mircpa

Hello all client sold foreign rental property at a gain of 56K. Form 4797 is not transferring gain onto line 1 of 1116 for calculating foreign tax credit. I try to enter manually onto 1116 it is not working. Does anyone knows it is because of Sch D or qualified dividends capital gain work sheet or something else.

I would go to brokerage to take out CA as resident state if in fact client is not a resident.

@jklcpa Question: If this person has dental office drawing salary and income, can he take position of materially participating in rental activity ?

@cpabsd What is transition period ? You mean from the time contract entered into until it is closed ?

@peggysioux5 File tax returns for all years partnership transacted business even if extending beyond dissolution date.

@BulldogTom I believe it is CA based business S corporation, when 1120S gets generated it also generates CA K1 which would have K1 income or loss and capital gain which is sourced to CA. S corporations in CA files 100S & K1 100S

If this business is based in CA then it CA source K1 income & capital gain regardless of where shareholder lives.

@Tax Prep by Deb I believe this shareholder who is resident of OK should file CA 540 NR with its share of CA K1 income & capital gain. Include CA 540 NR California adjustments.

@Max W If all liabilities are loans that means owners do not have stock basis. Equity of negative 150K could comprise of previous years and current year losses. You should also look at past years 7203's. Double check outside entities loan balances at year end, may be they might have miscategorized shareholders loans as outside loans.

@schirallicpa Since wife is contesting ownership, do nothing at this point. Wait until this ends up in court and follow judge's advise. I am thinking may be you have to retro fix

@schirallicpa File retro 8832 to regard this as corporation. I believe in absence of 8832, IRS is regarding this entity as sole proprietor or partnership. At this time you can either file retro 8832 for it to be treated as corporation or amend tax return to sole proprietor (Sch C) or partnership.

@Max W Issue 1099 for whatever amount paid to contractor prior to and subsequent to sale & mark that as expense OR increase basis

@Catherine Are you not suppose to file MA Non resident tax return indicating whole year taxpayer was not present in MA ? MA instruction to file ONLY if MA source income greater than 8,000

@WITAXLADY Your answer might lie in basis. It could be that 7203 does not have correct basis from past years.

There are 2 separate issues being discussed One is reasonable officers compensation on which SS & medicare needs to be paid. Amount of SEHI needs to be added in line 1 of W2. Also you will take deduction of SEHI amount against AGI in 1040. For you to take this deduction, amount of SEHI should be less than SS & medicare wages. Should the amount of SEHI is higher than medicare wages then your deduction is limited to amount of SS & medicare wages & excess will get reported in Sch A under medical expenses.