OldJack

1. I don't like doing the IRS's work at zero hourly pay. 2. When I give the paper tax return to the client I am done. No checking to see if the IRS got it, etc. 3. Its the clients responsibility to file their tax return and I don't need that liability. 4. Paper is cheap and my time is not. 5. I can find the file copy when the electricity is off. 6. I don't like someone telling me what I have to do.

>>and proceeds to take about 40% of the firm's business with them.<< There may be a violation of the individual's corporate responsibility and theft of corporate income if that person was an officer of the corporation when he/she contacted clients to go with them. Your client needs to establish facts and talk to an attorney.

>>She said that 2009 is compatible with 64 bit but older versions are not.<< Well... I have 2008 and 2009 on a Win7 64 bit and they both work just fine. I have not tried to run older versions.

yes

>> So can I recognize the suspended losses on that property on the individual tax return << Yes, suspended losses are from each property/activity at the individual level and when one property is disposed of the suspended losses are deductible.

>>If the property was held by the taxpayer individually... to recognize all past losses on the property disposed? << Remember the LLC is reported as a partnership (form 4797, 8825 and 1065) which flows all tax attributes thru to the individual. Therefore, the gain/loss is reported from the 1065K-1 to the 1040 Sch-E where suspended passive losses are waiting for recognition of completed disposal of real estate for deduction.

I don't know what is going to happen, but it looks to me like it will get worse for quite a while before it gets better.

Well scare me half to death!! I have not been on MyATX this year and have no idea what my password was from before. I just started the ATX program and it automatically logged on and updated with no problem. What are you guys talking about?

So now we can all quote Jainen as a tax authority (if you dare)!! I disagree that the definition of investment is only property held for appreciation. Investment property can be held for various reasons including income production or protection of other property.

>>I have to agree with Jainen on this one. The increase in value comes not from appreciation, or even the addition of materials, but from the addition of the skilled labor this contractor is in business to provide. << An increase in value from appreciation is only one factor in entering into a business transaction for profit. The original post only said "Husband is in the construction business and works for another developer and files Sch-C." This so called construction business sounds like a developer's employee not classified as an employee and for all we know he could be a ditch digger. That would hardly be the "skilled labor" you refer to. I guess you would not allow a real estate salesman to invest in real estate and report the sale on Sch-D?

>>Apparently he did not intend to hold the property for investment.<< I find it difficult to understand how you can decide the taxpayer's intent from the original post information provided only by a tax preparer. I have no problem with accepting that a professional can enter into an investment activity if it is his/her intent, regardless of his other business activities and their success or failure. According to your logic a construction company owner is not allowed the classification of an investor (Sch-D transaction) if he purchases any real estate property simply because he works on buildings.

Based on the facts as stated I agree with Gene. I would argue that the deduction in 2008 was an error due to the taxpayer being a "small person" not knowing what he was doing. Fact is that a proprietorship is not required to keep a formal set of books and is not required to keep separate accounts used only for business purchases. A proprietorship only has to prove its income and deductions. Therefore, I see no reason the taxpayer could not purchase investment property materials from a supplier that he commonly purchases materials for his proprietorship Sch-C business. The main subject for this property classification is the taxpayers intent with the property and it appears to me that it was a personal investment reportable on 1040 Sch-C. Always ask the taxpayer his intent rather than assume or decide his intent.

Your original post did not indicate that the client determined it was a not-for-profit rental. You only said that you had determined it was not-for-profit.

If you think it is not a rental for profit and your client thinks it is a rental you should send the client to another tax preparer.

We remember that besides love, on or wedding day we made a promise to each other. :)

Damn.. there sure are a lot of old folks on this forum. That must be why there are so many smart people here! The wife and I have made it over 50.

Shoot... thats nothing... wait until the little girl divorces and you pay for a second wedding. I had 3 girls and 2 of them have had a second wedding. The younger generation now days just don't pay attention or take responsibility for what they promise.

Something is fishy about this story. Is it actually a sale of rental property or the sale of a residence? Why would the other tax preparer have said it would cost him taxes if in fact it would not have cost him taxes because he did not receive any money? Or, did he receive a down payment in the year of sale? You have to establish facts before deciding what to do.

If the distribution was paid before the FYE 3/31/10 it would be reported on the 2009 tax form. When you call it a distribution I think S-corp profit distribution and an S-corp is not allowed a fiscal year end unless they received prior permission from the IRS. Therefore, maybe you mean a liquidating distribution or C-corp taxable dividend? In any case assets distributed must be at fair market value with gain/loss recorded on the corporate books and tax return.

Since the expenses all appear to have been delivered and consumed at the job site for the benefit of the owner I would include such expense in the cost of the construction.

>>You'd be in a hassle with him over his accusations of incomplete work and him trying to use his "uncooperative accountant" as another ploy to try and keep the IRS at bay.<< I agree with JohnH. Just say no!

>>Does it make any difference who owns more << No difference to the corporation unless the C-corp shareholders think the wife is a better risk! Just kidding.

Sure a C-corp can loan money to a LLC>1040 or a LLC>1065>1040. However, if the loan is not treated in every way as an arms-length business transaction it could be reclassified as a taxable dividend to the shareholders. I question the classification of the LLC as a single member entity for federal tax filing purposes. Your state may classify a husband-wife owned LLC as a single member LLC but the IRS has stated that a Husband-wife LLC does not qualify as a "Qualified Joint Venture" (QJV) which can elect to NOT be a partnership. The IRS website adds that, "Only businesses that are owned and operated by spouses as co-owners and not in the name of a state law entity qualify for the election". Also, see 2009 Small Business Quickfinder Handbook, pages F-6 and B-2.

yaeh and I awlyas thought slpeling was ipmorantt.

Its not about the rapacious (greedy) Congress or big brother (IRS) raising revenue, its the burden on small business that is the issue. It was best summarized in the last paragraph of the article: >>If it goes into effect, it will waste vast quantities of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. The struggling American economy can’t afford anymore suffocating tax regulations. This mandate is a giant deadweight loss. It should be repealed.<<