OldJack

Depr schedule continues as was from individuals.  LLC books depr schedule assets at original cost and accumulated depr accounts balances.  Then the fair market (or agreement price) value minis the net book value of depr schedule is booked as a non-depr asset like land.  

Yes original dates can normal be entered in most software.

On ‎6‎/‎27‎/‎2017 at 6:10 PM, Max W said:

Client purchased a 62 foot boat this year to be used exclusively for his office (Sch C).

 

@Abby Normal: Read the original post.  Is it your opinion that the taxpayer did not intend otherwise?

31 minutes ago, Abby Normal said:

But the unused part is not used for business, so it is personal use, even if it's not used for wild parties.

Sure it is!  Using your theory a stand alone insurance business building could only deduct where their desk were located in the building.  Please tell what personal use when the "taxpayer" said the boat was purchased for business use, or did he say only his desk was for business?  Maybe you are only thinking office in the home deduction?  Its not a home.

It appears that the boat is NOT used for any purpose other than for business, therefore why would it not be a 100% deprecation asset and business deductible?  It appears to me the whole boat is his office or business.  If you treat it as personal property you will keep the taxpayer from recognizing a deductible loss if sold.

Well, I really question the 65% personal.  Is it his home?  Does he have a home otherwise?  Does he have another office?  Why is the boat not 100% business?  What does the taxpayer/owner say about its purpose and use?

well you still have not told us what kind of work she did.  Obviously it was more than once as it was over 2 year period, so it would appear that it is income subject to employment tax either as employee or self-employment.

I have my 1977 tax return and it doesn't look a think like that.  hehehe

I disagree,  there is no age limit for a self employed person.  I agree that the preparer had no choice but to file subject to SE tax as 1099 was issued for earned income although as she did work/labor it should probably have been filed on 1040-Sch-C.  If your niece wants to contest the status (for employee) I believe there is an IRS form 8919 and SS-8, for procedure of doing that with an amended tax return.  Search IRS for "Misclassified Workers to File New Social Security Tax Form".

Guarantee payments in a partnership is not a partnership expense deduction.  It is not payroll.  It is just an amount that is deducted from the computation of profit to be allocated according to ownership ratio.  It is taxed to the partner the same as his share of profit.

Basis before sale plus taxable gain(s) reported, less non-taxable capital payments received (with interest payments) equals new basis.

I agree date of original owner dod FMV unless basis has changes during the trust period such as improvements or destruction.

Nothing... the sub S account becomes frozen on the Corp books (still shown as AAA account) and a new account is established for the C-Corp.  Remember if S status is terminated on any date other than the first day of the year you must file 2 tax returns one as 1120S and the other as1120.  You can file your revoke and elect to make it effective on the first day of the year.

It is not your obligation to advise the clients of your opinion of previous errors on previous tax years.  Therefore it's not your obligation to amend any previous years unless the client requests it.  My advice would be to deal with any problems if and when they occur.  You make waves in a small town and you lose. 

No.  Non deductible commute expenses.

I have had C Corp NOLs many times and simply file 1139 with 2 attachments of page 1 of 1120C marked "original" and "as amended".

Well maybe IC.  What does the client do otherwise and does he do similar work for others?  Is there a written contact for a specific time or project.

You should state if the corporation is a 1120C or 1120S. We assume a C Corp.

First a 1041 is an income tax return and does not report asset values of an estate or distribution of assets.  Form 1041 may report distribution of taxable income but not value of assets.  That paragraph is simply making you aware that an estate may need to also file an estate tax return if values are over the credit amout.

It is true that on audit the agent is required to allow additional deductions presented when proven on audit.  I have gotten audits to "no change" or refund presenting deductions during the audit.

42 minutes ago, Lion EA said:

Is it inventory of the partnership that was created to be in the business of buying and selling property?

Explain taxes to the client, ask the client if it is investment property or inventory, (its not a tax preparer decision) the client will say investment as it probably must be sold before they can have money to do another.  It is possible for joint ownership in real estate without it being treated as a partnership.  The property is not being used in a business (not in condition for use and depr) so It is most likely not the intent of the parties to inventory the property.  As this property is not in use it is code sec. 1221 property, capital asset (Sch-D), and not business 1231, 1245, or 1250 (form 4797).

It is "investment property" not property subject to deprecation as it is not USED in a business operation.  Therefore it is not form 4797 rather form Sch-D.  There is no reason a person or business in the real estate business cannot have an "investment property" resulting in capital gain or loss. (ie; stocks, bonds, land, buildings, etc.)

On ‎9‎/‎2‎/‎2016 at 2:29 PM, Max W said:

1.Doesn't there have to be basis in the corp (either with Paid in Cap or a legitimate loan,) to take the NOL?  There may well be a bank loan to the owner, but the corp is not paying any interest.

2.As for return of capital, there is also a minus $700K in retained earnings so there is nothing to be distributed.

3.How would you suggest legitimizing the loans? Some of the loans were made seeral years prior to 2012.

Thanks for your help. 

 

 

1.I don't understand your concern about taking the NOL.  Who are you thinking takes the NOL.  No one takes the NOL except the C-Corp against future profits.  If the C-Corp folds the NOL is lost but the loaner writes off his loans and stock basis as bad debt (on 1040 Sch-D) with the same results as if it was capital with write off of stock basis. Don't confuse a NOL of a C-Corp with that of an S-Corp. The NOL is a carryover for the C-Corp.

2.Once you capitalize loans you can't go back to loans (to pay back the loaner).  If the C-Corp has future earnings then you can't take your paid in capital out without paying dividends on those earnings resulting in the earnings being double taxed just to get your paid in capital out.

3.Legitimize with a new loan, that gets rid of the old loans.  The past is the past and you can't do anything about that.  The Corp defaulted on interest unpaid since it didn't have income to pay.  Default is not income to C-Corp and not income to loaner.

I don't understand what a NOL has to do with capitalizing.  A C-corp NOL is carried forward until C-corp income and not deductible otherwise.

10 minutes ago, OldJack said:

I disagree with capitalizing the loans.  Obviously there should be some capitalization for the issue of shares of stock which is really the problem.  Issue of shares of stock can be booked even with an account receivable from the owner.  Obviously the loans should be documented and subject to interest.  The problem with capitalizing the loans is that the IRS considers a return of capital only qualifies for tax free distribution if all retained earnings have been paid as taxable dividends first.  So in effect you may be locking in those loans making it difficult to distribute in the future.  That can make your client very unhappy.

Also, Check to see if the corp is actually paying interest to a bank when it should be paying to the shareholder as this loan probably came from a financial institution such as a bank.

I disagree with capitalizing the loans.  Obviously there should be some capitalization for the issue of shares of stock which is really the problem.  Issue of shares of stock can be booked even with an account receivable from the owner.  Obviously the loans should be documented and subject to interest.  The problem with capitalizing the loans is that the IRS considers a return of capital only qualifies for tax free distribution if all retains earnings have been paid as taxable dividends first.  So in effect you may be locking in those loans making it difficult to distribute in the future.  That can make your client very unhappy.