ILLMAS

Thank you everyone.

If a church or an organization hosts a fundraiser event and sells tickets for $400.  The cost of the meal has an approximate value of $150 and the remaining $250 is the donation.  In the same event, they hired a motivational speaker and a genius employee or board member suggested that $100 should be allocated to the cost because they feel the attendees received a benefit, another employee suggested they should include $50 more to the cost because the DJ provided entertainment and people were dancing.  Another employee not wanting to be left out, suggested they should add another $25 because the attendees received pictures from the photobooth  that are shareable their on social media etc…. and can be used for personal marketing.

Fast forward to the end of the year, attendees will be receiving their donation letter with the following:

Cost benefit: $425

Deductible donation: $75

Does anyone know of an IRS publication that specific to what the IRS considered to be a benefit to the attendees?  From the research so far, I only see mentions of meals and the rest.

Thanks

Can someone confirm if this applies to residents of DC that want to file MFS?  From Pub 555, TP's need to report half of their their community income VS the DC-40 instructions for MFS contradicts Pub 555, TP will each report only their income.   Which is the correct way to prepare a MFS DC return?  In the past, our office would prepare a couple's tax return in a common law state and the income was always split between each other (state of TX).

 Thanks

From Pub. 555

Community or Separate Property and Income If you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income. Likewise, a registered domestic partner must report half of all community income and all of his or her separate income on his or her federal tax return. You each must attach your Form 8958 to your return showing how you figured the amount you are reporting on your return. Generally, the laws of the state in which you are domiciled govern whether you have community property and community income or separate property and separate income for federal tax purposes. The following is a summary of the general rules. These rules are also shown in Table 1. Community property. Generally, community property is property: • That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state; • That you and your spouse (or your registered domestic partner) agreed to convert from separate to community property; and • That can't be identified as separate property. Community income. Generally, community income is income from: • Community property; • Salaries, wages, and other pay received for the services performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state; and • Real estate that is treated as community property under the laws of the state where the property is located. Separate property. Generally, separate property is: • Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership); • Money earned while domiciled in a noncommunity property state; • Property that you or your spouse (or your registered domestic partner) received separately as a gift or inheritance during your marriage (or registered domestic partnership); • Property that you or your spouse (or your registered domestic partner) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership); • Property that you and your spouse (or your registered domestic partner) converted from community property to separate property through an agreement valid under state law; and • The part of property bought with separate funds, if part was bought with community funds and part with separate funds. Separate income. Generally, income from separate property is the separate income of the spouse (or the registered domestic partner) who owns the property. In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community CAUTION income.

VS

DC-40 instructions

Married or registered domestic partner filing separately If you are married or have a registered domestic partner and both spouses/partners had income, you can use this filing status. You will each report only your own income, deductions, and credits. You will each report one-half of the income from any securities, bank accounts, real estate, etc., that are registered or titled in both names.

4 minutes ago, cbslee said:

 

Where the heck do you keep finding these clients anyway?

 

 Good client 

TP sold a zero basis rental property (in exchange for the land) for 200K, the $200K reduce their 25% share $800K-200K = 600K adjusted basis into the new property (land).  At the time I wrote the original post, TP was taking on the position that their basis should of been 800K and not 600K, but now that we have the file there is nothing to worry about.  I didn't prepare the original return going back to 2007 but I was afraid there was a screw up and the wrong cost for land was entered.

Each TP reports their share on a 1120S, the TP paper tax file was found, secretary thought I was asking for former clients files.  Anyway, TP did a 1031 therefore their basis is the 600K and not $3,200,000 x 25% = 800K.

FYI the land was being rented and it had expenses over the years.

