Corduroy Frog

I dunno a lot about it, other than what I've heard. An increasing number of business are accepting it as legal tender, and if this happens, I expect the difference between the dollar value paid and the dollar value of coins when purchased would constitute gain or loss. Someone please correct me if I'm wrong. If Paypal charges a fee for purchasing BitCoin (and I don't know why they wouldn't), it would seem this would go into the basis of what was bought. I'm also told there was a fixed volume of this currency when issued, never to change. I suppose that was to make it more attractive than currencies who print money forever.

Why does the IRS need to know if you HAVE BitCoin? If it is treated as property, there should be no tax until BitCoin is sold. We can buy 100 shares of Ford Motor Company, General Mills, or 50 acres of land, and we don't have to report it to the IRS until we SELL it. What is the difference with BitCoin? I didn't have any customers tell me they had any when I asked them.

Mr. Lee, you do a great job of bringing current IRS and other issues to the forefront as soon as they become available. Thanks.

Thanks for all feedback.

No responses after several views and several days. I believe this is probably because I asked for responses if my assumption was incorrect. I believe my assumptions is therefore correct, or I would have heard from someone. I further believe the credit must be substantial before anyone would jump through the hoops on 7200 just to get an advance 60-90 days ahead of fruition.

I hope I have this correct - please advise if not so. From what I can see, Form 7200 is an advance payment for a credit which is not realized until Form 941 is filed and reconciled. If a taxpayer wants to pay his accountant (or people like us) the time necessary to calculate up to 3 months in advance the amount of the credit and get money back from the IRS for various employer credits, it can be done. But all the payments resulting from 7200 must be paid back when calculating the 941 at the end of the quarter. Correct?

Dan, I didn't prepare any of the K-1s in question. Judy, I have enough personal hometown knowledge of the first partnership to confirm this was SE income. And I agree that Drake is handling correctly, after reading all the posts. First I've ever heard of a suspended loss for SE purposes - they generally try to protect Social Security from prior events - witness the recent exemption of Unemployment.

The saga continues with more reflection. To Judy's question, the answer is a resounding "no" - there was nothing in Box 14, and there should have been, as the owner is a general partner, and the creator of the 1065 himself. Like Abby said - Not all K-1s are prepared correctly. I inserted $11,355 in Box 14, and the SE amount increased accordingly. I suppose the honest answer to Dan's question about basic understanding is a perplexing "no" or I wouldn't be asking all these questions. Thanks Dan for responding.

Thanks for this, and for visiting the other board, where I asked the same question. The software I use is Drake, and the numbers in my example are fictitious. I will need to present the real numbers to track what Drake is doing. There are four potential sources: From a proprietorship, Sch C - Profit of $5114 From a first partnership, general partner, Ordinary Income of $11,355 From a second partnership, also general partner, Guaranteed Payments of $120,000. From the second partnership, Ordinary loss of ($180,778). There is insufficient basis to deduct the loss for AGI purposes. I don't know how Drake is aware that he cannot deduct the loss - I have not restrained the data entry. But Drake is not allowing the loss. From all this, Drake is populating his Sch SE with only $5114, and $4723 after applying the .9235 factor. I have an uneasy feeling that something is simply not right - which is why I am asking for help. Your answer seems to be the most authoritative, but it leads me to believe the total subject to SE should be $136,469, or $5114 + $11355 + $120000. I don't know that Drake can get to the bottom of this. No one encounters this kind of thing every day. Thank you - Ron J.

What is the amount subject to self-employment tax (before the 93.25%) for the following situation?? Taxpayer has: **A proprietorship which made $12,000. **A partnership with $120,000 in guaranteed payments **A loss from the same partnership of $150,000, but taxpayer has insufficient basis to deduct ANY of this loss for AGI purposes. **The K-1 from the partnership shows Self-employment income of -$30.000. Thank you in advance for your response.

A good seminar instructor (Chris Bird from Champagne IL) this fall stated that the IRS does not have the manpower to chase down the "rush-and-take-the-kids first" abusers. They not only would have to catch them, but they would also be drug into the facts and circumstances to determine whether someone is righteous or not. This is true even if the second filer follows up with a paper return. Not right.

