taxdan

Thanks Tom, that's what I figured. Just wanted to be sure.

I hesitate to show my ignorance, but... Does CA conform to the cancellation of debt on principal residence in 2009? How about in 2010? Thanks so much! Dan

Thank you very much for the replies. I do appreciate any input and do know that you are all very busy this time of year. For anyone interested, I think I am going to file a sch E pg 2, check "yes" on line 27, write in "PYA" on line 28 column a (as per instructions), then the amount paid for the lawsuit on line 28 column h. I will then attach a statment explaining the situation as no K-1 will be issued since the business closed up in 2008. Oh, and I think I will attach a 6198 for further clarification. If anyone thinks I'm going in the wrong direction with this, please let me know. Thank you! Dan

Cash basis.

I have a client that was a 50/50 shareholder in an S-corp restaurant that was bleeding money from 2002 to 2008, finally closing in 2008. He was sued (personally, not the business) for rent not paid for the business and lost. (don't know the specifics) He made payments in 2009 amounting to about $7,000. Can he deduct this anywhere on his personal return, like perhaps on line 21 with an attached description. Thanks for the input. Dan

Hi Catherine, Although I'm not in the San Francisco area, I am a financial planner in Santa Barbara. I'm a CFP and an EA and have been doing tax and fin planning for about 17 years. If any of your engineers would like a planner about 4 hours south of them, I do have clients all over the US. Hope tax season goes well for you! Dan

Thank you both very much. I appreciate the info.

New client brings me S-corp and personal returns to complete for 2006, 2007, and 2008. I notice on the 2005 return that an NOL had been accumulating up to about $150,000 at that time. It looks as though the election to carryforward was done in 2005. The extremely unprofitable business was closed in 2007. My question... In filing the 2006 and 2007 returns, can I still elect to carryforward the old NOLs to future years? I know I can not carryforward the 2006 and 2007 NOLs since they were not filed timely, only back. I have a lot to learn when it comes to NOLs. Thanks! Dan

Thank you both very much for the input. I will ask some more questions of the client and then make my decision. Thanks again!

If a client rents a house all year at below FMV to a non family member (old family friend), does the client not report the income and take any interest or prop taxes on sch A? I assumed the client reported the income on sch E along with any expenses UP TO the income...no loss... ...but the instructions for sch E say that renting to anyone for less than FMV is personal use and if personal use is more than 14 days...and you "rented" it for less than 15 days...do not report income and do not take expenses. It's late and I'm confused. Someone take me home. Thanks for any input!

To avoid the pre 59 1/2 withdrawal penalty from an IRA, does the withdrawal have to happen on or after the DAY the person reaches 59 1/2 or anytime during the YEAR the person reaches 59 1/2? I believe it's the day, but my mind is working a little slow today and I just wanted to verify with you good people. Thanks! Dan

I like it! Thanks guys. That's what I'm going to do. Line 21 it is. Pssst. I wasn't going to have him pay the tax anyway. I was just going to do it wrong by putting it on the E and taking the expense. But I like this way better.

Thanks Jainen. I think you're getting loopy like I am! It's time for me to go to bed!

Sorry. As is often the case on the message board, not all details given. Rent collected by client from the city and handed over to the landlord is less than $4K. NO other deductions because elderly person pays own share of utilities and maintenance. Client has no other itemized deductions (no mortgage interest or property taxes), so standard would be higher. Client in 25% Fed bracket so I didn't want him to have to pay an extra grand in taxes. I was just hoping I could claim rent collected on E and write off same amount paid to landlord. Once again, wishful thinking on my part.

So, in my situation listed above, since the client does NOT own the house (pays rent), and received the 1099-MISC for rental income, is his only option to claim the income on line 21 and take no dedcutions for it?...even though he just hands the money over to the landord?

I completely agree with you Scott. Taking the deductions on the A would not benefit my client in this situation. He does not own the property, so there is no interest or taxes to write off. Taking them on the E would be much easier. Oh well.

Client rents and lives in a house. Client takes care of elderly unrelated disabled person who also lives in house and pays rent. City is paying part of elderly person's rent under Section 8, but the checks went to my client who in turn, paid it to the landlord. Of course, the 1099-MISC showing rental income went to my client. I told my client to have the city pay the landlord directly in the future, but for now, can I just claim this income on a sch E and write off an equal amount of rent paid as expenses? And of course, if I put it down as not for profit rent, the whole amount will flow to 1040 line 21 and tax will be owed on it. Any input is greatly appreciated! Dan

That's kinda been my philosophy also. Thanks for the input!

Stimulus payment aside, is it normally a good idea to file a final return for a deceased person with no tax liability with the sole purpose of letting the government know they've lost another taxpayer? An attorney told my client this who lost her mother last year. I'm filing a return this year because of the stimulus thingy, but was just wondering for future years. Thanks! Dan

Thanks KC. Yet another thing I learn about the program. That is nice.

Thanks JRS. Yes, that is what I normally do. I was actually thinking about a partnership return though. The 8825 showing rental income varies from Fed to state due to depreciation and I wasn't sure if I should attach a "CA" version of the 8825...in addition to the 3885P. The only reason I got started thinking about this was that the last preparer that did this return attached a "CA" version. Oh well, not that important.

Are we supposed to label the Federal forms we attach to the state returns at the top such as... "California Copy" or "California Copy - California Amounts" ...assuming the state amounts are different due to depreciation and such. If so, is there an easier way than going into the form and editing it...or handwriting it? I know, I know...stop bothering us with silly questions Dan! I'm tired.

Actually, I think Cathy was right with the 20% up to $45K.

Well....I figured out what it was soon after I made the original post. I'm sooooo slow. Yes, it had to do with the date on the return. I took over the return from a previous preparer in 2004. I entered the partnership info and depreciation info that I took off the old return. The partnership had a "date business started" of 6/1/02. Many of the assets had beginning dates of 5/14/02. I just didn't catch that back in 2004 and I guess the program had no problem with it either. The 2006 program actually bumped all the assets back to 2001 and I didn't notice until this year. I simply changed the dates of the assets to 6/1/02 and it worked fine. Sometimes I just really frustrate myself. Thanks all for your help. Dan

For the heck of it, I just tried opening a new 1065 and entered info on the asset entry screen. Everything worked fine. It looks as though there is just a glitch with this particular return. Which...I guess means....I will have to redo the whole return from beginning. yippeee