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It does seem clunky, and if your software carries the sq ft over to next year, you'll have to remember to increase it to the full sq ft, not the diluted average.

Thanks, Dan. I was way off on the first line, but you had a couple of errors in the figures that I've corrected in bold. I fixed up the basis and cash outlay, and this does come back to the deferred gain and basis in the new property as I'd calculated above. I do have one question for you though. In your first and second lines, why isn't the $300K held in escrow included in the amount he received and why isn't it included in the amount he paid for the new property?

I googled "OIH for partial year" with that acronym and the IRS FAQs page was at the top of the list. I guess I get lucky with a lot of my searches.

If my reasoning above is correct, then I think the basis in the new property is $487,500. That is the $510,000 paid less the deferred gain of $22,500. This basis makes sense if you think of property give up with adjusted basis of $277,500 plus the cash outside of escrow of $210,000 that he had to use. Again, maybe someone will correct me if I am all wrong.

Yes, he can do a partial 1031 exchange, however as I said earlier, he has bigger problems and larger gain that you initially thought. Here's what I think, and someone feel free to correct anything that I have wrong. What I say here is based on the facts you provided and assumes there is no debt on the property sold or the property acquired and also doesn't take into account any closing costs. In a full tax-free exchange, the sale price $612,000 less adjusted basis of $277,500 = realized gain of $334,500. That is the maximum that could be taxed in a sale. Then you have to calculate the recognized gain. If the seller reinvests all sale proceeds, all is fine and there is no recognized gain, but your client reinvested only $510,000, so that alone creates boot of $102,000 and would be the taxable portion of gain if all of the sale proceeds were held by the qualified intermediary, but that is not what happened. The problem your client has is that only $300K was held by the qualified intermediary and he took the remaining funds of $312,000. This is the big problem. At that point where the client purchased the property with FMV of $510K, only $300K of the sale proceeds were used, and taxpayer bringing the other $210,000 of cash to the transaction does not remedy this. As I said in an earlier post, any time the taxpayer touches the money before the 1031 exchange is completed is a problem! Because he took the $312,000 of sale proceeds, I think the gain to be recognized as taxable is the lesser of the realized gain of $334,500 or the cash he took out, so I think he has a taxable gain of $312,000. Maybe someone else will correct this if my thinking as wrong, but there is definitely more than the gain you initially thought it was.

Maybe start by reading this on how partial exchanges and boot can occur. It's a fairly easy read but only an overview: https://learn.roofstock.com/blog/partial-1031-exchange This one on rules of boot is more detailed and gives some examples of the traps that one can inadvertently encounter in the 1031 process: https://www.efirstbank1031.com/advancedTopics/rulesOfBoot.htm Sorry, I don't have much time today to work through numbers. Maybe I'll be back late tonight but make no guarantees to have time then either.

The asset sales aren't included. Here is what I found for the SSA's Code of Federal Regulations to determine what is earned income. Also, keep in mind that in the year of retirement, I believe that only the earned income through the end of the month preceding retirement is counted. Here's that first link: https://www.ssa.gov/OP_Home/cfr20/416/416-1110.htm And here is the link to that same Code of Fed Regs for 404.1080 that is referenced in the first page: https://www.ssa.gov/OP_Home/cfr20/404/404-1080.htm

This transaction has multiple problems going on. Client created "boot" by not investing enough (not trading even or up), client only put $300K of the $612K in escrow(any time seller touches money it has potential to create up to that much recognized gain), and client doesn't have the deferred gain that you think he has. Also, this may be only a partial like-kind exchange.

According to the IRS Q&A on OIH, you prorate and only count the month if it was for more than 15 days. This is accomplished by paring down the square footage by coming up with the average sq ft over 12 months. This should help: IRS Q&A page on OIH

@Matthew in the PNW congratulations on landing the new position and best wishes on this new path. Don't be a stranger; you are always welcome here.

To answer this part of the original question - No, 3115 is not appropriate and will not be a remedy. This is not a change in accounting method. The taxpayer missed making the election, and there is no way to fix that now.

