DANRVAN

Have you seen the sales agreement David? Is the partnership listed as the seller? I don't see any other way than to allocate the gain according to each partner's share if the partnership received a check and/ or note for the sale price. How did the partnership acquire the property? Are you the preparer for the partnership and the partners?

Maybe property could have been distributed to three partners with undivided interest. Then purchasing partner buys interest of the other two. Section 704(c) could still be lurking.

Maybe that could have been avoided if the sale had been structured differently. However this sounds like a done deal and now your picking up the pieces in order to file the tax return. Maybe it's not to late to remedy the situation if all the partners are on board.

Why? David indicated it was an outright sale of partnership property to a "purchasing member" at what sounds like fair market value. Maybe I am missing something, but why would that be treated a partial distribution instead of a legit sale? David also indicated the purchasing member will remain a partner in the partnership which will continue renting other property. So unless there is a 704(c) issue related to contributed property, then why would you not treat is as a sale from partnership to partner and allocated gain 1/3 each?

If the payment is really alimony then client needs to report it as such. Also report and back out of C to prevent the IRS letter. You can spend a lot of time and money trying to get ex to correct it.

Terry it looks like you have proof of the actual basis, so why not go back and amend 2016? In regards to the uncollected $3,000, he can not write if off since it was a capital contribution and not a loan. Smells like a lot of bad blood developed in the deal, were they friends to start with?

Qualified education expenses paid by a 3rd party for the dependent of a taxpayer are considered paid by the taxpayer.

Depends. If joint and separate liability then it goes to the one who pays. If tenants in common and not JSL then they can only deduct their share.

Terry, the information in your post is not clear to me. -How do you know his original basis (contribution) was not reduced to $2,475 over the years? -It appears basis of $2,475 was reduced to zero in 2016. -In 2017 he received $6,000 for exchange of stock which now has a basis of $0...? -I don't see how he can take a deduction for $3,000 proceeds he never received from the sale of stock The unpaid balance was never included as taxable.

So do I, I use an asset program outside of ATX.

I don't believe providing more than 50% of support to a dependent is a factor in qualifying for HHH, but the taxpayer must provide over 50% of the cost of keeping up a home for the year.

Thank you for your response Pacun. I found some case law that supports the argument for temporary absence for the boyfriend. My big concern is to get over the hurtle of resident alien which is new to me. Looks like "The Substantial Presence Test" will be met.

This is new one for me and would appreciate your input. Taxpayer is in US under DACA (C33). She has SS# and works at bank. I believe she would qualify for EIC under the Substantial Presence Test since she has been in US for over three years. She has 2 sons, one born in the US and one born before she came here, they both have SS numbers. Boy friend (also client) is the father and they have lived together except while he was detained by immigration for over 6 months in 2017, then went back to work. He made $16,000 and she made $23,000. The want to file to maximize tax benefits. In this case, it appears she can file as HHH, claim 2 dependents, EIC, CTC and credit for child care while he will file single. Can anyone see if I am overlooking anything? Thanks.

The client needs an attorney who is experienced in this matter. Reg 1.170A-14 is a good source for the qualifications. Also if client is a qualified farmer or rancher per sect 2032A(e)(5) he might be able to deduct up to 100% of his contribution base.

You just input the cost of sale on line 1b of Schedule F, there is nowhere to input the beginning and ending inventory.

That sounds right.

Depends. If there is stored wheat or calves raised by the farmer they would be a section 481(a) adjustment. If there are calves purchased for resale he would continue to treat as inventory under the cash method.

In some cases, I have prepared both the 1065 and 706. In other cases there was no 706 to file. In any case, the preparer needs to ensure that the estate is informed of the election and how it works. In regards to the depreciation aspect, I would never trust ATX. I use a separate depreciation program and input back into tax program.

That would be true if he was required to report at office by employer or actually did some work there. The only other way to deduct would be if he was temporarily working outside his "metro" area.

In my opinion, any tax preparer who does not understand the concept and importance of maintaining both inside and outside partnership basis should stay clear of preparing 1065's. A missed 754 election can be costly to the client and leave the door of litigation open to the preparer. However, there is relief. First automatic relief may be available under Regs. Sec. 301.9100-2. Under this regulation, a taxpayer is granted an automatic extension of 12 months. If that time period has passed then the only recourse is to seek relief under Regs. Sec. 301.9100-3 as a PLR. In that case, the tax payer must have reasonably relied on a qualified tax professional and the tax professional failed to make, or advise the taxpayer to make, the election. A taxpayer will not be considered to have reasonably relied on a qualified tax professional if the taxpayer knew, or should have known, that (1) the professional was not competent to render advice on the regulatory election, or (2) the professional was not aware of all relevant facts.

The additional standard deduction for the elderly and the blind has not changed. The House bill would have eliminated it, but the Senate amendment and Conference agreement saved it.

Look at the sect. 163(j)(7)(A). Also, per section 163(j)(7)(A)(ii). an "electing real property trade or business" is not considered a "trade of business" for the interest expense limitation. An "electing real property trade or business" is one that is described in sect. 469(c)(7)(C) as a real estate prof. and makes an irrevocable election to use ADS. So as with the new section 199A deduction, it looks to me that case law and sect. 469(c)(7)(C) will determine whether a real estate rental is a trade of business in regards to the business interest expense limit, unless we hear otherwise from a rev. ruling or tech. corrections.

The code uses the terms "paid to" and "payment...to". Therefore if there were no payments made, then I don't see any reasonable compensation paid in respect to 199A.

I don't see how reasonable compensation could be attributed to an amount which never drawn out by the sole proprietor. Also, in regards to a partnership in which a partner never took out any guaranteed payments or draws, I don't see where 199A (c)(4) would come into play at this point.

No. Actually It is an unrecaptured section 1250 gain that is taxed at a maximum "capital gains" rate of 25%.