DANRVAN

1/2 vs 5 acres depends on facts and circumstances. But with a barn claimed for depreciation........

You can't exclude any of the land that was used for farming, including the land which the barn sits on so you need to make a reasonable allocation. Was there an appraisal on the house? How does the appraisal compare to property tax statements? From what I have seen for property taxes there is usually about a half acre included with the house. Curious as to where the $50,000 basis for the barn came from.

Keep in mind the credit is only available for deferral items, so not all prior AMT is a available for the credit.

No, but that is an interesting situation. Actually the reporting methods described by reg 1.671-4 are optional, so I don't see any reason why a 1041 could not be filed to report the income if that is what the client really wants to do. But as you indicate, that mom as grantor is the payee, so you might have an issue under the assignment of income doctrine by issuing k-1 to child.

Please disregard that last part, I made an edit that did not get saved. It should flow through the form. If the credit c/f is on line 21, reg tax on line 22, and AMT of zero on line 23, credit should flow to line 25 of 8801 and to schedule 3 of 1040.

SaraEA is basically correct, that is the general rule under reg 1.671-4 as it relates to grantor trust. There are also two alternatives per the reg. The first is the most common in which the grantor provides his/her ss number to the payers so the 1099's are reported under their ss number instead of the trust id #. Secondly, the reg allows the trust to issue 1099's to the grantor instead of reporting on form 1041, thus eliminating the need to file form 1041. It is by the authority of the reg that the grantor is allowed to use his/her ss# for income reporting of the revocable trust income.

You apply the credit to the amount reg tax exceeds AMT....if reg tax is 12,000 and AMT is 10,000 then credit = 2,000. If zero AMT then zero credit.

I would input directly to the tax form instead of messing with the worksheet. You can usually override the entries.

So if father is married, there is 24,000 of standard deduction to apply. Also a portion of the gain would receive zero capital gains rate! Son should be informed of how much could be saved if he was to pay dad's taxes (which could be minimal) vs gifting stock and increasing his own liability; provided he has basis left in the loan to convert. Sounds like there is land owned by the corp that buyer is interested in, most likely would buy the land from the corp instead of buying the stock? Also consider dad's health and age. If there is appreciated property in the corp son could receive a stepped up basis in dad's share of stock.

Are there suspended losses? With the history of losses it seems son would have taken losses against his basis in the loan. How would the overall tax picture look if son paid dad's taxes instead of increasing his tax liability. Maybe keep son in lower tax bracket and make best use of dad's deductions? Also might eliminate the need for filing a 709.

Has the son's debt basis been reduced by pass-though losses? Is the potential buyer looking at buying the corporation or the assets of the corporation?

You use the ratios from the tables based on the parents age on the date of each transaction. Use the ratios from the table based on parents age on date of gift to allocate the parent's basis between parents and children. Use the ratios from the table based on parents age on date of sale to allocate sale price between parents and children. Subtract the children's basis as determined above to calculate gain. For form 709, you use the ratio's from the table based on parents age on date of gift to determine value of gift. Also, since the proceeds were divided up without using the ratio's from the tables. there was most likely gifting from or to the parents due to Assignment of Income rule.

Sounds like you have a good grasp of the 754 adjustment which is intended to give the partner the benefit of the stepped up basis of the assets. So in the year the assets are sold by the partnership, the adjustment will include increase in depreciation and decrease in gain. 754 adjustment can also effect SE income.

Yes.

There can be advantages and disadvantages of either a shareholder loan or contribution of capital by the S corp shareholder. As pointed out the capital contributions will increase basis and distributions will decrease basis rather than triggering income, absence positive AAA or AE & P. On the other hand, if debt basis has been depleted, repayment of the debt can result in taxable income. The key is to inform (and document) the shareholder of the possible impact of either injecting capital or loaning money to the corporation; keeping in mind the consequences if the company goes under. In that situation, the stockholder might be better off holding 1244 stock resulting in an ordinary loss.

On second thought, it would be treated as a sale of partnership interest and termination of the partnership.

Not sure what you mean by only a partner sale?

In this case it sounds like the property and mortgage were held by the individuals instead of the partnership. Otherwise I agree, it would then be treated as a 736(b) payment.

Not abandoned since they transferred title. How much debt was relieved? Would probably report on 4797 with debt relieved as consideration.

Best tax treatment might be abandonment of property or of partnership interest depending on facts and circumstances. Unfortunately they did not get tax advice before they signed the $1 deal, although that is not the final determining factor. That $1 might have been the most they could get out of the deal so maybe no gifting here. As Lion pointed out, was there any relief of liabilities?

I have reported like that without receiving a cp 2000, maybe just by luck. I would deal with it when it comes after tax season instead of spending time and billing client on it now

Looks like you might have some gifting going on.

So if partner had outside basis 754 adjustment should reduce gain. Also should reclassify a portion of it as capital gain from ordinary gain.

Bio fuel industry is giving the big push on this.

It is the 3rd box on the election statement, it refers to reg 1.454.....