DANRVAN

Your role is to advise him on the tax consequences of the proposed transaction. Sounds like things might start moving fast and you should as well.

I am not on the hook for anything. My clients have the "right to remain silent" in regards to discloser of health coverage. Furthermore, the IRS will "ACCEPT" the return as being compete as a result of the executive order. Then, after accepting the return with out requiring the taxpayer to make a disclosure in regards to health care coverage, the IRS can certainly make a written inquiry but they cannot access any penalties for failure to check a box the taxpayer wasn't required to check. Also, under Code Sec. 5000A(g)(2) and Reg. § 1.5000A-5(b), a taxpayer is not subject to any criminal prosecution or penalty for failure to timely pay the individual mandate penalty, and IRS can’t file a notice of lien with respect to any property of a taxpayer because of his failure to pay the individual mandate penalty or levy on any property of a taxpayer with respect to that failure. But IRS may offset any liability for the shared responsibility payment against any overpayment due the taxpayer, in accordance with Code Sec. 6402(a) and its regs. And even if they do throw me in the slammer, I am not the least bit concerned since I made a pact with Rita and she will bust me out.

While the law concerning the SRP penalty has not changed, taxpayers are allowed to file without indicating whether or not they have coverage. That means a correct and accurate return can be filed without checking the box. The taxpayers need to know what their rights and possible consequences are. I have filed one that way after a thorough oral and written explanation I drafted was signed by the client. I can not force them to check a box they which they are not required to check.

Not clear what your question is. Sounds like you are wondering if it is okay to file the 2016 and claim the activity as a business while the activity has been reclassified as a hobby during audit of previous years?

It depends on the facts and circumstances. The courts have based decisions on how active the landlord is in managing the property., For example in DURBIN, the land was farmed by sharecropper but court found landlord exercised no personal control or management of the farm land. Therefore held land was not used in trade or business so ruled it was a capital loss. On the other hand, in GOOD, court found landlord was active in management of property leased to shareholder and therefore used in a trade or business. In that case an ordinary loss was allowed.

Sounds like you are on the right track. I don't think I saw your question posted. If beginning A/R was $10,000 and beginning A/P was $6,000, you would have a positive adjustment of $4,000. Hope that helps.

No, as my dad used to say the only stupid question was the one that was never asked. Per Section 642(c), the charitable contribution is only allowed to the extent of income and as directed by the governing instrument. So the excess is a distribution of corpus that is deducted on form 706. I am not sure what your asking about waste. You could deduct the admin expense of the estate on 706 and take more charitable on the 1041, but I believe it would all wash out the same.

A letter from the school won't cut it. She needs attendance records.

Did someone else claim the kids? Sounds like you are headed towards an appeal.

Budget cuts have limited the resources of IRS to provide "customer service". Don't expect it to get better anytime soon.

It's sounds to me like you are handling this in a prudent and professional manner. I see no compelling reason why you should "Fire" her. Regardless of what you know about her ex husband's intent, you should determine if she is entitled to claim any of the dependents. That is your responsibility and maybe was overlooked before her return was completed. You do not want to be in a position of allowing her to claim any of the dependents (or related credits) and then have them disallowed after the refund check is spent. In regards to your concern about preparing ex husband's return, see section 10.29 (authority for circular 230) for what is allowable when you have conflict of interest, esp.(b)(3). You might not even have one. Conflict of interest is more of an issue during the divorce process. Here are a couple of articles you might want to look at: https://www.aicpastore.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2010/Wealth/DivorcingClients.jsp http://www.thetaxadviser.com/issues/2011/nov/tpr-nov11.html I have some excellent CPE material on this subject but unable to post a link. You are the best judge of this situation and should follow your instinct and professional judgment. As the AICPA article implies, why "fire" a loyal client who seeks your trusted advice unless there is some compelling reason to do so. ************************************************************* § 10.29 Conflicting interests. (a) Except as provided by paragraph (b) of this section, a practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest. A conflict of interest exists if - (1) The representation of one client will be directly adverse to another client; or (2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner. (b) Notwithstanding the existence of a conflict of interest under paragraph (a) of this section, the practitioner may represent a client if - (1) The practitioner reasonably believes that the practitioner will be able to provide competent and diligent representation to each affected client; (2) The representation is not prohibited by law; and (3) Each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the practitioner. The confirmation may be made within a reasonable period after the informed consent, but in no event later than 30 days. (c) Copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients, and the written consents must be provided to any officer or employee of the Internal Revenue Service on request.

