DANRVAN

Pacun I am following your advice and will attach a statement explaining the situation along with a detailed list of custody dates. I have pasted a rough draft of the statement. Based on your experience, can you tell me what action to expect from the IRS? Thanks, Dan. STATEMENT OF CUSTODY My federal income tax return for the year 2013 was electronically filed and rejected. The rejection message indicates my ex wife claimed my two children for whom I am entitled to claim per Internal Revenue Code Sec. 152(e)(4)(A). I am the parent that had custody of the children for the greater portion of the calendar year. The attached worksheet shows that I had custody of the children for 194 nights for the tax year 2013. My ex wife and I separated in 2012. She moved to a location over three hours away. The children were with me for the first week of January 2013. From then until June 15th the children spent every other weekend with me as well as a week during spring vacation. The children were also with me from June 15 to June 28. The children were then with me from July 6 to August 26. That included a time period my ex wife was ordered by the court to have no physical contact with the children. On August 23 I was awarded custody of the children by the court. From that date until the end of the year, my ex wife was allowed to have the children every other weekend and for five days during Thanksgiving. Those dates are also reflected on the attached worksheet. I have also attached a copy of the court papers as support of the amount of time the children spent with me after the court date. I believe the above statements to be true and accurate. ________________________ _________ JOHN X DOE DATE

I disagree. That is a common practice and I have never heard of any IRS inquiries because of it. Why waste time and money dealing with a CP 2000, and not to mention a possible coronary arrest when you client sees that IRS letter in the mail. It's better to grab the bull by the horns and throw him out of the corral now.

Sorry for the user name confusion. My original user name on some other boards was Ranger. That was taken by another user (who seldom posted) on the original ATX board so I became DANRVAN there and I carried that over to this board. Then I started using Ranger which (was not taken on this board) to be consistent between the boards. I have not been consistent here and one is remembered on my laptop so they got crossed when I used it instead of the desktop. I will try to delete one of the usernames to prevent further confusion.

There is no doubt the father is entitled to the claim the kids and mother cannot legally claim them. Pacun, you mentioned an IRS investigation. How long does that process usually take? Thanks for all your comments.

Trailers are listed under Asset Class .26. The recovery period is 5 year GDS or 6 year ADS. I believe that is regardless of whether it is big trailer or little trailer. In regards to construction machinery, the recovery periods are still 5 GDS and 6 ADS per Asset Class 15.0. The IRS doesn't consider what you estimate the useful life to be. There are trailers out on the road which are over 20 years old.

Client was granted custody and rights to claim the children. But ex wife claimed them anyway and client's return was rejected. Can someone tell me how the process works to straighten this out. I know the next step is to file a paper return, but then what happens. Thanks for any suggestions you might have. Dan

Here are some references to my earlier post. This would apply in the situation where taxpayer works by day as branch manager at Hooterville First National Bank and then drives over to Bugsville to referee. Please note that the facts and circumstances in Rev. Rul. 54-147 do not apply in this situation. But there are some general statements that do. ****************** Rev. Rul. 54-147, 1954-1 CB 51 -- IRC Sec. 23(a) "Where a taxpayer is engaged in more than one trade or business and such businesses require a division of his time between two distant cities, he may deduct his traveling expenses incurred in discharging his duties at that city which is removed from his principal post of duty. Walter F. Brown v. Commissioner, 13 B. T. A. 832, acquiescence, C. B. VIII-1, 6 (1929); Joseph W. Powell v. Commissioner, 34 B. T. A. 655 (appealed on other issues); Joseph H. Sherman, Jr. et ux. v. Commissioner, 16 T. C. 332, acquiescence, C. B. 1951-2, 4. In other words, where a taxpayer has more than one place of business or employment his principal place of business or employment constitutes his “home” to serve as the point of origin for determining his deduction for traveling." ****************** Section 23(a)(1)(A), of the Internal Revenue Code provides that in computing net income there shall be allowed as deductions: (a) Expenses.— (1) Trade or business expenses.— (A) In General.—All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including *** traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business; *** . ****************** RIA observation: Generally, when a taxpayer has two or more geographically separated places of business, he or she is away from home while at the location of the minor or secondary business.

The distance factor might change things and the issue goes beyond local commuting. I have seen reference to this situation before where a second job/business is conducted away from your tax home. Your tax home is the general area where you do most of your work or business. More research needed.

You might be thinking of the Charles Walker case. I actually had a logger client with the same name, he went by Chuck. That case really hit home with him, or served as the club to hit him over the head with. I agree it is comuting and the fact he stores his uniform and a whistle in his closet makes no difference.

I don’t follow what you are saying about repairs. “if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Example. You repair a small section on one corner of the roof of a rental house. You deduct the cost of the re-pair as a rental expense. However, if you completely re-place the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. You depreciate the cost of the new roof.”

As Mr. Pencil stated, he needs to see an attorney. Since he probably does not have one (or at least a good one) you should recommend one to him. You are more likely to be kept in the loop. Outline your concerns for him to discuss with the attornery.

If the assumption is that he spent all the money on gambling, he spent $3,700 the first day. He started out with $500 and then won $ 5,000 less $800 in withholdings, 500+5,000-800=4700 funds available. Less $1,000 saved = $3,700 spent. So $1,300 gain. Second session started out with 1,000 plus winnings of 22,000 less 4,000 w/h for total funds of 19,000. Since all the funds were spent he had a net of gain of $3,000. Total gain of $4,300.

Your client might have been better off to treat the transaction as a sale from the start, depending on income level and related capital gain rates the tax could have been greatly reduced. In regards to the IRS, they are concerned about a business that is treating a purchase as a lease; specifically in situations where the term of the "lease" is shorter than depreciable life of the asset.

