Julie

Here's the schedule.

http://www.irs.gov/taxpros/providers/artic...=174255,00.html

I had to spend an hour or so searching for this the other day....seems there's no pub that pulls it all together any more. The best I could do was this page: http://www.irs.gov/efile/article/0,,id=118663,00.html

He's a new client. We'll see if he comes back after this. The amount spent on the exchange is pretty close to the taxes due without it.

Thanks again!

>>it appears to me... <<

Yes, but good luck with your client. He probably has some different math, like "The new property is worth $200 thousand and that's more than the total gain, so NONE of it is taxable and all the installment payments are tax-free too!" Then he'll go into a rant about paying for the most prestigious intermediary and all the lawyers that approved this. And the best reply you can muster will be, "Gee, I wish you had called ME first."

Okay....I think that explains why this didn't seem to be working. Yes, it appears to me from the closing statements that only $75 was passed into the replacement property. Thanks, jainen.

>>3rd party exchange done through intermediary<<

I would not trust a client's description of this transaction. Insist on seeing ALL of the sale and exchange documents. My first impression is that only $75K went through the intermediary and into the replacement property. That leaves $200K as boot, which exceeds the $195K gain. By that math it is a fully taxable sale. Since no gain is deferred under Section 1031, you can ignore the exchange structure and report the entire thing as an installment in the ordinary way.

Taxpayer has a 1031 exchange with boot paid in installments. I think I have the exchange right (that's the part I have little experience in), but I'm having trouble getting the 6252 right. The IRS instructions make the sale appear to be a loss, when it should have a recognized gain. So that means I'm doing something wrong.

Premises:

TP bought commercial building in '01, adjusted basis approx 80K

Exchanged in '07, FMV275K, for new apartment building FMV200K. 3rd party exchange done through intermediary.

$137K was paid in '07, $75K was applied to apt building and the remainder is to be paid later. TP has $125K mortgage on the apartment building.

Or is the entire gain disqualified from 1031 treatment because of the mortgage?

What should the 6252 look like?

Thanks,

Julie

Glad to hear the surgeons did a good job and he's getting better....I've been off the board for a few weeks, so didn't know he was ill. But my thoughts are with both of you that he recovers fully.

I don't think the purchase of a domain name (essentially an exclusive license to a given web address) or a web site (going business) would qualify as a software purchase. If I understand the question correctly, this might be closer to buying a trade name. (sec 197, see pub 535 p 27.)

I would suggest capitalizing and amortizing over 3 years or it's estimated usefule life due to the large amount.

Per, http://www.irs.gov/publications/p946/ch01.html

"Computer software. Computer software is a section 197 intangible and cannot be depreciated if you acquired it in connection with the acquisition of assets constituting a business or a substantial part of a business.

However, computer software is not a section 197 intangible and can be depreciated, even if acquired in connection with the acquisition of a business, if it meets all of the following tests.

It is readily available for purchase by the general public.

It is subject to a nonexclusive license.

It has not been substantially modified.

If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later. If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months. "

Here is an interesting link to an IRS examination Technicque guide:

Retail Industry ATG - Chapter 3: Examination Techniques for Specific Industries (Electronic Business, Online Retail)

http://www.irs.gov/businesses/small/articl...=141491,00.html

"The tax treatment of the following items may result in potential tax issues. Many of these potential issues boil down to capitalization versus expensing and timing of deductions. The tax treatment of these items is still under consideration by Counsel and issues involving the tax treatment of these items and online retail should be referred to the E-Business & Emerging Issues staff for assistance.

Business Start-up Costs (Internet Business)

Acquisition of Domain Name(s) and Website Development Costs

Acquisition of Hardware

Acquisition of Intangibles, including Costs of Production of Literary Content, Graphics, Sound or Video

Acquisition of Software and Software Development Costs Lease Expense

Catalog Costs

Research & Experimental Expenditures and Credit "

Wish I could go with you! But not this year.....

...till the man burns!

I'm off to the desert tomorrow...

