Linda Mathey

Hi, Hope this is an easy answer. One of the partners would like me to create a PDF and send his K-1 to his accountant. When I go into print and select K-1, it creates a file of all K-1's and all basis statements, etc. What if I only want to send pg 1 of the K-1? Thanks for helping.

What I am asking is that they sold their partnership units not the assets of the LLC. However instead of reporting all the proceeds on Sch D as LTCG, a portion must be allocated to ordinary income because the underlying assets of the LLC contained inventory. Internal Revenue Code Section 751 (a) states that "the amount of any money received by a transferor partner in exchange for all or a part of his interet in the partnership attributable to (1) unrealized receivables of the partnership or (2) inventory items of the partnership shall be considered as an amount realized from the sale or exchange of property other than a capital asset. I think I found my answer I will report it on Part II, Form 4797. Thanks for responding.

How do I reflect on their 1040 the portion of the sales proceeds that is attributable to the inventory? If I need to use 4797 which part? When I enter sales proceeds in part one with $0 cost basis it calculates gain but wants to make it ordinary. Any advice is welcome.

My client is the trustee of her parent's trusts. Mother died 3 years ago and trust was set up with father as trustee. A portion of her trust was QTIP. Father died 1 year ago and my client was successor trustee on both trusts. Father also had some assets not in name of trust. An Ohio estate return was filed that had to include the QTIP interest in mother's trust. Trustee paid attorney's bill for father's estate directly from mother's trust. Since estate is not closed, we are filing a combined 1041 for the estate and father's trust. I think this should be considered a distribution and I would need to do a K-1 to his estate to carry the pro-rata share of income to his estate in addition to the K-1's for the two children based on distributions each party received. However, just thinking outloud...since father is deceased can his estate actually receive income from mother's trust or should his estate repay her trust? If anyone out there would like to help me brainstorm the correct way to treat this....I would appreciate your comments

Cathy, Depending on what state she lived in, the CD's along with the loan may have been enough to create a taxable estate for state purposes. Without a will, the loan would probably also have been deemed to belong to her sister. She could then have gifted it to the nieces and nephews and unless she has a lot of money using her annual gift exclusion and a portion of the unified credit there would have been no gift tax. Also remember that if there is gift tax it is paid by the donor not the recipient. Just additional comments.

So would the money received from this type of policy be required to be reported as reimbursements on Sch A or is it similar to disability insurance in that if you pay the premium yourself the benefit is not taxable?

Here are a few ideas, if you have caller ID do not answer when you see their number come up. Go ahead and answer "Joe's Pizza shop, may I take your order?" Or I like the answers from above ask for a large retainer....$2,500-$3,500. You might also, just to satisfy my curiosity, ask them why after 10 years they have decided to file. You could also explain that if there are balances due there will interest and penalties and that will be substantial. If all else fails, tell them that you are no longer doing taxes, you are going to truck driver school and will soon hit the open road.

I have used ATX since 2002. I like having a program where I can unprotect worksheets and change font sizes, etc. I will continue to renew as long as CCH supports the software. I think it is a bargain considering I can prepare 1040, 1041, 1065, 1120, payroll, etc. and all EFiling is included. I do not do over 2,000 returns and do not have 12 networked computers and I am not sure this program is intended for that type of high traffic use.

Hope this is a easy question...I am having trouble deciding how to handle. Client is on Medicare and has a Medigap policy. In addition they took out an AFLAC policy that pays them directly for hospital stays they just submit bills and are reimbursed so much a day. This year husband had a long hospitalization and they received $4,000 from AFLAC. Since these premiums are not deductible would I have reflect any reimbursements on Sch A? Thanks for any assistance.

He wants to take the mortgage interest, real estate taxes, utilities, insurance, etc. on the home office which is 5.5% of the total sq ft. I will advise that if we do that he needs to take the depreciation as well. Otherwise he should forget it and not take OIH. Thanks for the responses.

In ATX go to the top of the form for the IT-203C there is a box that says "check this box if spouse has the NY income."

Try the website www.oanda.com. It is free and does a great job converting based on specific dates or yearly average.

I have a client who retired as an engineer. He designed a specific product line. He has been contacted by other companies with similiar products. He is working out of his home assisting them in areas that do no violate his confidentiality agreement. He wants to take office in home expenses but not depreciate his home. His rationale is that he only has about a two year window until his skill set will be obsolete. When the consulting is over in two years he intends to sell the home and move. He does not want to have to worry about the fact he depreciated a portion of the home. Would the IRS care that he did not take depreciation? Would this be a case where they would take the position that it was depreciation "allowed or allowable?" and impute depreciation anyway?

