jainen

Life is so fragile, and we mostly trudge on unthinking. You have had great courage and poise during this trial. We have drawn strength from that. God bless you and your beautiful, strong family.

>>whether anybody was allowed in without the "contribution."<< Aside from the impracticality of such a survey, I doubt it could generate meaningful data. The organization probably has all sorts of different arrangements for regulars, related organizations, "major draws," influential contacts, favored booth locations, whatever. Even if the company could have gotten in free, so what? Pub 535 says "an expense does not have to be indispensable to be considered necessary."

>>dreams of MIT<< Three words: Scholastic Aptitude Test. Right or wrong, fair or not, the SAT is the single most important factor. Learn HOW to test and take it early so you can repeat if necessary. Other factors are grade point average, which in high school generally just means you turn your homework in on time even if it's screwed up, AP or local college classes that score higher, and extra-curricular activities, especially leadership positions. The challenge is getting in, NOT paying for it. When MIT decides they want you, they will make it happen. In other words, don't bother with UC San Diego unless there is an academic program or professor you absolutely need there, which is not likely for an undergraduate. It may sound strange, but private schools are MOST affordable these days. They have money--even the government financial aid grants are higher there. They also graduate in four years; University of California generally takes SIX because you can't get the prerequisites in the right order. That in itself means a 50% increase in tuition, and a loss of two years earnings. And once you get the degree, or even on the way, the private schools have wonderful networks for job placement. Plus free continuing education for life.

>>The organization cannot accept a fee<< That's because they choose to evade taxes on UBTI. Well, we aren't doing their tax return, so it's not our problem. We want to know what it is for the payer. A different taxpayer might make an identical payment to the non-profit as a charitable contribution, but in the original post there is a clear business purpose. Page 44 of Pub 535 addresses the matter directly, with a couple of good examples. One is payment for an ad in a church bulletin. The other is a "donation" to a chamber of commerce. According to the IRS, both are legitimate business deductions, not charitable contributions.

Excellent article, KC! I suggest printing it double-spaced so you can read between the lines. Take that next-to-last paragraph. In the old days before the IRS decided to put pressure on tax preparers, we use to worry that pointing the IRS to exactly what's wrong with the return was usually not in the client's best interest. It still isn't. Author's recommendation: document that you attached Form 8275, then let the client remove it! So what are the legitimate uses of disclosure? In this forum I have several times recommended Form 8275 when you disagree with a 1099. We're all seeing more and more flawed 1099s, sometimes blatantly so. For a lot of the other stuff we talk about here, Form 8275 is worse than bad. Like claiming a dependent under a divorce decree; that's an unsupportable position and your best hope is the IRS won't find out. (Which hope by the way is specifically prohibited under Circular 230, at least for covered opinions.) Other times I often protest threads that contain the word "intent," but I suppose Form 8275 might offer some protection to a preparer with lots of proof. But if you have lots of proof, you'll probably win anyway so why wave the red flag?

>>they would gladly accept a monetery contribution and allow you to come in the event and sell<< According to one of the most respected analysts of U.S. tax law, William Shakespeare, "A rose by any other name would smell as sweet." This is a mnemonic for the "substance over form" doctrine. It doesn't matter what you call it, an entry fee is an ordinary and necessary business expense.

>>made the decision clear cut<< Truly sorry about that--generally my intention is to muddy things up! Remember that mere co-ownership of rental property does not in itself constitute a partnership. If spousal co-owners can file a single Schedule E, why can't spousal co-owners in a disregarded entity do the same?

>>Aaaaaaaaaaaa.......Fire ain't a casualty.<< Casualty, yes. Casualty LOSS, no. I can't guess the numbers except the original post did say, "Insurance covered the loss." Generally insurance pays replacement value, often even with building code upgrades,. In this market that might very well exceed FMV, which is all you can base a tax loss on. And with rental property depreciation further reducing adjusted basis, he may have a taxable GAIN. That's why I don't think Steve was "missing everything" and "way off base." I think he was very close if not dead on. (But a good cynic plays both sides, so I can't help wondering what the fire investigator had to say about the convenient timing.)

>>how the tax code looks at it.<< Once again, I see it differently. There was no casualty loss because it was covered by insurance. Instead, he has an involuntary conversion. He can report gain/loss on Form 4797, or file an election to defer gain for up to two years. If he rebuilds or buys new property, the tax effect might indeed be similar to what the original post suggested. Steve's wording was awkward, however, so I recommend researching Section 1033. Start with Pubs 544 and 547.

>>I am sure it is just from a dancer client<< Well, you know times are tough. Sometimes one has to trade services in lieu of professional fees--but of course I always report the FMV as taxable income!

>>I know many ministers who come to churches with no promised payment/honorariums/gifts amount promised.<< Nothing religious about it. Same thing for a dancer's tip jar in a bar, or a street mime passing the hat. Very much the same, I'm sure.

>>Since CA is a CP state. you COULD file an E on the 1040.<< California has the same rules as federal for Qualified Joint Venture, which is not available for a business conducted under a "state law entity" like a limited liability company. [source: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Election-for-Husband-and-Wife-Unincorporated-Businesses] Community property laws are an entirely different matter. They apply equally to partnership and sole earnings.

