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G2R

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Posts posted by G2R

  1. On 3/4/2022 at 5:58 AM, Randall said:

    I just did this for an S corp.  Only one shareholder.  The 7203 info was imported and I double checked it with the Basis Statement in the 1120S.  I attached it as a pdf.  Haven't efiled it yet.  Working on the shareholder 1040 now.  I don't know if this was from a recent ATX update or not.

     

    Nice.  I haven't seen this yet, but I am very happy to hear ATX did this.  

  2. I was wondering about this too.  I do plan to attach it.  I prepare many NY returns and CT-399 is a PDF attached requirement too so I'm used to the extra legwork. 

    On a separate note, it would be nice if ATX pulled the Shareholder basis stmt info from the 1120S return to the 7203 during the K-1 import.  Probably a big ask, but it would be nice since it's pulling the K-1 data anyway. 

    • Like 1
  3. That's a damn shame @cbslee.  Wonder if they ever thought back to childhood memories and asked themselves, is this really what we've come to?

    Had a client who gifted shares of his company to his children.  Easily worth millions.  The son got mad at at his dad and sold these gifted, never earned them or worked a day in his life, shares to the minority shareholders, which then gave them the majority, and they eventually pushed the owner/dad out of his own company that he had built from the ground up.  Most cold-blooded move I ever saw in my career. 

     

    • Sad 2
  4. 9 minutes ago, cbslee said:

    I assume the non controlling shareholders are retaining outside attorneys and the defending attorneys represent the controlling shareholders and the business.

    Correct. 

    10 minutes ago, cbslee said:

    This will take some serious research. I suspect you will find that the attorneys, representing the business and the controlling shareholders, should be able

    to provide research supporting the deduction of most if not all of these fees. I know at first glance that doesn't seem right, but in the real world that is what happens most of the time.

    Thanks for your reply @cbslee.  As always, I really appreciate it. 

    When they first got into this mess, I told them "The only one that's gonna win in this are the lawyers." 

    • Like 3
  5. Family business. The shareholders are in a bitter legal battle with each other over ownership, money handling, trademark infringement, etc. 

    The way I understand, legal fees paid for the protection of company assets (trademark), and in the ordinary course of business (like being sued by a customer or vendor) would be deductible to the company.  But the battle over who will retain ownership, buyouts, etc, is NOT deductible to the company.  

    I have asked the lawyers to be very specific in their billing so I can pick through the bill for deductible items.  

    Any one have experience in this area to confirm my research.  TIA

  6. 50 minutes ago, jklcpa said:

    The PPP tax-exempt income increases stockholder's basis.  It should be shown as an increase to Other Adjustments Account and doesn't add to AAA.

    Hi JKLCpa, this confused me.  I thought the updated 1120S instructions actually does say to increase AAA. 

    On 1/22/2022 at 3:59 PM, WBR said:

    Final 1120-S Instructions for 2021

    If column (a) on line 2 or line 4 of the
    Schedule M-2 includes expenses paid
    with proceeds from forgiven PPP loans, an
    S corporation should report that amount in
    column (a) on line 3
    and in column (d) on
    line 5 of the Schedule M-2.

    If column (a) on line 1 of the Schedule M-2
    includes expenses that were paid in a
    prior year with proceeds from PPP loans
    that were forgiven this year, an S
    corporation should report that amount in
    column (a) on line 3
    and in column (d) on
    line 5 of the Schedule M-2."

  7. Hi @Yardley CPA I have a client that works in NY, but lives in FL for her own convenience, not the employers.  I only file an IT-203 and allocate 100% of the W-2 income from the NY job to the NYS amt column pm IT-203. 

    Another client of mine work in NYC, but come Covid, he worked remotely in NJ the entire year.  All wages were still allocated to NY earnings despite his lack of physical presence in NY. 

    I think IT-203B is meant for W-2 jobs where some of the wages are earned inside NY and some are earned outside NY, the deciding factor being necessity.  Meaning the wages earned outside NY and are not allocated to NYS because it was necessary for them to be outside of NY to perform the job. 

    I agree with your assessment of the convenience test.  

    I was confusion about the NJ/ Penn reference in relation to NY so if I misunderstood the question, I'm sorry for a pointless reply.  

