Sara EA

Don't bother with the gift splitting--that gets complicated just showing each spouse where to sign one another's and their own return. Unless your client is likely to have gifts and a residual estate in excess of $23 million, he is in no danger of ever owing gift and estate taxes. So file a single return for him and be done with it. Better check the state though--some have much lower thresholds than the feds.

How about the photos that are sideways? Or the ones where the font is so small it should be illegal. I HATE when clients send photos. They get an abrupt request for a legible document and put in the back of the queue. On a related note, how about the phone messages where the person leaves their number so fast that you can't digest it or write that fast. If I can't get it after listening three times, I do not attempt to call back. (Our billion dollar phone system does not show caller ID within messages. They're in the history but cumbersome to track down. If someone can't leave a clear call back number, they do not get a call.)

The state will absolutely calculate the value of the remaining life estate and count it as an asset should she apply for Title 19. The mother should have received its value on the sale. The daughter had no right to keep all the proceeds. There is no completed gift unless mom got no money for her interest. The calculation of the remainder interest on sale is tricky but needs to be done or the state will do it for you, which actually sounds like it will save a lot of work!

I think we're all bumping into these types of issues at this time of year. We know exactly what the outcome should be, but how to tell the software? I spent the good part of the morning on a return with foreign income exclusion. That was the easy part, fighting with the software took a lot longer. Diagnostic that address was incomplete. Well, I didn't enter a city or state because she lived in France, duh. Same with employer EIN. I just kept going to the help screens in UT and eventually got it worked out but it took a lot of time. These types of events show why we are tax Professionals. We know what the result should be, and if the form doesn't match our expectations we have to figure out how to tell it what to do.

The IRS hasn't decided whether or not to allow the excess deductions yet. I think it's best to continue entering the expenses in the event they eventually get moved to the not 2% area. I did that last year with PMI even though the deduction had expired. This year when I encounter a client with PMI I check last year's return to see if an amendment is in order. So far I identified just one, the others still wouldn't meet the higher standard deduction. The IRS hasn't updated the 2018 software yet, the software companies can't until the IRS does, and we don't do prior year amendments during tax season anyway. At least the numbers are in there. I'm doing the same with the 2% deductions on the 1041.

Vanguard actually warns people that their 1099R will show the full distribution and that they should make a copy of the check (which is sent to the taxpayer but made out to the charity).

The Box 13 amount is not reported on the return. It is a basis adjustment (but only for covered bonds; the adjustment for uncovered ones is somewhere in the detail pages.) The taxpayer paid more for the bond than its face value. That "premium" is amortized. It is part of the cost of the bond, not earnings on the bond (those are reported as interest). A loss on the sale of a tax-exempt bond purchased at a premium is disallowed.

When you sell a home, as we recently did, the attorney gives you a form to sign and check off whether you've lived there for 2 of the past 5 years. If so, and the sales price is not above the Sect 121 limits of $250k or $500k, no 1099S is issued. Therefore no reporting is required. Why make work for yourself?

Is this the same Ring Central as the doorbell business? We all know how NOT secure that is, including employees looking into people's homes.

In many places the $1 is required to trigger the recording of the transfer. Like if you give your old car to your kid, DMV puts $1 sales price in order to transfer the title ($0 would imply the car was junked).

Rita and Gail are correct. If mom lived in the home, paid the bills, etc., there was an implied life estate. IRC Section 2036 states that such "paper only" transfers are subject to estate taxation. Property included in an estate is assessed at fmv on date of death, which is what the heirs inherit as their basis.

Life insurance proceeds are not income so are not reported on a 1041 (there may be some interest included, which is income). However, life insurance is taxable on a 706, which taxes assets instead of income. With the high estate tax threshold it's unlikely any of our clients will ever file a federal 706, but some states have lower exemptions.

A gift tax return must be filed. I don't know what state the clients are in, but some state tax departments are meticulous about checking public real estate transaction records for such things. They don't want to let people get away with gifting their homes and then qualifying for Title 19 when they need nursing home care.

You're right. One spouse can't itemize while the other takes the standard. Don't know what I was thinking. I once asked some IRS agents who were students in one of my classes if the IRS actually checks to see if both spouses itemized or not, and they all did a good job of beating around the bush.

Basis is DOD value. You will have to look at the broker statements to see if basis is or is not reported to IRS. If it's not, the IRS assumes the gross sales price is all gain so you will have to file a return to show basis. If the stocks will be sold at a loss, you want to file anyway so the beneficiaries can use it.

