OldJack

I am not aware of any recent cases where the IRS argued to 'pierce the corporate veil'. That is normally left to disgruntled shareholders. By state statute and corporate bylaws, officers of a corporation are usually authorized to sign loan documents without any board of directors resolutions. It is only the financial institutions that like to have a resolution in their file for their bank auditors.

Thanks for the quote. I had searched "thetaxbook" for that situation and found nothing on the subject. Another example of how much better Quickfinder Handbooks are for the tax preparer.

I have maybe one IRS letter to a client per year and that usually has nothing to do with paper filing. Now you folks want to charge your clients for paper filing when you are paying extra to efile and you are not charging for that? I sure am glad that my clients don't want to efile. I certainly don't want to spend all that time with those efile bounce back errors and waiting for those confirmations. :lol:

Wayne, the IRS asks for corporate minutes to find something to use against you. Of course its a good place to document those "written plans", but those plans could be separate and there is no penalty for not having corporate minutes. And they are a good thing to have if you find yourself in a legal battle with a shareholder.

Yeah KC... I missed in the original post the fact that the cash partner got his investment back at termination. A case could be made that the bus partner contributed the money back to give to the cash partner and the entries just need to be made on the books. I would say if there were documents, or partner statements to back it up, a case could be made that the bus partner contributed the bus to the partnership (but check the title) for a 50% ownership with a loan due him for the excess value over the cash partners investment and that the $25k taken back was just a payment on that loan due the bus partner (should have been a paper document). However, if that is true, then the bus did not belong to any one partner when in the business. But the bus partner could take the bus in liquidation if he contributes additional capital to create basis equal to the value when he first contributed it to the partnership (ie: the $25k that ended up to the cash partner). The bus partners basis would be his 50% matching $25, plus the loan due him, plus the additional contribution of $25k that brings him back to his original basis before the LLC/Partnership. Therefore, if the partners both agree that was the intent going in and terminating out there should be no tax to either partner as they both got back what they put in.

True.. its the fact that when the bus was contributed the individual got $25k. Unless he has already recognized the income or took the money out of the business for some other reason. He can withdraw the bus on termination without paying a tax unless he is taking more than his basis. You have to talk to the members/partners to be sure you understand what was the deal. Also, When the partnership terminates the cash partner appears to have gotten nothing for his investment so he has a 1040 Sch-D capital loss unless he has already reduced his basis as a result of loss deductions or property distributions (draws).

>>Couldn't you also resell the treasury stock? << Sure you could resell all of the Treasury stock,but unless you sold it for the exact cost on the balance sheet you would have an adjustment to the retained earnings account that would need to be documented by corporate minutes. However, let me say here for the record that there is no actual requirement, for tax purposes, that a corporation has to have written minutes of meetings.

By vote authorization from a shareholders meeting and by resolution of the board of directors. The officers then reorganize by canceling the treasury shares and make an entry closing the account to the retained earnings account thereby reducing the retained earnings of the corporation. Such transaction must be disclosed in the notes of the financial statement and cannot effect the current year income statement.

Of course you will need to discuss the $25k with the cash LLC member to be sure you handle it correct. But I would expect that the cash LLC member contributed the cash to purchase his number of units/shares or percentage of ownership and it should be recorded that way. Then I expect the Bus contributing LLC member took a number of units/shares or percentage of ownership for the Bus and had a loan due him for the balance of the value of his Bus. That makes each member with the correct number of units/shares or percentage of ownership and value according to their agreement. Thus when the Bus member took the $25k he would be reducing the loan due him. Unfortunantly, the Bus member has now got to recognize a taxable gain on the boot for the cash taken as a part sale of his Bus.

But since the estate is converting it to rental property there will be a business gain (form 4797) subject to ordinary income treatment from "Nonrecaptured net section 1231 losses from prior years". Any gain after ordinary income would flow to 1040 Sch-D for gain up to "Unrecaptured Section 1250 Gain" at a max tax rate of 25% and if any other gain is left then at a max tax rate of 15%. Your clients should be made aware that renting the property could be undesirable compared to just selling it for 15% max tax on any gain.

Lion, any of the professional tax message boards are safe for your computer. The message board only puts 2 cookies on your computer so that you can login automatically without retyping your password. As far as I have ever seen there had never been a post with the name "dCock4" on the message board until your post. The "dCock4" has been erased on your computer now that you have the cookies with the name that you use today. Actually the "name/password" is within the cookies "quickfinder.com" and/or "www.quickfinder.com" and each time you change your name it is changed on your computer. Don't know what caused the problem but you should have no further problem on the website. Its really no big deal.

Lion, I don't think you have been kicked off of QF message board. I expect that what has happened is that somehow your password has been deleted or damaged in the process of the moderator trying to fix a password program error. Or the fact that you can login with "dCock4" handle might imply that someone has hacked your password and changed your handle. While it is true that QF staff appears to not be answering problems, I expect that it is because they are still trying to figure out what is going on with their board. I posted my problem of not being able to change my password and it took 3 or 4 days for them to respond. The staff correcting my login and password problem may have been the culprit that screwed up yours. Give them time and they will get it right.

