BulldogTom

The most interesting thing to me was that wages were the least of their earnings. Their income comes from capital. They are investing in businesses and reaping the profits. The data come from the period just before the bust in the market. I wonder what the next report will look like. Tom Lodi, CA

Your point is very well taken jainen. We don't know all the facts and circumstances. However, if the property was purchased as a rental, and they never refinanced, and they intended to make a profit, and they had a plan to make a profit, and they operated the rental with a market rate of rent that covered the costs of the venture, then I stand by my assertion that the exception applies. You are also making some assumptions jainen. I don't see where it was purchased as a family home. I made different assumptions that it was a purchase for a rental and the tenant happened to be a relative. Note the post where it says the rent was way above FMV for the area. If your assumptions are correct and mine incorrect, I would concede your treatment. Tom Lodi, CA

Just to add another point, if the beneficiary does not start taking the RMD's based on the annuity table, they must take all the money out of the IRA within 5 years. Depending on the value of the IRA, it could cause a tax problem in the 5th year if they do nothing. Assume the IRA has a million bucks in it and the beneficiary just lets it sit. In year 5 they will have a million to add to thier 1040. Another comment on the post. The IRA company should have known that they cannot roll an inherited IRA into the beneficiary's name. If they did this, it should be corrected. Most IRA managers are familiar with this rule and would not make the mistate. Double check. I am assuming that Dan has not gotten the full story from the client and needs to inteview him a little more and make sure what is done. If they did in fact roll the IRA to his name, he has a distribution of the entire amount and a non qualified contribution to an IRA that must be removed from his IRA. What we don't know is the age of the sister, the age of the brother, or the balance of the IRA. I can assume (very dangerous) that after the transfer the IRA lost value and that is what the taxpayer is trying to capture. That will not fly. Tom Lodi, CA

the second week in May I am traveling to AZ for a personal matter, then going to Fla on a business trip for another 4 days. That is why Super Seminar in Las Vegas is out. In June, I am taking my son's to the Boise State Football camp for 1 week. I still have to do all the work I would normally get done at my day job and I am going to be out of the office for nearly 3 weeks out of 6 in mid-may to mid june. That also knocks out Super Seminar in Reno first week in June. Looking for something the last week in April or the first week in May where I can take a 4 or 5 day weekend. Anyone else have an idea. My wife will be very appreciative if I find a nice place to take her. Tom Lodi, CA

KC, Keep reading. Page 7 in the pub there is an exception for real estate used in business. There is an example of a store owner who gets a loan modification and keeps his store, but reduces his basis in the building. Files form 982 and reduces tax attributes (basis). There is some debate over rental real estate being a trade or business. I fall in the camp that it does. It is a profit motivated venture. I say the example in the pub fits Deb's situation based on her limited information posted. Tom Lodi, CA

So my wife and I both have our birthdays and our anniversary during tax season. I would like to go someplace nice for a few days in late April or early May to make up for missing these events. But this year, I have some serious conflicts with my schedule this year and will not be able to make the Super Seminar in either Las Vegas or Reno, so I need some CPE too. Is there anyone out there who knows of an EA society or Tax institute in a real nice place (Florida Keys, Aspen, Hawaii, San Diego, etc) where I can pick up at least 16 hours of CPE and have a couple days to relax with my wife as well? A nice tax deductible trip to get my CPE. KC - I have always wanted to see Arkansas. Anything coming up in your neck of the woods during that time? Thanks for the suggestions. Tom Lodi, CA

Does the IRA have basis? The only way to know is to pull the deceased's returns and look for 8606's for non-deductible contributions. The taxpayer who inherited the IRA cannot roll the IRA into their own IRA account. They can only make a rollover to an account in the name of the decedent. They are required to take the Minimum Required Distributions. When taking distributions from the Inherited IRA, if the IRA had basis, the taxable amount of the distribution is calculated using the rules for annuities. There are no gains or losses attributable to an inherited IRA. Tom Lodi, CA

Pay very close attention to the limitations and make sure you have all the FMV numbers correct. Tom Lodi, CA

Client brings me a letter from FTB with 1500 due. Nothing special about his return. Lives with his girlfriend and his child. GF does not work. Files HOH. Sch. A. No big deal. No audit flags. Apparently, the FTB sent him an HOH questionaire. Of course, he says he never recieved it. FTB changed filing status from HOH to Single. He says never got a proposed notice of the change. The letter he gave me is indicates assessment is final and due. I know the client and his record keeping is not good. How would you approach the FTB. (I know, he should have just filled out the dang form, but that is not what happened). I just got the POA and will start by calling the FTB and seeing if I can get somewhere with a representative. Tom Lodi, cA

Margaret, We as professional tax preparers must keep an objective point of view. Our clients may want us to advocate for social change, but that is not our job. There may very well be a preparer out there who will take this position and give the client what she is asking for, which in my opinion is marital status on her tax return. She wants you to recognize her position as a married individual and apply the tax law as such. Unfortunately for her, it is not how the tax law is written. So she is trying to make the tax law fit her circumstances. Don't fall into that trap. There are a ton of tax laws that we don't like (see the post on the kiddie tax and the passionate feelings some have regarding that tax). But, while we can rail about these things to each other, we have a standard of practice to uphold. We must apply the tax law how it is written and interpreted by the court. You are not an advocate for change in the tax code when you are preparing a return. If your client does not get that, they don't understand the service you provide. Stay strong and quit beating yourself up. Think about it this way. If you do what they want, the upside is a happy client and the downside is you lose your livelyhood if the IRS determines you intentionally disregarded the rules of practice. Is the client going to pay that much for your services? Tom Lodi, CA

