OldJack

Put a space before and after the "b" and not smiley. Thanks, Jack, I was putting a space before but not after the b. KC

Small minded people do! All this about personal tax returns and personal information is very important to a large percent of the citizens that can't see the big picture.

Yes it would be nice to have some disclosure from BOTH candidates. But the fact is some things are personal and should remain personal. If we can't get all that personal information maybe we should look at the mans public record and achievements.

I would prefer to hear, and see, the candidates ideas and proposals for solutions. I could then better judge if their solution makes sense and weigh the possibilities of it becoming a reality. Many citizens have trouble "listening" as it isn't taught in school or by parents anymore.

Sorry... didn't mean to cause you to show your age! I get carried away sometimes.

Seems to me that citizens should be looking for "solutions" to our countries problems and therefore decide who is best for the job of president. Problem is, many citizens refuse to look past their government benefits. I don't think the presidential candidate's personal tax returns or tax rate will be any indicator of how problems will get solved in this country.

You are to young to know that banks cleared check before the days of MICR encoding, this was probably around the time you were born. The client's employee that copied and pasted was a 17 year old school girl, the daughter of the owner. Yes... I'm the dumb old fart for not calling her dumb.

>>I don't agree that Mitt's return is totally above ground; the horse partnership is a good example.<< I don't know about this horse partnership and I have not seen Mitt's tax return. However, I have had clients with horse partnerships and there are real purposes for such partnerships other than taxes. I have defended such horse partnerships on IRS audit and never lost the client tax status. These partnerships are usually well documented business operations with horses that are thoroughbreds costing large sums of money and expensive to maintain. Such horses commonly produce revenue, produce valuable offspring, and are seldom ridden by their owners. It's common for some tax preparers and IRS agents to jump to conclusion (with a smell test) that it is only a hobby or tax write-off. Know all the details before you draw a conclusion.

>>the IRS cashed it and the bank processed it leaving the client with paying the tax twice. << I must clarify that the copy machine check was "canceled and returned with the statement" to the client as this was before banks quit serving their customer with not returning checks!

Well... ATX software calculates "Average Tax Rate" by using "Taxable Income" line 43 to "Total Tax" line 61. I think this is fair as everyone should be allowed adjustments, deductions, and credits under the law. I expect that many complaining about 13% are paying 0% tax, $0 paid in, but with a tax refund. We have a crazy tax system any way you look at it.

In todays world if you are not "political" you are ignoring what is happening and should not be allowed to vote in elections. In years gone bye citizens could mostly go about minding their own business and not be affected by what happens in government. Today, if you want a job, want to keep a job, or want a future for your children, you best pay attention to what is going on! I am so damn old that nothing is going to change for me by whatever happens, but younger folks are fools, or don't have any common sense, if they don't take a serious look at our current federal government and its policies.

LOL ............ I agree and have always written my correspondence to the IRS on that level. One case I had was that a client had to prove they had made a payroll tax payment, so they copied their canceled check front and back, cut to check size gluing back to front to make it look like a check so a 3rd grader would recognize what it was. You guessed it..... the IRS cashed it and the bank processed it leaving the client with paying the tax twice. It took a lot of correspondence over a year from me to get it cleared up. LOL

And look at it another way. If the fiscal year ended 8/31/2010 the tax return is due November 15,2010, and the 2010 paper tax return has not been printed or released so you have to use the 2009 paper tax return.

That would be a 2009 paper form with the fiscal year dates entered on the top of the page.

>> if father dies before then, does it go away. << I would think so as it is father's tax basis item and not anyone elses. Remember it is only on father's k1.

Question M on the K-1 is new starting in 2009 and I have no experience with what they are looking for with that question. It would appear that you would have to declare the facts of the Partner's property outside tax basis v. FMV booked in the LLC. I really don't know, hope someone else will give us the answer.

A sec. 754 election applies only to sales or exchanges of partnership interest and to distributions. It does not apply to contributions of property, including money, to a partnership. [small Business Quickfinder Handbook] Sec.754 adjusts for the difference the inside basis of a partner that has "purchased a partnership interest" at an outside cost tax basis different than the inside basis. ie: 3 equal partners in a partnership with only one asset having a tax basis of $6,000 and a FMV of $9,000. New Partner purchases Selling Partner's interest for $3,000. If the partnership sells the only asset for $9,000 the New Partner has a tax gain of $1,000 (9,000-6000 x 1/3 interest = $1000 New Partner k-1 gain). New Partner reports $1,000 k-1 taxable income on 1040 and increases his/her outside partnership tax basis by $1,000. If sec. 754 had been elected at the time of purchase, the partnership account for New Partner would have been adjusted to $3,000 ($2,000 plus $1,000 special 754 allocation) and New Partner would have zero tax gain on the k-1. I don't see that you have a reason to elect 754 until and unless the heirs become partners and facts change. Like I said, partnership accounting is complicated and you should do more research. When father dies his heirs get a step-up tax basis to FMV for his interest (outside tax basis) in the partnership. Generally, fathers "outside tax basis" is his tax basis when he contributed the property plus/minus his profits/losses/allocations to him in the partnership plus any other contributions, less distributions to him.

