LouD

1065 return that sold a commercial rental building in 2008. Loan costs being amortized since building purchase in 2004 with $25k left to amortize when building was sold. How do I treat the write-off of the remaining loan costs? Should I write it off directly on the Form 8825 rental activity or does it get written off thru the Form 4797 and can I use the disposition function in the asset manager?

thanks taxbilly - much appreciated for the help!!

It's coming to the S-Corp via the 1065 K-1 in Box 4 for Guaranteed Payments

The next question is how to I report that income on the personal return since it's coming thru on the S-Corp K-1 as "Other Income" in Box 10E? Should I just add a new line item on the Schedule E pg 2 and call it "Other Income" for that S-Corp EIN?

Client has S-Corp holding company that owns a 50% interest in several LLCs. For the first time this year, one of the LLCs allocated guaranteed partner payments of $45k to the S-Corp on the 2008 K-1 for some additional work that the S-Corp owner did for the LLC during the year. On the S-Corp return, this guaranteed payment is being routed by ATX to Box 10E (Other Income) of the K-1. Two questions: How do I treat this $45k of income on his personal return (the other income box does not route anywhere on the personal return). Secondly, is it subject to SE tax - it's coming thru an S-Corp so I wouldn't think it would be subject, but guaranteed partner payments are normally SE tax, so I'm not sure which answer is correct. thanks for the help!

I renewed on Thursday and was told that if I used an ACH payment for the inital payment now and then pay the balance in December with the credit card, that I would avoid the $20 credit card fee. I was then supposed to fill out 2 forms - one for the initial ACH payment and one for the credit card payment in Dec. I ended up just signing up for both payments to be ACH as I didn't trust that the credit card would utlitmately be avoided - just didn't smell right to me so didn't want to get stuck with the extra $20 in December.

Client is going thru the short sale process on their primary residence and will have about $150k of debt forgiven once the home sells. Purchased the home 6 years ago so will qualify for the primary residence debt income exclusion. 3 years ago, they did a cash out refinancing where they consolidated about $55k of credit card and automobile debt - so I know that this $55k of debt can't be excluded using the primary residence debt exclusion. My quesiton - can they use the insolvency exclusion for this remaining $55k of debt forgiveness?

I have a client that is working on a loan modification for a piece of land he’s held for a two years. Client is not a contractor or in the business of building homes, but the intent has always been to parcel off the land and build homes to sell but nothing has been done yet with the market the way it is right now. Bank has agreed to lower the loan amount due – so client will be paying off the $300k loan in full after a $80k reduction in loan as agreed to by the lender – so there will be a 1099-C coming to client for the $80k. Looking at the cancellation of debt exclusions, the only one he might qualify for is the Qualified Real Property Business Indebtedness – but the language that scares me is that the property “must be used in a trade or business”. Because he’s not in the business of building homes, would that disqualify him from using this exclusion? Are there any other factors that might help him qualify for this exclusion? He doesn't qualify for the insolvency exclusion, so I'm hoping there's some relief out there. Any help or guidance would be greatly appreciated!

thank you very much Joel - much appreciated!

Hi Joel- Thanks for the response. Does it make a difference that the K-1 has checked the "Limited Partner" box? From what you're saying, maybe it doesn't matter and I can treat him as General Partner regardless?

Not sure what the right answer is for IDC deductions in the first year and passive activity treatment. Client is LP in new 2008 O&G limited partnership and was allocated $22,500 in IDC on their K-1 and a small ordinary income allocation. From everything I've researched, it appears that O&G working interests are excluded from the passive activity rules unless the entity limits the taxpayer's liability, which in this case, because the taxpayer is not a general partner, would mean they have limited liability. So it would seem that all activity from this partnership (including the IDC) would fall under the passive activity rules which would mean my client couldn't deduct the losses due to his income level. Client was obviously sold on this investment because of the 1st year losses from IDC, so I want to make sure my analysis is correct before I drop the bomb on my client. Thanks in advance for any help.

sorry - it's being reported on a 1065 return

Client in previoius years had been a 1/3 owner in a residential rental property with Mom holding the other 2/3 interest. In Jan 2008, client buys Mom out of her 2/3 share so they now own 100% of the property for the entire year. The original purchase price of the property was $417k back in 2005 so client's share of that was $139k based on his 1/3 share. Client pays Mom $175k to buy her out, so it's less than the original 2/3 share. My clients costs basis is now $314k, which is less than the original $417k. What figures should I now be using for the depreciable basis of the rental property and the accumulated depreciation that should be entered on the books of my client? I'm thinking the cost basis will be the $314k, but should I add any accumulated depreciation for the Mom's time of ownership or just the accumulated depreciation that my client had for his 1/3 ownership before 2008? Is there anything else that I'm missing for this year's return? thanks in advance for the help!

I have a client that has invested some of his IRA in a private equity LP that apparantly owns several profitable manufacturing companies. Clients IRA custodian is saying that if there is unrelated business income greater than $1,000, it will have a taxable affect on the IRA and taxes will need to be paid out of the IRA. Based on client's ownership percentage of the private equity fund and the projected profits of the companies within the fund, they will be over the $1,000 for 2008 so there will be a taxable event. Will the total unrelated business income essentially be the ordinary income that shows up in Box 1 of the K-1?

there are a few of the tabs in the 4562 module that produce the next year's depreciation amounts - the 4562 Statement tab and the Tax Classification Report tab - gives you a couple different options of how to view the assets. just select Next Year Fed in the blue box at the top left of the page

New client closed down a 2 shareholder S-Corp in 2007 and previous tax preparer filed a final return for that entity. Client set up his new single shareholder S-Corp in January 2008 doing the same busines activities - just doing them withhout the previous shareholder. There was debt on the books at the end of 2007 that is still being repaid and the client has put this debt on his new company's books and the related principal and interest. Should this debt be on the books of the new S-Corp and the related interest? Or is this something that the owner should be handling separately on his personal return somehow? Thanks in advance

Working on a new client S-Corp return for 2007 - in 2006, previous CPA and client converted their C-Corp to the S-Corp with no built in gain issues that needed to be resolved. During 2007, client went thru IRS audit for the C-Corp/S-Corp for 2004, 2005 and 2006 (with large errors on the 2004 and 2005 returns) resulting in corporate taxes due of $100k with $15k of interest and $20k of penalties (which is why they are my new client) How do I treat these payments on the 2007 S-Corp return - penalties and federal taxes aren't deductible and I'm thinking that I should handle them on the Sch M-1, but I'm thinking that the interest amount should be deductible? Also, it doesn't look like the previous CPA amended the returns for the state amounts that will be due (AZ will no doubt send an invoice in the next few months based on the audit report they will get from the IRS) - can I accrue these taxes and interest amounts on the 2007 return so the S-Corp gets the deduction this year? Much thanks for any help or guidance!