David

H&W have a K-1 (1065) for 2012 reporting $52K in box 13E and for 2013 reporting $56K in box 13E and $56K in box 18B. The 2013 K-1 is marked final.They held onto the 2012 K-1 and gave it to me in 2014 when they dropped off their 2013 tax documents. I entered the information in the K-1 (1065) input sheet but it doesn't carry over to Sch A line 17. TPs already have a form 8283 for other noncash giving. So, I thought I needed to also enter the K-1 information on form 8283 but it still doesn't flow to the K-1 section of Sch A line 17. How do I get this information reported correctly? I have never had a K-1 with a capital gain property to a 50% organization (30%) limitation. The footnotes on the K-1s state: Taxpayer basis is reduced by cost basis of noncash charitable contribution rather than the value of the contribution. Taxpayer's portion of the cost basis of the noncash charitable contribution is zero. Therefore, noncash charitable contribution is not limited. The value of your noncash charitable contribution has been included in tax basis contributions. Some of those statements seem contradictory. Do these statements simply mean that the TP chose to reduce the FMV of the contribution by the amount of LT gain? Therefore, the statement that the contribution is not limited is referring to the contribution isn't limited to 30% but is limited to 50%? The footnote for line 18B on the Final 2013 K-1 says that the $56K is unrecognized gain from noncash charitable contribution. Is this statement only informational and the TP still gets to report the contribution even if there is an unrecogniezed gain to the partnership? Thanks for your help.

Thanks for your help, everyone.

OK, thanks. Since he inherited the vacant land does it matter how the decedent used the land or only how my client has used the land since the DOD?

Thanks for helping me with this. So the client gets to take the full loss in 2013 even though he will be receiving the sale proceeds over 5 years?

Client inherited a house and a separate piece vacant land. He sold both in 2013. Based on the DOD (2010) value he will have a gain from the sale of the house. Based on the DOD (2010) value he will have a loss from the sale of land. Furthermore, my client has a five year note from the buyer. My questions are: 1. Is the vacant land considered personal property and therefore, the loss is not deductible? 2. If the loss from the sale of vacant land is deductible I am thinking the loss has to be taken proportionately each year during the installment period just as a gain would be? I have never had an installment sale loss so I want to make sure my thinking is correct. Thanks for your help.

Thanks, KC. Would you also recommend sending the original 2553 that I completed in 2013 pursuant to Rev. Proc. 2007-62 to show that diligence was attempted in response to the first letter received in May 2013? Also, is it necessary to also send Form 8832? Thanks.

SMLLC chose to make a late election to be taxed as an S Corp with it's 2012 1120S. I completed Form 2553 and e-filed the client's 1120S. I thought the 2553 would be e-filed with the return but it must have not been - I use ATX. The IRS sent my client a notice in May 2013 stating that it did not recognize the entity as an S Corp and that the client could file a late election under a couple of rev. procs. I mailed the signed 2553 to the IRS at that time. My client received another IRS letter for his 2013 1120S tax return stating that the IRS does not recognize the entity as an S Corp and that he can file a late election under Rev. Proc. 2013-30. It appears that Rev. Proc. 2013-30 has replaced all other late S eleciton Rev. Procs. and is now the only Rev. Proc. available for late S election. I filed the original 2553 pursuant to Rev. Proc. 2007-62. I plan to fax a response to the IRS so I at least have a time stamp and proof that they received the late election. My questions are: 1. Since Rev. Proc. 2013-30 allows late election within 3 years and 75 days from the time the entity wanted to be taxed as an S Corp., should I just file a new 2553 electing S Corp satus as of 1-1-12 pursuant to Rev. Proc. 2013-30? 2. In addition to filing a new 2553 should I also send a letter explaining why the S election is so late and enclose the original 2553 filed pursuant to Rev. Proc. 2007-62? Or will this confuse the IRS? 3. In either case, does the 2553 suffice for allowing the SMLLC to be treated as an S Corp at the beginning of 2012? Or does form 8832 also need to be filed? It appears that Rev. Proc. 2013-30 covers both a late entity election and late S Corp election but the instructions seem to only require Form 2553. 4. Since the client has 3 years and 75 days to file for the late election, should I send the new 2553 independent of the IRS letter or should I send it in response to the letter? The response date will be a couple days late of the requested response time per the IRS letter. Thanks for your help.

Judy, thanks for helping me with this. I appreciate it.

TP cashed out his annuity and was told by his broker that he could write off the difference between his tax cost basis vs. the amount he received. This difference is ~ $199K. The only thing I can find in the pubs and regs is that when a TP dies the unrecovered investment can be deducted on his final return on Sch A, not subject to the 2% limitation. Can the TP write off the unrecovered amount since he cashed out of the annuity? Thanks.

There were no % information included as well. Does everyone make the client get that information when a 1116 is required?

