Margaret CPA in OH

:bday: and many more!

I would still take the position that this does not mean car rental or motel room rental. Perhaps you could call NM department for clarification. I can't imagine that it means everything rented for any business purpose. Many business people rent a projector for a presentation for a couple of hours. I would not even think of including that. Perhaps a key word might be "annual" rental rate which would be reasonable when renting an office for business purposes or a copier, for example. Your quote also uses the term, "subrental." How likely is it that they mean a rented car used for several days or a room for a temporary stay? I believe the intention is for property used for business purposes that would be ordinarily rented or be expected to be rented on an annual basis. If this client has no business office rented anywhere, put a zero in both places. Neither of my contractors rents anything that would be on an annual basis. It never occurred to me to include the occasional rental of a machine to be included there. So maybe check with the NM tax department because I don't think any of us here really know the answer. Then maybe tell us what the answer is - for next time. Good luck!

In my opinion as above on May 10, the car rental and apartment rental (motel with cooking facilities?, extended stay?)are really travel expenses and should not be part of this allocation. I think that she will and should end up paying a tiny amount of NM tax in proportion to the gross receipts. That tax will then be a 2010 deduction against income as local or state tax or a credit against 2009 home state tax. In my many years of multiple municipal returns for contractors, it sometimes works out this way. If there is a loss, that is allocated in proportion even though one muni may, for book purposes, have activity that resulted in a profit. And is there is an overall gain, each shares in proportion even if one had, for book purposes, a loss.

Thanks for starting over and asking a great question. For us I think the primary secret, other than love, is that we choose, again and again to stay together. We spent about 7 years before marrying making sure and were 'older' with some experience. We share many common interests yet have our own - he's an avid golfer, I am a scuba diver. He plays bridge and bikes, I run. Yet we have both played golf and bridge and biked and run together but not at the same level. We both have master's degrees but in different areas and respect each other's sphere of knowledge. Yes, I think mutual respect, even in disagreement, is so important.

Okay, I will chime in with our 31 years. It's hard to believe how quickly the time goes, as mentioned. And we looked so young back then!

I just asked the question. Would it be a fair assumption for the heir that the estate determined and took the gain or loss on the sale and the proceeds are after tax? Would not that sale have to be reported somewhere? With the cash distribution, wouldn't it then just be a tax-free inheritance? Which, of course, was the original question. As usual, you are correct that the basis is/was an issue with the executor, not the heirs, as the stock was sold prior to finalizing the estate. I presume the executor had the knowledge of the wishes or intentions of the deceased and that the heirs would not have chosen, given the opportunity, to keep the stock (regardless of what it was).

:bday: and many more!

I with Don on this one. In any event, the executor should have has a list of estate assets and valuation, including basis of all securities, in 2007 for probate and/or an estate return. The heirs should receive a copy of this in order to show the basis of any stock and why was the stock not distributed to the heirs and sold instead?

KC, are you able to provide some definitive explanation for the 'right' way to do this? And hopefully provide a cite of some kind. I wrote what I derived from my limited research in QF but here is the answer my brother, an agent for maybe 30 years, wrote: "I bet there are as many ways to pay insurance agents/employees as there are accountants, lawyers and agency owners. Every one is always looking for a way to decrease their own tax liability. I have worked as a 1099 independent contractor,(Country Companies, Knights of Columbus) and also received full health benefits. Those don't really go together, but somehow those companies could do that. On the one hand your were an independent contractor(when convenient for them) and on the other an employee eligible for benefits(again when convenient for them). I have worked as a 1099 independent contractor, (Current agency) with no right or access to employee benefits. I currently work as a salaried W2 employee with access to full benefits available from the agency. However, I do earn commissions on my personal sales which are paid to me on a quarterly basis and all applicable taxes are witheld and reported on the W2. Most other agents in this scenario would get their commissions reported on a 1099 basis. I did not want to fool around with paying estimates on taxes and the additional self employment taxes on my commissions. The accountant approved the arrangement and all is well. I know of no other agent that has this arrangement. In almost all agencies that I know about, agents are paid on a 1099 basis as independent contractors. They do not want them to be considered employees. Direct writers for insurance companies are often treated differently as with Country Companies, Knights of Columbus and the life company you referenced. Since this individual is also going to get an hourly wage for work outside of personal sales, then the norm for an agency would be W2 on the hourly wage and 1099 on the commissions. In closing, refer back to the opening statement." I just don't want to be in a position of preparing this client's returns when I am not fully convinced that the person being paid is being treated correctly. I really would hate to lose this client but want to feel confident in the treatment of this situation. Thanks so much for any assistance!

