OldJack

A "bequest" is just that. It's a gift from the estate and not taxable.

>>bequest from a relatives will<< That would be a tax free inheritance.

Maybe ask your clients.

Maybe a form 4797 sec.1244 loss, probably not a form 4797 business bad debt, likely a form Sch-D capital loss.

As I stated above, "Basis is at mom's death as dad only had an income interest." However, basis would change in the trust for any normal sale or purchase of assets by the trust during the period before distribution.

The sec. 1244 loss is limited to 50/100k in the year of sale. The 1244 loss is claimed on form 4797 part 2 which flows to 1040 page 1. If as a result of the 1244 loss the taxpayer has a NOL, then the NOL is carried back or forward as a NOL loss, not a 1244 loss. Any excess over the 50/100k is a capital loss in the year of sale and may be carried forward as a capital loss until used as a capital loss.

Basis is at mom's death as dad only had an income interest.

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Try turning the printer off and back on.

I transfered ATX 2008 and 2009 from XP desktop to a new HP Laptop computer running 64 bit Win 7 Pro and had no problems. I did not use the XP compatibility feature of Win 7 Pro.

Also, you are filing 2010 and someone else filed 2009. Other than advising the taxpayer of your findings you have no reason to do anything about the sale in 2009.

I ran Win7 pro on an HP laptop this year and had no problems. The only thing I don't like is the libraries concept.

Well... What is the big deal if the estate will be small and exempt from estate taxes. Why not just make it simple and put the money or account in joint names with the mother receiving the 1099 for income tax. Sure there may be a gift tax return that needs to be filed but not likely any gift or estate tax.

You forgot to calculate the Alternative Minimum Tax!

Well damned if we don't agree to disagree again! Thats why we have got along for so many years. Sounds like you agree to the classification of "earnings". I have no idea what a 501c3 would do with such a situation. I expect they would ignore it like I might consider if I was the taxpayer's preparer. Its not likely the IRS would know what to do either.

>>(3) Character of income determined by reference to decedent The right, described in paragraph (1), to receive an amount shall be treated, in the hands of the estate of the decedent or any person who acquired such right by reason of the death of the decedent, or by bequest, devise, or inheritance from the decedent, as if it had been acquired by the estate or such person in the transaction in which the right to receive the income was originally derived and the amount includible in gross income under paragraph (1) or (2) shall be considered in the hands of the estate or such person to have the character which it would have had in the hands of the decedent if the decedent had lived and received such amount. << Its pretty clear when it says "in the hands of the decedent if the decedent had lived and received such amount". You can justify in your own mind that character only means ordinary verses capital, but that doesn't make it so.

I would say yes. The son is not receiving an inheritance, rather it is IRD and subject to the same tax treatment as was in the hands of his father. Code Sec. 691(a)(3).

>> Will she lose the carryover if she doesn't use it?<< The carryover must be reported on the Sch-D each year until it is used up. Any amount that is not used on the current year will carry forward to future years. There is no option to use or not use in a current year, the tax return is simply not correct if it is not reported on Sch-D.

If it was pre-tax dollars it should not be reported on the W2. Box 14 is intended to make the taxpayer aware of items that may be deductible or should be reported on his personal return.

Well... it is obviously something that was withheld from your clients paycheck and likely tax information and/or deduction. If he tells you it is health insurance why would you not accept his statement?

Brother liked form 4797 as a loss in part II passes to 1040 page 1 as a fully deductible loss. However, form 4797 is only for depreciable business property, property used in a trade or business, and involumtary conversions. This property does not fit into that classification as it has never been used as such before or after death. If he reported it in Part I, it would flow to Sch-D and have the same result as reporting it on Sch-D in the first place.

It appears to me, from the above statement, that the property was held as investment property and the fact there was no income for the investment holding period is irrelevant. I would take the loss on 1040 Sch-D.

I use a HP laptop with Win7 Pro 64bit and run ATX without any problems.

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Read the instructions on page 4 & 5 of form 4797. Recapture takes place on the S-corp tax return when you fill out form 4797 and include sec.179 depreciation in with other depreciation resulting in ordinary income on form 4797. The K-1 statement advises the shareholder of the sec.179 recapture as the shareholder may or may not have deducted the sec.179.