BulldogTom

Thanks Lee. I saw that in my research. Very helpful. Lets me know I am not able to advise the client on the F type reorganization option. I think I am on the right track with how the taxation goes if they liquidate the corp and then fire up a new LP. Just looking for some re-assurance that I am applying the related party rules correctly. Tom Longview, TX

S Corp is looking at succession planning. 3 shareholders right now, Grandma (40%), Grandpa (40%) and Mother (10%). Grandma is the President. GM & GP want to pass their ownership to Grandchild #1 and Grandchild #2 eventually but keep M in control of the company. S-Corp owns highly appreciated real estate that generates rental income. There is only a small amount of debt on the property. Taxpayer plan is to convert to a Limited Partnership. GM & GP would form trusts holding their partnership interests. The trusts would then pass the partnership interests to GC#1 and GC#1. I don't think there is a way to get a non-taxable re-organization of the company from SCorp to LP? If I understand the general rules correctly, the SCorp needs to essentially buy all the outstanding stock from the shareholders in a liquidating transaction. The SCorp will calculate gain or loss and that will increase the stock basis of the shareholders, and then the shareholders will calculate gain or loss on the sale of their shares to the corp. Do I have the basics correct? However, since the parties are all related, they don't get Cap Gain treatment on the sale (§1239). Am I interpreting this correct? Assuming FMV of 3MM and Adjusted Basis of 700K, the Corp would distribute income of 2.3MM to the shareholders via their K1 and the shareholders would pay tax at ordinary rates on that amount. The 2.3MM is the sales price for their shares, assuming basis of of 200K plus the 2.3MM distributed, would produce a loss on the redemption of their shares of 200K which would be capital in nature. Finally, the shareholders would contribute their stepped up basis property to the new LP and continue in business. Am I anywhere near on the right track? Tom Longview, TX

I have a lot going on personally and professionally so I don't have the time (bandwidth) to devote to this client at this point in the tax season. That is all I am saying. Tom Longview, TX

HMMM....I have it on 2 computers, but I used 2 phones. Same app on each phone. Which authenticator are you using? Tom Longview, TX

Clients - CA MFJ currently CA residents. Exchanged 1 rental property in CA for 2 rental properties in ID in 2021. Have rented and reported rents every year on ID properties. They now want to move from CA to ID and convert one of the properties to a primary residence. California conforms to the §1031 provisions, with a clawback provision and reporting requirements for exchanges out of the state. I understand all those provisions. Rev. Proc 2008-16 generally provides a safe harbor of 2 years rental on exchanged properties converted to primary residence or personal use. Does CA conform to this safe harbor? My clients are good with the timeline for IRS purposes as they have over 3 years rental on the ID properties and it will be over 4 years of rental period if they make this move. Reason for the move: Irrelevant unless audited, but they have been taking care of their mother in CA and are no longer able to do so. The mother will be moving into assisted living which terminates the need for my clients to continue to live in CA. I am not worried about the IRS, but I cannot find anything that says CA will abide by the Safe Harbor provided in Rev Proc 2008-16. Total deferred gain is over 400K, so I don't want to screw this up. Thanks for your comments in advance. Tom Longview, TX

^^^^^^ ??????? Tom Longview, TX

I had a client several years ago who works overseas. I last filed his 2019 return. He contacted me this week asking if I could get him caught up. I don't have the bandwidth right now to get to the unfiled prior year returns (I assume most of you don't either). He lives abroad. Lucrative client, just something I can't get to in January. DM me if you are interested in a referral. Looking for a good home for this client. Tom Longview, TX

I don't know why you made your decision, but if you do come back, I will welcome you. I have enjoyed your company on this board. Tom Longview, TX

chump change

Don't hold back Judy, tell it like it is..... Tom Longview, TX

I know this is a stupid question, but since we went to 2FA, will ATX stop making us change the Password every 90 days? Seems redundant. Tom Longview, TX

I have nothing of substance to add to this post. I just want to say thanks for posting. I learned something. Tom Longview, TX

There is a time and place for Roths in a financial plan. There is a time and a place to do conversions (very low income years). Conversions are not the solution to all financial and tax plans. Tom Longview, TX

I hear you. If you are in the 10-12% bracket and you think you will be in the 28% bracket in a couple years, it makes sense. I don't see it happening for my retired clients either. Tom Longview, TX

surrender penalty is up to client to decide on. I just want to make sure it is tax & penalty free because it is in the IRA. Thanks for confirming my thought. Tom Longview, TX

Client does not want to keep his annuity that is held in his IRA. Wants to surrender and invest in something else. Since the surrender value will still be in the IRA, there is no tax or penalties, correct? Tom Longview, TX

As a practical matter, I file the delinquent returns as they would have been had they been filed within the statute, knowing that the credits should be disallowed. However, I have found that the IRS processes and only denies the refundable portion in most cases. It has been a while so don't rely on this.... Tom Longview, TX

That is incorrect. Exactly the opposite. I don't have the sites right now, but you must take RMDs for an inherited IRA unless you are a spouse or a special exception. Tom Longview, TX

You go I follow. We need you here. Tom Longview, TX

Nothing has changed. If you are not a CA resident, you only pay tax on the wages you earn while working in the state. CA is a stickler on the proof that you are working outside the state. Example, my spouse is my employee. I do a lot of CA tax returns from TX. All my CA clients are CA sourced income to my business. I file a NR tax return an pay taxes on the profits from those clients. However, my spouse works exclusively out of my TX home office on CA client returns. None of her W2 income is taxed by CA. Tom Longview, TX

Reasonable method. If no good records, then CA may assert all CA income. Facts and circumstances. Tom Longview, TX

I should say also that if the corp is not registered to do business in any other state, all income is CA sourced. Tom Longview, TX

California taxes the location of the benefit of the work to the business. The employee location determines who taxes the wages. Where does the income for the Scorp come from? If the client or the work is in CA, then your K1 income to each shareholder is CA sourced and taxable to CA. If only a portion of the work is in CA or for CA clients, then the Scorp should apportion the K1. Where did the business employees work? If they worked in both CA and OK, then they apportion their wages on the W2 and pay accordingly. If they exclusively worked in 1 state, the W2 should reflect that. Shareholder 1. Some or all K-1 Income is CA sourced. Some or all of the W2 income is CA sourced depending on how much work is done in CA. Need to apportion on the W2. Shareholder 2. Some or all K-1 income is CA sourced. All W2 income is OK sourced. Shareholder 3. Some or all K-1 income is CA sourced. Hope this helps. Tom Longview, TX

^^^^^^ Yep. I can see a lot of calls coming regarding the additional payment everyone is getting and when will mine come..... Tom Longview, TX

What could go wrong with this plan????? Tom Longview, TX