jklcpa

No problem, John, share as much as you want. We need to talk about it, share our ideas of how to keep working safely and effectively, and share information about what's happening in our areas. If it helps just one person here understand more fully, that's always a good thing. It will help relieve some of our stress too. Below is a screenshot from the pdf for those that don't like links. @JohnH, maybe you'd be kind enough to quote me for those here that have me on "ignore." Thanks.

Oh yes, and I've had 4 calls today from one elderly person that is worried about *everything* and must have thought I'd have time to chat!

@Medlin Software and @Lion EA I'm very sorry to hear of each of your losses, you have my deepest sympathy. Both of you and your families are in my prayers.

From your post, is the gift actually a split of only cash since you said the house was solely in his name? Or did he voluntarily spread the inheritance of the house to include his siblings? If he sold the house in his name alone and gave cash gifts, then he must file gift tax returns. The gift splitting is done on the gift returns as is the use of unified credit. If he elected to split the inheritance of the house by including the siblings in the ownership of the house, that is not a gift. That is him as a beneficiary voluntarily sharing the asset with others.

I would too. If your client is married, he can elect gift splitting with his spouse and eliminate the gift tax on the $27800 gift. If the other two siblings are married and your client elects gift splitting with his spouse, he could effectively eliminate all the gift taxes. He could also use up part of his unified credit that would show the taxable gift, offset with the credit, and still eliminate any gift tax owed without doing any gift splitting at all. He has options!

Max W, if you or anyone ever feels strongly about a post being political, you are welcome to report it to me and I would consider it for deletion. Unfortunately I wasn't on to see it until others had already responded. We definitely need to do what we can to slow the spread of this virus, and we need people to take this virus and the suggested "social distancing" seriously now. Here are some facts about why some people weren't taking it as seriously as they should have earlier on, and just some of why our initial responses to it were too slow: Instead of allowing an official position by experts to be released earlier than they were, Fauci's appearances on the news channels were cancelled while the talking heads were frothing at the mouth as they blathered on about this while a plan was formulated. Now about not having a plan in place... In 2018 National Security Advisor Bolton, in an effort to streamline the National Security Council, disbanded the Directorate for Global Health Security and Biodefense whose mission is to lead federal coordination and preparation for disease outbreaks, he fired Homeland Security Adviser Bossert who had called for a "comprehensive biodefense strategy against pandemics and biological attacks," and he also fired head of pandemic response, Rear Adm. Timothy Ziemer, and the entire global health security team. That team was never replaced. We are relatively early in this outbreak, and in addition to distancing, we should have already been testing many more people. All one needs to do is look at how South Korea has been managing this and the fact that it has tested a much larger population earlier on that lead to earlier isolation and earlier supportive patient care, both actions that have resulted in a greatly reduced number and percentage of fatalities compared to any other country. Because South Korea had learned from the MERS virus, it had an established response plan that it very quickly initiated. It was testing early on as many as 10,000 people a day including through drive through stations that we are only just now setting up. That country has already tested more than a quarter million people because of having a readiness plan and using the WHO formulation for the tests. As for testing here, we could have started earlier if we had used that same formulation from the WHO instead of having additional delays because the CDC wanted to develop its own test that it thought would be more accurate. Not only was there a delay to develop the test, but also because when it was rolled out it was found to be faulty in some way. I liken this to what it takes for a lot of major plane crashes, that it isn't just one problem but a series of smaller incidents that all compound into a larger "perfect storm" that brings the plane down. I hope we don't crash too badly with this.

The CPA Practice Advisor article says we may have details tomorrow. The article also has a link to a chart with information compiled on states that have made changes related to the virus.

We didn't have it confirmed here until a U of Del professor visited someone out of state that has it, and every state around us has cases. Now multiple cases related to that one professor, and how many did he infect before his results came back? Because we are so small, we have many out of state workers coming from neighboring states, and in reverse, many residents in my county working in those other states. It was only a matter of time before it got here anyway. Those of you in less densely populated areas will hopefully be less affected.

I wanted to start a separate topic related specifically to changing office procedures related to the spreading virus. I am small volume as far as the number of returns I prepare and already have the majority of people's data in via drop box or delivery service. I already have a bottle of hand sanitizer and tissues at the door, will be wiping down after appointments, and of course lots of hand washing. I am considering changing over to mailing completed returns back to people wherever possible to limit in-person contact at this point. Clients already have multiple ways to return signature forms to me, so there's not really a change needed there. What have others here changed or are considering changing because of this?

Not to be doom and gloom, but about the mortality rate that's mentioned, those are averages, and CoVid-19 mortality rates goes up significantly in age brackets over 60 and even higher for the aged that also have other underlying illnesses or disease processes. The rate can be as high as 14% for those with heart disease, diabetes, any sort of lung disfunction, etc. I am sure that similar patterns exist for the flu for the elderly with those sorts of ailments. I am worried for my mother at 93. She just came home from a short stay in a rehab facility 2 days ago and is supposed to have some ongoing in-home PT. I'm not thrilled with that idea of having strangers coming directly into her home at this point. Before her release, the wing of the building went through very restricted visitation and other protocols for active flu cases, then last week started with restrictions on visitors for this new virus. I was visiting at lease once every day and was being screened each time entering, having temperature taken, masks, hand sanitizer, and the smallest sniffle would be cause to be examined by a nurse. The facility was going on full lockdown the afternoon of her release, no visitors allowed at all.

