jainen

>>Today, 10:17 PM<< That only took nine minutes. You seem to have all the answers ready to hand, so what's the problem?

>>General Partner<< Passive activity?

>>it does not address this exact circumstance<< You can't get an additional credit unless you are eligible for the basic credit.

>>Rentals net a loss on 1040. Is a NY NR tax return required?<< Yes. The filing requirement looks at gross rental income (before deductions), same as fed and CA.

>>the investment income won't qualify them for the rebate, must be earned income, or soc sec, or disability va benefits<< You don't need "qualifying income" if "tax liability is at least $1 and gross income is greater than the sum of the applicable basic standard deduction amount and one personal exemption (two personal exemptions for a joint return)." Since you say your clients have investment income (i.e., gross income) that requires them to file, the invisible Social Security makes no difference at all unless they are writing off all the income in some way. But if they do need to refile, nothing could be simpler than a no-change 1040X with 1040 attached. Good service would be to mail it immediately to the client without being asked.

>>it holds a 60% interest<< Is the S-corp acting as a general partner or a limited partner?

>>concentrating on my current clients<< I believe taxtrio IS asking about current clients. I haven't run many numbers yet, but it seems that line 20a is only important for the rebate if they don't have at least $3000 other income on which to base the minimum credit. The maximum credit is based on tax liability, not affected by non-taxable Social Security. If anybody needs to use line 20a, they probably have not filed yet.

>>All the information you need is here:<< ... except how much they're going to get! Occasionally one of our clients might be interested in that minor detail. My software is calculating an estimate of that figure for each return I do.

>>a letter from a CPA stating this business is in business<< You should ask this question at AICPA or an accounting board if you have that kind of relationship to your client. I'm pretty sure even a CPA who has audited the activity should be exceedingly cautious of declaring that "this business is in business." As a minimum you should probably only address it to your client, not a third party who may use your assurance to incur substantial risk. If you are primarily a tax preparer don't ever write such a statement without legal advice. You really aren't in a position to attest anything except that he filed his tax return(s) with Schedule C, the form normally used to report self employment income, and that he reported interest from an account at the named bank.

>>getting a refund of the more recent payments<< You'll need to ask FTB for a record of those payments to see where and when they were applied. There are no exceptions to the California statute of limitations, which is the later of four years from the original due date or timely filing, or one year from the date of overpayment.

>>a unique mascot for ATX users<< Woodland Caribou (Rangifer tarandus caribou), an endangered species.

>>If a child is claimed as a qualifying child by two or more taxpayers<< The important word is "IF." They can trade off kids to their hearts' delight, as long as they don't BOTH claim the same one.

>>shouldn't the program be able to detect this and not tax it<< No, I don't even see how it could. You must go back to the 2006 program and recalculate both the regular tax and AMT with the recovery amount added back in. Maybe in this case it's simple enough to do in your head, but you don't want the computer to assume there was no tax benefit for the entire refund without actually running the 2006 numbers again.

>>But it's not Tom's client, it's Ceintax's client.<< Yes, in my previous post I responded to Tom's comment but addressed my advice to cientax by name. >>she's left with the income, just not the expenses. That is crazy.<< It may be crazy, but I rather think it more likely that it was a reasonable interpretation of the facts and circumstances, at least in the way they were presented to the auditor. The client had neatly-labeled folders, but what was IN the folders? We know that it was not an accurate record of either income or expenses (according to cientax), and the auditor undoubtedly figured that out too. We know that the income and expenses for most of the year was not subject to community property laws, and that the auditor tried to convince the taxpayers that they were more properly allocable to the person on the construction site. (We don't know all her reasoning for this decision, but it doesn't sound crazy.) When the taxpayers insisted on separate returns, why shouldn't the auditor follow through with disallowing expenses she observed were somewhat make-believe and in any case not paid on behalf of the taxpayer? Without professional representation, the poor taxpayer never had a chance. From our point of view it's unfair to leave the income and take away the expenses, but the IRS never has a problem with that sort of thing. Remember, the taxpayer herself insisted the income should be counted. The expenses are a separate matter and, right or wrong, she failed to convince the auditor that they were legitimate. A professional might have been able to resolve the inconsistent treatment, but as I said she probably made the auditor mad. Auditors are pretty touchy; you can't just throw around ideas like "unfair." I'm making this IRS defense because that's how this was decided, and that's how it will be decided in any future review by agency or court. The only way to get through to them is in those terms. It's the concept behind allowing audit reconsideration only when there are new facts: if you present the same arguments, you'll get the same result.

