David

Thanks for your help. So when the member's negative $12K is reduced to zero where is the offset reported? Thanks.

One LLC member wanted out and the LLC paid him $18,000 for his interest. The agreement says it is a redemption of debt. There is no debt, no hot assets and only fixed assets. The member's capital account prior to the buy out was $6K. One of the remaining LLC members contributed $18K to the LLC in order to have a 2/3 interest and the remaining member still having a 1/3 interest. The books recorded the $18K buyout as a distribution to the departing member. Therefore, the departing member's capital account has a $12K negative balance. How is the negative $12K capital balance zeroed out on the balance sheet and on the tax return? Thanks.

Yes, that's correct. The TP just got under the wire. That's why I asked the question. Maybe a limited deduction in 2019...

You say they can play nice and agree to the every other year. However, if it's the non-custodial parent's year that person won't be able to claim the CTC since the child did not live with him/her more than half the year and he/she does not have F 8332 to attach to the tax return. The due diligence requirement would not be met. Correct? Thanks for your help.

If the statement included the custodial parent's SSN then it appears that it would include all information required on F 8332. Would this then qualify as a similar statement?

What qualifies as "similar statement" or "other written declaration" in lieu of filing Form 8332 by the non-custodial parent in order to claim a child for the CTC? I can't find any examples or definite requirements in the regs or other information. A non-custodial parent TP has a signed, dated, notarized statement from the 2018 current year custodial parent that says each parent agrees that for all remaining years the child will be claimed by the 2018 current year custodial parent in odd years and by the 2018 current year non-custodial parent in even years. The agreement doesn't designate custodial or non-custodial parent - I am only trying to describe who the 2018 custodial parent is. The parents were never married. The statement lists their names but does not list either parent's SSN. If the definition of a similar statement or other written declaration means that it must include ALL information on Form 8332, then I would say this signed, dated and notarized statement doesn't qualify as a substitute for Form 8332 since it does not list the custodial parent's SSN. Is this the correct interpretation or am I being a stickler about this? There is history between the TPs and a lot of fighting. I want to make sure that I am correct by saying the statement doesn't matter to the IRS and only the custodial parent can claim the child and the CTC. Thanks.

Hopefully that is the correct assumption. I'd hate for this to backfire on the client when it is my interpretation of the SSTB.

Thanks, Black Bart. Yeah, I've often wondered why architects seem to get favorable treatment in a lot of tax law areas. Yes, I have read similar articles and even the IRS information on SSTBs and still am not sure on the IT service business. It appears that consulting is mainly the business coaches, counselors, psychiatrists, etc., isn't it? My main concern was the skills of the business owner, which may apply to an IT service business. However, the research seems to indicate that the intent of this definition is for celebrities who endorse products. So I'm leaning toward the thinking that the IT services business is not an SSTB. However, I want to make sure I'm not misreading the information that's out there. Thanks for your help.

Also, he does advise clients on what systems or servers or computers they need for their business. I would say most of his time is involved in solving computer problems and installing servers and computers.

He fixes clients' computer/server issues. Sets up clients' computers, printers and servers. Also, sells computers, servers, printers, etc.

I have an S Corp single shareholder client. Is this business considered an SSTB? Originally, I thought it would be considered an SSTB because of the consulting aspect and the primary asset being the skill and reputation of the owner. However, reading the definitions in the 199A instructions and research materials, it appears that this business isn't considered a SSTB. Is my understanding correct? Thanks.

The property is owned equally between each of their SMLLCs. The father owns a real estate business and he and his wife also have a rental property - Sch E. This is the father's first fix and flip. The son is just beginning to purchase property so this is his first fix and flip. Since the father owns a real estate company does this mean the fix and flip and the rental property previously reported on Sch E should all be reported on Sch C as business activities? It appears that the son can report the fix and flip as capital gain, correct? Thanks for your help.

A father and son each own a SMLLC . They purchased a fix and flip property which was owned 50% by each of their SMLLCs. Since the SMLLCs are disregarded entities, is the sale of the property reported on each of their 1040s? Or is the purchase and sale of the property considered a partnership owned by each SMLLC and reported on a 1065? Thanks.

Thanks, Judy.

TP received a Sch. K-1 (1065) with an Additional Information statement stating Section 754 Amortization and an amount. This amount is not reported on any lines of the K-1 with an asterisk relating to the additional information statement. Should this additional sec. 754 amortization be reported as supplemental business expenses or UPE on the TP's 1040? Thanks for your help.

Taxpayer purchased rental property in Feb 2017 and spent all of 2017 restoring, repairing and improving the property. The property was not rented in 2017. I know that all of the restoration, repairs, and improvement expenses are capitalized and not depreciated until the property is advertised for rent (ready for rent). I can't tell for sure from pub 527 whether the mortgage interest, taxes, insurance and utilities expenses can be deducted or if they must be capitalized. It appears that even though these costs are for managing, conserving, or maintaining the rental property, these expenses aren't deductible until the property is available for rent. However, I am reading that the expenses such as utilities, insurance, interest and taxes can be deducted while the property is vacant for repairs and improvements. Can anyone let me know the answer and possibly a cite? Thanks.