I had just turned four. I remember my mom was really upset, she was Irish Catholic. I was too young to grasp the seriousness of the situation but vividly remember watching the military service at Arlington Cemetery on TV. The coffin covered by the American flag and the 21 gun salute stand out. I also remember at some point mom intently watching LBJ speaking.

I pay about $1,000 a year for Checkpoint plus another $299 for their CPE library. What do you get for $89?

Neil Harl has addressed this topic in the Agricultural Law Digest as well as his FARM ESTATE AND BUSINESS PLANNING manual. The key words here are "non-material participating" landlord, meaning the crop share has not been subject to self-employment tax. If it had been, basis would be determined at FMV on DOD. If decedent was a non-material participating landlord, then proration is made during the rental period before and after death. The portion of income allocable before death is IRD. The balance is taxable as ordinary income to the estate. There is no stepped up basis in this situation. -Here is a quote from page 175 of the FARM ESTATE AND BUSINESS PLANNING manual: “SHARE RENTS. Crop share and livestock share rents held by the decedent at death are income in respect of decedent and are taxable on later sale by the estate or heirs. This is the treatment if the landlord was a non-materially participating landlord. And many are, for social security reasons. If the landlord was participating materially in the production of income under the lease, the share rents are treated as selfemployment income with the usual adjustments to income tax basis at death as the stored crops and growing crops (and livestock) receive a new basis at death based on fair market value. For death of a non-materially participating farm landlord during a rent period, with crops and livestock sold after death, the portion of the proceeds allocable to the period before death is income in respect of decedent. That portion is also includible in the gross estate for federal estate tax purposes. The remaining amount represents ordinary income earned by the estate after the landlord’s death. The proceeds of sale are apportioned according to the number of days in the rental period before death (ending with the date of death) and after death, commencing the day after the decedent’s death, using a 365 day rental period.” -Neil Harl makes the same conclusion in the following article in paragraph six (with citations): http://www.econ.iastate.edu/~harl/ald/HarlAgLaw20110128.pdf -Another author has the same opinion in this article: http://www.calt.iastate.edu/briefs/CALT%20Legal%20Brief%20-%20Tax%20Issues%20Associated%20with%20Unharvested%20Crops.pdf -Also, the Eight Circuit reached the same conclusion in the ESTATE OF Verdon GAVIN, Appellant,v..UNITED STATES of America, Appellee, (as pointed out by Checkpoint RIA). Hope this clears up the issue for you, Dan

This could have been a lease situation where the lessee provides for all the care of the cattle (feed, pasture, veterinary expense etc.) and the owner receives a percent of the calf crop. Just like a crop share arrangement which is reported on Form 4835. If that was the case, you will need to determine how much of the income was for breeding stock vs. calves and allocate between 4835 and 4797, after you have determined the basis. The only thing certain is you will need to file an extension to allow more time for research.

“I am going to write off half the cost of my storage rental unit. My wife volunteers for “Friends of the Library” and we have been storing used books for them. I also want to write off half of our garbage bill since we disposed of their discarded books. Oh, and then I took our garden tractor down to the Country Club for spring cleanup, that must be about $60 per hour…….”

Corrective surgery. Rev Rul 2003-57 permits taxpayers to claim a medical expense deduction for the unreimbursed cost of: ... Breast reconstruction surgery following a mastectomy that removed a breast as part of the treatment for cancer. The reconstructive surgery qualifies medical care because it ameliorates a deformity directly related to a disease. ... The cost of laser eye surgery (e.g., LASIK, radial keratotomy) to correct myopia, which is a bodily defect

I believe CPE is what you make of it. I have been to live seminars where some of those attending were engaged in activities such as reading the newspaper, sleeping and working on crossword puzzles. I have been using an online package from Surgent MCcoy to earn my cpe credits. They have a wide range of tropics and I try to choose courses that I will benefit from. I will admit that on occasion I have downloaded the most basic course available in the final hours of the renewal period. In order to keep up to date on tax law changes, I rely on the daily updates from Checkpoint via e-mail. Ed, thanks for pointing out the Checkpoint CPE bundle. I am going to try the Premier Package.

822,026. Examination of closed years. A closed year may be examined or re-examined even if IRS doesn't show probable cause to suspect fraud (¶ 822,025) as long as: ... the examination is conducted pursuant to a legitimate purpose, ... the inquiry is relevant to that purpose, and ... the information sought is not already in IRS's possession. If the taxpayer establishes that IRS's actions constitute an abuse, the examination is barred. However, the mere passing of the normal three-year statute of limitations on assessment (¶ 838,001) is not, by itself, proof of an abuse. 7 ________________________________________ 7 U.S. v. Powell, Max, (1964, S Ct) 14 AFTR 2d 5942, 379 US 48, 13 L Ed 2d 112, 64-2 USTC ¶985

I think constructive receipt might be your best route for amending if you can make it fit. This case is unique in that the taxpayer wishes to claim income instead of deferring it to the following year. So you probably won’t find any applicable case law. How overdue was the payment? Was there an enforceable contract that payment could have been demanded at anytime? What percent of her farm income did it represent? On the other hand, how much tax will your client owe if reported in 2011? As KC pointed out there will be some future benefit in SS income. Is that important to her? I don’t have a clear answer on this. My guess is that if you come up with a reasonable explanation in the text of the amended return it will be accepted and you can move on to 2011. (suject to audit of course) In regards to a retro accounting method change, it might be too late. Section 1.451-2, Income Tax Regs., entitled “Constructive receipts of income”, provides in pertinent part: (a) General rule. Income although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given.

Getting back to your original question, when was the income constructively received? Also consider what the IRS says about using a combination method of accounting: “Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently.”

Unfortunately, schedule J does not apply to SE tax.

Any chance the policy met the requirements to be excluded from the estate?