lbbwest

If a formal life estate is required, why did the IRS say in the first revenue ruling I cited:

"Transfer of residence to child; continued use and enjoyment. The entire value of a residence occupied by a decedent and the decedent's child and conveyed in fee simple to the child by the decedent, who continued to enjoy unrestricted use and possession of the entire residence until death, is includible in the gross estate of the decedent under section 2036(a)(1) of the Code."

In Michigan it is not a legitimate transfer unless it is in writing and so stated on the deed. (The "Life Estate" does not have to be a separately written document, but somewhere it HAS to be stated that the transfer is pursuant to "continued enjoyment" of the property.

If a formal life estate is required, why did the IRS say in the second revenue ruling I cited:

"The value of a residence occupied by the decedent-donor after transfer of the property, pursuant to an understanding by all parties, is includible in his gross estate."

In Michigan "the understanding by all parties" MUST be in writing.

If a formal life estate is required, why do the IRS instructions for Form 706 state on page 15:

"A retained life estate does not have to be legally ebforceable." They then go on to give a specific example where no formal life estate existed, yet the houe was includable in the gross estate.

In Michigan the transfer never occurred unless it was in writing. There for it WOULD automatically BE in the gross estate.

If a formal life state is required, why do all the court cases cited in the revenue rulings not require one to include property in the gross estate under 2036?

Just as I have addressed your questions, I would have to look at each case and contact my attorney regarding the same. I don't have time.

If you can answer these questions, you get a frickin banana.......lol

I don't believe in advising clients regarding ANY transfer of property without legal counsel. Nor do I interpret legal transfers of title without legal counsel. Earlier yesterday there were posts regarding various state TAX authorities not following Federal Tax rulings, there are states that allow same-sex marriages, yet the IRS does not. I don't understand what the big deal is, IF the title is transferred subject to continued enjoyment then pay the attorney $150 to have it stated that way. Otherwise, I firmly believe you are opening up all kinds of cans of worms.

If I have contacted a licensed attorney in Michigan and have been advised as above, it would be negligent for me to proceed as you have suggested. We agree to disagree.

You keep the bananas, I'll keep my license.

New client came in with their tax info and wanted me to file for

the Slavery Reparation Credit and/or Deduction. I told them

that I had to find out from other practitioners what IRS Form

to use to claim this amount.

What Form would you use?

I think that the 1040-PRISON Form is appropriate.

Booger (Emancipation Proclamation Guy)

It's a credit silly not a deduction. I always file it on the "Alchohol Used As Fuel" credit form. Next time call Betty Sue BEFORE you file. lbb

Have to admit one of my S-corp clients had a small loan balance after I did his taxes this year. If the loan is less than $10,000 its usually not a big deal. However, this year I had a C-corp client that paid $20,000+ in personal expenses so I prepared a 1099DIV. You got to use some common sense with these things depending upon the facts and circumstances.

Benjamin Franklin said "Common sense is very uncommon." I don't believe it's getting MORE common. lbb

I have a client who disputed the amount on her 2007 1099. She had cancelled checks, etc., that showed a different amount. She asked that I write to them (on my letterhead) and ask for verification of the amount they used. I did, and they wrote back that they had included a Dec. 26 check in the 2007 1099 and not in the 2006 1099; and they showed a copy of the check. They should have included the amount in the 2006 1099; but, the amount is going to be taxed either in 2006 or 2007. This would require an amended 2006. The 2007 return has not been done yet. Now, the client wants me to write them again asking for verification of the amount on the 2006 1099. This time she has no copies of cancelled checks, etc., to prove otherwise. I told her I was not comfortable asking for verification (using my letterhead) of an amount that she can't even prove; that, for 2006 she will have to write the letter. What do you think?

Usually if someone is self-employed they have earnings in excess of what is reported on 1099s, I use actual earnings. If your client only works for one employer there may be issues about whether she is an employee or not.