Yes.. a revocable trust was what the client was told to do. Thanks KC.

>>If your client has a juicy story like this, please share it. << None of the above... client simply wants the best way to avoid tax and give the real estate to the kids. I was comparing all the various alternatives. Someone had told the client that an irrevocable trust was the way to go. You know, everyone is a tax expert except me.

>>What matters is that you had the right to control the details of how the work was done<< Well taxpayer/clients certainly have control of the details as they feed it to the tax preparer. Of course there are those tax preparers that like to be "creative". I wonder how many households prepare W2's for their lawn service? I'll bet the IRS is just swamped with such W2's. LOL

>>so there will be no step-up whether the property is held or distributed<< That was what I was afraid of and the reason I was asking the question. So setting up an "irrevocable trust" during lifetime only accomplishes freezing the fair market value of the gift for estate tax, form 706, purposes. When faced with this question I realized that all the irrevocable trusts that I had handled were for either life insurance where basis was not important or setup as a result of death where basis had been stepped up. Thanks for your response Jainen and KC. Much appreciated.

Hey guys these are not trick questions and I expect the answers are obvious. But, I really would like your comments. The numbers are close to a clients tax situation and although I have an opinion as to the answers I would like to confirm it with other opinions before I call back the client.

So if I only do tax returns at the home of my clients am I qualified as a HH employee? You guys know better than that.

>>My big dream is to get a dentist for a client. << Oh veritas... you look just fine with those teeth.

Facts: Client transfers commercial real estate, bare land, with FMV of $500,000 and cost basis of $100,000 into an irrevocable trust. The irrevocable trust has a non related person as trustee. Beneficiaries are clients children. Client files a gift tax return showing FMV at $500,000. Client has only other assets for estate of approximately $200,000 therefore no gift tax or estate tax upon death. 1. What is the land tax basis if the irrevocable trust sells the real estate while the client is still living? 2. What is the land tax basis if the irrevocable trust sells the real estate after the client is dead? 3. What is the land tax basis if the irrevocable trust distributes the land to the beneficiaries after the client is dead and the beneficiaries sell the land?

Although I did not read every word real close or check the dollar amounts for current year limits, I have no basic disagreements with the CPA's statements. I do question the household exemption of self employment tax on teenagers working at jobs such as lawn mowing work for neighbors. I would consider that as a Sch-C business subject to SE tax since age has nothing to do with independent contractor status. Under that broad theory of working for a homeowner, some tax preparers would be able to exempt a large portion of their tax preparation business from SE tax since they prepare the tax return with the client in the clients home. I think not.

What veritas says is true. Frankly, if the vehicle is, or has been, treated as a S-corp asset I intentionally don't bother to check to see what the title says.

Sure.. 1. He can file form 2106 flowing to 1040 Sch-A and claim business mileage or 90% of actual expenses, including depreciation, for the business use and/or 2. He can also submit mileage or actual expenses to the S-corp for tax-free reimbursement under the theory of an accountable plan. Of course if he wants to also claim the expense on form 2106, the reimbursement is shown on the form 2106 as income netting the expenses. 3. He can immediately title the vehicle in the name of the S-corp and claim that it was a mistake when financing to title it in his personal name. Of course this is questionable and up to the owner/shareholder to justify if questioned. There is also an argument that could be made that a shareholder is allowed to hold title for the S-corp as a straw party or agent of the S-corp and the S-corp is the true owner making the payments (check with a lawyer). Then, the S-corp could claim the reimbursed expenses and depreciation, but the corporation must add the 10% personal use according to the IRS auto chart as a benefit to the user's W2 gross income.

See my post paragraph as edit:...

Don't know for sure but there are certain exclusions for Public Officers, Victims of terrorism, and Astronauts killed in the line of duty [code §101(i)(1)]. Reg. 1.404(a)-12(b )(2) says that payments to the widow or other beneficiaries of a deceased employee to continue salary for a reasonable period are deductible by the employer to the extent they qualify as a business expense. However, payments as a gift based on the beneficiary's need doesn't qualify as a business expense. Payments under a group life insurance plan are still excludable, otherwise it looks like any payments fall under an employee benefit rule and would be w2 taxable. No I don't look at the other board. However, I just might go look, but I expect whatever they are saying is probably true. LOL Good to see you back on this board Veritas. edit: Well!! I took a look at the other board and it was no real surprise to see that Bees Knees accused me of recently posting a fake post. For the record I have never posted any posts under any name on that board since I was unjustly banned from the forum. I am not registered on that forum under any name and as such I will not post on that forum now or in the future. Such comment by Bees Knees shows the character of the gentleman.