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Dept of Defense and military personnel have the deferral.

Yes, I agree with Dan that if the client still has the same route with a reduction of several customers, then I'd say company bought back those several customers for the $30K. My answer would be different if this was not substantially the same route though. I'd prorate the cost, amortization, and remaining basis saying that what was bought back was 30/130 or ~23.08% of the route and report that against the $30K proceeds so that the client would report ~ $21, 460 of gain (30K - 8540 of basis). What I wouldn't do is frontload an entire $30K of basis against this sale and report -0- gain.

I can't answer that because I moved to Drake starting with the 2012 tax year.

Both the Sch C individual as transferor and the S Corp as transferee will each attach statements. https://www.law.cornell.edu/cfr/text/26/1.351-3 Shareholder receiving stock must file statement with return for the year of the transfer under Treas. Reg. §1.351-3(a) Corporation must file a statement with its return for the year of the transfer under Treas. Reg. § 1.351-3(b) Both must maintain permanent records to determine subsequent gain or loss

I'll take a shot, but am not entirely sure, but I think this could happen under the ordering rules with redemption distributions. If you look at the ordering rules in 1.1368-2(5), the "ordinary" distributions can't take the AAA below zero, but I think a redemption can. The M-2 section for AAA distributions doesn't have separate lines to differentiate between the two types of distributions, so I'm guessing that this may be possibly why ATX has this option. Maybe someone else that's had this situation will chime in.

Dan, I was thinking the same thing. File the returns to make the election. I'd also put a statement on the return that indicates the partnership had no activity that actually required a return be filed so that the IRS doesn't try to assess late filing penalties. ILLMAS, if you, or anyone else, would like a more complete reading of this under sec 266, this article from The Tax Advisor is a pretty good one. It also reminds us that with more people claiming the higher standard deduction, this election should be considered because the taxpayer can still benefit by adding real estate taxes and interest to basis that would otherwise be lost.

Can't help you with Texas. With the facts as presented, this partnership would NOT be required to file a Delaware Form 300 partnership tax return. It would need to file an annual report for its franchise tax with the DE Secretary of State each year though, and that must be filed via the internet.

I agree with this too ^^. Quoted Lion EA b/c a merge of two duplicate topics didn't work properly. Creating a new topic with all three posts was the only way I could find to fix. Grrr!

Max, to be simpler and more clear about the warehouse sale: the form 4797 should show only the $211,971 in part one and Drake will use the label "from K-1". That is the entire net gain and is all that should be on that form. just that one figure. From there, that net gain figure will flow onto the Schedule D on line 11. The unrecaptured 1250 gain of $16,821 is the portion of that gain that has the potential to be carved out and taxed at 25% because of the depreciation method used for the warehouse, and it will show on line 19 of Sch D, the "Wks CG" worksheet, and the "Wks 1250" worksheet. That is all that should happen related to the warehouse. As I said in my post immediately above, you still also will have to report the liquidation of this client's shares of stock in the S corp too, and that will go directly on Schedule D. Hope that helps you.

Yes, if there were any rents collected and if gross income from all sources everywhere exceeds NC's filing threshold for the client's filing status. This is the actual quote from NC's instructions for nonresidents, and keep in mind that where it says "income" from rental, that means gross rental income before expenses: Here's the filing requirement chart for 2019 for individuals:

No, that's not right. There are 2 separate things that happened. First, there is the sale of the warehouse by the S corp, AND second, there is the liquidation of this client's shares of stock in the S corp. FIRST, regarding the sale of the warehouse: The building was sold by the S corp and reported on the corp return. Your client's share of the NET gain flows onto his K-1. There are 2 items on the K-1 that are related to this sale and those 2 figures are what you need to enter into the software related to this gain. You don't enter proceeds or the building's basis because the S corp already did that. Just enter the 2 figures from the K-1 of $16,821 for the unrecaptured 1250 gain and the $211,971 for the 1231 gain. Don't enter the escrow figure either or worry about reconciling that; it is only informational. SECOND, you also have the liquidation of the shares of ownership in the S corp that should be a loss, and that is a capital loss that will be reported directly on Schedule D.

I've been very busy with some personal issues on the homefront lately and have read only what's been posted here about this and have to say that this will create a gigantic mess. Has anyone in D.C. with these stupid ideas thought about what will happen if an employee works for a company that defers in the fall and then that employee changes jobs next year to one that didn't defer? All I can say is thank goodness this isn't going to be a reconciling item on the 2020 1040s!

I'm wondering if the client also received other funds as a liquidating distribution, or if the liquidating distribution was included in the amount on line 16D of the K-1 instead of on 1099-DIV, or if client also received 1099-DIV for that part of this puzzle. Max W, do you have a 1099-DIV with amounts in either box 9 or 10? Or, did the client receive more in distributions than was reported on line 16D of the K-1?