TP bought land back in 2007 with another person (75% and 25% ownership), firms client retention policy is 10 years and tax files prior to 2011 were shredded.  Land was sold in 2022 and there is a discrepancy  between the cost of the land per settlement statement vs cost on tax program and accounting file.  Accounting file was reviewed and the TP land allocation is made up of $100K capital contribution and $500K mortgage loan they assumed totaling $600K vs $800K if you multiply 25% x the cost.  In case the $800K is correct, how can one make adjustment of $200k difference, the asset is land and it was never depreciated?

thanks

Scenario

X moved to VA for work from IL in late 2017, in 2018 X met the residency test of VA and has filed as a full-year resident and files a NR for IL (rental property).  X prefers to keep his mailing address in IL since they are always traveling for work (very common for people to use another address for important things).  X receives a notice from IL informing them that they should not be filing as NR and to pay the tax on VA wages etc.... X writes a letter to IL, submits copies of the a rental lease, utility bills etc.. showing proof of residency and the claim is denied because X continues to renew their IL driver license, that they are considered a resident of IL for tax purpose.

Has anyone ever heard of this before?  

Our office phone system is now on Zoom but no so long ago their caller ID only works with verified numbers, basically I cannot tell who is calling and send all my calls to voicemail.

Can you send them back to the person that recommend QBO?

I just spoke with a 1031 broker and it cannot be done since the second property was already bought.

18 minutes ago, cbslee said:

 

I'm confused? Are these two different properties?

18 minutes ago, cbslee said:

 

I'm confused? Are these two different properties?

Yes, sell one and use the funds to improve the second property.  
 

2 hours ago, DANRVAN said:

Maybe they need to take a look at the big picture here.  

Are they better of pouring money into the pit, or generating cash by selling the property and paying taxes?

The cost of the property plus improvements combined is around 350K, value of the property is around $700K and the monthly cash-flow once rented makes perfect sense.  And there is no mortgage or debt on the property.

TP bought an investment property to rent, improvements cost are getting out of hand and is running out of money.  If the TP were to sell another investment in a 1031, can they invest the money in the money pit property?

Thanks

Amen to this and I cannot wait for ERC recipients to realize the company that charged them 25% to get the credit DID NOT amend the business tax returns.  @schirallicpa charge them another 25% to amend it 

32 minutes ago, Medlin Software, Dennis said:

 

Another relative was conscripted off the reservation to fight for the Confederacy.

Wow, that was around the time the states of California, Nevada, Utah, New Mexico, most of Arizona and Colorado, and parts of Oklahoma, Kansas, and Wyoming were part of Mexico.

This happens all the time, just some races fall below the radar.  Just watch the TV 90 Day Fiance.  

2 hours ago, kathyc2 said:

The site this article is on is in the business of selling reports for reasonable salary.  I'm guessing there is more to the story than what was in the article.  But fear sells......

I did not catch that, thanks for pointing it out.  

24 minutes ago, Margaret CPA in OH said:

Wow!  I'm glad I no longer do business returns, especially S-corps.  At least the few that I did do had something close to a reasonable salary.  It's sad how much we are being held responsible our client (mis)behavior even after the fact.  It seems, in this case, unless the client self-prepared the corp return, any preparer would be held liable even if for a new S-corp client.

I found it odd, in all the years as a tax preparer, reading, tax seminars etc...  I have never heard of the IRS penalizing the preparer for a "reasonable salary" until this story.  I see myself and other preparers dropping their non-payroll 1120S clients.

Seems like a real story about reasonable compensation.
 

https://rcreports.com/blog/tax-man-cometh/?mibextid=Zxz2cZ

35 minutes ago, cbslee said:

I think what Danrvan is asking is. 'Since January 1st 2022 have their legal, accounting and payroll activities been handled as a Partnership or as an S Corporation?"

Ah, as a partnership.

11 hours ago, DANRVAN said:

If they have been filing as a partnership, then I believe the answer is no.  

On the other hand, if they had been filing 1120-S and had "reasonable cause" for failure to file a timely election then they should be good. 

Your research should turn up a rev. proc. with details.

I have looked over the rules, I have not seen a mention of a partnership not being able to file a late election, can you point me to the source.

Thanks

Has anyone been successful in making a late election to become a S-Corp?  I have partnership client that would like to do a retro election to January 1, 2022.  
 

I am aware this goes against a timely filed form 2553 and this a last minute decision by the client.

Thanks 

6 hours ago, cbslee said:

Read several in depth articles recently saying that this trend started over 20 years and that the professions leaders never took it seriously.

I like the fact that some “outsourced” countries can fall below the radar compared to manufacturing countries.