DANRVAN

He and the corporation are two separate entities. He cannot deduct the expenses that belong to the company. The case of Lambert clarifies “Citing the long established rule that a taxpayer can't deduct expenses incurred on behalf of someone else's business, the district court ruled that Lambert's unreimbursed expenses were the corporation's expenses, not his.” You might take a look at “Graves” in the 9th Circuit Court. He was allowed to write off worthless loans to his corporation on Schedule A. Good luck, Dan

Section 172 disallows income not attributable to a taxpayer's trade or business in the NOL calculation.

My prayers are with you KC. Dan

It looks to me like your client would be an employee in the eyes of the IRS. She is performing an integral part of the business operations as well as the other factors Jainen pointed out. What is the risk to your client if reclassified as an employee? This sounds like a situation where you need be careful not to hand out legal advice. Good luck.

Some real property is 1245 property. Research sources such as RIA have detailed explanations. Or try a google search for articles such as this one: http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpFin/Section1245.jsp

I had one that was filed final for three years for one reason or another. In the “final” year some farm program payments were paid and reported to the estate by mistake. Don't worry about it, the door is always open at the IRS when there is income to report.

Can she claim the 24 year old daughter as a qualifying relative? (Income less than $3,700..etc.)

The early distribution exceptions from Qualified Plans (including IRAs) are found in Section 72(t). The exception specifically mentions distributions “attributable to the employee's being disabled.” Since the code does not mention spouse, I don’t think you have a case.

There was only one form but the error message was saying otherwise. The form was corrupted even though it was up to date. I had to manually force it to update. Thanks for your response TAXMAN.

Error reads “Filer is limited to one form 5329”. There is only one 5329. I tried deleting it and reloading it, updating program, closing and reopening. Has anyone else had this problem?

Jump to the worksheet and you will see a check box at the top that will calculate the 80%.

My designation is Cowboy Practicing Accountant.....

It sounds like the original return was never processed. I had a similar situation which was also a handwritten mess. You might get a POA and check the status of the original return by calling the number on the IRS notice. In the situation I was involved with, a corrected return was sent directly to the IRS department which had it on hold instead of filing an amended return.

He said it was farmland in original post. I don't now how the smiling face got into my previous post. Past my bed time.

-Here is a website that uses the classic example: http://www.extension...nts/M1178-7.pdf -Here is a reference with cites. Income in Respect of Decedent Installment contract payments that are unpaid at the time of death of a decedent are income in respect of a decedent (IRD) to the estate or other recipient of the contract [i.R.C. § 453B©]. The total IRD is the excess of the face amount of the remaining installment obligation over the decedent’s basis in the contract at the time of death [i.R.C §§ 453B( and 691(a)(4)]. The remaining gain on the contract is not generally reported on the decedent’s final income tax return [i.R.C. § 691(a)(4)]. Instead, the IRD is reported by the recipient of the payments as the remaining payments are made. Practitioner Note Cancellation at Death An exception applies if the remaining payments on an installment contract are canceled on the death of the contract holder, or if the buyer of the installment contract inherits the remaining payments. When this occurs, the payments are treated as being made in full to the estate in the year of death, and the estate must report the gain on its income tax return. Installment payments received by a decedent’s estate or other beneficiary are included in gross income in the same way the decedent would have reported them [Treas. Reg. § 1.691(a)- 5(a)]. In other words, an installment contract does not receive a basis adjustment to FMV upon the death of the contract holder.

Good to see you back KC! I believe this is a situation where the taxpayer “steps into the shoes” of the decedent. If mother had been reporting gain on installment sale, then beneficiaries would do likewise. If son pays off contract to siblings, then entire payment is subject to gross profit percentage. If son inherited a share of the contract then it really gets interesting! In that situation, his portion of the inherited contract is considered paid on DOD. This situation is very close to an example used in several estate planning studies and is discouraged because there is no step up basis for installment contracts. If you need a cite Neil, I will be glad to look it up and post it.

Sounds like he is paying off the contract which his siblings inherited. The land is already his; subject to the contract as I understand it.

Good answer. My source was an analysis of the tax code. Digging deeper, I see section 1402(a)(1) makes reference to section 202 of the Social Security Act.

The deduction is limited to the net profit from the business which includes the CRP income whether subject to SE tax or not. Good question.

