Corduroy Frog

After a tax-free exchange, taxpayer invades equity to withdraw cash. Sorta defeats the "boot" definition. Maybe an example can paint the picture, with simplified fictitious numbers. Taxpayer owns Property 1 with a basis of $250,000, but FMV of $1,000,000 and existing mortgage of $85,000 which does not transfer to the buyer. He buys Property 2 for $1,000,000 and borrows $150,000 in the process. The sale/purchase goes through a qualified intermediary within the prescribed time limits, so BINGO! Tax free exchange! Taxpayer sits on Property 2 for awhile, but six months later, he takes out a loan from the equity in the new property in the amount of $500,000, and doesn't use the money for improving Property 2 at all. Does this scenario result in taxation?? Keep in mind that he had this same equity in the original property so it would appear he has the right to do this. But also, he is walking away from this tax-free transaction with a bunch of money...

Lynn, thank you. I'll look into Square and other alternatives.

I have not gotten into accepting credit cards, and it has turned off a few people who want to pay everything by using their phone. I've got to wonder how they were even alive before smart phones were invented. They don't see the effect on recipients. If presented with a bill for $100, they think all they have to do is pay $100 and everyone is deliriously happy. I accept checks (and of course cash). I prefer checks because it has the routing # and account # I can use to direct their refund deposit. If they try to read off these numbers to me, they can leave out significant digits, and if I can actually LOOK at them, I have a safer feeling that it will be correct. It's not just 4% or thereabouts you must add to the bill to cover the cost of a credit card network. A credit card processor usually costs $75 per month in addition to the 3-5%. And the $75/month is for 12 months of the year, not just end of January thru April. For my 200 customers or so, it's just not worth the extra amount I would have to charge my clientele to cover this. I'm with CBS on this - cash and checks.

Many of these are troubling, and I believe will backfire. In particular, I am old enough to remember two previous attempts to eliminate preferential treatment for capital gains. In both situations, these attempts to "soak the rich" resulted in a huge slow-down in real estate transactions. When this happens, not only do the rich suffer, but also construction workers, materials suppliers, and everything associated. Within a year, the legislature restored preferential treatment for capital gains. Another of these is the possible elimination of "stepped-up" basis for sales of inherited property. In these days of inflated housing and land values, even modest middle-income people have property whose FMV exceeds $1 MM. Again, if buyers of real estate have their prices jacked up to pay increased taxes, they will back away. Slow-down of real estate effects everyone, as described above.

Thanks to both of you, PencilSharp and Judy, for your suggestions. Neither of them worked, but somehow I got rid of it and don't know how. The only option I might have chosen was one claiming "Remove Bookmark". Thanks for your responses. Always good help on this board.

This is for those of you who know computerese better than I do. (This means practically ALL of you). When I open any website on Foxfire and then leave it, another screen is left open. It is a combination of Orbitz/Expedia/Priceline/Kayak. Asking me if I'm still wanting to make a trip to Norton, VA on May 28th. I did in fact, make a trip to Norton, VA (bluegrassing) on May 28th - 30th, but I made reservations through Choice Motels and stayed at one of them in Norton. The screen has been pestering me ever since. I have to X out in the upper left to get rid of it, but every time I use Foxfire (like when I access this ATX site), that screen remains. Question: How do I get rid of it. Right-clicking the options doesn't give an option to get rid of it. Thanks in advance -

West Virginia has been mentioned, and the timbre of this post is somewhat out-of-ordinary. Gorgeous mountains, but as far as a moving destination, probably weak on communications and infrastructure. West Virginia reflects the stereotype of Appalachian poverty. It is real, indeed many towns have only a few brick buildings aside from maybe a post office or govt social security office. Black lung disease from the coal mines is a reality. But there is always an untold story. I would like to focus on one area, McDowell County, although much of WV is very much like McDowell. A civic map of WV looks very much like a bulb from a spray bottle. At the very bottom of the "bulb" is McDowell county. A recent demographic statistic indicated the per capita income there was the lowest of any county in the US. But along with this bleak perspective, over 90% of the homes are owned outright, partially because banks won't loan money there, and partially because the population has been in these homes for generations. Most of the people at a low income level have no loan service digging into their incomes. As such the people there are fiercely independent and self-reliant. The county seat is Welch, a town built upon straight up-and-down mountain country. The buildings are old and in bad repair. You can get a glimpse of Welch if you have Google Earth, and can see that the houses and streets are built on top of each other. Although the movie was filmed in Petros, TN (another coal town), McDowell County was the home of the "Rocket Boys" from the movie "October Sky" (might have been Jake Gyllenhall's first). The star, Homer Hickam, who became a NASA engineer, had a real-life family pedigree most people don't know about. His father, Homer Hickam, Sr. invented the slender rescue capsule used to rescue coal miners to this very day. People there are very independent, and don't ask anything from outsiders. There is wondrous good among every social strata that we attempt to pigeon-hole. West Virginia? Maybe not your ultimate destination. But if you find yourself driving through, enjoy the beauty of the state and the hospitality of its very real people.

Tom, come visit Tennessee and stop in to see me in Manchester. I can show you around, even take you to Rita's town. Middle Tennessee is exploding with people from all over the country. Extreme Western part of Virginia I visit quite often and is gorgeous, much like extreme Eastern Kentucky. My cousin lives in Vacaville, CA and is dying to move. In the last month, 3 neighbors on his block have moved out. One to AZ, another to CO, another to ID.