Yes, that is what I am saying. Please see cbslee's and TexTaxToo's posts above also. Rev. Proc. 2010-51 says this: "By using the business standard mileage rate, the taxpayer has elected to exclude the automobile (if owned) from MACRS pursuant to § 168(f)(1)" and that election must be made by the due date of the return including extensions. The time for making this election is in §301.9100-7T(a)(1) and §301.9100-7T(a)(2)(i)(A) that says:

Have you actually seen the return to know that both were actually deducted? Just guessing, but is that what the client thinks, that both were deducted but weren't really? I'd want to see for myself and not rely on what the client is saying. I mean, every program allows the input for both methods and it will choose the better of the two, so if he did that and actual exp+deprec was higher then that is what may have happened. Also, client may be thinking mileage was used if he entered it for the program to calculate the percentage of use for business purposes.

No remedy. Must use mileage in the first year for that method to ever be available again.

Capital loss as long as it was an arms length sale, to an unrelated party, and not used personally or intended for personal use before the sale.

Are you using ATX? Check to see if that form had an update and make sure yours is the current version. You could try deleting the form, closing the return, maybe also closing the program, and then reopening the return and adding that form back in. See if it is calculating correctly after that.

cbslee is correct. Keep in mind that even if there was a valid 1031 exchange that was properly set up and executed, there wasn't though, the fact that he took money from it would make at least that much taxable and indicates that not enough was spent on the new replacement property for the transaction to be totally free of tax.

The fact is that we all probably have equipment that is more UTD than that of the IRS. Remember when they tried to tell us how small our shredder chips had to be? IRS is a disaster.

Not a tax professional. Runs a business providing hardware repair, virus removal, surveillance systems, and IT consulting.

No, the IRS won't see any difference in the POA. At this point and without a valid perfected POA that IRS will accept, the only return the wife could file is her own as MFS. If the wife wants to file either return (MFJ or MFS for husband, she MUST "perfect" that general POA because the general POA isn't specific enough with its wording of only "tax return". To summarize...again: Spouse can only sign joint return on behalf of if - INJURY OR DISEASE PREVENTS SIGNING If one cannot sign because of disease or injury and tells his or her spouse to sign, then spouse can sign on behalf of the other followed by the words, “By (your name), Husband (or Wife)”. Attached a dated statement signed by you which includes the form number of the return you are filing, the tax year, the reason your spouse cannot sign, and that spouse has agreed to your signing for him or her. (Don’t forget to also sign in the space provided for your signature.) SPOUSE DIED BEFORE SIGNING If your spouse died before signing the return, the executor or administrator must sign the return for your spouse. If neither you nor anyone else has yet been appointed as executor or administrator, you can sign the return for your spouse and enter “Filing as surviving spouse” in the area where you sign the return. SPOUSE IN COMBAT ZONE – NO POWER OF ATTORNEY You are permitted to sign for your spouse serving in a combat zone, or performing qualifying service outside of a combat zone, or in missing status in a combat zone. Attach a signed statement to your return that explains the situation qualifying you to sign. SIGNING AS GUARDIAN OF YOUR SPOUSE If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian. Sign your spouse’s name, followed by the words, “By (your signature), guardian.” SPOUSE AWAY FROM HOME If your spouse is continuously absent from the United States for at least 60 days prior to the due date for filing the return, you may be able to sign the tax return with a properly executed power of attorney. Otherwise, you should sign the return and send it to your spouse to sign so that it can be filed on time. DIVORCED TAXPAYER If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year, and cannot choose married filing jointly as your filing status. If the divorce became final after the end of the tax year, you may file a joint return. However, you generally can sign on behalf of your ex-spouse only if you are given a “valid power of attorney” that is enforceable after the divorce. (See “SIGNING WITH A POWER OF ATTORNEY” below.) OTHER REASONS SPOUSE CANNOT SIGN If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a “valid power of attorney”. (See “SIGNING WITH A POWER OF ATTORNEY” below.) Again, because Taxman's client doesn't fit into any of the above reasons except the last one of "other", if she wants to file a joint return or file a MFS on behalf of the missing husband, she needs a valid POA. Right now, that general POA doesn't contain all of the language to meet the IRS requirement but may be perfected as described below. SIGNING WITH A POWER OF ATTORNEY (POA) Regulations §1.6012-1(a)(5) permits you to rely on a POA as authorization to sign a return for another person only if that person is unable to sign due to disease or injury, continuous absence from the United States for at least 60 days prior to the due date for filing, or if specific permission has been granted by the IRS. The POA must specifically state that you are given the authority to sign, and give the specific reason why as listed above. You may be authorized to sign either as the taxpayer’s representative or agent. Generally, a representative must be an individual eligible to practice before the IRS, such as an enrolled agent, attorney, or CPA; a family member (limited to spouse, parent, child, brother, or sister) may also act as your representative. There are no restrictions on who can be appointed as an agent for the specific purpose of signing a specific tax return. The tax return (or electronic filing authorization) should be signed in the following manner: “(Taxpayer name), by (attorney-in-fact name) under authority of the attached power of attorney.” The POA must be attached to the return. If the return is filed electronically, the power of attorney must be attached to Form 8453 and mailed to the appropriate service center once the electronic return is accepted for processing. A non-IRS POA may be used, but it MUST contain: the taxpayer’s name and mailing address, social security number, the name and address of the agent or representative, the type of tax involved (“income tax”), the federal tax form number (1040, 1040A, etc.), the specific year(s) involved, a clear expression of the authority granted, and the taxpayer’s dated signature. To be authorized as the taxpayer’s representative (as opposed to agent), the non-IRS POA must also contain or have attached to it a signed and dated statement made by the representative referred to as the Declaration of Representative (which can be found in Part II of Form 2848). If the non-IRS power of attorney does not contain all the information listed, the IRS will not accept it. Non-IRS POAs typically do NOT contain all the information required, simply because they often don’t specify tax form numbers and years, and don’t specifically authorize the signing of the tax return. A non-IRS POA may be “perfected” as follows: by signing a Form 2848 on behalf of the taxpayer, as long as the original non-IRS POA grants authority to handle federal tax matters (for example, general authority to perform any acts), and a statement signed under penalty of perjury is attached to the Form 2848 stating that the original non-IRS POA is valid under the laws of the governing jurisdiction. Sign Form 2848 in the following manner: “(Taxpayer name), by (attorney-in-fact name) under authority of the attached power of attorney.” The individual named as representative on Form 2848, often the attorney-in-fact, must also sign and date Part II of the form. The specific authority listed must include the authority to sign the tax return