I'm not especially conversant with that form, but in ATX you can always add a spreadsheet or an itemized list to the tax return. From inside the return, look in the "forms" menu. You'll have a choice between a text statement, an itemized list, or a spreadsheet. Use whatever seems most appropriate to you.

Yeah, I read the section after jainen's first reply, and it's pretty clear. They're trying to determine whether the permit will be transferable and could be sold if he decides to retire, before deciding whether to make the investment.

Either way, he's stuck with the 15 years, although you should be able to write ithe balance off in full in the year he retires for good.

Question: Did your client know he was participating in an illegal pyramid scheme?

I've got a client who lost over $60,000 in a pyramid marketing scheme called Wealth Pools International. The owners of the company were charged with fraud by the SEC in December 2007.

He has not seen a penny of the money back. Anyone know if he can claim some/all of this as a capital gains loss.. or perhaps a "casualty" loss? I've done tons of searching and reading on this and can't seem to find anything...

I think it's also known by the name "butterfish," as well as a few others. I hadn't seen the name "sablefish," but it appears to be the same thing. Fishermen often use different names for the various species than you'd see in the market, or in books. I don't know about climate change being a factor here, although maybe it would bring them down your way. I think they've always caught a few off Mendocino and Humboldt counties, at least occasionally.

>>If they were going to Alaska<<

Well, I'm not a fisherman, but I must assume "black cod" doesn't mean the true black cod, which requires a trip to the south pole. No doubt he means sablefish, which is indeed regulated by that kind of limited permit. They used to hang out in the Bering Sea; maybe climate change is bringing them south.

This is California. If they were going to Alaska, they could still fish salmon. And yes, they are limited, and the licenses, which can cost up to $100K, are linked to specific quotas. He's looking at one with a high enough quota to keep him in business for a few more years.

>>a commercial fishing license, for (I think) blackcod<<

Okay, that's not California. He's talking about getting a federal permit to fish up around Alaska. They are limited, so he has to buy it from a private party.

No, this is a commercial fishing license, for (I think) blackcod. I'm sure you already know that commercial salmon fishing has been banned entirely in California for the second year. The fishermen are getting some payments from the government for the complete loss of their livelihood, and he's looking to invest the money in a license for another species.

>>The likelihood that he will be fishing commercially in 15 years is not all that high.<<

Not to worry! The lifetime license is only good for sport fishing anyway. He can't amortize it, because he can never place it into service for commercial use so it is not an ordinary and necessary business expense.

Actually, at $30,000 he must be referring to some kind of private membership, not a license.

Thanks!

Client is 80, so will not want to hear that. The likelihood that he will be fishing commercially in 15 years is not all that high. But I printed out the section to highlight and show him.

>>lifetime licenses<<

As Section 197 property, a license is amortizable over 15 years starting the later of either the month of acquisition or the month placed in service

Does anyone have any experience with lifetime licenses? I'm wondering how long they should be amortized.

Client is considering buying a $30K lifetime commercial fishing license.

There's another reason for not growing blueberries in the Valley. We have alkaline soil, and they like it acid. The coast has mostly acidic soil, hence the native rhododendrons and *yummy* huckleberries (acid lovers as well).

Actually, blueberrys are not usually commercially grown in the central valley. They do more up in Oregon and Washington. I think it has to do with the humidity in the air. The central valley is a little to dry and the growing season is too hot for berries, which is why most are grown closer to the coast over in Watsonville, Salinas, Oxnard, and Santa Maria. We do have an early spring and late fall strawberry crop in the valley, but they are mostly commercially grown for juice or the local market because they don't compare to the coastal varieties. Even the Blackberries and Raspberries that do well in the valley are not as good as the commercial varieties from the coast.

I am sure you can get better information about the varieties that would do well in your personal garden at a local nursery. I am sorry I can't help you with that one.

Tom

Lodi, CA

I had one like that this year too. Settled it about three weeks ago. I'm glad I wasn't the only one.

