DANRVAN

Sounds to me like you have an ordinary and necessary business expense that will be paid after the business discontinues operations. Deductible in year paid by cash basis taxpayer regardless of raising eyebrows.

I have not dealt with this issue but it looks to me like you report wages on line 1 to include as earned income and subtract on line 21 to exclude from taxable income. However, IRS might revoke notice 2017-7 to eliminate the double tax benefit that they argued against in Feigh v C. The court firmly held that that the IRS does not have the authority to deny EIC to the payments IRS excluded under Notice 2017-7. The judge was critical of the IRS in it's drafting of Notice 2017-7. The judge stated that Notice 2017-7 contradicted previous court ruling. While it appears to me that the IRS has no grounds to appeal the Feigh case, it may very well follow the advice hinted by the court and rethink Notice 2017-7. As the court clearly pointed out the IRS created the double tax advantage and it would be up the IRS fix it. As far as amending returns to pick up EIC while excluding the payments, as of today that appears to be the law of the land.

The IRS can not take collection activity on the individual mandate penalty, but as Max pointed out that has nothing to do with repayment of PTC.

In order to petition the tax court, you will need to dispute a notice of deficiency or determination. It sounds like you have not got to that point and are still in a cat and mouse game. When you get to that point, the case is assigned to an appeals officer. You do not need to be "admitted to practice before the tax court" to deal with the appeals officer. I dealt with one a couple years ago. Case was resolved in taxpayer's favor within 6 months of filing petition following several correspondence and final telephone conference.

Could you give some detail? How did the IRS botch those returns? That might just create another letter and another problem, besides an inaccurate tax return.

Information on Wolters Kluwer Network and Service Interruptions Dear Customer, As you have noticed, certain Wolters Kluwer platforms and applications have been experiencing service interruptions since Monday. We want to apologize for any inconvenience this may have caused. Through this email, we want to inform you about what happened. On Monday May 6, we started seeing technical anomalies in a number of our platforms and applications. Our team immediately started investigating and discovered the installation of malware. As a precaution, in parallel, we decided to take a broader range of platforms and applications offline. With this action, we aimed to quickly limit the impact this malware could have had, giving us the opportunity to investigate the issue with assistance from third-party forensics consultants and work on a solution. Unfortunately, this impacted our communication channels and limited our ability to share updates. On May 7, we were able to restore service to a number of applications and platforms. While taking our services offline was precautionary, we wanted to act quickly to protect our applications. We regret any inconvenience and that we were unable to share more information initially, as our focus was on investigation and restoring services as quickly as possible for our customers. We have seen no evidence that customer data was taken or that there was a breach of confidentiality of that data. Also, there is no reason to believe that our customers have been infected through our platforms and applications. Our investigation is ongoing. We understand that you may have additional questions or remarks. Please feel free to contact your account manager, check the Wolters Kluwer News page for updates or contact Support at 800-930-1753. The Wolters Kluwer Team

What I really did not catch was the need for immediate action vs long term resolution, which is beyond PPL.

I did not catch that part.

Looks to me like the 10 SOL started on 11/3/08 and from what you are saying there were no conditions that would have extended the SOL. "Currently Not Collectible" status (CNC) does not suspend or extend SOL. I would respond to the letter and refer to the SOL expiration date under section 6502 Also point out that you are not aware of any factors that would have suspended or extended the SOL per IRM 5.1.19.

Sorry if I am getting off topic, but the whole point of the B trust is to serve as a by pass, set up prior to death of first of spouse to shelter his/her estate tax exemption. Why would it be created and funded for any other purpose?

The recapture of the credit produced a tax deduction. The deduction eliminates the recapture. What am I missing?

An "A - B" trust arrangement is an estate planning tool which creates two trust. The "A" trust is a marital trust. The" B" trust is a By-pass trust (also know as credit shelter trust) which is funded on D.OD. of the first spouse. Whatever you are dealing with, 654 election is only good for the first couple of years so no election if dealing with estate of spouse who died 4 years ago.

Deducting an expense not allowable by the tax code?

I would show total premium on line 29 and payback zero. Sounds crazy but give your client the benefit of the doubt and let him decide. Explain to the client and document in writing how he wishes to proceed and consequences if IRS disagrees. As I understand the situation, the instant he claims the excess PTC he is in effect not liable for it since he can then claim the repayment as a deduction. If he pays back the PTC and does not claim it on line 29, then he is overstating his income by an allowable deduction. It seems like catch a 21 situation, but if the client wants to go that route I would fight for him.

The A trust would be the marital trust and the B trust would be the by pass trust which is funded on date of date. In order to qualify for sect 645 the trust must be revocable at taxpayers death (actually the moment before), seems like bypass trust would meet that qualification but better to consult legal dept.

Are you thinking about making the election for the A trust or B trust? Also curious why? There is the fiscal year advantage but the accounting can get sticky.

Also the tax savings today will most likely out weigh the future gain considering SE and ordinary tax vs capital gain subject to 1250.

That quote from 1.1014.4 (a)(2) is also confusing. It is an illustrative statement of the general rule of that paragraph which basically means there is not a 2nd step up when the asset passes from the estate to the heir. The preceding paragraph 1.1014.4 (a)(1) tells us the adjusted basis of depreciable of property passes from the estate to the heirs. An estate is allowed depreciation per section 167(d), therefore adjusted basis includes deprecation allowed or allowable as with any other entity.

After assets pass from estate, heirs get stepped up basis less depreciation allowable by estate. Look up Uniform of Basis Rules per reg 1.1014-4. That can be significant if estate has a long drawn out duration.

In the situation I referred to above the estate had more income to off set in the current tax year so 3115 worked better than an amended return.

Been in that situation Gail!

Yep, recently did one from HR Block screw up. They also overlooked to file an initial short year and accrual accounting which would have offset income with legal expenses.

That article did not mention the case of Reuben v US and over looked the end result of the Dorrance case in which a zero basis was determined. In Reuben, the 9th cir relied on Dorrance in determining that the taxpayer had no cost basis. In both the Dorrance and Reuben cases, the courts were critical of the Fisher case in which the "Open Transaction Doctrine" was applied in determining a cost basis. In fact, the court in Fisher referred to it as a rare and extraordinary situation in applying the "Open Transaction Doctrine". The IRS indicates it will continue to litigate this issue and has 2 out of 3 cases in it's favor; and one weak case against it.

I agree, never use it and like to keep a file as "originally filed" if I ever need to refer back to it.

and long term since the property was inherited