Does the Canadian University participate in our student aid program?

Anyone seen the Bitcoin investment that people can make through Paypal? I have one client that told me he just bought some in 2021 but hasn't done anything with it. It seems more like a mutual fund to me because it can't be used to pay for things, and Paypal says it will provide the details for reporting the transactions.

If this is helpful, here are the rules that govern non-IRS POAs and what IRS requires in order for them to be acceptable, and how to perfect a non-IRS POA. It comes from Pub 947 but has the code sec cite of when the person with authority may sign a return and those requirements: Processing a non-IRS power of attorney. The IRS has a centralized computer database system called the CAF system. This system contains information on the authority of taxpayer representatives. Generally, when you submit a power of attorney document to the IRS, it is processed for inclusion on the CAF system. Entry of your power of attorney on the CAF system enables IRS personnel, who do not have a copy of your power of attorney, to verify the authority of your representative by accessing the CAF. It also enables the IRS to automatically send copies of notices and other IRS communications to your representative if you specify that your representative should receive those communications. You can have your non-IRS power of attorney entered on the CAF system by attaching it to a completed Form 2848 and submitting it to the IRS. Your signature is not required; however, your attorney-in-fact must sign the Declaration of Representative (see Part II of Form 2848).

Max W makes a good point. Taxman, whatever filing is done, I hope you will give us a followup post of how this plays out with the returns and if the husband is ever found.

Delete the pdf and close the return. Rescan the document and name it something different, and make sure to close it. Reattach the pdf with the new name, calculate the return, recreate the e-file and try again. https://support.cch.com/kb/solution.aspx/e-file-Rejection-X0000-029-A-binary-attachment-submitted-in-the-PDF-format-must-begin-with-the-file-header-PDF