DANRVAN

7 hours ago, GeorgeM said:

I want to file a 1040 X for so she can get the refund that she is entitled to but I can't come up with their interpretation of her tax return.

 

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

On ‎10‎/‎02‎/‎2016 at 4:32 PM, RitaB said:

Ok, let's talk about the odds that Christian would be penalized for helping Generous Single Guy pay more tax, at the request of GSG.

I'm going with exactly zero.

 

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.

On ‎09‎/‎23‎/‎2016 at 3:17 PM, Hahn1040 said:

Apparently the judge sided with the father:  she told me that she signed it.  And wrote on the page that she "signed it under duress."

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.

On ‎09‎/‎12‎/‎2016 at 7:53 AM, David said:

Yes, I looked at that and the comments above are how I understand this should be handled. However, it doesn't seem to address what to do for assets that sec 179 was taken.

It seems as though the remaining member is deemed to take 1/2 the fixed assets at 1/2 fmv. So even though book value is zero, he gets to increase the value of the assets and start depreciating them again?

 

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.

Sounds like a scam or misunderstanding.  How can you get a $445,000 donation for $100,000?  There are no special rules for conservation easements that allow such a thing.

On ‎08‎/‎12‎/‎2016 at 9:30 AM, Catherine said:

.  Else your client would be taking a distribution to hand out money to cousins and the 1099's would be needed so that they, and not your client, get hit with the taxes.

I believe in that situation, the income would be taxable to the client under the assignment of income doctrine. The client cannot change the fact the income belongs to her by issuing a 1099 to a third party.

The disclaimer may not resolve the issue either.  The heir can disclaim the inheritance but can not dictate who it will go to, that is determined by the will or by law.  Also, it appears the funds were accepted by her since they have already been transferred to an account under her name, so the window for disclaimer might already be closed.

As others have posted, the client can voluntarily gift a portion to her cousins in order to comply with her aunts request if she wishes.  It would be her choice to make the gift after taxes, whether she takes it as a lump sum or by RMD over time.  She is under no obligation to disclose how much the taxes are or what tax bracket she is in.

1 hour ago, Pacun said:

 

OK. You send back the client to the government... good luck with that. Or you "correctly" report the money in the year received then the client receives two letters for the two years that the client received a W2-C and didn't report it. Good luck with that too.

If the employer will not correct the mistake, then I believe the remedy is to file form 4852 for each incorrect year. If the IRS letters still come, you have the tax code to back you up.

I don't believe the basic accounting principle of materiality usually applies with the same meaning to tax law.  The choice is to charge the client to file two incorrect amended returns or charge him to correct the problem if the employer will not do it.

22 hours ago, BHoffman said:

Pubs are not regulations and have no authority at all.  Pub 957 is just guidance for employers reporting back pay and other special compensation payments to the

 

The Pubs are usually based on authority.  In this case the authority is section 451(a) which very clearly says income is recognized in year received unless one of the special rules from 451(b) through 451(I) applies.

In regards to Pacun's comments; in this case the W-2c is clearly wrong.  The instructions for W-2 says report wages in year paid.

In Messina vs Commissioner, tax court ruled back pay was reported in year paid, not in years attributed.

An incorrect W-2c is not a free pass to incorrectly file false amended tax returns.

I called in on May 27 to see what kind of a deal I could get. Got the 10% discount, $100 down and balance due in December. I've never had any issues dealing with ATX.

As Max stated above you have to weigh all the variables. For one thing, the parents cannot directly gift the assets since they are owned by a separate entity, they would first have to be transferred to the parents.

On the other hand, the gifting of stock can be done over time and allow the parents to gradually shift control with the least amount of interruption to the operation of the business.

I will meet with them jointly and hear what they have to say.  Until then I am not making any assumptions or taking any action.

Thank you Judy for the link.

Thank you for all your comments. Looks like penalty for not filing could be accessed since joint return would not be considered filed until 1040x filed. But on the other hand it seems accuracy penalty would not go back to wife's return.

He said he has not received any notices Judy even though he has been issued 1099-misc box 7 for 2012-2014.

Now I have seen wife's returns and she has been filing HHH and claiming EIC

I will be talking to both in person before I proceed.

Husband has not filed for three years while wife has been filing separately.  They will owe about $30,000 jointly for federal and state.

It looks like the route to go is to file amended and show the wife as the primary taxpayer.  I am wondering if this will clear him of the penalty for not filing?

Has anyone on the board has been down this path?

Thanks, Dan.

You could also put in full amount as reported on 1099-B, then on the next line enter as negative 1/2 of the proceeds and as negative 1/2 of basis.

I believe that would resolve any IRS matching issues and client coronary issue that might result from an IRS letter.

5 hours ago, FDNY said:

Looks like the one on the right is sorry she ever listened to him.   A common mistake made by many.

She should claim innocent spouse, I bet she didn't have a clue what kind of monkey business he was involved in.

It is very clear in section 1060 that the allocated price of the assets can not exceed FMV and the inventory must be allocated before the FF and improvements.

Since 1060 requires the use of the residual method, it looks like the ordering in this case would be: inventory, FF  &  improvements, and then the residual would be allocated to goodwill. I  don't think you really need to be concerned about the detail of goodwill; it is what the buyer is willing to pay above the fmv of  the business assets.

Since the corporation has no right to tell the shareholders what to do, the covenant not to compete is a separate transaction outside the corporation.

In regards to your client, I don't think the final allocation will make a lot of difference since there is no capital gain break for the corporation. They just need to be informed of the correct procedures.

Happy belated Birthday and many more to come!

There are restrictions.  See Reg 1.217-2 for reference to: "reasonable"; "shortest and most direct route"; and "lavish or extravagant".

1 hour ago, Abby Normal said:

But the gain on the house would have happened in 2003. .

and gain from involuntary conversion  excluded under section 121

4 hours ago, Christian said:

 All of this in plain view and the Service never batted an eyelash.

The service never batted an eye because the service never took a close look at it. It was either electronically filed or inputted by a data entry clerk whose job description does not include examining tax returns.

Just last week I was talking to a "small farmer" who has been using turbo tax for 5 years. Her comment was "I must be doing it right since I have never heard back from the IRS."  (note: eye roll emoticon goes here).

-General rule for liquidating distribution:  gain = "money" received in excess of  partner's adjusted basis.

-Basis of property received = partner's basis less money received.

-No gain recognized until property is disposed by partner.

18 hours ago, Pacun said:

Partners didn't like each other anymore and last January they split. The previous years they have purchased little items that were not depreciated and last January they split those Items for a total of $2000. For example they split 16 soft rigging at $2 each FMV (cost $4 new). Now it is time to show those $1000 on each partners return. Should that go on K1 or somewhere else. This was a teaching and acrobatic performances so they were buying their tools and fabrics and the partnership was making money. No basis for both partners. Thank you.

 

I am not sure what your question is. Are you saying the small items were expensed vs depreciated; or not expensed at all? In any case just show as a liquidating distribution of partnership assets.

Technically, I believe the basis for any depreciable assets would  be reduced by depreciation allowed or allowable in the hands of the partnership.

Not 1252 property.  That is farmland for which soil or water conservation expenses have been deducted and are recaptured on form 4797.

16 hours ago, jklcpa said:

 Perhaps that is why the 1099S is in error and shows only his name? 

I have seen 1099-S where there are multiple owners but only one listed.