OldJack

Wishing you all a very Merry Christmas and a full year of happiness with all the best in the new year.

>>Any of this deductible on my Sch. A charitable contributions?<<

Of course!!

But it probably is not a legit deduction and would be disallowed on audit. Maybe if the church paid all the bills with you giving to the church, but then the church knows they can't really do that since it is really for personal expenses to pay for the donor.

>>I think I put the peanut butter on the "right" side! <<

Is there a penalty if you put the peanut butter on the "left" side?

I wouldn't know about such things since I have trouble fixing a peanut butter and jelly sandwich. Which is the correct slice of bread for the jelly or should both ingredients be mixed on the same slice?.

>>almost always agree with "Old Jack"<<

Obviously I just happen to post before you as you are always right. LOL

Well, I suppose an argument could be made that the interest is owed but it is just not due, therefore prepayable. I don't think most would buy such an argument. I expect the bank, as Jainen says, would be required to apply the payment to principal under current banking rules (not that I know anything about the rules since I have not audited a bank in about 40 years).

But then isn't there an old 12 month rule on prepayments (that I find hard to apply) but says (in my simple brain) that if the prepayment of expense is not more than 12 months, or exceeding the next year-end, it may be allowed as an expense?

I note that 2006 Quickfinder 1040, page 5-11, says:

>>"Mortgage interest prepaid in 2006 that fully accrues by January 15, 2007, may be included in Form 1098, box 1. This prepaid interest is not deductible in 2006; it should be deducted in 2007. Note: Some lenders apply prepaid amounts to both interest and principal; others apply prepayments to principal; only.<<

You would think the IRS would make up their minds on how such should be handled!

>>Old Jack, investing in mortgages is one of the oldest forms of fixed income investment, and the tax treatment I believe is quite settled and common.<<

Under your opinion there is no such thing as a personal loan to a related party.

>>It is directly comparable to margin interest on a securities account<<

I disagree that father could have investment interest. Father may not even qualify for mortgage interest expense (or may be limited) since the mortgage proceeds he took out was not used for improvements to his owned home.

The margin interest is investment interest because it is based upon actual ownership of investment property in the account. This loan to his daughter is a "personal loan" and it is not an investment loan; he has no investment property attributes; or even an underlying investment property for his personal loan.

2006 Quickfinder Handbook, page 5-8, lists interest expense that is not included in investment interest: 1) Qualified residence interest 2) Interest expense from a passive activity 3) Interest expense that is capitalized 4) Interest expense related to tax-exempt interest income and 5) interest expense on life insurance policy loans.

I expect you would have trouble getting past item #1 and/or item #2.

My understanding is that investment interest is one of several Sch A deductions which is excluded from the itemized deduction limitation calculation. Medical and Casualty Loss are also excluded. So, you get 100% of the deduction. I think the place to put the interest income is Sch B.

I don't believe you could classify this mortgage interest as investment interest excludable from the limitation since the loan does not qualify as a "buying investment property". For a recap of what is investment property read 2006 Quickfinder 1040, page 5-7 and 5-8.

OK.. for others that might read this and wonder, it doesn't matter what accounting method or year end. A corporation may not deduct a shareholders wages on the books that have not been actually paid in cash before the corporations year end. If such wages are on the books they are a page 4, Sch-M, adjustment in the year booked and an adjustment when deducted in the year actually paid.

What is a composite return?

>>The other item that i deduct for my brother is the cost of home security system.<<

I also would deduct this item in your brother's case, however, if it is a deduction for your brother it should be a deduction for anyone that wants to be safe. Its another example how we tend to apply tax rules how we thing they should be justified rather than how they are.

>>The sun shines very bright in southern Texas (when it shines at all), and cops need good eyesight so sunglasses are appropriate as safety equipment<<

hee hee ha ha $250 hee hee ha ha hee hee ha ha

That list is a good joke! Best have the tax return preparation done by the previous preparer. You can't win with this client. LOL

edit: The reason she is coming to you is probably because the last preparer doesn't want to do it again.

It appears obvious that the day care is not a separate not-for-profit organization, rather it is an operation of the church and not required to file anything but church employee payroll taxes.

I agree with So and So. If the taxpayer is a transient or itinerant their tax home is where they are and that makes it they do not qualify for moving expenses or travel expenses when going from town to town. Of course I would probably try to find and argue that they had a tax home somewhere.

Excellent!

>>Richard Spires, the deputy IRS commissioner for operations support, said in an interview that the agency is considering not processing all early returns if the AMT issue is not resolved soon.

"We are worried that if we allow certain filers to file that it does not cause a lot of confusion and delay the whole filing system for everyone," he said.

<<

>>$100 per month per shareholder<<

I say its a good penalty to have. 1120S forms should be filed the same as C-corp forms. Tax preparers should not procrastinate getting the job done so shareholders can file their 1040s early if they like.

>> paint my house at $10,000<<

Like a hooker, price is irrelevant, classification is all that matters. Either it is or it isn't.

When you file a 1120 consolidated tax return you are opening all corporations for audit together, when if you file separate you are not.

I assume you have been hired to do the bookkeeping. I would talk to the owners explaining the problem and state that if a better system could not be worked out to properly account for monies and documents that they should hire someone else. You should not be in a position of "fudging" their accounting records to accommodate their lack of proper procedures.

I agree with BullDogTom. Expense everything as repairs. The only thing of real question is the dishwasher and its a small amount. Good Grief...I would never depreciate paint!! If paint isn't an expense real estate taxpayers are in real trouble.

>>I think that the paragraphs are overkill<<

Its just AICPA's way of CYA.

Why would you want to file a consolidated 1120. And if you did, other than check box 1 to indicate consolidation, why would the tax return be any different than for just one corporation. Are you expecting the tax software to do your consolidation of the numbers of each corporation? Thats an accounting job.