Corduroy Frog

Has there been any change in the penalty? As long as it remains at $500/per day with no limit, I'm not going to touch it. I'll refer my LLC customers to a corporate attorney, or try to do it themselves. Does this apply to LLCs only, or does it apply to any entities (S corps, C corps, partnerships)??

Deductibility of mileage is a topic for discussion. I believe the full mileage cost per mile is applicable. But there might be some argument about how much mileage can be deducted. I believe IRS would prefer only the mileage which produces revenue would be deductible. The driver leaves home and drives 3 miles to pick up his passenger. He drives 20 miles to drop off his passenger, and drives home only 22 miles, being able to take a different route home. How much is his deductible mileage? 20 miles because that is the only mileage with the passenger? 40 miles because the charged rate assumes a round trip is necessary to return, even without the passenger? What about 45 miles, which would be ALL the mileage incurred including the trip from home? I don't have any Uber drivers among my clientele. At least not yet, but it may happen. I can tell you that so many people are using Uber that traditional taxicabs are hurting. Also Car Rentals such as Avis and Hertz.

I set up a reminder to donate a small sum to Eric for the benefit I receive from this website. It is a paltry sum compared to bringing questions to the group and getting knowledgeable answers from people whose expertise far exceeds my own. I'm sure many of you will do the same before year-end. I am wondering, however, about the deductibility of such an amount. It is not a donation freely given with nothing of substance being expected in return. In my opinion, there is a great deal of substance returned (whether required or not). It could possibly be a business expense (such as a membership) rather than a Schedule A contribution. Perhaps I should not tarnish the conversation by combining the tax consequences with the greater message. I can promise I am not trying to deduct millions of dollars...

I believe there is ample evidence that the amount of loan forgiveness should be added to his W-2 as taxable income, as well as taxable under social security. Not exactly the same as the exercise of a stock option, but if there are no code/regs stipulated, the impact should be the same. Stock options 100s at a strike prce of $10 versus market price of $100. Benefit $90 per share for exercising options on 100 shares. $9000 gets added to his W-2 taxable income and social security income if not over the limit. Employee basis in stock is $100 per share. Employer dictating this? Only to the extent that the employer set up this arrangement from the beginning.

Related topic but not exactly. My last seminar taught that effective 01/01/2025, ALL Employees (including Part-Time) will automatically have 2% withheld for retirement (401k, 403b whatever). Employer would not be required to match, unless company has a match for otherwise qualified employees. This will be automatic unless employee opts out, and the opt-out will be available. Any more news on this topic?

Not a tax topic, but certainly an economic topic. This is been going on for some time, but I'll start with an occasion several months ago. Wrote a check for $125 to our veterinarian. The clerk ran in through a machine, then gave the check back to me and told me they already had my money. End of story?? I would think so. But no. She shoved a piece of paper at me and told me to sign it. She said their lawyer is making them get these things signed any time they are tendered a check. Didn't make sense to me, so I refused to sign it, and found another veterinarian. Can anyone tell me what is going on with this??

I have to take my hats off to Abby Normal. I should hesitate because there are so many other great people on this board that should be mentioned. I am notorious for my cumbersome phraseology. Often I will ask a question and get responses from good people who, from their responses, are unclear what I am asking. This is my own problem, and not anyone else's. Often I have to repeat myself, and the conversation runs in many directions, very much like a "circular reference" in Excel. Occasionally you meet someone who can perceive what is in your mind - to the extent they know what you are saying before it ever comes out of your mouth. Hopefully, in your years of human experience, you have encountered a few such people. Abby Normal seems to know exactly what I am asking, why I'm asking, as if he is in my own shoes sharing the subject. Not just once, but consistently over and over again. I met this Abby Normal (and forgot his real name) at the gathering at Rita's in 2018, which was a delightful event for myself and my wife. Again, there are a number of helpful people in this community and I don't want to lessen their contributions by not mentioning them. Thanks to all who have put up with my awkward choice of words. Abby, wherever you are, please stay with us...

This issue of paying people for services rendered confronts most of us as tax preparers. First of all, NO ONE wants to have a payroll. I don't blame them because of the administrative time, expense, and penalties that the IRS jumps on them. No one wants a payroll, but the fact remains that in many cases, a payroll is the proper manner because the payer is determining the task and methods. Secondly, in lieu of anything better, I will offer to prepare 1099-NECs. If they don't want to do this, I give them the choice: either forego the deduction or find another preparer. As stated before, the deduction is still valid, but the failure to report is the violation. In spite of this, I take the position to force the client to comply with the need. The IRS can force the issue by making more audits. At my last seminar I was told that they would be examining 1099-NECs and looking for recipients that received only one 1099. If they are not receiving multiple 1099s then they are not really in business for themselves.

I believe that the mileage procuring tools, supplies, etc from the mainland really IS deductible, but must be supported with a log. Without a log, it is still just plain ole commuting.