Sounds like both to me, see (a) (2) below. Reg §1.451-6. Election to include crop insurance proceeds in gross income in the taxable year following the taxable year of destruction or damage. Effective: August 26, 1992. Applicable to payments received after December 31, 1973. (a) In general. (1) For taxable years ending after December 30, 1969, a taxpayer reporting gross income on the cash receipts and disbursements method of accounting may elect to include insurance proceeds received as a result of the destruction of, or damage to, crops in gross income for the taxable year following the taxable year of the destruction or damage, if the taxpayer establishes that, under the taxpayer's normal business practice, the income from those crops would have been included in gross income for any taxable year following the taxable year of the destruction or damage. However, if the taxpayer receives the insurance proceeds in the taxable year following the taxable year of the destruction or damage, the taxpayer shall include the proceeds in gross income for the taxable year of receipt without having to make an election under section 451(d) and this section. For the purposes of this section only, federal payments received as a result of destruction or damage to crops caused by drought, flood, or any other natural disaster, or the inability to plant crops because of such a natural disaster, shall be treated as insurance proceeds received as a result of destruction or damage to crops. The preceding sentence shall apply to payments that are received by the taxpayer after December 31, 1973. (2)In the case of a taxpayer who receives insurance proceeds as a result of the destruction of, or damage to, two or more specific crops, if such proceeds may, under section 451(d) and this section, be included in gross income for the taxable year following the taxable year of such destruction or damage, and if such taxpayer makes an election under section 451(d) and this section with respect to any portion of such proceeds, then such election will be deemed to cover all of such proceeds which are attributable to crops representing a single trade or business under section 446(d). A separate election must be made with respect to insurance proceeds attributable to each crop which represents a separate trade or business under section 446(d).

Amount realized by tenant from lease buyout treated as capital gain PLR 200045019 <a name="NEWSARC:54890.2">IRS has privately ruled that a landlord's payment to induce a tenant to move could be treated by the tenant as capital gain from the sale or exchange of a leasehold interest. That was true even though the tenant didn't actually have a lease in effect when the payment was made. He was occupying the premises under rent-control laws that apparently didn't require a lease. Facts. A taxpayer we'll call Smith had entered into a commercial lease in a building. The lease was subsequently renewed for a period of years. Smith filed a rent overcharge complaint against the landlord on the ground that he had used the premises predominantly as a residence and, as a result, the premises were subject to his city's rent-control laws. He won the case and retained the right to continued possession of the premises for an indefinite period without a written lease. Smith's landlord agreed to pay him a fixed sum for agreeing to give up his apartment. The sum represented (1) a dollar amount for his interest in the premises, plus (2) enough money to cover estimated taxes. The second element was determined on the assumption that Smith's gain from the transaction would be treated as capital gain. In the event that the gain would be treated by IRS as ordinary income, the landlord promised to pay an additional amount, plus interest and penalties. The landlord also agreed to pay an undisclosed sum to the lawyer who had represented Smith to cover his legal fees. Favorable ruling. IRS said it wasn't clear whether the leasehold was a capital asset under Code Sec. 1221 or a Code Sec. 1231 asset (because it may have been used for business purposes partially or for part of the lease period). In either case, however, IRS ruled that the gain recognized on the leasehold would be treated as capital rather than ordinary gain. Reasoning: Case law established that the right of possession under a lease or otherwise was a substantial property right which, if sold at a gain, would produce capital gain. On the particular facts of the ruling, IRS said that the holding period began with the vesting of Smith's statutory right of occupancy to the premises. Because Smith held this right for more than one year, his gain was treated as long-term capital gain. IRS also ruled that the landlord's payments to cover Smith's legal expenses, and his tax bill, were part of the purchase price to the extent they were made for Smith's leasehold interest and not for Smith's abandonment of some other legal right or property not related to the lease transaction. References: FTC 2d/FIN ¶ I-6341; United States Tax Reporter ¶ 12,214.31; United States Tax Reporter ¶ 1234A4; TaxDesk ¶ 25,08

Sounds like a sale of mineral rights that needs to be reported on Schedule D.

It’s an all or none deal, unless there are separate farming operations with separate books reported on separate tax forms. There are some other requirements you need to be aware of. See pub 225 for details.

If mom has life estate and children have remainder interest, then you would determine the basis using the tables in pub 1457 and 1459. In another application, the tables are used to calculate the value of a charitable gift of the remainder interest in a home. This method is also used to determine the value of remainder interest in bankruptcy. An appraiser will be needed to determine the FMV on the date deed was modified to create the remainder interest to children. Then you will need to find the section 7620 interest rate to determine which pub 1457 table to apply. You will also need the appraiser to estimate the “remaining life” and “salvage value” of the house and structures for the reduction per pub 1459. Once you have determined the value of the future interest that was transferred, you compare that amount to the compensation received, $20,000 per 1/3 share. If the amount received was less than full and adequate consideration; the difference would be a gift, since the parties are related.

I believe Julie is on the right track. It’s like he created a billboard for an ad campaign and is responsible for removing the billboard. Go ahead and take the expenses. If he is able to sale the exhibit later, that’s a separate transaction.