RDennis Posted March 7, 2014 Report Share Posted March 7, 2014 Help!! I have taken over a friend's tax practice. One of his clients has qualified for Earned Income Credit from time to time. I have not prepared a return with EIC in many years, and not under the newest guidelines. She, a single mom who has been divorced for some ten or more years, has two children living at home 100% of the time. She provides 100% of the support. She and the kids seemingly meet all of the criteria, until I get to Worksheet 1, Investment Income. She inherited quite a bit of stock after her mother's death in 2013, and there were a lot of stock sales in 2013. In 2014, the remainder of the estate was distributed--not a factor here. Her earned income was $17,613. After the stock inheritance, she quit her job!! She had gross proceeds from the stock sales of $195K. She also received rental income of $23,000. There is also dividend income and a state income tax refund. So, lots of money received during the year. I go through the Worksheet, and in the first three sections, she has only $1,082 in dividends. In part 4, it appears that on line 12, I should enter the net loss from passive activities (the rental) of $7,650--lots of depreciation and probably light on the amount of rent charged--as a negative figure. Am I missing something, or does she really qualify for the EIC? If so, it certainly doesn't seem fair. Thanks for your help, Dennis Kavanaugh Colorado Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 7, 2014 Report Share Posted March 7, 2014 Proceeds of $195K from stock sales. If she had a gain, that goes on line 5 of worksheet 1 as additional investment income. If a loss, enter -0-. Maybe that is what you are missing. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 7, 2014 Report Share Posted March 7, 2014 If it's a rental loss, it doesn't count towards the investment income threshold. I hope you advise your client on what NOT to do with this windfall (but if she already quit her job she might not be open to advise) Quote Link to comment Share on other sites More sharing options...
RDennis Posted March 7, 2014 Author Report Share Posted March 7, 2014 She had a gain in 2013, but had a $28,000 capital loss carryover. So, the bottom line on Schedule D is a $23,000 capital loss. So, yes, I entered 0 on line 5. And, yes, she had a rental loss. Every single line in the right hand column is zero, except for dividend income of $1,082. Line 15, then, is the $1,082--so less than $3,000. Thus, it appears she qualifies. Well, at least, for 2014, she won't have any earned income! And, no, she won't be open for any advice. Quote Link to comment Share on other sites More sharing options...
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