jainen

>>the dealer always gets exactly what he wants for his new vehicle<< That's right. If the buyer agrees to his price of $50,000 that's what the deal is. If he allows $15000 on the trade, he gets $35,000 more in cash or financing. That does not imply that the buyer got the only or best price available for his old vehicle. It would have a different value in a different transaction, such as an auction, the dealer across the street, or U-Sell. But that's what he agreed to take for it in trade, so that's what it sold for. Not what it could have or should have. Just what it did.

>>Do I still need to report this as a sale<< Yes. You must recapture Section 1245 depreciation on Form 4797. (Section 179 should have already been recaptured in the year of conversion.) Any additional gain is taxable, but loss is personal so non-deductible. And I disagree about using some average Blue Book value instead of what was actually agreed to, There are all sorts of reasons about condition and local market that can not be reflected in Blue Book. If the trade-in was overvalued, the dealer would be getting less than the new vehicle is worth and that just doesn't happen.

>>I had to increase the basis of the property to the amount of forgiveness to be wash.<< When canceled debt is excluded from income because of bankruptcy, you must REDUCE the basis of the property. See Form 982 and instructions. He can not exclude capital gain on Form 4797, even if it occurs in foreclosure due to bankruptcy. In fact, it seems poor planning for his bankruptcy means his gain is now higher.

>>I don't think the Cancer Society would like to get involved in real estate deals<< Surely you jest? Do you suppose cancer research is funded by those address labels they send out? [this was in sarcasm font.] When his mortgage holder died, that didn't change the taxpayer's situation any more than Washington Mutual going bankrupt. The note was an asset transferred to the Cancer Society or another heir. Contact the estate to find out what actually happened (which might be different from what was supposed to happen).

>>didn't mean 1250 recapture<< You didn't SAY 1250 recapture either, whatever it means. Yes, depreciation reduces basis. "Unrecaptured 1250 gain" is the amount of long term capital gain attributed to straight line depreciation, taxed at 25% maximum. Additional LTCG is taxed at 15% maximum. Investment expenses should have been taken annually (assuming the former home was being held for investment). There is a provision to capitalize "carrying charges" on property being developed. I don't understand it except that they include interest and taxes. It's an annual election made on or within six months of a timely return.

>>i assume the depreciation during rental needs to be recaptured<< Don't assume--look it up. Residential MACRS is not subject to recapture, except for any Section 1245 furnishings sold at a gain.

>>there are no 501-c-9 jeans<< Oh, but there are! http://www.informatics.jax.org/javawi2/servlet/WIFetch?page=alleleDetail&key=647185

>>They don't know why he filed as a partnership.<< Perhaps he was trying to give the partner half the Social Security credit, or just make a clear record of how the community income was split on their separate federal returns. There was and still is a lot of confusion about the best way to file returns for Registered Domestic Partners in California. By the way, getting an EIN only takes a few minutes. If he wrote "applied for," he was also supposed to show the date of the application.

>>I have not heard anything<< Form 941 itself can be mailed. But according to the Instructions to Form 941, payments must be electronically deposited. Form 941-V voucher can only be used in specific situations.

>>Parents rented house for many years to their son and his family at FMV. In 2003 they sold the house to them in an installment sale.... what happens to the remaining gain in the installment sale if they gift it to them? For tax purposes there is no "remaining gain." The sale of depreciable property to a related party can not be reported on the installment method. The entire gain was taxable in 2003, and that is beyond the statute of limitations for the IRS to do anything about it.

>>Don't be so negative<< I have to back off--apparently sarcasm doesn't play very well this time of year. Since the California real estate boom was so intense, the bust here rivals anywhere else in the country. And our mild winter has attracted more than our share of homeless squatters in the vacant houses.

>>it doesn't fit to file 8853 on his<< Why not? Income in respect of a decedent (IRD) has the same character as it would have had if received before death.

>>For November, I should use a stepped-up basis.<< I would guess the son was stealing from his mother, but in any case the decedent can NOT get a stepped-up basis on the final return,

>>empty and trashed rentals<< Don't be absurd! You can't lose money in real estate because the population keeps growing and they aren't ,making any more land.

>>Final 1099B shows sales after date of death.<< Who grabbed the cash without telling the brokerage that the assets belonged to someone else? The 1099 needs to be reissued with the correct tax ID number. I can't imagine a brokerage not responding to a reasonable request, since they are under so much IRS scrutiny this year (not to mention the SEC).

