David

I thought they needed the signed copy no matter what. Has anyone found it to be different?

I completed a 3115 for a taxpayer who never took depreciation on the rental home he sold. He signed the form but it was not attached as a pdf to the return before the return was e-filed. The return has been accepted by the IRS. Has anyone had this issue before? I'm thinking I am OK as long as the signed 3115 is mailed to the IRS. Is this correct? It is for the automatic approval for a change in depreciation. Thanks.

I thought I read that if it is an automatic change for depreciation that you only needed to e-file the 3115 with the return and not have to also mail it. I guess it is safer to do both?

Thanks, Judy. I appreciate your help.

I think I misread the HSA information from the TP's W-2. The deductions from his gross to taxable wages includes $6,350 Cafeteria 125 HSA. The box 12 code W amount is $7,550. I'm now thinking that the code W includes both the employee's $6,350 contributions and the employer's $1,200 contribution which total $7,550. Am I clear on this now? Or is my brain getting tired? :-)

TP's employer contributed $7,550 to his HSA family plan. Employee also had HSA deductions from his paychecks for $6,350. TP is over 55 years old. Are only the employer contributions reported on form 8889? The employee's HSA payroll deductions aren't reported on line 2 of Form 8889 are they? The instructions appear to state that contributions through a cafeteria plan are not included on line 2. Am I understanding this correctly? It seems that the total employer and employee contributions are $13,900 which is over the family contribution limit of $6,550. Thanks.

Thanks, KC. Am I required to only attach as a pdf to the tax return or am I required to mail the form?

TP prepared his own tax returns and never claimed depreciation for his rental property put in use in 2010. He sold the property in 2014. If I am reading Rev Proc 2011-14 sec. 6.01(1)(a)(i) correctly, he can file Form 3115 and receive approval for automatic change to take the allowable depreciation in 2014 as a 481 adjustment - even though the IRS does not usually grant a change in the final year of the business. Am I correct in my understanding? How do I mark Part II question 3 of Form 3115 where it asks if the applicant ceased to engage in the business? He sold the property in 2014. Also do I simply put the depreciation adjustment on sch E under other as a 481(a) adjustment? It appears that the 3115 has to be signed by the TP but can be e-filed with the return and doesn't have to be mailed to any agency. Is this correct? Thanks for your help.

I thought if you first used a home as a personal residence and later converted it to rental property, you are able to prorate and get a partial exclusion. It must be the long hours getting to me. Thanks.

TP owned his house since June 2006 and used it as a personal residence until he converted it to a rental in December 2010. He sold in November 2014. Personal residence use was roughly 1 year out of the last 5 years. Does he get the partial exclusion since he lived in the rental prior to converting it to a rental? Or does he not get any partial exclusion and must have lived in the house 2 years out of the last 5 years? Thanks.

TP's box 1 W-2 includes the difference between the FMV vs option price for ISOs exercised. I thought only RSUs were included in W-2 income. Since the gain from exercising the options is included in W-2 wages, it appears that I don't need to report the ISO gain for AMT. Is this correct or am I missing something? Thanks.

OK, thanks. His W-2 indicates he has an employer retirement plan. The program allowed both the 401K $11,500 contribution and the SEP contribution. Should I be worried?

TP left employer mid year 2014 and started his own consulting business. His W-2 shows 401K deductions for $11,500. TP is over 50 years old. The maximum SEP allowable based on his Sch C profit is $19,500. The program is not limiting his SEP to maintain a total of $23,000 between his 401K and SEP. Is he allowed to also contribute $19,500 to his SEP after contributing $11,500 to his 401K? Thanks.

Yes, I am planning to go back through previous tax returns if the client can't get basis statements. The client's books don't match the tax returns because they were never given adjusting entries. My main question is whether the accrual to cash conversion should be treated as an addition on line 3 of schedule M-2 if the book profit is greater than the tax profit.

