jainen

>>Would it be a fair assumption for the heir that the estate determined and took the gain or loss on the sale and the proceeds are after tax?<< I have no idea--what would the heir base that assumption on? Why not just ask the executor?

>>how to proceed with an OIC<< Hey, Terry--you spent an hour and a half just trying to get Collections to accept your Power of Attorney! They even told you they couldn't care less whether the guy files or not! Okay, they were lying about that last part, but honestly, what are your expectations about getting an Offer in Compromise through? You still want to talk OIC? Here's the deal. FULL 100% payment of everything due since 2000 with P&I, and they will let earlier years go. File a complete financial statement (Form 433-A). Pay at least 20% of the total balance due in the same envelope as the Offer. Don't have that check bounce. Use automatic electronic withdrawal for a payment plan that will pay off the total within three years (okay, five years if he will pay 30% up front). Sign a waiver of the statute of limitations for collection. File all tax returns on time during the payoff period. Any default will void the agreement and they will go after the entire balance due immediately. And they make no promise about criminal charges.

>>I don't think I should extrapolate those out to the annual rent * 8<< Why not? That's what the instructions say you are supposed to do, for New Mexico and worldwide rented property. The idea is to use a standard measure to get that ratio for NM tax. If you want to invent new definitions your first time, you're on your own.

>>I don't know why the other preparer reported it as rental in the year of sale and then continued to show it as rental in the year after sale<< Are you planning to find out?

>>why was the stock not distributed to the heirs << What's the diff? Estate administration has many details, and we can't second-guess them. Basis is only an issue for the executor, who isn't asking about it. I don't see any particular problem with one of the heirs helping make the distribution.

>>Is that added to the 2009 payment<< The ENTIRE gross amount is the 2009 payment (line 20a). The lump sum election is a method of calculating how much of the entire 2009 payment is taxable (line 20b). The legal fees are not part of that calculation, except for being included in the gross amount.

>>$5 million in sales from November 2005 through June 2006<< Wow! And that's just one company, and just the extra sales not reported. I'm sure glad I had all boys -- $88 tux rental from Men's Wearhouse!

>>can we still go back and report it as an installment sale<< That is the only option (other than leaving it wrong). He can't elect out of installment treatment at this time. Did you ask why he was leaving the other preparer? My clairvoyant intuition thinks his story is rather unlikely.

>>someone on this board would ask about a non-tax deduction<< The original post was indeed a tax question, and appropriate for this forum even if the answer had been negative. All three answers agree--the payment IS deductible on the tax return. All three answers also agree as to where on the tax return the deduction can be taken.

>>Can a regular C corp pay for the funeral expenses for one of it's employee's relatives and deduct the costs? << Certainly. I don't understand the previous responses that say it is not deductible but then explain how it is deductible. In my opinion, it should be obvious they can deduct it as a taxable fringe benefit. If they don't want to put it on the W-2, they can still pay it out of corporate earnings and deduct it on their books. In that case it would simply be another item to reconcile to the tax return at the end of the year. In my opinion, it isn't a big deal either way. This is another example of how tax effects should not be the most important factor.

>>He didn't think he had to pay the IRS<< I commend you, Terry, for taking on this client. For all we know at this point, it is really only the size of the engagement that is troublesome. But just do it one year at a time and everything will probably fall into place. I recommend you call the IRS number on the letter, introduce yourself and explain what the taxpayer has asked you to do, politely asking for time and help in bringing the taxpayer back into compliance. I expect you will find the IRS very tolerant--after all, they can't very well do anything else! I strongly doubt mcb39's characterization I quoted at the beginning of this post. In my opinion, there might be any number of good reasons he got into trouble. Tax protesters are very rare, and they don't bother coming to tax professionals for help.

>>will the IRS accept an OIC for this TP? << While he may not be a good candidate for an Offer in Compromise, he DOES seem to be a good client for a collections engagement. He has to deal with the tax lien somehow in order to sell the house, and he apparently has sufficient assets to get straight (and pay your fee!). We all get clients who greedily read the stories (ads, not news) about settling for pennies on the dollar. In reality, the IRS is far more practical. For a small amount like $13K, the disadvantages of an OIC are probably not worth it.

>>By declaring the sale, she can bring in the money<< I still think you are mixing up two separate questions. Of course she must report taxable sales on her income tax return, but that does not give her the right to move money across international borders.

>>some burned bras<< As I recall, there was more than one political issue at the time. >>8. Beatle or Bug<< "Beatles" were English. The German cars were "beetles." That was about as benign as the slang got. It was mostly negative, like "Hitler's car." Only 32 HP, didn't even bother having a radiator. But if you are REALLY a VW buff, you remember flipping the little turn indicators at each other. >>9. Buddy Holly<< The Big Bopper and Richie Valens as well as Buddy Holly.

