Terry D EA

Client's mother entered a contract with a forestry company for the sale of timber from her land. Before the proceeds were paid the client passed away. The proceeds were paid to her 9 children in equal amounts after she died. I'm of the opinion the amount each one of her children received is taxable.???? Date of the contract determines this correct???? The proceeds were not paid out as part of her estate. I confirmed this with the attorney who completed the sale. I say not an inheritance but has the character of IRD??? Nobody has any idea what the basis of the client would have been. But at the very least, I think each child gets a step-up in basis to FMV. I am contacting the forestry company to see if they can shed any light on a possible basis. Total sale was for $131,700.00/9. I know there are some timber experts on this board so any help from anyone will be appreciated.

One of the questions I have is I don't know if the land was sold with the timber or just the timber itself. I still think my first approach is to contact the attorney who processed the sale and find out what he knows. I also thought of the company who bought the timber to find out how and what was purchased.

Well I though maybe I would get a reply by now. As I look into this, apparently it is not easy to determine basis of timber. Especially if a basis inventory of the timber wasn't taken or records kept from the purchase. I guess the first thing to do is contact the attorney that prepared the 1099S and see what he/she knows about the sale. Seems to be the most reasonable starting place.

This is an area that I have little or no experience in. Client brings me form 1099S. Shows 14K of real estate proceeds that is for the sale of timber. Here is the problem. The person who received the 1099S is my client's father who is their dependent who only has SS income. The proceeds were from the sale of his mother's timber. His mother entered into a contract with someone to purchase the timber right before she died. The sale was finalized after she passed. The proceeds came to 9 of her children at 14K each. The 1099S forms were processed by the attorney who apparently handled the sale. Does my client's father get a step-up in basis or is his basis his mother's basis. This apparently is not an inheritance and is a sale. I could really use some direction with this. I already plan on extending the three returns brought to me that are affected by this situation.

I'm right on board with this one. Do the same thing and like everyone else, I have the folks that I have told for a few years to increase withholdings or do something relevant to their situation like estimates etc and to no avail they don't follow through. Get all those ugly looks when they have to pay again.

Yep and must be capitalized as a cost of the purchase.

Just wondering, why he wanted to get rid of it????? Better have it checked.

I agree and as I read your original post my mind was leaning toward trying to qualify Granny for Medicaid. I think I would need an explanation from the lawyer as well. This could turn into a mess. If they are asking to create a W-2, is the grandson a household employee? Certainly seems like a lot of unanswered questions here.

I'm going with John on this one as well. I have done this exact same thing in the past with a clear conscience. This year, I completed a return a client wanted a second opinion on. They paid me, I gave them their return and offered a full refund if someone else found any error, omission or incorrect calculation using the same documents that were presented to me. It was also understood that I had the right to review the findings prior to issuing the refund. Still got a client at the end. I think Max W is right as well. You don't know what they want at this time so try and find out. But...I'll be that banana split as well.

If I remember correctly, there is an entry for the 529 distribution along with a calculation showing what the qualified education expenses were and indicating what the 529 distribution was used for. Doing so tells the IRS the funds are either taxable or non taxable.

Agree with cbslee as this is a capital loss reported on Sch D

Got one of these as well only client's made a bit more on the S-Corp.

These were my thought exactly except the 50/25/25 division . Two brothers were the beneficiaries and two sisters were given 1K each. The two sisters to me would have received a gift from the bene.

Estate received income from a 401K. Apparently no beneficiaries were listed for the 401K. This is IRD and income tax was withheld. I understand completely that the tax withheld cannot pass thru to the bene. But on the line for the fiduciary expenses to administer the estate, I am little fuzzy as to what can make-up the amount. The fiduciary is also a 50% beneficiary and he spent the time and money to travel from NC to GA to go to court to begin probate of the estate. Those expenses are part that make-up the administration expenses. Good so far, he also paid his mother's (decedent) dish network bill and credit card balance. As I see it, these are items that had his mother not died, they would have been expenses she would have incurred and are not deductible any where correct? The bene (fiduciary) followed the will and gave 1,000 to her church, 1,000.00 ea to both of her sisters. I know what to do with the church donation. Would both sisters be listed as beneficiaries and require a K-1 to be completed for each of them? To the best of my knowledge, and I will ask, this was part of the will. This would not be an expenses for administering the estate in my opinion. How to handle this part?

I couldn't have said this any better. I for one am changing software programs this year. I know the Drake price but not the ATX price. What about the price to get me back to ATX? Wonder if there is any specials there? I used ATX when it was Saber Pro and NTS was the transmitter up until the CCH buy out and the old board snafu. There are better ways to get out business. Providing good support is just one. Hiding the price always tells me they don't want you to know the price for fear it would chase you away. So, they have a better chance of winning your business if they can at least get you on the phone and then the car buying starts.

Well, 72 is not old and I am nearly right behind you at turning 61 this summer. Remember when we were kids, someone who was our age we considered them as ancient. How things change!

I follow the same rule as Catherine. If I prepare the work I charge. But... there is a serious discount.

Thanks Gail, that was exactly my point.

I too will always make room for a new client. More often than not, there is a risk of incomplete information with a new client coming in this late in the season. I don't put them ahead of anyone else for any reason either. Drop offs are processed in the order they are received.

First, you need to find out how much the scholarship paid and how much the tax payer paid so you know what you are dealing with. What are the reasons the daughter cannot be claimed as a dependent? Did she provide more than half of her support? Did she change residence? Before she graduated, was she enrolled as a student at least half time? Was the daughter under 24 at the end of the year? The only way the parents can take the education credits is if they are able to claim an exemption for their daughter. If the daughter claims and exemption for herself, she can use the education expenses for which ever credit applies to her situation. It does not matter who paid them but they are reduced by the scholarship amounts.

The OP just said "Partners" and that's it. Not really sure what the situation is. I am assuming there wasn't a partnership and I asked a couple of times about an agreement or elsewise and didn't really get a definitive answer. So, I don't if the partner's had an agreement in any fashion. I just think this is being turned into way more than it needs to be. JMHO.

Ah, thanks Lynn I hadn't thought of that and it makes perfect sense.

Regardless whether the items were expensed or depreciated. Their cost is reduced by depreciation allowable. I don't know if the term "ordinary income" is correct but it FMV at the time of the liquidation of these assets is definitely a recognizable gain to each partner. Again, and as I stated earlier, if there was not a partnership agreement then no partnership existed. However, I think the same rules above apply.

I am pretty sure you are correct. Also, the tax withholdings passes on to the bene as well which should not have a major impact. One thing confuses me, and I didn't see the will, but according to the client, everything was split 50/50 with this brother so why was the 401K withdrawal was sent to the estate and not the bene. The outcome is going to almost the same.

Yes, you are correct that it will increase his basis and yes it is better to have profits. Also, the bottom line is it is taxed. I have to admit that I did forget he could distribute enough to pay the tax and not be guilty of comingling of funds.