BulldogTom

Jainen brings up a point I had not considered at first. What is your relationship with the shareholders? Did the practice prepare the personal returns? If I was only engaged to prepare the corp tax return, I think I might consider "politely, very politely" informing the IRS auditor that those records are outside the range of documents that you have access to. Express your willingness to provide the detail of related party transactions from the general ledger, but I would really consider if I want to volunteer the shareholder's 1040's that are not "officially" under audit. This of course could lead to the auditor pulling all the 1040's for audit, so consider everything before you communicate anything to the IRS. This brings a whole new dimension to the scope, as you don't want to be representing the shareholders on their individual returns if you are not the preparer or don't have a good feeling for what is on those returns. And even if you are the preparer, it may not be a good idea to let the auditor go poking around in the shareholder's 1040's on an 1120 corp audit. I am just thinking out loud, but if there is any other issues on the 1040's not related to the corp, it might make the auditor more suspicious of the 1120. Think about this. Talk to your clients. Get a good strategy in place ahead of time. Protect yourself. Tom Lodi, CA

From the two items you listed, I would guess they are looking at employment issues to see if they are truly subcontractors. When you mention "product", I would immediately look at the inventory to see if that should have been in the COGS and not in the expense side of the financials. Unicap rules may be in effect. That is just the first things that popped into my mind. I think you will be working on this for a while. It should generate some good revenue for your practice. Get the POA and the engagement letter, and most importantly, get a retainer up front. You are going to be working nights on this. Tom Lodi, CA

You are right about keeping politics and taxes separate on the board. There is probably no one I respect more than Jainen when it comes to taxes, but there is also no one further from my political point of view than Jainen. I hope he knows how much I respect him, even though I don't agree with his politics 400% of the time. Tom Lodi, CA

I subscribe to Kiplinger tax letter. But I also get the PPC letter from the CPA firm that my day job company has engaged. I guess I am pretty lucky that I don't have to put out a lot of cash for updates. And this board is another resource. Tom Lodi, CA

As the tax season approaches, I am getting much more anxious this year than any other year in the past. Despite my normal CPE and an upcoming update seminar, I feel like this year's tax law changes are going to make this a more challenging year than ever before. It used to be that a client with a home and a mortgage just meant we needed to look at the 1098's for refinances and any points that were paid. Now, we wonder how many are losing their homes and which new law might or might not apply to them. I already had a client in for a consultation, and I nearly missed the fact that she had too much income to qualify for the new first time home buyers credit. With the expiration and extention of so many credits, I am having a hard time keeping up with what can and cannot be claimed in the upcoming year. Teachers credits expired and are extended, home energy credits are lost, but coming back NEXT year, AMT was patched again. I am really going to need all of you to help me out this year. I will also do all I can for each of you. Every one of you are appreciated. Lets keep our tax family strong in the upcoming year. It ain't gonna be easy, that is for sure. Tom Lodi, CA

Hey Eric, you missed the best candidate - Alan Keyes of the reform party. That is who I am voting for. How about some equal opportuntiy posting on your tag line for the "Best Black Candidate"? Tom Lodi, CA

Great to hear from you again Kerry. Post some pictures of the girls when you get a chance. Good luck at the new company. And don't be such a stranger. You are family here also. Tom Lodi, CA

If you ever decide to retire, please refer that client to me. I will be happy to take some racing time in a Ferrari in exchange for some tax prep work. Tom Lodi, CA

Like ed says - no harm no foul. No change to the tax, just change the date in the system and don't even tell the client. Tom Lodi, CA

I would say the minute he drives it for any purpose other than to take it from his business to a show and back, he is in danger on audit. If it is that classy of a bike, any auditor worth his salt is going to call it personal and make you prove it in front of a judge. Tom Lodi, CA

You do need to be skeptical. That being said, 8K is not a lot for a bike, seeing as an entry level Harley will run at least 12-15K. IF the tp was only going to take it to shows where he was generating business and leaving it in the showroom of his business as a display, I MIGHT do some extra research to find out if there is a case or ruling that supports the deduction. IF it turns out that this could be a legitimate business expense, I would document every single dollar of revenue that the display (never call it a motorcycle again) generated, and I would definately never ever ever see a single personal mile on the bike. Be very skeptical. Tom Lodi, CA

