tax1111

TP owned and lived in the property for more than 2 years out of 5 year before the house was sold in 2021. But they also rented the property for the time they no longer lived there.
I used the 121 exclusion but how to deal with the disposal of rental property at the same time? Will the suspended passive loss be released in this case or it is lost. Thansk.

TP received 1099B which contains a sale of Proshare ultra bloomberg crude oil fund shares. The basis of the sale is the original purchase prices which is illustrated on the final k1 from Proshare ultra bloomberg fund TP received. The final k1 shows substantial amount of short term capital gains and 1256 income.
Based on my understanding, the cost basis of 1099B is wrong which does not reflect the cumulative basis adjustment which TP has already reflected in his personal income return each year through k1 data input.
So, I need to manually adjust the 1099B basis by the cumulative basis adjustment. Is my understanding correct?
Also, TP said he never receive any k1 for previous years except the final k1. How should I deal with this also? Ask him to contact Proshare fund asking for previous years' k1s and amend each impacted tax return?
Thanks.

TP usually goes to NY office to work. But due to covid, he worked in a NJ office of the same employer for 2021. How does that impact his NY wage reporting on his NY nonresident return? Should the days he worked in NJ location be counted as days he worked outside of NY for the purpose of filing IT 203B schedule A? Or these days still are counted as NY working days.

Client provided me with dependent care account statement showing contribution of $500 during 2021 and 500$ of child care expenses spent with it during 2021. But her w2 does not have box 10 filled with $500.
Why is that? Should I ignore the w2 issue and manually input $500 onto 2441 form? Thanks.

2 hours ago, DANRVAN said:

Just got done working with a local scholarship organization that had been self reporting on 990 when if fact they are a Private Foundation, so switched over to 990-PF.   Also explained to them that they are a nonoperating instead of an operating PF.

Thank you for the information. Besides 5% minimum required distribution for nonoperating foundation, excise tax for net investment income for both operating and nonoperating foundations, are there other areas a private foundation needs to pay attention to so as to maintain its exempt status?

Thank you!

Thank you for quick response and your advice! 

Can anyone help illustrate how the income test of Private operating foundation work?
As per IRS: "A private operating foundation is any private foundation that spends at least 85 percent of its adjusted net income or its minimum investment return, whichever is less, directly for the active conduct of its exempt activities (the income test)."

say, for tax year 2020, the foundation's minimum investment income is $80; adj. net income is $100 (gross income is $300, deductions are $200). 85% of the less of the two is $68.

What is the exempt activities' spending in this case? Is it $200 deductions? If so, since $200 is more than $68, the foundation passed the income test?

Any help will be greatly appreciated!

7 hours ago, Lion EA said:

If he qualifies, he can make a pre-tax IRA contribution or after-tax IRA contribution or Roth IRA contribution through Monday 17 May 2021 for tax year 2020. He can do the same for tax year 2021 through next 15 April 2022.

Thank you! very helpful!

If a taxpayer is eligible for pretax IRA contribution, can he choose to treat the contribution as after tax instead? Or the contribution has to be pre tax first?
Thank you!

Is rollover contribution (from after tax 401k to ira account) considered nondeductible contribution for line 1 of form 8606?
Thanks. 

Taxpayer sold her investment property (not rental property) in foreign country with a gain over $1mil. She paid to the foreign country capital gain tax 5%

Please help with following questions:

1. besides original purchase price, renovation costs, selling expenses, what are some other gain reduction options? Is flight tickets to the foreign country to sell the property deductible? how about building insurance, HOA, maintenance fee, etc. I understand that these seems to be nondeductible for non-rental investment property. But just to make sure if there is any exceptions. 

The building insurance is a mandatory fee to property owners by the government. Does that make any difference?

2. taxpayer sold all her appliance, furniture within the house to the house buyer. Can any of these personal property's cost be included in the real property sold?

Thank you!

5 hours ago, Possi said:

Here is the question; When TP graduated college, did he then begin working in CT before joining the military in CT? 

If so, then the military might have deemed CT his HOR. But, as @HAHN1040 stated, TP can keep NJ as long as he didn't actually change his tax home.

If not,  then file the NJ resident return and file the CT as a non-resident. 

I have a feeling that the TP began working and living in CT after college, and the military determined his HOR for him, OR it was an error that needs to be changed.

Sorry to have dropped the ball on this. I'm traveling and if I access the site from my phone, I'm another person. I popped in on my home computer remotely to respond. 

So, if you see..... like.... Cher... it's just me. 

Thanks, Possi, for taking the time to answer my questions during your travel. 

I need to check with the client about more details. But as far, he told me that he lived with his  parents in NJ most of 2020 only travel to CT one week each month from Sept 2020 when he joined National guard. I understand that in such case, he should be treated as CT nonresident and NJ resident. 

Also, it seems that CT does not tax military income from nonresident. So, even though the w2 shows CT income, I need to override it to 0 on tax software.

Thanks all!

2 minutes ago, Lloyd Hudson said:

Original post says that client is active duty GUARD. Probably paid by the state as Guard. Unless, forwarded to federal activation. Then the w-2 would be from DFAS and taxed in state of residence, At least that is the experience  in Arizona. Of course, in Arizona active duty would not be subject to state tax at all.