In my experience with ISO's, a disqualifying disposition happens when the stock is sold before meeting the holding period or employment requirements. The employer then deducts the excess of the fmv on the date of exercise over the option price and reports it on the W-2 as compensation. If there are any proceeds from the sale over the fair market value on the date of exercise then that portion is treated as a capital gain or loss. A qualifying disposition occurs when the stock is held for the required holding period. I have never seen a qualifying disposition reported on the W-2. They have a capital gain or loss upon sale of the stock in the amount of the excess of the sales price over the option exercise price. On those shares, the employee would have had an AMT preference items for the difference between the fair market value on the date of exercise and the the exercise price. This preference creates a different basis for AMT than for regular tax. In addition the AMT paid related to this preference may be used in any year to bring the AMT liability down to the same as regular tax liability. Finally, it is important that execs with ISO's plan carefully because if they time things correctly with a sale in the year they again exercise new ISO's the AMT credit may be enough to eliminate the AMT due to the exercise. They need to track the basis for regular tax and AMT so that correct basis is used.

There is a box at the top of the form that you must "x" if the spouse is the one with NY income. It will then put the wife on line one as the one with NY income and the husband on line 2 as the one without NY income. The wife will then be the one to sign the form.

We have an LLC with 2 members. They filed as a partnership. They sold their units (shares) not their assets to a third party which is a corporation. Since a single member LLC either files a Sch C or can elect to file an 1120, the new owner has elected to file as a corporation. The LLC is continuing but it will file a short return as a partnership up thru the date of sale and then another short return from the date of sale to the end of the year as a corporation. I was just trying to understand how the reporting would work. I presume the balance sheet as of the date of sale would be the final balance sheet for the 1065 as well as the opening balance sheet for the 1120? Hope this is clearer...

I have an LLC that filed as a partnership on Form 1065. During 2007 both members sold their units to an outside party. The outside party is a corporation. Since the LLC is now a single member, they elected to file as a corporation. I assume that we file the 1065 as final using date of sale as the end of year. Since the assets are still in the LLC would our final balance sheet be the balance sheet on the date of sale? I do not think there is any reason to show distributions of property to original members because they sold their units not the assets. I think I would just show the K-1 ownership at end of yr...sale date as zero. Does this sound correct? I have never had this situation so I am trying to determine how we report the sale of units on the 1065 or do we?? I know the gain will go on their 1040's Sch D. Any comments are welcome. This is my year for LLC issues and there is still a month to go!

Most attorneys I work with give the client a one page analysis of the trust listing section numbers and what they cover. Makes it easy to review a trust document.

I may be wrong but I thought that the amount of the contribution was your basis or the FMV on date of donation whichever is less.

No, the buyer was a corporation. I will request they revise the 1099 Misc to reflect $0. This brings up another question since both original members have sold to the corporation does this terminate the LLC? Or does the LLC continue with a single member (corporation). If yes and they file Form 8832 and elect to be taxed as a corporation would there be a short period return (1065) thru date of sale and then a short period corp return for 2007? What if the corporation did not file the 8832 within 75 days of purchase how would they report income or loss on their return? Sorry for all the questions but my mind just starts running in circles. I appreciate the feedback.

Did they sell to a related party?

The purchaser (corporation) of my client's LLC units prepared a 1099 Misc for my client (seller) showing proceeds as non-employee compensation. That does not seem correct. If they are to prepare a reporting form what should they use to report sale proceeds from LLC units? It looks like the best choice is 1099B. Thanks for any input.

I agree it is a little ridiculous. You could try what I do, I use the same password and change the last 4 digits to the month and year. Makes it easier to remember.

I have a new client that held 18% of the units in an LLC for two years. He made no cash contributions and did not sign on any debt. The first year there was a loss. Not deductible to him since he has no basis. The second year (2007) there was a loss up thru the time he sold his units for $85,000. Since his basis was zero I assume the sale of units is capital gain. What happens to the losses? He had another accountant tell him that he can use them to offset the gain on the sale of the units. I am not certain how to handle since I have never had this situation where the losses were suspended due to lack of basis and then the units sold. Any comments would be appreciated.

I guess I am giving too much credit to the program. I did re-run the calculation with and without the refund and the tax is the same because of the large AMT. Therefore I guess I will just leave it off the form and hope it does not create a matching problem for the IRS.