David

Yes, I know that automatic approval with Form 3115 isn't available for the 2011 tax year since it is the year of dissolution. However, can't the 2010 tax return be amended and Form 3115 filed for the 2010 tax year? Thanks.

That is correct regarding the gain and depreciation recapture. However, the client is concerned that he never got the full depreciation deduction throughout the years. The asset was purchased for $122K and should have been fully depreciated. However, because the incorrect asset classification was used, only $40K was depreciated. Since the nbv of the asset for purposes of the gain calculation is zero (because the depreciation allowed was the full $122K), the TP hasn't had the benefit of taking the full depreciation deduction on his tax returns. The TP wants the additional $80K+ depreciation that he is allowed. I am trying to figure out how best to accomplish that. I thought we could file form 3115 and take the additional depreciation in 2011. If I amend 2010 and file form 3115 to catch up the depreciation through 2010, then the TP does not get the last year (2011) full depreciation amount. Is my only option to amend 2010 and file form 3115 to catch up depreciation through 2010 and then amend 2011 to take the correct depreciation for 2011? Thanks.

H & W LLC filed the final return for 2011. It was determined that depreciation for one asset was incorrect through the years and approximately an additional $80K of depreciation should have been taken. I thought we could correct the depreciation by filing form 3115 requesting an automatic change in accounting method. However, the instructions for form 3115 says that the automatic change is not allowed in the year of dissolution. I don't understand why an adjustment can't be made in the year of dissolution, but I know there is no logic in the tax code. What is the best way to handle this so that all depreciation through 2011 is taken for the TP? If I amend the 2010 tax return to take all of the depreciation that should have been taken through 2010, then the TP will not have the benefit of taking the correct 2011 depreciation. Thanks for your help.

SMLLC has decided to elect S Corp status for 2011 and has filed an extension. TP made quarterly estimated tax payments during 2011. The payroll service has processed an annual 2011 salary and the the related 2011 employer reports. The payroll service reported the TP's quarterly estimated tax payments as taxes paid/deposited on the employer reports, resulting in no tax due. I'm sure that was the result of miscommunication between the payroll service and the TP. The payroll service probably asked the TP if he paid taxes during the year. Of course the TP said they did and gave the payroll service the total amounts of the quarterly payments made in 2011. Before I tell the TP that they have to pay the amounts stated on the employer reports and that he will get a refund for the quarterly estimated taxes when he files his tax return, I thought I would check with any of you who may have encountered this situation. I don't think the IRS will consider/apply the quarterly estimated tax payments as payroll taxes paid for purposes of the 941, 940, etc. Does anyone know if this can be done which results in no taxes due with the employer reports being filed for 2011? Thanks for your help.

TP has an outstanding loan to his employer with documentation. Employer is claiming bankruptcy and told the TP that they will not be able to pay the loan. The company's CPA sent the TP information stating that he would be able to fully deduct the bad debt since employee loans to employers are considered business debts. From my research it is correct that this employee loan bad debt is considered a business bad debt. However, none of the research sources say where a business bad debt is reported on Form 1040. Is it reported as a negative number on line 21, other income? Since the bad debt is fully deductible it doesn't seem right to report it on Sch A since the only way a TP would be able to take the bad debt deduction is if he is able to take itemized deductions. Thanks.

Where are Canadian oil royalties reported and how is the foreign tax credit reported? These are small amounts so a Form 1116 doesn't need to be filed for the foreign tax credit. Form 8891 appears to be only for Canadian retirement plans and not for oil royalties. Does the TP also get the 15% depletion allowance? Thanks.

Thanks for your help. 2011 is the first year I have purchased the trial balance program so I don't have the 2010 program, unless it was included in the 2010 Total Tax Office Package. The 2011 program allows us to enter 2010 transactions. Will that work or will it not transfer the 2010 profit to the 2011 retained earnings? Thanks.

I am using ATX trial balance for the first time for a financial review. I need to show comparative statements that will show 2010 numbers (reviewed by the previous CPA) and the 2011 numbers. The instructions say to enter beginning balances for the balance sheet accounts only. However, I need to also show the 2010 P&L numbers. Can those of you who have used ATX Trial Balance tell me the best way to enter the information so that the 2010 P&L will be presented in the comparative statements and the 2010 profit will be reflected in the 2011 retained earnings? Thanks.

Yes. Again, I can't see anything different in the way this asset was entered into Asset Entry than the other assets. There are some assets that only had $3 - $10 NBV at the end of 2011 that didn't show any 2012 depreciation. I'm guessing these are rounding issues and aren't a big deal. However, the asset that I am concerned about was purchased in 2010 and the depreciation should be $720 in 2012. I can't override the zero amount in the "Next Year" report. Any other suggestions? Thanks.

No, I checked for those things. The asset was purchased in 2010 and no bonus depreciation was taken. Is anyone aware of a glitch in the program?

Client wants to know what his depreciation numbers should be for 2012 so he can book them in his 2012 financial statements. I am using the next year depreciaiton feature in form 4562 that shows the 2012 depreciation. Some of the 2012 depreciaition numbers show zero and the asset isn't fully depreciated. I can't see any difference between the way those assets were entered into asset entry that may cause this problem. Has anyone encountered this? How do we correct the calculation so it shows 2012 depreciation for the asset? I would like the 2012 depreciation schedule to look correct before sending it to the client. Thanks.

