Kea

Yep, you are right. I started working backwards with the daughter-in-law and didn't catch that I added a 2nd daughter-in-law. I must now hang my head in shame since I am usually pretty good at these kinds of things.

There are 8 members of the family. 1st generation: husband and wife 2nd generation: they have one son who has one wife 3rd generation: they have 3 children -- 2 daughters and one son. The son has a wife.

Thanks Julie and Jake. I like that better than reporting the whole gain in '07.

Client called today to say he sold land to a friend for $113K (FMV) with $25K down and $500 / month until balance paid. There is no interest included in the agreement. Since there is no interest it isn't an installment sale. I think this means I show the whole $113K as the selling price, and it all gets included in the year sold (2007). Is that right? My client bought the land 3 years ago with plans to build a house on it. He cleared the land and installed utilities but never built the house. I know I can include the utilities in the cost basis, but can I count clearing the land? The buyer of the land wants to build a house, so I would think that clearing the land would count as an improvement. Thanks.

I may end up running into a similar situation. I am testing other software packages and one of them will let me do any state's return. ATX 1040 only let me do 3 states, and late this year I got a new client with a 4th state. So I used the new software but got a reject (on 10/15 & 10/16) due to a software problem. It didn't transmit one of the forms I had included. I will transmit the return with the same DCN (I overrode the default DCN) tomorrow. I hope it goes through. I checked with the e-file help desk and they said it should work. Re-submissions can be made until 10/20. I also hope the direct debit with work OK. Best of luck to both of us.

If your mother paid $1 for the land, her basis in the land is $1. (Since this is a nominal amount, it may still be considered a gift from your grandmother. If that is the case, her basis in the land is the amount your grandmother paid.) But if you did not sell the land, the basis is not an issue for this year's return. If the trees were not there in 1966 and grew back naturally, then your basis in the trees is $0. If she bought small trees and planted them, the basis would be the cost of the saplings. If I am reading your post correctly, she sold the timber for $12,000 in 2006 (or the year you are working on)? If so, you would report the following for the sale of timber: Date acquired: 1966 Date sold: 2006 Purchase price: $0 (or price of saplings) Selling price: $12,000 Gain on sale $12,000 - long-term. I have never done any timber sales, so I can't help with the timber tax portion. Good luck!

Quickfinders made reference to the Morcos TC Summary Opinion 2001-114. I Googled it and found some information, but could not find the complete decision. In this case, the taxpayer & spouse rented out 3 rooms on their 3rd floor for exclusive use by the tenants. They also rented out a carriage house (exclusive). They took deductions for the 3 rooms, the carriage house, a portion of the 1st floor (that was used by all), and portions of the upgrades they made to the grounds. The court disallowed the grounds and allowed the carriage house. I could not find the decision relating to the 3rd floor (exclusive) or 1st floor (shared). This case seems to fit my situation, but I can't find the portions I need. Is there someplace I can find what they decided on these other aspects? Thanks.

But 2 rooms are exclusively rental. I'm pretty sure I can take losses for that part. It sounds like for the shared part, you would take the expenses, but not the loss. Thanks.

Thank you so very much. That worked great!

My client moved back to Texas from Georgia and some of her files got buried in transit. She has the amount of unemployment she received, but not the 1099-G. Does anyone have the address and EIN so that I can e-file this return tonight? Is the entity that paid it Georgia Department of Labor? I can't find the info on the website, and their offices are closed. Thanks so much.

Did he pay any phone bills between March 2003 and August 2006? If so he would most likely have paid a Federal Excise tax during that time. He would very likely qualify for the $30 credit which would give you the positive number you need for e-file and an extra $30 in his pocket. If he didn't pay any US phone bills in that period, he can't use it.

I had one Friday that had 142 sales. After entering everything, I started reading this board and found the attachment method. Oh well. Also found out that I had sales from 4 accounts, but she has 5 accounts and couldn't find the other 1099-B. It looks like I'll have some more typing to do today.

I thought the personal use came into play in determining how much of the losses could be claimed. For the exclusive part, I believe the losses can exceed the income. It's the shared part of the house where I am confused as to what expenses, if any, I can take. I've been reading Quickfinders, Pub 17 & Pub 527 as well as the Morcos TC Summary Opinion 2001-114 and feel like I am going in circles. The Morcos Opinion seems to fit my situation best but the summary I read didn't seem to explain exactly what the court allowed and didn't allow. Is there a good place to find this? Thanks

I know I should know this, but I haven't had to deal with this scenario in my previous rentals. Client owns house. 1 bedroom and 1 bathroom (15% of house) are used exclusively by her. A 2nd bedroom and 2nd bathroom (another 15% of house) are used exclusively by renter. Remainder of house (kitchen, living room, laundry room, etc.) is used by both. These are the only 2 people living in the house. Rooms were rented all year. This is a new client who has previously reported 1/2 of all her house related expenses as rental expenses. She has claimed all of her losses. I know this isn't right. I believe that she should only take 15% of all expenses and that losses (up to $25K) are allowed, and that nothing is allowed for the 70% of house they share. Is this true? Or, would I report 2 units on Sch E. the 1st as 15% and allow losses with the 2nd one being 35% (1/2 of the 70% shared) and only taking expenses up to the income? If so, I guess I could proportion out the rental income 30 / 70. If I use this 2nd method, would I depreciate the shared area? Thanks, At least this is all over tomorrow (for a few months).