    • Thanks 1
  8. New client, new LLC in 2021.  They want to be taxed as an S-corp for 2021. They didn't file timely so I'm filing a late 2553. I found the button in ATX to add the verbiage to the top of 1120S (screenshot below for anyone looking for it). 

    Question: do I attached a PDF of the signed 2553 to the efile or do I have to fax a copy to the IRS?  Should I do both? 

    image.thumb.png.8a912eb85da606522c87b2153b543b0b.png

  9. Just reading up on the 1120S instructions updates. Found this summary which quotes the 1120S instructions.  To Read the Entire Article, Click Here

    Quote

     

    In the draft instructions for the 2021 Form 1120-S, the IRS has now stated their position—and it agrees that such expenses do not reduce the accumulated adjustments account.  Page 45 of the 2021 draft Form 1120-S instructions provides:

    An S corporation should include tax-exempt income from the forgiveness of PPP loans on line 3 and report expenses paid with PPP loans that are forgiven on line 5 in column (d) of the Schedule M-2.[5]

    Thus, returns prepared using the default treatments provided by most tax software will have understated AAA and overstated OAA for S corporations who received PPP loans and have treated the loan as forgiven when filing the 2020 S Corporation income tax return.

    Revising this calculation should not require formally amending the 2020 S Corporation return, since the amount of AAA at the beginning of 2021 is not required to agree with that shown on the 2020 return by any provision of the IRC. Rather, the IRC simply requires that the S corporation use the proper amount of AAA to determine the tax status of any distributions.

    If distributions in 2021 did not exceed AAA this adjustment would be all that is necessary to correct the reporting.

     

    The words in red were written under column (d) instructions for the 1120S so I'm not understanding how this corrects the reporting on M-2 column (a) being understated.  Are we suppose to add the PPP forgiveness to line 3 of column (a)?

    • Like 1
    • Thanks 1
  10. 49 minutes ago, DANRVAN said:

    Would that be an actual distribution of cash, or would it be a redemption of B's stock so A becomes 100% shareholder?

    Redemption of B's stock so A become 100%.

    50 minutes ago, DANRVAN said:

    It is not clear here what the objectives are.  Is the idea to get shareholder B out?

    The two SHs do not want to own the replacement property together.   Since the property is tied up in the S-corp, it seems getting B out offers the lowest tax cost overall.  A becomes 100% owner of the S-corp and can choose the property he wants inside the corp & B, with the SH buyout proceeds, can purchase whatever property he wants individually.    Does that sounds accurate? 

  11. 2 hours ago, Abby Normal said:

    Now, ATX needs to update the jump from the 8582 to take you to that tab and not the one where you can't enter anything. And, they should add a jump from the tab you can't enter anything on Sch E to the tab where you can.

    Agreed!  It shouldn't be such a mystery to find.  I find those little checkboxes and blips of information ATX throws in above the forms is where they stealthily put a lot of incredibly important data entry clues. 

    • Like 2
  12. Thank you @DANRVAN for all your insight on this.  It's good to hear another professionals advice on the matter.  You're 2nd option for the buyout if they don't have cash is what I was trying to explain in my post above (obviously not well).  I've referenced my thoughts in Red below.  If you see something drastically different than you analysis, please let me know.  I want to learn.

    16 hours ago, G2R said:

    Say they sell property for $100. Shareholder A wants to 1031 his portion, the company reinvests $75 into a like-kind property and no gain recognition will occur on that (partial 1031).  But SH B wants their portion for themselves, so if they distribute $25 to themselves that triggers gain recognition to the shareholders based on ownership. (25% of the sale's proceeds aren't reinvested, so SH A would have to recognizes 75% of that 25%'s gain!)   That's unfair to SH A, but that's how it would play out.  (Meaning, he'd pay tax on the 25% not reinvested, though he doesn't get the money distributed to him if SH B takes it.  That's why it's a crap idea for SH A.)