I have a new client that used an employee leasing company and he used a worker as a commissioned worker. The leasing company paid the employee for the hours worked but my client also paid him commissions for his sales. My client (not me) reported the commissions as nonemployee compensation on Form 1099 in 2004 & 2005. The employee filed an SS-8 with the IRS and the IRS determined that he was also an employee of my client even though he was hired through the employment agency and IRS is now requiring my client to pay the employment taxes that were not withheld or paid and to file the 941c's.

Can someone give me the code section(s) where it states that commissions on sales are considered wages? I always "THAWT" that commissions were subject to SE tax and considered Self Employment income. Have I bean wrong for the last 20 years?

* My client has a concrete construction company and he had the worker find new jobs for the company. Not selling anything other than promoting the company and getting new jobs and would get paid a commission based on the dollar amount of each job.

Unless I am reading your post incorrectly the barn door is closed. When I take a position regarding employee versus I file the SS-8; I was under the impression that the SS-8 WAS the determination.

or, you could say HOW THE HELL SHOULD I KNOW????

GET OUT OF MY OFFICE!!!!

Booger

That's what I say.

I'm not too good at links, but here are two for Revenue Rulings that illustrate the application of Sec 2036 to a tee.

Rev Rul 78-409

Rev Rul 70-155

Now if I could only figure out a way to collect all the overpaid taxes caused by the "gift is a gift" naysayers I could buy my own island and grow my own frickken bananas........lol

Before you retire to the islands on the overpaid taxes, I believe a point should be clarified. I contacted my attorney as this issue continues to be brought up and applauded. IN MICHIGAN there is NO LIFE ESTATE CREATED unless it is specifically written as a LIFE ESTATE. The parent can't just "put the name" on the deed and create it. IF the transfer is written subject to the Life Estate, no problem you get your bananas, mom stays in the house, step up in basis upon death. If not, gift created, no step up in basis. lbb

>>a lesson was learned here<<

We all hate bankers, but you have to admit they are often right.

Just proves Lucho is right and you have a heart, (and I never believed in inductive reasoning before.)

TP and sister owned vacation home (50% each) for several years. Client sold her 50% interest to sister at FMV which resulted in a profit. This was handled by an attorney. In previous years the TP itemized the 50% portion of mortgage interest on Sch A.

Suggestions on how this is reported.

If it was never rented out, depreciated etc. it simply is a normal capital gain on Schedule D, am I missing something? E.G. Total Purchase Price $200K each sibling paid $100K improvements $20K each sibling paid $10K your client's basis = $110K sale to sibling GAIN taxed at purchase price minus basis (difference from FMV and sale price = gift) Any loss NOT deductible on Schedule D because of related party rules. lbb

Pacun and lbbwest are right. Without the sarcasm, just put it on the C. That's what the interest belongs to, so that's where it should go.

"in another business that has nothing to do with this rental property"

Poster did not state what type of entity the other business is, there for one can not determine if a schedule C is an appropriate placement of the interest expense. (sarcasm free post)

True - but please be advised that the term is considered a pejorative and no longer politically correct.

My kids got NIPS when they were in grade school but Kwell sp? cleared them right up.

Don't forget to vote......and vote often.

Booger

I'm orginally from Chicago, we vote even after we are dead. lbb

My client has a rental property which he reports on Schedule E. He has regular mortgage and a line of equity on that rental property. he has invested the line of equity money in another business that has nothing to do with this rental property. My question is , can he deduct mortgage interest paid on the line of equity on schedule E? if yes , can I just add this interest expense with his qualified interest expense. Any help will be appreciated.

Gee, Publication 535 Chapter 4, says you have to allocate expenses according to the flow of funds, not the security; but if you prefer you can deduct it on the Schedule E rental property and say that jainen and Booger said it was okay. lbb

The IRS has the following listed on their web page regarding food program reimbursements:

Food program payments to daycare providers. If you operate a daycare service and receive payments under the Child and Adult Care Food Program administered by the Department of Agriculture that are not for your services, the payments generally are not included in your income. However, you must include in your income any part of the payments you do not use to provide food to individuals eligible for help under the program.

