peggysioux5

Taxpayer buys home that sits on 50 acres and he decides to use 45 of those acres for ranching. If taxpayer prorates mortgage interest between home/5 acres and remaining 45 acres and applies the mortgage interest from acreage to Farm Schedule, when he decides to sell 10 years later, will the gain of the sale pertaining to the acreage be excluded from the home exclusion deduction? Peggy Sioux

Taxpayer received a 1099-Misc from Union for working on a committee of Union. Would other tax preparers determine that self-employment tax needs to be calculated? He did say he will continue to be on committee ongoing so not a one-time thing but he is not looking to make a profit and it is not a business. Peggy Sioux

She is going to have the same issue for 2019 as the ex has already filed for 2019 as well so her return will be rejected if efiled.

I am currently working on a 2018 tax return for taxpayer and tax return cannot be electronically filed due to ex-husband already claiming children even though taxpayer had more than 50% custody. Being paper returns are not going to be processed for some time, what is the best way to handle so that taxpayer can receive stimulus payment? My first thought was to file as single with no dependents just to get tax return electronically filed and then file an amended. However, there is a tax liability if taxpayer files single and she really doesn't have the monies to pay the liability to get bank info into IRS system. Any suggestions would be appreciated. Peggy Sioux

Taxpayer and ex-spouse have joint custody of children and divorce decree states ex-spouse claims children. Taxpayer has children more than 50% of the time and provides a home for the children. In a current tax year, I would advise the taxpayer to file as HOH and submit a form 8332 to ex-husband. However, taxpayer is just now filing for 2018 and wants to file as described above; however, 8332 instructions state "the custodial parent must sign Form 8332 stating that she will not claim the child as a dependent for the tax year and the non-custodial parent must attach to his tax return." Ex-husband has already filed for 2018. Can a Form 8332 be prepared for 2018 and submitted to ex-spouse if filing late? Peggy Sioux

1099 Composite form shows assets sold that were held less than one year; however, transactions are listed as long term. Are there exceptions that allow for assets held less than one year to be considered long term? Peggy Sioux

2018 tax return shows form 3801, line 2c with $10,000 loss. I am only trying to continue the carryover to the next year as 2018 allowed none of the loss.

I have a new client that has a passive loss carryover from Schedule C. Drake software is not allowing the carryover for the CA tax return stating CA does not allow. I can't find in CA regulations where CA does not allow a carryover passive loss from previous year. It makes no sense to me that CA allows the current year passive loss but does not allow previous year loss to carry forward. Drake programmer is stating the program is correct, but I disagree. Taxpayer was not passive for 2018 or 2019. The passive loss was from earlier year. Any input would be appreciated. Peggy Sioux

Max, thank you for the references; very helpful. After reading the references, I am hoping you can answer an additional question for me - Section 1314(e) states "this part shall not apply to any tax imposed by subtitle C (Section 3101 and following relating to employment tax)." The tax that was erroneously charged was self-employment of almost $5000. Is there another tax code that pertains to employment taxes?

No; taxpayer is requesting that I attempt to obtain correspondence from former preparer. However, in speaking with IRS, no correspondence is noted in taxpayer's account from June 2016 until April 2019 when I got involved. I think what transpired is previous tax preparer started the process in 2015/2016 and IRS made some (but not all) changes and tax preparer did not follow up after 2016. Taxpayer made many calls to previous tax preparer asking for information on the issue but nothing in writing so I would think that might be an issue in the appeal as well.

I have a new client that had an issue with 2013 tax return that former CPA was handling. 2013 federal tax return was filed as MFS in a community property state with form 8958 submitted. Previous tax preparer input 50% of spouse’s income on line 21. IRS recalculated federal tax liability in 2015. Tax preparer submitted correspondence to IRS in 2016 along with 8958 and IRS adjusted tax liability but one issue still was not resolved – IRS deemed line 21 income as self employment income. Taxpayer asked me to look into in 2019 and I submitted new info to IRS for which IRS has adjusted taxpayers account. However, IRS is disallowing refund due to time limits. The taxpayer contacted previous tax preparer many times regarding issue and tax preparer would advise client that “it just takes time with IRS” but according to IRS nothing was submitted to IRS after 2016. With the above information, would other tax preparers consider lack of handling by previous tax preparer grounds for appeal?

