OldJack

Did taxpayers receive a $400 per person payment during 2009 or do they get it with the 1040? I know about the $250. Is there an IRS website to check?

So how did a partnership get a retirement distribution?

A Trustee that is assuming the fiduciary responsibilities of controlling the properties and filing any documents including the estate and/or fiduciary income tax return. Address on the 1041 will also be this trustee's address.

I'll bet you think we all know what a PLLC is. I guess it is a partnership that is a LLC. The insurance agent is probably thinking that the policy would be with the S-corp. A LLC that elects to be an S-corp has to act like a S-corp for federal tax purposes.

I would refer you to the 2009 Small Business Quickfinder Handbook, page B-7, that summarizes such partnership situation. If the new partner is receiving a "Capital Interest" of ownership of prior capital, the value is taxable as compensation to the new partner and deductible as a guaranteed payment for the partnership. [Reg § 1.721-1( b )] If the new partner is receiving a profits interest in exchange for services it is generally not a taxable event (with exceptions, see Handbook) [Rev. Proc. 93-27]

>>This was retirement money earned as a teacher's aide. << If this investment is in a qualified retirement account and she puts the money received back into the retirement account it should not be taxable or reportable.

You are missing telling us that this is a 1041-K1. Did you expect us to just guess what you were talking about when you said 14H? 14H with a 1041-k1 is "other information" and is not telling you what to do about income taxes concerning the distribution. You have to find out what the taxpayer did on the previous tax returns about this investment (as to sale gain or loss) and decide how this distribution enters into the overall investment results.

I agree with JohnH that this appears to be the same as the old TCMP audits. Expect a complete audit on everything. I have never seen this type of notice where the auditor will tell what is needed by telephone rather than by the letter.

Results are all about detail facts. Did the new partner receive a percent of ownership of current assets (equity ownership) or is it a percent of future profits (income ownership). What were the intent of the parties, is there a written agreement? Did the new partner receive the ownership for work previously performed, ie: bonus for work? To many variables to determine just from your post.

Quote from heading of 1040 Sch-E instructions: >>Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.<< The rental of the house should be reported on 1040 Sch-E, page 1. There is no requirement that the taxpayer own the property in order to report rental income from real estate. Of course instructions refer to owning real estate as that is the common taxpayer situation.

The 1099Misc should have box 3 reporting the payment which the person would report the amount on 1040 line 21.

All you guys are missing what nctx means in this comment. This is a compliment to jainen inthat he knows more than us CPA jerks! Well most of us. :)

Disregard the NO. The $500 loss then in my example would not exist. If partner A claims/takes partner B's $500 share on liquidation, then Partner A's claim of bad debt would be only $2500. However regarding the partnership tax return, depending upon the classification of the $5,000 loss would determine if the loss was an operating loss for 1040 Sch-E (1065-k1 Box 1)or a capital loss for 1040 Sch-D (1065-k1 Box 8 or 9a).

>>Is it really a partnership << The facts established in the first post says there was and the statement "2. Partnership invested $5,000 in business venture" looks like a partnership disbursement to me.

NO! The 1065 tax return loss deduction reduces each partners tax basis. Partner A: $3,000 Beginning Tax Basis 2,500 50% Loss deduction from form 1065 deducted on 1040 Sch-E, page 2 $0,500 Tax Basis for Sch-D liquidation capital loss $3,000 Possible Bad Debt Loss on Loan to Partner B Partner B: $3,000 Beginning Tax Basis 2,500 50% Loss deduction from form 1065 deducted on 1040 Sch-E, page 2 $0,500 Tax Basis for Sch-D liquidation capital loss edit: Of course something doesn't add up as $5,000 deduction leaves $1,000 capital unaccounted for in this example.

>>And is it really a change in agreement if an agreement was never signed or filed? << Verbal agreements are legal and do not require filing. Its not for you, as a preparer, to change or claim something different from what you know are the actual facts.

Its not likely there is any tax basis for an IRA unless the taxpayer filed form 8606 (attached to 1040) to establish non deductible contributions.

>>I don't want to file anything fraudulent, but in reality this was 100% Partner A's loss. << You can't just change the partnership agreement to fit what you think is reality. Each partner gets his share of the loss and Partner A has to attempt to collect his loan from Partner B in order to claim a bad debt.

A partner can only deduct losses up to his/her tax basis. Therefore, the basisless partner has no deduction for any year. Other partners cannot deduct any portion of the basisless partners share unless the partnership agreement had previously been modified to distribute profit or loss in some different manner.

Basis after a divorce is the same as before the divorce regardless of who is awarded the asset. The financial adviser is more likely wrong.

John, I really like the oat reply. Good one! :lol:

Congratulations, you now have something to prove every time you post.

>>I don't want to give them wrong advice << You should not be giving free complicated tax advice even to a friend.

>>The house was deteriorating and unlivable.<< Did you value the house and property? Have you even seen the property? They obviously had a loss as the house is no longer there and in whatever condition there would be some value if nothing but scrap. The question of fact is do they have a casualty loss as allowed by the code? It is your job to find out the facts and calculate if there is a deduction. Not just assume as KC has in this post.

>>Right or wrong? << Wrong... they have a casualty loss deductible on 1040 Sch-A, probably more than $6,000. Thats the problem with taking phone calls on the golf course.