MJG CPA

OK, I appreciate the replies.

Taxpayer is giving me a hard time. He lives on the farm that he rents out. In 2007, he put in a blacktop driveway. He thinks this should be at least partially deductible because it is the same lane that is used by the farm tenant.

I don't think a blacktop drive falls qualifies as an "ordinary and necessary" expense. Am I being too strict?

What say you??

I had only one client who made use of puts and calls. His annual paperwork included some excellent explanations about how to report them. I think he trade through Schwab.

Yes, I received some of these from my clients also. So be sure to ask your client for any such information [clients don't always bring you all the paperwork they received-at least mine don't].

I would like a good resource in learning how to report stock options. I have a return to do with puts and calls and have never reported these before.

HELP!!

Karen

If you have the 1040 QuickFinder, see pgs. 7-7, 7-8, and 7-15; also Pubs 525 and 15-B if it is an employee stock option. That will at least get you started.

helps in reminding the client that this is a separate 'entity', and must be treated as such, even if it is reported on a Sch C. Never, ever, let them just continue to use their old bank account. The new entity should always start clean, with it's own seperate bank account.

Good point, KC.

Thanks, JRS!

Does a single member LLC need to apply for an EIN if there will be no employees or other reason to have an EIN?

I had something similar a few years back. I was calculating the SEP contribution for a new client (s-corp sole shareholder) and wondering why this year's contribution was so much less than the prior year's contribution. Turned out the prior year was calculated incorrectly. In coming to this conclusion, I was in contact with the Plan Trustee and once they became aware of it, they insisted the excess be removed or applied to another year. We amended the return for the year in question, carried forward some of the excess, but also had to remove a large chunk.

My QuickBooks payroll program just downloaded a payroll update and one of the changes was they are now saying (for 2008) that s-corp medical for >2% shareholders is considered taxable wages for IL.

I am not aware of such a change and upon calling IL Dept of Revenue, they were not aware of it either.

IL practitions will want to be aware of this issue.

Does anyone have any information concerning this change or is it an error by Intuit?

I go by the theory that if i can't figure it out and the atx programmers can't figure it out, then the irs auditors can't figure it out either. Hand them a work sheet and 9 out of 10 times they say fine if the numbers are close. on that dreadful 10th time, just blame it on the computer!

Well, I happened to get #10. I submitted the ATX NOL carryover worksheet (which was different by about $11,000-the change in taxable SS benefits and change in deductible medical) and IRS has rejected it saying it needs to be calculated using sch B of Form 1045.

So that's what I am doing. :(

If you wish to send me a message with the details, I would be happy to review your calculations for you.

Maribeth

I have just sent you the information. Thanks for your offer. :rolleyes:

I have a 2006 NOL being carried back to 2005 which is not totally used in that year. I'm trying to make sure I have a good number for the amount remaining to be carried forward to 2007.

In calculating the carry forward, I brought in the ATX NOL worksheet (the Ln 24-NOL tab) into the 2005 return. It calculates a different number than my manual calculation on sch B of the Form 1045.

The difference is due to the change in taxable social security benefits and amount of medical benefits that are now deductible because of the decreased AGI.

The ATX worksheet is basically saying that these items don't consume part of the NOL but the 1045 ignores these items in determining the amount to be carried over.

If anyone is good at calculating NOL c/o's:

1. Can the ATX worksheet NOT be used for a calculation of NOL usage in a carryback year?

2. Logically, does it make sense that the decrease in taxable soc security benefits and the increase in deductible medical exp. (sch A itemized ded.) would consume part of the NOL?

Appreciate any thoughts!

and which entity would this be that you are nudging? S-Corp or LLC?

Currently, the client is a general partnership, looking to form either an s-corp or an LLC for liability protection.

From a tax and cost standpoint, initially I favored the idea of s-corp due to low cost (in IL). The client has no debt - owns the land outright, so debt basis is of no concern.

The sec 754 election available to the LLC may warrant another look - so that's where I'm at right now.

>>I like LLC's for a number of reasons<<

The original post only gave one reason -- liability protection. As an attorney you must admit there is far less case law supporting liability protection for LLCs than for corporations.

