OldJack

The instructor may be correct if the loss was not used to offset income!! If you take a blank ATX 1040 form with no income and enter a 10,000 carryover loss from prior year for Sch-D you will find that 1040 page 1 will show the -3,000 but when you look at the worksheet for carryforward to the next year the 3,000 will be added back as it was not used.

what jainen said.

I believe that ATX asset entry tab has a "disposition" tab of an asset the same as a sale that will then calculate your partial year depreciation automatically. Technically she would be withdrawing the asset to personal use so select "type of disposition" as "convert to personal" and there should be no gain to forward to form 4797.

How soon we all forget!! I too first thought of material participation.

If you think the properties are held for investment some expenses might likely be capitalized with the property or may be investment expenses for 1040 Sch-A subject to limitation of investment income. However, they could be Sch-C expenses, it all depends. The real question is to determine the exact status of the properties as held by the owner. You should review code 1221 [capital asset], 1231 [business asset], and 1250 [depreciable asset] as it relates to your clients property, if those code sections do not apply then it is 1040 Sch-C inventory held for resale assets. It is possible to report income and expenses as 1040 Sch-C and the sale of real estate as form 4797 [code 1231 & 1250] or 1040 Sch-D [code 1221] depending upon the property falling under which code section. I suppose it is even possible that these properties might be rental properties [code 1250 reported on form 4797] for 1040 Sch-E expenses. Just because he thinks he may flip is not the final determination of the tax status. You have to discuss the possibilities with the client and ask him what he is doing. .

I guess I should start signing: OldJack, CPA, BF (Brain Farter) :D

>>Is "a sheet of paper with the figures" not acceptable as enough information to prepare a Schedule C?<< It is if you are willing to take the risk that the information is accurate. In most such cases it is probably reasonable close but usually not accurate. An income statement for tax preparation should be prepared in conjunction with a proper balance sheet for such business.

Yes I had a big brain fart!! He did indeed say he built a house rather than rehab a house but that may make little if any difference. There is nothing to keep an individual from investing in property and improving the property [by building] before selling said property and thereby not be in a trade or business of building or selling property. An investor can buy land and develop land [for a shopping center] with the sale of said land as a capital asset. Just because he is a carpenter and did this one time [or even occasionally] does not itself make it a trade or business for 1040 Sch-C. He did not "use" the property in a business so the property is not business property [code §1231 or §1250, form 4797] or for 1040 Sch-C unless it is considered inventory. I would say it would not be inventory for resale until it is ready for sale. It would appear that this property is code §1221 capital asset property for Sch-D. So the question here is what is the status of the carpenter? Is he an individual investor or is he in a trade or business? Maybe we should ask the carpenter and not automatically make that decision for him.

Tom... I got rid of a few such clients years ago and it made my life and tax season much better. Yes, you can pick your clients and when you do you will make more money since the bad clients will eat up your time at a lesser profit. <_<

Wait!!! There are a lot of people around here with brain farts and I am sure they will post different opinions than what you have see so far. :lol:

This is probably an investment property where the carpenter rehabs the house and sells it. All costs are capitalized as cost of the property. It is not business property, form 4797, unless he "uses" it in his business. Rehabing investment property is not using the property. The entire sale should probably have been reported on 1040 Sch-D not subject to the SE tax (as would be with reporting on Sch-C).

This post was on quickfinder.com message board and jainen questioned the numbers. I don't see here the fact that the lady owner was given the business by her boy friend and her boyfriend gave her the numbers for the preparer. Jainen said after the boyfriend was disclosed than he regretted that his name was even on the post. LOL

Agree with taxperson... Sch-C.

Well lets see... he opened and closed in the same year so there would be no depreciation allowed or allowable on anything. There would be no deduction for such equipment. Therefore, he would have a gain or loss from the purchase price and sale of any equipment. Such equipment sale would be reported on form 4797. Any equipment he kept and did not sell would be a tax-free conversion to personal and would just keep its tax basis of purchase price until the year he sells it.

The IRS concept is correct inthat a NOL is deducted on page 1 thereby reducing AGI before any deductions or exemptions on page 2. I usually check the carryback results and the estimated carryforward results before filing the 1040 with a NOL.

Well... in all likelihood the payer has issued a correct 1099 and the client is wrong. Its probably an end of the year payment that the client didn't cash until the next year.

Just proves that no one is indispensable! I for one did not like William since he emailed me a nasty legal threat because I criticized ATX software a few years ago in a message board post, but I still wish him well at the unemployment line.

Whats to keep you from having just one business with 2 activities and one Sch-C?

>>asking the loan officer, "what's going to happen now?"<< The preparer is probably going to lose his state license and his ability to represent taxpayers with the IRS. The taxpayer is going to pay dearly and might go to jail if it qualifies as fraud. Its a good thing.

>>Now I'm on the fence - if you do nothing<< Suggest to the loan officer that they file a complaint with the CPA's state board to investigate his license/permit to practice. Of course you could do the same.

If you click the little color square beside the message title it will open the message at the last post that you previously read.

>>The land by itself was worth the purchase price and the building had no value.<< That statement is a tax preparer, or taxpayer, opinion only if there is no independent appraisal. We must remember that it is not our job to appraise taxpayers properties. An independent appraisal is "required" if the taxpayer wants a deduction. If he gets a qualified appraisal, has proper acceptance/receipt paperwork, meets the requirements as outlined by KC, then the taxpayer should have no trouble deducting.

Interest expense and probably everything else gets added to the cost basis of the land to be expensed at time of sale. --- >>HOME REMEDIES: If you have a bad cough, take a large dose of laxatives, then you'll be afraid to cough.<<

Well.. not in all cases such as your basis and loan deduction has been restored due to profit for the year. - Remember: Everyone seems normal until you get to know them.

A shareholder loan to a S-corp does not in fact create or add to basis. However, for purposes of deducting a S-corp loss it is considered as at-risk basis for allowing the loss deduction. Repayment of the debt reduces basis from the standpoint that the interest paid is an expense and any net expense/loss would decrease basis.