DANRVAN

In general, I don't believe real estate rentals will qualify unless the taxpayer can rise to the level of a real estate professional. Otherwise they do not meet the trade or business requirement of section 199A. Since "trade of business" is not further defined by TCJA or 199A, case law will prevail in definition. On the other hand, in regards to the business interest limitation, both the TCJA and revised code 163(j) specifically refer to section 469(c)(7)(C) in defining real estate professionals who are exempt from the limitation as a trade or business. So it appears to me that any rental activity that can clear the 469(c)(7)(C) hurdle gets the 199A deduction.

The bill and code don't clearly define trade or business. As I understand it, in the final negotiations, congress extended deduction to include rentals to gain support of the bill by a couple of hold outs (who just happened to be owners of rental property). Per section 199A (d) (1) In general. The term “qualified trade or business” means any trade or business other than— (A) a specified service trade or business, or (B) the trade or business of performing services as an employee

For sure.

Need to put emphasis on "should be" or change to "might be". 199A (c)(4) specifically refers to " reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business" and guaranteed payments. However, it is possible reg's or technical correction could extend that to include draws by sole proprietor in amount considered reasonable compensation.

First of all, stay away from giving any advice in regards to corporation vs LLC, that is legal advice for lawyers to handle. LLC'S are a creature of state law and have nothing to do with tax law. It looks to me like he should file as sole proprietor, Schedule C. The income would then be taxed at 24% vs 22% at the corporate level according the information in your post. Even if he goes with C. corp, he will need to pay a reasonable salary which will come back to him at 24%. A reasonable salary would probable eat up most of the $30,000 profit anyway. Also, as a sole proprietor, he should be eligible for the new section 199A deduction. As I read the code, a sole proprietor is not required to reduce Qualified Business Income by a reasonable salary. Also, per 199A (d)(3), he should fall below the threshold amount for service income.

The change in bonus depreciation allows for 100% deduction of new or used qualified property placed in service after September 27 2017. Not a big deal for equipment but allows property such as land improvements and farm buildings to be wrote off 100%.

That appears to be the case under section 199A(c) as added by the tax reform act of 2017.

My clients have been advised in writing. They have also been advised they are not required to check the box due to an executive order and IRS notice. (for further discussion see the thread on this forum "What's the latest on the silent tax return regarding health insurance". It looks like the executive order providing relief from the health care coverage penalty is not only executive order the IRS is taking seriously (per Notice 2017-38, 2017-30 IRB, 07/07/2017, IRC Sec(s). 7805.). I am hearing complaints from taxpayers who were not informed of their options under the executive order providing relief from the health care penalty.

(retracted my response)

Partnership is terminated. Remaining partner becomes a sole proprietor. For details see Rev. Rul. 99-6, 1999-1 CB 432, 1/15/1999, IRC Sec(s). 708.

Are you sure he is allowed to make a partial donation of his partnership interest? I think you will find that restriction deep within the bowels of section 170. I don't have time to look it up, headed out the door.

Basically it works like this: Joe needs $100,000 to start a business, let's say to buy a franchise. He sets up a C corp. which initially has no assets. The corp. sets up a 401(k) plan which specifically allows the plan to invest in employer stock. Joe rolls over $100,000 from his retirements account to the 401(k) plan. The 401 purchases 100 shares of the corp. stock with a par value of $1,000. The corp. now has $100,000 available to purchase the franchise. Then after several years of losses as in the case of David's client, the corp. dissolves leaving the plan with the worthless stock of the corp. They have been around for awhile and are legit as long they are properly structured and executed. There are tax court rulings against some who were not. I mentioned franchise because some work with promoters to encourage ROBS.

