OldJack

>>As of 12/31 the majority shareholder owned 100% of company.<< This would appear to be a request for a tax return of a previous year such as 2007. Since your client is in fact a corporation (who pays you), your obligation is to provide copies to the corporation. Since the current corporation officer has told you not to provide copies to anyone you would not be allowed to do so without a court order. I would simply tell the prior shareholder that his request should be directed to the corporation that you have provide copies to it.

>>leave your love life out of this! << No problems there... it just gets better and better with age!! :)

Oh Joan! You did good and just want to impress us that it was hard. lol And I was not just talking about the tax part, but that would be especially easy for those that have experience doing taxes . Don't you think? And by the way I don't claim to be a tax pro and I also still sometimes have problems dealing with partnerships technicalities. Oh well...

Quote from 2007 Pub 225, "Farmers Tax Guide", page 36: >>Placed in Service Property is placed in service when it is ready and available for a specific use. whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Even if you are not using the property, it is in service when it is ready and available for its specific use. Example. You bought a planter for use in your farm business. The planter was delivered in December 2007 after harvest was over. You begin to depreciate the planter for 2007 because it was ready and available for its specific use in 2007, even though it will not be used until the spring of 2008. If your planter comes unassembled in De- cember 2007 and is put together in February 2008, it is not placed in service until 2008. You begin to depreciate it in 2008. If your planter was delivered and assembled in February 2008 but not used until April 2008, it is placed in service in February 2008, because this is when the planter was ready for its speci- fied use. You begin to depreciate it in 2008. <<

Well... if the cows were held as inventory for sale assets I would revise my opinion. If said inventory was disposed of in a one complete block transaction and in liquidation of the corporation they would indeed be section 1231 assets (assets used in business, gain reported on form 4797 short-term ordinary income) and would qualify for recognition on the installment sale since there is no gain allocated to recapture. This because the assets, even though prior classified as inventory, were not sold in the ordinary course of business as inventory. :)

And like EA's all CPA's must have a certain number of study hours each year in order to retain their state license to practice. Most of the study seminars are tax seminars and as I understand it some states require the CPA to study a certain percent of time on taxes regardless if they only do audit work. Only CPA's working for the huge-large CPA firms have the luxury of not doing tax work and those represent only a small portion of the CPA's in public practice. Those CPA's that only do audit are usually beginners, first-time hired, for the specific detail audit purpose and don't know diddle-squat about taxes and don't attempt to do taxes until later in experience. Yet these beginner CPA's are pointed to, by some ignorant people, as the reason all CPA's don't know much about taxes. As to "claiming letters" after the name, those letters are *required* by law to be disclosed after the name in order to practice as such. edit: True that tax is only a portion of the CPA exam, but the test is easy if one knows basic accounting and taxes. Every tax preparer should be able to pass and it only takes a short time to answer the questions. It is hard to understand why a tax professional does not want to "claim the letters after their name" so the public knows their qualifications. EA's also understand and know the importance of the letters.

Yes, the S-corp could distribute the note, after recognizing any taxable gains, to the shareholder and continue the installment sale collection. However, since the tax gain must be reported and passed by 1120S-k1 the shareholder must pay any tax due as reported on the k-1. Therefore, assuming there were no gains above the depreciation amount recognized in the current year, the shareholder would be collecting the future note payments as tax-free income. Of course, if there were any installment sale capital gains after recapture, they would be taxable according to the amount calculated on the installment sale tax form as received.

The transfer/distribution of the vehicle is treated as a *sale* to the shareholder at fair-market-value. Therefore, there is no loss unless the FMV is less than $12,000 (or book value). For a 2005 truck it would appear that the value is probably much greater than book value and therefore the S-corp must report a taxable gain on form 4797. Since the S-corp passes the gain to the shareholder the shareholder must pay the tax and the FMV as a result becomes the tax basis in the hands of the shareholder for future disposal.

