jainen

>>that is the percentage of the attorney fees that are deductible<< Is that allocation based on any specific ruling? The amount of the fee is set by law (technically, the maximum fee), and is not related to the amount of the award. The so-called non-taxable part is identical to a calculation that it is fully taxable at a lower rate, like capital gains. In my opinion, not allowing the fees to be deducted in full does not reflect the true economic circumstances of the transaction, and is patently unfair and unrealistic.

>>Where did that come from? << It came from the fact that if he goes back to court he will have to PROVE that the two parents provide more than half the child's support and the child lives with one or both of them more than half time. Otherwise she has no obligation to sign the 8332. And proving that will be very difficult if a friend or relative is helping with either time or money. He can't force her to release the exemption if she is not eligible to do so. I suggest you stop quoting that divorce decree and see what genuine documentation you can find. The court order has a loophole big enough to drive a schoolbus through.

>>how do I tell if held as community property?<< Start with how it is titled. In my experience, property held jointly is usually considered to be community property if it was acquired from joint funds during the marriage. This is generally true even if actual title is joint tenant or separate, but that would require a bit more clarification. Property titled as tenants in common, partners, shareholders, and so on is less likely to be community property. Also a pre- or post-nuptial agreement can be relevant. In my opinion, this information should come primarily from the client. However, it often makes the interview awkward when the client doesn't have a clue what you're talking about. But we muddle along.

>>assuming she get 100% step up(hope)down on stock because of community property state<< Also assuming the stock was held as community property, and the trust was a family or living trust that was disregarded for tax purposes.

>>Mom will not cooperate and refuses to sign the 8332.<< The divorce decree only says Mom has to cooperate, not that she has to take any specific action such as releasing the exemption. Anyway, one of the easiest ways to get around that is to arrange for at least 50% of the child's support to come from third parties such as the new boyfriend. In that case the 8332 is not only not necessary, but not even legal. Can your client prove that such support does not exist? Or suppose Mom arranges for the child to stay with Grandma a lot, so is not a qualifying child living with Mom more than half the year. Then she can cooperate by demanding Dad sign any forms necessary (like monthly checks) to pony up more than half the total support, which is the only way he could claim a qualifying relative--and HE will have to cooperate or face contempt charges!

>> I'm absolutely convinced there's more to this story<< My guess is there is LESS to this story. Come on folks, we know how the IRS works. This is just stupid urban legend.

>>Aggregate Analysis Adjustment<< How much did THAT cost you? Sounds like something you have to amortize over the life of your driveway.

>>put the number of months the child was alive<< That number is 12. According to the instructions to Form 1040, "A child is considered to have lived with you for all of 2009 if the child was born or died in 2009 and your home was the child’s home for the entire time he or she was alive." As for the sick leave, I don't know. It seems to me the gift was of intangible rights to income, and the actual payment came from the employer in the ordinary course of the employment relationship. In that sense it was appropriate to put it on a 1099 if not the W-2. I mean, he couldn't very well charge it to the friend! So it would go on Line 21 if you want to call it taxable. But believe it or not the tax system really is kinder and gentler--at least, if the money in question is no more than a few thousand and does not constitute most of the taxpayer's support for the year. In the interest of fair tax administration (not to mention PR), I really doubt the IRS would enforce the 1099 if the taxpayer disclosed the non-conforming treatment as exempt. In my opinion this should be done on Form 8275, but others in this forum prefer offsetting entries on Line 21, perhaps with a sad note attached.

>>a portion of the distribution reported on form 1099-Q can be taxable<< Thanks! I'm always looking for more loopholes to treat a client's income as taxable.

>>Member FDIC<< Being a member of FDIC does NOT mean that any particular account is insured. These days pretty much anything paying more than a penny is not covered.

>>sometimes attorneys are wrong<< So true, so true--but fortunately you can always count on the Internet! I already answered about treating it as a sale. Which deed is best is generally a matter of local law and personal goals. As for other options, if the bank can sell it so can he, and there are unlimited forms of alternative financing (but sadly not unlimited funds), and basically I think you ought to let the attorney ask the questions.