Terry, the issues here is not "for profit". Section 280A disallows most expenses for a personal residence when rent is below fair market value. The only allowable expenses are for those that go on schedule A, property tax and mortgage interest. Section 280A closes a loophole of writing off personal expenses of a second home owned by the taxpayer, regardless of who lives in it. It's different for a business. You can charge half price for tax work and still write off all your office expense as long as you are still doing it for a profit.

The only imputing rule I can think of is for below low market interest loans under section 7872, which actually makes sense. If there was a "general imputed income doctrine", we would be taxed on any returns we prepared for less than the going rate!

Imputed rent? I have never heard of it. It is well know fact that below fmv rent limits deductions under section 280A. Under what authority can the IRS impute rent which would otherwise be considered a gift?

No. There is a general misunderstanding that farmers must file by March 1st. However they can avoid paying estimated tax penalties if filed by the March 1, provided that 2/3 of their gross income is from farming; that includes gross income from form 4835. Form 4835 is used when rent is based on production, such as a percentage of the crop sales or calves sold. The land lord shares part of the risk. In regards to the pasture rent, that would go on schedule E, unless the rent is based on percent of gain. That would be the case if tenant was grazing steers and rent was based on how much they gained. In that case 4835 would be used since landlord is taking risk. Percent of production arrangements usually qualities the property for special use valuation under section 2032A for estates. In regards to the pond work, it depends on whether is was routine maintenance or major overhaul.

I don't see a concern with state of California. We get transplants here so I am aware of California Conformity to fed tax code and adjustments for differences. I am not aware of any adjustment for difference in recognizing dissolution of corporation. ************************************************** California Conformity to Federal Law On September 30, 2015, AB 154, the Conformity Act of 2015 was enacted. The Act changes California’s conformity date to the Internal Revenue Code from January 1, 2009, to January 1, 2015. California’s conformity results in numerous substantive changes to both personal and corporation tax law with respect to those areas of preexisting conformity that are subject to changes under federal laws enacted after January 1, 2009. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, get FTB Publication 1001, Supplemental Guidelines to California Adjustments.

The first thing I would ask is how much is he charging her?

The IRS and the courts could care less about state law. Note what Reg § 1.6012-2 posted above says "whether or not under State law it may thereafter be treated as continuing as a corporation" Also, Rev. Rul. 54-518, 1954-2 CB 142 states "There is no provision insection 112(b)(7) of the Code, and the regulations promulgated thereunder, which requires the formal or legal dissolution of a corporation. However, for the purpose of this section, where, as in the instant case, a corporation ceases business operations, has retained no assets, has no income, and has actually liquidated within the calendar month, there is in effect a de facto dissolution even though the corporation has not been formally dissolved. See I. T. 3871, C. B. 1947-2, 62; Rev. Rul. 215, C. B. 1953-2, 149; A B C Brewing Corporation v. Commissioner, 20 T. C. 515" Also note what the IRM states: 4.11.7.4 (12-01-2004) Definition of "Complete Liquidation" "Complete liquidation" is a term not defined by the Code. The regulations under IRC section 332 suggest that the status of liquidation exists when the corporation ceases to be a going concern and its activities are merely for the purpose of winding up its affairs, paying its debts, and distributing any remaining balance to its shareholders. The Tax Court applies a three-pronged test to determine whether a complete liquidation has taken place (see Joseph Olmstead v. Commissioner T.C. Memo 1984-381): Was there a manifest intent to liquidate? Was there a continuing purpose to terminate corporate affairs and dissolve? Were the corporate activities directed and confined to that purpose? Dissolution under state law or lack thereof will not be controlling for federal tax purposes. Intent coupled with actual distributions to the shareholders are the usual determining elements. IRC section 346(a) allows for a series of distributions pursuant to a plan of liquidation to be treated as being part of a complete liquidation. If the plan is not formal or is ambiguous, there may be uncertainty as to which distributions are made pursuant to the plan. Distributions made before there is evidence to support an intention to liquidate should be taxable as dividends (ordinary income to a shareholder). The U.S. Tax Court's decision in Pittsburgh Realty Investment Trust v. Commissioner, 67 T.C. 260, 1976, shed some light on a corporate liquidation. The Court stated that: The determination as to whether and/or when a corporation has liquidated is a question of fact. Proof of a distribution in complete liquidation not only depends on an intent to liquidate but also requires acts which demonstrate and effect that intent. A corporation in existence during any portion of a taxable year is required to make a return. If a corporation was not in existence throughout an annual accounting period (either calendar year or fiscal year), the corporation is required to make a return for that fractional part of a year during which it was in existence. A corporation is not in existence after it ceases business and dissolves, retaining no assets, whether or not under State law it may thereafter be treated as continuing as a corporation for certain limited purposes connected with winding up its affairs, such as for the purposes of suing and being sued. If the corporation has valuable claims for which it will bring suit during this period, it has retained assets and therefore continues to exist. A corporation does not go out of existence if it is turned over to receivers or trustees who continue to operate it.

