DANRVAN

Both of those articles where wrote prior to Proposed Reg 1.199A, you should be able to google something more current, I agree they are a good starting point.

I don't think you have given enough info to answer your question. However, I don't think you can call it a theft loss, it sounds more like a bad debt. If so, the question becomes whether it is bad dept from business (write off 100% as ordinary loss) or personal (treated as short term capital loss). Section 166 basically says that a business debt is one created or acquired in connection with a taxpayers business,: or incurred within a trade or business. It depends on facts and circumstances as case law tells us. For example, there was a case where a CPA incurred a business debt when he loaned money to a start up business with the expectation of providing professional services to the business. So in the case of your client, if he can show it was connected to a trade or business he gets a free pass to write it off as an ordinary loss. However, there is another possible twist since you mentioned a partnership. There are cases where the courts have treated loans as a capital contribution in exchange for a percentage of profits. If that was the case, then the loss becomes deductible under section 165. So then the question is whether the house flipping venture was going to be treated as a business or an investment in determining whether an ordinary loss or capital loss was incurred.

How much did your client lose?

Thanks for the reminder, still have some late ones to take care of.

Sounds like client might qualify for OIH under Sec 280A(c) which would make travel to the base deductible. Is it necessary to work from home to carry out employer's business and to allow employee to properly perform his duties?

Congratulations on building a successful practice and entering into a positive exit strategy that will take care of your clients and employees. Best wishes as you enter the next chapter!

Really need more info to provide an answer. Basically "income" distributed to ben's is not taxable on 1041.

If this pertains to the Sub S case then disregard my post above and refer to the previous thread. The key is to liquidate the s-cop before the end of the tax year.

Estate gets stepped up basis at date of death. That won't help much for the wrecked truck and trailer but should not be much gain on the other assets.

How about form 8879? I am really not that concerned about it, but if it becomes a common practice maybe IRS will look into the massive wave of rejects that occurs every year on October 15. By the way, if we happen to become cell mates, I get the top bunk.

Have also done that but keep low key about it with clients. If IRS catches on could be an issue with filing an incorrect and incomplete tax return.

As Judy stated, looks like their is some stepped up basis involved.

From what I can tell, the house was appraised at $450,000. Client did a partial sale of $400,000 and gift of $50,000. Results in gain of $25,000.

I am confused as to who is involved in this transaction? Client, son, ailing parent, community spouse, marital house? How much actual consideration did client receive for the house?

No, because he and the business are the same entity. LLC has no meaning for tax purposes.

Who had title to the car when it was taken to repair shop and who's name was on repair invoice?

What about SE tax if showing a profit? The right way is the only way.

In order to compute the basis of new truck you need to know how much compensation was given; down payment, loan...

I agree with Catherine, don't rely on software. You should understand NOL computation upside down and backwards before proceeding.

Not sure what your question is.

Hey that reminds me of a post a couple years ago where a member here was spotted in a photo while snoozing at a live seminar. Personally, I prefer webinars so I can snooze at my own desk.

It does not matter how decedent used the property. For example in Marx(5 TC 173) court determined a yacht willed from husband to wife was investment property where wife put it up for sale after death of husband and was loss was allowed. The fact that she never used it for personal use proved her profit motive under section 165(c)(2). In another case, Watkins (TC MEMO 1973-167) husband was willed personal residence from wife. The court ruled property was held for investment since heir / husband decided to put it up for sale within a week of wife's death. Therefore he proved his profit motive per section 165(c)(2). It did not matter that the house had been his residence while wife was alive. It also did not matter that he lived in it for a short period of time after it was bequeathed to him. What mattered was that he was able to prove his intent was to sale it and was allowed to deduct loss. So in the case of your client, it appears his thought was "heck I might as well sale this junk and make a little money off of it". There is your profit motive per section 165(c)(2).

Terry, if your decision is to treat this as personal use property I disagree. Did the heir use it for personal use or entertainment? I would treat it in the same manner as a personal residence that was inherited and put on the market without being used personally or as a rental. It has been held by case law that type of property is investment property.

I have dealt with that situation. The cost of logging can take a out a huge chunk of change when timber is in rugged terrain and a long haul from the mill. In reality, the heir has no economic loss for netting less than the standing value on date of death due to logging cost.

1 year rule is under section 1014(e). That basically applies where property is gifted to donee and then donee bequest back to donor. That prevents the donor from receiving stepped up basis through death of donee. Section 2035(a) requires certain assets transferred within three years of death to be included in estate. Those assets include certain transfers with retained life estate, revocable transfers and certain transfers of life insurance policies.