>>he pays most household expenses<< Don't jump to any conclusions from this fact. He only needs one qualifying child to claim HoH, and she potentially gets thousands in EIC.

>>They are still the lazy, vindictive, incompetent slobs<< Ain't it the truth? An' that brings up another issue, Tom. What would you talk about if you ever DID get back into audit? Can anyone seriously believe the examiner will get off on the finer points of community property in a divorce? Heck no! What she wants to hear is why a red-blooded Texas nail-pounding man puts his wife's name on his own paychecks. Matter of fact, I want to know that too. I think it's probably the map to this whole dungeon, and it don't look so good for our spunky heroine. I'm not trying to discourage you, cientax, because I believe your client does need your professional assistance. I just want to inject some realism into your approach. For example, realistically you'd better collect your fee up front on this one.

>>Can community property be split on an HOH filing status?<< Community income per se is not affected by filing status. But how are you going to make your point? Both spouses went to the audit and didn't object to the way income was divided as originally filed, the women insisting that she owned the company herself. Such an agreement between the spouses would probably override the presumption of community income. Now that the time limit for appeal has passed, you want the IRS to shift half the income to the ex-spouse who is no longer cooperating after the divorce. Good luck with that. Maybe the auditor didn't understand, or was arbitrary or even vindictive. The time for dealing with that was way back then. Audit reconsideration is NOT a higher level of appeal. It is a rarely granted opportunity to bring something NEW, information that was not known or was unavailable to the taxpayer before. Have you got anything like that?

>>It was the position of the auditor to disallow the deductions based on her opinion<< Well, we weren't there so we can only speculate on the auditor's reasoning, but what you say IS what the auditor is hired and trained and authorized to do. Did the taxpayer have any representation? Because here is what I think happened. Just a guess, just a daydream of what maybe went down. I think she made the auditor mad at her. The auditor's response is typical for that -- an all-or-nothing demand for permission to talk to the partner. I think the documentation was NOT very good (what construction company's is?) Even you admit they hid income and claimed too much mileage (what construction company doesn't?). And I think the taxpayer was fussing about splitting income and women running a business and the other guy's audit and a lot of other stuff you mention that had nothing to do with the specific expenses being questioned. So the auditor got mad and officially told her to get it together in 90 days or else. But she couldn't get it together because there is no "it," and now time has moved on and we are into the "else" phase.

>>I just post on this board, find somebody to agree with me, and overwrite the entry. It works really well.<< Sure. I can see how that would work for you. My problem is that I can almost never find anyone to agree with me!

>>Monkeys are funny<< and money is funky

>>why do you think I could or should add this to the clients income<< I didn't say that much. You'll need to look at the details and see how the client feels about going one way or another and see if tax court has had anything to say on point. There is a general principle that you can't get a tax benefit from fraudulent activity, and this transaction had a major tax motivation in claiming depreciation and other rental expenses for property that he doesn't really have any investment in. By the way, that "innocent party" line doesn't get much traction with the IRS.

>>audit reconsideration... amended return reclaiming all expenses... requesting a different auditor ... preparing a 1065<< I admire your creative energy but I'm not optimistic about chances for success. Since her ex has already decided enough is enough, how are you going to come up with a retroactive partnership agreement? Trying to change the form of entity four years later in response to an audit is going to look like bad faith and a frivolous position, shifting quite a bit of risk from the taxpayer to the tax preparer. Apparently she could not support her deductions with adequate records. That's not something audit reconsideration will accept; they require a NEW issue that was not considered previously. If she can not pursue this through normal appeals and tax court filings, you need to address it as a collection matter.

>>the 1099 shouldn't have been generated in the first place<< I wouldn't go that far. The trend is to use information returns for more and more payments. If you decide to treat it as an adjustment to the sale price, be sure to document the basis reduction. Don't try anything weird like allocating it all to the land. If the transaction had a nefarious purpose such as to evade taxes or defraud the lender, consider leaving it on line 21 without an offset. (Please don't take offense at the suggestion. This kind of deal almost always indicates a manipulation of mortgage qualifications, which is part of why the IRS is pushing for more 1099s and other disclosure.)

>>many 'start up costs' are for things that will change before 15 years are up<< Supplies are completely consumed before the business even opens, but they still use the same amortization rule.

>>I cannot find whether they are eligible to exclude their gain<< It's very clear in Section 121 that exclusion is not available unless you sell your ENTIRE interest in the property.