OldJack

Remember, it is not the estate/trust distributions that cause income tax due to the government, it is the earning/receiving of the income by the estate/trust. If taxable income is earned in a tax year, someone has to pay income tax for that year. If the estate/trust passes the taxable income amount on a 1041-k1 to the beneficiaries they pay the income tax, otherwise the estate must pay the income tax. Who pays is determined by the terms of the estate/trust document and the executor/trustee, not by the tax preparer.

I could use 3 bucks for my things rather than giving it to the federal government. Lets face it, the federal government will spend more than they have regardless of my 3 bucks.

Maybe the 1040 is telling you the loan had already been deducted by way of using it for basis in deducting operating losses.

1120S-k1, box 16 =Items affecting shareholder basis. This amount is not a taxable income box. A loan from the shareholder increases basis for deducting operating loss and increases basis for liquidation. Repayments of the loan decrease those same basis and that is why it is reported in box 16.

Where did the proceeds from the sale of assets go if not cash distributions to the shareholders which would reduce shareholder individual stock tax basis? Official liquidation would be determined by state law, normally with a filing with the Secy Of State of by default of not filing certain forms with the state. Federal is recognizing state law and filing a final 1120S tax return.

More than 700 tax returns were filed in 2010 from a single residential address in Belle Glade, Fla. The IRS reportedly issued over a million dollars in refunds to the Belle Glade address that year. Either one particular home in South Florida is really, really crowded, or there's something shady going on. In 2010, 741 tax returns were filed to the federal government from a single address in Belle Glade, Fla., the South Florida Sun-Sentinel reports. In response, the Internal Revenue Service issued over $1 million in combined tax refunds to that address, which is, y'know, embarrassing. Most or all of those returns were probably filed by identity thieves, and the Belle Glade case isn't even the worst of it, according to a report issued last month by the Treasury Inspector General for Tax Administration. That report notes that in addition to the Belle Glade home, there was an address in Tampa that sent in 518 tax returns and got back almost $1.8 million in refunds, and an address in Lansing, Mich., sent in 2,137 tax returns and got more than $3.3 million back. The returns from these addresses all bore the hallmarks of identity theft, according to TIGTA.

Gain or loss from the sale of assets flows to the 1120S-k1 for his 1040. The balance of the outstanding loan is either a business bad debt deduction (form 1040-4797) or capital loss (1040-Sch-D) calculation on liquidation of the corp depending upon the facts. The 1120S balance sheet would show no assets and a debt still unpaid and the capital accounts. The Corp may need to issue 1099-DIV, box 8 or 9.

I would probably not file a 1041 but if I did I would use the same EIN. It's not taxable income to the estate but it could be considered gross income. I would just distribute it to the beneficiaries of the estate unless it could cause an estate tax reporting.

Its not fair that some do not pay any tax. Its not fair to charge anyone more than anyone else.

A SEP plan is a piece of paper. Contributions may be made to any SEP-IRA account, old or new, and different accounts for each participant.

You read it wrong. It states making an "adjustments in the "items" taken into account by such individual or shareholders". If there are no items (payments) there is no adjustment the IRS can make. >>(e) Treatment of family group If an individual who is a member of the family (within the meaning of section 704(e)(3)) of one or more shareholders of an S corporation renders services for the corporation or furnishes capital to the corporation without receiving reasonable compensation therefor, the Secretary shall make such adjustments in the items taken into account by such individual and such shareholders as may be necessary in order to reflect the value of such services or capital.<<

Well... I don't think you can actually buy a client! In reality your client is buying a covenant not to compete arrangement.

IRS has authority to reclassify "draws/distributions or other payments to a shareholder" if the shareholder has not taken a reasonable salary for the work performed by the shareholder. If wife has taken nothing out of the S-corp, she does not have to take a salary.

Usually if there is a statement of taxable it is because there was a cash payment also with the shares of the new entity. You need to research this further. I see no indication of a deductible $ loss from your numbers.

The odds are it makes no difference if/when the asset is sold as any gain is going to probably be ordinary income/loss unless the asset is sold for more than the original cost. Depr is recaptured up to any gain as ordinary income on form 4797.

Me thinks no amount of wampum donations will get Chief Fauxcahontas out of trouble!

Why would you conclude it is a passive activity? Follow the 1041 instructions on the line number as reported on the 1041-k1.

The President appoints the head of the IRS that determines the rules... who did you vote for?

Agree..1040 Sch-A, Misc

>>are they charging this to personal use on their logs?<< Some of us don't have to keep a log.

Well... it doesn't take but one valid business transaction and an actual event to operate as business to qualify for deductions. The real question is did he actually operate as a business in an appropriate business transaction before terminating the business. The fact that he made no income and the business fails in the same year is irrelevant.

You don't have to be afraid if you prepare a correct tax return. Is your license worth only a dollar?

And you and the client will both stick to that story in the federal tax audit! Martha Stewart went to prison for lying to a federal agent.

>>Does that make it a lie? I don't think so.<< @jklcpa: Rounding is allowed and if thats what it is no problem. Adding or subtracting a made-up dollar or more is in violation of your ethics. Is it still ok to add more than $1, say $2, if that is what will make it efile? >> Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.<<

efiling is so great!