RitaB

Deb, unless I am missing something, the dad will have to file personal returns for both 2006 and 2007, and since he's not available to sign, I think you are correct to put date of death on top of both, and the personal rep or "person in charge of decedent's property" will then be able to sign. You might check to see if he had savings bonds, because he can elect to report the accrued interest through the date of death on the final 1040. Might really save someone some money. The estate, if even necessary (because of income received on probate assets after death), starts "at the moment of death", which is in 2007. I don't think you'll need to worry about that one. This is really interesting, and I hope others will add to this. I wish I knew more about it myself. I'm about to do a 1041 for a lawyer who died without a will. (?!!?) Has (had) about 35 investment accounts with no beneficiaries named on any of the accounts. I am looking at The Tax Book section 21, and I think Pub 559 will help you, too. Sorry this is all I know at the moment. (Except that I am tired and grouchy.)

Just had a slacker drop off their stuff and tell me: a) I don't know why we just didn't do this ourselves; it is so easy. We don't want to pay any more taxes than we have to. OK - does this guy think that I went "Ohhhhh, I see. Their stuff will now go in the stack for people whose returns need to come out with refunds. Also, note to self: Don't charge them; after all, they could have done it themselves. Arghhhhh!!!!!

OK - sorry, I didn't answer the second question. Yes, the loss on the deer farm will offset the SE on the income from the profitable LLC. I am losing it here!

I would say yes it's all subject to SE since they are obviously working for the LLC. However, somebody has probably told them they don't owe SE on the ordinary income, so you may have to convince them. If you have The Tax Book, p. 5-23 has a good explanation. Here is a quote: "The IRS wants SE tax under most conditions if the LLC member works for the LLC..." But then, it goes on to give the author's comment that in court cases, IRS has caved on this and just required SE on the equivalent of a "reasonable wage" (like S- Corps). I personally make it all subject to SE when they are working for the LLC. (Hey, I pay SE on all of my income as a sole proprietor. I hate dealing with LLC's.) You might also consult Publication 541 and instructions to Form 1065 as well as the section on LLC's in The Tax Book. Hope this helps!