jainen

>>Do I take half of expenses and half of the allowable depriciation<< There are several issues here. First, if there is no possible way this arrangement could generate a profit it might be considered a not-for-profit activity in which tax deductions for expenses can not exceed income. If it is truly market rate, it is still a "dwelling unit used as a home" subject to Section 280A income limitations, i.e., utilities and other operating expenses can not create a tax loss. In any case, expenses are limited to the percentage used exclusively by the tenants, any shared space must be treated as non-business use.

>>I need to adjust the SS benefits out of the federal income<< Yeah, well I think I think you need to follow the instructions so good luck. I'd guess, from the prominent way the form directs you to those instructions, that you are not the first to question the Wisconsin law. And, from the same prominence, I'd guess the state is pretty confident of their interpretation. Moral: if you want to make money the Wisconsin way, you have to pay taxes the Wisconsin way. Or as they used to say, "when in Rome do as the Romans do." http://www.romewi.com/

>>How do I get the SS Income removed from the Fed AGI so it is not taxed for WI purposes?<< Have faith, my friend! Shun those other suggestions that are pure fantasy guesswork. Read the instructions! The form itself tells you exactly what page to go to on that very question. For Line 35 it clearly says "Note: Even though you may start the tax computation based on federal income, the tax will be later prorated based on the ratio of your Wisconsin income to federal income. The result is that you pay only the portion of the tax attributable to Wisconsin income." That's different from how we do it in California, where the ratio would be HIGHER because SS is subtracted from the denominator first.

>>the IRS will not accept an attachment with the information<< Your software should have a way to do this. The instructions to Schedule D (now including Form 8949) still say "Instead of reporting each of your transactions on a separate line of Form 8949, you can report them on an attached statement containing all the same information as Form 8949 and in a similar format."

>>college will not graduate the student until they pass their boards<< That's an odd requirement. Usually candidates must complete the schooling before they can take state exams. And there are plenty of non-academic reasons a student would not be eligible or able to take the exam, which would damage the school's important graduation ratio. Anyway, I don't think such an expense is qualified. Nursing students may also be required to prove current vaccination record, fingerprinting and background check, transcripts from other schools, and so on. In my opinion, the credit is more narrowly focused on the curriculum itself.

>>The IRS gave me a different PTIN this year.<< If you're lucky, maybe that means they decided it was too much trouble to go after you for all those past years, so they're going to give you a fresh start! On the other hand, maybe it means they're putting you in a special category they can watch more closely! But most likely it just means they mixed you up with another tax preparer whose last name starts with the same four letters or something.

>>They are not added to basis on a refi, they are amortized over the life of the mortgage,<< Says who? Maybe the reason you can't find a code section is because there isn't any. Maybe they must be capitalized, like other intangibles. But adding them to basis does NOT make intangibles depreciable property. Even assuming a business purpose for the new loan, maybe intangibles are just going to sit there on the balance sheet until the company is sold.

>>there is something called an ATIN for adoptees and of course an ITIN<< An ITIN is only for aliens not eligible to get an SSN. An ATIN is only for pending adoptions. According to the instructions for Forms W-7 and W-7a, you should not file until you have the actual SSNs. I would guess something is wrong with the application, like they never turned it in or followed up with requested documentation.

>>the date he purchased the property<< Since he purchased the property in Feb 2009, he was allowed to take the credit on his 2008 return. But it was still an $8000 credit with no repayment schedule. Be sure to use the December 2009 version of Form 5405 and instructions from the IRS website, even though you are doing a 2008 amendment. Do not revoke the election to claim in 2008, but amend it to $8000. 2009 is fine as filed, but amend 2010 for the incorrect repayment. Attach full documentation to EACH return mailed in separate envelopes, and tell him to expect a long wait for his refunds.

>>is it 7 in the morning where you are?<< No big deal. I wrote the answer last night before I went to bed. Then this morning all I had to do was copy and post to the forum as soon as the question was asked.

>>it is very vague on what expenses actually qualify.<< The first section of the instructions to Form 2441 tell you to see Pub 503 for more details. Pub 503 says, "Expenses for a child in nursery school, pre-school, or similar programs for children below the level of kindergarten are expenses for care."

>>"So what do we do to get the $1,000 back?"<< You are too harsh. I think the client had a darn good question that deserves a good answer, not just kicking her out. Unfortunately 2011 is done so it's too bad she didn't bring her tax planning question to you earlier. But there's still time to restore the credit for 2012. Just tell her to have another baby!