I guess since there was no response that we don't have that feature with ATX. New client's tax return prepared by their previous CPA had a nice schedule that listed all the assets that were disposed during the year. You would think ATX would have that capability.

Is a schedule of disposed assets available in the ATX asset entry section? I can't seem to find a schedule that shows the amount of assets disposed. Thanks.

What is even more strange is that I don't have the purchaser's TIN or address entered yet, which is required, and the e-file program accepted the return. Does this mean that I only need the name of the purchaser and not the other "required" information?

Thanks for your help on this. The tab I used was the correct one. I originally listed the amounts and the type of agreement in list form on that tab. I changed it to enter complete sentences explaining the amounts paid and the type of agreement and the e-file check accepted it with no errors. That is strange why it didn't like a list of amounts and type of agreements.

Single SH S Corp client entered into an asset sale agreement in 2011. Client's business is financial advisor. He sold the client list, future revenues, name and goodwill. There is also a non-compete agreement and an agreement that he will provide consulting services over a certain time. I am filling in Form 8594 Asset Acquisition Statement. I checked yes in line 6 indicating that there is a non-compete agreement and an employee/mangement agreement. I filled in the appropriate information on the Ln4 - Asset Transferred tab thinking this is where the required information is entered in the ATX program. I listed the sale amounts and the types of agreement on the statement tab. I get an error saying that since I checked yes on line 6 I need to complete the Ln4 - Asset Transferred worksheet specifying the information I listed on the Ln4 - Asset Transferred tab I completed. I can't find a Ln4 - Asset Transferred worksheet anywhere in the ATX program. I can't file until I clear up this issue. Can anyone tell me where to find this worksheet or how to get work around the error? Thanks.

sec. 1,750.05 states that in a time-share arrangement each owner of a unit is treated as having a continuing interest in the unit the entire year no matter how the interest is treated under local law, rather than limiting each owner's interest to the time that he is entitiled to control. Thus personal use by any owner of the unit is attributed to each owner, even though income and expenses remain individual items. Does this change the personal use greater than 14 days answer?

OK, now the TP 'fessed up. It is not 2 timeshare units. They upgraded from 2 summer weeks to 2 winter weeks. The management company allowed them to keep the 2 summer weeks and also the 2 winter weeks which they were able to rent 100% of all four weeks. Getting 4 weeks is unusual and they should have only had 2 weeks. So, how is this situation handled now on Sch E? Thanks.

Thanks for your help with this. I don't need to report expenses do I? Since each property was rented less than 15 days no income or expenses have to be reported. But since a 1099 was issued, I am trying to figure out how to exclude the 1099 income. Can't I take it out on the income line with the description of "exluded income- rented less than 15 days". The TP's expenses don't offset the income. How have any of you handled this type of situation? Thanks.

TP has two separate timeshare units. They have 2 weeks available for each unit which they rented all 14 days for each unit and did not use any of the units in 2011. The management company sent a 1099 showing the combined rent for both units. The IRS instructions say that if a TP rents their property less than 14 days, the income does not need to be reported. However, since the 1099 has to be reported, where in the ATX program is the income excluded? Also since I have to report the 1099, can I show half the amount on each property in Sch E or will this cause a matching problem for the IRS? Thanks for your help.

OK, I read the pubs and and other research materials. I understand the hot assets and the general instructions. However, none of the pubs explain exactly how this is booked in the books and in the tax return. He took out a business loan to payout the other members. If the loan payout to each member exceeds that member's capital account, where does the excess get booked after I zero out the member's capital account? Likewise, if the payout is less than the member's capital account, where does the difference get booked when I zero out the member's capital account? The client told me he is taking a section 756 election to step up the basis of the assets. I think he means a 754 election. As far as the 754 election, if I add the difference between the amount of the payout and the member's capital to asset basis,how is this recorded on the books? Is this a one line adjustment in the other assets section titled "Sec. 754 adjustments"? Or is an entry made to each asset to increase the basis? If so, are the allocations to fixed assets booked to every asset and depreciated? Or is this booked in the equity section as either a positive or negative balance? Sorry, this is my first partner buyout. Thanks for your help.

New client of a 6 member LLC has bought out the other 5 LLC members during 2011. Client is continuing on with the same company name and EIN. I know a final 1065 return has to be prepared as of the date of the buyout. Client took out a loan to buy out the other members. If the buyout amount (distribution) for a member exceeds the member's capital account, where is the excess recorded on the books and how is this reported on the K-1? How is this reported in ATX? Also, if the buyout amount is less than a member's capital account, where is the difference recorded on the books and how is this reported on the K-1? How is this reported in ATX? This is my first partner buyout and I thought the answer would have been easily determined. My brain must be getting fried - and it's not even April yet... :-)

I have a new client who's business has two restaurant locations. His prior year depreciation schedule from the previous CPA shows assets grouped by location. For example each computer is listed individually under location A with a subtotal and then computers are listed individually under location B with a subtotal and then a total for computers for both locations is listed on the depreciation detail report. I can't find anything in the asset entry that allows us to do this. Does anyone know if we are able to group assets by location? Thanks.

Thanks for your help. Won't the IRS try to match each W-2G and, therefore, think there are missing W-2Gs being reported?

When I performed an e-file check, I received an error message saying that only 30 copies of W-2G are allowed. The return includes 39 copies. I have done previous e-file checks for this return even after all 39 W-2Gs were input and didn't get this error message. Now that I am ready to e-file, I get this error message. Does anyone know a way around this? Thanks.