I am having the same issue in the Drake software for CA. Odd that Drake and ATX has the same programming issue. Peggy Sioux

Handling tax returns for registered domestic partners in CA, both receiving Social Security income. I have researched to determine if social security income should be considered community income in the year received and I do not find anything definitive; however it appears from things I have found, it appears that social security income is considered community income. However, the last two tax preparers who have handled taxpayers' returns have not applied the social security income as community. Hoping other tax preparers have handled this issue in the past and provide some input. Thank you. Peggy Sioux

Thank you so much for the detailed info Sara; very much appreciated. Peggy Sioux

Would a gift tax return be required for 2018 being partial gift completed at time of sale?

Taxpayer purchased hot tub mid-2018. Taxpayer obtained a prescription for hot tub in October 2018. Would you consider expense to be legitimate medical expense? Peggy Sioux

Yes, sales proceeds divided between mom and children. Yes, children are on deed along with mom with life estate.

Life estate created 15 years ago and parent is now 90 and still living. Children are selling home. I realize children will pay capital gains on their share and parent should be eligible for 121 exclusion, However, I have not dealt with the actual calculations of a life estate. What IRS tables do I use to determine Life Estate/Remainder % (I think Table S, but need confirmation) and do I use table based on current age of parent , date of sale, and sale price of residence? Will I need to determine value of life estate at creation date? Or are the calculations based on original basis of parent and then percentage of Life Estate/Remainder based on parent's age at time of sale? Any direction is greatly appreciated.

The expenses in question are utility costs, upkeep of landscaping, and administrative fees, not repairs or improvements to the home. (I should have provided this information in the original post.) If the estate reimbursed executor in 2018 for 2015 through 2017 expenses, would the expenses be deductible in 2018? Thank you in advance for your input. Peggy Sioux

Taxpayer is executor of mother's estate. Mother passed away in 2015 and only asset was residence which had to be repaired prior to sale. Estate was cash poor so executor paid for expenses from 2015 to 2018 when home was sold. Taxpayer did not file any estate income tax returns from 2015 through 2017 thus no election to capitalize expenses. Probate did not begin until 2018 and executor was reimbursed for a portion of his expenses in 2018 through probate. If expenses from 2015 through 2017 were reimbursed in 2018, would those expenses be deductible in 2018 on 1041 estate income tax return or being expenditures took place in previous years and no income in those years, would those deductions be lost? (I think it would be the second choice, but hoping there is some exception being there were almost $15,000 in expenses that will be lost). Unable to make 2018 tax return final (attorney advising me that probate will take another four months)

Can an estate use the 663(b) election (the 65-day rule) if the distributions are capital gains?

Taxpayer has a small business and is also a W-2 employee in similar type work. Through his self-employment business, he has access to better rates for some material than his employer. He purchases material through his self-employment business and "sells" same product to W-2 employer at same rate of purchase. Would that be considered a reimbursement and not be considered as income/deduction for his self-employment business being there is no mark-up or should it be considered income/deductions that basically wash each other out on Schedule C?

Approximately $40,000. Peggy Sioux

So what would be the correct procedures being I have corrected W-2c's for previous years? Should I include the income in 2016 even those the 2016 W-2 is not going to reflect the award pay and attach an explanation of the situation with copies of the W-2c's? I would think the IRS would send audit letters for the previous years once they receive the W-2c's and no amended returns will have been filed; so I would handle that issue once audit letters arrive? Appreciate everyone's input. Peggy Sioux

Being taxpayer received W-2c's in 2016 for prior years, would those understatement penalties still apply?