>>state forms are printing in some random crazy order<< Everybody wants to complain without taking personal responsibility. How do you expect software to print in the correct order if you don't bother to pre-sort the blank sheets before loading them into the printer?

>>how to report it as investment exp<< I changed my mind. The corporation is not an investment in any logical terms. Anyway it would still be on Schedule A.

>>He did a jewelry appraisal on investment items.<< What a horrible development! But he was stupid. Insurance would have paid all his legal defense, and the settlement too. He should know that any professional is vulnerable to this kind of extortion, a nuisance lawsuit that's cheaper to lose than to win. Well, that was his own business decision and his own business outcome. He can't expect the tax system to bail him out. If he doesn't have investment income this year or in the future to offset this as investment expense, the best he can do is put it on Form 2106 and see if he can salvage some through an N.O.L. calculation. It might attract IRS attention, with unpredictable results.

>>if you are going to prepare a simple 1040 and you are going to charge your client $50, you prepare an engagement letter?<< It really is no big deal to include a standardized letter with your organizer. There are plenty of examples around.

>>No body here does business on a hand shake any longer?<< No, we don't. And if the original post in this thread isn't enough to show you why not, I'll copy the link from Eli's post on the same day. It's a shame, but the financial services industry has rather knowingly destroyed the client trust it used to enjoy, all in the name of unbridled greed. Now we honest folks have to spell out exactly what we can do, what we can't do, and what the client has to do. >>http://news.yahoo.com/texas-jury-slaps-195-million-penalty-taxmasters-ceo-004001134.html

>>the suit was for a professional job he did on behalf of his company<< That describes the context but not the issues of the suit. Did he accidentally injure somebody or damage property in the ordinary course of business? Or was there some malfeasance such as fraud or misrepresentation? Perhaps it was a civil rights violation like age discrimination or sexual harrassment. You say "the appraisal" so I would guess the allegation is that he did not exercise ordinary business care and prudence, and the corporation did not adequately supervise its employee. Of course, I'm sure he denies the allegation, and claims he only paid off the one plaintiff to avoid higher legal fees. To the extent that protected the corporation, it's probably an investment expense. To the extent it protected him personally, it is probably a personal expense. To the extent he was tax motivated to shift the deduction onto his 1040 because the corporation already has a huge NOL (which is the reason given in this thread), it isn't deductible at all. I don't think you can characterize this with any confidence until you have read the court and settlement documents and discussed it with the insurance adjuster. Put this one on extension. By the way, this is a good example of how using a corporation doesn't offer much liability protection for professional services.

>>Send the letter and cc at the bottom AICPA and NYS OFFICE OF PROFESSIONAL MISCONDUCT.<< In my opinion, representing a client in a case like this is too close to practicing law. The client can file a complaint herself if she wants. Anyway, a professional messing up someone else solely on hearsay while competing for the same engagement? Stay away from that position. Generally I feel that if my client isn't comfortable with my work, it's best to stop the work. But I don't invest $1300 worth of my time on a single return, so I defer to whatever her engagement letter says. By the way, what does it say?

>>is that going to cause an issue because they are married now?<< The 1099-A is separate from any cancellation of debt. It is treated as a sale with gain or loss. The bankruptcy estate may have taken a shortcut, returning the secured property to the debtor still subject to later foreclosure on the recourse loan. Read the court documents! Anyway, if only one spouse met the 2 out 5 year tests, maximum Section 121 exclusion is $250,000. BUT remember that basis was reduced by any cancellation of debt in bankruptcy, unless he had NOL or other tax attributes. My understanding about non-business assets is that the basis reduction is recovered like Section 1245 depreciation. It sounds like your client still owes either the mortgage or taxes following the bankruptcy, at least from the lender's point of view. Read the court documents!

>>if you waited to elect until you filed the return it would have been accepted<< The election for 2011 was due before March 15th of LAST year. Since they didn't decide until September 2011, they should be electing to be an S-corp starting in 2012.

>>Will that be "reasonable cause?"<< No. It may have been reasonable, but it wasn't the cause. I mean, you can't just say they filed late because they decided late. Why didn't they decide when they were supposed to a year earlier, with the business already looking so good? Or, having decided in September 2011, why didn't they file the election for 2012 in the ordinary time line?