RitaB

Did you catch the part where I was not the original preparer? All of this happened in FL, and I mistakenly reported to you all that the son had the interest income in 2005; it was actually 2004. (You know how time flies whether you're having fun or not.) He came to me for help in March 2007. Would you still handle it with the 706? Would that option be available? Also, you would have to take some of the interest on the son's return, I believe, unless he cashed the bonds on the DOD, which he did not. I appreciate the opportunity to learn something here, even though my original post was titled "NT..." Thank you for your help.

Yeh, they could have put the accrued interest thru DOD on dad's final, but they didn't. (There was no 706. It's not required for everyone.) Same amount of tax whether son or father reported it. I did think of that, and should have elaborated on that as well, I suppose. I forgot for a moment that us accountants really love to find errors with what other accountants do.

Yep, that's what I realize now! I was a lot less helpful in my explanation this time. It took about 15 seconds this time! Geez! It's kinda like explaining to some clients why they can't itemize - after a while you just take their papers, complete the Sch A with $3000 on the bottom line, and move on!

The house was in FL and an appraisel was done on the DOD. Yes, he reported the rental income, and depreciated the house using FMV on the DOD, and yes, there was a gain on Form 4797. Sorry I didn't elaborate on all that. If he had a loss, he would have been eager to report THAT, which was my point. He wanted to have it his way, like at Burger King.

Thanks, KC, it never even crossed my mind that there might be a question there. It is so good to have lots of people who think differently, isn't it?

It probably would have been good if I had spent some time learning to spell decedent... But yes, I thought I would just smack him when he said that. He just wants it to not be taxable, so he has some kind of block there, or something. People are like that, aren't they?

Last year, I gained a client who had been getting "love letters" from IRS asking for taxes on $38,000 of savings bond interest. He inherited the bonds from father in 2005, cashed them all cause "everyone" told him inheritances weren't taxable. Even the accountant that did his 2005 return ignored the 1099-INT. I mean, there it was, stapled to his other stuff, bigger than howdy, and the interest completely absent from the return. I spent an incredible amount of time printing articles in layman's terms, plus stuff from IRS about income in respect of decendents, convincing him that inheriting the bonds was not a taxable event, but cashing them sure was! He finally saw the light, coughed up the tax he owed, and I was happy to have contributed to his education. This year, he sold the house that his father left him that he had been using as a rental. 'Where's the settlement statement?" I ask. His response: "I thought I didn't have to report that cause it was inherited." Arghhhh!

Jeff, you enter interest expense on Line 6c of the Vehicle worksheet. Yes, you use either: 1) standard mileage rate and interest expense, or 2) depreciation and actual expenses, including interest expense. Either way, they have to keep up with mileage figures. If this is the first year of business use, and you elect to use standard mileage rate, you can switch to depreciation in future years. I never tell clients this. It's messy to me; you have to adjust for the depreciation factor that is included in the SMR. So, I just make them pick one and stick with it.

Yes, I hope some others will chime in. Too bad the lone "partner" didn't just stay in the business as a sole proprietor. He's going back to it, I think you said, so I'd be tempted to deduct expenses on Sch C. (Yeah, I know, that's not right, I said tempted, but since he has no other income from self-employment, the loss would only get deducted for income tax purposes, like a capital loss, only not limited to $3,000.) I think Terry's idea that you might need to amend 2006 partnership to make it a "not final" might be what you wind up doing. Course, you don't want the runaway partner to get the benefit of the losses... Anyway, they have known for a long time that there is a mess here, so don't let their problems become an emergency for you.

Wow! Congratulations, Bob, I'm so happy for you! I can see you are quite a looker; your gal will be thrilled! And, best of all, by the end of May, you will have received that big fat STIMULUS REBATE! All kidding aside, I pray for God's best for you, I know it has been a tough year.

Sorry, Karen, I meant Sch E input pages. Hey, at least I am increasing my number of posts, huh?

I think you have a box checked that you shouldn't or not checked that you should. Look at top of sch E pages and possibly the EIC worksheets. --- Rita

He/they will have to report these sales on their personal returns. (I don't do their personal returns. Yes, I know, I told him it would be best to let one accountant do it all.) I am about ready to hand it all back to him. He's just like a lot of others who set up business entities; he wants to have the title and the liability protection, but still run it like a half-@$$ sole proprietorship. He's a retired lawyer, and not to stereotype, but I don't think anybody has ever said to him, "You can't do that." Or, if they have, he just smiled and thought, "Lalalalalalal. Not listening. Lalalalala." Well, I had plenty to do before he brought this stuff in here, so it really would not bother me to let him go. Actually, it would probably be good for him and me both!

