jainen

>> refer to the info we have already provided in the prior year return<< You're kidding, right? Why in the world would you want an IRS agent to pull your client's prior year return? What do you tell your clients? "I don't bother following the IRS instructions, because they should just go back and take another look at last year's return."

>>They want to play "stupid"? << Who are "they"? At the risk of once again sounding like a shill for the IRS, I will point out that our public servants have made it perfectly clear to us what they need. "Deducting a Carryforward... You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them." In my opinion, that is excellent communication. I don't think it's stupid for them to expect professionals to read and follow simple instructions. See page 9 at this link: Pub 536.

>>I don't think I can stop this << Tell him to ask the bank to reject it. That probably won't work, but it will get him out of your office! What are YOU supposed to do about it in fairness? With a joint return SHE is your client too, so don't take sides. What good is a paper check anyway? She has to sign it. Best bet is to hang out in the bank lobby with a laptop, and withdraw the money as soon as it hits. You can tell him exactly when that will be, because the IRS publishes a refund schedule that you can share. But don't take sides.

>>the wrong date to be picking those nits<< I had already admitted I was joking, and this thread had wandered off into bad 80's music. Then it was pulled back with a direct quote and challenge, so what's a poor contrarian supposed to do but defend himself? Now the claim is that taxes and mortgage help us understand the FMV. I still disagree. A great many of our Schedule E clients have found that rental income does not support the cash flow. Rental value is often, and sometimes dramatically, less than actual expenses. That's not just a coincidence--part of the reason renters can not afford more is because they can't use tax breaks and leverage the way their landlords can. Why, kc, just an hour ago you confirmed your earlier assertion [in Marilyn's thread "Rental Real Estate"] that expenses remain deductible even when FMV drops and produces a total loss.

>> If it materially extends the useful life of the asset<< Thank you, Gail. I was having a hard time being the contrarian on this. While the minor cost would seem to indicate a "repair," if that was just the price of parts on a self-installed modification to convert to LPG or otherwise make the vehicle suitable for a different use, then it is a depreciable asset. However, just restoring the vehicle to it's original use and condition would not extend its life because it would still be five or seven year property.

>> he knows the situation better than all of us<< Certainly, but by definition there is NO circumstance under which actual housing costs such as mortgage or property taxes can be included in the calculation of support for purposes of a dependent. If you disagree, I challenge you to cite any authority for your position. I would accept any standard tax guide or IRS pub, as well as any statute or regulation. Any.

>>major refurbishment of the property<< I would expect such expenses to be capitalized and depreciated over 27.5 years (assuming residential) starting the month it is returned to service. That would include ongoing expenses such as utilities and mortgage interest incurred while the property was not available. You have a bit of flexibility since there isn't any definite statutory time frame to leave the rental vacant; just be reasonable and it should be fine. In the original post, the owner did not adjust his rates to reflect current market conditions. Whatever his reasons, after several months it begins to look like the property is not actually available in any real sense. At least by the second year I would hesitate to treat it as a rental property.

>>When the results are inmaterial, you can put it anywhere<< Fair enough. The point is to pay the correct tax, not simply fill out one form or another. In the original post, $1395 on Schedule C is likely not immaterial because it might generate SE tax or have other effects. On the other hand, it might position the taxpayer to deduct losses from his photography business the following year. We don't know all the details because we don't have the interview notes and documents. The fact that it was a prize or that he has another job does not by itself tell us whether he is in the photography or art print or publishing or any other business.

>>$1395.84 in box 7<< I've never understood all the questions like this. That 1099 has no authority at all. It was probably issued as part of a group by a low-pay (i.e., untrained) bookkeeper who doesn't pretend to know anything about your client's tax position. We can't help you either. The fact is, in some cases a contest prize might be self-employment income while in some cases it is other income or even wages. Or it could be royalties, or non-taxable something, or issued to the wrong Tax I.D. number. It's YOUR job to properly characterize it based on your interview and the client's documentation. So what if the IRS questions it? That's their appropriate role, the way the system is supposed to work. If you're afraid you can't support your treatment of the prize, do a better job with the interview and documentation.

>>make an appointment for April 5th << Not in my office. After March 24 it's drop-offs only. We'll do "the best we can" but won't promise anybody later won't go on extension. That's been our policy for years, and it works pretty well. (For some reason they never figure out that in order to put them on extension we have to do the whole return anyway so they can pay the balance due.) I've been very sluggish this year for some particular reasons not related to my career.

