OldJack

On the day it was rented it became/converted to business rental property. The refinance was as business rental property and not a personal residence.

I agree with Jainen! It is simply a valid business decision as to not involving the insurance company. It is an ordinary and necessary business expense.

>>The October distributions to the beneficiaries would seem to require Form 1041 Schedules K-1 reporting of their shares of the interest income<< >> scarcely understand OldJack's response, at all, I'm afraid.<< @TaxCPANY: I'm afraid you do not understand estates and trusts reporting - Schedule K-1 reporting of taxable income for 1040 is as a result of the estate/trust filing form 1041 and electing (or if required by the trust) to PASS taxable items through to the beneficiaries. Taxable income may NOT be reported on any K-1's if the estate/trust elects to pay all tax on the 1041 from the estate/trust funds on the first 1041 timely filed. The only thing distributions play in anything is a credit on the 1041. Of course, if the estate fails to timely report, or file, the IRS has authority to "collect" its taxes from the beneficiaries that received distributions, but the beneficiaries have NO requirement to try to calculate taxable income from distributions and report them on the 1040. >>Estates: Day after death is the beginning of the first tax year. The first year can cover any period of 12 months or less that ends on the last day of a month. The executor chooses a tax year when the FIRST fiduciary return is filed. Filing deadlines for Fiscal year - The 15th day of the fourth month following the close of the tax year. [2010 Small Business Quickfinder Handbook page G-1.]<<

>>But this cost of financing is an intangible with no determinable life.<< I don't believe closing and refinancing costs are an intangible. >>Examples of capital expenditures include: Costs OTHER than interest incurred to borrow funds and OTHER finance cost are capital expenditures to be amortized over the life of the loan. This applies to commissions and other fees paid to get a loan, cost of issuing bonds, including legal fees and printing, cost and finder's fees and commissions paid by a lender to get borrowers. Taxpayers can elect to capitalize interest under code sec. 266 only after applying the uniform capitalization rules for interest under code sec. 263A. RIA Federal Tax Handbook 2012, page 202, Paragraph 1653.<< As I understand the post this is a loan/mortgage for business rental property and not a private residence.

Distributions are not reported to a beneficiary on a 1041-K1 as they are not what is taxable. The reason is that only taxable income (usually interest, dividends, rent, etc) is reported on the 1041-K1 and therefore taxable to the 1040.

Look at it this way... where did the money come from that created the 40k loss. It had to be from a partner capital account or a debt.

Need more info. Maybe its an investment loss. Maybe its a casualty theft loss.

As a general partner he is liable for all partnership debts which normally puts him at risk and should give him some basis for deduction. You need to rethink this situation and look closer at form 6198 calculation.

No it goes on page 2 part III for depreciation basis calculation as to ordinary income.

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We are all unpaid IRS employees now! We should file for federal unemployment compensation during the off season.

>>taxpayers don't sign the 'return'. They sign the 8879.<< And they are given a paper copy of the return for their review and approval before the return is transmitted. The taxpayer is responsible for their return, not the preparer.

I expect this client/partnership is on the cash basis of accounting for tax. Therefore, for tax purposes you record interest only when interest is actually paid.

I agree with Pacun and Jainen. It was the job of the paid preparer to "suggest" an IRA contribution and the taxpayer must have agreed and know they were required to make the contribution by the required date. You don't want this client!!

>>Let's not assume too much.<< @Jainen I agree, we can't really determine a solution until the deed is examined as to who owns what and tax basis for each person involved is established.

It sounds like mother deeded the property to the kids and no longer owns the property, however, retaining a right to live there. That makes the transfer with the "deed" a gift transaction from mother to the kids at her tax basis less the value of the life estate, if any value. That is assuming the gift was acknowledged and accepted. Therefore, it would appear that each child has a 1/3 tax basis of mothers basis in the property to apply to the sale price of $20,000. It is certainly an unusual transaction and one could argue several solutions.

>>Mother has life lease on house. It will be part of her estate.<< You need to establish more facts for discussion by looking for paperwork. As an example, how can mother have a life lease if she still owns the property? Then what document transfers at mothers death?

>>Then the car can be depreciated/expensed, and have the corporation make the payments for the loan.<< >>assignment of the vehicle.<< The vehicle has to be "sold" to the corporation at fair market value (with title transferred) in order to create tax basis for the corporation to depreciate. The vehicle would not qualify for Sec.179 depreciation under the rules of anti-churning.

@Deb >>. First I doubted the schedule C, I would think it should be E,<< Per Sch-E Instructions: Personal property. Do not use Schedule E to report income and expenses from rental of personal property, such as equipment or vehicles. Instead, use Schedule C or C-EZ if you are in the business of renting personal property. You are in the business of renting personal property if the primary purpose for renting the property is income or profit and you are involved in the rental activity with continuity and regularity. If your rental of personal property is not a business, see the instructions for Form 1040, lines 21 and 36, to find out how to report the income.

>> TP sold rental real estate. He has a $48K gain and has taken $15K depreciation over the years. He has a loss carryforwar of $30K on his 2009 Sch D. Form 4797 is reporting the full gain as long term on line 6 and carrying that to Sch D to be netted against the $30K loss carry forward resulting in $18K long term capital gain. Is the ATX program handling this correctly?<< This is correct as this is real estate sec. 1250 property and only accelerated depreciation (up to gain) is taxed as ordinary. SL depreciation on real estate is not recaptured as ordinary gain.

Maybe a good idea to have an agreement notarized but for federal tax purposes it is not necessary. Partnership status requires a federal and state tax identification numbers. The partnership records have to be set up with transfer of any assets, such as cash bank account and vehicles. Determine each partners beginning tax basis in the partnership. Maybe a local business license or permit. Sales Tax number and Unemployment tax number if applicable. Although not necessary, unit of ownership certificates (like stock certificates) can be issued so each partner has paper proof of his share of ownership.

>>Rental of the property to a related party is a personal use unless a fair rental is charged. So you cannot depreciate it......expense limitation rules << I believe this is mainly when there is a loss on the property and if a profit this would not apply. And it would still depreciate but may not be deductible.

Its an argument that might work, but I would not want to make it and would expect to lose.

Why would trying before listing have anything to do with it? It was not rental property at the time of the cost incurred.

No. Carrying cost was on a 2nd home status.