>>the people that qualify or think they qualify go to an IRS office so that their staff can determine eligebility<< You want the government to audit ANYBODY with kids who struggles on low wages? Why not audit Schedule C instead? It is even more complex with vastly more chance of fraud including unlimited deductions. At least EIC is capped at 5K.

>>the parents have agreed on who claim<< The tiebreakers only apply when they can NOT agree and both claim the child, and only if the child lived with each of them for more than half the year. Presumably that means they all lived together for some time. In terms of the original post, the tiebreakers also apply for whoever can claim the child, including siblings. If everyone agrees, they can do it whichever way they want (except for EIC). If the parents were separated the custodial parent rules apply instead. Those are closer to qualifying relative than to qualifying child.

>>You, your 5-year-old son, and your son's father<< Sorry, this example is not at all the same. In the original post, the players are you, your brother, and the father of both of you. The rule was added specifically to EIC, not to qualifying child. Since the minor is a qualifying child to both his brother and his parents, either can claim him for dependent, Head of Household, child tax credit, and/or dependent care (if otherwise eligible). But NOT Earned Income Credit. Read my quote carefully in its own context. The situation in the original post is exactly why we have this rule. The EIC was intended as an incentive for welfare families to return to work. The IRS noticed that MANY wealthy families, especially with exemptions phased out, were allocating children to maximize the refundable credit. You know they didn't think of this on their own; we tax professionals pushed it. Apparently some of us still think it's a pretty good idea even after Congress closed the loophole.

>>his father has a higher AGI<< This year we have to attach the due diligence Form 8867 to the return, so let's finally get around to actually reading it. See the instructions to line 13c, which say "If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person’s AGI is higher than the highest AGI of any of the child’s parents who can claim the child." In other words, you are right. This form also boasts one of my favorite lines in all of IRS-dom, right below what I just quoted. Line 13c has boxes for "Yes," "No," or "Don't know." But if you select that third box, you haven't done your due diligence!

>>Would this be taxable income to the State of MI<< My quick check of the MI instructions at http://www.michigan....ok_341323_7.pdf shows that MI taxes UIB included in federal AGI. However, it seems Schedule 1 allocates it to the state of residence so maybe it REDUCES MI tax! I hope you aren't going to try to do a tax return for a new state without reading up on it first.

>>$84K that he is on the hook for<< Weren't these expenses already distributed to the partners at the time they were incurred, part of his 91K accumulated losses? How much did he pay to buy out his partner? Can he increase basis by simply agreeing to pay debts he was NOT otherwise liable for? Was the $51K passive income on a Schedule C? What does the 1065 for 2007 say?

>>if attorney fees are deductible under Sch A, misc. deduction for a loan modification?<< To the extent the fees can be allocated to acquiring taxable income (such as cancellation of debt) they would be deductible.

>>deceased taxpayer had gross income below the filing requirement<< Same issues as for a living person. Will the family be more comfortable avoiding an IRS reminder? Do they want to get past the statute of limitations? Did a short period of employment trigger EIC? Kids or ex-wife snooping around? You know, whatever.

.."grace" and "license" don't belong in the same sentence<< What do you have against funding for higher education, John? http://www.grace.edu...-license-plates

>>"His Grace" would be appropriate to an archbishop<< Yes, I did feel uncomfortable writing it that way. But I had to use the word "grace" as part of the joke. I didn't want to make it longer with a whole nother sentence just for the one word, so I took a bit of poetic license.

>>when they are stationed outside of CA they are considered non Residents<< Do not confuse "domicile" and "residence." In the original post, the servicemember stationed in Florida was not a California resident, but WAS still domiciled in California. That is why the spouse must include 1/2 of the community income, even though the servicemember's half is excluded.

>>this was all I saw for the definition of "home:"<< Agreed--but see the definition of "qualified energy efficient improvements" on the same page, middle of right hand column.

>>can the taxpayer ELECT to report the scholarships and grants as taxable<< There is no election available for that. I think you would have to have incredibly detailed records to support such a position, and that would not be, well, credible. If the scholarships and grants are used for qualified expenses they are tax free, and you can't pretend they aren't. And then you can't take a credit for expenses paid with tax-free assistance. Presumably the 1098-T shows such tax-free amounts. But Pub 970 does say "the amounts in boxes 1 and 2 of Form 1098-T might be different from what you actually paid." That's where good records are important.