DANRVAN

Even if you could establish that the court house was a place of business, and therefore becomes the business premises, I believe the meal would have to be served on the premises, not at a "restaurant near by". 　

Agree, and its not just small employers, but also medium size and large size employers like FED-EX.

The only issue I can see would be if section 179 was taken and gift was made before the end of depreciable life; recapture.

Now that is creatave accounting; modify the tax code to benefit your clients!

It could be deducted on Sch A only if it qualified as a second home: personal use more than the greater of 14 days or 10% of the days it was rented.

We take part in all the Holy Week activities in our Parish starting with Holy Trursday Mass to celebrate the Lord's Supper. Our faith is a tremendous source of strength.

I do not have any experience with Christmas Trees either. Might be elgible for Schedule J farm income averaging.

I can't think of any reason why the rule would not apply to your client's situation. I don't belong to the AICPA for the same reason as Judy.

I am not in a community property state either, but I believe the full step up must be allowed because all the joint property is included in the decedent's estate. (?)

Are you saying that they bought the property together but it is only in one partner's name?

Joel said the client was 98 years old, so maybe the successor was already acting under a durable power of attorney.

But in the meantime the IRS is wading through a pile of incorrect information sent in by the taxpayer. My experience has been the same as JMDAVIS; get the correct information sent in and a request to retract the taxpayers' initial response.

Grace, you made a good point in mentioning the 663( b ) election. The 65 day election can sitll be made if the return is filed or extended by the due date and any distributions that were made during that period would count.

I agree. You can state that your client wishes to retract his written response and has requested that you reply on his behalf instead.

From what I can gather, the daughter and daughter-in-law each received 50% of the income. Then the income would flow through dad's estate reduced by his estate's attorney fees and any other allowable deductions. The income would not be taxed at the estate level if distributions were made before the estate's year end. Daughter would get a K-1 for her share. Son's estate would get a K-1 for his share. Then son's share would flow into his estate where it would again be reduced by attorney fees and any other allowable deductions. In order to maximize deductions the estate can elect accrual accounting and a short year can be used first if it helps to match income and deductions in a later 12 month period. Hope this helps.

Yes, if it was business property it would flow through as an ordinary loss. If investment property then capital loss. That sounds like quite a loss for inherited farm property, is this in a drought area?

The fact that she got out of the business because it was not profitable is a factor in determining that she was in it for a profit. That was a determining factor in the tax court case won by the banker / weekend race car driver. Unlike the hobby loss taxpayers that forge ahead with an activity because of the personal pleasure involved.

I was scanning through the taxbookforum this morning when I saw something that looked off. Since I don't subscribe to the product, I am unable to post but I visit the site occasionally to see what I can learn. The topic was Sect 179 partnership trust. The question was what happens when a partnership takes section 179 and an estate is a partner. As I understood the answer, it was stated that the estate's portion of section 179 is simply lost unless the partnership agreement allows it to be reallocated to the other partners. Section 179 is not lost or reallocated. Instead, the estate takes normal depreciation under section 168 and a separate basis is maintained for the estates share of the asset per Treas Reg 1.179-1(f)(3).

$10,800 is not even close to reasonable. Keep in mind the related penalties that you and the client could be slapped with. Case law is not in the favor of the sole shareholder/employee when the income is from personal services. Distributions are usually not allowed by the courts until the stockholder/employee wages are over the social security base. Distributions are usually associated with income from non-shareholder employees or capital and equipment. The key is to research and document what is reasonable. The IRS will have an expert witness as a hired gun when you face them in court. In regards to the under reported payroll taxes and withholdings, there is a good chance of abating the penalties given the circumstances.

Wages are considered taxable income from trade or business per the section 179 regs.