Thanks everyone for your help on this. There was no supplemental information showing the amount of foreign sourced income. In that case what do you do?

Thanks for your help. Most of the time I just see the total ordinary and qualified dividends. The foreign portion isn't shown. So I guess using the total amounts may be a problem. What do you do when the foreign amounts aren't shown? Thanks.

Single TP has > $300 foreign taxes. I haven't had to prepare form 1116 before. The foreign taxes were entered into the 1099-DIV worksheet. However, they aren't transferring to the 1116. How do I get them to transfer? Thanks.

OK. Thanks.

That won't raise a red flag with the IRS or cause a problem with prior year accumulated depreciation? Thanks.

Thanks, KC. I don't know why I didn't think of that. I don't see a place in fixed assets to adjust the remaining basis. Where do I do that? Thanks.

Business owner was reimbursed for a portion of the leasehold improvements that were done in 2012. I'm wondering how to handle this. Set it up as a liability and amortize it into income over the remaining depreciation period of the leasehold improvements? Or can I add it as a negative fixed asset? I have had so many problems with ATX fixed assets that I am afraid to do anything out of the ordinary. Thanks.

That makes sense. So a 1099-C would not be correct if the departing member did not personally guarantee the loan? What if 1 member/shareholder personally guranteed the corporation debt and the other 2 members/shareholders did not and the 2 members/shareholders who did not personally guarantee the loan terminated their interest in the S Corp? The remaining member of the S Corp is left holding the bag and no 1099-C is issued to the other 2 members? Thanks for your help.

After thinking more about reg 1.301-1(m) could the cancellation of debt of a shareholder by a corporation mean a direct loan to the shareholder from the corporation and not corporation debt guaranteed by the shareholder? Hmmmmm....... so instead of reporting it as a property distribution on the K-1 are we back to the S Corp issuing a 1099-C?

OK, someone pointed out reg 1.301-1(m). It states that cancellation of debt of a shareholder by a corporation is treated as a property distribution. So, I guess this is reported as a distribution on the K-1 - unless the reg is referring to C Corps only. Thanks everyone for your help.

Thanks for responding. I'm thinking the same but like you I am not certain. I thought I was the only one who never dealt with this before. The problem is that the previous CPA told the 2 remaining members that the departing member will have to pay tax on 1/3 of the debt that she is walking away from. If this is correct, I don't know where to show that on the K-1. Does the S Corp issue a 1099-C to the departing member for 1/3 of the debt? Remember, the debt was from the departing member's father. Since I have never dealt with this before I want to make sure I am doing the right thing, especially trying to explain to the remaining members that the departing member has no repercussion from walking away from the corporation and the corporation debt. I would appreciate input from those of you who have dealt with this issue. I have to have the S Corp tax return completed tomorrow. Thanks.

OK, maybe I need more information? The debt was from the departing member's father to the LLC, signed by all 3 members. The remaining members tried to get the departing member to pay her portion of the debt but she refused. The termination agreement stated that the debt to the departing member's father has to be paid in full within 30 days of the departing member's termination date. The remaining members paid the debt in full with a loan from one of the members and from another debt from that same member's parents. The termination agreement also states that the departing member is released from company debt and all other claims. The departing member had a basis at 12/31/12 of $9K - $7K stock basis and $2K debt basis. She left in February 2013 so there will be a little more profit added to her basis. How and where in the ATX program do I show that the SH was relieved of 1/3 of the debt? Doesn't this debt relief get reported on the K-1 as taxable income? Or is it netted against the SH basis and then the remaining amount is taxed to the SH? Thanks.

LLC taxed as a S Corp had 3 shareholders. One SH left during 2013. The company has debt. How and where in the ATX program do I show that the SH was relieved of 1/3 of the debt? Doesn't this debt relief get reported on the K-1 as taxable income? Thanks.

Thanks, everyone for your help with this. KC, you say the father can gift $20K with no tax impact. I thought the father could only gift $14K. The son is getting married this year. If the father decides to gift to both of them and keep the property in the LLC doesn't the daughter-in-law then have to be an LLC member? I want to make sure I understand this correctly: The gifting strategy is used if there is concern of the son having enough basis to take any losses. So if the property is generating income then the father can transfer the property to the LLC and the father and son determine that they both share equally in profits and losses. No gifting is needed. Also, can they each have 50% interest in assets or since the father contributed the property then he has to be allocated 100% of assets and the son has no share of assets? Thanks.

Also, I thought one LLC member could contribute property and the other member doesn't have to contribute anything to an LLC. And unlike an S Corp. the members can determine the % each LLC member shares in profits and losses. Can't they determine that each member has a 50% interest in profits and losses? But since the property is contributed by the father, can they still determine that each has a 50% interest in assets or does the father have to have a 100% interest in assets and the son zero % interest in assets? Thanks.