DANRVAN

You need to help your client decide whether there will be a greater benefit by going forward or back with the NOL. There are all sorts of possibilities. For example there could have been lower tax rates in the previous two years due to capital gain or offsets by tax credits. Higher rates could be expected in the future due to lower depreciation deductions. On the other hand, consider the time value of money (cost) by waiting for future tax benefits of a carry forward.

A 1099? Parent's office? Are the parents partners or sole proprietors? If so then child's wages are not subject to social security. Are you preparing taxes for the child but not the parents?

It's great to see a family get along so well with each other.

Capital gains are included but do not include any gains from land, grazing rights etc. That should be spelled out in the instructions to Schedule J or Pub 225.

If it should have been reported on 4797 in 2012 and doing so would save $5,000 this year, then why not amend 2012 and extend 2013?

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.

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.

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

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.

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 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.