DANRVAN

Sect 751 prevents converting ordinary income to capital gains at the partner level. It does not apply to corporations since the transfer is a deemed sale to shareholders. And the situation you described is a direct sale unless Sec. 368(a)(1)(D)) is applied.

Why are they selling inventory and recognizing income instead of a Type D tax free transfer if ownership is the same? 751 applies to transfers from partnership to partners. Transfer of corp. assets is an entirely different ball game.

I use excel spread sheet to allocate and summarize. Several years ago I did one for a new client with 1040x because original had been totally blotched by previous preparer. That and other mistakes were in client's favor by $20,000+. 1040x was audited with no change.

That is correct, it is a separate return which is filed to report UBI.

Report sales on Schedule F and depreciate same amount as cost of vehicle.

That was my first thought, but there are three parties involved. I have never head of anything like it. So if farmer wants to buy a $50,000 pickup from Fast Freddy's auto lot, he delivers grain with the exact same value to Riverside Grain Grabber's Inc. RGG then forwards the money to Fast Freddy. Seems odd Fast Freddy has no obligation to report for sales tax.

FMV of product is recorded as sales. There must have been a negotiated price before the deal was closed with the buyer. That also becomes basis of vehicle. I have not seen this before, is the buyer of of calves/grain independent from vehicle dealer?

If the nonresidential portion is within the residential dwelling unit, then the exclusion applies to the entire gain except for any depreciation that was allowed. See reg 1.121-1(e) for details.

Due diligence comes first in my book. In this case the the only extra work is probably the form 2553 which is simple. An initial / final 1120-S is not going to be much different than a 1065. Sure they are a couple kids that made a mistake. If they were my clients I might give them a $ break but not a free pass to avoid compliance. Their actions created an entity where the members were paid wages and shared in profit and loss. Why not report it accordingly?

Abatement for ignorance of the law does not apply to inaccurate return by preparer. Late Sub S election and 1120 S covers all the bases with very little extra effort or cost.

From an AICPA source which did not give a cite: "This administrative penalty waiver allows a first-time noncompliant taxpayer to request abatement of certain penalties for a single tax period—one tax year for individual and business income taxes and one quarter for payroll taxes." There is also this possibility: Internal Revenue Manual Section 20.1.1.3.2.2.6 (11-25-2011) Ignorance of the Law 1. In some instances taxpayers may not be aware of specific obligations to file and/or pay taxes. The ordinary business care and prudence standard requires that taxpayers make reasonable efforts to determine their tax obligations. See IRM 20.1.1.3.2.2, Ordinary Business Care and Prudence. 2. Reasonable cause may be established if the taxpayer shows ignorance of the law in conjunction with other facts and circumstances. For example, consider the following: A. The taxpayer’s education. B. If the taxpayer has previously been subject to the tax. C. If the taxpayer has been penalized before. D. If there were recent changes in the tax forms or law which a taxpayer could not reasonably be expected to know. E. The level of complexity of a tax or compliance issue. 3. Reasonable cause should never be presumed, even in cases where ignorance of the law is claimed. 4. The taxpayer may have reasonable cause for noncompliance due to ignorance of the law if the following are true: A. A reasonable and good faith effort was made to comply with the law, or B. The taxpayer was unaware of a requirement and could not reasonably be expected to know of the requirement.

That is correct. form 8832 was from Bulldog's post. A state issue, minor detail.

Fix it now with a form 8832 and a 1120-S. Very little extra effort or cost to client than filing an inaccurate 1065.

I believe so for S-Corp, as I recall from something I have either read or learned from CPE. There is also abatement for reasonable cause due to "ignorance of the law" which might be a possibility in this case.

I believe the nondeductible amounts should be disclosed before hand. The amounts should be based on fmv using any reasonable method per reg 1.6115-1. It is the entity's responsibility for making the estimates, but I would ask about the reasonableness. For example, what would the speaker normally charge per person and did the attendee's really receive a benefit? Same with music and dancing.

I see issues with compliance and professional standards regardless of the dollar amounts involved and whether the net result is basically the same. RR 69-184 clearly states that a partner cannot be treated as an employee. Sec. 6664 prohibits taking a position on tax returns unless there is substantial authority for the tax treatment of an item. AICPA SSTS#1 requires members to adhere to the above statements. Looks to me like they can and that is probably how I would handle this situation. Most likely the simplest way to straighten it out. I thing an abatement is possible and they should be informed of that.

Probably not even a raffle by definition since participants are only making pledges and not $$ for tickets, and the pledges might be for time or talent instead of dollars.

Out of curiosity per Oregon DOJ division of charity: Who may conduct bingo, raffle and Monte Carlo events in Oregon? Only organizations exempt from paying federal income taxes may conduct charitable gaming events in Oregon. This includes public agencies and public schools. Private organizations qualify if they are active nonprofits. An organization must have held tax-exempt status for at least one year and been engaged in its charitable, fraternal or religious purpose during that time. ======= Do all bingo, raffle, and Monte Carlo gaming operations require licenses? Generally, all nonprofit organizations wishing to operate bingo, raffle and Monte Carlo events are required to have licenses issued by the Oregon DOJ. Following are the only three exceptions: Nonprofit organizations operating bingo games with a handle of no more than $2,000 per session and with a total handle of no more than $5,000 per calendar year. Nonprofit organizations holding raffles with a cumulative handle of no more than $10,000 per calendar year. Nonprofit organizations holding Monte Carlo events with a handle of no more than $2,000 per Monte Carlo event and a total handle of no more than $5,000 per calendar year. === For Oregon, it does not look like a good idea for an individual to conduct a raffle.

I don't see where any legal advice was given. Just potential tax and reporting issues.

I think you are referring to a crop share lease which is not a partnership.

It is a combination of 7 year and 15 year. The above ground pivot is movable while the well and underground pipe are permanently attached to the land. A separate appraisal might be needed for the pivot by an equipment appraiser. A RE appraisal might not include the details. I don't see where it would matter.

Sounds to me like an award based on the actions of the shopper, not a gift.

Technically it is income to the winner of the drawing per sec 74(a) at fmv. Determining fmv is a gray area, case law points to the value to the recipient. She might need to file a 1099 but I would not hold her to it as income tax preparer.

What do you mean by "apply the 743 for this partnership until 2014"? Did you file a timely 754 election? But that would not effect the shares of partner that died in 2012; and they would not have received any benefit from an increase in depreciation. The partnership is not "revalued"; only the inside basis of the inherited shares. I will be straight forward. Sounds to me like you have been practicing in an area you are not qualified in. That would be an ethical conduct violation if you were a CPA. For partner who was entitled to 743(b) but did not receive it, the disparity between inside and outside basis usually equalizes when assets are sold and the partnership is dissolved in the same year.