BHoffman

Yeah...what SaraEA said.

I don't think the 1099B cost basis figures in. On the exercise date, the taxable income on the W2 is the difference between the FMV of the stock that day - the exercise price = the bargain element. On the sale date, the cost basis is the amount he actually paid for the stock at the exercise date plus the bargain element. An equation would look like this: Cost basis = Exercise Price + (FMV - Exercise Price). FMV = 45 Exercise Price = 25 Bargain element = 20 Sale Price = 50 His W2 would show the bargain element of $20. The 1099B would show the sale price of $50. The cost basis would be: Exercise price $25 + Bargain element $20 = $45 Sale price $50 - Cost basis $45 = $5 S/T gain. If he sold it on the exercise date, the FMV would be the same as the Sale Price and there would be no gain or loss. He would be taxed only on the bargain element in his W-2.

Here is an example where the client exercised the option and then held the stock for less than one year before selling: From this link: https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Non-Qualified-Stock-Options/INF12046.html Exercise date: 6/30/2015 Exercise price: $25 Market price on 6/30/2015: $45 Sales date: 12/15/2015 Sales price: $50 Commission paid at sale: $10 Number of shares: 100 Again, the compensation element of $2,000 (calculated as in the previous examples) is considered taxable income and should be included in Box 1 of your 2015 Form W-2. If not, you must add it to Form 1040, Line 7 when you fill out your 2015 tax return. Because you sold the stock, you must report the sale on your 2015 Schedule D. The stock sale is considered a short-term transaction because you owned the stock less than a year. In this example, the date acquired is 6/30/2015, the date sold is 12/15/2015, the sales price is $4,990, and the cost basis is $4,500. The short term capital gain is the difference of $490 ($4,900-$4,500). How did we get these figures? The sales price ($4,990) is the market price at the date of sale ($50) times the number of shares sold (100), or $5,000, less any commissions you paid when you sold it ($10). The Form 1099-B from the broker handling your sale should report $4,990 as the proceeds from your sale. The cost basis is the actual price you paid per share times the number of shares ($25 × 100 = $2,500), plus the compensation element of $2,000 for a total of $4,500. So the gain is $490, the difference between your basis and the sales price, and will be taxed as a short-term capital gain at your ordinary income tax rate

On what day did the client exercise his option? If it's the same say he sold the stock then the basis will equal the sale price. I'm sorry I just assumed this was the case. If he exercised the option and held the stock for less than a year before selling it, he might have a gain or a loss but we don't know without more information: His exercise date, exercise price, number of shares exercised, market price on the exercise date, sales date, sales price, and number of shares sold. Sometimes the employer will give the client a letter with this information.

One more thing - you will need to show an adjustment to the cost basis on the Sch D.

If the client exercised the option and then sold the stock short term, the cost basis and the sale proceeds for reporting on Sch D will be either the same or will show a small loss due to commissions. The income is reported on the W2. The 1099B works out to be a wash.

https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Non-Qualified-Stock-Options/INF12046.html See the link for a nice description of how to deal with this. There are details as to when the client exercised the options and when the client sold the stock,

What shows on the W2 box 12 code V?

Well, no. If the home office is no longer being used, the carryover is lost.

I have a client who is winding down her Sch C business and has a home office deduction carryover. She had a little income of $8k. She says she really didn't use her home office in 2015. I want to simply apply the 8829 carryover as her home office deduction to that income without incurring any more home office deductions. Can I stop the depreciation as of 01/01/15, and use form 8829 for the carryover only? It would be just about used up if so. And can I enter the 2015 mortgage interest and property taxes only on Sch A?

I've manually input W2s for companies that have only a few employees. The Confirmation Receipt shows the W-3 information. If you didn't print it, you can go to "Submission Status" and print the page that shows W-3 detail. I don't think you get an actual W-3 form, but you could create one and attach the BSO W-3 detail information.

I think it's how (if it was) the transactions were recorded. I've seen clients code vehicle payments to "Auto Expense" instead of capitalizing the asset and recording the payments to the loan. The trucks and trailers might have been written off over the years as an expense.

I would probably be asking for tax returns 2011 and forward, along with the purchase docs. "Rocky, watch me pull some trucks and trailers outta my hat!"

Hi David - Rev Rule 99-6 offers guidance. Might want to take a look

I went to www.irs.gov and searched for 'conservation easement' and read the first article. Your client would need to very carefully document everything and tread wisely. Seems that IRS is all over this.

See IRM 25.6.1.9.4.4 - "The joint return is deemed filed on the actual filing date of the joint return where only one spouse filed MFS and the other spouse did not file and had gross income in excess of the exemption amount."

You might be able to use the First Time Abatement. I've had it approved over the phone a few tImes.

OP is happy as a clam

Yep. Especially when the K1 got here yesterday and the client needs the tax return for a refi the day before that. Thanks everyone for saving me a lot of time

Abby,. I'm a Drake user. There are no input boxes for 16 on a K1. Jklcpa, this does meet that criteria and I'll take another look at 1116 instructions with a little more confidence. Thanks!

Can I put the $61 on Sch A and be done with it? I'm going to charge a lot more than the $61 credit to prepare the 1116 forms....

Never mind.....

I would rather not screw this up Partner K-1 box 16 has codes and amounts (see below), and I'm lost as to where on form 1116 to enter them. The foreign tax paid is only $61 (box 16 code L). Can someone guide me? The client will be getting this K-1 every year. I'm not understanding the form 1116 instructions for this. Code A - OC (Other Country OK) Code B - $21,958 Gross income from all sources. (line 1a?) Code E - $10,550 Gross income sourced at partner level. (or is this on line 1a?) Code G - $163 Interest Expense (?) Code I - $38 Passive Category (?) Code J - $9,127 General Category (?) Code L - $61 (Part 2 OK) Thanks for any advice!