jainen

>>only principal being repaid << Overlooking the fact that you would be backdating a contract for a transaction that has already occurred, sure. You can make any agreement you want. It's a free country. However, for tax purposes (and circumstances that require Generally Accepted Accounting Principles) you would have to make an adjustment to the books showing interest allocated to the time period the interest covers. What are you trying to do? The IRS already knows the trick about gifting or otherwise cancelling a debt before it's paid, but maybe someone here can give you another idea.

>>she got a refund for 2K<< Don't you mean a refundable credit?

>>the H&R block preparer told her not to send estimated payments because she didn't owe any taxes for 2009<< I always like to take the dog's side in H&R Bash. They do a pretty good job. I admit I got caught a few times myself in this trap. The problem with the 82-year-old is that she didn't have to take Required Minimum Distributions in 2009, so her income was just her regular pension that already had withholding. If you were rushed and just let the software calculate safe harbor estimates, Block was right--she wouldn't have to mess with ES. But that's only to avoid a penalty. When RMD kicked in again (pulling Social Security along too), so did the rest of the tax. Even worse, the standard deduction is 500 or a thousand dollars less this year because you can't take property taxes. That's the way the Republican Congress extended the Bush tax cuts.

>>clients that say they had a lot more withheld<< And the early-withdrawal clients who say, but I already paid taxes on it. Sorry, they only took 10% (and zero state), but you are in the 25% bracket PLUS the 10% penalty. Then I had a client yesterday who inherited $40,000. After I happily explained that it's tax-free to the heir, she pulled out a 1099-R with that sweet little X in the IRA box! She said that's okay because her broker told her she could just roll it into a tax-free annuity. I asked if she actually received a paper check that she gave to the broker, and started fishing for a gentle way to break the news that she owed $15000 state & federal, including being double-taxed because it pulled her Social Security into the mix. I love this job.

>>It's not over << That's probably the worst aspect of it. The quake was big and scary, but it was over in a minute. The floods were big and scary, but they were over in an hour. But since then, every ten or twenty minutes there have been aftershocks of magnitude 4, 5, or 6. And the 2s and 3s aren't even being reported. You can't exactly feel them. There is just a CONTINUOUS instability in the whole world around you for days. My town went through that in 1989. It's about the most exhausting thing imaginable, completely sapping your strength when you need it most to recover from all the heavy damage. [This time my town suffered 20 million dollars damage, mostly to our small craft harbor. No reports of injury except one crazy surfer still missing.]

>>deferred the gain << The fact that he acquired the property by exchange is irrelevant now. The deferred gain is already accounted for in his adjusted basis, which should be much lower than the actual purchase price of the replacement property because it uses the carryover basis. You just need to make sure you pick up the various pieces of adjusted basis--the carryover basis, any additional purchase value even if paid by mortgage, and the ordinary transaction costs and capital improvements and depreciation and so on. If the exchange included appliances or other personal property, that's another piece of the adjustment. Once you have the basis, you can determine gain/loss on the foreclosure in the ordinary way, paying attention to recourse or non- as well as the other usual stuff.

TC Memo 2011-50 Taxpayers gave money to sister to invest, but the stocks eventually became worthless. They took the loss against gain from IBM employee stock options. Court agreed with IRS that they can't do that -- they couldn't prove ownership, and anyway the options were ordinary income. Fair enough, but what about the 20% accuracy penalty? Taxpayers brought in the IRS pubs about capital gains and options and so on, and asked the judge to figure it out. No penalty.

>>Nature sure can get very mad<< IT WAS TERRIFYING--WE WERE TRAPPED! Every way we turned the roads were blocked with fancy equipment the first responders finally got a chance to try out. [As usual, the real disaster for California was the media frenzy.] But Japan, now. That's for real. If you don't have experience you can't imagine the enormity of an 8.9 earthquake. That's one of the most powerful in history, a hundred times more energy than the recent New Zealand quake. It will probably generate several aftershocks that themselves are more powerful than New Zealand's. In a heavily populated area of steep slopes like Japan the damage may be unmeasurable.

>>out there on the coast<< Thanks, Tom. I'm 1/2 block from the abyss. It was only three feet in Hawaii, and low tide here, so we can probably put our trust in the laws of nature without invoking nature's God. Please pray for the victims in Japan.

>>are they investment properties<< Pacun has some great questions! Besides the total gain, I ask about two ratios. How big an increase in value was it, and what part of that can be attributed to the repairs? For example, if they made a 30% profit that probably far exceeds the market increase, but if they barely squeeked out 3% then there isn't much business purpose in it. In any case, short term capital gain is taxed pretty much the same anyway unless you're trying to soak up a bunch of old losses.

