jainen

>>this was just not handled correctly<< I'm not convinced anything is wrong. Living trusts typically include a pour-over will for probate assets not previously placed into the trust (for which there are several perfectly good reasons). Since the annuity was cashed under the trust's EIN, that may be what happened. If all the beneficiaries agreed to sell the property, it made sense for the trustee to do so with a single signature. By the way, a revocable living trust is a disregarded entity so the property would still be in Mary's taxable estate and get a basis step-up. So read the trust.

>>how to calculate the carry forward amount after the first year<< When they say "theft loss" they mean it is not a capital loss from an investment. And since it derives from a transaction entered into for profit, it is treated like a business casualty in that it is not subject to the 10% threshold. It was deductible in 2009 (year discovered). If it exceeds 2009 income, it is not carried over as such but contributes to a Net Operating Loss. The NOL calculation does indeed look at other income, so there may be no carryover at all. Also, it is too late to elect to carry an NOL forward to 2010--it must be carried back first.

>>I think it unfair to say the least that she, with a profit, will not only pay with this but on her personal return.<< Why is that unfair? It's the same for everyone, and a well-known standard part of tax planning when she decided to set up the company. Here in California the minimum tax is $800.

>>treatment of the conversion of the rental to personal<< Well, first of all, vacation home rules do not apply (unless it was rented for less than 12 months). Adjusted basis stays the same for any appliances or other personal property as well as the real estate, which could generate recapture or gain on disposition (but not loss since it is now non-business property). Presumably there was no Section 179 on residential rental, but any listed property would have recapture since business use is now less than 50%. Suspended passive losses remain suspended until disposition or other passive income. The home will be eligible for Section 121 exclusion after two years, except for gain attributable to depreciation and non-qualified use prior to conversion. Interest on equity loans up to $100,000 are deductible now, but utilities aren't. More.

>>Tax Preparers Sue IRS<< I have no respect at all for this frivolous lawsuit. I am serious about being a professional in an important service industry. None of the three plaintiffs is interested in what it takes to be a full time professional. The first one doesn't even want to take yearly update classes! Another one wants the same exemptions as licensed attorneys and CPAs, but without the bother of getting licensed. The third plaintiff wants to hire others to work in impoverished areas, the taxpayers most vulnerable to being exploited by unqualified tax preparers.

>>utilities and depreciation for the space used<< It sounds like there are two issues. First,they are hosting foreign exchange students, presumably not for-profit. If high school or less, they can deduct up to 50 dollars per month as a charitable contribution. Anything else, including college students, is personal. See Pub 526 for details. They also have a part time job as a laison. All the 1099-MISC income goes on Schedule C. They can't document any expenses except mileage, which is probably almost the only expense anyway.

>>would it be safe to file a zero and final return for the 1120S and report all the income and expenses on Sch C<< Not safe for YOU. Who's going to get blamed when someone sues him personally because he didn't operate his corporation as a separate entity? File the corporation return with no salary, since that is what really happened. If the IRS dings him for payroll taxes or something, that's not your problem--he was warned.

>>an S Corp that is purchasing a new business.... The owner of the S Corp is purchasing the building and starting another shop<< Let us know when he gets his story straight.

>>the cost of building them<< Unfortunately, you already know the answer to that. The best I can do is remind you that if the clients can identify furnishings and appliances separate from the building itself, that might be depreciated or deducted faster. Also, fences and other land improvements may be 15 year property.

>>purchasing a new business<< What sort of business? If it is a disregarded entity (e.g., LLC or sole prop), it can't be get separate. If it is a C-corp, generally it MUST be separate. If it is an S-corp, do more research. Also check whether the acquisition should terminate the S election, intentionally or not.

>>rent for a week, or a weekend<< According to Reg 1.469-1T(e)(3), this is not a "rental activity" because the average period of use is less than seven days. Therefore, it does not go on Schedule E; it is treated as a trade or business on Schedule C (assuming it is not a hobby). However, it is still a passive activity unless the owners had material participation. That's a higher standard than active participation, probably more than chopping wood and washing up. Do they handle their own bookings, or use an agent?

>>concerned about the ITT not being a qualify institution<< The basic criteria is being eligible for federal financial aid. Major schools like ITT could not exist if they had to sell their product on the open consumer market without government support. But if you want to make sure, go to www.fafsa.ed.gov and click on School Code Search.

>>it is a recourse loan because the home was not the client's primary residence<< No, it is a NON-recourse loan because that's what the client told you after seeking legal counsel on the matter. If you think that it "appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete" [in the words of Circular 230], you should ask to see the loan documents. If the client says the attorney does not have a copy, then he's stuck with what the 1099 reports.