They are talking about the situation where your client receives $5,312 in reimbursements, spends $4,312 for the children in the daycare, then the balance of $1,000 is income.[/font

]My question is: if the reimbursements are not taxable would the child care providers reduce their food expenses by the amount reimbursed? YES

And what do they mean by "that are not for your services" The payments are not for the time to purchase or prepare the food, simply for the food.

I have a client that received $5,312 in reimbursements and had food expenses of $7,428 -- so it seems that I should reduce the expense by the reimbursement. THIS IS CORRECT

The T/P runs the child care and prepares the meals with help--so she would provide the service. YOU are overthinking. Food expense = $2,116 ($7248 - $5312)

If any of you have experience in this area --- I will appreciate your advice.

Thanks in advance.

Are you switching your questions now? Based on what you have said... HRB might be right.

"I have a client that can file HOH as he can claim his girlfriend ( on SSI) to get that status."

Girlfriend does not qualify taxpayer as HOH; if on welfare support worksheet needs to be done for each dependent that he wants to claim as welfare IS included in the support test.

Why do we care what HRB did, or anybody else for that matter? lbb

I have a client who lost his home because he couldn't pay for it. I'm thinking this debt relief act would help him. The instructions for this form is not too clear. Should I file the return without showing the income from the foreclosure and attach the form 982. Not sure how this would work. Any help will be appreciated.

What year was he foreclosed in? I know it's not always the CORRECT response, but I have a tendancy to "follow the form." Find out if he was sent a 1099 of any kind before you proceed. lbb

And you certainty would not commingle those activities.

What bars do you go to? I thought commingling was mandatory.

>>The end is near<<

I'm not worried. I set up three separate entities (Wine.LLC, Women.LLC, and Song.LLC) to handle all my bad habit activities. I'm very careful not to have personal responsibility for any of that.

Wasn't it one of the old time baseball players who said something like "I spent the money wisely, on wine, women, and song. I wasted the rest." ????

23. When the word yankee is always the second syllable of a word that starts with D, and the first syllable sounds like that thing that impedes water flow on a river.

(By the way, I was born in Tennessee)

When you know what "Isn't that nice." really means. lbb (from Chicago, but spent summers in Oaklahoma on my grandmother's peanut farm."

I agree

I should write it on the calendar, jainen, lbb, & OldJack agree to agree. lbb

I just got off the phone with my better half and she said were having fish sticks also! I wonder who else is having fish sticks tonight?

It's also a fast day.

JB - Maybe you could amend your response and say "I have several other friends whose satisfactiion I care about as well, so in addition to Tech Support responding to me, I would also request that TS respond to (list their names), and once I have received confirmation back that they have received satisfactory assistance, I will THEN respond to sales".

You wouldn't mind coordinating this would you? :-D

Can my name be first? I'll give you a banana!

But is it a frikken banana? He is very particular. I understand, I only REALLY like Fuji apples.

What is this supposed to mean?

Most of us have had clients for 20-30-or even more years. They don't stay with us because we're fun! Well, maybe some do.

That's the rub, there is NO assurance, any more than there is for an attorney or physician. In my area there are practitioners of all flavors for decades whose integrity or technical ability certainly could be debated. Initials are no proof of competancy, but neither is longevity. lbb cpa ea mst (and brain damaged due to lifestyle choices.)

The downside of being human is that we are flawed. Anybody who has never made a mistake stand up.

I am in MI, the last two I State filed, both had state credits. Both are senior citizens who I told last year (per phone call) that income was below filing requirement, true answer but flawed.

lbb brain damaged due to lifestyle choices.

>>The letter for today is Q<<

That guy from Star Trek Next Gen.

Wasn't he the guy that tricked everybody into thinking he was godlike, but turned out to be a bad little boy that misused his powers? I think he was from California or some other supernatural zone.