I just received an S Corp's books late last week and am beginning to prepare their 1120S. I just found out that the S Corp officer didn't take a salary in 2017 but did take $55K distributions. This is the first time the officer didn't take a salary. At this late date I'm wondering how best to handle this. I'm thinking I could report the distributions on the officer's 1040 Sch C so that the SE tax is reported. Also, report the distribution amount as a negative Other Income on his 1040 line 21 since the S Corp profit will be reported on the K-1. For those of you who have had this situation - is there a better way to handle this? Thanks for your help.

Manufacturing S Corp leases a building from the 2 S Corp shareholders. The building is in an LLC owned by the 2 shareholder. The operations moved to the building in 2015 and incurred leasehold improvement costs. The capitalized leasehold improvements account included non-structural items and repairs & maintenance items. These costs were depreciated on the 2015 and 2016 tax returns using a 39 year recovery period. Now the owners have given me a detail list of the amounts capitalized as leasehold improvements showing non-structural items, leasehold improvement items and repair & maintenance items. Of course, the changes will be to depreciate non-structural items over 5, 7 or other appropriate years and to expense repair & maintenance items. Based on my research, it appears that Form 3115 can be filed to get IRS automatic approval for a change in accounting method. No amended tax returns will be needed for 2015 and 2016. I'm sure some of you have dealt with this same issue before and can let me know if I am headed in the right direction. Is form 3115 the correct way to handle this? Is this considered a change from a permissible method of accounting to a permissible method of accounting? Or is it a change from an impermissible to a permissible method of accounting? Thanks for your help.

Clients are wanting to do a 1031 exchange on property they own and identify property to purchase with their adult children. I know the name on the new property has to be the same name on the new property. However, it isn't clear if, as long as the name on the old property is on the new property, that other names can be included as well. Can this be done as long as their portion of the purchase price of the new property is greater than the cost of their current property? I wanted to check before I tell these clients that they can't use the 1031 exchange to purchase a property with their kids. Thanks.

The client previously operated her business as a sole proprietor. On 4/14/18 she registered the business as a SMLLC with the Secretary of State and applied for an EIN on the same day. She also filed F 2553 requesting to be taxed as a S Corp with an effective date of 4/14/18. So based on these facts does Judy's following answer apply? Therefore, the TP has until 6/28/18 to revoke the S election retroactively to 4/14/18? Thanks for your help.

Or is the revocation deadline 6/15/18, which is the 15th of the third month of the taxable year with April being the first month even though the S election didn't begin until 4/14/18?

The TP was filing as a sole proprietor and her previous CPA told her to become a S Corp and filed F 2553 with an effective date of 4/14/18. So does the TP have until 6/29/18 to undo the S election retroactive to the 4/14/18 effective date? The instructions say that a revocation has to be made by the 15th of the third month of the taxable year. That would seem to me that the S Corp taxable year is 4/14/18 - 12/31/18 and the TP can request revocation back to the 4/14 date. However, I know the tax regs aren't as straight forward as I would think. Thanks for your help.

OK, I'm not getting any replies to my post that I attached to an older post with a similar issue. I guess that doesn't work to add to an older post? New client's previous CPA told her to file for S Corp election. She did so in April with an April 14, 2018 effective date. Now the client wants to undo the S election - to be treated as never having been an S Corp. She hasn't received her acceptance letter from the IRS yet. Client is a part time piano teacher and has 2 pianos, one for $50K which she took the sec 179 deduction. It appears from my research and the posts here that the S election can't be retroactively undone unless it is filed within 2 1/2 months of the tax year. Does the 2 1/2 month requirement apply from the 4/14/18 date of the S election effective date? The IRS explanations and cites aren't clear whether the 15th of the third month applies to a S Corp's short tax year or if it applies only to the calendar year. If so, does the first month start on 4/14, therefore, the revocation letter has to be mailed by 6/29? Or does the first month begin on April 1 therefore, the revocation letter has to be mailed by 6/15? I want to make sure that the revocation is effective retroactively to the election date so that no 1120S is required. Also, I don't want the client to pay taxes when she transfers the fully depreciated assets from an S Corp back to her SMLLC. Thanks for your help.

This seems to apply to my client's situation - New client's previous CPA told her to file for S Corp election. She did so in April with an April effective date. Now the client wants to undo the S election - to be treated as never having been an S Corp. She hasn't received her acceptance letter from the IRS yet. Client is a part time piano teacher and has 2 pianos, one for $50K which she took the sec 179 deduction. It appears from my research and the posts here that the S election can't be retroactively undone unless it is filed within 2 1/2 months of the year. Does the 2 1/2 month requirement apply from the date of the S election effective date? I want to make sure that the revocation is effective retroactively to the election date so that no 1120S is required. Also, I don't want the client to pay taxes when she transfers the fully depreciated assets from an S Corp back to her SMLLC. Thanks for your help.

Thank you for the information, Judy. I guess I was reading dwelling unit as the taxpayer had to live in the house in order to take the home office deduction. Unless I'm not reading 280(d) correctly, it appears that the client can take the home office deduction for the second home even though he lives in another house as his primary residence. Using the house to help others is considered personal use which qualifies for the home office deduction? Thanks again for your help.