>>was told it was still non-recourse<< Presumably the lawyer derived that knowledge from the loan documents, since the special law about a residence doesn't apply. Did the lender check Box 5 of the 1099-C?

>>not taxable because since CA is a non-recourse State<< Well, maybe for a principal residence, which this wasn't. Non-deductible personal loss PLUS taxable COD--doesn't bother me a bit because this guy could afford to pay what he promised but just flaked out instead.

>>jainen has a cpa or an ea<< I used my free classes as an HRB employee to pass the EA exam in 1992, the same year we parked our pencils and learned ORRTAX. Learned a lot since then, too, but I never figured out what this argument is about.

>>I'm an idiot and I needed company<< Welcome home, OldJack. What I love about this place is that I always learn something new. For example, I just learned that apparently some people keep their eyes open when they stick their tongue out.

>>Jumping to conclusions with little information ranks up there<< Thank you! I do work hard to achieve that exalted level!. True, I don't know how much talk radio, but then I didn't actually quantify it. I only said "too much," which is my interpretation of your own statement,"I was listening to a program." But in fairness I'll concede that your rant was properly about other people, so I have edited my post to "they" instead of "you."

>>Why is it that everyone thinks the only person who can answer questions about taxes is a CPA?<< The same reason everyone thinks only MDs know about nutrition or only Generals know about weapons of mass destruction for God's sake. You They listen to too much talk radio, where the message is simplified so as not to interfere with the advertising.

>>request a 1041<< It's going to take an extra step of explanation for the IRS to issue a refund on withholding not matched to a 1099. I'd try asking the IRA to reissue the 1099 in the name of the beneficiary (preferably) or the estate that received the income.

>>does the grant have to be subtracted?<< Is Ameridream back? It's been illegal for years because it was a fraudulent way to get around FHA lending requirements. The so-called "grant" was actually funded by the seller who paid a so-called "fee" to the organization. That means the buyer got 100% financing with no down payment or equity, forcing the government to guarantee a high-risk loan. I think you use substance-over-form and reduce the purchase price to what the seller really netted.

>>foundation in Scotland<< According to the Instructions to Schedule A, page A-6, "Contributions You Cannot Deduct.... Gifts to Foreign Organizations." It then refers you to Pub 526 for exceptions of certain U.S. charities that transfer funds, as well as treaties with Mexico, Canada, and Israel.

>>Two staples<< Okay, I'll concede it's a clever bit of irony. But really, you must not have ever worked as a mail clerk in a big organization. I have--and I can assure you it's naive to think the IRS cares how many staples you use. It's just a hassle for some poor temp trying to make it to Friday with all her fingers intact.

>>basis for gain/loss is different if/when the car is sold<< Like any asset used less than 100% for business, a sale (or an exchange) is treated as two transactions--a personal-use capital asset, and a business asset. The sale of a non-business vehicle will almost certainly be a non-deductible loss, so there is no need to track that portion of it. The basis of the replacement business portion is the same for depreciation as for gain/loss. There are two ways to get the right number. Neither one has anything whatsoever to do with a new loan, so please edit your earlier post to delete that line before you get mixed up. First take the new basis (percent of $26356) minus deferred gain (percent of $7500 minus adjusted basis). Then take the old adjusted basis and add the additional cost ($26356 minus $7500, percentages thereof). You must not proceed until you get the same number both ways. The second method gives a clearer picture of the two separate bases for depreciation. One is the adjusted basis of the old truck, continuing on its same schedule. The additional cost starts a new 5-year schedule. Or, make the election to combine both into a new five year schedule. By the way, did you check the classification tables to verify that a truck is like-kind to a Ford Focus? With real estate everything is like kind, but equipment has some arcane rules about product codes and stuff.

>>Section 179 or nothing. Tracking different depreciation, losses/gains for CA & Fed is rarely worth the amount of tax savings<< You do know that California doesn't conform with most of the recent changes to Section 179? Do you always elect out of bonus depreciation? What if the client has more than $25,000 of potential 179 deductions? What about Section 179 for 15-year real estate or computer software? What if you need to amend a 179 election? I won't even mention that corporations aren't allowed to use MACRS. How do you avoid California adjustments? The election is not to treat as separate; separate is the ordinary way in which the remaining basis of the old vehicle continues its same schedule while any additional cash or financing for the replacement vehicle is treated as a new asset. That gives the fastest write-off, but makes more sense with the big numbers in real estate. You can elect OUT of this separate treatment, and say the remaining basis of the old vehicle and the additional cash or financing for the replacement vehicle are treated as a single new asset starting over on the date of the exchange. That is simpler, but requires longer depreciation with no Section 179,