Such a spreadsheet could be voluminous if client routinely pays for stuff with BitCoin. (And BitCoin is not the only one out there). Yes, if we get sucked into it we will need to charge for the extra time, and even if the client keeps up with it, we have due diligence responsibility. What about the guy who shows up having paid for a buncha stuff all year long but brings NOTHING??

Hi Lion - we are filing MFJ, but the IRS claims the allocation will be prorated downward after a quasi-MFS separation.

The IRS offers to do this, but most clients want to have some idear what is going to happen, during their appointment before insisting on it. The appropriate items of revenue and expense are allocated. Rates in use, before proration, are married filing separately. Which, if any, of the following are true? In absence of clear identification, items of expense are allocated in proportion to respective incomes. Even though using married filing separately, Large items such as EIC can be allocated even though MFS does not support EIC. Thanks in advance.

Sorry, folks. don't know how to delete or rewrite. I don't even know how to spell I.T.

I dunno about CBS this time, folks. An intermediary is not required, if traded property is actually identified and actually traded. Most LKE using an intermediary is a paper shuffle, and the intermediary is paid for his services. There may be a disallowance based on Inventory and new Rental Property not being like-kind under the new definition (2018).

It's amazing how many customers think the IRS is doing preparers a big favor by giving them an extra month to prepare returns. No way. I wanted this season to be over April 15th, and I suspect most of you felt the same way. To answer the original question, my fees tend to go up during the season after I am drug through the garden on ongoing changes and PITA stuff I hadn't foreseen going into the year. So late filers are subject to the maximum fee - not by design but by what happens.

I dunno a lot about it, other than what I've heard. An increasing number of business are accepting it as legal tender, and if this happens, I expect the difference between the dollar value paid and the dollar value of coins when purchased would constitute gain or loss. Someone please correct me if I'm wrong. If Paypal charges a fee for purchasing BitCoin (and I don't know why they wouldn't), it would seem this would go into the basis of what was bought. I'm also told there was a fixed volume of this currency when issued, never to change. I suppose that was to make it more attractive than currencies who print money forever.

Why does the IRS need to know if you HAVE BitCoin? If it is treated as property, there should be no tax until BitCoin is sold. We can buy 100 shares of Ford Motor Company, General Mills, or 50 acres of land, and we don't have to report it to the IRS until we SELL it. What is the difference with BitCoin? I didn't have any customers tell me they had any when I asked them.

Mr. Lee, you do a great job of bringing current IRS and other issues to the forefront as soon as they become available. Thanks.

Thanks for all feedback.

No responses after several views and several days. I believe this is probably because I asked for responses if my assumption was incorrect. I believe my assumptions is therefore correct, or I would have heard from someone. I further believe the credit must be substantial before anyone would jump through the hoops on 7200 just to get an advance 60-90 days ahead of fruition.

I hope I have this correct - please advise if not so. From what I can see, Form 7200 is an advance payment for a credit which is not realized until Form 941 is filed and reconciled. If a taxpayer wants to pay his accountant (or people like us) the time necessary to calculate up to 3 months in advance the amount of the credit and get money back from the IRS for various employer credits, it can be done. But all the payments resulting from 7200 must be paid back when calculating the 941 at the end of the quarter. Correct?

Dan, I didn't prepare any of the K-1s in question. Judy, I have enough personal hometown knowledge of the first partnership to confirm this was SE income. And I agree that Drake is handling correctly, after reading all the posts. First I've ever heard of a suspended loss for SE purposes - they generally try to protect Social Security from prior events - witness the recent exemption of Unemployment.

The saga continues with more reflection. To Judy's question, the answer is a resounding "no" - there was nothing in Box 14, and there should have been, as the owner is a general partner, and the creator of the 1065 himself. Like Abby said - Not all K-1s are prepared correctly. I inserted $11,355 in Box 14, and the SE amount increased accordingly. I suppose the honest answer to Dan's question about basic understanding is a perplexing "no" or I wouldn't be asking all these questions. Thanks Dan for responding.

Thanks for this, and for visiting the other board, where I asked the same question. The software I use is Drake, and the numbers in my example are fictitious. I will need to present the real numbers to track what Drake is doing. There are four potential sources: From a proprietorship, Sch C - Profit of $5114 From a first partnership, general partner, Ordinary Income of $11,355 From a second partnership, also general partner, Guaranteed Payments of $120,000. From the second partnership, Ordinary loss of ($180,778). There is insufficient basis to deduct the loss for AGI purposes. I don't know how Drake is aware that he cannot deduct the loss - I have not restrained the data entry. But Drake is not allowing the loss. From all this, Drake is populating his Sch SE with only $5114, and $4723 after applying the .9235 factor. I have an uneasy feeling that something is simply not right - which is why I am asking for help. Your answer seems to be the most authoritative, but it leads me to believe the total subject to SE should be $136,469, or $5114 + $11355 + $120000. I don't know that Drake can get to the bottom of this. No one encounters this kind of thing every day. Thank you - Ron J.

What is the amount subject to self-employment tax (before the 93.25%) for the following situation?? Taxpayer has: **A proprietorship which made $12,000. **A partnership with $120,000 in guaranteed payments **A loss from the same partnership of $150,000, but taxpayer has insufficient basis to deduct ANY of this loss for AGI purposes. **The K-1 from the partnership shows Self-employment income of -$30.000. Thank you in advance for your response.

A good seminar instructor (Chris Bird from Champagne IL) this fall stated that the IRS does not have the manpower to chase down the "rush-and-take-the-kids first" abusers. They not only would have to catch them, but they would also be drug into the facts and circumstances to determine whether someone is righteous or not. This is true even if the second filer follows up with a paper return. Not right.