Another reason why we don't use ATX for our main program. UT separates the returns and even automatically labels them SMITH TP and SMITH SP, but of course it costs a million dollars. MFS works when there are significant medical expenses that can be attributed as paid by the lower earning spouse so that 7.5% ding isn't so awful. Used to work sometimes when we still had the 2% AGI misc Sch A deduction. In CT, the property tax credit essentially doubled if MFS. which sometimes offset higher federal taxes. Now we have such a high standard deduction that many couples can't exceed it filing jointly but one may by filing separately and taking all the itemized deductions while the other takes the $12,200 standard. In fact, that sounds like it might work for a lot of people and I should be running the optimization a lot more than I do.

You are right that the trust is now an irrevocable nongrantor trust. Whether it is a simple or complex trust depends on what it distributes. A simple trust distributes all income but no corpus and no charitable distributions. A complex trust is one that isn't a simple trust (that's the real definition!). A trust can be simple one year and complex the next depending on the character of the distributions. If yours is only distributing income this year, it is a simple trust. When it dissolves and distributes both income and corpus, it will be complex that year.

These expenses can be considered by the trust for bookkeeping purposes, but not as income tax deductions. When the trust was a grantor trust they weren't deductible, and now that it's not a grantor trust they still aren't deductible. The property taxes can be deducted as well as legal and accounting fees. Trusts almost always have to use a calendar year. The only exception I know is if a qualified revocable trust (that becomes irrevocable upon death) makes a Section 645 election to be treated as part of the estate, in which case the estate reports the income and deductions. (Sorry, carrying costs like insurance and HOA fees aren't usually deductible for estates either.) If the property had been rented it would be another story. Perhaps someone else knows how a trust can use a fiscal year; I can't think of anything else.

Does anyone know why CA is proposing this? I can imagine the state does get lots of complaints about taxpayers who walk into one of the chains or seasonal places with a couple of W2s and walks out with a fee of $600 because they had HOH and EIC. Those places know these clients get free money from the gov't and definitely take a share. Since the IRS is pushing free file this year after they noticed that only 2% of eligible taxpayers use it, I can see CA following suit. A PR campaign from the tax dept could accomplish the same end of making people aware of their options. I don't think the pricing requirement will help people at all because they don't know what all those additional items are. They might know they get some kind of credit for their children but likely have no idea what the additional child tax credit is. If they put some money into a 401k they won't be aware of the retirement saver's credit. Many probably don't realize it takes another form to get a state credit for car taxes paid. All of these forms add to the fee, but the client walking in the door doesn't know s/he needs them. So with their couple of W2s they'll think they will pay the basic fee and still be surprised by the $600 final. The above verbiage does state we only have to disclose average fees to potential clients, not existing ones.

IL will compute tax on total AGI and give credit for taxes paid to the other states up to what IL would have charged. CA and NY likely have higher rates than IL, so your client will only get partial credit for those states. The other states will calculate tax on the income earned in that state at the rate that applies to the taxpayer's AGI. For example, someone making $6k in NY would probably have no taxable income there, but someone making $100k would be taxed at over 6%, which is the rate that will apply to the $6k. I don't think WA has a state income tax, so all of that income will be taxable in IL with no credit. Getting the logic of this doesn't make it easier. I always have to fight whatever software program I'm using to get it to come out right. When I was at HRB there was an "all states specialist." I want one of those!

Injured spouse. Be sure to file one for the state too. I've done this for years for a couple in which the wife has outstanding student loans. He always gets the refund, but it takes awhile.

A 1041 is an INCOME tax return. Unless the will specifically requires bequests to be paid out of income, they are usually paid from corpus and therefore not deductible from income. Charitable donations can only be made if specified in the will. They too are usually paid from corpus unless the will specifically states to pay from income. I think the source of confusion is that the 706 addresses assets and has its own rules for deductions, while the 1041 addresses income and expenses paid out of income.

I think the only time a phone number is required by IRS is when a taxpayer is having a balance due debited from a bank account. CT has had a space for phone numbers for years, and more recently they added a spot for email. I never filled out either. A few years ago at a state liaison meeting someone asked the DRS speaker why CT was asking for this info while the IRS was advertising all over the place that they will not call or email. He did not have an answer. I notice that taxpayers in lots of states can now request an IP PIN. Is anyone advising their clients to apply?

You add it to the student's income, not the parent's. However, since it was all used for qualifying expenses you can just use $2200 as qualifying education expenses or whatever was spent (make sure you see receipts). I second cbslee's suggestion to just take the tuition and fees or Lifetime credit this year and save the AOC for years when expenses are higher.

Property taxes are not passed through separately. The estate will calculate its income and deductions and pass the net income through to the beneficiaries. If it held rental property, those property taxes are deducted from rental income on Sch E. If it sold the decedent's home and paid property taxes at the closing, those taxes go on the estate's 1041 subject to the $10k limitation. Please tell us specifically what property taxes the estate paid.