artp

H & W owned several farm parcels In IL (not a community property state) which were inherited by their 3 children. H died in 1982. W died in 2000. In 1982 per H’s will 50% interest in parcel A was transferred to his son, the other 50% went into a trust with an income only benefit to W for her life and remainder interest to each of the children as 1/3 undivided interest in the land. Trust held title to the land until W died and the children inherited. While the parcel was in the trust the children could not sell, convey, encumber or do anything with the land until M passed.

Question 1. At what time does the step-up in basis occur? In 1982 when title passed to the trust or 2000 when effective ownership was passed to the children?

Also in 1982 per H’s will 50% interest in parcel B went directly to W with the other 50% going into the same trust as above with the same provisions. On W’s death in 2000 her 50% went to the children.

Question2. At what time does the step-up in basis occur for parcel B?

For the 50% interest that went into the trust-1982 or 2000?

For the 50% interest that went to W and then to the children 2000 ?

My take for question 1 is that the step-up occurred in 1982 since title transferred at that time from H to the trust. A step-up happens at the decedent’s date of death even though the children do not have effective control of the property until W passes.

Same answer for question 2 for the 50% that went into the trust. The other 50% that was inherited from W would get a step-up in 2000.

The two daughters sold their interest in both parcels to their brother in 2009. So it would appear that they would have the following:

For parcel A basis from 1982 for their share of the 50% from via the trust

For parcel B basis from 1982 for their share of the 50% interest via the trust; from 2000 for their share of the 50% interest from W

Do you agree? Anything that I am missing here?

I have a small (mostly tax only) practice so I may not be typical, but I went to virtually paper free this year just using a Kodak i1120 scanner and Adobe Standard. I looked at Document Manager, but it was too expensive and did not really save much time. I just needed simple document storage system rather the a complex document sorting and retrival system. I post any notes directly on the client docs before scanning and add electronic notes as needed afterward. So far works get. My client folders just consist of signature forms and the occassional odd document. I backup daily to separte external hard drive. Just my two cents worth.

What do you keep in your file, a paper copy of your clients return or do you save a pdf version or maybe both? I've always kept a paper copy of the return along with any back-up information such as W2's, 1099's, etc (my filing cabinet is starting to burst at the seams). I find it would be too time consuming to scan all the back-up, but I'll admit, I haven't really looked into any scanning solutions and I'm sure there are packages out there that provide an easy means of accomplishing that. Just wondering what each of you does?

When filing the MO CR for the MO 1041 the line instructions refer to the MO 1040. I could not find a CR form with specific line references to the MO 1041. My software picked up the taxable income from line 13 of the MO 1041 for the line 1 input on the CR. Is this correct? My only non resident income is from farm rentals in IL. I assume this would go on line 4? The net result is that the IL farm rental income exceeds the MO “taxable income” so we are deducting 100% of the IL tax liability on the MO 1041. Am I on the right track here?

Sorry, I got ahead of myself when I posted the question. The legal fees, appraisal fees and title transfer fees are all in connection with the transfer of the farm land and liquidation of some small investments that were held by the decedent and passed throught the estate to the estate heirs.

>>In this case fully deductible?<<

In WHAT case? You haven't mentioned what the legal fees were for.

>>appraisal fees, title work and transfer on death fees<<

I presume title work is an addition to basis and the rest are miscellaneous deductions for the estate, but again, you haven't mentioned what the purpose of these expenses was.

1. Are attorney fees paid by an estate fully deductible on the 1041 line 14?

Estate consisted mostly of farm property in which the decedent had a partial ownership. Farm was actively operated on crop share basis, but decedent was not active in the business. The other assets consisted of small bank account and some savings. Ownership of the assets were transferred to children from the estate. From reading past posts there seems to be a disagreement on deductibility of legal fees. Deductibility allowed for preservation of income producing property vs transfer of title/ownership of personal assets. Is this the proper framework for determining deductibility? In this case fully deductible?

2. Second issue is deductibility of appraisal fees, title work and transfer on death fees. Deductible, subject to 2% of income? Fully deductible? Non-deductible?