The Bipartisan Budget Act made changes to the way partnerships are audited and allows the IRS to assess and collect tax at the entity level. Prior to its passage, any assessments were collected from partners. Here's a pretty good summary that explains it: https://www.thetaxadviser.com/issues/2018/jul/irs-final-regs-electing-out-centralized-partnership-audit-regime.html#:~:text=The BBA brought in a,generally effective for most partnerships.

I did not suggest that there would be. The S corp shareholder's basis in his shares starts with his or her initial investment, and each year it will change for the items on the K-1. It increases because of the income that flows to the shareholder, and it decreases for things like nondeductible expenses and distributions. There is a specific order that is followed for each year's increases and decreases. Below is a pdf worksheet for calculating a shareholder's S corp basis. It is somewhat general, so please keep in mind that the gains reported on the K-1 will go on this worksheet on one of the blank lines for other income. There is also a line for the distributions lower down in the bottom section. Most tax programs will automatically create this basis worksheet for us if we ask it to. It's too bad that the preparer of the S corp return didn't provide this to your client. In your case, the first year would start with -0- basis from the previous year and then add the $94K contributed, then the items from each line of the K-1. You will need to complete a basis worksheet for each year the shareholder was in the S corp, starting with the first year, and the ending basis of each year carries over to become the starting point for each subsequent year's calculation. Also below is an article from the Journal of Accountancy that discusses the basics of calculating basis in an S corp. It's from 2012 but the concepts remain the same. S_Corporation_Shareholders_Adjusted_Basis_Worksheet.pdf https://www.journalofaccountancy.com/issues/2012/jan/20114319.html

Maybe I should be more clear. There should have been some initial investment this person made in exchange for his shares in the S corp that would be his initial basis that is adjusted each year for his share of the S corp activity on the K-1. Don't forget to account for any nontaxable income, nondeductible expenses, as well as the distributions he received each year when calculating his basis.

The answer still may, or may not, be 'no' unless the client put nothing, no cash or no property, into the S Corp at acquistion of his shares. You need to know the initial investment and then you will be able to use the activity and disrtributions on all of the K-1s to reconstruct the basis.

Anyone wanting more information should possibly consider contacting this new person by private message through this forum since the OP hasn't been back since last week, and I'd moved his post above out of a topic from 2011.

It may be because a scammer attempted to use the taxpayer's SSN to file a fraudulent return to claim a refund.

I'm not sure if this is your issue or not, but IRS refunded 2018 underpayment penalties when the taxpayer was eligible for the waiver but didn't request it on the return before the waiver became automatic. The change to automatic waiver wasn't implemented by IRS until mid-Aug last year, so not sure how quickly some taxpayers would have received the refund. I think one of my clients may have received a refund. Do you know which year your clients' penalty refunds were for? https://www.journalofaccountancy.com/news/2019/aug/tax-underpayment-penalty-relief-now-automatic-201921833.html https://www.irs.gov/newsroom/irs-automatically-waives-estimated-tax-penalty-for-eligible-2018-tax-filers

The instructions to form 8863 cover certain circumstances when the college or university doesn't have to issue a 1098-T and says that it is possible to use those expenses for the education credits, and it lists what other documentation would be required. Expect the IRS to question the credit without a 1098-T from the second school. cbslee is correct - no AOC for non-degree programs As for your questions - #1 - yes, sometimes it works like this. If the 529 is in the son's name, he reports the distribution on his return, and whoever claims the dependent with the education expenses claims the credit. In this case, it would be the lifetime learning credit. No double dip on this - the same qualified education expenses can't be used for the credit and to offset the 529 distribution. The education credit on mom's return probably gives a bigger tax benefit that the offset to the 529, so apply the expenses toward the credit on mom's return first before using any against the 529 on the son's return. The last one I had like this, the parents income was so high that all education credit would have phased out so all of it went toward reducing the 529 on the child's return. #2 - see my answer at the start of this post.

You should enter the unrecaptured gain and box 9 1231 gain as they appear on the K-1 with no additional adjustment necessary. Box 16, code D indicates that is the amount of distributions paid to the shareholder during the year that reduce the shareholder's basis.

Hope the IRS corrects its statement because we all should know that code sec 7502 that says that the postmark date is the date payment is considered to have been made, not the date IRS receives it.

@cbslee I merged your topic in with mine posted on the same topic a few minutes earlier.

https://www.forbes.com/sites/irswatch/2020/08/13/the-check-really-is-in-the-mail-after-failing-to-open-envelopes-irs-duns-taxpayers-for-money-theyve-sent/amp/ Payments that are mailed to lockboxes are streamlined for processing, but payments that were mailed to service centers went unopened because of the shutdown. Article specifically mentioned the Ogden, UT service center as a problem but must have happened in the others too. Here's the update that appears at the end of the article: