OldJack

Regardless of what you promised to the guilty person, (s)he still stole the money and should now be turned over to the proper authorities (federal mail). And even though you were successful you should not have confronted the thief. You are not being paid enough to confront crooks.

A member here should not be chastised just because they only want to ask a question with certain or limited facts. After all, the answers here are only each persons opinion based upon not knowing all the facts. Now that is a fact.

You are certainly welcome Laurie. Good luck with your business.

Laurie.. I agree with your debits and credits except for possibly some depreciation for a part year if that has not already been included in accumulated depreciation to determine book value. If you handled this thru the asset disposition tab it would/should have taken a part year depreciation. The form 4797 and K-1 would appear to be correct if your FMV and book value is correct resulting in an allowable loss. Good work.

The personal withdrawal feature of the Asset Schedule should not be available for a form 1120S corporation. Non-recognition of gain or loss is simply not allowed. Any asset of an S-corp must be treated as sold at FMV to the shareholder and reported as such on form 4797 or Sch-D as the case may be. In the case of a vehicle, it is usual, due to depreciation, that the FMV will result in a taxable gain to the S-corp. Depreciation upto gain will normally be recaptured as ordinary income. I would not use the feature of withdrawal to personal and show it as a normal sale at FMV, then an adjusting entry to the books to charge at FMV as a property distribution. The "Force 4797 might work.. I have never done it that way.

I am the luckiest guys I know!

I just had another power outage a few hours ago even though its clear sky and electric cables underground. Guess what??? My FAT table is still FAT and my computers rebooted and are still computing. Printers, scanners, and all electrical equipment are just fine. I have run test and have declared there are no really bad things happening. :)

The best answer here may be to turn this tax situation over to the attorney that is going to handle all the legal stuff regarding the theft. You are not going to get paid enough to deal with this as it is going to go on for some time.

You have probably done it but just to mention the fact that an asset distributed to a shareholder of an S-corp must be treated as a sale at FMV, therefore it should show up as a gain or loss on form 4797.

Then there is the problem that the trust owns 100% of the common stock in the new business and therefore is running the business with the beneficiary wanting a salary and employee benefits. Thus, the beneficiary is directly or indirectly benefiting from the trust. The first prohibited transaction in the code is when the trust "(1) lends any part of its income or corpus without receiving adequate security and a reasonable rate of interest" [§503(b )(1)]. Would 100% of the common stock of a new business provide any security when the new business has no assets other than the investment from the trust? I think not. Would common stock of a new business be providing a reasonable rate of interest? Common stock does not pay interest. The second prohibited transaction in the code is "(2) pays any compensation in excess of a reasonable allowance for personal services actually rendered"[§503(b )(2)]. Would the beneficiary employee of the business work for a reasonable wage? What is a reasonable wage? Is it what the IRS auditor determines or what the beneficiary employee had paid himself? But more important is the sixth prohibited transaction "(6) engages in any other transaction which results in a substantial diversion of its income or corpus to; the creator of such organization (if a trust); a person who has made a substantial contribution to such organization; a member of the family (as defined in section 267(c )(4)) of an individual who is the creator of such trust or who has made a substantial contribution to such organization; or a corporation controlled by such creator or person through the ownership, directly or indirectly, of 50 percent or more of the total combined voting power of all classes of stock entitled to vote or 50 percent or more of the total value of shares of all classes of stock of the corporation [§503(b )(6)]. If this 6th prohibited transaction does not apply to this scheme, then I would certainly not think it would apply to most any other situation.

All I see is the states agreeing as to paying benefits. I don't see anything about the worker's business paying contributions. But then I only scanned through all that nonsense wording. Another OldJack? Not likely! :P

You want to give us a clue as to what page number you refer?

Yes.. A shareholder in a C-corp can certainly borrow money from a 100% owned corporation. There are, of course, dangers in doing so unless the loan is properly documented and treated in an arms-length type transaction. Note that when the corporation files its 1120 tax return it must report such loans on a separate line of the balance sheet on page 4. Thus, the loan is called to the attention of the IRS which will then look to see if the corporation has reported interest income on page 1. The loan should have proper documents reflecting proper terms and interest and due date or payment plan. Interest rate should be the current market rate at the date of the loan or at least the quarterly IRS published applicable federal rate. The greatest danger is that the IRS will reclassify the loan as a taxable dividend to the shareholder and thus no tax deduction for the corporation. This is usually when proper documents are not a matter of record and the shareholder has made no payments to reduce the loan. Interest paid by the shareholder may or may not be a 1040 tax deduction depending upon the facts of how the loan is treated. It is possible for a short-term loan to only pay interest without principal if the due date of the note is less than 12 months. There are other concerns that you should do a little research on before advising your client.