Code sec 704( b ): >>( b ) Determination of distributive share A partner's distributive share of income, gain, loss, deduction, or credit (or item thereof) shall be determined in accordance with the partner's interest in the partnership (determined by taking into account all facts and circumstances), if - (1) the partnership agreement does not provide as to the partner's distributive share of income, gain, loss, deduction, or credit (or item thereof), or (2) the allocation to a partner under the agreement of income, gain, loss, deduction, or credit (or item thereof) does not have substantial economic effect. << If you check this box [704( b )] on the K-1 you are declaring that distribution of profits is in accordance with the "partners interest" in the LLC which could be different than the LLC book value. How profits are distributed/allocated should be written in a LLC operating agreement.

>> maybe Jack will chime in again if he sees a reason for you to calculate it anyway. << There is no reason to depr from a tax return prospective or tax accounting method. However, if the entity is preparing audited financial statements for public or financial institutions they should be presented in accordance with Generally Accepted Accounting Principals which would require depreciation reflecting the decrease in fair market value of a used asset over a useful life of the asset. I agree with KC's statements regarding partnership accounting as nutty and would add that it can also be extremely complicated.

Thanks for the comment. I always try to write my opinions very clear so that other readers that might not know could understand. I also try never to use abbreviations other than LOL or LMAO. PS: giving details sometimes prove me wrong. :)

Did you check 1040 Sch-R, Credit for the Elderly or the Disabled ?

Why on earth would you call the IRS. Advise the client to deposit the check, but don't spend it until after 3 years. Do you guys think you are IRS agents?

Think partnership accounting with a multi-member LLC (unless they have elected corp status). There are a lot of but-if's in partnership accounting! Therefore, in simple general terms, depreciation deductible and depr tax basis by the partnership-LLC is the same as it would have been to the person contributing the asset (in your case zero depr). The difference in depr tax basis and FMV is an asset that cannot be deducted or depreciated for tax purposes, but is normally carried on the books like it was a separate asset or land tied to the tax basis asset. The reason for FMV is to give FMV to the members equity account for purposes such as distribution of profits and ownership. If the LLC, for book and financial purposes, depreciates the asset at FMV, then there is a non-deductible amount of depreciation (all in your case) that must not be deducted for tax purposes and becomes the "reconciling item" on the tax return balance sheet every year. When you say father will own 95% of LLC for 100% of assets contributed you have a question that must be determined. Is the 95% for profit/income allocation or is it ownership of capital? If it is ownership, there is the question of gifts to others and/or income to others for value received. Or 100% must be shown for the father until profits are distributed to capital accounts. Profits can be distributed on a basis other than capital if spelled out in the LLC agreement. There is no "built-in gain" on value of a partnership LLC, that is only on a Sub-S corp that previously was a C-corp. Inheritance is at fair market value on the date of death based on ownership interest and beneficiary would receive a step-up to such FMV. For simple reasoning of such things, I usually have the LLC issue "Units of Ownership" certificates so that everyone things like stock in a corp.

I know you know this but: If the estate elects for a calendar tax year the first 1041 would have been due not later than April, 15, 2012. If the estate elects a fiscal year the 1041 is due Oct. 2012. If estate is calendar year and passes income for tax, the beneficiaries would be taxed on their 1040 for the year 2011. (Oct 2011 thru Dec 2011 income) If estate is fiscal year and passes income for tax, the beneficiaries would be taxed on their 1040 for the year 2012. (Oct 2011 thru Sept 2012 income) I doubt the executor knows much about estates and taxes.

>>There is a will that just states everything goes to her children<< That may complicate things. A will document must be probated in the probate court to determine who gets what before distributions, also in some states the will must be presented to the probate court within one year or the will is not valid. If not valid then beneficiaries are determined by state law defaults. The estate probably must pay the income tax until the probate court determines/rules who the beneficiaries are (specified children or state law). Also, remember that an estate may have a fiscal tax year or calendar year determined by the first tax form filing.