jainen

>>an away-from-home temporary job<< Nothing in the original post states that he was "away from home" or that the job meets the definition of temporary. Other likely scenarios that fit the same facts are a transient worker and a worker in a failed attempt to relocate.

>>1600 square feet of mainly flat lawn to mow<< A cow is nice. Sheep and goats need a lot of managing to avoid over-grazing. Actually, I don't know much about lawns. They're basically illegal here in Santa Cruz. The eco-nazis cause too much grief, so most of us just park cars there if it's in front or grow sensemilla out back.

>>this trip wasn't really ordinary and necessary<< In my opinion, that's an extremely low standard--it seems obvious to me that visiting libraries is an appropriate thing for a librarian to do. But I'm not sure that's what happened here. Travel itself is not deductible as an education expense, and that's pretty much what the People-to-People programs are about. She got continuing education credit for chaperoning kids on the trip, not for researching libraries. And since People-to-People covers its leaders' costs, her $6500 must have been just personal costs not much related to the business purpose.

>>how to properly fill out the 1040x to get the numbers correct<< According to the instructions to Form 1040X at My link, "If you and your spouse are changing from separate returns to a joint return, begin by combining the amounts from your return as originally filed or as previously adjusted (either by you or the IRS) and the amounts from your spouse’s return as originally filed or as previously adjusted. Then make your changes to the combined amounts."

>>Sons did not contribute to purchase<< According to the instructions to Schedule E of Form 706 at My link, "Generally, you must include the full value of the jointly owned property in the gross estate. However, the full value should not be included if you can show that a part of the property originally belonged to the other tenant or tenants and was never received or acquired by the other tenant or tenants from the decedent for less than adequate and full consideration...." In my opinion, that means the full value of this stock must be included in the taxable gross estate (even if it is below the exclusion amount), triggering a step-up or down on the entire holding. In my further opinion, the fact that it was gifted into joint tenancy is not relevant because the mother retained the right of survivorship.

>>I have trust and confidence in your opinions<< Thank you very much. I must remind you, however, I have often stated that the positions I take on this forum are not necessarily the same positions I take with my own clients. For example, I honestly believe the IRS may be wrong in their interpretation that both spouses must have occupied the same residence, but I am not supporting that opinion with any link.

>>I can't think of any other way to make the 50k non taxable on the return<< Why not do what the IRS expects? According to the instructions to Form 1040, "Enter the total distribution on line 16a and the taxable part on line 16b."

>>waiting a few weeks to see if the 1099C will come<< Non-recourse debt means the foreclosure fully satisfies the obligation. There is no cancellation of debt in that case. Report it as a sale for the amount of debt. In your case this would presumably show a non-deductible loss on personal use property.

>>Usually most rentals are automatically passive.<< Oh yes, of course. The rental ACTIVITY is passive. But the capital GAIN is not passive income, so it can not offset passive losses. By the way, why are they changing tax preparers in the middle of this?

>>Need more clarity<< It seems clear enough to me. Just review "Repayments" on page 90 of Pub 17 at My link.

>>My first guess would be to back it out on Line 21<< My first guess would be that for some reason the plan is NOT treating this as a loan. In my opinion that contradicts what the taxpayer claims, so you should reconcile the matter. Has he, for example, failed to make timely payments, or violated other terms of the loan or the plan? My second guess is that he has.

>>you can do a lot of searching before you find the answer and then still not be absolutely sure that it is the right answer<< I can't be absolutely sure it is "the right answer" but it does not take a lot of searching to find "the answer." According to the IRS in the Q&A at My link, "Both spouses must have owned and used the same previous principal residence." And just in case you missed it the first time, they say it over again.

>>any tax benefits for this expense<< Yes. Tax-free earnings from an educational savings account can be used to pay any of this expense. It is possible that some of the cost or related costs that exceed the value of the schooling could be treated as charitable contributions. In some cases the fees might include medical costs. The expenses are included in support for determining dependency, and the school records can be evidence of where the child's principal home is. If the tutor qualifies as an independent contractor the family could avoid employment taxes completely.

>> Same fund, same sale date, but acquired on different dates<< Presumably these were all disposed of in a single transaction, so you only need one entry on Schedule D. The 1099-B does NOT have all the dates acquired because there is no place on the form for them. You are no doubt looking at a supplemental schedule that is not sent to IRS.

>> I find their instructions to be confusing. << You are too modest. We Californians generally think of our tax laws as being hallucinatory. Yes, your client must file a California non-resident return. Calculate the tax on his TOTAL world-wide income, and then take about 6% of that representing just the California wages. I recommend you do this by hand prior to entering it into the computer, so you know when you get it right.

>>the IRS is saying the property that was disposed of was not a passive property<< I would guess the IRS position is that capital gains do not offset passive losses. Of course, the entire disposition of a passive activity will release suspended losses from that specific property, but that doesn't appear to me to be what happened. By the way, why are they changing tax preparers in the middle of this?

>> Any code cites?<< In typical bureaucratic jargon, Section 62( c) is written inside out. Like, this is not something else if it does not allow you to negate this other thing. I suppose it could all be done with a handshake or at least a wink, but really, OldJack, "accountable" rather implies that there is some sort of record, don't you think?

>>would his legal fees be added to loss or go on sch A << Assuming some of his legal fees could be allocated to the collection of taxable interest on this note (an assumption for which there is no foundation in the original post), they would be deductible on Schedule A. Speaking of assumptions, "Assume this was all done correctly" is kind of a whitewash. There are any number of correct ways to do a corporate liquidation, but when the sole shareholder says he'll just pocket all the assets because instead of investing he had actually only lent the money to his corporate self -- well, I would at least not make any assumptions as to what his basis in that note was.

>>This is a good example of why if we rely too much on the programmers<< In my opinion, this is the opposite of such an example. It is an example of expecting too much from ourselves without getting the best tools available. But why did you tell us "one spouse claims to live in a community property state" anyway? If you told your software that, I would expect it to react the way it did.

>> I would be lacking other income information on the spouse.<< I'll let the attorneys figure out about the information, but-- In my opinion, your client (assuming this is the one not in a community property state) is required to file a non-resident return for the community property state reporting his or her share of community income sourced to that state plus all of his own income. And the same world-wide income is presumably taxable in his home state.

>>the cost of having an employee<< Did I miss something? Hasn't the building owner ALREADY been hit for misclassifying an employee? Does he think he'll get away with repeated warnings for repeated offenses? And that was just the IRS--they haven't called in the state agencies yet. Well, he's not the client. Your client is fine. As a contractor, he can put someone else on the job. But of course HE has to pay Worker's Comp and other payroll taxes, which will presumably be passed on to the building owner anyway. Yeah, I must be missing something.

>>you can offset passive losses with passive gains<< True enough, but apparently these taxpayers don't have any passive income. By the way, why are they changing tax preparers in the middle of this?

>>a formal partnership was never established<< Why did you tell us you were "advised to include the step son as a 50% partner"? At least for tax purposes I see no reason not to accept corrected or updated numbers from the client, assuming they are still consistent with everything else you know. You might ask for more documentation to support the accounting changes.

>>it was just a scare tactic since i am unaware of any way to actually do it<< Beautifully done! My favorite kind of tactic. And very appropriate here, too, because that same tactic is basically about 99% of the power the IRS exercises over us (which is the whole reason it worked for you). I nominate michaelmars as Forum Member of the Week!

>>this qualifies Dad as HOH. Correct?<< Well, it doesn't DIS-qualify him. In my opinion, your statement about "all the pertinent info I can put my eyes on" is a bit too indirect. Does this taxpayer meet ALL the requirements for Head of Household, or does he not?