DANRVAN

AICPA specifically asked that the that Excess deduction on termination become an above the line deduction. There has been no response one way or the other.

Agree with Judy that you need to find out how that allocation was determined.

If mom was still living in the house when it was sold, and continued to live in the house after the sale, that would be a cut and dry a case of remainderman interest sold; such as when one child sales future interest to a sibling. But when mom moves out I believe the question of completed gift to daughter comes into play.

Revenue rulings and tax courts have held that there is not a completed gift while donor parent lives in house rent free and assumes rights and burdens of ownership. As I follow the time line of this post, father died while mother was still living in house. At that point there was not a completed gift so mother get's one half step up in basis. Then it appears mother moves out, daughter takes legal ownership of house and sales the house in her name. At that point, it appears gift to daughter is completed so mother's basis becomes daughter's basis. If that is the case daughter would also get the 1/2 step up in basis.

Thank you for sharing grandmabee.

That is correct, they retain their character as capital losses but only pass through in the final year of the trust or estate. The NOLs go into the excess deductions bucket in the final year and are currently not allowed under TCJA.

I agree, you nailed it!

The only time a loss is passed through is in the final year of a trust or estate. However, under current tax code there is no benefit since it is 2% misc deduction.

Thank you for your reply.

Do remember how long the process took? Thank you for your reply.

Was there a distribution made to the beneficiary during 2019 or with in 65 days after the year end (per the 65 day rule)?

Have not dealt with this for awhile. Parent's return rejected because son already filed and claimed himself even though it did not benefit him. Parent was hoping to get refund right away. I see the following options: -Amend for son, wait for x number of months for it to process and then e-file for parent. -Paper file for parent with explanation and attach copy of 1040x of son. -E-file without son, receive reduced refund (still have 2 other dependents), then amend for both parent and son. Realize that does not involve a complete and accurate return. I have used the first method in the past but there was no hurry for a refund. Has anybody here used the paper filing method, and if so how long did the process take? Any other suggestions are appreciated. Thank you.

That is true. I have not had to deal with it yet.

Who received the proceeds and whose name was on the sale contract?

That is true, but the limited information provided does not indicate a legitimate position taken in the past or present. Yes, we do have a responsibility to keep our clients in compliance with the tax code and and allow them the maximum tax benefits available. So if this client had actually paid himself a one time payment during the year of $128,000 in December he would have a case. However, if instead he had taken monthly distributions of $10,000, then he needs to report payroll accordingly, regardless of the QBID benefit. You have not explained how you can "conceivably can create a payroll for 2019 paying himself $128,000 in December."

As is see it, the lesson this client will learn is that he can call it whatever he wants in order to get the best tax position from the transaction. So now 63 days after the year end, it is no longer a social security saving distribution; but a QBID producing reasonable salary, paid on the last day of the year! You are right, a reclassification is in order, but sounds like this client will only go with whatever gives him the net benefit.

There is a grace period per 199A(b)(4)(C).

and you will prepare inaccurate returns to bail him out? did you review 199A(b)(4)(A) and 199A(b)(4)(C)?

I am not following you Catherine. Were both of these individuals involved in the business?

AMERICAN AIRLINES INC. v. U.S.looked at lack of restrictions on transfer and use of cards in determining that they were cash equivalents.

not taxable to the estate, Reg § 1.101-1.

In some situations life insurance proceeds are considered part of a decedent's estate and taxed for inheritance tax, but not for income taxes.

The rule is the same for estates and trusts. The beni's are not allowed the deduction until the final year of the trust or estate. Then it goes into the big bucket of "Excess deductions on termination of an estate or trust", which could have been deductible in the past only as a 2% misc itemized deduction...so under current tax code no deduction what so ever. See Reg § 1.642(h)-2. for details.

To clarify, guaranteed payment does not directly reduce the capital account of the partner receiving a payment, as would a distribution.

That is on the partner's side of the transaction, It does not mean that the partnership treats it as a distribution to the partner. See code sec 705(a).