>>issues with older software<< For the first time in my life my new computer is not old technology. I ordered an Affinity from Costco.com for the least I've ever paid for a computer, less than building my own. Awesome machine that runs all my silly old shareware flawlessly. (The day it was delivered Intel recalled the Sandy Bridge motherboards, so I'll have to deal with that next month.)

>>Why are they doing this to me?<< Wow--I nominate you for Worst Client of the Week. Even though it's only Monday. I have found the best way to get OldJack to weigh in on things like this is for me to say something stupid. So I think it's a related party transfer and the basis carries over to the new owner. It's not a "gift" because it is within the business relationship.

>>Surely, you jest<< Busted! I'm not always rude and mean-spirited, you know. I've been feeling puckish this weekend. [Or is it peckish?]

>>$7,500 will be included on Form 8606 with a basis reduction of $2,500 for net taxable of $5,000.<< This excellent question apparently slipped by us in the February rush. My understanding is that the entire $5000 distribution is applied to 2012 first. See page 63 at this link: Pub 590. Might have made a nice planning strategy if we had noticed it before the end of the year.

>>started with 1099 << Ooops, I got that wrong. Doesn't matter. Even worse for the doctor who KNEW it was supposed to be a W-2 and did it wrong anyway. But she sort of made an effort, so I'd have the employee give her a call or note, requesting to be grossed up a fair amount to avoid having to file the SS-8. Wait two or three days, then go for it. The state and fed taxing agencies are so mad about this stuff, they don't give any value to the employee's coerced agreement.

>>What do you call someone who is taking between half and one credit less than full time?< In my experience, "at least half-time" is a synonym for "full time," the opposite of "less than half time."

>>She wants to file the 8919 and SS-8. << Seems like a slam dunk. Changing to 1099 without any change of duties is pretty blatant. How do such stupid people manage to get through all those years of college and med school? Greed. They rip off their patients, and they rip off their employees.

>>What is better method?<< You'll have to ask your client about that. So who is your client? One or both of the minority shareholders, one or more of the majority shareholders, the corporate entity, a customer or creditor, a parent or subsidiary entity, a spouse? Each stakeholder probably has a different reason to think one method is "better" than the other.

>>instructions on page 4 of the 8863<< According to the instructions on the page right before that one, a "part-time" student can not claim the AOC. He must be taking "at least one-half the normal full-time workload for his or her course of study."

>>the govt may be shutdown! (what as shame)<< In my opinion shutting down the government would be disgusting, not shameful. Why can't the majority party pass a budget? This is not the first time the Republicans have blackmailed the nation in this way. They did it to the previous President who wasn't from their own party too.

>>they took it on the 9th<< Sorry. I misunderstood when on the 12th you told us they took it "yesterday." In my opinion, the solution is not to hold the efile and run everything right up against the deadline. I think it would be better to allow MORE time, not less. In general I recommend people not authorize withdrawals unless they have the funds available. Your arrangement sounds too much like the old idea of "float," by which a checkwriter would hope they could get the money into the account before the check cleared. That was poor business practice back then, and it's still poor business practice now. Still, I hope you do win. Electronic payments are now REQUIRED for many taxpayers, state and federal. We must demand the agencies follow consistent and reasonable policies that taxpayers can rely on.

>>IT WAS ON THE 1120<< I'm not sure exactly how this works, but I've got a hunch you're going to lose this one. Page 4 of the INSTRUCTIONS to Form 1120 does say something about "the day before the deposit is due."

>>Mom pays the mortgage, real estate taxes, utilities, food, et al<< Similarly, much of this is NOT support. Only the food, maybe a share of the utilities et al, but definitely not any part of those housing costs you list.

>>Why can't we make it a loan<< In my admittedly stodgy opinion, she can't "make" it a loan because it isn't already a loan. It wasn't recorded in the corporate books as a loan, and it wasn't recorded in the corporate minutes as a loan. There never was any agreement to repay it on any kind of schedule; repayment wasn't enforceable at all. Maybe she will return it as needed, but she certainly never agreed to pay for not returning it. She hasn't paid a dime for the use of that money, and she doesn't intend to because she considers it to be her money taken as a capital distribution just like all the documents already say. She just wants to phoney up some new documents to beat the tax system. She even admits that herself! The only way she can make it a loan is by playing the old childhood vocabulary game about the difference between "can" and "may."

>>students have spent their money on discos, ipods, cell phones, games, make up and cool things.<< This is NOT "the opposite." Every bit of this counts as SUPPORT provided by the student. Our opinions about what is or should be the necessities--totally irrelevant in determining whether the student can be claimed as a dependent. Now, if the student did something responsible with the money like save it for grad school, that would not be self-support. That would be the opposite.