EricF

Will ATX provide a standard attachment to K-1s to let owners know a K-3 is not coming unless requested, or at least a box to check for it to be included, or will we have to type the statement in each return to attach to the K-1s?

Cbslee, I was going to post the same. Thanks. Death was not addressed in the first stimulus payment law, but it was for the second. The Q&A 5 you posted relates to the first payment, and the IRS specified returning it if the taxpayer died before receiving the payment. The second Q&A is relates to the second payment, and repeats what Congress specified.

I do not believe land rental qualifies as a Section 162 trade or business, a requirement for QBI (with real estate rentals having some other thresholds and requirements.) A trade or business has been held by courts to require regular, systematic and continuous activity, something is rarely part of rental of land.

Items ultimately treated as short- or long-term capital gains, or short- or long-term capital losses, are not QBI, including net Sec. 1231 gain. But if Sec. 1231 gains are netted with Sec. 1231 losses to produce a loss, the loss does reduce QBI. If there is Sec. 1245 recapture or ordinary gains, that does increase QBI.

In ATX, open up the Ln 18c, Sch K - Nonded Exp worksheet. There is a place to enter up to 4 nondeductible expenses other than meals and entertainment.

He didn't meet the 5 year rule, so the penalty applies. The distribution itself is not taxable because he had basis exceeding the distribution.

Try entering the $544 basis in the Roth account in Box 22 of Form 8606,

The recognition of gain to the corporation on the distribution of property from the corporation is required by Section 311(b), even if the corporation is an S corporation. If he doesn't want to trigger the gain that would be passed through to his 1040, it's better to leave the property in the corporation. If he thinks the S corporation is costing him too much in fees, compare that to the tax on a gain on the difference between fair market value and adjusted basis.

I think Publication 970 is clear. Both pages 15 and 16 have the same language: "the scholarship or fellowship grant must be one that may (by its terms) be used for nonqualified expenses." (Emphasis supplied by me.)

Christian, In ATX, go to the 1040 ExExp worksheet, Scholarship Worksheet tab. The default is to show the scholarship as nontaxable on Line 7a. You can enter a different number you want to be tax-free on that line, and it will show the balance as taxable.

It appears that ATX is forcing us to answer the question. Based on the answer, hopefully it won't print Schedule 1 for a "no" answer where Schedule 1 is not otherwise required.

Re-entering the prior year is essential for the NOL worksheet, because the NOL carryover is not just the Schedule C loss. It can be affected by other income reported in the return as well as deductions from income. Don't forget that we now have QBI loss carryforwards, nothing from 2017 and before, but if there was a QBI loss in 2018, it carries forward to 2019 to reduce 2019 QBI.

Yes, only make enough scholarship taxable to give dad $4,000 of college costs he can claim the $2,500 maximum AOTC. But with a standard deduction up to $12,200 for the daughter, it really doesn't matter how much she gets in most cases, unless the state doesn't have as generous a standard deduction, or none at all.

Please see the discussion on pages 4 and 5 of the Form 8863 instructions, with fuller discussion on page 16 of Publication 970, for IRS approval of this strategy.

There's no election. You just do it. See page 16 of Publication 970.

You can choose to make some or all of the scholarship taxable to the student. This would leave the tuition available for the parents to take the full AOTC. The scholarship income is considered earned income that can increase her standard deduction and result in zero taxable income.

The cash distribution of $10,131 would be on 1099-DIV in Box 9. Assuming the shareholder's basis is the $5,000 of common stock, he would report a capital gain with $10,131 proceeds and $5,000 basis, paying tax on the gain of $5,131, representing the retained earnings that are taxed again to a C corporation shareholder.

Using normal ATX, numbers do not flow from the 3115. You must input the 481(a) adjustment where it goes on the 1120S. It might be easy to program that for ATX, but when it comes to 1040s, where it goes depends on the activity the change relates to. Even in a business return, there may be more than one activity, and ATX wouldn't have any idea where to put the income or deduction.

Dawn, In the S corp return, there's a new tab under 1120S, "199A Activity Summary". There will be listed an 1120S activity, with an opportunity to add more. At the top of the form is a Check ('X") if Qualified Business. If you check that box, numbers will flow to the K-1s. If it is also a Specified Service Trade or Business, check that box also. Most of the input should flow from 1120S, but you may have to supply a Section 199A W-2 wages number and/or a Section 199A unadjusted basis number.

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.

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.

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.

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.

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.

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.