jainen

>>he should still have a reciept for the amounts donated<< Even holy men are subject to the normal substantiation rules for charitable contributions. Everything must have written documentation, and donations of more than $250 require acknowledgment of the amount and the value of any support or other services provided in exchange. I don't know much about vows of poverty (my own poverty comes from a vow of marriage instead), but I think it strange that he only has to turn over a "minimum" of his income and can use the rest for personal preferences.

>>Check out the "Views" column....<< Yeah, that's a good observation. But check out the vanity column (a.k.a. "replies"). Tips has ten times the density.

>>Can I change my vote<< There's no place for my vote. I haven't used ATX for a while, and I don't see anything to make me go back now (except the outstanding community of users!)

>>I have a Frikkin big raccoon in my attic<< That's not possible, Janitor Bob. Raccoons have been extinct for more than half a century. The last ones were killed during the WW2 blitzkrieg.

>>cancellation of debt which IRS have and my client do not have << In my opinion, the most likely scenario is that the client is not telling the whole truth. The credit cards probably gave up serious collection efforts several years earlier before finally writing it off in '06. The client hoped it had just gone away and the same personal or financial problems that caused them to get behind also caused them to miss or ignore the notices. Of course, I'm just guessing, but I say it because usually the IRS is right about this kind of thing and for a few thousand dollars it's often best for the taxpayer to pony up and move on in life. If they want a little more information, you can probably do that for a few hundred dollars (paid up front). That's only to GET the information; challenging it would cost far more. Using a power of attorney, obtain the 1099 transcripts from the IRS. Then help the client with online requests for free credit reports, and contact the credit cards and other delinquent accounts for their records. (Use your own business address for this purpose.) Don't forget that if the client would like to repay the debts, it will help their credit rating and they can take a miscellaneous deduction for the previously taxed income.

>>what percentage would be allowable for depreciation<< Since personal use exceeds 14 days or 10% of rental use, deductible expenses cannot exceed income. After taxes, mortgage, and maintenance, you probably don't have room for ANY depreciation. But research the Bolton decision for an alternative allocation that moves more of the taxes and interest onto Schedule A.

>>As far as the items not being like-kind, that, is up to your professional judgment.<< Not entirely. For tangible personal property, you must first look at the NAICS classes, which is exceedingly objective. Only if you don't find the match there, can you consider other factors. >>I think ATX has made this form more complicated than it should be though.<< I use ProSeries and Lacerte, and I can assure you it is just as impossible with them. I always do exchanges in pencil on a yellow pad, and then force the correct numbers in the software.

>>Can the settlement costs be claimed as business expense?<< As always, it depends on what the costs represent. They can probably be treated the same as legal fees, if they are ordinary and necessary costs of the business activity. You have not given enough background to say. Just because a lawsuit arises in a business environment does not mean it is not a purely personal problem, so you need to understand what the claim was for, and what the settlement was for. For example, an auto accident during commute is not a business expense, even if the plaintiff goes after business assets.

>>since this is a trade on, I am not sure you need report it here<< That's the whole point of an exchange--you trade for something else. Remember, Section 1031 goes back almost to the beginning of the tax system, and in that long history it has been mostly used for vehicles and equipment, usually with a dealer. The original purpose was to help cash-poor farmers upgrade, but during the Great Depression the IRS enforced it to disallow losses. The widespread application to real estate gains is a more recent development. Anyway, you must file Form 8824 to defer gain from a 1031 exchange. I agree that $15000 would be the new depreciable basis if this qualifies, but the like-kind categories for personal property are so narrow that you need to look carefully at that.

>>Just remembered a few minutes ago at lunch<< Don't worry about it. At least you remembered lunch, which is the important thing.

>>the 2008 filing season (for tax year 2007) is substantially complete<< I don't find this to be true at all. A good fourth of my clients are on extension. IRS revamped their computers last year so we can expect far more CP2000 and other letters. Stats issued this week show the IRS has backed off the big corporations and is going after OUR clients (and frankly, that makes sense to me). And we haven't even STARTED the rebate fiasco, which is based on 2007 filing. I predict this particular filing season will stretch out indefinitely.

>>Does interest tracing apply to home mortgage?<< Yes. It is not qualified acquisition debt because it isn't secured by the property. Therefore, interest tracing rules apply. In this case, the interest is traced to a personal use, which of course is not deductible.