At $135,000 I would take a hard look at. I see two issues, first would the corporation need to file amended returns if the tax is paid at the corp level. Secondly if the shareholders claim the refund is there an assignment of income issue. I believe you are off the hook on the first issue. Per Reg 1.446-1(c)(ii) "under an accrual method, income is to be included for the taxable year when all the events have occurred that fix the right to receive the income and the amount of the income can be determined with reasonable accuracy". The second issue opens a can of worms tried by case law where reference is given to Reg § 1.6012-2 Corporations required to make returns of income; which states "A corporation is not in existence after it ceases business and dissolves, retaining no assets, whether or not under State law it may thereafter be treated as continuing as a corporation for certain limited purposes connected with winding up its affairs, such as for the purpose of suing and being sued. If the corporation has valuable claims for which it will bring suit during this period, it has retained assets and therefore continues in existence." There are a number of cases you can look at. "SIGURD N. HERSLOFF, 46 TC 545". In this case, it was determined that an asset award due to a dissolved corp. was not taxable to the corp. but to the surviving share holders. The opinion reads: "Considering anew the issue in this case, we are of the opinion that since both dissolved corporations had ceased business, were without assets, were not being operated by the newly appointed trustees, the dissolved corporations must be regarded as fully liquidated and no longer in existence for tax purposes. Accordingly, we hold that the Commissioner erred as was alleged by petitioners in their assignment of error previously set forth herein." Here are a couple more cases you might look at: Beauty Acquisition Corp. v. Commissioner, TC Memo 1995-87 is a case where the IRS failed to prove "the corporation has valuable claims for which it will bring suit during this period". Therefore the income was not taxable to the corp. JAMES PORO, 39 TC 641 where a lawsuit asserting a claim of the corporation was started several years after distribution of all corporate assets and was filed in the name of trustees in dissolution of the corporation, the Tax Court held that the claim was asserted on behalf of the shareholders, rather than the corporation. Thus, the corporation was not subject to tax on the collection of the claim I think you have a strong case in favor of reporting the refund to the shareholder. I would discuss the regs and case law with him, and document that discussion. One thing that is certain is the corp. did not bring suit against any valuable claim per Reg § 1.6012-2.

They need to consider who is going to get credit for SS earnings.

Dealers and salesmen are such a great source of tax advice.

Agree with Bulldog.

So in the case of partnership with income from only rentals, you are creating an ordinary loss by deducting the expenses mentioned above on page 1 of 1065. That is not supported by the IRS document in your link.

Still personal property so the choices are line 21 or C. From what you are saying the activity is carried out in a manner that indicates a degree of recurrence, continuity, and availability as described in R.R.77-356.

The bottom line is not the same. An ordinary loss and passive loss can have very different tax consequences. The expenses are those of managing a passive activity and therefore should be allocated to the passive activity. The expenses of a partnership that is strictly involved in a passive activities should be allocated to those activities. If the partnership has both business activities and rental activities then an allocation would depend on reasonableness and materiality. Beside the annual fee, you also mentioned that legal fees, office supplies and accounting/tax preparation fees should be reported on form 1065. Can you give a cite where these expenses are allowed to create a ordinary loss when there is no ordinary income?