S Corp SHs have excess distributions in 2014. The prior year tax return, prepared by another preparer, does not include a basis statement. The client's books are accrual basis and tax is cash basis. The prior year M-2 is giving the SHs credit for the accrual to cash conversion on line 3 Other Additions. The book profit is greater than tax for 2013 and 2014. The 2014 M-2 is not giving them credit for the accrual to cash conversion. Should the SHs get credit for this or was the 2013 tax return incorrect? Thanks.

Evidently they work as independent contractors in the oil and gas industry getting contracts and lease deals.

New client is a landman. His 2013 tax return showed state tax returns for every state he worked in and he paid state income taxes to those states. He says that in talking with other landmen, he learned that he only has to pay state taxes in the state he resides. I haven't been able to find anything that indicates landmen are treated differently and only need to pay state taxes to the state of residence. Can those of you who have landman clients let me know if this is correct and give me a cite or other authority? Thanks.

I am preparing a 1041 for a decedent's complex trust. i am reporting all dividends and stock gains/losses to the trust and showing that all earnings have been distributed to the beneficiaries. Everything in the account has been distributed to the beneficiaries. One of the beneficiaries wanted a particular stock transferred to him and this was part of his distribution. Distributions of cash from other stock sales and dividends as well as the stock distributed to the one beneficiary were equally distributed. Do I need to report the distribution of the stock differently or just report distribution amounts equally for all beneficiaries? Also, there is $81K capital gain from stock sales. Doesn't this get allocated to the beneficiaries' K-1 since everything was distributed to them? The program is treating the capital gain as trust income and taxed at the trust level. Thanks.

Ok, thanks. Do I report all assets as converted to personal use and report the installment sale on his personal return or do I report the sale of all assets on his S Corp return?

S Corp SH retired from his insurance business. He sold office furniture, equipment, etc. to the new guy taking his place with the agency. There is 3 year installment agreement. If I'm not mistaken, the sale of equipment doesn't get reported on the S Corp return and the resulting gain/loss doesn't get reported either since there is an installment agreement. The gain/loss from the installment agreement gets reported on the SH's personal tax return. Is my understanding correct? Also, no one buys his business. He just leaves. The insurance agency pays him a certain amount over several years. Does this get reported as regular income or does it get included in the installment sale? Thanks.

Client has been asked for a valuation of their business. The requester is fine with a valuation method to use in lieu of getting a full valuation done every year. They told my client that their CPA should be able to give them insight as to how most companies in their industry are valued. They gave an example of net profits times X% + assets. The X% is supposedly the typical valuation % for the industry. Does anyone know a good resource that I can use to determine a valuation method for a roofing company? Thanks.

Thanks so much for your help.

S Corp shareholder terminated his interest on 10/15/14. The company had a loss YTD 10/15 and a huge profit from 10/16 - 12/31. We allocated the SH's profit/loss on the SH's final K-1 based on the loss through 10/15 and allocated to the remaining SH his portion of the loss through 10/15 and 100%of the profit from 10/16 - 12/31. It didn't seem fair to allocate the prorated % of the total year's profit to the terminating SH. I thought there was an election that had to be made to do the final allocation based on profit/loss through the termination date. I can't find that statement. Maybe I'm wrong. Is an election required? If so, where do I find it? Thanks.

Thanks, KC. When does the twice in a 10 year period test apply? Is that for improvements (betterment) that would normally be capitalized?

This must have been lost in the mix of posts so I will post again. Client owns a restaurant business and also has a separate LLC that owns the buildingthat the restaurant is leasing. The restaurant is responsible for all maintenance,repairs, improvements, etc. He paved the parking lot for $44K and received a grant from the city for $22K. Since the paving is keeping the property in it's original condition and isn't a betterment, does he get to expense the $22K cost? Or is does he have to meet the expected 2 times in a 10 year period test? Also, now that we don't need to file a 3115 for our small business taxpayers, don't we still need to make the annual election for the deminimis safe harbor and the repair safe harbor? Thanks.