Mike, that is the same conclusion I reached and sent to the client in an email. I asked a bunch of questions and pointed out the principal determining factors for her consideration. I am still a bit confused about how to handle the compensation, though. How is the commission reported? Does it go on the wages line of the W-2 but only the wages are subject to employment taxes? Since a stat employee does not file SE, then does the employer, my client pay employment taxes on the commission, too? I decided to consult my insurance agent brother to see how he has been paid/reported lo these many years. I think he will get a kick out of my asking him for tax information! I do hope someone with particular experience chimes in. I did not find a MSSP on the IRS site, but thanks for the suggestion.

:bday: and many more! I somehow missed this and encourage you to keep on keepin' on! I got my CPA license at 48 so you are still a youngster to me. Go for it but enjoy this birthday to the fullest!

Thanks, Lion and Julie. I am fairly informed about employee vs contractor but not when commissions are involved and not if there are special rules with insurance agents. From the client's description, it seems the new hire (that seems already to be an employee)is under her control, uses her office and equipment, etc. However, the new person surely has a profit motive. My beginning research in QF points to Statutory employee for a Full-Time Life Insurance Sales person for one company. So I guess when this person is licensed she will become a statutory employee. But the period prior to that, in my opinion, should be as a common law employee. The client says she was told that a 1099 for that period is proper, as if the potential employee was being evaluated. I just want to be sure she does the right thing and gets the correct information from me, not someone else. Thanks again.

Insurance agent client has just 'hired' someone who will focus on marketing but soon get her own insurance license and be able to write insurance. When I asked about specifics as she has had employees in the past, she said the new person would be paid on 1099 at $13 per hour then reduced to $9 per hour plus commission when fully licensed. She said she was told by a very experienced senior agent, owner of a large agency, that this was appropriate. I expressed mild surprise and said I would like to look into this as I don't have much experience with business clients paying commissions. I am not even sure where, other than here, to begin looking for the 'correct' way to handle this. She seemed very confident, I am less so but, hey, I certainly don't know it all and you all, collectively, do. Any guidance appreciated!

Heartiest congratulations to you both! I'm sure we are all glad to be able to assist with this most happy occasion as you have so generously assisted us and Brandy has been so willing to go along, too. I would ask to tell us all about the great evening but maybe just the dinner. Enjoy yourselves!

Thanks again, Jainen, for pointing out the less obvious (to me, anyway). I, too, interpreted the question to mean deductible for tax purposes. I honestly did not believe that someone on this board would ask about a non-tax deduction. I really should know better and am glad that you do. Thanks, again.

The charitable angle might work but keep in mind that deductible contributions are limited to 10% of the C corporation's taxable income. And, as Ron pointed out, the contribution cannot be designated to benefit any specific individual.

No research here but I can't imagine that the expense would qualify as "ordinary and necessary," the criteria for a deductible business expense. I also wonder if the payment would have to be considered as compensation to the employee. Hmmm, good question, Bart, and I am interested in other input.

Good luck to you, Terry. I do hope you keep us informed as to the progress. I guess I am too old and cautious to undertake such a task but wish you well in this one. Using the tactics as noted should not hurt you in any way - cash up front is a really good way to begin!

:bday: and many more!

Well, they didn't only pay with pizza. They gave each a small stipend, a few hundred dollars, none over $300. This is a family effort, like many family efforts. The main remodeling work was done by the oldest son, a self-employed, licensed contractor, about 30 years old. These folks also provide, as a family effort, dinner for about 40 people each month at the Tender Mercies homeless mission, among many other contributions. They are very generous.

Thanks for the replies. I think it unfortunate that they will be depreciating these expenses over 27 1/2 years while paying the 9% interest on the LOC but did they ask me anything ahead of time? I don't believe they fetched beer, though. There were multiple trips to Lowe's and Home Depot for drywall, paint, etc. Besides, these folks keep a pretty close eye on the 'kids.' They are all adopted and minorities from abusive situations. The parents are a physician and nurse couple with the biggest, most generous hearts I know.

:bday: and many more!

This was on another listserv. I am one of the 60% that did not know this and am glad that I have not yet disposed of any copier or scanner. http://www.cbsnews.com/video/watch/?id=6412572n&tag=contentMain

Client with one rental in an LLC, bought a second with 50% from their funds and 50% from LOC from first property (ugh! the interest tracing won't be pretty). The 'new' property was a foreclosure. They put their several teenagers to work fixing it up (two are into construction stuff). Among the expenses are several pizzas, Rally and McDonald burgers and some gas money, probably to go fetch materials. Since these were charged to the LLC credit card and even the LOC (yikes!), any suggestions on how to account for them? My inclination is Loan to Members or deductions against the significant loan from the members. Other ideas? These expenses total $300 ish. Then the interest to carry these? I think this is the last year I want to deal with them but I've got them now! Thanks-and I used to like extended returns.

Here's another voice agreeing with the "Get out now" crowd. There is no way you can come out even let alone ahead with this situation. Listen to Catherine - she just dealt with a losing proposition wisely recently and, I'm sure, is sleeping ever more peacefully. And I don't think a brick was involved but her wisdom is clear.