Kea

I'm not trying to deduct a bad debt. I did throw out extra information because I wasn't sure if it was relavent or not. Normally determining basis is very easy and straightforward to me. But I keep thinking myself in circles on this one. I'm sure I'm just over-thinking it. I think I'm getting confused by getting back an asset that was sold but without "paying" for it -- just not getting full payment so he gets back whole property. (Yes, I know that didn't make sense.) And just to verify / "thinking out loud": basis in note = FMV @ sale (= sales price) - payments on principle This sounds like the balance of the loan [which would NOT include the additional 3 months interest between last payment & foreclosure] Gain (/ loss) on repo = FMV at foreclosure - balance of loan so IF FMV at repo = FMV at sale then gain on repo = principal received (that is starting to sound logical!) IF FMV at repo <> FMV at sale then gain on repo = principle received +/- increase / decrease in FMV (makes sense) And this gain on repo is reported in year of repo, right? Original sale was shown on Sch D, so this goes on D. But the property wasn't "sold." Schedule D would show sale of "note"?? Now basis of land becomes FMV at repo, right? I think I might be starting to swim out of this fog. (Maybe) I will see if I can dig out my old HRB books from the late 90s. They should be around here (probably buried under more current books.) Thanks Jainen & Lion.

I'm sorry Lion - I think I'm just extra dense this year. I'm not seeing a chart of examples in Pub 544. When I search the pub for "repos"sessions, I find examples for the the buyer. For the seller, I found an explanation of the holding period. But otherwise they sent me back to the Installment Sales pub 537 - which is where I started. It also referred me to Pub 4681 (Canceled Debt, Foreclosures, Repossessions, ...). There I could still only find references to the buyer, not the seller.

Well, actually it doesn't qualify for installment sale since it was sold at a loss. Client purchased land for investment for $30K. 1 1/2 years later he sold it for $25K with $5K down and rest paid over 2 years. A bit over a year later the buyer stopped paying and 3 months later client forclosed. I found the worksheets for calculating the taxable gain and basis for repossessions on installment sales - but that's for sales with profits. I didn't find anything in the Basis publication (551) that addressed repossessions -- but perhaps I didn't look in the right place. So is this the proper way to calculate the taxable gain on repo? principal portion of all payments received (prior to repo) less cost of repo Then the basis of the repossessed land becomes: unpaid balance on loan (at time of last payment or at time of foreclosure?) plus taxable gain on repo plus cost of repo Client took loss on sale in year of sale (Sch D). Interest received has been reported each year. Balance of loan was $7900 when last payment received. Balance was $8020 @ foreclosure after adding 3 months interest not paid. Thanks

I've had this on one return so far. I couldn't find any check boxes, either. I went in and put the negative of the Medicare premium in the SE insurance box. That netted to $0. On the other hand, it won't now carry the Medicare to Sch A. Not an issue in my case. A check box would make things smoother. But for the few hundred $ I'm saving compared to ATX, it's something I can live with.

I do recommend studying something (NATP or other). If nothing else, it gets you back into test taking mode.

I took the NATP class first and then used their sample tests online. Even though the real test was open book, I was doing the sample tests without them. I was missing a lot of questions and was really panicked. When I got to the real test I found it easier than the NATP sample tests. I went through and tried to answer all questions without the references. But I listed each question I wasn't sure of. I then went back through to look up the ones on my list and was able to find most of the answers before time ran out. They provide a Pub 17 and 1040 instructions. There were a few Circular 230 questions but you couldn't look those up. I am not a memorizer -- AT ALL. I don't try to remember code sections or anything I can look up. I don't think I'll attempt the EA exam. Good luck to everyone else who will take (any of) the exams.

Another change on the Form 8606. Client converted Traditional IRA to Roth in 2010. 1/2 to be taxed on the 2011 return. It shows on the 8606 properly but no longer carries back to the 1040. It carried over yesterday. I added one small royalty to the return and they went from owing $1000 to getting a $2000 refund. Big change in the wrong direction for adding $400 to income. Software did update today, but the only things I noticed for the update were state forms. But I didn't look at the list very closely. (This is also on the 8606 thread.)