>>He did come home every night.<< It seems obvious to me that he did not meet the overnight rule, so travel expenses are not deductible. He can only claim business-purpose miles, if any, after reaching the job site. By the way, in my observation 120 miles is a bit long, but certainly not uncommon for a daily commute.

>>The bank forgives $3 mil<< As I understood the original post, the bank won't forgive anything. They will take the property in full satisfaction of the debt, according to the terms of the note. The corporation will report this as a sale for $3,000,000 against zero basis. As to whether "its really the same pocket" for payment of the tax, I will defer to the attorney.

>>does the wife just sign his name where needed ?<< She can NEVER "sign his name where needed." If she has a valid Power of Attorney, she could sign her own name with the label "attorney in fact." Note however that according to the instructions to Form 1040 "you must have a power of attorney attached that specifically authorizes the representative to sign your return." Most general powers of attorney do NOT meet the requirements of federal law in this. The IRS recommends use of Form 2848. In any case, you are not required to accept a power of attorney, and in my opinion you should not do so unless it is properly worded.

>>Client owns a building an an S corp<< I don't understand if you are asking about the corporation, the shareholder, or both. Do you mean that this is a non-recourse loan, or just that the shareholder does not guarantee it? For a non-recourse loan, the property satisfies the debt in full, and the sale (presumably for the outstanding balance) is reported in the normal way. See what the attorney has to say. There may be a lot of capital gains tax that can't be discharged in bankruptcy.

>>May a LLC take the standard mileage deduction<< Employees and self-employed individuals can use the standard mileage allowance. The partnership itself can only deduct actual expenses, though I'm pretty sure it can use the standard rates to reimburse employees. To my mind, this question suggests some complicated shortcomings in the entity's business records, such as whether company vehicles are used some percent for non-business purposes.

>>The "50/50" is a given << Like bcoleen said, it is not possible. The law specifically demands that the divorce decree can't be used to determine custody. You must look at the actual time the child lived with each parent. But if you can't accept that, then in my opinion you must at least accept the IRS ruling that neither parent had "MORE than 50%."

>>that is what I was trying to convey in my original post<< And is that what the decedent was trying to convey in his 1982 will? Apparently this scenario was not as complicated as I thought. Unwilling as always to give in to raw simplicity, I will only say now that the half of property B that went in to the trust might yet be included in the taxable estate of W and thereby receive a step up, if for example, she had been deemed an owner or contributed to the purchase in the past.

>>is there something I am missing in your response? << My response was missing almost everything. Why are you asking this question? It kind of sounds like you are saying W's share of property B was designated for the kids by action of the 1982 will and/or trust, rather than W's 2000 will. If not, why would there still be unresolved questions so many years later?

>>now she just wants to get everything straightened up<< This is a major engagement, so in my opinion you should start with a comprehensive engagement letter. Who is the client, the one daughter, the partnership, other partners? Why now--has something happened? Is there any suggestion that your office might in some way be blamed for the non-filing? I don't mean that you should be, just that you could be. Let the attorney address the issue of statute of limitations, which may be far more complicated that you expect. The lawyer should also consider whether criminal charges could be filed, inasmuch as the partners knew they were not reporting income. Don't be casual about this. There is a LOT at stake, including perhaps tens of thousands of dollars in fees.

>>On W’s death in 2000 her 50% [in parcel B] went to the children.<< Why?

>> buying medical office<< Do you mean a building, or a business? You need to identify the individual assets being acquired, and depreciate or amortize accordingly.

>>I don't know of any way you can dodge SE taxes << I know. I got confused. I did go back and try to change my answer, but Booger had already quoted me. Then I thought about pretending I was only talking about limited partners, but obviously nobody would fall for that line.

>>Would this sale be reported on form 6252.<< Generally the sale of a business is treated as the sale of individual assets. If that applies to your situation, you can not use the installment method for the part of sales price allocated to inventory, depreciable assets sold to a relative, ordinary income from recapture, or assets valued below basis.

>>Where is the deduction for the miles reported?<< In my opinion, based on, well, everything, mileage is only deductible by self-employed individuals and employees. A partnership must use actual expenses, and in my opinion a partner would generally use actual expenses, especially if they are using the partnership to dodge SE taxes.