DANRVAN

I wonder if just by coincidence he is looking for a new tax preparer? As others have mentioned there is a high bar for raising a gambling activity to the level of a trade or business; and allowing deductions that would otherwise go on schedule A instead of C.

A delicate situation for sure. Easier said than done, but I believe all clients should have a backup plan in the event they are no longer able to handle their financial affairs. In your situation, I would arrange a meeting with both Mr. and Mrs. Longtime Client. Send a letter addressed to both, so he is likely to see it. Then when you meet and Mrs. brings up the refund question for the umpteenth time, you can gentle say something to the effect “as we have previously discussed your refund was received last May (or whenever).” Maybe Mr. will pick up on the repetitive cycle you are going through. The goal of your meeting is to find out who you should contact if both become incapacitated and bring husband on board. Hopefully he is not on the same medication; and you can persuade them to obtain a durable power of attorney.

That would be true if a beneficiary (non trustee or executor) on her own accord (but not necessarily a Honda Accord) decided to travel across several states to wash the windows and polish the brass monkeys, with the idea her efforts will increase her share of the sell price. In that case then deduction would not be allowable per § 20.2053-1(b)(2)(ii)(B) since the following is not true "The nature of the claim or expense is not related to an expectation or claim of inheritance.".

"Legal and accounting fees, taxes, etc. are specifically allowed by the Code" Agree with you on that, for example legal fees are deductible per 20.2053-3(c). Then when you scroll down, to 20.2053-3(d)(2) the following is stated: "Expenses for selling property of the estate are deductible to the extent permitted by § 20.2053-1 if the sale is necessary in order to pay the decedent's debts, expenses of administration, or taxes, to preserve the estate, or to effect distribution". But keep in mind the instructions are not all inclusive. In this case, it appears the travel cost in an ordinary expense allowed under 20.2053-3(d)(2). I believe the answer here is also yes per 20.2053-3(d)(1) " Expenses necessarily incurred in preserving and distributing the estate, including the cost of storing or maintaining property of the estate." Cost of travel was for preserving and maintaining assets, so why not?

There are two acceptable method that I am aware of; interim closing in regards to the deceased on date of death, and the proration method. The proration method is not allowed for extraordinary items such as the $500,000 loss you referred to. Therefore the allocation is made on date of ownership under either method. See reg 1.706-4 for details.

I misunderstood you the first time, thinking you said she could not be reimbursed by estate. However, I do not see why the estate would not take a deduction for an allowable expense paid for and reimbursed to the executor; regardless of whether he/she is also a beneficiary. What if he/she paid for legal or accounting fees out of pocket? Are you saying the estate can reimburse but not take the deduction if she is also a beneficiary?

at 11:59 pm eastern time Tuesday 11/22/2022.

I see two prongs to your question: legal and tax. Whether she has to send it back is probably a legal question (though for an minor amount) that I would not likely advise on. However, if your search came up with an answer I would pass that on to the client. Regardless, if the proceeds are not returned, then I would include them in the estate.

If her travel was done while carrying out her duties of executor, then I see no reason why she would not be reimbursed by the estate, and expense deducted on form 1041. I don't see an issue if she is also a beneficiary, otherwise she is donating toward the benefit of other heirs. The expense is allowable under 20.2053-3(d)(3) which overlaps with Sect 20.2053-1(b) as referred to by Sara.

Depends on the the purchase price vs fmv of assets purchased. For example, if the purchase price was $640,000 and fmv of equipment, trucks, etc was $200,000 then Goodwill was properly valued $440,000.

"DON'T DRINK THE WATER!"

I question that. I am not aware of any authority for an agent to grant a filing extension? How well do you know this client? You mentioned a transcript, new client?

Hopefully by advising your client you need this information dad will cooperate.

And he should know better than posting past his bedtime....thanks for the correction!

A 645 election would have to be made by filing form 8855 by the due date of the first return. To qualify for the election, the trust would have to been revocable up to DOD. Also, the election would end no later than 2 years after her death. So in order to file an accurate amended tax return, you will need to use a year end of 12/31, unless the election was previously made. Actually you will need to file an amended return showing zero income or expenses for 7/11/20 - 7/10/21 (the dates on the original return). Then file an original return for the correct period ending on 12/31/20. When the late filing notice comes, refer to the original return with the incorrect periods when requesting penalty abatement. (I dealt with a similar HR BLOCK correction a few years ago) Seems like it should be matter of posting deposits and disb. from bank statements, including anything you have personally paid. With the family issues you mentioned, sounds like you should consider turning over accounting and tax prep to a third party to work with the attorney.

Is this a trust or an estate? Trust would have a calendar year end unless a section 645 election has been made. The first tax year of an estate must end no later than the month end preceding D.O.D. So in this case the first year end must end no later than 08/31/21. I am not sure what you are asking. But as Lion pointed out, you use cash basis unless accrual was elected on the original return.

For a trust that was not making required distributions? Without knowing the details, sounds like a potential breach of fiduciary duty. Beneficiaries paying tax on money not received? For a simple trust, earnings can be distributed within a reasonable period after the end of the year. Reg 1.651(a) uses the example of paying out 4th quarter earnings within 15 days of the year end.

I am not aware of any tax advantage of holding the investments an S-Corp., but there is extra accounting cost as you know. Now they are stuck with it, unless they wish to deal with gain from distribution under section 311(b); or nondeductible losses if basis of investments are greater than fmv.

And along that same line, it is not common practice to itemize every single piece of personal property owned by the decedent on form 706; 10 pairs of socks @ $5, 6 blue jeans @ $10...........etc.

I agree with you Sara, those items are immaterial, and right or wrong I have never itemized them out on form 709.

Wow, that sounds brutal! But I it will depend on facts and circumstances. If the child is a minor dependent, then I believe most of those gifts could be considered support: clothing, recreation, transportation...if reasonable.

Sounds like a theft loss since scammers took possession of his funds through a forced sale. Capital loss does not sound right since it did not result from a change in market value.

Schedule G on page two should show where the tax came from. 5 year carryback was allowed by CARES in 2019. sounds right if 2021 is the final year

It is not clear to me how this scam works. Did the "traders" remain anonymous and pulled his money out with out a trace of where it went to?

A Schedule C reported on from 1041. It is not clear what the situation is. Need more detail. Are you referring to the business above?