    So, I'm not seeing a way around 50% of of the gain being recognized by the SHs without financing the stock buyout.  (Meaning between the two SH, 50% of the realized gain would be recognized)

    • 25% would be recognized by SH B when he sells his stock in the company. 
    • 25% of the $100 would be recognized when it's not reinvesting in like-kind property & instead used to buy SH B's stock. (Unless he gets a loan from a bank and finances the stock buyout.) (see below)

     

    43 minutes ago, DANRVAN said:

    A third option is to complete the 1031 in whole, then borrow 50,000 against the replacement property at the corporate level.  The $50,00 is then used to redeem the 25% stock owned by B.  In that scenario A has not spent any money personally to become 100% owner in a corp worth $150,000, including a note payable of $50,000.  Also, "A" does not incur a tax bill under that option.

    This is what I meant by the 2nd bullet point above. "25% of the $100 would be recognized when it's not reinvesting in like-kind property & instead used to buy SH B's stock. (Unless he gets a loan from a bank and finances the stock buyout.)  

    Only problem is I asked the SH if he thought the bank would give me the loan with the recently acquired property as collateral, he said he didn't think so.  Seems odd though considering the loan would be for 25% of the property's value.  

    I probably should have noted that BOTH SHs are my clients so the tax ramifications to both are important. 

  13. 1 hour ago, DANRVAN said:

    There are not any specific rules for that.  You just follow code 1031 and apply it to the entity level which is the corporation.  Then you follow the rules for shareholders.  Your client has the advantage of owning 75%, so that puts him in the drivers seat.

     

    Ok, between your article @DANRVAN and the one @cbslee linked, I think this is how it goes. 

    Cbslee's article discussed one shareholder wanting 1031 & the other wanting to cash out.  What I thought they were saying was that it's all or nothing.  If any cash is taken by a SH, then the entire 1031 exchange is taxable.  But actually, reading it a second time, what it's saying is, the portion not reinvested is recognizable proportionate to the SH ownership. (Typical 1031 stuff.)

    Say they sell property for $100. Shareholder A wants to 1031 his portion, the company reinvests $75 into a like-kind property and no gain recognition will occur on that.  But SH B wants their portion for themselves, so if they distribute $25 to themselves, that triggers gain recognition to the shareholders based on ownership. (25% of the sale's proceeds aren't reinvested, so SH A would have to recognizes 75% of that 25%'s gain!)   That's unfair to SH A, but that's how it would play out.  

    So, I'm not seeing a way around 50% of of the gain being recognized by the SHs without financing the stock buyout. 

    • 25% would be recognized by SH B when he sells his stock in the company. 
    • 25% of the $100 would be recognized when it's not reinvesting in like-kind property & instead used to buy SH B's stock. (Unless he gets a loan from a bank and finances the stock buyout.)

    The timing of the SH buyout is irrelevant. 

    Then I found this article: https://legal1031.com/1031-exchange-resources/1031-exchanges-s-corporations/

    In the article, they give a potential solution, but I'm struggling to understand OPTION 3's execution.  

  14. Client is a 75% owner in an S-Corp.  The S-corp owns property that is about to sell for big bucks.  Client wanted to do a 1031 exchange but wants to be 100% owner of the new properties.  I explained that usually the same owners must sell and buy the exchanging properties in a 1031 exchange. 

    If the S-corp buys out the 25% owner shares, then my client becomes 100% owner of the S-corp and can proceed with the 1031 exchange under the S-corp umbrella.   What do you think?

    Is there any advantage or disadvantage to 1031 occurring BEFORE the 25% shareholder is bought out? 

  15. 38 minutes ago, Lion EA said:

    How does a CT S-corp that files a NY return opt in? Online? A form to fill out. (In CT it's mandatory.)

    Just efiled my last return for the day, so need to get to these things I postponed !!

    Deadline to opt in for 2021 is TODAY.  

    This is from an email NY sent out a while back:

    To opt in:

    Log in to your S corporation's or partnership’s Business Online Services account. (If the business doesn’t have an account, we recommend creating one by October 8 to avoid missing the election deadline.)

    Select the ≡ Services menu in the upper left corner of your Account Summary homepage.

    Choose PTET web file from the Corporation tax or Partnership tax expanded menu, then select Pass-through entity tax (PTET) annual election.

    Reminder: Tax professionals cannot make the election on behalf of their clients.

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