A typical case of some bureaucrat with nothing better to do. We have these people down here in the Sunny South as well. Of course, I don't know New York law, but it seems that in lieu of statutory compliance, alternate proof should be acceptable. From what you tell us, this alternate proof is overwhelming. I hope you hear from someone familiar with NY.

More and more people are wanting to bail out of this electronic age. As the identity theft becomes more astute, websites/providers are having to put up more hoops to jump through all the time. Many folks are going back to simply writing checks and putting them in the mail, and looking for alternatives to electronic obstacle-dodging.

This one is marked final, and consists of various losses from the previous year. The long-term capital loss is over $4000, which is more than the $3000 limit. However, none of the beneficiaries (2) have LTCL over $3000, so I gather from previous comments that each beneficiary can get their entire loss rolled forward into this year. Admittedly, I am not very experienced with Estate returns and would not have accepted this, except it is my brother's estate.

The capital loss restriction of ($3000) appears to apply to fiduciaries as well as individuals. Does the $3000 loss ceiling apply to the entire estate or to each beneficiary?

Thank you...not enough research done on my part.

In 2025 when the tax cuts expire, there is liable to be tampering with strange new twists. One thing you can count on, however. Federal standard deductions will remain sky-high. All my career, they have been putting the standard deduction so high that it is out of reach. I believe the IRS is in favor of this - gives them less to audit on a personal tax return.

A client sold his interest in a partnership and will collect the proceeds over a 10-year period (Installment method). There was a loan attached to the partnership interest. The buyer in effect took over the loan. Technically it doesn't meet the definition of a "wraparound" mortgage because he had to secure his own loan so he could pay off the loan attached to the partnership interest. There is no question that the loan payoff becomes part of the revenue associated with the installment sale. However the timing is up for discussion. Question: When reporting on the installment method, must he show the mortgage payoff as collected revenue in the first year? My guess is that he must, because that's when he received the benefit. Incidentally, this client is the same one mentioned in my previous post. He was partner in two partnerships, sold one at a loss and another at a gain, both instalments.

A Client sold his partnership interest in 2024, on a 10-year installment. After calculating his basis, he sold at a loss. He is not obligated to report using the installment method. However, he would be better spreading this loss over a period of years rather than all at once. Question: Can he report this loss on the installment method, or does he have to show the loss all in the year it occurred? Thanks in advance for your comments.

Judy. I am suspicious as well. A flat monthly fee for a management company doesn't seem to fit well with their business plan. I will investigate further with the client. Thanks.

For years, the IRS has been trying to squeeze self-employment taxes out of what used to simply be rentals. This latest thing is to declare "short-term rentals" as taxable for SE tax. I'm assuming this means AirB&B and the like. My question: A client (C) owns a suite in Gatlinburg, TN (a heavy tourist location at the foot of the Smokies). He rents it to a management company (M), who pays him a flat monthly charge. (M) in turn rents out the suite to all comers for one night - or more, maybe even a week. M is doing "short-term rentals." What about (C) who is receiving monthly rent? Is C falling into the Short-Term-Rental umbrella? I'm sure the IRS has their own interpretation, but what is the correct answer??

One of my clients has a $700,000 gain on the sale of land and is selling on 5-year installment method. He wants to divert some of the gain to his church without having to deal with getting it absorbed by the huge std deduction. He has suggested setting up a charitable organization. I believe if he does this, payments to such an organization would still be a Schedule A deduction, getting absorbed by the std deduction (i.e. worthless). Are any of you aware of anything exotic his objective can be accomplished? I can't think of any, but this group is smarter than me. If he had asked me earlier, I would have advised him to make the charity part-owner of the land prior to the sale.

Thank you to the group. Even worked on my cell phone...

Any suggestions as to how to stop Google from taking over my computer? Google assumes I want to subscribe to their products, and nothing can be further from the truth. I want as little to do with Google as I possibly can. But casually doing anything on my PC, I am bombarded by pop-ups from Google wanting me to subscribe to their version of whatever application I am working on. My browser is FireFox and they have even planted on icon on Firefox that I can't get rid of. Most of you are more computer literate than myself. This is partly by choice on my part, and partly my own ignorance. Look forward to suggestions from the group.

Judy, thank you so much. That pretty well answers the question. Apparently the ordering rules are: Reduce the Earnings and Profits to the extent they exist at year-end. Reduce the Basis Report Capital Gains Great link also. Ron J.

Thanks for all comments. Very instructive. Yes there was confusion due to the introduction of basis. If there is a $1000 initial contribution of cash for capital stock in a C Corp, that should be the end of the basis it if nothing else happens to capital stock. Further income, loss, non-taxable income, non-deductible expenses should not change the basis. If the issuance of dividends is taxable to the extent of E&P, the question becomes is the measurement of E&P effective at the beginning of the year or at the end of the year??

Darlene, I would love to have gone there. Sorry to miss. Neighboring Chippewa Falls is one of my favorite places on earth.