>>the minister is required to report the $500<< I agree. The minister is required to report it as taxable compensation for personal services. However, you might make a case that the church only acted as a conduit for the payment, so I'm not sure it would have to issue a 1099 (if over $600). As for "they didn't think it was fair that this guy would get penalized (taxed)," I suspect that thought was not unanimous. A common religious tradition interprets "render unto Caesar that which is Caesar's" to mean legal taxation is a duty, not a penalty.

>>the lawyer is dispensing such low-quality tax advice<< I wouldn't be so quick to blame the LAWYER. In my experience, it is more likely the CLIENT heard several important points and rearranged them himself, either in confusion or otherwise. In fact, a minister IS self-employed by definition relating to self-employment tax. And the housing allowance IS an important benefit with a specific relationship to self employment tax separate from wages. On the other hand, why is an ACCOUNTANT asking if the chief executive officer should be paid on a 1099? Sorry, but from the description of other clients, THAT sounds to me like the source of the idea that a housing allowance is not available to an employee.

>>Through the divorce decree each will claim her (the daughter) every other tax season<< Sorry, that is no longer allowed. According to Pub 501, "The noncustodial parent cannot attach pages from the decree or agreement instead of Form 8332 if the decree or agreement went into effect after 2008." Doesn't matter what the decree says or what the judge ordered about "joint" custody. How many nights did the child spend with each parent? If less than 183 your client can NEVER claim the child except with a signed Form 8332. She may need to talk to her lawyer if the decree does not require the other parent to sign that form.

>>He paid income tax on the costs (basis) of his stock withdrawn<< Presumably tax would be due on the FMV, since a 401(K) doesn't usually have basis. In that case, the new basis would be the taxable FMV, prorated equally for all shares withdrawn at the same time.

>>it's impossible to answer this one with this amount of info<< In my opinion, for the issues you all raised the question has enough information within itself. Yes, Barbara might be disabled or a student, in which case we would have to determine if $20,000 was more than half her own support. But even in the real world we might only ask for such additional facts if something in the scenario suggested it was incomplete or inconsistent. We could not do our work if we had to factually eliminate every issue that does not apply. Now, other criteria like citizenship and SSN and filing requirements DO call for an affirmative fact or at least assumption, but none of that came up. The trick was simply that Form 8332 is not valid because Ann's parents do not support her. In my opinion, Barbara can claim her daughter.

Carol supports her adult daughter Barbara and Barbara's child Ann who lived with her all year. Ann's father did not live with them but has claimed Ann for several years because Barbara signed a permanent Form 8332. In November Barbara received $20,000 settlement for back wages, which she used to buy herself a car. In February she gets a W-2 and decides to claim Ann as a dependent with EIC. Can she do that?

>>that is all to you<< That's the practical answer, but not technically correct. FMV is supposed to be an objective standard not related to a specific buyer. Now, suppose you put on that specialized bed with added basis and six months later they come out with the new version that is thinner and has a choice of colors and a hands-free dock for your iphone? When you remove the first replacement, you have to remove its basis too, right?

>>the question posted is one straight from EA exam<< Hah! Great catch, Pacun! On the 2004 exam (http://www.irs.gov/p..._see_part_1.pdf) the answer (http://www.irs.gov/p...nswers_11_2.pdf) to question 74 is C. That's from the TWO children column, Mr. Fuller, including the one age 26.

>>I hold off on my complaint<< No you don't--you scream and bellow. You threaten to post negative reviews all over the Internet and formally challenge their IRS approval for such a fundamentally stupid error, unless they give you full credit PLUS return all your ninety-nine bananas.

>>the right one<< I agree with KC. Except that the intention at time of purchase is irrelevant. As mas quoted, demolition costs "and other losses" are added to the basis of the bare land in any case. You can't rent out a building you no longer have, so depreciation is not allowed. But I wonder if it counts as acquisition cost! And I also wonder--actually, what I started this for--if you just replace the roof instead of the whole structure, what do you do with the basis of the old roof which can no longer be included in the home's basis?

Let's say you buy a livable but dilapidated house on a nice lot for $250,000. The land value is appraised at $150,000. You spend $20,000 to tear down the old house and $400,000 to build your dream home, but financial problems force you to rent or sell it. The best offer you get is $650,000. If you accept, what is your gain or loss? If you rent it, what is your depreciable basis?

>>see how this turns out<< I'll start a new thread for "calculation of basis." For Taxman's original question, several answers have been proposed. The tax professional will need to decide the best treatment, considering the specific circumstances including the taxpayer's overall situation and even attitude. My position is that utilities are not deductible, and Marilyn changed her mind to agree, but our citations relate to a personal residence. Michael thinks utilities can be deducted or perhaps capitalized as investment management expenses, but he doesn't offer any citation. KC thinks utilities can be capitalized as improvements in some situations, Along the way ideas were floated about costs of selling, etc.

>>it was there... now it's gone<< Yeah, I know--I've been feeling that way myself these last few years. Now that you have repaired your post, I understand your basis for it. I'm sure it will have a useful life of more than a year. Let's move on to a related topic that I rarely see discussed. It's the paragraph immediately following the chart you posted from Pub 523. "Improvements no longer part of home. Your home’s adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home." Doesn't that mean, for example, that if you increase the basis of a building by the cost of a new roof, you must also decrease it by the cost of the old roof?