jklcpa

Hmm, maybe after that will be those 709s that you weren't at all worried anyone would ever find out about... even after having read the technically correct answer. Last year it was "reality, too much effort, and who's ever going to find out" and now it's "known/should have known, ethics, and circ 230". Pick one.

I'm praying that everyone stays safe, whether you are in the hurricane's path or helping family and friends in need.

Well, I went directly with your title where you called it investment property so I deleted my earlier answer.

LionEA gave much more detail of this client's situation in the topic she started back on 4/8 in the ACA forum, and it would be most beneficial to keep all of the answers in one location. I'm not merging the two topics since the most recent answers may be slightly out of order and may not make sense if I do that. I'm locking this one and direct anyone else wishing to respond over to this topic in our ACA forum. Thanks.

If you prepared the W-2s in ATX there should be an option to print a W-3 if the auditor insists. Like you said, it is merely a transmittal that reports the totals, so if he insists on having one, you can show him that the figures on the W-3 agree with the totals generated by the EWR system during the upload.

Not so fast there. I don't know that these rules have been finalized yet. The following statement is unofficial, but I found this in many places: "The recent guidance mentioned above would also apply to U.S. expatriates and U.S. residents working abroad. Where the plan sponsor provides insured coverage for U.S. persons working abroad through an insurer regulated by a foreign government and complies with the notice and reporting requirements of the ACA, these participants may be deemed to have MEC." I also found this as part of the law as entered in the Federal Register. Please see page 30314, #3 subpart G - Minimum Essential Coverage, part a for Other Coverage that Qualifies as MEC where it references sec 156.602 and in the first paragraph of the middle column where it says: We proposed to amend § 156.602 by adding paragraph (e) to designate certain types of foreign group health coverage for expatriates as minimum essential coverage. These proposed provisions would codify previous CMS guidance published on October 31, 2013, with some additional detail. We are not finalizing this section of the proposed rule at this time. We will consider finalizing the proposal in the future, and will address comments received on the proposal at that time. In the interim, stakeholders and others can rely on the published October 31, 2013 guidance. I also found this: See the last sentence in the first paragraph of page 2 of this guidance from HHS CMS that is dated 2/13/2015 that discusses the requirements in 156.602(e) and also specifically footnote #5 that says: Section 156.602(e) of the proposed HHS regulation proposed to codify the guidance published on October 31, 2013 that designated certain types of foreign group health coverage as minimum essential coverage. See Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond; Proposed Rule, 79 FR 15808 (March 21, 2014). We have not finalized this section of the proposed rule at this time. And finally, this in 156.604 that goes back to those reporting requirements I mentioned at the start of this post. I think the requirements for and insurer regulated by a foreign government must comply with the reporting requirements under sec 6055 to be considered MEC. Sec 156.604(a)(2) and 156.604(d) spell that out. https://www.law.cornell.edu/cfr/text/45/156.604. Please take notice of the amendment date to this in the FR is 2/27/2015. Maybe that will give you enough references to the law as entered in the Federal Register and to the IRC to continue with your research so that you may decide how best to advise your client.

I think you posted about this same client back on 4/8, unless you have more than one client teaching in Singapore. You'll find that topic in the ACA forum. Did you ever establish whether the coverage they have through the U of Singapore qualifies as MEC? That will determine which forms you will need.

I agree with Joan and Michael, and I have clients whose fact patterns are similar to Michael's. I also have some wealthy elderly clients with only investment income who are now giving away large sums of money to universities and places of worship that also well exceed their AGI. I report the actual full amount of contributions that are documented, and if the AGI limitation creates a carryover, then that is what is reported.

If this is the federal marketplace your client should be able to print that 1095A out himself by logging on to the site and downloading the 1095A. They are posted as messages in the mailbox there.

Thank you for sharing what you found, Margaret. Confirming answers that are found and proper handling of issues makes this already-great forum all the more useful.

Yes, this model: Edit to say - sorry this is so large!!!!

Is it time to buy more acreage in that back field yet?

The "build, improve or acquire" rules pertain to home acquistion debt. Reverse mortgage interest is considered home equity debt that does not have those requirements. As far as the beneficiary being able to deduct the interest, the property has passed to the heir and heir is now the legal owner of the property, so I think that item (b) below applies and allows it (underlining is mine, for emphasis): § 1.163-1 Interest deduction in general. (a) Except as otherwise provided in sections 264 to 267, inclusive, interest paid or accrued within the taxable year on indebtedness shall be allowed as a deduction in computing taxable income. For rules relating to interest on certain deferred payments, see section 483 and the regulations thereunder. (b) Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness. As I said in my earlier post, I think he can take the interest deduction as long as he is able to under the rules pertaining to interest paid on home equity debt. He is the owner, the loan is secured by the property, he has the obligation to pay it off, he makes the payment.

Yes, I would put that on Sch C.

Without research, I would say that this is based on the equity interest in the home, and that is its FMV minus the balance of any outstanding debt secured by the home.