This is why I never recommend that people form joint ventures. My best off-the-cuff answer is that filing a final return last year was correct, cause when you're down to one "partner," there is no partnership. So, the 2007 transactions couldn't be partnership transactions, could they? Not even "unreimbursed partnership expenses." (Not to disagree with a lawyer, or anything.) But, if 2007 really is the final year, you'd need to amend the 2006 to make it "not final," I'd think. Basically, I have no idea on this one, unless the remaining dude continued in the business and can file a Sch C, which he apparently did not. Maybe the best he can do is capital loss? I hope someone can help. Maybe more will read this Monday. Sorry, I know I am just thinking out loud on this one, and this is no help at all. I will try to do some reading after church.

1) Got extensions Friday - check! (Saw your post on another forum about the $85. Thanks for the heads-up, BTW.) 2) My first thought, (well, second, I can't share my first), was: "You guys are gonna have to report these on your personal returns." Further complication: I don't do the personal returns. I asked him to take these to the accountant(s) that does his/their personal. "No, I want a local preparer." Translation: "You don't charge as much as the CA accountant." 3) Covered in #2. 4) Very good suggestion. I like it! 5) Now we're talkin...

I am posting this under a new topic because it really doesn't fit the place I originally put it. Sorta, kinda, but not really: Old fart has nothing better to do than set up S-Corps, and LLC's (all by himself, mind you) so he can spend his retirement days making my life miserable. He comes in yesterday with two new S-Corps, that bought and sold about 20 lots, "ALL LONG TERM" he tells me about fifteen times. OK, for starters, you're gonna have to get me dates on all these. After he leaves, I look at the charter filing date: 12/27/07! What do I do with THAT?!

Oh, that's just great... Here's another one: Old fart has nothing better to do than set up S-Corps, and LLC's (all by himself, mind you) so he can spend his retirement days making my life miserable. He comes in yesterday with two new S-Corps, that bought and sold about 20 lots, "all long term" he tells me about fifteen times. OK, for starters, you're gonna have to get me dates on all these. After he leaves, I look at the charter filing date: 12/27/07! What do I do with THAT?!

Hey, I'm just happy that I knew one!

Donny, if this was just truck traded for truck, there won't be anything on line 15 of Form 8824. And, yes, depreciation will show up for both vehicles on Sch C.

I know. I have one that paid $300 for someone to set up him up as an S-Corp just so he could pay himself wages, then lay himself (and his employees) off, and they all draw unemployment for 3 months during the year. Course, he now gets to pay franchise and excise tax, and his state unemployment rate should be real sweet, too.

Yes, I am getting calls, too. And, to be honest, it's probably easier to figure out what their rebate will be than to take the time to refer them to IRS. I don't know about your clients, but many of mine are just scared silly at the thought of contacting IRS. Plus, a lot of folks with questions are the older folks that don't use computers, so they won't be looking anything up online. AND, I really do want to be helpful and answer these questions, so I at least LOOK like I'm on the ball, this is just the worst timing ever.

Karen, I believe you were incorrect to call this activity "non-passive." I made the same mistake a few years back, as I mentioned in my first post. If you look at the directions for Schedule E, under "Passive Activities," rentals are considered passive by IRS unless you are a real estate professional. It was news to me, too, but that lesson learned the hard way stayed with me.

Hi, Karen. It could be that you have the box (blank?) checked for "non-passive" activity on the input sheet for the rental on Sch E, p. 1. I believe rentals are passive by definition. Of course, there must an exception (isn't there always) or the option wouldn't be there to check "non-passive." This happened to me a few years ago. Don't feel bad. We all have stuff like this happen. Well, I do, at least!

OK, don't tell my clients; they will swear that this is their situation! I can't wait till May and we have to deal with all the (additional) questions. I think I'll rip out the phone. Or, maybe just not answer and have the IRS # on my greeting.

Thanks for the link. I believe the calculator needs a little tweeking, though, as it will give the $300 to my client that this post was originally about (we appear to have changed the subject to e-filing somehow). Taxpayers don't get $300 for dependent children over 16, correct?