Yes, that was the client's reason for wanting to incorporate. But I'm trying to look at it from a taxation point as well. If both an LLC and s-corp provide liability protection, but there is any tax benefit to be gained by going one way or the other, then I would try to steer the client in that direction.

So far, I have not come across anything that would lead me to believe the ultimate tax on the capital gain would be computed any differently if sold within an LLC vs. an s-corp.

If anyone else has a better idea, I would appreciate a nudge in the right direction.

Thanks!

To an extent, that depends on the state involved. Some states tax LLCs more than they tax Ss. But it's really a question for a local attorney, not a tax question. Also depends on what the planned 'destination' of the land is. Planning to pass it on to family? Or sell?

I agree an atty s/b consulted, but my concern is with the tax implications of the entity choice. Land in IL was gifted to the grown children by parents, with their very low carryover basis. Eventually, land will be sold and proceeds distributed. At that time, there will be a large cap gain.

I'm just wondering if there are any tax considerations in choosing one form of entity over another.

What is the best choice of entity to hold appreciated land?

Client currently has general p/s but wants liability protection. Asset is farmland [quit-claimed from parents] with very low basis.

Eventually, the land will be sold with potentially large cap gain.

Are there any advantages of using LLC over s-corp to hold land?

Taxpayer died in May, so had low income for the year.

We filed the final 1040 and IRS has sent a notice stating the taxpayer was eligible for EIC??

Really?

I believe may take the $735.00 to offset the income, then depreciate the remaining $2365.00.

Jerry W

You can elect to use the whole amount for sec 179, but the amount that is greater than net income (before sec 179), would be suspended and could be deducted the following year, assuming there will be a profit in 2008.

So, now I have an ethical dilemma. S/ I self disclose my error from last year, and do a n/c 1040x for them (to get about $1,000 extra refund), or s/ I keep my mouth shut, and hope they don't discover it themselves...

Yes, I've been caught by that too. You have to amend - the client will think more of you for it.

The other posting was mine & my efiles were rejected. Two clients have ptnship K-1 with SE income from ord inc, guar payts & sec 179. The 179 is the problem causing mine to reject. It affected 2 returns, so I paper filed them.

The returns are for my 2 brothers, so I guess they'll forgive me for making them pay postage

I have the same situations: partnership with sec 179 deduction and one with both sec 179 and unreimbursed partner expenses won't let me efile. I'm sure this is an ATX programming issue, but no time to wait for them to fix it, so we are paper filing. <_<

Just file both; the parents will get processed and her X will get processed and then no one will get a letter saying requesting one of them be amended, because it already will be.

Thank you for the response. In the order that things get processed at IRS, won't an amended return go on the back burner, so to speak, so if both returns are filed simultaneously, the dependency exemption will get denied on the parents' return since the child has already been claimed.

I just wondered if it wouldn't be wise to hold the parents for a few weeks (maybe more?) after the child's amended return is filed to allow the amended return to get into the system first.

I'm just not sure how long of a waiting period is sufficient, and the parents don't want to wait forever to get their refund.

First, possibly only, 8332 of the year. (Usually only see one or two.)

I thought I read that the 8453 and 8332 could be faxed

Elfling

Oh you dreamer! That would be way too helpful...

Child self-filed and claimed herself so she could get her $60 refund [she is so grounded!]. Now I have to amend her return so the parents can claim her. [Found out when the parents' e-file got rejected (SSN already used).]

My question is, would you wait to file the parents' return claiming the exemption until after the child's return has been amended - or file the child's amended return and the parents return in the same envelope? If we wait, how long should we wait to be sure IRS has processed the amended return?

I don't want IRS to deny the exemption to the parents due to the amended return not being processed yet.

Has anyone run into this?

Client has $2000 passive loss from partnership, with basis to take the loss.

Also has $5000 interest and dividend income (considered passive by nature).

ATX is disallowing the loss on Form 8582. None of the portfolio income shows up on the Form 8582. Should it? If so, how do you get it there?

Anyone have thoughts on this?

Addendum: After looking further, it appears that the portfolio income cannot offset passive losses - is that correct?

MJG - Did they mean rejected by IRS or rejected by EFC?

Rejected by EFC. If rejected by IRS, at least that would generate additional days to get the returns in - right?