OldJack

>>receiving no benefit nor burden of this residence << >>you are UNABLE to occupy it the day that you receive it<< While all those comments may be true they are irrelevant. Purchase has to do with transfer of ownership or title. In this case title and purchase transferred with the closing documents. The only time the date of occupancy enters into the situation is when the taxpayer is constructing the residence. My opinion is that this taxpayer is not constructing anything. He received legal title (prior to the credit law) for property that had already been constructed by someone else. In my opinion he does not qualify for the credit. Had the closing been after Nov. 6, I would think otherwise.

Another reason I don't like links without comment is they sometimes don't work. Here, I think, is what taxbilly was referring to: >> Q: I’m already a homeowner. If I buy another home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit? A: No. If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09) <<

You need to read Publication 15B starting on page 23: >>You cannot use the cents-per-mile rule for an automobile (any four-wheeled vehicle, such as a car, pickup truck, or van) if its value when you first make it available to any employee for personal use is more than an amount determined by the IRS as the maximum automobile value for the year. For example, you cannot use the cents-per-mile rule for an automobile that you first made available to an employee in 2008 if its value at that time exceeded $15,000 for a passenger automobile or $15,900 for a truck or van.<< There are other requirements for the cents-per-mile rule in pub 15B. Otherwise you must use the lease value rule and the chart on page 25.

We can't let a challenge go unanswered. I agree with code sec. 36( c)(3)( B ) that says A home "under construction by a taxpayer" is treated as purchased by him on the date he first occupies it. However, I disagree in this case that the homebuyer is constructing this residence as he is only watching delivery. As I understand this case, he has purchased the home under a binding contract and closed at the bank before the law that allows him credit. In looking for a clearer wording I look at Code sec. 36(h) which states the first-time homebuyer tax credit is extended to apply to a principal residence purchased (1) before May 1, 2010; and (2) before July 1, 2010 by a taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of the principal residence before July 1, 2010. Nothing in this code is requiring the occupancy of the house that is being built, instead it is based on the closing date for the definition of a completed purchase.

I know as a practicing tax professional with more years experience than any one of them, I certainly would not have time to author a good tax book. I find it amazing that these 5 people think they do a good job just because they have experience. If you compare their books for prior years you will notice that basically they make little or no changes from year to year. That has not been the case with congress. I used their book for several years in addition to Quickfinder, but I don't know about their current year publication as I have not ordered it.

>>Yes they were originally employees of Quickfinders.<< They were fired by Quickfinder. Makes you wonder about them. I also have in the past bought both books. I have never had disagreement with Quickfinders opinions, but I have in the past disagreed with the tax book author and they have admitted I was right. The tax book is a good reference, just not as complete or as good as others.

I just received my 1040 Quickfinder Handbook and my Small Business Quickfinder Handbook. Quickfinder publications are by the tax publishers Thomson Reuters. They are a huge tax publisher that publishes other tax books such as the RIA Federal Tax Handbook and RIA Federal Tax full series of Books. I have always found Quickfinder publications better than the tax book. The last I knew the tax book company has less than a dozen employees to research and write their book. I have no investment or connection (other than as a customer) to Quickfinder or related companies.

>>unless an election was made by the shareholders at the time of the sale.<< Its not an election necessarily documented at the time of the sale. It is an election statement attached to the 1120S at year-end that declares consent by all shareholders (shareholders as of the date of the sale), including the seller shareholder. See page 21 of the 1120S instructions for election details required to be attached to the tax return.

The S-corp books should be closed as of the date of sale of the stock and the information used to prepare the seller's 1120S-k1 at year end. Only one 1120S is prepared for the year with 2 1120S-k1's attached (old owner and new owner). The corporation continues as tho nothing has happened except a change in shareholders and officers as listed on the 1120S. If it is to late to close the books as of the date of sale, then information for the seller's 1120S-k1 is the year-end numbers prorated on the number of days of stock ownership. The seller's stock basis is increased/decreased by the seller's current 1120S-k1 numbers and the sale proceeds reported on 1040 Sch-D.

Mr. John Abel's (CCH/ATX Sr. Manager - Tax) explanation is ridiculous to those that are aware of the simple formulas that are used to generate the report. Just my opinion.

Thanks Lynn. That information is very helpful!

Well... I certainly did not expect so much happy happy. Thanks! I had not put my birthday in the profile as I am so old that I thought you might think I didn't know anything! :wacko:

I have a one man small corporation that provided a service in Canada and they withheld $3,000+ taxes. I don't know yet if they made payment to the corporation or the individual. I know nothing about Canadian taxes could anyone give me a tip on Canadian filings? Where do you get forms, etc.?

