Corduroy Frog

Thank you...not enough research done on my part.

In 2025 when the tax cuts expire, there is liable to be tampering with strange new twists. One thing you can count on, however. Federal standard deductions will remain sky-high. All my career, they have been putting the standard deduction so high that it is out of reach. I believe the IRS is in favor of this - gives them less to audit on a personal tax return.

A client sold his interest in a partnership and will collect the proceeds over a 10-year period (Installment method). There was a loan attached to the partnership interest. The buyer in effect took over the loan. Technically it doesn't meet the definition of a "wraparound" mortgage because he had to secure his own loan so he could pay off the loan attached to the partnership interest. There is no question that the loan payoff becomes part of the revenue associated with the installment sale. However the timing is up for discussion. Question: When reporting on the installment method, must he show the mortgage payoff as collected revenue in the first year? My guess is that he must, because that's when he received the benefit. Incidentally, this client is the same one mentioned in my previous post. He was partner in two partnerships, sold one at a loss and another at a gain, both instalments.

A Client sold his partnership interest in 2024, on a 10-year installment. After calculating his basis, he sold at a loss. He is not obligated to report using the installment method. However, he would be better spreading this loss over a period of years rather than all at once. Question: Can he report this loss on the installment method, or does he have to show the loss all in the year it occurred? Thanks in advance for your comments.

Judy. I am suspicious as well. A flat monthly fee for a management company doesn't seem to fit well with their business plan. I will investigate further with the client. Thanks.

For years, the IRS has been trying to squeeze self-employment taxes out of what used to simply be rentals. This latest thing is to declare "short-term rentals" as taxable for SE tax. I'm assuming this means AirB&B and the like. My question: A client (C) owns a suite in Gatlinburg, TN (a heavy tourist location at the foot of the Smokies). He rents it to a management company (M), who pays him a flat monthly charge. (M) in turn rents out the suite to all comers for one night - or more, maybe even a week. M is doing "short-term rentals." What about (C) who is receiving monthly rent? Is C falling into the Short-Term-Rental umbrella? I'm sure the IRS has their own interpretation, but what is the correct answer??

One of my clients has a $700,000 gain on the sale of land and is selling on 5-year installment method. He wants to divert some of the gain to his church without having to deal with getting it absorbed by the huge std deduction. He has suggested setting up a charitable organization. I believe if he does this, payments to such an organization would still be a Schedule A deduction, getting absorbed by the std deduction (i.e. worthless). Are any of you aware of anything exotic his objective can be accomplished? I can't think of any, but this group is smarter than me. If he had asked me earlier, I would have advised him to make the charity part-owner of the land prior to the sale.

Thank you to the group. Even worked on my cell phone...

Any suggestions as to how to stop Google from taking over my computer? Google assumes I want to subscribe to their products, and nothing can be further from the truth. I want as little to do with Google as I possibly can. But casually doing anything on my PC, I am bombarded by pop-ups from Google wanting me to subscribe to their version of whatever application I am working on. My browser is FireFox and they have even planted on icon on Firefox that I can't get rid of. Most of you are more computer literate than myself. This is partly by choice on my part, and partly my own ignorance. Look forward to suggestions from the group.

Judy, thank you so much. That pretty well answers the question. Apparently the ordering rules are: Reduce the Earnings and Profits to the extent they exist at year-end. Reduce the Basis Report Capital Gains Great link also. Ron J.

Thanks for all comments. Very instructive. Yes there was confusion due to the introduction of basis. If there is a $1000 initial contribution of cash for capital stock in a C Corp, that should be the end of the basis it if nothing else happens to capital stock. Further income, loss, non-taxable income, non-deductible expenses should not change the basis. If the issuance of dividends is taxable to the extent of E&P, the question becomes is the measurement of E&P effective at the beginning of the year or at the end of the year??

Darlene, I would love to have gone there. Sorry to miss. Neighboring Chippewa Falls is one of my favorite places on earth.

For an accrual basis taxpayer, reduction in receivables, inventory, etc. would be tax free so long as the income was recognized in a previous year. By the way, I appreciate your posts, not withstanding your seeming doubt of my applications. Your answers are accurate and thought-provoking, and for the most part, helpful..

Dan, for a C Corp, Stock Basis of the shareholder is very basically the same as capital, with exceptions for non-taxable income and non-deductible expense, unless there are non-cash transactions such as donated equipment, etc. For purposes of the question, one may assume basis is the same as capital balances.

Good question Kathy, but cash could have come from non-taxable sources, such as a reduction in receivables, inventory, or disposal of fixed assets,,,,

This is messy. Not sure I know the best way to present this without giving hypothetical numbers as an example: Facts for a C Corp: 01/01/23 C corp Capital Stock $1,000 01/01/23 Retained Earnings $12,000 CY2023 Taxable Loss ($9,000) CY2023 Dividends (Distributions) $7500 a) If the dividends are applied FIRST, they are all taxed as Dividends, as beginning equity $13,000 accommodates dividend charges of $7500. b) If the dividends are applied AFTER the Y/E, there is only enough equity ($4000) to accommodate $4000 of taxable dividends, and the remaining $3500 are considered liquidating and non-taxable. Which of the above a) or b) would be correct? Or this there another answer? Thank you for your patience in reading this messy situation, and for responding.

Marilyn, best wishes for you. Much of your weariness reflects a growing disenchantment with the electronic age and all the problems which have multiplied dramatically in recent years. If you have to quit, you are living in a great state. I mail order cheese from WI.

Yes, in a strange turn of events, effective 01/01/24 employees that are paid overtime premium have their OT Premium totally exempt - not only from withholding, but from taxation entirely.

Drake does not populate the DR License from the previous year. You have to re-enter it every year.

My information (from limited sources) tell me most CPAs and EAs won't touch this because of the penalties, and their E&O insurance won't cover them. Again, I'm not sure my sources are as numerous as to conclude anything...

Abby, thank you for your usual response. Code # is 62(a)(2)

Does anyone know the IRS section that governs accountable travel plans? IRS.gov allows a search and you get 63 pages of responses. That's why this board is so useful.

I do several Alabama returns each year. Your new client is horribly confused about a number of things, including differences between Federal and Alabama taxation of ministers. Part of the problem, especially with smaller churches, is that no one in their church is knowledgeable about issuing W-2s, 1099s, housing allowance, etc. Larger churches who have CPA members generally don't have that problem.

Thanks to all who responded. I was able to recover Windows 10 in about 15 minutes once I figured out how to do it. Abby, the information in the link was really great - step by step for someone not very good at I T stuff.

A Microsoft update appeared as necessary for me to schedule. It did not announce that the update was to change from Windows 10 to Windows 11. I didn't want Windows 11 and all the garbage that Microsoft wanted me to have that comes with it, not to mention the change in navigation. Is there any way to get Windows 10 back? Thanks in advance for advice.