OldJack

Well... to meet the requirements of a tax free transaction the assets are supposed to be transferred to the S-corp at FMV in exchange for the shares of stock (Debit Assets / Credit Stock). This does not mean that depreciation basis changes, rather it continues as before, but that the excess of FMV in excess of depreciation basis is a non-depreciable asset.

Nothing is required to be shown on the 1040 for the transaction, however, you could show a disposition/withdrawal of assets on form 4797 at no gain/loss just to document.

but he is uncomfortable telling his current CAP that he wants to leave him. Instead he wants me to contact his soon to be former CPA

Many times a fellow like this owes his CPA and does not want to meet and pay up? That would be the first thing I would check out before doing anything for this possible client. If that is the case you don't want this client!

Taxable Income on a UGMA account is taxable each year to the kid. Classification of taxable income would be the same as for any account for any individual. If it is an interest bearing account it would be taxed each year as interest income, etc.

Probably not a smart move. You will become a Personal Service Corporation. Tax BAD!! Corporate tax of 35% PERIOD. The taxed on the flow thru amount on your personal return as well.

Not recommended for tax professionals.

Personal services. Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts.

An S-corp is exempt from the classification of a Personal Service Corporation.

What is there you don't understand about "disregarded" for tax purposes. Disregard the LLC except for legal purposes.

I believe that your client has incurred a prohibited transaction, with the wife's corporation, that has disqualified his IRA and subjected it to tax and penalties.

>>And I din't want to ask my CPA because she wii inundate me with links and I 'me not even sure what's happening....and then she will tell me she cannot give me legal advice....blah blah<<

You are over your head on this and you are crazy if you don't take it to your CPA.

I doubt a CPA is required to give information on an account that is not in the CPA's name. Especially for an account that the "client" can easily access.

You are not missing anything. Tell her she could take her tax info to whoever prepared her friends tax return, but it is still not an allowable deduction.

In most cases the S-corp must pay an officer on a W2 a fair wage for work performed. Of course an S-corp (LLC) must file a 1120S tax return.

I assume the title of the property was in the name of the trust at date of death, otherwise you don't have a trust problem. Trust therefore gets step-up basis to fair market value as of date of death. Trust (not the trustee) then rents property, takes depreciation, pays expenses, and receives income that it either pays income tax on 1041 or passes/distributes the taxable income/loss amount to beneficiaries for taxation (not to confuse with cash distribution) EACH YEAR. The trust then distributes all assets which would be the property and any cash and shows any unused deductions/loss FOR THE FINAL YEAR on the final trust 1041-k1 for the beneficiaries.

Its hard to understand a loss when the only cash the trust had was from rent income, unless the loss was a result of something like depreciation.

See form 1041 instructions on excess deductions upon termination of the Trust. In most cases such deduction may be passed onto beneficiaries by way of the final 1041-K1.

Basis to mother as a gift is the basis of the beneficiary/trustee basis at the time of the gift. Not FMV at time of gift.

A gift tax return is required (assuming basis is more than normal exception) by the giver of the property.

The 34% calculation should come after determining the gain on each animal. This sounds like a required partnership tax return whether they like it or not?

>>Paper file 1040 and attach 1099R so the IRS can see where the withholding is coming from.<<

A form 1041 is the 1040 income tax return for a deceased person.

>>Don't see how I can put this on a 1041 as no estate exist.<<

>>If income is received in 2013 by surviving spouse<<

There was an estate and it was the 1099R distribution. The 1099R says the deceased received income (which is received by the deceased estate), not a surviving spouse. The estate then distributes the money to the surviving spouse. There is an estate taxable income that requires a 1041 tax return either paying the income tax or passing the taxable income to beneficiaries for tax. Just because the surviving spouse got the money does not mean it is the surviving that should have gotten the money or report it as taxable income.

edit: The Master Tax Guide is talking about IRD taxable payments made directly to the surviving spouse on a 1099 with the surviving spouse's social security number.

You didn't say what tax year the 1099R is for. Guessing it is a 2013 tax year would mean the spouse/estate has taxable income in 2013 and should file a 2013 tax return form 1041. Marriage and joint return filing ended in 2012 tax year end.

I think KC has answered your question. And it appears the CPA knows what he is doing.

>> Crop share and livestock share rents held by the decedent at death are income in respect of decedent and are taxable on later sale by the estate or heirs.<<

But was the decedent holding a crop share or holding a stored asset?

>>Client died leaving harvested wheat in storage.<<

It would appear to me that this might not be an IRD as he had a right to the stored asset rather than to income. Without further details I would think it is just another asset of the estate subject to a Step-Up-Basis.

>>Rent paid in the form of crop shares is included in self-employment earnings for the year you sell<<

The decedent did not sell the wheat and the crop share issue is irrelevant.

I agree with KC. The PTIN is nothing more than another way of IRS control and collect money.

Sec 312(n)(6) is regarding corporate distributions/dividends in determining "earnings and profits".

Sec 312 is not the section for income tax reporting purposes. A small business corporation may report income on the completed contract method of accounting or the percentage of completion method of accounting. The difference in the two methods, if book is one way and tax return the other method, is reconciled in the 1120 schedule M1. It is common that GAAP financial statements are prepared with the percentage of completion method with books and tax return prepared on the completed contract method.

Completed contract method is sometimes referred to as "income is recognized when job is done and the last nail driven". Whereas income is recognized as the job progresses (such as partial billing) on the percentage of completion.

Its pretty bad when a professional forum has to have a warning system! Makes you wonder if the members are really professional.

Because of a few posters this forum has become very unprofessional!!

IRS SERVICEWIDE SUMMARY OF SHUTDOWN IMPACT
This IRS Shutdown Contingency Plan (Non-Filing Season) for fiscal year 2014 reflects a total of 8,826 employees (9.3% of the total employee population as of 09/07/2013 – 94,516) who are designated as “excepted” and would be retained in the case of a shutdown in order to protect life and property.

I promise not to attack you here!