>>his domiciliary state would dispute the income allocated to the other states << What's to dispute? It all must still be reported as taxable to the resident state in any case. For that reason, I disagree that there is some de minimis amount that depends on a third party maintaining records for the taxpayer. The employer might not even know the exact schedule of a frequent traveler over a large territory. I am (mildly) offended by the suggestion that we only have to report things the taxing agency can prove. It may sound corny, but I support our voluntary tax system as in the best interests of both the government and the taxpayers. On the other hand, the client might be offended that I want to charge for another return, when the overall tax (after other-state credit) is about the same.

>>CBS asked a couple to file their taxes three ways<< In my opinion this was a fraudulent news story. Obviously the taxpayers did not provide the same information to each service. They said TurboTax used the wrong form, which almost certainly means the TAXPAYER answered a question incompletely or inaccurately. They said the CPA provided more comprehensive planning services. Apparently a major issue was determining whether or not they were actually in business, a question with a big dose of subjectivity depending on the client's comfort level with a more aggressive tax position. H&R Block moved expenses into a future year, which potentially might mean much larger total refunds by offsetting SE income in a higher tax bracket. How about we check the CBS Morning Show against competitors to determine the "best" way to get news?

>> I am finding both << Please name your sources.

>>CA-source income<< California taxes wages paid for services performed within California. If a non-resident works in California at intervals throughout the year and is paid an a daily, weekly, or monthly basis, the gross income from California sources is calculated from the ratio of California days to total days worked.

>>NYS wouldn't let them << You might not believe this, but California actually did the fair and reasonable thing on this point. We now have a streamlined procedure for dissolving a corporation. Of course, owners and officers will still be pursued for back taxes, but a tax clearance letter is no longer required so the company can be closed down without running up more accounting costs and the minimum tax of $800 per year.

>>question on the Ohio return asks if you made any out of state, mail order, internet or other purchases<< California tried it that way for several years, but of course it didn't work. Now EVERY business, including Schedule C, that ever had $100,000 gross receipts in any prior year, MUST file a use tax return even if they have no such purchases or owe no tax. The return is due April 15 for both calendar and fiscal year filers.

>>that itemization is required<< Yes, each individual sale must be reported. However, it does not need to be typed in or imported. If the broker statement is similar in format to Schedule D-1, you can simply attach the paper copy and mail it. Your software has a place to mark that you are attaching pages to Form 8453.

>>representing settlement of your lemon law claim against<< The lawyer said all he got was his out of pocket costs? Nothing else, like maybe at least to cover his own fees? Oh never mind. I'm sure a lemon law lawyer would be very honest, so who needs to see the paperwork? Put it on Line 21 if the client wants to be safe. Otherwise ignore it (if in your professional judgement it is simply a reimbursement). The IRS isn't likely to pay any attention either way.

>>clothes/gear would already be covering it<< That gear just covers the wall until she puts it on. During that process, co-workers might well be offended if the tattoo has political, religious, or other social relevance.

>>wins the claim for repair costs<< A reimbursement of non-deductible expenses would not be taxable, and related legal fees would not be deductible. Often, however, a settlement is a written agreement that the original claim was NOT valid, no admission of guilt, etc. What does the actual document say?

>>I simply cannot imagine any fire personnel having a leg exposed while on the job.<< Why not, if she exposed it during tryouts?

>>let me know if I messed this up<< I don't think you've messed up yet, but you still have plenty of opportunity! First determine the donor's basis. It may have been stepped up or down in whole or in part on date of death. It is further adjusted for any gift tax paid on the amount of FMV exceeding basis, i.e., appreciated property. Because, yes, the gift tax is on FMV. That is the carryover basis for depreciation. But if the FMV at the time of gift was lower than basis, you will need to track TWO carryover bases for future gain/loss. Then you need to make sure the property is not re-assessed for local taxes under Prop. 13, depending on exactly how all these title changes were structured.

>>a tatoo on her leg<< What could be more inherently personal than a part of her own body?

>>Does franchise requirement make the cost deductible? << No. The courts have been very narrow on this point. Safety equipment and costumes, okay. Clothes that just set a certain image like tuxedos and natty ties -- nope, even though nobody ever does wear that stuff in the real world. Unless there is a SPECIFIC business need, clothing is considered inherently personal.

>>the numbers might be diferent<< These numbers will never be different. He has already disposed of the property, so it's a done deal. The amount realized was the lower of FMV or debt paid off; calculate gain/loss from that and his adjusted basis in the normal way. Later, there might be ADDITIONAL numbers if the lender cancels any debt.