Client left message Mon that he is still waiting for his refund. I did a check on IRS and WI sites. No info available. I suddenly remembered that I was waiting to find out if he wanted DD or paper check as he is an OTR driver. He picked up his papers, paid me and I just totally never remembered to send the e-file. Filed it yesterday and received ACK today. I told him that the lady told me to refile it. Of course, I was the lady who told me that, but he bought it and thanked me for the help. Does this mean I should hang it up or should I finish the extensions that are still piled on my floor.

Can we expect a penalty for late filing? Of course, I would pay it if there is one. If I plead "stimulus insanity"; will they forgive it? Just remember, I didn't have to tell this story.

I'm so glad you came, Joan.

Where he was...he went to visit our doggie Sassy with the sitter. Why? Perhaps because he has no sense of time. There's a reason I do all the "hard" stuff, and leave him the "fun" part. (I always knew he was a genius...the challenge is keeping him on track.)

Anyway, this turned out to be a really nice event, and as we get it polished, I'm sure we'll learn how to turn out a crowd. I'm still working on that video slideshow...whenever I'm not on the phone with clients or the IRS.

yea, just what was he doing when he went out for those cream puffs? Walt does nice stuff....one I was particularly drawn to...not sure if it would fit in the office but would go with the decor!

really nice to finally meet you!

It went very nicely. Not perfect. About 25 people showed up. No sales, but some nibbles who may yet come back to buy. And some people we were counting on didn't make it, and we still need to drag them in here. And Walt kept disappearing...five minute errands somehow turned into hours.

But all in all, it was a good first day. This is gonna work out. I am very, very tired.

Wish I could be there for you Julie, but I'll say a prayer for you. Hope you have a wonderful day.

We're having our "grand" opening tomorrow, for my new(ly moved) tax office and our new art gallery. Anyone in or near Sacramento is welcome to come by and say hi. I know I'll be here from about noon till 11pm, although after six we're making it more of an art gallery reception (meaning there will be food). Anyway, directions are at www.your-taxes.com and www.gallery14.net

I've discovered that ATX does not like my new business name ("Your Taxes & More") and the "&" has to be rendered as "and" for e-filing.

Thanks for posting the outcome. We all get plagued by those pesky characters from time to time, the almost invisible character you hit by mistake and didn't see there and even a extra space that doesn't belong. Or, the ones you can't use in that particular software. (My address has "O'Clock" in it, so can't be used that way in many softwares, especially when I'm ordering something on line!)

While not everyone finds this kind of abuse funny, we do share in common our frustrations with the IRS, and occasional helplessness in the face of its intractability. This kind of humor is one way to let off steam when we feel safe in our own company. You'd hear the same kinds of things at any employee gathering where the boss isn't present. I think its purpose has more to do with shared identity than with comedy. At any rate, I'm with KC: it's one of the things that characterizes a community.

Chief, you are WRONG. While the decision as to what is humorous is a personal one, that can be different, sharing jokes and such IS one of the things we do on this board. that is why we call it a 'Community', rather than just a Tax Board. You do not have to read them if you do not want to. The only mistake Elrod made was not labeling it NT, and I will fix that.

Thanks. I had IE View, but not IE Tab.

It is not there unless you add it in. Go to tools and then addins on the menu and it will provide a link to the Firefox site where you can add custom features to your Firefox. One of those features is IE Tab another IE View, then load them in. You might find all sorts of other add ins you will like there as well. But don't go overboard, as one of the nice features of Firefox is that it is Trim and Slim!

This is my experience, too. IRS will always pay themselves first.

Every t/p with an IRS debt that I know of has his refund taken, even if making payments on their debt through an installment plan. And I do not believe it is possible to have a 'private' arrangement with an IRS agent, as stated here. So I think the t/p is trying to scam you into filing the return without his paying you first.

I haven't had that problem with this site. IRS doesn't like Firefox, but ATXcommunity works fine on mine. Wonder why the difference?

I use FireFox. Sometimes it doesn't play well with programs designed for IE. Then, the screen looks really funny, and I use the IE button within FireFox. After a few hours or a few days, I can use this and other boards under FireFox again. I don't know what happens, but it's resolved itself each time so far. Right now, I happen to be in IE since things started acting up earlier today.