Publication 537, "Installment Sales", page 6: >>Depreciation Recapture Income If you sell property for which you claimed or could have claimed a depreciation deduction, you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year. Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale. The recapture income is also included in Part I of Form 6252. However, the gain equal to the recapture income is reported in full in the year of the sale. Only the gain greater than the recapture income is reported on the installment method. For more information on depreciation recapture, see chapter 3 in Publication 544. The recapture income reported in the year of sale is included in your installment sale basis in determining your gross profit on the installment sale. Determining gross profit is discussed under General Rules, earlier. <<

There is a common misconception that CPA's are more interested in auditing than tax work and even a misconception that CPA's are *not* competent to do tax work. All CPA's that I know are interested, they study continually, and successfully practice both activities. With most business entities, audit type work is necessary in order to have accurate numbers to properly prepare tax returns. Blindly accepting taxpayer numbers and filling out a business tax form is not professional tax preparation and does not usually result in an accurate tax. The main reason CPA's get the certification is to let the public know they are qualified professionals. Therefore, most of us do not need one size larger underwear. .

Correct

Its not likely that the sale price got down to the 50 cents without some list of what was being sold. You have to have them give you the list.

Another example of a non-professional tax preparer that likes to slam those that have taken the time and expense to prove they are qualified to practice. Form 2220 Instructions page 1: >>Who Must File Generally, the corporation does not have to file this form with its income tax return because the IRS will figure the amount of any penalty and notify the corporation of any amount due.<< edit: Have you ever looked at the amount of time it takes to prepare form 2220 Annualized Income Installment Method? I expect the CPA's billing is not excessive.

>>a bill from the CPA firm for $1,500 for their attempt at correcting the return they screwed up that resulted in an $1,100 penalty.<< It sounds to me like the screw up was probably the client not making estimated payments in the proper amount or on time. In many cases the CPA does not even know if the payments were made on time or if a form 2220 or 2210 is needed. Its easy to blame someone else for your own mistakes. As a CPA I also find the original post outrageous and offensive. :angry:

Right!!

>>Form 4564 has a laundry list of documents requested.<< I would assemble the documents requested and prepare a summary analysis or detail worksheet that the auditor would be satisfied to accept as part of his workpapers. If you provide the analysis for his workpapers he might only have to take the time to "review" your work and hopefully accept it as his own. That gets him out of the clients without digging around and asking more questions. Good advice from the others on here. Your preparation time should be much more than you spent preparing the return. I have a policy that if the auditor is at my clients.. so am I, even if I am not getting paid for it.

Well shoot!! add OldJack for the other 100%. Heck, I like disagreeing with my old friend Jainen. He is so damn right most of the time that I don't get enough times to disagree with him. LOL

I Agree with KC and would add that just moving them by deed to a default taxation single member LLC would give protection only if the LLC acts like a separate entity in its business activity (bank account, LLC billing, LLC collection, LLC pays bills, etc). If the LLC is taxed on 1040 Sch-E (default) you should show 2 property entities with carryover of the depreciation schedule from the previous part year individual business Sch-E and the LLC Sch-E part year entries in the transition year. By showing the rental activity as an LLC you thereby separate the LLC financial numbers from personal ownership indication.

What is fair comp is always debatable and not something the tax preparer should determine. This is a decision of the employer/employee. That is not to say the tax preparer does not consult with the S-corp on this matter but it should not be the preparers decision. However, upto now the IRS has only taken to tax court those S-corp tax returns with zero compensation. Seems reasonable to minimize such wages. As to the previous post quoting below, generally I plan to ignore this IRS employee statement as bureaucratic hog wash. >>the head of Employment Tax from the SB/SE Specialty Programs stated IRS will continue and expand upon federal and state partnerships particularly in the QETP (Questionable Employment Tax Practices) Program. He specifically stated that 1120S salaries and the issue of reasonable compensation would be a target and that tax return preparer’s were exposed to penalty assertions if they prepared returns that reflected a “less-than-market” salary for services rendered by small business owners of Sub S corporations. <<

Hey lbbwest! I am still around. However, like you, Florida is like in another country although I have had clients there in the past (long ago). I'm in Missouri and not taking any new clients. Thanks for the thought and nice comment.

As long as he has normal proof of payment for legal business service or product, I don't see any reason he cannot transmit the payment in whatever form he wishes.

I got it and I still have not renewed and will not just to be in a drawing.

Just because the shareholder was personally relieved of paying the credit card company does not relieve the corporation from paying its debt to the shareholder. From the standpoint of the corporation the loan should be paid to the shareholder so the corporate books should still reflect the debt. The attorney should have stuck to chasing ambulances.

Enter the 1099 as normal, then enter a new line 1099 with estate ID# and negative amount for what goes to the estate.

Why thank you for the nice comment, taxbilly!! I don't know about such expertise, but I always have an opinion. :)