OldJack

Terry, the corporation accounting method has nothing to do with the purchase cost of treasury stock. Think of it as if the corporation purchased equipment at a bargain, you don't record it at a different price than what you paid for it. The cost of treasury stock as a debit account in the equity section is important in financial statements as it reflects a current value of the stock at the time of the treasury purchase. It is a no-no to reduce retained earnings for such purchase unless the corporation is reorganizing. And, you can't have paid in capital increase from a purchase of treasury stock as the selling shareholder is not making a contribution to the corporation. It was not an issue in your post but I am sure you are aware that for small business corporation a partial redemption of a shareholders stock may be a taxable dividend rather than the capital gains from a sale of stock. If this is an issue you should check the 5 tests (#1) the substantially disproportionate test (this is the old 80% & 50% test) [code§ 302( b )(2)( C )]; (#2) the complete redemption test [code§ 302 ( b ) (3)]; (#3) the not essentially equivalent to a dividend test [Reg§ 1.302-2 ( b ) ] (#4) partial liquidation of a noncorporate shareholder [code§ 302 ( b )(4)] [code§ 302 (e)(1)] and (#5) a redemption of a decedent's stock to pay death taxes [code§ 302(a)].

It is the amount he "purchased and placed in use" for the year 2008. How he financed the purchase is irrelevant.

This is a tricky case as real estate is not normally valued at less than the book value. I am not sure as I have not had this, but here is my take on the situation: There was a partnership that owned the property and the client did not purchase the real estate as such from the partnership. Rather, he purchased an interest in the partnership (an outside tax basis $175k) which immediately caused administrative liquidation as he was the only owner left. The property was not "sold" to the client so there would be no gain or in this case a loss to recognize on liquidation. Therefore, the partnership distributed the real estate at its book value so that the liquidated value ($417k less depr) remains the tax basis for depreciation deduction until accumulation reaches his outside tax basis ($314k) at which time he could no longer deduct depreciation.

>>The par value method is used to record the treasury stock purchase<< It should be the actual price paid that is recorded for the treasury stock purchase. There is no paid-in capital with the transaction. Retained earnings does not change.

You have to tell us how the real estate was being reported for tax purposes by your client. Was this reported on a form 1065 tax return or 1040 Sch-E tax return.

Oh, I remember doing the tax return for 1863. It was really complicated back then. Here is the 1863 law as it relates to the due date: >>By the sixth section of the Act of July 1, 1863, it is made the duty of any person liable to the income tax, on or before the first Monday of May in each year, to make a list or return of the amount of his annual income to the assistant assessor of the district in which he or she resides.<< Attached is the blank 1863 tax form that I still keep just in case I need to make an amendment or for some non-filer. f1040_1864.pdf

Anyone is welcome to disagree with OldJack as he is used to it. He has been married over 50 years. :wacko:

And its S-corps that are due 3/15... that now has a flat penalty if you don't file for an extension. Fail to file penalty of $85 per month per shareholder (max of 12 months) IRC§6699.

It is the clients tax return and the clients job to provide me with proper tax information. It is the IRS's job to audit that tax return. It is my job to prepare the tax return in accordance with the rules and regulations. Its not my job to ask, decide, or determine if a client is renting below fair market value.

Its not my job to decide or determine if a client is renting below fair market value.

The state of Missouri has a program that will let you use the credit as a down payment at closing before you get the money. Maybe other states have something also.

Try rebooting your computer and see if the schedules reappear.

As Bart said, except I would split out and show depreciation allowable on 1065, page 5, Schedule M-1, line 4a just to keep track of it. Then on 4b would go all those other book costs such as vehicle insurance, vehicle repairs, vehicle interest expense, vehicle gas & oil, vehicle license, vehicle inspections, vehicle tires, vehicle washing, and any other vehicle expense.

Don't you think that the answer you get here would depend upon you telling us if this is a proprietorship, partnership, S-corp, or C-corp entity? How it is treated may depend upon the type of business.

Ray, I would wait for other opinions that will probably be posted. As you say, it is a gray area and it is always best to hear other opinions before you decide what to do. The thing that scares me the most with a client like this is they will take the mileage and then not want to exclude other expenses related to the vehicle. As you know if you take mileage you would need to disclose, on the partnership tax return page 5, reconciling items from book income to tax income.

