peggysioux5

Another question regarding the partial gifting of a residence. If appraised value of home is $350,000 and taxpayer sold home to her adult child for $250,000 and gifted the remaining $100,000, are you required to divide the basis by the % by purchase/gift? For example: $350,000 appraised value 250,000 is 71% (selling price) 100,000 is 29% (gift) So if basis is $175,.000 than the adjusted basis to carry to the gift tax return for the gifting portion of the home is $50,750. Or can taxpayer put a zero basis on the gift and carry all $175,000 basis to the sale of the home to lower the capital gain on the sale of the home? I would think one has to go with my first scenario but wanted to get input from knowledgeable tax preparers. Thanks.

So, I received a copy of appraisal from taxpayer (parent who sold to adult child) and the appraised value was $325,000, sold for $250,000 and closing statement shows gift of equity of $50,000. The home that was sold was a second home so taxpayer (parent) has to pay capital gains on the difference of $250,000 and her basis and closing costs and a gift tax return has to be filed for the $125,000 (the $50,000 of gifted equity and the difference between appraisal price and sold price of $75,000). Please let me know if any of the above does not sound correct. My question is more of a "why would the sale be handled this way?". If they had sold the house for $200,000 and didn't provide the "gift of equity", the parent still would have to file a gift tax return for the $125,000, but would have to pay less capital gains on the sale of the property. The only reason I can think of is adult child had no monies to pay the required down payment so mortgage insurance wouldn't apply. I would appreciate others' input. Much appreciated.

I think I know the answer to the following question, but am second guessing myself so want to be sure. Parent sells home to adult child lets say for $250,000 and gifts the equity of the home of $50,000 to the buyer. I know the sale price would be $250,000 but does the gift of equity of $50,000 come into play in the calculation of net capital gain? The closing statement for the sale shows in section "Amounts Paid by or in Behalf of Borrower" an amount of $50,000 and description of "Gift of Equity Seller Credit to Buyer. There was also a "Gift of Equity Letter" that states: This gift of equity is being given to xxxxxx who resides at xxxxxx. The purpose of gift of equity is to cover buyer's down payment and closing costs. This is an outright gift, with no repayment expected or implied in the form of cash or by future services. So does the gift of $50,000 play into the calculations when determining the capital gain on the sale or is gain strictly based on listed sale price less original purchase price plus any improvements?

Taxpayer took a distribution in 2015 of $50,000 but paid it back within the required 60 days (I have statement showing the payback date); however, the 1099-R shows box 1 and box 2 the same. Shouldn't box 2 show $50,000 less than box 1? Taxpayer contacted investment company and was told that the "tax-free roll-over" will be reflected in the 5498 when issued. Am I missing something? Peggy Sioux

The trust stated that asset was to be split between the beneficiaries. My question is that being the asset was sold under the name of the trust rather than the beneficiaries, should a trust return be filed with K-1's to the beneficiaries showing the disbursement of the funds?

Taxpayer's mother had a revocable trust with her personal residence as an asset held in trust. Mother passed away in 2015. Trust reads that asset was to be disbursed to beneficiaries after Settlor's death. The closing statement for the sale of the residence lists the Living trust as the seller. Would a trust return need to be filed with K-1's to the beneficiaries showing the disbursement of the funds? I would have thought that the asset would have been disbursed to beneficiaries and then sold. The daughter stated that the property was put into her name so she could sell the property, but the closing statement shows differently. I would appreciate input on the correct handling.

Thanks Judy - very helpful. Peggy Sioux

And the taxpayer is working for a non-profit so she will only have to pay on the loan (based on her income) for a total of 10 years. Very generous program. But I am still trying to find a cite that helps me determine if the any of the interest would be considered deductible.

Taxpayer has been going to college for several years and began paying on her student loans in 2015. She also entered into one of Obama's Student Loan Forgiveness Programs in 2015. She received two 1098-E statements totaling over $7000. She definitely did not pay that interest in 2015; however it appears that the new loan company under the forgiveness program paid the interest to the original loan holders. Normally, if she had not entered into a loan forgiveness program and refinanced her loans, that interest would be deductible being she technically paid the interest in the refi which she will pay off during the length of the loan. I would not think the interest is now deductible due to the forgiveness program. However, she said she is paying interest on her current loan so shouldn't some of the interest be deductible. Do any tax preparers have a cite reference that clearly states how to handle this situation?

This taxpayer works for a small company with fewer than 50 employees and has not received a raise in several years so income does not fluctuate. I want to handle in a way that is most beneficial to my client but within the IRS guidelines and making sure I have done my due diligence. It seems very unfair to taxpayer if insurance representative advises her that she is eligible and sets up the PTC and then at the end of the year find out that she is not.