Ok, with that being posted, I have a few comments and observations of my own to add and are posted here to keep them separated so no one thinks they came from that website. Here are some of my thoughts on additional disadvantages: An additional requirement is that the homeowner must be at least 62 years of age. This includes a spouse or anyone else that is on the title of the home, so this may preclude some from using these products if the spouse is younger than that or if a child or other person is on the title. There may be lenders that offer these products for those younger than 62. The lender will require that the home is maintained to its satisfaction and may require costly repairs be done. Some examples I've heard of are sidewalk repairs for any cracks or unevenness and damp basement remediation. If the borrower does not have the resources for this, it will have to come from the reverse mortgage proceeds themselves. Because there is no income requirement and solely based on the equity of the home, the interest rates +/or fees may be high. If choosing the monthly payment or line of credit option available with these products, each of those draws usually come with a fee attached to them as well. The loan does not have to be repaid as long as the home is the borrower's primary residence. It becomes payable when the borrower sells, moves out, or dies. Moving out also includes the borrower being placed in a long-term care facility, and that is usually when the family is looking to the remaining resources to fund this person's needs and care. Accumulating interest adds to the loan balance. Estates or heirs are required to pay off the mortgage so inheritance is reduced. An heir wishing to keep the family home in a cash poor estate will have to use other funds to do so.

We had a recent topic on reverse mortgages that was about the proper handling of an heir's payment of the interest. Many of us have aging parents and clients, so I thought I'd start this discussion with the lists below that I copied from a page on a site called reversemortgageguides dot org. This should not be considered a complete list, so please add to the discussion as I have done in my next post, especially anyone that has firsthand experience. Pros of Reverse Mortgages Allows the homeowner to stay in the home. Can pay off existing mortgages on the home. No monthly mortgage payments are required, however the homeowner must live in the home as their primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements. The homeowner receives payments on flexible terms: Credit line for emergencies Monthly payments Lump sum distribution Any combination of the above A reverse mortgage can not get “upside down” so the heirs will never be personally liable for more than the home is sold for. Heirs inherit the home and keep any remaining equity after the balance of the reverse mortgage is paid off. Loan proceeds are not taxable. The interest rate may be lower than traditional mortgages and home equity loans. Reverse Mortgage Cons The fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage because of the insurance cost. The largest costs are FHA mortgage insurance and the origination fee The loan balance gets larger over time and the value of the estate/inheritance may decrease over time. A reverse mortgage loan usually does not affect eligibility for entitlement programs, such as Medicare or Social Security benefits. However, some needs based government benefits such as Medicaid and Supplemental Security Income (SSI) may be affected by a reverse mortgage loan. You should consult a qualified professional to determine if there would be any impact to your government benefits. The program is not well understood by most individuals. However, the availability of independent counseling helps.

I changed the title of this topic for clarity and will be starting a new topic shortly to cover advantages and disadvantages of reverse mortgages.

No, the estate is filing a 2015 return and the Schedule K-1s are part of that filing, and they are correctly prepared on the 2015 Schedule K-1s that are part of that filing. Everything in that entire filing should be prepared on 2015 forms. As I said in my first post, when the beneficiaries receive those 2015 K-1s with fiscal year dates entered, the ending date of the fiscal year determines the year the individual reports it on his or her return. The actual 1041 K-1s instructions to the recipient do not say this, but that is how it works. That is found in IRC 662(c): (c) Different taxable years - If the taxable year of a beneficiary is different from that of the estate or trust, the amount to be included in the gross income of the beneficiary shall be based on the distributable net income of the estate or trust and the amounts properly paid, credited, or required to be distributed to the beneficiary during any taxable year or years of the estate or trust ending within or with his taxable year.

No, at the entity level the tax year is determined by when the tax year begins. Individuals receiving K-1s will report the activity in which the year ends.

The numbers change all the time. Today I got one on my business landline and another on husband's cell phone, both robocalls from the wireless # 336-848-2137. I'm getting a few each week from a variety of numbers and area codes, all robocalls saying the same thing.

If this worked at all though the crooks could easily change the letter to say to contact IRS at a stated phone number for instructions on how to make payments, then still scam unsuspecting individuals. I shared it so we'd be aware that crooks are now trying emails with attachments too.

IRS posted IR 2016-123 today about a new phishing scam where recipients receive an email with an attachment containing a fake CP2000 IRS notice related to the Affordable Care Act and having a balance due that is small enough that the recipient may not question the amount and just pay it. Besides the obvious fact that IRS will not contact taxpayer's by email, other telltale signs include instructions to make payment to "IRS" (payments are correctly made to "United States Treasury") and the address is to Austin Processing Center with a P.O. box that does not match the Austin center's address. Safe link to IRS news release page, specifically for this release: https://www.irs.gov/uac/irs-and-security-summit-partners-warn-of-fake-tax-bill-emails

Getting back to the original subject, the IRS released IR 2016-119 today pertaining to Practitioner Data Security. You can search for it on the IRS site as I did after receiving an email from the IRS' Philadelphia Stakeholder Liason, Stephen Connor, who sent out the IR as a Word doc to be downloaded. Just a touch of irony there. The thing is that this was a one-page statement that was certainly short enough that it could have been included in the body of the email.

Adding to my post above, I'd probably deduct it. I don't think the character of the loan or its terms are changed simply because it was inherited. It is still a reverse mortgage, and if it is still in the estate the administrator or executor would handle it the same way the decedent would if still living, and in the heir's hands he is still bound by its terms and is required to pay it off within a certain time frame. From pub 936: Reverse mortgages. A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. With a reverse mortgage, you retain title to your home. Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II.