DANRVAN
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Posts posted by DANRVAN
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But without an office in the home, his mileage from home to ref activity and back home is not deductible on the sch. C. It is commuting mileage. He is a "turtle" in the eyes of the code. There is a tax court case on this that I read a long time ago for a logger who never worked in the same place for more that a few days at a time. He did not have a regular tax home, so the court said that where ever he was working, that was his tax home, and therefore he could not deduct mileage.
Tom
Hollister, CA
You might be thinking of the Charles Walker case. I actually had a logger client with the same name, he went by Chuck. That case really hit home with him, or served as the club to hit him over the head with.
I agree it is comuting and the fact he stores his uniform and a whistle in his closet makes no difference.
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Anyway, "capitalize" in this context does not necessarily mean "depreciate." You still have to determine if they are repairs, which are not MACRS property and can only be recovered when the activity is disposed of.
I don’t follow what you are saying about repairs.
“if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it.
Example. You repair a small section on one corner of the roof of a rental house. You deduct the cost of the re-pair as a rental expense. However, if you completely re-place the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. You depreciate the cost of the new roof.”
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As Mr. Pencil stated, he needs to see an attorney. Since he probably does not have one (or at least a good one) you should recommend one to him. You are more likely to be kept in the loop. Outline your concerns for him to discuss with the attornery.
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If the assumption is that he spent all the money on gambling, he spent $3,700 the first day. He started out with $500 and then won $ 5,000 less $800 in withholdings, 500+5,000-800=4700 funds available. Less $1,000 saved = $3,700 spent. So $1,300 gain.
Second session started out with 1,000 plus winnings of 22,000 less 4,000 w/h for total funds of 19,000.
Since all the funds were spent he had a net of gain of $3,000.
Total gain of $4,300.
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Your client might have been better off to treat the transaction as a sale from the start, depending on income level and related capital gain rates the tax could have been greatly reduced.
In regards to the IRS, they are concerned about a business that is treating a purchase as a lease; specifically in situations where the term of the "lease" is shorter than depreciable life of the asset.
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I had just turned four. I remember my mom was really upset, she was Irish Catholic. I was too young to grasp the seriousness of the situation but vividly remember watching the military service at Arlington Cemetery on TV. The coffin covered by the American flag and the 21 gun salute stand out. I also remember at some point mom intently watching LBJ speaking.
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I pay about $1,000 a year for Checkpoint plus another $299 for their CPE library. What do you get for $89?
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Neil Harl has addressed this topic in the Agricultural Law Digest as well as his FARM ESTATE AND BUSINESS PLANNING manual.
The key words here are "non-material participating" landlord, meaning the crop share has not been subject to self-employment tax. If it had been, basis would be determined at FMV on DOD.
If decedent was a non-material participating landlord, then proration is made during the rental period before and after death. The portion of income allocable before death is IRD. The balance is taxable as ordinary income to the estate. There is no stepped up basis in this situation.
-Here is a quote from page 175 of the FARM ESTATE AND BUSINESS PLANNING manual:
“SHARE RENTS. Crop share and livestock share rents held by
the decedent at death are income in respect of decedent and are
taxable on later sale by the estate or heirs. This is the treatment
if the landlord was a non-materially participating landlord. And
many are, for social security reasons.
If the landlord was participating materially in the production
of income under the lease, the share rents are treated as selfemployment
income with the usual adjustments to income tax
basis at death as the stored crops and growing crops (and livestock)
receive a new basis at death based on fair market value.
For death of a non-materially participating farm landlord
during a rent period, with crops and livestock sold after death,
the portion of the proceeds allocable to the period before death
is income in respect of decedent. That portion is also includible
in the gross estate for federal estate tax purposes. The remaining
amount represents ordinary income earned by the estate after the
landlord’s death. The proceeds of sale are apportioned according
to the number of days in the rental period before death (ending
with the date of death) and after death, commencing the day after
the decedent’s death, using a 365 day rental period.”
-Neil Harl makes the same conclusion in the following article in paragraph six (with citations):
http://www.econ.iastate.edu/~harl/ald/HarlAgLaw20110128.pdf
-Another author has the same opinion in this article:
-Also, the Eight Circuit reached the same conclusion in the ESTATE OF Verdon GAVIN, Appellant,v..UNITED STATES of America, Appellee, (as pointed out by Checkpoint RIA).
Hope this clears up the issue for you,
Dan
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This could have been a lease situation where the lessee provides for all the care of the cattle (feed, pasture, veterinary expense etc.) and the owner receives a percent of the calf crop. Just like a crop share arrangement which is reported on Form 4835.
If that was the case, you will need to determine how much of the income was for breeding stock vs. calves and allocate between 4835 and 4797, after you have determined the basis.
The only thing certain is you will need to file an extension to allow more time for research.