>>cannot exceed the sum of 1) any gain recognized on the transaction<< That's what I said. In a 1031 exchange, you only RECOGNIZE gain from non-like-kind property, also known as boot. Section 1245 generally refers to personal property, but frankly I think it odd that your source would consider Section 1245 real estate to not be like kind to other real estate. The courts have made it clear that "like kind" is a description of the character of the property, not its use or quality. I've never researched the question, though, so I suppose he's following one of the many 1031 court rulings. Also note that a lot of commercial or industrial property is specifically "segregated" as personal property to take advantage of accelerated depreciation. In any case, your quote confirms my position. Section 1031 defers all gain derived from like kind property; you are only taxed on the boot.

>>?since two years old when placed in service, do I change the recovery period to three?<< No. You change the depreciable basis to the 2-year-old price, which is less than when the car was new.

>>See IRC section 1250(d)(4)... << Like I said, there are too many issues to resolve before Tuesday. Nevertheless, time zones notwithstanding, the section you cite says it only applies to "the amount of gain recognized." In other words, the boot. 1031 is extremely powerful. It defers ALL gain, capital or ordinary, including recapture of normal or even excess depreciation and 179 expense, as well as personal profit like mortgage-over-basis and the old Section 125.

>>They did assume the lease on the Ruby Tuesday ground<< Don't you think the right to receive monthly income for a long, long time is worth something? >>due to recapture of depreciation they are going to have $68,000.00 that will have to be reported as ordinary gain<< I doubt there would be anything to recapture after that much time, but at any rate 1031 defers it ALL.

>>Do I need something indicating it was a like kind exchange<< Generally you do not need to verify your client's documentation unless you run into an inconsistency. However, 1031 is a very demanding section, and it would be best to review the intermediary's contract and other sales and exchange documents as well as the basic settlement statements. As a minimum, you should ask for a copy of the written statement in which he identified replacement property within 45 days. Dealing with large properties and national corporations is bound to present some timing problems. You also want to be sure the property is truly like-kind. The apartment complex undoubtedly had personal property with it, such as washing machines, office furniture, and maintenance equipment. The replacement property has a land lease and possibly other tangible or intangible assets. The ONLY way to clearly understand these issues is by reading the sales contracts, escrow instructions, and the rest of the whole file. If they are just bringing this to you now, put it on extension. Unless this was a previous client of yours, there's a reason he isn't going back to his own accountant. In any case, this is beyond your ability to resolve before April 15th.

>>Spidell's Analysis & Explanation of California Taxes<< This is the basic reference, available at www.caltax.com. As far as I know, FTB isn't too concerned about this issue if you complete the questionnaire correctly. However, the wording on the questionnaire is all screwed up so your client probably answered it wrong. It won't be hard to fix, but apparently you need to file a formal appeal to get back on track.

>>Can they be taxpayer's dependent if the taxpayer can prove he provided over 50% of his parent's total support?<< Certainly, assuming each of the other dependency requirements are met too. Perhaps you should ask about those, instead of the ones you already know the answer to.

>>none of our asset entry sheets have any place to put salvage value<< If you take Standard Mileage Allowance in the first year, you can switch to actual expenses later. But you have elected out of MACRS so you must use those old methods. In my opinion that requires a salvage value; not everyone agrees with me.

>>he can take the entire deduction and probably needs it.<< Although he could offset W-2 income this year, by saving depreciation for the future it might reduce income that is also subject to SE tax. You'll need to consider whether he is likely to max out FICA wages, whether his income is subject to AMT or phaseouts, and anything with a similar effect on overall total tax.

>>if she divided the money into two accounts, he'd only get $600 from each<< I routinely recommend this excellent solution. Of course, she has to get a second Social Security Number for him, but I don't charge much for those.

>>Seems almost silly to file it.<< According to Circular 230, you are supposed to advise the client of his need to file the return (little) and the potential penalty for failing (none). Don't forget to mention your fee (lots). Then follow the client's instructions. There are various reasons why a client might file even if not required at all, so don't be surprised if he doesn't agree that amending is silly.

>>I would tell my boss... << I would tell my boss, thanks. He more than doubled her pay and gave her more freedom to work on her own, while still having full access to the office resources. I wouldn't mess up that sweet deal by whining about the commute.

>>with the loan came a repayment of a previous loan<< If he took title "subject to" an existing loan, they might have written it up in various ways. Most likely the payment to the seller would be reduced by the amount of liability, but the basis to the buyer is still FMV. If you mean that he used the new equity to cover a prior debt of his own for an unrelated matter, the new basis is still the FMV and you must allocate the interest expense according to the use of the proceeds.