jainen

>>written identification<< You don't need written identification IF -- and ONLY if -- you complete the exchange within 45 days. Another way of saying the same thing is, you ALWAYS need written identification! Someday some deal might close on time, but don't bet that it will be yours. Talk to your intermediary, and make sure they are eager to completely document everything in detail. Also make sure they can answer this question without looking it up. A few other things to ask them include what they are going to do with the money they are holding. There should be some kind of bond or warranty that you get it back if they go out of business. I'm not being sarcastic in this post. As for the tax implications, expect a rough ride. The first thing to remember is to ignore all mortgages. (In the extremely rare instance that the new owner ASSUMES the mortgage, ask for more advice. That means the SAME loan is transferred, not that the lender reissues the paper.) 1031 doesn't care whether property is paid for with cash or debt, so ignore all mortgages. There are two ways to carry over the basis. One is to ignore the carryover and start everything new at FMV. It is allowed because it usually means a longer recovery period. It'svery common especially with equipment and vehicles. The other way is to set up TWO new assets, the carryover basis continuing on the old schedule and a new schedule for whatever new money (or mortgage value) was added. Of course, there is always more than one new asset. There is land, different buildings, irrigation and other development, and maybe furnishings or machinery. You have to allocate the total carryover basis among all the new assets according to percentage of total FMV. Do not try to match building for building and land for land, it's all real estate so the land basis will be distributed to ALL the new assets in the same way as building basis. Except for personal property, which unless you can match the narrow categories is going to mean boot given or taken. With section 1031, NEVER use a computer. Print out blank worksheets and forms and do everything by HAND. Once you got it right, wait a few more days and then try to copy it into the computer.

>>Alabama is really hurting for money<< Are they getting any more money from your clients? It would make me uncomfortable, even here in California where we are used to the Franchise Tax Board being very aggressive. Hey, maybe they are really looking at YOU through your clients! More likely the IRS told them to do their own audits because the feds aren't finding much there. Or it's just politics in an election year, when every candidate wants to claim they are digging out tax cheats. Whatever it is, you probably should tighten up your organizer/interview procedures a bit, including the engagement letter.

>>they are designated for a specific vehicle<< As I read the regs for Maryland (if that's what this is), it seems that repair LABOR is not subject to sales tax, though separately stated materials are taxable. So if the driver gets an "oil change," no sales tax for the included fluid. If he buys a case of oil to do it himself, add 6%.

>>haven't been able to find a QI who knows exactly what to do<< "Exactly" is a very important word for Section 1031. Any real estate broker who handles commercial listings should be able to refer you, even if you are asking about personal property.

>>attempt to get a transcript of 2009 << You have an inexperienced loan officer who asked for the wrong thing. A W2/1099 transcript is available. Still, the mortgage company is being very flexible. Make sure your client understands that this is no time stretch the truth. They WILL verify the tax return after filing, and they will send a live investigator to verify owner occupancy and everything else. Funding the loan is somewhat towards the beginning of the process when you go limited docs.

>>Could this be hypothetical?<< It could certainly be hypothetical. My response is the same. The taxpayer has taken a tax position, but the question is now outside that. The reason the question has come out is an integral part of the answer. Is he in trouble, has he reconsidered his comfort level, is this just a screen for some other issue?

>>This guy has always taken these deductions<< Why does he want a new tax preparer?

>>Pick the biggest, meanest looking one and take your best shot at him<< Often my best shot is to turn to the one, point to the other, and shout, "Are you going to let him say THAT about you?" And then run away.

>>he used the standard mileage NOT depreciation<< Depreciation is mandatory for business vehicle usage, and is an integral part of the standard allowance, with a specific dollar amount required to be used. The 2% floor applies to Schedule A miscellaneous deductions as a whole, not any one particular expense. You can't defer or bank expenses below the threshhold. It's another one of the mysteries of "allowed or allowable." In reality business usage varies over the five years, so you may have to use the worksheet to calculate gain on sale. In the simple scenario of the original post, it's easy to do in your head. The depreciation component of 100K miles is 19 something, so business basis was reduced from 13 something to zero. 2/3 of the sale price is allocated to business, and counts as gain.

>>we can all withhold 28% there too<< I'll be sure to tell my employer to withhold 28% of my withholding, and send it to the IRS with my withholding.

