David

New client married in 2013 and her husband owes taxes from 2008 and 2009. They filed MFJ in 2013 and had a balance due. They are receiving a refund on their 2014 MFJ return. I am filing form 8379 but the instructions aren't clear as to how much of the refund will be intercepted for the H's portion and how much the W will receive. After going through the allocation of income and deductions and taxes withheld there is no final calculation on the form that shows how the refund will be allocated to each spouse. Is it automatically 50%? Is it based on the % taxable income? Is it based on the % of taxes withheld? I did a MFS analysis and the W will owe a little and the H will receive a refund. Is this what the IRS will do with the allocations on Form 8379 - calculate as though they are filing separately and determine that the W would owe, therefore she will not receive a portion of the refund? Thanks for your help.

S Corp officer is the only shareholder in the company. In the past he has been taking the above the line health care premium deduction. He just hired an employee who has been getting his health care on the exchange. The company is not providing insurance for him. I don't think the shareholder can claim the deduction anymore since the company doesn't offer health care benefits to all. Is this correct? Therefore, the shareholder can only take the health care premium deduction on Sch A? Thanks.

S Corp started leasing a vehicle that is used approximately 68% for business. The value of the vehicle is $53K. After the capitalized cost reduction ($3K) and residual value deduction ($37K) the 36 monthly lease payments are $18K. This appears to be an operating lease and not a capital lease. Therefore, do I simply record the lease payments as lease expense and make sure that the personal use is reported on the shareholder's W-2? Also, the lease began in 2014 and the personal use was not reported on the shareholder's W-2. How would most of you handle this situation? Thanks.

A transfer was not done shortly after the DOD in 2010. There was no will. The TP says his attorney said he would have to go to court to get the partnership transferred and the court costs may not be worth transferring the partnership interest. I thought since they were married that the surviving spouse would automatically have rights to the partnership interest.

Thanks for your help.

TP's wife died years ago and had a passive interest in a partnership. TP received a final K-1 with his wife's name and ssn listed. In addition to a passive loss carry forward, the TP's wife also has a $60K remaining basis. Even though the K-1 is in the TP's deceased wife's name and ssn, can he take the passive loss carryforward and the $60K loss from unrecovered basis on his tax return? Thanks.

Thanks for your help.

So the accrual box for foreign tax paid on Form 1116 indicates that the TP reports on the accrual basis? If he can't claim the credit until 2015 and he doesn't have any foreign income, then he will never get the credit for those taxes paid, will he? Thanks.

New client had Canadian taxes and foreign tax credit carryforwards in 2012 and 2013. He had a minimal amount of Canadian wages in 2014. The Canadian Revenue Agency sent the TP a letter in the summer of 2014 stating that his tax return was incorrect. They finally settled on the discrepancies in late 2014 and the TP paid an additional $90K+ taxes in January 2015. How should the additional $90K Canadian taxes paid in January 2015 be reported so that my client gets the most favorable tax credit? The client filed an extension for his 2014 tax return. Does the 2013 tax return need to be amended so that the 1116 shows the additional $90K and the box that is checked that says taxes paid is changed to taxes accrued? I am thinking this is better than reporting it as accrued taxes on the 2014 tax return since the 2014 foreign income is so minimal. Is there a better way to help the TP get the most foreign tax credit for this situation? Thanks.

I'm sure no one has had this happen before but I thought I would check. We prepared client's tax return and emailed it to him on 4/15. He made some changes that resulted in additional taxes. We filed an extension and he paid his recalculated amount owed with the 1040-V form and mailed it in. I'm debating whether to show the amount on the 1040 as paid with the extension. I know the IRS will be confused with this one. I don't know where else I should report the payment. Any ideas? Thanks.

TP sold condo in 3/14 that was used both as rental and primary residence. There have been 2 capital assessments. One in 11/12 and the other in 4/13. The home sale adjusted basis worksheet has one line for capital assessment amounts. Therefore, the capital assessment in 2013 will be treated as though it is a long term capital gain. Should this assessment be broken out as it's own sale and the resulting gain treated as ordinary gain? Or should it just be thrown in to the total cost of the condo and treated as LT cap gain? Thanks.

Thanks all for your help with this.

Client has 2 K-1s for PTPs included in his IRA. These are final K-1s. The K-1s report ordinary business income (loss) in box 1, interest income, dividends, royalties, 1231 losses, and minor amounts of UBTI in box 20 code V ( the net of the 2 K-1s is a loss). The instructions indicate that since this is a final K-1 and the partnership interest has been terminated, then a gain or loss from the sale of the interest needs to be reported. The K-1s don't need to be reported since they are related to an IRA account, do they? I don't want the client to get a letter from the IRS regarding unreported K-1 information. Thanks.