This is from the CCH U.S. Master Depreciation Guide. 169A. Hope this helps. Increased Business Use After Recovery Period Depreciation on MACRS property that is used only partially for business or investment purposes does not necessarily end upon expiration of an asset’s recovery period. Additional depreciation may be claimed if the percentage of business or investment use in a tax year after the recovery period ends exceeds the average percentage of business or investment use during the recovery period (Code Sec. 168(i)(5); ACRS Prop. Reg. § 1.168-2(j)(2)). No MACRS regulations have been issued detailing the computational rules. However, a similar rule applied under ACRS (Code Sec. 168(f)(13) (pre-1986)) and was explained in ACRS Prop. Reg. § 1.168-2(j)(2). This rule, however, does not apply to listed property described in Code Sec. 280F at ¶208 (Temporary Reg. §1.280F-4T(a)). Under Prop. Reg. § 1.168-2(j)(2), a taxpayer determines the average percentage of business/investment use during the recovery period. In the first post recovery period year that the percentage of business/investment use is greater than the average percentage of business/investment use, a depreciation allowance is claimed as if the property were placed in service at the beginning of that year. The deduction is computed by multiplying the original cost as reduced by prior depreciation (or the fair market value at the beginning of the tax year if this is less than cost reduced by prior depreciation) by the first-year recovery percentage. This amount is then multiplied by the percentage by which business/investment use for that year increased over the average business/investment use during the prior recovery period. The same procedure is followed for each subsequent year in the “second_ recovery period. For any year in the “second_ recovery period that business/investment use does not exceed the average business/investment use for the first recovery period, no deduction is allowed. The total depreciation that a taxpayer may claim may not exceed the original cost of the property. If the original cost is not recovered during the “second_ recovery period, then the process may be applied to a “third_ recovery period. The average business/investment use, however, would be redetermined by taking into account all of the years in the first and second recovery periods. Example (1): A calendar-year taxpayer places an item of 5-year MACRS property costing $1,000 in service in 2007. The half-year convention applies. Assume that business use during each year of the recovery period (2007-2012) is 50% and that deductions were claimed as follows: Year Calculation Deduction 2007 $1,000 × 20% × 50% $100.00 2008 $1,000 × 32% × 50% 160.00 2009 $1,000 × 19.20% × 50% 96.00 2010 $1,000 × 11.52% × 50% 57.60 2011 $1,000 × 11.52% × 50% 57.60 2012 $1,000 × 5.76% × 50% 28.80 Total $500.00 Assume that business use is 60% in 2013, 40% in 2014, 60% in 2015, 70% in 2016, 60% in 2017, and 20% in 2018. Assume further that at the beginning of 2013, the fair market value of the machine is greater than the remaining $500 undepreciated basis ($1,000 − $500 depreciation = $500). Average business/investment use during the first recovery period was 50%. For each year in the second recovery period that business/investment use exceeds this percentage, the taxpayer may claim an additional depreciation deduction. The depreciation deductions in the second recovery period are computed as follows: Year Calculation Deduction 2013 $500 × 20% × 10% $10.00 2014 00.00 2015 $500 × 19.20% × 10% 9.20 2016 $500 × 11.52% × 20% 11.52 2017 $500 × 5.76% × 10% 2.88 2018 00.00 Total $33.60 This cycle would be repeated beginning in 2019 because the taxpayer has not recovered the total cost ($1,000) of the property. If the fair market value of the property in the beginning of 2019 is less than the undepreciated basis ($1,000 − $500 − 33.60 = $466.40), then the recovery percentages are applied against the fair market value. See also Example (2) in ACRS Prop. Reg. § 1.168-2(j)(7).

I have never had a problem using the force code for part one of 4797. Is that the part you are having problems with?

I agree with Ron; mail in separate envelopes. Once I sent two years of amended returns for a new client in one envelope. I thought I made it as clear as Catherine did with bold print, highlighter, sticky pads, etc. I thought that there was no way they could miss one, but they did. The one they lost was for 2010 with a $20,000+ refund. They processed the 2011 which had a small balance due. Took awhile to straighten that out.

In this case being a general partner is better considering the overall tax picture for dad. The guaranteed payment to son is SE income to son and reduces the amount of income that could be allocated as SE to dad.

KC, thanks for the edit help. How did you do that?