>>does it flow thru normal net income of the partnership<< Section 754 is an advanced topic. Since nobody else responded, I'll take an unreliable shot from my inexperience. My understanding is that the partnership must now maintain separate books for the new partners, as the basis step up has no effect on the other partners. It is not the "ownership interest" that is now amortized by the partnership, but the depreciable property defined by the difference between book value and FMV. If you are the one making the decision for the partnership, I hope you have good E&O coverage.

>>the property and business is in separate LLC's<< Who cares? LLC's are disregarded entities, so disregard them. He must have found his tax avoidance guide in an old library. The IRS shut down this scheme long ago. You can't avoid SE tax by shifting income to--who did he shift it to, himself?

>> 31 members of Congress << Yeah, yeah. NATP threw some shindig and got a few signatures. Big deal. Don't read too much into this. It's just political blather from a special-interest lobby trying to impress its members by pushing some hot buttons. The article itself even says the letter was nothing but the same old unsupported objections the IRS had already dealt with. Oh, wait--I didn't notice this was OUR lobby! Well, in that case it's great that Congress is intervening to stop this evil plan.

>>20K miles are business miles<< His business basis was reduced to zero by depreciation, so he has a $2000 gain.

>>I was thinking of writing a letter << There is pretty good authority for your position, but it is NOT statutory. The rulings are not even all favorable, nor do they necessarily set precedent that applies to your client. I recommend your response stay carefully within the appropriate structure for appeal, making sure to observe time limits and other elements that protect your client's rights. Be exceedingly thorough in your documentation, with, for example ALL checks from the beginning of the mortgage, with bank statements and a full printout from the mortgage company, as well as the loan documents, credit report, certification from the parents, cash flow statement, and a couple dozen other things. You aren't going to turn it all in, but you just don't know what the IRS is going to demand. (For that matter, when you get the material together you may find it doesn't actually support the client's position after all.)

>>write the check for 28% less<< But Your Honor, I DID renew my registration on time! DMV just wouldn't give me new tags because I withheld the required 28%.

>> a tidbit << I didn't know any of those body parts, speaking of which at first glance I thought I knew #6 until I saw that there was only one of what it was talking about.

>>will backup withholding apply<< I nominate Bulldog Tom for Post of the Week! Let's start a protest movement with a goal of 100 million W-9's sent to the IRS.

>> shouldn't they be subject to the same critical oversight << That's a very good point, and lack of such oversight no doubt allows mistakes or even abuses which degrade the image of the whole industry. But while I'm "baiting," I'll point out that this forum has not been very supportive of increased oversight lately.

>>we also all know what Edward meant<< What jainen meant is that John's level of professional service and skill is presumably the same for the pro bono returns he does, so signing or not signing is no indication at all of whether a preparer is a creep. Now let's acknowledge that our industry finds a nice market for paid preparers who don't sign. Why do you suppose that is? I think it's because preparers who don't offer follow-up service can charge a little less, and clients want the lower rates since there's only a small chance of being audited anyway. So why complain about the guy who didn't get paid for premium service? The clients made the choice and got what they bargained for. Edward didn't say whether he took on that particular cheapskate, but aren't we all at least interested in new clients?

>>deduct the add-on portions of my DUI fine<< Oh, never mind. I'll just bury it in professional memberships and CPE like before.

>>she is the only one in the loan<< That probably means he was added to title AFTER the loan. If so, he is not obligated to pay and can't even claim he is protecting his (subordinate) interest. He can not deduct the mortgage payments, but it's not too far out to claim the deduction on HER return, since he was apparently making payments in the nature of a gift to a loved one. If you didn't need to be very conservative and not risk an audit (which you would probably win anyway), you should be able to allocate the refund according to taxable income and/or payments.

>>IRS should enlist the assistance of the Post Office to run down all these creeps<< Do "these creeps" include our good member JohnH, who in the post just before yours admits he prepares returns without signing them?

>>making restitution payments<< Does this mean I can deduct the add-on portions of my DUI fine that cover booking fees, police enforcement and administration, road repair, and court costs, which is about 80% of the total? Assuming the swill had a documented business purpose, of course!

>>Can the IRS use the US Postal to track where a TP recieves mail?<< As far as I can tell, even the postal service can't always figure out where people get their mail.