business expenses.—

(A) In General.—All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including *** traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business; *** .

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RIA observation: Generally, when a taxpayer has two or more geographically separated places of business, he or she is away from home while at the location of the minor or secondary business.