Another change on the Form 8606. Client converted Traditional IRA to Roth in 2010. 1/2 to be taxed on the 2011 return. It shows on the 8606 properly but no longer carries back to the 1040. It carried over yesterday. I added one small royalty to the return and they went from owing $1000 to getting a $2000 refund. Big change in the wrong direction for adding $400 to income. Software did update today, but the only things I noticed for the update were state forms. But I didn't look at the list very closely. I'll put this on Ryan's thread, too.

Congrats J.Ron! I just got my letter. I passed, too!!!!

Agreed - just spelling out the history.

It is a single family residence that was the clients' home. They moved to another house and could not sell this one. They put it into rental service and has remained so.

Hummm. I can see the totals now. Perhaps fixed in an update?

Perhaps "makes sense" was a poor choice of words. Nothing was taken out at refinance to pay any other bills. The refinance was higher than the previous balance but only due to the cost of closing costs. So if treated like acquistion debt, does it get its own new 27.5 year depreciation? Or, is it spread over the remaining 24 years of the original depreciation?

If it was his separate property the whole time, I believe she would get stepped up basis. If it was ever put in their joint names then I believe the answer depends on if they are in a community property state or not. Community property - it all steps up non-community property - his half steps up, her half doesn't.

Thanks. I did try to look at the regs. And I'm sure I missed something by not looking in the right place. But the only closing cost reference I saw was for the original purchase. The only thing I saw regarding refinance was for the points. Since it's a refinance, I wouldn't think it should go to basis (but could be wrong). Spreading it over the life of the loan makes sense.

Client is renting out their house (100% rental). In 2011 they refinanced to a 10 year loan. I know the points they paid can be amortized over the 10 years. The original closing costs were added to the basis. But I'm not sure what to do about the refinance closing costs (not related to interest, property taxes, etc.) -- just the fees to do the refinance. Do I spread them over the remaining 24 years of the oringal depreciation? Do they start a new 27.5 year depreciation? Thanks so much

Client was taking substantially equal distributions from retirement plan. Last year plan paid out remainder of account while client was only 58 1/2 (so close). I found in the instructions that to recapture the 10% penalties that have not been paid over the last 10 years, you put the amount on line 3 of Form 5329 and "attach an explanation." Is there some place in TRX to put an explanation? Or, should I just type up something, save it as a .pdf and then attach that to the e-file? (And if anyone can help me get my client out of the 10 years of penalties, that would be great, too.) Thanks

I haven't used ATX in a few years. But I believe there was a tab at the bottom of the 8829 to enter the house asset info. Not sure if they still do it that way. Good luck.

Thanks. I'll check on this.

Lucho, that's the same practice that Goodwill does. It is up to the client to list the items they donated.

In the TRX (Tax Works) client manager it shows the number of files in that folder at the bottom of the window (below the left / right scroll bar). Has anyone else noticed that you can only see the top 1/3 of that in the 2011 program? Making the window larger doesn't help because the text & scroll bar remain in the same place relative to the bottom of the window. It's not terribly important, but I do like glancing down at that to see how many returns I've completed and how many I have left.

Thanks neil & Jack.

Client put on a new roof and used higher efficient shingles. When checking the energy credits in The TaxBook, I saw reference to insulation and / or systems which reduce heat gain or loss. OK, sounds good, but what is the specific criteria? Pub 17 mentions "any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home." While stll trying to determine what to ask to client to verify, I checked out IRC 25C (and 25D). 25C only mentions the metal roof and not the asphalt. Might the shingles count? If so, do they need "energy star" or what does the client need to check to make sure they have the appropriate coatings? The shingles meet the remainder of the criteria - original use on principal residence in the US and they should last at least 5 years. Thanks

Thanks so much.

Client is receiving Social Security & paying Medicare premiums. She is self-employed and receiving a pension. Her husband retired last year and began receiving his pension. I understand that Medicare premiums do count as self employed paid medical insurance. However you can't deduct insurance premiums for months that you are eligible for insurance coverage from an employer or spouse's employer. Before I ask what insurance they have or are eligible for, I wanted to make sure I knew when I can and cannot take the deduction. If she could get subsidized insurance from her husband's employer before he retired, then she wouldn't get the Medicare premium deduction, right? What about if she is eligible for subsidized insurance from either her or her husband's retirement benefits? Thanks!