Client has interest from a bank account in Colombia. I tried entering the info on either the 1099 Int (even though this form would not apply) and I tried entering the info on the 1116 Input tab. With either method the tax paid in foreign currency and in US dollars is showing up in Part II columns ® and (v) taxes withheld at source. The taxes were paid on the income tax return. How do I make the numbers show up in columns (s) and (w)? I tried doing it as an override, but then line 8 did not carry down to line 9. Even though the taxes paid are in the wrong columns, this does not affect any of the calculations. How important is it to have the figures in the correct columns in this case? Or, am I not understanding the meaning of "withheld at source" correctly? It seems that the source in this case is the bank. Could they be referring to the foreign country instead? Even then, the taxes were not "withheld." Thanks

He was in the US for 13 days in 2006. He was also here a few weeks ago, but I do not know for how long. Thanks.

I will add one more wrinkle to the story. The client works in Colombia and has a US green card. I did not include that detail in the original post because I know he must follow the same rules as US citizens. In this case, there is no W-2 / 1099 to issue. (This is the same person I referred to in an earlier post, but I since learned some corrections. I have been dealing through a translator since my Spanish is not very good.) In 2006 he worked for a bank and they asked him to also make some speeches to (or for?) the Board of Directors. Since this was not his regular job, the bank categorized it as honoraria rather than salary. On his Colombian tax return, he reported $55K in salary and $45K in honoraria (2 separate lines on return). He then subtracts $12K in expenses related to the speaking fees. The income tax was calculated on this total. The tax treatment was the same, just reported on a separate line. So, is it reasonable for me to report his honoraria on line 7 or 21? In this case the employer would never have paid into the SSI system anyway, so there is nothing to "replace" through the SE tax. (He does plan to move to the US in a few years, but he will not qualify to collect SSI.) I am not sure how limited the speeches were. The honoraria was not much less than the salary, but there were also considerable expenses. I will see if I can get an estimate on time spent. I will try to verify that, in Colombia, salaries and honoraria are subject to the same rules. Just because the income tax return treats them the same, there may be something else behind the scenes. Thanks so much.

Taxpayer is an employee, but his employer also paid him an honorarium for some board work (making speeches and presentations outside his regular job description). Is the honorarium treated as Schedule C income or is it misc income on line 21? If line 21, then the expenses go on Sch A, right? Thanks

I am amending a return for a new client. Husband and wife are 63 and are Colombian citizens living in Colombia. They are both US residents because they have green cards. They kept their green cards because they plan to move back to the US in a few years. Last year the husband retired in Colombia and was hired back by his previous employer (a bank) as an independent contractor. He will not qualify for Social Security when he moves here because he did not work in the US anywhere near long enough. But his independent contractor work is subject to $4000 in SE tax. In previous years, he has filed tax returns but has never owed US taxes since his income has always been less than the exclusion. For 2006, his income is still under the exclusion, but because he is now a contractor rather than an employee, his income is subject to SE tax. As an employee in Colombia, he has never been subject to US Social Security tax. I did not see Colombia on the list of tax treaties. I can't find anything to exempt him from the SE tax. He has not lived in the US for the last 7 years and is not asking for US Social Security during his future US retirement -- he has a pension from the bank. Are there any exemptions for this type of case? I hate telling him that he owes $4000 for a US Social Security / Medicare system that he can never use and are only subject to because his employment designation changed. Is he better off giving up his green card and starting the process over when he does want to move back? Thanks.

Pacun - I understand the $10K gift limit (although gift tax return limit has been increased to $12K), but what is the significance of student bringing $9K with him? Thanks.

Gail, Thanks. I have been asking that much. No one has ever said "yes" - so that's probably why I never went any further. While I do have several clients from other countries, most are citizens at this time. There are some that are still on their green cards, however. I will make sure I am more thorough on this issue. But this issue could easily come up with clients who have lived in the US all their lives. Just in the last year, I have had 3-4 clients ask me about tax consequences of moving to another country. I did run across that form at that time, but had not recognized the form number. (And I know I have a lot more research to do.)

I do ask (all) my clients if they have any other sources of income. I explain that the IRS requires reporting of worldwide income. But I must admit that I have never asked if they have assets or trusts in another country - even if there is no income generated. Thanks so much. I learn so much from this forum.

I plead ignorance to that one. I must admit I never heard of that form. They never taught me that at Block or any of the other classes or references I've used. I never knew to even look for it. Thanks. I'll do my homework and learn more about it.

Gail- Thanks. Sending the tuition, etc directly to the school does make more sense. There will still need to be some money transferred to the brother because he would need general living expenses. But that amount is not as significant as the tuition. Jainen - I never said there were no differences between India and Pakistan, only that I didn't have any reason to know which country this client was from. The governments of my clients' home country have nothing to do with how I prepare my clients' tax returns. There are also significant differences between Republicans and Democrats, but don't check party affiliation before preparing returns. I agree that the specific country should not be an issue with a tax question, unless the issue is related to a tax treaty. And I also agree that moving large sums of money between any countries is an issue. Especially in this day and time. Thanks to all.

I appreciate everyone's concern for my liability. I called my client this morning to find out which country he is from. He is from India. I knew it was one of the two because I have several clients from these two countries. I started with one in 1999 and from word of mouth referrals, these 2 countries now represent about 10% of my clientèle. Most of the time I have no reason to know which country they are from. The main exception is when I have had to fill out the form requesting an ITIN for a spouse or other family member. As I said, this client is from India, not Pakistan. I apologize for not knowing before. I hope that minimizes your concerns. (Last time I heard, we were still on good terms with India. I'm still waiting for those mangoes.) So, it is still my understanding that to minimize tax consequences and avoid a potential gift tax return, the best option is for the brother to set up a US bank account before he leaves. This also seems to be a better option than the brother bringing the money with him (I'm assuming he would carry a check. Carrying cash would be extremely dangerous - regardless of the country of origin.) Even a check could get stolen. Have I got this right? Thanks