I agree with Tax Bird unless it really is not a theft. The question has to be asked... How would someone else deposit the check, withdraw the money, and close the account unless they had legal access to the bank account? If so, there would be no theft. Is this a husband/wife family breakup situation? Seems like a case where you have to determine more facts before judgment.

Both states will collect unemployment tax based upon the wages paid in their state. As a result, I don't think you are allowed to draw benefits from both states at the same time, but you are NOT limited to only drawing from your state of residence. I believe the application to draw asks if you are receiving from any other state. I think you have to qualify for the benefits from whichever state you choose to apply.

>>I like when Jainen comes hard on some of us << One of the problems of typed messages on a tax forum is that it is easy to misinterpret the meaning behind a statement. One person may consider a statement as insulting while another may consider it as harsh, whereas someone else reads it as constructive criticism or informative. We should all be more aware of what we say and how we say it, likewise we should take note of what we ask and how we ask it.

Gene.. we all learn something new every day, or we are in the wrong business since tax is a never ending and changing subject. As a broad statement, seldom should a tax preparer every use 1040 line 21 on the 1040 since most tax items have been decided over the years for reporting on some form. Too often lesser experienced tax preparers simply use line 21 rather than take the time to research where the item should be reported.

What Jainen says has been in all your publications and handbooks for years. Here is Quickfinder quote and there is an example just like yours on page 5-18.

The website info all looks good but I would not go there with a qualified retirement plan. The 5 steps look like a plan to evade taxes to me. The last step says the C-corp would be debt free. I guess if you don't consider equity due shareholders as a debt that would be true. It is interesting, and I don't understand, that step 2 requires the C-corp to adopt a tax-deferred trust and replacement plan. I think they are pushing the concept with misleading information, such as showing their determination letter for the trust as meaning something more than just the fact that they established a trust.

I have never heard of such exemption and I think you are confusing the withdrawal of retirement money to purchase a home for a first time buyer. I don't believe there is such an exemption to avoid income tax or the penalty. Here is the statute you quote and it has nothing to do with a new business, as you can see it is the statute that generally exempts a not-for-profit organization from taxes.

Since some of us don't efile I guess we can store taxpayer information anywhere we wish without telling uncle?

Well... I just had a power outage last week on a clear day and for no known reason... my computer still works with no "really bad" things. A loss of power does not damage your computer components, a surge in power when the UPS kicks-in might but then I don't know that. I had no intention of giving advice on UPS when I have no real knowledge about the things. I only offered my experience and stinking opinion. I agree that buying one is like buying insurance, but do you really need the insurance? How about someone telling us how many times their UPS did anything over a period of its lifetime. Maybe I should buy one just to be safe.

Well... I am not against a APC/UPS or whatever you call the thing, but I have used computers (since the 1980's) without one of those things and have never had power failures causing any damage to my computers. Sure you may lose a little current working data if you don't backup/save as you work. In my opinion those backup batteries are just another piece of equipment that is an unnecessary expense as it just sits there doing nothing until it is necessary to replace it. To me that is like hiring an employee to sit and watch you work. I'd rather use the money to go play somewhere with momma. :wub:

>>is there anything more to do other than setting the clock? Could it be I'm not going far enough in the setup program?<< After you change the settings are you sure you are selecting save changes with the menu before exit. True it could be nothing has been saved in the setup program as it was wiped out with the power outage. I have to say that sometimes a father knows best. It actually could be that your battery has completely failed and nothing is being saved when you power down or power fails. Therefore, the boot process has no information on the hard disk but is successfully finding the information as it boots. In that case it would not find the date and time which would give you the error you are receiving. You have only a few dollars to loose by replacing the battery. First enter the setup program and copy/print all your settings since you might have to enter them again manually, although with most computers now days the boot process should find the settings automatically. Also, all instructions tell you not to do it, but being very careful not to touch anything but the battery, I have replaced the battery with the computer running.

I have never prepared a form 4137 or SS-8 as the client/worker has usually worked all year and accepted a vendor type check clearly with no payroll withholding. That client/worker has known (or should have) all year that he was not being treated as an employee and if he was not willing to work as an IC he should have quit the job. The client/worker created his IC status and as his tax preparer I will only prepare his taxes according to his tax status. In other words its up to the client/worker to solve his tax status with his customer/employer. Its not my job.