>>PS Mine is January 1st!! (Hint! Hint!) << So... I just had a birthday and no one said happy happy!

>>The only one I had never heard was "foot feed". We always called it the "gas pedal". Some words may be localized like coke/soda/pop/dope. << Before the "foot feed" it was called "The Ears" as it was 2 levers one on each side of the steering column (thus they looked like ears). One lever was for the "spark" setting (spark advance) and the other the "motor speed". To run full blast down the road you pulled the "ears" down. There was nothing on the floor about gas or speed.

If used for business as you say I would disagree with the agent's proposal and argue it is a valid business deduction. The real question might be is rent the proper value of the deduction and do you have documentation of the business use as required?

What do you mean those words are gone? I use them all the time. Oh, now I understand why my grandkids are laughing at what I say! Now you are making me feel old.

If you refi in a partnership and put the money in your pocket you lose the ability to deduct your loan interest as business or mortgage interest expense. The interest (or a part thereof) would be personal non-deductible interest, this is a result of what is referred to as the loan proceeds tracing rules. Putting refi money in your pocket is a dumb idea that clients are always trying to get away with and for tax purposes it doesn't work in any type entity. Also, if you take refi money out of a partnership it reduces your partnership basis offsetting the increase in refi debt basis so that does not work either. If you refi in a S-corp with money staying in the S-corp you have S-corp deductible interest expense on the loan. If you take the refi money out of the S-corp you have either a NON-TAXABLE DISTRIBUTION up to accumulated profits in the AAA account (retained earnings) and capital gains for amounts in excess of the AAA account. You NEVER have taxable DIVIDENDS from an S-corp unless it was previously a C-corp paying out C-corp earnings that have not been paid before. In the case of real estate there is virtually no difference in the "tax results" of a Partnership and S-corp ownership except the partnership can distribute the real estate property back to the individual without it being a taxable event.

No... he is losing on his net worth because before the housing crash he had a house worth probably much more than the mortgage of $615,000 (plus the $150,000) and it is now going to sell for $150,000. When he was relieved of the obligation it cost him taxes and did not put a penny of money in his pocket nor did it increase his assets. How can you say relief of debt is the same as making money when he has no money to spend from the debt?

I agree, but as I said in my post for this type rental property that would be a very low hourly rate amount. How much time would this client have spent with the rental business? Probably only a few hours a year with paying a few bills and the tax return!! And you have to admit an S-corp liability protection has been better tested in courts than an LLC. I would guess this S-corp was established before the LLC became law in this state.

KC, I believe you are thinking of the C-corp. Look at the 1120S-K1 boxes 7 thru 9 where the gain is reported for the shareholder to report on his 1040. Of course if the asset with gain is code sec. 1231 there will be an ordinary income factor but that would be true in any entity.

I fail to understand how he is gaining $315,000, could you clarify that? It looks to me like the most he might be gaining would be $125,000 (sale $150,000-down $25,000). Am I missing something?

>>here on a Travel Visa<< That is not a work visa. As I understand it he would have to get a green card and an ITIN in order to work.

It is not clear but I assume your "delimena" has to do with income in the S-corp, Company B. An S-corp cannot pay a "dividend" (unless from prior taxable C-corp earnings) that would qualify for the 15% capital gains tax rate as it can only pay a "distribution of profits". Distribution of profits are not taxable since the entire yearly profits are always taxable to the shareholders as ordinary income regardless if there are any distributions. The S-corp MUST take a reasonable salary if there are profits from which to take the salary. Since Company B is a real estate activity it would be reasonable to calculate the salary based upon time and effort which would usually be low number of hours.

Sucks only if you later want to take the property out to the shareholders. If the property is to be used or sold by the S-corp it has little difference. This example may not have each company standing on its own due to what is called the "step transaction doctrine". Which basically say if the steps are in substance integrated the steps in between can be ignored. As long as Fair-Market-Value rent is paid there should be no problem with this arrangement. Rental real estate activity is reported on form 8825 attached to the S-corp tax return with the net income from the same shown on page 3 and the 1120S-k1 line 2. This is passive rental income that is passed to the shareholder to report on 1040 Sch-E. Therefore, it does not change the taxable income from 1120S, page 1 that might be subject to self-employment tax. Rental real estate net income is never subject to SE-Tax.