A leasehold improvement can be fully amortized in the year the company no longer holds the lease to which the improvement relates. Tom Lodi, CA

Please double check my thinking on this. PS (farming) forms with three partners about 15 years ago. Partner 1 holds the PS interest as communitity property. He dies and wife now has partnership interest. The only asset of the ps is land which has not been farmed since partner 1 died about 5 years ago. The land was never deeded to the ps after it was purchased. It is still titled in each partner's name. It was always the intent of the partners to treat the land as an asset of the ps, and it has been included on the 1065 balance sheet every year. Can the sale of the land be treated as sold by the ps? I am pretty certain that the land does not get step up basis, but the PS interest does. However, since the land is the only asset and there are no liabilities or other encombrances, the value of the ps interest is 1/3 of the value of the land at partner 1 dod? Your thoughts are appreciated. Tom Lodi, CA

That means tomorrow is the big 60. Only 5 years to retirement, provided your 401K did not have Fannie or Freddie or Lehman or AIG or Bear Stearns or WAMU or Indymac in it. Happy Birthday. Tom Lodi, CA

NO - I refuse to get old. I am just hoping to get smart. I have a ways to go. Tom Lodi, CA

Thanks Jainen. You are bringing back memories from my partnership classes. I always hated those classes, because it was always about property transactions that were designed to avoid taxes. It is something I don't use very much, and I need some reminders about the rules. Someday I am going to grow up to be just like you!!!!! Tom Lodi, CA

Right - because he does not own the land, just an interest in the partnership. And partnership interests cannot be exchanged. BUT - Could the partnership distribute 1/3 of the property to him in liquidation and then he take his third and exchange it for other investment property? You can beat me with a bigger stick now. Tom Lodi, CA

Here is the situation. General partnership with farm land as the only asset. 3 equal partners. They are selling the farm land and then closing the partnership down. One partner wants to structure his portion as a 1031 exchange (sounds like I need Jainen). The others want to sell and take the profits. Can this partner do this? I am not touching this with a ten foot pole. It is way over my head, but I would like to know if it can be done, and if so, how? You may flog me in public now. Tom Lodi, CA

Just a shot in the dark - I am not sure this will work. Couldn't you contact the BK attorney and work for him? He could pay you, as he needs this done for his client to complete the BK, and I think the BK attorney bill will not get discharged. If the BK attorney adds your fee to his and he pays you, wouldn't that work out for everyone? Again, I have not run into this, so I am just throwing this out for discussion. And depositing your fee into your account is prohibited by Cir. 230 as mentioned above. Tom Lodi, CA

I am with Julie on this one. I think 15 year amortization. Tom Lodi, CA

Mel - the commercial has a guy with a beard, shorts and a floral shirt who works out of an open air bamboo hut with a grass roof on a deserted beach. He sees some footprints on the beach that are not his, and calls CDW to get an upgrade on his security package for his computer equipment. It is kinda funny. Tom Lodi, CA

Every time I see that CDW commercial with the guy who has his office on the beach, I think of Mel in Hawaii. I have no idea what Mel looks like, but I just picture him something like that. Tom Lodi, CA

Absolutely. I prepare the schedule every year and book the interest. We use the rate of interest on the Corp's line of credit as the interest rate. Tom Lodi, CA

Yes, they are an ATX partner and their software is integrated. All forms and transmissions and check printing right from ATX. No issues for us last year, but then again, we do very low RAL/RAC business. Tom Lodi, CA

Like I said, this is coming from the client, and I am not sure what the attorney actually said to them. I am just trying to be ready for when my client drops an impossible situation on me about April 1, 2009. I smell a big retainer and tax prep fee. Of course they will need the tax return in a hurry to get the BK or foreclosures done. Extra speed equals extra fees, and if they are going to consider BK, it means up front payment. Tom Lodi, CA