This issue is always troublesome. I would appreciated response from those with experience on these issues.

I also purchased Kodak i1120 a few months ago. Mine works fine too. I have a lot of single-side scanning so I set up a custom set up so I won't create a "blank" image for the back side of a scanned document. I found that Adobe Standard works well to save an image name when scanning documents to client's tax folder. I too am waiting to see how well the unit holds up during tax season.

Well, I decided to do it, and got myself a duplex scanner.

Since the Fujitsu that folks have raved about is no longer made and I read mixed reviews of the quality of its' replacement, I ended up with a Kodak i1120. It's the first peripheral I have ever purchased to run on a Windows machine that worked perfectly, first time, right out of the box. The scan quality is good, too. We'll see how well the customization goes, and how it lasts under the "strain" of a tax office in season. I'll let folks know if there is anything momentous.

What I cant' get over is how tiny it is! It's just a little wee box that fits on the corner of my desk, and weighs less than six pounds. It came with cords to plug into any outlet in England or Europe as well as the US/Canada, and quick set-up sheets in about a dozen different languages. I had fun figuring out which language was which. French, Spanish, Italian, Russian -- those were easy. Danish, Dutch, Polish, Finnish -- those were harder. And there are two Oriental languages I'm still not sure of. There are Chinese, Japanese, Korean, and one other. And I'm not sure which one is the Japanese and -what- the other one could be!

Catherine

I now understand that I need a more robust version of acrobat-either standard or professional. I have looked on line and prices are really all over the place. Does anyone have a reliable source for version 9 that they would recommend? I found a price under $ 100, but seems to good to be true.

You could rename the file:

00000001.pdf could be renamed 1099.pdf.

To do that: right click on the file, go down to rename, type in the new name and hit enter.

taxbilly

Great, and I just started using Paycycle for a couple of new clients! It seemed like a really good deal, but you are probably right. They will try to kill it off and move everyone to their rip off high priced Quickbooks products.

Finsihed the last one. Hope you guys are done soon. Have a great after season break. I know I am going to.

Thanks, I will give that a try.

If husband is in your system from prior year, pro forma him to 2008 and prepare him MFJ. Then, call up the X, switch their names/SSNs, and type in her info from her original HOH return in column A. I'm having you switch the primary taxpayer and the spouse to get the one that's being amended listed as primary. However, you might want to research whether that's necessary. Maybe it's OK to have the one who's being amended as spouse; OK to file as primary taxpayer on an amendment the one who has NOT filed yet. Probably so, and then you save the hassle of switching names/numbers in your system.

What if the wife filed as HOH (another prepare did her return) and the husband (my client) has not yet filed? What is the best way to get to MFJ? Do I need to file husband as single first and then do the 1040X?

Has anyone been able to efile a 1040 with the first time home buyers credit using form 5404?

Farm client is wanting to take depreciation in 2008 for a used combine he will be purchasing. Assuming he has sufficient income from his farming operations, I believe he would be be able to use Sec 179 but would not be eligible for the new 50% bonus depreciation since the combine is used equipment. Correct? If he takes possession before 12/31/08 is that sufficient to meet the "placed in service" requirement? He may be taking delivery late in Dec and therefore would not be using the combine to harvest any crops in 2008. Would this jepordize taking the Sec 179 and regular depreciation in 2008? Could he then take it in 2009? Farmer is expecting substantial profits in 2008 and needs the deduction this year.

KC & OLD JAck

Thanks for the quick reply. Sorry I did not respond sooner.

Farm client is wanting to take depreciation in 2008 for a used combine he will be purchasing. Assuming he has sufficient income from his farming operations, I believe he would be be able to use Sec 179 but would not be eligible for the new 50% bonus depreciation since the combine is used equipment. Correct? If he takes possession before 12/31/08 is that sufficient to meet the "placed in service" requirement? He may be taking delivery late in Dec and therefore would not be using the combine to harvest any crops in 2008. Would this jepordize taking the Sec 179 and regular depreciation in 2008? Could he then take it in 2009? Farmer is expecting substantial profits in 2008 and needs the deduction this year.