I want to make sure I understand...We calculate on the year 2019 or 2020 with the lower income, even though the calculation may give a higher EITC in a different year because of change in children or other qualifiers. Is this correct? I did read your response above, but could not come away with a clear-cut yes or no. This pretty much means that this is NOT a good year to switch tax software.

Lion, it sounds like the criteria is based on income alone, and not necessarily the EITC formula which may involve different numbers of children....correct?

Thanks folks. Glad you are on top of this better than I am.

Some info floating around, and I want to make sure it is for real: If someone does not qualify for EIC in 2020, but qualified in 2019, they will be deemed as qualifying for 2020. In fact, if their EIC calculates greater in 2019 than in 2020, they will be entitled to the higher amount on 2020 tax return. On a joint return, the "above-the-line" charitable deduction is $600 rather than $300. For stimulus payments, all amounts received are calculated using 2020, even if some of the stimulus was not received until 2021. (For some reason, the automatic stimuli are supposed to be over and done by Jan 15th possibly to accommodate this. I'm sure there are sources to research, but I even wonder whether they are up-to-date.

I'm very interested to know. The virus is worse than ever, and we should be later than usual getting our appointments scheduled. Especially for deadlines due on March 15th. I have been vaccinated and will be immune (I'm told) by Feb 8th if successful. I am not taking appointments before Feb 12th. The IRS will be under pressure to collect $$ but their worst enemy in this regard is Congress itself. What I foresee: IRS does not want to enforce a deadline, assess penalties, and then go to the administrative hassle of having to waive penalties because so many clients (and preparers too) will be claiming the coronavirus was the reason for the delay. CBSLee if you are listening, you generally have a drop on IRS information quicker than the rest of us, so you are encouraged to share...

Thanks for all who have replied. To be clear on my example, it looks like: The net of $3500 is added to Federal Taxable Income The $3500 is not added to Social Security wages or Medicare wages. $3500 becomes SEHI on Shirley's personal tax return, given no complications with spouse.

I used to know this stuff inside and out. Now I can find citations but nothing which takes me thru the process A to Z: Shirley is a 5% shareholder and an employee for a Subchapter S corporation. The company pays out $5000 in medical insurance, and she contributes $1500 out of her paycheck. How much is added to her taxable income on her W2, $5000 or $3500? Is the amount added to Taxable income? Social Security Wages? Medicare Wages? Does the amount qualify as Self-Employed Health Insurance deduction on her personal return?

I am 60 miles from downtown Nashville and have AT&T supplying my cellphone. Could use my cell for about two days. Rita is further away, so don't know whether she was affected or not. If she doesn't use AT&T, she should have been OK. Is anyone's guess as to whether we have been given all the relevant facts about the bombing. For whatever benevolence may ascribe, it is obvious that the bomber didn't want to kill anyone but himself.

Tom, I'm sorry (I guess). You may look back at some point and conclude this was the best thing that ever happened to you. Just reading your recent posts it may appear that you were not afraid to speak up about your increased frustrations as your company piled more and more on you. Your employer must have been terribly remote to be so out-of-touch with what was going on. I have to take a page from Sara's post and conclude that the govt believes they can pull the rug out and change the rules up-to-the-last-minute. Just in the last couple weeks the EIDL grant had to be deducted from PPP forgiveness, and now suddenly it doesn't. Tax issue? Maybe not but all along we have to make allowance for non-deductible expenses paid from exempt funds. Oh, wait a minute! Now all-of-a-sudden these items change too, such that they are fully deductible. One of the worst things about it for people such as accountants and tax professionals: So much time is being spent on being sucked into PPP forgiveness applications and tax changes that we cannot address day-to-day normal issues that help management and profits.

Thank you Danrvan. Cleared up my question. Didn't think of what would happen if only a portion of the loan was paid, but it makes sense that the adjustment in basis would only occur to the extent of the partners' unpaid amount in proportion to what was really paid by the others. Calculation of basis at year-end means amended returns are not necessary but the entire amount falling out is the same as money received as cash.