Why do you think you will lose the client? You have considered their tax situation and have applied the law as you see it should be applied. If your clients are not satisfied with the results of your analysis (which I think is right on by the way) shouldn't they fire the writers of the law and not the preparer of the return. If they want to blame you for the result they got, you are better off without them. Explain that you cannot make foster child fly on a federal return. It just does not fit the federal definition. But the taxpayer does get to claim the dependency exemption based on qualifying relative. Tom Lodi, CA

I like KC's approach to this. Let the trust or estate take the refund into cash and then distribute it to the beneficiaries. Clean. Tom Lodi, CA

How interesting. How long have you had these clients Margaret? Are they new to you? This is kinda fascinating to me. I don't know what state you are in, so I won't assume that I know anything about your state's laws concerning a child/parent or child/foster parent relationship. It seems to me though that a parent gets custody and the custody is permanent unless changed by the court. And it seems to me that a foster parent gets guardianship and it is a temporary arrangement until changed by the court. Now here comes your client. One is clearly the parent and has custody of the child. That person is granted all the benefits of the tax law related to children by right of birthing the child. No question about that. The other member of the household is trying to also gain those benefits of parenthood for the same child. But this taxpayer wants to go the fosterchild route. If in fact the court has granted the other spouse "joint custody" of the child, then it would seem to me that the child is hers just as any other child who a court has deemed to be a custodial parent. If the court in fact did this, the child is a child of the second taxpayer. But the taxpayer is not saying that, now is she? She is saying that this child is her foster child. HMMMMMMMMMMMMmmmmmmm - something does not add up. I know for sure that if I was in a relationship and I wanted to know the status of my partner's child in relation to me, I would has someone spell it out pretty plain. And I am not talking about a measly $1000 tax credit. If I went to all the trouble to go to court, I would surely understand what rights and responsibilities that I came out of court with. Hmmmmmmmmmm - Just not sure about this one. Tom Lodi, CA

That is the way I understand it. No double dipping. I am certain it works that way for the Solar, Wind and Geothermal credit. Tom Lodi, CA

OK, so now I am confused. So no one paid him anything during the year? It was only SS, Veterans, and RR beneficiaries that got the 250 payment? Is this is what is going on? Then, if you are a retiree and you don't earn enough to qualify for the $400, you can get $250 on your return? But if you make enough, you get the 400, or if your spouse works and makes enough, you get the $800? Holy crap. This should not be this freaking hard. Tom Lodi, CA

I think a single number is a little tough. I used to use ProSeries but I dumped them for ATX. I loved the software, but customer support was non-existent and the price was outrageous. So I would give them a 9 for the software, 2 for support, and 5 for pricing. ATX on the other hand is a good solid product, but support is lacking in the last 2 years (CCH buyout). But for the money, you get a lot of value. So I would rate ATX a 7 for software, a 5 for support, and a 9 for pricing or value. Tom Fresno, CA

Client is retired from CHP. The Sch M says if you are retired from US Govt or state job where your earnings were not subject to SS tax, you should have gotten the 250. But from who? I asked the client if he got the money and I got the typical "I don't know" answer. Then he asked who he should call to find out. I suggested he look at his bank statements. But the question is a good one. Who is supposed to be making the $250 payments to retirees? Anyone know? Tom Fresno, CA

Dang, that global warming is sure cooling things down. Kinda inconvenient for Mr. Gore. Lets see, two years ago it was going to be so hot everything melted, and that was because of global warming. Now, it is snowing record amounts and it is because of global warming. It amazes me how people don't realize that God has designed this planet to fix itself. When it gets too hot, it cools itself off. But the scientist can't believe in God, so they try to act like they are gods. OK - off my soapbox. Sorry KC, you can scold me for my religious posts later. Tom Fresno, CA

Okay - I went back and re-read your post and you did say that, but I did not read it that way at first. You are becoming like Jainen. You are such a wannabee. ;0) Tom Lodi, CA

Pacun - you are partially correct. If the two spouses are eligible to file a joint return and file separately and one spouse itemizes, the other spouse can choose to take the standard deduction, but the amount of the standard deduction amount is zero for the spouse that did not itemize. §63 If one of the spouses qualifies to file as head of household, then the IRS has ruled in a Service Center Advice that the rule above may not apply. Tom Lodi, CA

I had 7 on fee collect that I thought would come in today. Only 4 actually did. the other 3 had EIC. That is the only thing they had in common. Tom Lodi, CA

Thanks all. Such a simple question and it is not addressed in the 1345 handbook. The kid made about 25oo and had 200 in withholding. I just wasn't sure if it would reject as his SSN was on another return. Tom Lodi, CA

I can't find the answer to this anywhere on IRS.gov or in the 1345 handbook. If a dependent is claimed on parents return, but wants to file to get withholding back, can you e-file the dependents return? Will it reject for SS# used on another return? I don't think it will be a problem, but I can't find an answer. anyone know for sure? Tom Lodi, CA

Happy b-day Rita. How can a 29 year old have a teenage daughter? Tom Lodi, CA

I am not aware of any direct payments made by the IRS to any taxpayers releated to the Making Work Pay Credit. Tom Lodi, CA