>>I will answer my own question<< Wasn't your question about bringing money into the country, rather than about selling property?

>>will the IRS accept an OIC for this TP?<< Frankly I'd be surprised if the IRS even let the short sale go through.

>>The parents are a physician and nurse couple with the biggest, most generous hearts I know. << Sure, that's why they only paid pizza for kids doing construction work.

>>probably to go fetch materials<< Yeah, materials like beer. I agree with OldJack. All those things are ordinary and necessary and should be capitalized as acquisition costs.

>>The link says he did receive the payment.<< Considering the original question, this forum would be interested in whether the link says he received the $250 from the State of California Employment Development Department.

>>this guy needs a tax lawyer. << I disagree. I don't see anything in the original post that needs to go to Tax Court or is beyond Terry's ability as an experienced professional. However, I do think Terry should insist the taxpayer consult with a criminal defense attorney to protect himself from an IRS change of heart. Right now they are just enforcing collection on a Substitute for Return. When he files (assuming the defense attorney recommends filing some or all of the back years), the taxpayer will be admitting all sorts of things about himself, including his failure to file (which is a crime). If the guy is sweet I might talk to him for a little bit. But I wouldn't start work without a thousand dollars on the table. He needs many years of tax returns, and I suggest prior year returns should be priced higher than current year. An Offer in Compromise is absolutely out of the question at this point. The IRS will never consider one that does not cover ALL tax years owing. And you would need a real tear-jerker story to convince them to negotiate with a non-filer. I know he is anxious for somebody to do something about that letter, but honestly the easiest, cheapest, and safest response might simply be to pay the bill or set up a payment plan. In addition to filing all ten years, an Offer in Compromise will take you 15 to 30 hours to submit and negotiate, presumably at an hourly rate higher than you charge for simple bookkeeping. Meanwhile you will have identified for the benefit of IRS Collections the amount and location of all the taxpayer's assets! And your engagement letter MUST make it perfectly clear that there is no guarantee of success. So I agree with Bulldog Tom. Do not "send him packing." He has come to you for legitimate professional help, which he dearly needs. Isn't that what you do for a living? Unless your practice just consists of quickie tax returns, consider this engagement carefully and thoroughly. Do not make assumptions--it's an unusual situation that requires some creative thinking. But if the guy wants to get straight, he can be a profitable off-season client for you. So remember to send the girlfriend a nice note of thanks with a Starbucks gift card for the best referral of the year.

>>someone could owe a state income tax when there was no profit in that state<< It is the same for employees. The idea is that the state income is a part of the whole. The state tax is based on a percentage of that whole amount. It works the other way too--even if she had no expenses at all in New Mexico, she would still get to use the federal expenses to reduce her state tax. And remember, she gets a credit against her home state taxes, so there really is little disadvantage.

>>there is no place to account for expenses<< Although the instructions say to use gross "sales" (compensation) to determine the apportionment, it only calls for "total business and/or farm income reported on your federal Schedule C(s)" for that first line 9 entry. Well, "total income" isn't a term used in connection with Schedule C, so you must interpret it. In my opinion, a reasonable interpretation would be similar to how these instructions treat expenses from rental property, by which only the "net amount of rents" is reported in Column 1. But note that you would be using total federal expenses, which as a ratio are apparently less than New Mexico. That is, overall she makes money even though this one trip was not profitable. So she doesn't get to completely offset her New Mexico income, and may have a small tax due.

>>it just seems to me like it should be $0 since it is a loss<< Like most states, New Mexico does not calculate tax for non-residents solely on in-state income and expenses, but on the ratio of in-state items to world-wide items. Without running your actual numbers or reading the NM instructions, I would guess the ratio of expenses could be different from the ratio of gross income, so that New Mexico expenses might not entirely offset New Mexico income.

>>Could I invite KC, Jainen, Old Jack, Catherine and Rita to join me at a specific time to chat about it, while keeping others out of the conversation?<< As several who have used the Messenger discovered, I almost never agree to private discussions. And I think it very unlikely that I would risk chat. My addict personality would be lost forever!

>>I've gotten different answers from different CPAs.<< Did you give different details to each, or did you let them guess the details for themselves? How exactly are the entities related? Is the LLC treated as a corporation for tax purposes? What did the LLC use the money for? What was the lender's purpose in making the loan? What are the actual terms of the loan? Frankly I don't see how you could get ANY answer at this point.