Pacun, thanks for delving into this. I'll try to define in answer to you. Partner C put down $25K from his pocket for 25% of the shares, correct? There is no evidence that Partner C put down $25K from his pocket. He may have put in any amount, or may have put in nothing and this could have happened several years ago. The only facts are that his basis prior to default was $27,500 with loans attributable to $37,500. The bank will not issue him a 1099-C because the loan was repaid to the bank. Not stated that the loan was repaid in full, only that the partners were approached and C could not pay anything. Technically he just lost 15% of his interest on the partnership. He only has 10% of interest and this is the way the new interests should be stated: You could be right. Don't know that his default (with no other contributing circumstances) disqualifies him from being a partner or reduces his stated interest unless he is forced out by articles of partnership agreement. The question only involves his suddenly "overdrawn" basis and how it is handled on his personal return. Actually, there is also movement in the partners' capital accounts which is different from basis. This is heavy stuff (especially for people like myself to understand) so I have a feeble mind when thinking about it. Thank you, Pacun.

First of all, please enjoy Christmas under these strange and unusual circumstances. I've lost a few friends and hope the vaccine can be distributed to all of us soon. This question concerns partners' basis and what can happen. It is a technical discussion, so you may ponder whether you wish to go ahead with it. Partners A,B,C,and D have been borrowing money with partners' guarantees for a number of years to keep the company afloat. The company has lost money consistently but is holding out for a brighter future. The partners all co-sign the loans with joint and several liability, i.e. each or any of them are responsible for the entirety of the loan should the other partner(s) default. Since partners' guarantees are allowable additions to basis, the basis of each partner is increased in proportion to the their partnership shares for the amounts guaranteed. In the most recent year, the lender is insisting that some payments be made on the loan. Partner C is unable to pay his share, so his basis attributable to the loan is split by the other partners in proportion to their remaining shares. Partner C has been deducting losses on his personal return by virtue of his share of borrowed money. Question: What is the effect of the sudden reduction in basis for Partner C? Is there income in the current year or should amended returns be prepared? Does he have the classic forgiveness of indebtedness income? This is difficult reading and stilted language, so it become clear if I put numbers behind the events. Partner A: 40% with a basis of $40,000. Guaranteed loans are $150,000 so his basis attributable to the loans is $60,000. Partner B: 20% with a basis of $20,000. His basis attributable to the loans is $30,000. Partner C : 25% with a basis of $25,000. His basis attributable to the loans is $37,500. Partner D : 15% with a basis of $15,000. His basis attributable to the loans is $22,500. Sorry I can't do anything about the graphics and emoticons showing up as I type. Partner C cannot pay. His basis in the loans of $37,500 is removed and split in the ratio of 40:20:15 among the other partners. This means A's basis is increased by $20,000, Bs basis increased by $10,000 and Ds basis increases by $7500. After the default by partner C, the new basis for A is $60,000 with $80,000 attributable to loans. New basis for B is $30,000 with $40,000 attributable to loans. New basis for D is $22,500 with $30,000 attributable to loan guarantees. Partner C who defaults loses all his basis, and actually goes into the negative by $12,500. He previously deducted losses of $3000 in 2017, $5000 in 2018, and $6000 in 2019. The question becomes: Does the $12,500 become income in the current year? If so, is it capital gains or loan forgiveness? If not income currently, does he have to amend 2018 and 2019 removing the losses claimed in those years? Is there a 1099-C from the bank or from the partnership? This is already complicated, so for purposes of this illustration do not consider the insolvency effect to avoid income.

Appears on page 57 of instructions, and I suppose it is ready to use if they don't change it. Thanks Lion.

Don't know whether I'm in the right place for this message or not. My seminars keep referring to the ever-forthcoming IRS worksheet to calculate or reconcile the stimulus payment received in 2020. Basis for calculation is 2020 statistics, but I understand there won't be any repayment to the IRS if the taxpayer has been overpaid. Has anyone seen the IRS worksheet?