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About EricF

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  1. We prepared a return in 2019 and created the e-file. For various reasons, the return was not e-filed until 2020. ATX Electronic Filing Center rejected the e-filing (on the extended due date!). The explanation was that the e-file identifier contains the year created and must be filed within that year. The return with a 2019 identifier was not accepted when e-filed in 2020. We had to delete the EF form and add it back. The recreated e-file had a 2020 identifier, and it went through. Lesson learned: Don't let the time between creating the e-file and submitting the e-file stretch over the end of a year.
  2. Per the form instructions, if a taxpayer is not otherwise required to complete Schedule 1, he does not need to include Schedule 1 with the return just to answer "no" to the virtual currency question. Anyone filing Schedule 1 needs to answer the question, and of course, if the answer to the virtual currency question is "yes", the taxpayer needs to file Schedule 1 to answer the question.
  3. Of course it depends on the terms of the trust, but it sounds as though the mom had the capacity to dispose of the land during her lifetime and end the trust. Bottom line, if the assets in the trust would have been included in the mom's taxable estate, even if the mom didn't have an estate large enough to have to file a Form 706, the granddaughter gets a basis equal to the fair market value on the date of mom's death (Code Sec. 1014(a)(1)). The value is not conclusive, but is a presumptive value that may be rebutted by clear and convincing evidence. See https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritances in the first part of the IRS answer to the question on the page.
  4. Agree since the parents provided no support; support is a requirement for dependent status. If they provided more than half her support, the daughter could be a dependent as a qualifying relative, as long as she did not have more than $4,150 gross income.
  5. Home office deduction is a deduction attributable to a qualified business, so it does reduce QBI. It can be a specified service business if it falls under the category of "consulting". The regs define consulting as the provision of professional advice and counsel to clients to assist the client in achieving goals and solving problems. The performance of service in the field of consulting does not include the performance of services other than advice and counsel, such as sales or the provision of training and educational courses. Facts and circumstances used in making the determination include, for example, the manner in which the taxpayer is compensated for the services provided. Performance of services in the field of consulting does not include the performance of consulting services embedded in, or ancillary to, the sale of goods or performance of services on behalf of a trade or business that is otherwise not an SSTB if there is no separate payment for the consulting services.
  6. Why are you saying this is not a final reg? The language is from the final regulations (T.D. 9847) released on January 22, 2019 for publication in the Federal Register on February 8, 2019.
  7. I take this back. The amount of wages properly allocable to QBI is the amount taken into account under Regs. Sec. 1.199A-3 (Reg. Sec. 1.199A-2(b)(4) . So if only 30% of your wages are used to determine QBI, you would show 30% of the W-3 amount.
  8. W-2 wages: There is no over-inflation of wages, if all the wages are reported on Form W-2. and no employees are on a foreign payroll. You are following the method specified by the regulations. Unadjusted basis: If assets are being used both in the U.S. trade or business and the foreign trade or business, they are being used in the U.S. trade or business, so I think their cost would be included and not apportioned. Can the identification of assets be put on the client? If you are using ADS for assets used outside the U.S. you are overstating depreciation because GDS is required, and the method is straight-line over a longer life. As I read the 1120S instructions, the statement should be attached if there is more than one trade or business. I think it is referring to more than one qualified trade or business, so if you don't have that, a statement is not required. Of course, you can attach anything you want, but I'm just saying it's not required. The attachment to the K-1 is to help the shareholder, not inform the IRS.
  9. Qualified business income must be effectively connected with a U.S. trade or business within the meaning of section 864(c) (Reg. Sec. 1.199A-3(b)(2)(A)). W-2 wages must be reported on a return filed with the Social Security Administration (Reg. Sec. 1.199A-2(b)(2)(iii)), so I would use the Form W-3 filed by the employer for the number. Unadjusted basis must be held by and used in the qualified trade or business (Reg. Sec. 1.199A-2(c)(1)(i)). How hard would it be to determine the cost of the assets used in the U.S. trade or business? If there are foreign fixed assets, I assume you would already be making the distinction by using ADS for depreciating foreign fixed assets and GDS for depreciating U.S. fixed assets.
  10. Well, we got the basic structure from Congress when the law was enacted in December 2017. There were so many open questions at the time that needed IRS guidance, it was hard to move ahead with confidence. Mid-2018, the IRS came out with methods for computing W-2 wages for Sec. 199A. Then we got proposed regulations in September that answered a lot of questions, but IRS was asking for comments, so it was open to change. It was enough to do some effective year end planning for 2018. The final regulations were released in mid-January 2019. That's when I really started studying the various provisions. The final regulations accepted some suggestions from practitioners, but rejected many more that were basically a wish list from practitioners. At the same time, we got the real estate safe harbor in an IRS notice. So, it has been on my radar screen all year, but my intense learning has been over the past month.
  11. The election to aggregate activities for Sec. 199A and the choice to group rental activities to meet the 250 hour safe harbor are two different things. The choice to group rentals under the safe harbor is one you can make and not have to disclose in the annual statement required by Notice 2019-07. There is a consistency requirement, though, and taxpayer may not vary the chosen treatment year to year unless there has been a significant change in facts and circumstances. The aggregation election under the regs under Sec. 199A is for the purpose of accumulating the QBI, W-2 wages, and unadjusted basis for application to the aggregated group of activities. This also has a consistency requirement. There is an annual disclosure of the activities that are being aggregated. That reporting must be consistently reported in all subsequent years. In a subsequent year, if there is a significant change in facts and circumstances such that if the prior aggregation of trades or businesses no longer qualifies for aggregation under the rules, the activities cease being aggregated, and the taxpayer must reapply the rules to determine a new permissible aggregation, if any.
  12. Buildings are included in the unadjusted basis number. They are still in their depreciable life if they are less than 27.5 years old, or 39 years old as the case may be. Assets with a depreciable life of less than 10 years can be included if they were placed in service in the last 10 years. Passthrough entities (RPEs) can aggregate, and individuals can aggregate. An individual may add activities to aggregation done by an RPE, but may not subtract activities from that aggregation.
  13. Yes. If the deduction of formerly suspended losses reduces taxable income enough, 20% of taxable income may be less than 20% of QBI, limiting the benefit in that way.
  14. The holding period begins at the date the stock is received rather than when the restrictions come off. So your client can sell the stock as soon as the restrictions come off and get long-term capital gain treatment.
  15. I don't think it kills Sec 199A per the law, but ATX doesn't list it as an activity on the Sec 199A Worksheet and therefore no QBI. In ATX, it's looking like you have to create a Sch C.
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