BHoffman

Dear Bulldog - If you look at prior posts on this thread, you can see that the cats won.  Get over it.  (just kidding)  

I have a trust return form 1041 to do.  Date of death was 06/13/16.  

I filed form 8855 to make an election to treat the trust as an estate so a fiscal year - first and final - return can be filed.  I also filed form 7004.

Do I have these date right?

Fiscal year is 06/01/16 - 05/31/17.

Due date without extension is 09/15/17.  

Due date with extension is 02/15/18.

I'm asking because the trust has income from a brokerage account.  The brokerage account was closed on 05/30/17.  Everything else was closed in 2016.

I have the 2016 consolidated forms 1099 and the 2017 monthly statements.  The thing is, I'd rather wait until the 2017 consolidated 1099 is issued than muck things up by trying to report a first and final 1041 and then have to go back and amend it if my calculations don't match the 1099.

The trust will not owe any tax.  Everything is distributed to the one beneficiary.  In fact, there was withholding from an annuity so there will be a refund and the trustee is keeping the bank account open until that's settled.  

If all else fails, I'm understanding that I can file the 1041 late without penalty if there is no tax due.  Right? 

BTW:  This is an Oklahoma trust, if that matters.

I have to renew my license this year and am down to needing 16 hours of live webinars.  I used to take 2 8 hour courses from The Taxspeaker, but am considering taking a bunch of free 1 hour courses from CPA Academy.  Anyone use that, and what did you think?

I am also required to submit a peer review this year and am finding the new PRIMA website to be a real misery. Anyone having any luck with that?

The AZ Society of CPAs board of directors is made up of mostly older power players.  They dictate to the AZ State Board of Accountancy matters such as ethics and peer review requirements.  

When AZ required 4 hours of ethics, the ONLY approved course was owned by one of the board members.  

Pretty sure AZ peer reviewers are all members of the Society.  

The testing and oversight isn't to weed out or catch the bad guys, obviously.  Based on results, that isn't happening.  What is happening is a movement of money.  Follow it and the reason for compliance testing and regulations become clear.  

Pub 535 says the amortization would begin on the date the restaurant opened for business.  

It is easier to discount than to raise prices.  I set my fee per form at the worst case scenario and then discount.  I have some real PITA clients and charge them a semi-high flat rate every year.  I usually charge new clients a little higher than average and then start discounting if they are organized, timely, responsive to questions, etc.

Like Abby, I file extensions for all business tax returns, ready or not.  I also filed for extensions on the 1099 forms.  Life is too short to work under the gun.  

1120S penalties might qualify for abatement under the First Time Abatement policy.  I've had these relieved over the phone more than once. Take Abby's advice about getting the 1065 penalty abatement and you might be able to deal with this over the phone by faxing the statement to the IRS rep.  

I used to avoid extensions. They have now become my best friend.  Knock on wood, none of my clients have received notices in the years since I've been filing extensions.  No hurry, no worry. 

Deb, how familiar are you with the balance sheet?  That's probably the biggest difference between preparing Sch C and the other business returns.  If you need to brush up on it, I'd suggest you start there with a particular focus on the equity/capital section and how it works with the income statement.  Every class is going to be talking about the balance sheet.

What software are you using?

I'm not so sure this was an operating lease. There are criteria, but usually if the client intends to own the equipment at the end of the lease term, we capitalize it.

If the loan balance was zero at the end of the lease term, and the $70k residual balance came as a surprise then I'm guessing the original purchase price of the assets may have been understated and/or the imputed interest may have been miscalculated.

The first thing I would do is take a look at the lease documents.  

I have been known to break out in song at telemarketers. Happy Birthday and My Way. Real loud until they hang up. But usually I just click the phone on and off.  If they are persistent, I block them.  Helps in the short term.  

Undivided interest in property info is here

https://www.law.cornell.edu/cfr/text/26/1.170A-7

Undivided portion is OK and it's spelled out in the amended agreement. 

