DANRVAN

In the OP, taxpayer converted a portion from personal to rental on Jan 1 2019. From that date, he had a three year window to sell the house for the full exclusion under the 2 out of 5 year rule of section 121; and meet the exception for nonqualified use under section 121(b)(5)(C)(ii). The basic rule here is that after conversion from personal to rental, you have three years to sell it to qualify for the exclusion; if it was used for personal use for two years prior to conversion and if there was not any nonqualified use prior to the personal use. I believe the purpose of the code is to prevent an investor from using a home as a rental for a number of years, then live in it for two years for the exclusion. On the other hand, a taxpayer is allowed to convert from personal to rental and meet the exclusion by selling within three years, provided they have never rented it out previously. If the house is not sold with three years of conversion to a rental, then nonqualified use is a moot point since there is no exclusion allowed.

I don't see why it would. As I read this thread, the 5 year period referred to in Section 121(b)(5)(C)(ii) started on January 1 2019 when a portion was converted from rental to personal and would extend beyond the period of first three months of 2021 when it was used one again for personal purposes. I might also question as to whether the rental portion was actually converted back to personal use, or whether for practical purposes, they chose not to rent in the short period prior to the sale.

Nonqualified use would only occur if the house was converted from a rental to a personal residence. Nonqualified use does not come from converting a residence to a rental, see Section 121(b)(5)(C)(ii).

Did they file for retroactive reinstatement, which would go back to the the date of revocation? Otherwise I think the postmark date in November is the reinstatement date.

It looks to me like this would be a case of first impression with no clear authority given the facts and circumstances, therefore no penalty for an unreasonable position. Given the actual dollar amount of the potential tax benefit, the auditor would probably either allow or disallow, and that would be the end of it.

But none of the cases, or any I have seen fit the facts and circumstance of the OP driver. The drivers are engaged in the business of transporting goods or people. I have not seen a answer to this question. If OP client was mine, I would explain to him or her as I have in this thread and the potential disallowance by the IRS. However, if they wished to take the deduction I would document their choice in writing and would not consider it to be an unreasonable position.

What if it was a vehicle that could be used for personal or business? Where are you going to draw the line to is disallow the deduction and for what reason?

But what authoritative basis is the IRS going to use to make that disallowance?

But if you know log truck drivers, more than likely not!

Or change the scenario, say client is owner operator of a small delivery van in large metro are and spends an hour (or more) driving x miles from one end of the city to the other to pick up his first delivery. Are you going to say the time and distance he spent in traffic burning fuel was commuting?

But what are the facts and circumstances of the given example? Sounds like a case where taxpayer drives to work location A, spends some time working there; then goes to location B, spends some time working there and so forth. In the OP, driver spends the day engaged in the business of transporting goods or people. The driver is not going from one work location to the next, driver is performing services with his or her vehicle. How would you handle my log truck driver example?

And it is possible that there is not any case law with similar facts and circumstances. In my opinion, the driver is in the business of transporting people or goods, and mileage to pick them up is an ordinary and necessary business expense as in the example of the truck driver. Also consider the expense of driving back home. What if the last drop off was 20 or 30 miles for home? That is not commuting in my mind.

Exactly, for example, I have a client who has a part time baking business she runs out of her home on a wheat ranch. She also sells organic ground wheat flour. She does not have an area exclusively used for her business. But she does have travel cost from her home to deliver her goods, pick up supplies.... etc. She takes a deduction for the travel although she does on have a home office. But that is different from the OP fact pattern since her home is her principal place of business.

I thought that might be the case. I didn't catch that part. Were the expenses paid out of an estate checking account? If the assets have been transferred to wife and she is paying the expense, then I think a 1041 is not appropriate.

That is why it is on the top of my check list. For Oregon, the deduction for federal tax is reduced by the stimulus. The reduction flows from the checkbox on line 30.

Curious, who is they? Tax year for decedent ends on date of death If spouse takes over she basically picks up where he left off. But in this case the business terminated and wife is holding the equipment as investment so expenses would be added to basis. If the assets transferred directly to wife there might not be a 1041. But even if 1041 is filed, I don't believe the expenses would qualify as admin expense under the hypothetical person rule of sec 67(e). In other words, if the assets were held as an investment and not deducible to an individual, in the same token they are not deductible as an expense of the estate. If the expenses were from the winding down of husband's business then they would be deductible as ordinary.

Did he explain the tax consequences of putting real estate into a C Corp, potential double taxation........? You need bring these issues to your client's attention. Good luck.

You need to report these on line 2 of form 4835 or your client will receive a CP 2000. Box 3 is the gross crop sales to the coop. Most likely you will need to deduct storage....etc cost to reflect his net payment. It might be to his advantage.

I don't have a cut and try answer here, but believe there is confusion over what it means to have a home office and deduct mileage. With a home office established as your principal place of business, you are allowed mileage for any business travel away from there. The key here is that your home is your place of business. However, I don't believe there is any written authority that says you must have a home office in order to deduct mileage form your home. Consider the case of an log truck driver owner/operator who leaves his home at 4 am to go pickup his first load of logs in the woods 30 miles away. I would not consider that commuting and prorate his depreciation, diesel...etc. Those are ordinary and necessary business expenses that start at the first turn of the key in the morning. While I do not have any authoritative cites to back this up, in reality, the principal place of business for the log truck and full time "uber/whatever" driver is behind their respective steering wheels; and while there are differences between the two cases there are certainly similar fact patterns. I do not have any uber driver type of clients but would dig in deeper if I did.

What is a temp rental? Are you reporting from 4797? Are you using ATX? You might have to make a manual entry on the distributable income tab. Curious as to why in today's market the rental is selling at a loss?

It is entered as a reduction of wages. For example on Schedule C, open the input sheet for Line 26 wages, enter ERC on 2(g) and it make the reduction. not sure what you are referring to. no, it is treated as non taxable income

and if they are representing at the shareholder level there would be a deemed distribution to the shareholders.

That sounds right, under the origin of claim doctrine those legal expenses would be capitalized.

Can you give an example of what you are talking about?

After you delete the EF info page and 8879, reopen the return and add them back the ID will show 2021. But after you create the efile it changes to 2022.