I have asked the taxpayer to request documentation from employer regarding MEC. We will see what she receives.

The employee's income is not the issue - she gave the correct "household income" to determine her eligibility. While the idea of contributing to an IRA is a very good idea; unfortunately, for this taxpayer, contributing to an IRA to bring down her income would not benefit her because the employee portion of premiums would still pass the test for affordability. Taxpayer swears that she laid everything out to the Marketplace representative regarding the employer insurance and her income/household income (and I have dealt with this taxpayer for many years and believe what she is telling me -- which does not really matter) and the representative told her she was eligible for the PTC. I was hoping I was missing something or that if Marketplace representative deemed her eligible with all the required information then she was eligible. I am unsure if the employer insurance meets the minimum value requirement. Is there a good website that would help me determine if the employer insurance meets the minimum value requirement?

Taxpayer had health insurance through employer; however, she called the Marketplace in January of 2015 to determine if she would be eligible for the PTC for 2015. She told the representative what her income was (she is at the 150% FPL) and what she was currently paying for coverage through her employer and what the employer plan covered. The representative set her up to receive the PTC so she dropped the employer coverage. She brings in her tax documents for 2015 and during our interview I ask her what the cost of the premium had been through her employer and that cost was below the 9% of income so I ask her if the employer coverage did not cover the minimum value requirements. She doesn't have a clue but told me she told the person through the Marketplace everything that the employer insurance covered. She then asked me why the representative would set her up to receive the PTC if she did not qualify so she says she must have qualified. So, I was hoping for input from other tax preparers. As tax preparers, are we to assume the Marketplace representatives did their due diligence before offering the PTC to taxpayers? Or are the tax preparers the only group that has to police the taxpayers and tell them they have to pay back the PTC for which they thought they qualified?

Rich, thank you for your input. The shareholder does have a basis issue and did take distributions beyond the AAA and will have to claim capital gains on distributions in excess of basis at the shareholder level, but the credit card was in the name of the corporation and 95% of expenses were business related so should be deductible, correct?

Unfortunately the shareholder take distributions from S-Corp when he needs additional personal funds and this is why I am hesitant in taking the late fee deductions. If there were not excessive distributions then I would think whole heartily that the fees were "necessary". But again, I don't know if I am being overly cautious and omitting a deduction that should be valid. I was hoping there was a clear cut regulation that would show if deductible or not and that other tax preparers could shed some light. I appreciate everyone's input. Peggy Sioux

There appears to be a grey area regarding the handling of late payment fees (or a difference of opinion by other tax preparers). While I would normally consider the fees tax deductible, the enormity of the fees for this business causes me to hesitate. Taxpayer stopped paying on credit card for a period of time, thus the large fees The credit card company does not show the late fees as interest when they provide the year-to-date interest paid. Another tax preparer noted Bailey TC Memo 1991-385 and after reading the ruling, I was leaning toward non-deductible, but do not want to omit a deduction at the taxpayer's expense if actually valid .

S-Corp taxpayer has SUBSTANTIAL late payment fees on a business credit card totaling more that $24,000. Would the late payment fees be considered interest and thus tax-deductible? S-Corp had a loss for the year in question and also had substantial shareholder distributions. The S-Corp has always made a profit in previous years.

But how are we, as tax preparers, determine if the employer's insurance meets the required minimum value requirements? I know that large employers are obligated to inform their employees of this information. But I do not think that small employers have the same requirement. The affordability requirement is much easier for us to determine if they are eligible. Taxpayer had insurance through her employer in 2014 so no problem for 2014. My concern is when 2015 return needs to be filed.

This is my first time posting to this board and appreciate any feedback other tax preparers can provide. The ACA questionnaires that I have reviewed ask if taxpayers were eligible for health care coverage through employers. If they answer "yes", there is another series of questions to ask to determine if they are eligible for the premium tax credit. My question is if the taxpayer comes to the appointment with a 1095-A but they answer yes to the above question, is it required of us to determine if they were indeed eligible for the premium tax credit that they received for 2014 or are we to assume that being they received a 1095-A, that the "Marketplace" made the determination that they are eligible and our job is to just reconcile the income actually received versus the estimated income to determine if any of the PTC received needs to be paid back. I have a client that had employer provided insurance for 2014 but she went on to tell me that for 2015 she received insurance through the "Marketplace" and is eligible for the PTC. Based on her income and premiums through her employer, her insurance is considered affordable. She also advised me that she had spoken with several different representatives in the "Marketplace" that told her they were not able to help her being she had insurance through her employer. So.....she tried a few more times and reached the one representative that set her up with insurance. I don't know if he was more knowledgeable or less than the other representatives. I just want to confirm that I know what my requirements are in this instance. Any input would be greatly appreciated.