Yes, the qualified written appraisal will be done. The client knows it is required. His attorneys know a few qualified appraisers and are getting quote$.

A twist in the plot!  I severely miscalculated the donation amount. The charity will receive 2% of the entire partnership, so it goes like this:

FMV = $10m X .02 = $200,000

Unrealized receivables = $1m X .02 = $20,000

Deductible contribution = $200,000 - $20,000 = $180,000

Makes a difference.  

35 minutes ago, cbslee said:

1.  A qualified appraisal is required for 8283 donations over $10k.  It can be performed after the sale and before the due date of the client's 1040 as long as the date of the donation is included.

2.  I think the charity has agreed to hold the interest until a sale is completed.  The client tells me they are definitely selling the partnership this year.

3.  There will be unrealized receivables and UBTI involved.  The charity's board of directors, attorneys, accountants, etc. have approved acceptance of the interest knowing this.  I'm going to assume they have covered their bases.  The charity will not receive any tangible personal property, just cash upon the sale of the partnership.

Thank you very much for taking the time to have questions.  I'm sure I will have more as this thing progresses   I appreciate it!

 

You guys need a hobby

Yes, I have been squawking about how the charity is apt to treat the shares, but have received no response. I am supposed to get the amended operating agreement tomorrow so the epic saga will continue....

He is an eternal optimist and believes the partnership will sell at an enormous gain in the next week or so.  He wants his favorite (qualified) charity to share that (tax exempt) gain, and he doesn't mind having a charitable deduction by doing that good deed.

As no good deed goes unpunished, I agree that the cost might outweigh the benefit. However, after running some proformas I found that if he donates the shares, his net cash in hand after the sale will be more than if he donates cash after the sale.  Frankly, that's the real benefit and I don't think the charitable deduction after expenses from a cash flow perspective is going to help much.  

You are correct about the $3500, but I don't know what's going on with your software.  FWIW, I've had better luck carrying back losses by preparing amended returns as opposed to using the dreaded form 1139

Good point. The attorneys are working on an amended operating agreement and tell me it will be ready on Tuesday. 

Oh, this thing is full of fun. There is also the issue of donating a partial interest, and last I heard the genius tax attorney was going to amend the operating agreement to allow a "non voting" class.  I'm just a hack, but I think to deduct a partial interest, it has to be an undivided share, meaning that the donee has the same rights as the donor.  I sent an email to the geniuses and have asked for an opinion.  The client wants to do this RIGHT NOW because he thinks a buyer will be identified on Thursday, and then it's too late.

I do the bookkeeping for this partnership for a nice fat monthly fee.  That will go away when they sell.  So, I'm not even real motivated to keep the client for just his wife's 1120S and their 1040 if it means a lot of knuckle biting next tax season over this. I'm too old and too ornery and too tired to enjoy slogging into weird and murky water like this.

Thank you so much for taking a look at this.

I'll try this again with different assumptions and better phrasing

My client is a 20% limited partner in an LLC.  He wants to donate 2% of his member shares to a qualified non-private charity.  I was informed on Friday, and he wants to this on Wednesday. 

The partners are trying to sell the partnership, but no buyer has been identified.  It is listed for sale.  The asking price is $10m.  If my client decides to make the donation, the required qualified appraisal will be performed shortly after the sale and/or before his tax return is due.

Unrealized receivable hot assets are $1m.  There are no liabilities.  There are few fixed assets and not much depreciation recapture.  He has no passive loss carryforwards, etc. so let’s ignore all that and assume the only issue is the unrealized receivables.

My calculations are this:

Estimated FMV of 2% donation = $10m X 20% = $2m X 2% = $40k

Less:  Hot assets = $1m X 20% = $200k X 2% = $4k

Client’s deductible charitable contribution = $40k - $4k = $36k

Is my calculation correct?  I’m asking because I’ve never actually done this before although I have researched it carefully.  I’m hoping for some confirmation if anyone has experience with this unusual transaction.