Here is a link to a discussion of that issue. https://www.bna.com/require-continuous-health-n57982085507/

I agree with Tom and Rita there are cases where individuals might wait until they are sick to buy insurance, but I believe for most people it is a matter of economics. The problem I see with the surcharge is a one size fits all solution. Unlike the individual mandate, there are not exemptions for hardships like loss of employment. With the risk of sounding political while discussing potential financial impact on clients, I am surprised to see the surcharge as part of the AHCA proposal. As you might recall, the individual mandate was at the heart of the case before the supreme court to repeal the ACA in 2012. The argument was made that congress did not have the authority to impose the penalty. Chief Justice Roberts shot that argument down as he construed the "penalty" was in fact a "tax" imposed on those who do not have health insurance; and, since congress had the authority to impose a "tax", that made it OK. Now there is a proposed 30% penalty that is called a surcharge which will go into the pockets of insurance providers. So individuals who are struggling to get ahead enough to purchase insurance will have an additional 30% to pay for up to 12 months. However, it comes as no surprise that the health insurance industry is a strong supporter of the surcharge.

That was the law prior to 1999 (Soliman, supreme court 1993). Tax Relief Act of 1997 relaxed Code Sec. 280A(c)(1). : "For purposes of subparagraph (A) , the term “principal place of business” includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business."

David, The bottom line is that the plan ends up owning the worthless C corp stock. No tax consequence, except they won't have to worry about paying tax on the retirement money they otherwise would have received. By any chance did this corporation buy into a franchise? There are some out there that lure individuals to use a ROBS to buy in.

I don't thing you are crossing the political line Tom. The House version would remove the enforcement of health care cover off the shoulders of tax preparers. That is significant, but I won't make any comments on what I think is fair in regards to the surcharge.

I am aware of the process Judy. I write a weekly column and a lot of the readers are interested in hearing about what's going on in Washington as it relates to taxes and health care since the two have been so closely tied together. Some actually write to their congressman and attend town hall meetings.

Call it what you want. I am wasting my time responding to you.

https://www.govtrack.us/congress/bills/115/hr1628/text In digesting the text of the American Health Care Act passed by House of Representatives, I see that the individual mandate would be repealed retro to tax years beginning after 12/31/15 (section 205). However, section 133, "Continuous health insurance coverage incentive", would create a new penalty in the form of a 30% surcharge added to the cost of a policy for those who have previously been without insurance for 64 days or more. It appears the penalty would be calculated by multiplying the premium by the number uninsured months (not to exceed 12) times 30%. So for example if a married couple had a 12 month period in which they were not insured and their premium is going to be $1,000 per month; the surcharge would be 12*30%*$1,000=$3,600. It appears the surcharge would begin in the year 2019 and for "enrollments during a special enrollment period, beginning with plan year 2018". I am curious if anyone has a different interpretation or has seen a published analysis of it. Dan

You have three choices. 1. Write a letter to the issuer and point out the penalties under section 6721 for failure to file a correct 1099. 2. Follow the accountant's advice and wait for your client to receive a CP 2000 for you to respond to. 3. Report the incorrect amount and back it out of the tax return. For example, if the client is an independent contractor, report the correct amount on his schedule C. Then open up a second schedule C where you report the incorrect amount as income and as an other expense to zero it out. Option 1 will not only add cost to your client, but possibly ill will to one of his clients. Option 2 also adds extra cost and the potential coronary by your client when he receives the CP 2000. Option 3 allows you to file a correct tax return and disclose the incorrect 1099.

I don't believe there is individual ownership in a trust unless it is a REIT (real estate investment trust) which is a publicly traded investment. Do they really have a trust? Have you seen the trust document? Was the property titled to the trust? Assume there was a trust bank account which income was deposited to and expenses paid from. So if it truly is a trust, the purchase would be from the trust to the individual beneficiary. What happens next depends on the trust document. Most likely the trust will distribute the cash to the beneficiary's then income will be allocated on K-1. If the sole purpose of the trust was to hold the property until purchased by beneficiary, then trust language should call for termination at that point.

Good point.

No gain or loss on trade. Disregard the trade in value. Remaining basis of old is added to basis of new.

You can check the box on 1040x. It has two boxes, one for yes and one for no. A one sentence explanation as well might help.