cpabsd

2008 was the first year for the S corp. In prior years they were a cash basis LLC. Since there was a new entity, they decided to use accrual basis. They are not really changing an accounting method since it is a new entity. My question has to do with how to show excess distribution on the tax return. Per my research, distributions in excess of stock basis is taxed as a capital gain. How is this shown on the tax return? Do I show an amount as negative in the other adjustment accounts line? I need something in order for the balance sheet to balance. Please help guide me. I have never encountered this before.

The corporation was newly formed and has a tax free transfer from LLC. They have always been cash basis but decided that it is time to swith to accrual basis due to some non tax issues. The have a small amount of receivables with large amount of payables at 12/31/08. This caused income to go down to $426,000. They are an S corp and distributed $473,000 to shareholders. I know this can be treated as dividend but am unsure of how to record on the books or on the tax return. Any suggestions? They do not want to record as loan to shareholder and that is not what it really was anyway. Thanks.

New client just brought in 1098-T. The taxpayer was in school for most of 2008. He was in graduate school. He was paid through a training grant for living expenses. The 1098T has 4895 in box 2 and 25086 in box 5 (scholarships and grants). Does this mean he has $20,191 in taxable income? I will be verifying with client that all that money was spent on living expneses and not education costs.

Thanks - I got it to work. I remembered seeing a post last week about it but could not find it.

I am having difficulty figuring out how to input the loss when it needs limited due to basis issues. The loss is $21000 but the basis is only $10,000. Please help on how to input into the software. :scratch_head:

KC - What is the IRTS website for fillable forms you mention here? I am not familiar with that website.

I haven't seen this but I am impressed that your personal return is already filed. Mine has to wait until late April or early May every year. Of course, I will fall into that FAFSA category soon, so will need fiegure out how to get it done earlier.

Are immigration expenses deductible as Sch A itemized deductions? I can not find any proof of this but a friend of mine seems to think they should be. She has spent a fair amount of money apparently on immisgration related expenses.

Yes, you select 1099's prepare as your forms and you can e file these returns as well. You will need to print ones to be mailed to the subcontractors but once you are in the file you can figure all that out. It's pretty easy.

Thank you for your help. I am trying to complete a lot of corporations and sometimes can not put my hands on the information I know is out there.

Client has residential rental property. They put a storage shed in the back to keep things like mower and tools. Does this have to be depreciated over 27.5 years? I don't know where else to put it but that really stretches it out.

A friend has an aquaintance who claims to be exempt from Federal income tax due to being a decendant of a person who is on the official role of an American Indian tribe. Any one out there ever have this come up? Of course, now my friend wants to investigate as her husband has Indian blood. I cannot find any thing listing this as true. Thanks.

Client had real estate in S corporation which was transferred to a trust then subsequently transferred to a new S corp. Client owned 100% of both entities at time of transfer. Per the attorney, the trust is a disregarded entitly for tax purposes and was only around for a few days. The attorney said the transaction was a non taxable transfer under Code section 355. I am fully aware of code section 351 tranfers and the requirement to attach info to tax returns. Is there any such requirement under section 355? Also, in order to remove the real estate off the books of corporation 1, I will credit building and debit accumulated depreciation. Does the remaining debit go to distribution? That does not seem correct but I am unsure of where else to put it.

Taxpayer redeemed savings bonds and used monies to pay for dependents tuition expenses. Total tuition was $4200. Excludable savings bond interest is $2597. Can difference in two numbers be used to claim lifetime learing credit or can the full amount be used for education credit? I have looked and cannot find this covered in any of my resources. Thanks.

That does make sense. That was part of my hesitence to include as the LLC was taxed as a partnership and those monies were not taxed in that entity. Both entities will be cash basis. Thanks for your help.

A client changed from an LLC to a Corporation as of 1/1/08. It qualifies as a section 351 transfer. The owernship was the same percentages in both entities. The LLC was taxed as a partnership. They are a cash basis taxpayer. At the time of the transfer, the LLC had $182,000 on the books as Accounts Receivable. This money was all received in January of 2008 per the corporations books. Is A/R an allowable item to be transferred in a 351 transfer? Thanks

Thank you KC and Old Jack. I sent the attorney an e mail so that he would be prepared to answer my questions during the teleconference. I will be certain to request the information in writing. Thanks again.

During May 2008, client transferred real estate from S corp to an inter vivos trust. Subsequently, client transferred property from inter vivos trust to new S corp. The intent was to move the real estate into a separate S Corp rather than have assets from other business co mingled. The attorney is a well respected tax attorney in our area. He told the clients this was a tax free transaction. Does anyone know how to record as tax free? I have a call into the attorney to get the full explanation but any thoughts here would be welcomed. Thank you!

During 2008, my client was reviewing his books and discovered that a former employee had taken approximatley $15,000 out of his account. The client is a sole proprietorship and most of the expenses were recorded as Draws. The police report has been filed. Does this amount get claimed by amending the 2007 return or claiming the theft on the 2008 return when it was discovered? Also, is there any break from SE tax as the client is really paying tax on money they never personally benefited from? Thanks for any guidance.

I have the exact same problem with a client. However, my client does not have EIC. It is a simple return, W-2's, Sch A with education and child tax credits. They are not blaming me but did call to ask for an explanation of the delay.

The loss did occur in 2008. The client will be able to use entire loss against 2006 tax year. The additional years willnot benefit this client. I have another question. How does AMT enter into the calculation? In order to prepare amended state returns, I went to 2006 tax year and when I input a NOL on line 21, it calculated AMT as still being due. Is this correct? Does not seem quite right as draft of Form 1045 does not calculate this. The original return does not calculate any AMT. Thanks.

I am confused. I have calculated the net operating loss to carryback. Should the Form 1045 be completed in the 2008 software or 2006 software? I can not seem to figure the form out. Of course, the client is wanting the return as they are hurting for cash. Thanks for any guidance.

Thanks Jainen. I knew the difference between realized and recognized just wrote the wrong word. I believe I have to manually input the new asset in Asset entry. The two pieces of equipment were both skidloaders so like kind exchange is permissible I believe.

Thanks for the info!

Client traded equipment with net book value of $7084. Trade value given was 22,000. New equipment FMV is $57,600 witn loan of $35,600. Recognized gain is 14,916 and I believe captialized value of new equipment should be $42684. I cannot get asset entry to allow equipment to be captialized at this amount. How should it be input? Please help. I need to get done immediately. There seems to be no where that I am to input the loan on the new piece of equipment. There was no loan on the old equipment.