I can't find anything in my research that addresses my client's situation. His employer paid his relocation costs in 2012. He was laid off and the employer required that he pay back the amount the employer paid. They settled on paying back half of the amount the employer paid - ~ $18.5K. The employer wanted $37K paid back of which $22K was for transportation of household goods, $8K was taxable income to the employee, and the remaining $7K is unidentified. The TP, of course, doesn't know what this difference is. Some of that amount should be for grossing up for taxes. However, $7K seems too high for that. Do I report the $18.5K as a claim of right deduction on Sch A line 28 or as a credit on line 73 of Form 1040? It appears that the only amount that can be deducted or credited is the amount that was originally included in income, which is $8K and the unknown amount of income to gross up for taxes. I'm sure I'm not the only one who has a client with this situation. How have any of you who have had this situation handled it? Thanks.

I would like to report it as additional income in 2014. However, since the transaction(s) was recorded in 2013 wouldn't I need to amend 2013 so that in the case of an audit the 2013 and 2014 numbers agree with the tax returns? It would be easier to report the additional income in 2014 with an internal note that explains why the P&L per the tax return doesn't match the P&L in the client's 2014 financial statements. I'm wondering if that would be acceptable if there were an audit. Thanks.

An 1120S client changed something in 2013 after the 2013 tax returns were completed. During 2014 we told them to close their year and don't make any entries to the prior year. Something still slipped by. There is an additional $1,785 increase to the 2013 equity/retained earnings. I am reporting that as a prior period adjustment in the equity section on the balance sheet. I have seen this adjustment on new client's tax returns prepared by other tax preparers. I'm sure this is a red flag to the IRS, unless they don't consider $1,785 a material amount. Have any of you who have made this adjustment ever had an issue with the IRS? Another option would be to enter the beginning balance sheet and beginning M-2 balance according to the client's current 2013 financial statements. However, I think that would be worse than the prior adjustment entry since the IRS probably flags beginning balances that don't match the prior year tax return. How do those of you who have this issue handle it? Thanks.

Cost was $289K, no improvements, depreciation allowed and taken was $35,988, and the selling price less selling costs was $324K. TP was divorced in 2014 and was awarded the house in the divorce. The HUD settlement statement has only her name listed. Therefore, all information reported for the taxable gain due to the nonqualified use portion and the depreciation recapture are being reported to her. The next question is, since she is awarded the house and the sale is being reported on her tax return, does she get to claim the $51K suspended loss or only half of it? I would think she gets to claim all of it since the sale is being reported on her tax return. If she only gets half of the suspended loss then do I only report half of the sale and half the gain from nonqualified use and half of the depreciation recapture? I'm sure her ex is not reporting anything related to the sale. Since there is a partial 121 exclusion, is she only allowed to deduct suspended loss to the extent of the taxable gain from nonqualified use and the depreciation recapture? Or can she take the full loss even if it generates an NOL? Thanks.

TP purchased residence in March 2005 began renting it in June 2006, moved back in June 2010 and sold in October 2014. She has a $51K suspended loss. When reporting the sale I should report the days rented after 12/31/08 as non qualified use for purposes of determining the partial gain exclusion, correct? The TP should get to deduct all of the $51K suspended loss. However, the suspended loss is being allocated between the non qualified use and the primary residence use. is this the correct calculation? Depreciation isn't being allocated. All depreciation is correctly reducing basis. Shouldn't all of the suspended loss likewise be reported as an increase in basis? Thanks.

Ok, thanks.

New client has a 3 year gap where no depreciation was taken on their rental property. In the past I have filed Form 3115 to get automatic approval to change from an impermissable to a permissable method of accounting and take all depreciation that should have been taken. However, I have always done this when the TP sold their rental property. My question is whether I can take all of the depreciation adjustment in the current year as a 481(a) adjustment when the TP is still renting the property. I think it is OK but want to make sure. Thanks.

TP sent me his 2011 information and is getting a refund. Before I tell him it is futile to file the return because he won't get the refund since it is past the 3 year limitation, I want to make sure. I recently read an IRS update email that said to make sure TPs file their 2011 tax returns ASAP or they may not receive their refund. Since the update said "may" that leads me to believe that we should go ahead and file and the TP may still receive his refund. Has anyone ever file a tax return shortly after the 3 year limitation and had the client receive their refund? Thanks.

TP set up an LLC for commercial rental property. H&W are members. Since the asset is being transferred I would think that the asset would carry over to the 1065 with the original purchase date, cost and accumulated depreciation. The 39 year depreciation period wouldn't start over, would it? If I show the same original purchase date and accumulated depreciation, etc. will I still be able to file since the purchase date will be prior to the LLC start date? How should this be handled? Thanks.

TP is filing MFS and going through a separation and or divorce. Husband owns a SMLLC and issued his wife a 1099 because he says she benefited from the earnings from the business. She did not work for the business. The business is electrical services. I am planning to report the 1099 on her Sch C and back it out under other deductions with a description "Fraudulently filed 1099-MISC". Has anyone ever had this situation? Is this the best way to handle this or is there a better way? Thanks.

In reading the instructions for the health insurance premiums credit it appears that the company gets this credit only if they go through SHOP. This appears to be the Obamacare exchange or state exchanges. Is this true? So if a company provided health coverage in the past for their employees and continued with the same company (Kaiser, United, etc.)do they no longer get the credit? Or am I to assume that the insurance company they always used is now required to be part of SHOP, therefore the business still gets the credit? Thanks.

Ok, thanks. I'm happy.