121(b)(5)(C)(ii)(I) is the exception to nonqualified use. After 2008, NQ use doesn't include any use after it stopped being the personal residence. I think all that will be taxable is the depreciation recapture. Now you have to figure out how to make the software do that.

You may be able to use Sch E, depending on state law. It's been a couple of years since I posted this in answer to another reporting question about a husband-wife LLC:

If capitalized, it's life is determined the same as whatever asset was painted. 27.5 yrs may not seem reasonable for how long it would last, but with the next repaint, any remaining adjusted basis in this paint job would be written off at that point because it's "replaced". From this IRS page: Ed, are we talking about repainting the entire building, an addition or portion that was renovated that needed painting and so the rest was painted to match and not look bad where a case could be made that the entire job wasn't exactly related to the renovated part? Was it an interior paint where cost could still be expensed because it is spread over multiple rooms? In other words, is there any justification to say that its cost is spread and is still a repair?

I can't tell you exactly how to enter this in your software, but the description below is from the 4797 instructions and describes that the gain is reported in Part III and the 121 reduced exclusion would be a negative number in Part I:

I almost lost it with a relative-in-law that said she could not figure out how to open my drop box, the same box she's used for 5 or 6 years now and that has a sticker on it that says "OPEN HERE." She insisted it was a new box because of a new black rubber rain cover over the lock that she was using as a push button in trying to open the box. I swear, a lot of people have rocks for brains.

I relate to them all too, especially the explaining over and over and over to the point of feeling like a robot, probably sounding like one too.

Dan, thank you. Of course you are correct because the mother permanently moved out and gave up the life estate. Fwiw, for anyone else following this post, I found a good article that discusses life estate issues and when step up occurs and when it would not. This same article was also published by NY State Society of CPAs in 2017, so I'm assuming that the attorney authored it about that same time. The pertinent section starts at subtitle (b) "Transfer of the Residence with the Reservation of a Life Estate" https://www.esslawfirm.com/articles/factors-to-consider-when-transfering-a-residence-for-elder-law-and-estate-planning-purposes-a-primer/

Actually the IRS did try to address this with notice 2018-61 that I included in my post above and that's when the AICPA asked again for clarification of deductions for beneficiaries. Also, as Abby stated, the IRS instructions are clear that it's not deductible. Your software may have allowed an entry, mine did not as the entry field for PMI was eliminated, and the actual Sch A line 13 was elminated from the form altogether. It WAS on line 13 in 2017 and prior, and the PMI that is back now is on line 8d starting again in 2018 thanks to the retroactive application of the law. This is also not true. IRS has already updated Sch A for 2018 to again include the PMI and put in on line 8d as it is for the 2019 year, and my 2018 software was updated several weeks ago. I did prepare an amended return for someone with PMI in 2018 earlier this month. Most of my clients that paid PMI exceed the phase out and have no tax benefit anyway except for the one above that was single in 2018 and had a portion of hers be deductible before phasing out. She couldn't use it in 2019 because she got married and the combined income greatly exceeded the top end of the phase out.

There may be a place within the program to tell it to not carry that amount to line 16, because I think the instructions for 1041 still say this is a deduction and to enter it. Back in 2018 the IRS came out with notice 2018-61 that tried to address the issue to which the AICPA wrote a letter requesting that IRS and Treasury issue regulations as additional guidance. To date, as far as I am aware, the IRS and Treasury have not responded or issued any further guidance. Tom, I was thinking of you too as I respond to this topic. Sorry to not be able to provide more definitive answers. https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/20181031-comment-letter-on-notice-2018-61.pdf https://www.irs.gov/pub/irs-drop/n-18-61.pdf https://www.law.cornell.edu/cfr/text/26/1.642(h)-2

I agree with the others that the agency will give credit for the estimated payments. It should be the same for the state too, if you missed entering state or local estimated payments. In your case, the only reason I'd amend for the missing estimates is if there were state or local estimated payments also not entered and the client would benefit by claiming these additional payments as itemized deductions.

The remainderman of a property with a life estate can sell a property before the life tenant dies if both agree and sign the transfer documents. I think you are correct that only the mother received the stepped up basis, but I haven't researched it. The proceeds should have been split based on the age and life expectancy of the life tenant, so you may want to actually calculate that. With the sale entirely in the daughter's name, how were the proceeds split? Did it all go to the daughter, or was there a payout to the mother listed on the settlement sheet? (Sorry, I've not directly had a sale while the life tenant was still alive). If not, did she use that 30% as the amount she gave to her Mother, or some other method of determining the mother's share? Sorry that isn't much help.

Found it under "About Us" that says they are "powered by" Crosslink, Drake, and TaxWise. I wondered if that is what the letters on their various products meant when I saw it. 1040-DR would be the Drake platform. Personally I'd rather buy directly from Drake for the higher price and know that I have full product support. Search the forum for "reseller" and you'll get lots of hits on troubles users here had with other resellers in past years.

I checked out their website and don't see anything that looks like Drake, although I didn't take the time to download the demos. Are you seeing it there or somewhere else? Screenshot so we can see?

1041