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“I am going to write off half the cost of my storage rental unit. My wife volunteers for “Friends of the Library” and we have been storing used books for them. I also want to write off half of our garbage bill since we disposed of their discarded books. Oh, and then I took our garden tractor down to the Country Club for spring cleanup, that must be about $60 per hour…….”
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Corrective surgery. Rev Rul 2003-57 permits taxpayers to claim a medical expense deduction for the unreimbursed cost of:
- ... Breast reconstruction surgery following a mastectomy that removed a breast as part of the treatment for cancer. The reconstructive surgery qualifies medical care because it ameliorates a deformity directly related to a disease.
- ... The cost of laser eye surgery (e.g., LASIK, radial keratotomy) to correct myopia, which is a bodily defect
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I believe CPE is what you make of it. I have been to live seminars where some of those attending were engaged in activities such as reading the newspaper, sleeping and working on crossword puzzles.
I have been using an online package from Surgent MCcoy to earn my cpe credits. They have a wide range of tropics and I try to choose courses that I will benefit from. I will admit that on occasion I have downloaded the most basic course available in the final hours of the renewal period.
In order to keep up to date on tax law changes, I rely on the daily updates from Checkpoint via e-mail.
Ed, thanks for pointing out the Checkpoint CPE bundle. I am going to try the Premier Package.
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822,026. Examination of closed years.
A closed year may be examined or re-examined even if IRS doesn't show probable cause to suspect fraud (¶ 822,025) as long as:
... the examination is conducted pursuant to a legitimate purpose,
... the inquiry is relevant to that purpose, and
... the information sought is not already in IRS's possession. If the taxpayer establishes that IRS's actions constitute an abuse, the examination is barred. However, the mere passing of the normal three-year statute of limitations on assessment (¶ 838,001) is not, by itself, proof of an abuse. 7
________________________________________
7
U.S. v. Powell, Max, (1964, S Ct) 14 AFTR 2d 5942, 379 US 48, 13 L Ed 2d 112, 64-2 USTC ¶985
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I think constructive receipt might be your best route for amending if you can make it fit. This case is unique in that the taxpayer wishes to claim income instead of deferring it to the following year. So you probably won’t find any applicable case law.
How overdue was the payment? Was there an enforceable contract that payment could have been demanded at anytime? What percent of her farm income did it represent?
On the other hand, how much tax will your client owe if reported in 2011? As KC pointed out there will be some future benefit in SS income. Is that important to her?
I don’t have a clear answer on this. My guess is that if you come up with a reasonable explanation in the text of the amended return it will be accepted and you can move on to 2011. (suject to audit of course)
In regards to a retro accounting method change, it might be too late.
Section 1.451-2, Income Tax Regs., entitled “Constructive
receipts of income”, provides in pertinent part:
(a) General rule. Income although not actually reduced
to a taxpayer’s possession is constructively received by
him in the taxable year during which it is credited to
his account, set apart for him, or otherwise made available
so that he may draw upon it at any time, or so that
he could have drawn upon it during the taxable year if
notice of intention to withdraw had been given.
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Getting back to your original question, when was the income constructively received?
Also consider what the IRS says about using a combination method of accounting: “Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently.”
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Unfortunately, schedule J does not apply to SE tax.
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Any chance the policy met the requirements to be excluded from the estate?
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He and the corporation are two separate entities. He cannot deduct the expenses that belong to the company.
The case of Lambert clarifies “Citing the long established rule that a taxpayer can't deduct expenses incurred on behalf of someone else's business, the district court ruled that Lambert's unreimbursed expenses were the corporation's expenses, not his.”
You might take a look at “Graves” in the 9th Circuit Court. He was allowed to write off worthless loans to his corporation on Schedule A.
Good luck,
Dan
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Section 172 disallows income not attributable to a taxpayer's trade or business in the NOL calculation.
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My prayers are with you KC.
Dan
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It looks to me like your client would be an employee in the eyes of the IRS. She is performing an integral part of the business operations as well as the other factors Jainen pointed out. What is the risk to your client if reclassified as an employee? This sounds like a situation where you need be careful not to hand out legal advice.
Good luck.
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Some real property is 1245 property. Research sources such as RIA have detailed explanations. Or try a google search for articles such as this one:
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I had one that was filed final for three years for one reason or another. In the “final” year some farm program payments were paid and reported to the estate by mistake. Don't worry about it, the door is always open at the IRS when there is income to report.
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Can she claim the 24 year old daughter as a qualifying relative? (Income less than $3,700..etc.)
Mileage Deduction for 1099 Contactor
in General Chat
Posted
The distance factor might change things and the issue goes beyond local commuting. I have seen reference to this situation before where a second job/business is conducted away from your tax home. Your tax home is the general area where you do most of your work or business.
More research needed.