Thank you!

Yes, the w2 is from DFAS with CT state income listed.

Can you let me know in this taxpayer's case whether CT or NJ should be the state of residence? I said NJ is the SLR in my OP but after feedbacks from this forum, I am not sure now. 

3 hours ago, Hahn1040 said:

Active duty can maintain their state unless they choose to change.

Ask: did he intend to change?  did they do all of the change residence steps: driver's license, vote, car registration etc.   If he did indeed change, then he would be a part-year NJ and CT. 

CT is not a state that military tend to change to  (FL, TX) .  But he may have his reasons...

If he did not intend to change, then I would file full year NJ. and non-res CT showing taxes withheld in error.  In the future NJ does not tax his militaty pay if he is not in the state.

Thanks. 

3 hours ago, Lion EA said:

Listen to Possi who has a lot of military clients.

Thank you!

3 hours ago, Possi said:

With the military, you file the Home of Record as resident only. 

If the military member ALSO had non-military income from another state, the state where he/she actually resides,  then you would file as a NON-resident for the other state, the one that is NOT his/her HOR. 

It doesn't matter if they own a home in the state where they are living/serving. The HOR supersedes as far as the resident return goes. 

Maybe I am not understanding the situation. 

 

 

Thanks for the help!

Some more details: the taxpayer graduated from college in April 2020 and joined national guard in CT. He has some non military income before he joined the army and he has been NJ resident in the past all the time. 

In this case, should he file NJ part year resident return to report the nonmilitary income and part year CT resident return to report the military income?

Thanks.

Taxpayer is in military and needs to file CT resident return (home of record) and NJ resident return (state of legal residence).
I have never done this before. How can I generate two resident returns at the same time? Does credit of tax paid to CT offset NJ tax?
Drake software seems not be able to handle this scenario. 
Thanks. 

14 hours ago, Bart said:

The W-2 appears correct.  

Thank you!

It seems that he needs to file CT resident return (home of record) and NJ resident return (state of legal residence).
I have never done this before. How can I generate two resident returns at the same time? Does credit of tax paid to CT offset NJ tax?
My tax software seems not be able to handle this scenario. 
Thanks. 

Taxpayer graduated from college in 2020 and joined National Guard stationed in CT. His state of legal residence is NJ.
In his w2, however, state wage from CT is listed but not NJ.
Should he have the w2 corrected?
Any other options?
Thank you!

Taxpayer left the country in June 2020 permanently. He was a resident alien based on substantial presence test for the period before he left and the residency status terminated when he left US. 

Does he need to file dual status return in this case? Since he has no US income after he turned nonresident, I assume he only need to file a regular federal 1040 to report his worldwide income before his residency terminated. Is that right?

Also, does he need to file 8938 to report foreign financial accounts assuming he had the reportable accounts by the time he terminated residency?

Thank you!

Taxpayer sold QSBS in 2020 with substantial gain. He meets requirements and is qualified to exclude 50% of the gain. Based on the tax code, the unexcluded gain should be taxed at 28% rate.
I read the schedule D instruction, and it says if line 15 and line 16 of schedule D is negative, no need to fill out line 18 which shows amount from 28% rate gain worksheet.
But I am confused about the logic behind this:
Why should the 28% tax be ignored if the 1202 gain produces capital loss?
Or Am I missing something?
Will the gain be included in the future year when taxpayer has capital gain?
Thank you!

I used different tax softwares and all of them shows 0 on line 3a (certain itemized deductions or standard deduction) of AMT form 1116 when taxpayer uses standard deduction. Is this correct?

Based on 1116 instructions, when taxpayer uses standard deduction, line 3a for regular form 1116 should show standard deduction amount. But the instruction does not explicitly say that standard deduction amount should be input on line 3a of AMT form 1116. 

Should I assume the tax softwares are correct or should I manually input standard deduction on line 3a of AMT form 1116?

Thank you!
 

4 minutes ago, jklcpa said:

No, the 5-month rule is applied for the purpose of determining whether the person is considered a "student" for the age test.  For the residency test, the person must live in the taxpayer's home for at least 1/2 of the year. The 5 months before graduation is a temporary absence from the taxpayer's home, but it isn't long enough to meet the "at least 1/2 year" of residency part of the dependency requirements. 

Thank you! That solves my confusion!

12 minutes ago, Lion EA said:

If she was under 24 and was a full-time student for any part of five months, she's a dependent:

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

The deal breaker can be the support test: did the child pay for more than half of her own support?

Thank you for the help!

I went through the IRS tool through the link you posted. There is one step asking if the student lived with parents more than half of the year and answer "No" leads to the outcome that the student is not a dependent of parents. 

That step is where I am not sure what to answer. Is the student considered living with parents more than half a year if she graduated in May and lived separately from her parents all year? 

Thanks. 

I know this topic has been discussed frequently but I just has some difficulty locating the clear answer

so, the student graduated in May 2020. She has been living separately from her parents all year 2020. Does she pass the residency test? For the first 5 months, she is considered as temporary absence from home and can be treated as living with her parents. But after graduating in May, she is no longer treated as living with parents, right? Or, as college graduate, she can be treated as living with her parents for the whole year so long as she is enrolled in college for at least 5 months?

Thank you!