DANRVAN

Might have case there. But why fight over it when she expected zero payment to begin with?

I had that thought, but where would you draw the line? Although she might have set up to due this on a volunteer basis, once she accepted the $$,$$$, it became a payment for her services. The excess over reasonable was a big fat bonus.

Yes. The presumption of former employee rule would not apply here, since she is not performing the duties for the former employer.

Possible life estate due to beneficial interest? Did mom live in house "rent free" until death? Did she pay property taxes, pay for upkeep? Those are factors tax court looks at in determining if the residence is included in the decedent's estate. Living rent free is a big one.

Does she know that will count as unqualified use if she eventually uses it has her personal residence and later claims section 121 exclusion?

I am not sure that is quite right. There are two separate tax year rules here. First is the greater than 1/2 year residency test specifically for a taxpayer without a child under 32(c)(1)(A)(ii). Secondly is the full year test for all taxpayers under 32(e) which you mentioned. I have been under the impression that 32(e) does not apply to 32(c)(1)(A)(ii). That appears to be the position taken by the IRS. The wording of question 4 of step 4 of the EIC question worksheet refers to the entire calendar year.

I have never heard of a situation like this addressed before. I can't think of a case to compare it to. I thought about that, but at first was thinking more along the line of a "nonprofessional" fiduciary or PR. However, there is a difference here since the former employee was paid for her professional skills, whereas a PR can do very little for big $$$. I can see factors against SE including: 1. she did not expect to get paid, therefore no profit motive. 2. it was a one time sporadic activity. 3. she did not make any billings, track her hours or otherwise carry on the activity in a business like matter. But on the other hand it could be argued that: 1. after three months the activity was conducted in a continuous manner. 2. although there was not an agreement, it was likely she entertained the possibility of some compensation for performing work of critical importance to the company. 3. in the end she was rewarded for her professional skills. I am not sure how likely the $50,000 will trigger an IRS letter, but I would sure document the facts and circumstances regardless of what position the taxpayer chooses to take. It seems crazy that the company would pay out $50,000 and not issue a 1099. It is hard to imagine that the payment was not deducted on their end, but that is beside the point. I would not hesitate to report it as other income after explaining and documenting the SE aspect to the the client.

That sounds right but I can't say for sure how it works in NJ. For an Oregon citizen living abroad and qualifying for the Earned Income Exclusion, his Oregon based investments are not taxed by Oregon.

There is no entry for fmv, just show distribution at BV.

The distribution is reported on K-1 at book value, basis to the partnership immediately before the distribution. IRS suggest, but does not require FMV on K-1.

Wow! A case could be made for either of those; but I would lean towards other income. She was not in the business of "offering to help out" and did not have a profit motive that would subject her to SE tax. So I see an argument against NEC. There is certainly not an issue of an employee gift vs bonus here. However, while there is an element of gratuitousness, the payment was in recognition of her efforts for the company in charge of the winding down process. Since the payment was made in recognition of her efforts; at a minimum I would call it other income with out further research.

Your original post said a "few months" later; so I assumed the 90 day window of Notice 88-74 was met. If that were the case I would deduct as qualified residence interest on 1041. The estate has legal ownership and obligation; therefore entitled to the deduction for interest it paid.

Sounds like you have a plateful. Starting off with the final paycheck, in a perfect world that would have been returned. Then a new one would be issued for the net amount due to the estate or beneficiary. The gross would be reported as S.S. and MediCare wages; withholdings would be made accordingly. The final wages would not be included on line 1 of the W-2 and a 1099 misc would go to the estate / payee. At this point, I agree it would be simpler to square up on the final 1040 by backing out the final gross pay as a deduction on Schedule 1 of 1040. Then report the net on 1041. Was the sale under the ein of the estate or SS of beni's? So it sounds like the transaction was a partial sale / partial gift. I don't understand why the mortgage interest was not claimed (disregarding any limitation of itemizing). So was mom the beneficiary?

3115 is not an option in this case because it is a math or calculation error instead of an accounting method change. Keep in mind that 3115 is not a catch all for depreciation errors. If this was in fact an accounting method change instead of a calculation correction, you could waive the 2-year rule under REV PROC 2007-16 and make a 481 adjustment in year two. I just had a case where there was a greater benefit to take the adjustment in year 2 rather than to amend for year 1.

I am not following you in regards to "a reduced exclusion" since the 2 out of 5 year rule was met. If you are referring to the Nonqualified Use Ratio of 121(b)(5)(B); that would not apply here since the house was converted from personal to rental. The Nonqualified Use Ratio would only apply if the conversion was from rental to personal.

$1,734.65 by May 31. I will put it on a card and get $26 cash back.

And to be honest with you, my concern is that you might be practicing in an area beyond your qualifications if you are preparing K-1's. In the AICPA that is an ethics question.

If box 14 was blank how did you arrive at -$30,000? edited: didn't realize you were talking about the other partnership.

Why would you subject your client to $120,000 SE income from the partnership regardless of the CCA? Do you understand the basic concept of SE income from a partnership? The fact that the partner was allocated a $150,000 loss and a $120,000 GP indicate the partnership correctly allocated -$30,000. If you were to follow the CCA the negative $30,000 SE income would be suspended.

I have filed a couple with no issues.

I am not crazy at all about filing a return that is not correct in that regard either. IRS might take longer to sort it out than a paper file.

Correct, if it was a new job for an indefinite period. Sounds like that was the source of confusion.

and you pass the support test for qualifying child.

Yes, that is clearly supported by Revenue Ruling 93-86 and case law.

Revenue Ruling 83-82, 1983-1 C.B. 45, provides that, for purposes of the deduction for travel expenses under section 162 (a) (2) of the Code, if the taxpayer anticipates employment away from home to last less than 1 year, then all the facts and circumstances are considered to determine whether such employment is temporary. If the taxpayer anticipates employment to last (and it does in fact last) between 1 and 2 years, Rev. Rul. 83-82, 1983-1 C.B. 45 provides a rebuttable presumption that the employment is indefinite