Is your partnership willing to not have any other vehicle expenses paid by the partnership (not likely)? Is your partnership willing to treat any personal use of the vehicle as a taxable fringe benefit added to the 401K-1 as guaranteed payments subject to SE tax (not likely)? Then, yes it is possible to calculate the mileage rate and deduct as other deductions, although not normally advisable. Partners in a partnership are considered as self-employed persons and mileage expense could be claimed as such. A partnership is nothing more than 2 or more self-employed persons. You are going to get other comments here that will disagree. From Quickfinder Handbook, page J-10: >>Partnerships and Corporations When a taxpayer uses the standard mileage method for deducting business auto expenses, depreciation is included. The use of the standard mileage method is limited to a self-employed individual or an employee (Rev. Proc. 2006-49). Corporations are not allowed to use the standard mileage rate method. Partners in a partnership are considered self-employed. Employer-provided vehicles. Partnerships and corporations can treat vehicles used by employees as being used 100% for business purposes if the value of personal use is included in the employees’ gross wages, or the employees reimburse the employer for the personal use. The employer must withhold the appropriate taxes from the employees’ wages. See Tab K for rules on the value to be included in the employees’ wages. If a partnership provides a partner with a company car, the value of the partner’s personal use is a taxable fringe benefit. The amount is included in the partner’s gross income as a guaranteed payment. [iRC §707( c ] Persons considered employees for purposes of employer-provided vehicle rules: [Reg. §1.132-1( b )(2)] • Any individual currently employed by that employer. • Any partner performing services for the partnership. • Any director of the employer. • Any independent contractor performing services for the employ­er. Reimbursement method. Rather than the business owning a vehicle, a partnership or corporation can reimburse the employee or partner for using his or her personal vehicle in the business. <<

Well, I thought it was an article quoting the reg, but whatever. Are you saying that you disagree with my statements that a written plan as such is not required?

This article makes exactly my point inthat there is not a requirement for a written plan as such. It is what substantiation would be required if the corporation was making the business expense on its own rather than reimbursing an employee. Most corporations use an expense reimbursement form for the employee to fill-out and attach his receipts in order to get reimbursed. The form documents the old who, what, where, when, and why. I have yet to find a small corporation that has a written plan document. clip from the article: >>(2) Accountable plans—(i) In general. Except as provided in paragraph ©(2)(ii) of this section, if an arrangement meets the requirements of paragraphs (d), (e), and (f) of this section, all amounts paid under the arrangement are treated as paid under an “accountable plan.” <<

I have never seen in government published tax documents where it say what an accountable plan must say, or that it must be in writing. Since the IRS has no example of such, I would not consider myself competent to writing one either. It is generally understood that to be reimbursed from a corporation, one must "account" for the expenses with appropriate receipts as to who, what, where, when, and why, the expense would be deductible by the corporation in order to actually be deductible and not taxable to the individual. If an officer of a corporate business reimburses himself personally for expenses that he accounted for and were qualify for business deduction, I would argue that the corporation reimbursed the employee under an accountable plan even though there is no written plan in existence.

You must remember that a S-corp is a separate legal entity from the shareholder. If an employee, other than the shareholder, was reimbursed for S-corp business use of the employees personal owned auto it would simply be an expense for the corporation and not taxable to the individual. There is no difference if the employee happens to be a shareholder. You can't capitalize and depreciate the shareholders personal auto unless there is a written financial lease between the two for the vehicle.

Oh for Pete's sake! And for crying out loud!! That link to the IRS article is only about what the taxpayer written consent should include for "disclosure of information obtained during the return preparation process to activities directly related to the preparation of the return". That has nothing to do with the tax preparer simply telling someone the name of his clients.

A quick look at Cir. 230 and I did not find any such requirement. Maybe you can check it out further.

>>(CPA won't give it to him). << Warning! CPA's freely give documents unless they are trying to collect their bill. You should ask the guy if he has paid for last years tax work so you can deduct it. It would be best to get your fee up front with this guy.

I don't have any current LLC/Sch-C business that the owner is taking a W2, but I have had in the past. In that case it was better to let the owner continue as it was the only way to get taxes paid-in on a timely basis. There are some that just will not pay large estimated taxes even though they know they should. If this is the case with your client, and since there isn't much difference in the taxes, I would let the client continue with the W2. Like Joel said, maybe this client needs to elect S-corp.

Its a damn nuisance to have to deal with those goodwill and other charity slips. You can spend as much time fooling with that as it takes to prepare the rest of the tax return. Not only do I have to ask the client for a fair market value, but when you fill-out the form 8283 you have to show original purchase price which they never remember either. I have been know to overlook those damn things. :angry: