artp

Thanks for all of the feedback. I have requested a complete time line for all of the family from 2017-forward as well as taxpayer's plan for working and living going forward. He still does maintain his IL home, has IL driver's license and car is still licensed there. Have more digging to do. If he could give me a clear intention of moving back to CA when he returns to the US and selling his house in IL, I would be inclined to do a PY IL for Jan-Jun and PY CA from Jul-Dec. The remaining sticky issue would be income on the CA W-2. It really should not be considered CA taxable (being earned while his is an IL resident), but with the employer withholding CA taxes, I could see both states taxing the same income, but my client getting at best a partial state income tax credit to ease the blow. The real tax bite is the SE tax on the $78,000 and no estimated taxes paid during the year. Ouch!

Client has for many years maintained his tax home in IL with his wife and children--house, registered to vote, driver's license, car in license, etc.. In 2018 he contracted with a medical staffing company from CA that contracts thru UCSF for client to work as a medical staffing professional in a hospital in Liberia from Jan 11-Jun 10, 2018. His income $58,000 was reported on W-2 from UCSF with CA withholding and using his IL address for reporting purposes. His wife and children lived in IL Jan 2018-June 2018 until they moved to rented housing in CA in Jul and the children attended school in CA from Aug-Dec. From June 29-Dec 31 the husband worked as an independent medical services contractor for Echo Locum Tenens for work in CA with earnings of $78,000 reported on 1099-MISC box 7 still using his IL address for reporting purposes. In early Jan 2019 the entire family moved to Liberia for husband to fulfill his contractual obligation to work there until June 30, 2019. Presumedly, this will also be reported on a W-2 with CA withholding. They are undecided where he will work or where they will live after June of this year. Given the above facts, how should he report his income for state purposes? PY CA PY IL? Ignore the fact that the wife and kids lived in IL for part of year and report everything as CA source and a full year resident? I understand that CA is very aggressive to treat anyone who has a connection with CA as a resident for state tax reporting. Is there a significant difference in CA treatment for full year resident vs PY? I really need some CA expert advice on this one! Thanks

Thanks Gail. Yes, he will still have a loss on the 2nd contract for deed so I am reporting the sales proceeds since it was reported on 1099-S just to have it on record, but no recognized loss for tax purposes since it is still a personal residence. Art

Gail are saying that there is a loss to be recognized for tax purposes on the repossession? The type of property is still considered personal residence? The 2nd contract for sale price is still less than his original cost basis so this would be a sale of personal residence at a loss, so not recognized for tax purposes? Art

Taxpayer stated that she had the employer withhold this amount from her pay on after tax basis. W-2 entries confirm this. The employer then forwards this to the provider. Taxpayer also paid an additional $5400 directly to the provider. When entering this into Drake the system treated the $5000 as employer provider and no dependent care credit. This does not seem correct or am I missing something? Should the W-2 be corrected?

I took a close look a the reg 1.1038-1(a) (1) and my understanding is given the facts in my case no gain or loss is recognized on the reacquisition of the house since it was originally sold at a loss and therefore no Sec 121 election was made on the original sale. See below: Does anyone have a different opinion? § 1.1038-1 Reacquisitions of real property in satisfaction of indebtedness. (a)Scope of section 1038 - (1)General rule on gain or loss. If a sale of real property gives rise to indebtedness to the seller which is secured by the real property which is sold, and the seller of such property reacquires such property in a taxable yearbeginning after September 2, 1964, in partial or full satisfaction of such indebtedness, then, except as provided in paragraphs (b) and (f) of this section, no gain or loss shall result to the seller from such reacquisition. The treatmentso provided is mandatory; however, see § 1.1038-3 for an election to apply the provisions of this section to certaintaxable years beginning after December 31, 1957. It is immaterial, for purposes of applying this subparagraph, whether the seller realized a gain or sustained a loss on the sale of the real property, or whether it can be ascertained at the time of the sale whether gain or loss occurs as a result of the sale. It is also immaterial whatmethod of accounting the seller used in reporting gain or loss from the sale of the real property or whether at the time of reacquisition such property has depreciated or appreciated in value since the time of the original sale. Moreover, the character of the gain realized on the original sale of the property is immaterial for purposes of applying this subparagraph. The provisions of this section shall apply, except as provided in § 1.1038-2, to the reacquisition ofreal property which was used by the seller as his principal residence and with respect to the sale of which an electionunder section 121 is in effect or with respect to the sale of which gain was not recognized under section 1034.

Thanks. I will check this out, but I am dealing with a loss transaction so I don't know if the discussion in the referenced material is on point.

Taxpayer sold his personal residence (lived in for 5 years) in 2015 on a contract for deed for $35,000; cost basis $53,000 so no gain or loss was reported in 2015. For all subsequent years he reports the interest received on the note. In 2018 buyer defaulted on the balloon payment that was due on the note and taxpayer took the property back. He then sold it again later in 2018 on a contract for deed for $33,000. Question: How to report the transaction on his 2018 return? Does the status of the property change from personal residence to investment property? What is his tax basis upon the date the buyer defaulted?

Thanks for all the input. Does seem we have very different opinions on this, but I think I will get the amended return filed now. It will be several months in processing and if by chance the IRS catches the oversight and sends a check for the W/H before the amended return is processed, no harm, no foul. I understand we could possibly have a problem if IRS should double up and send a second payment but that could happen even if we wait till their refund hits their bank account.

Just had 1040 return e-filed and accepted yesterday with direct deposit of refund. Missed Fed W/H on 1099-R. Question is it better to wait to see if the original amount of refund hits client's bank account or file 1040-X right now. Not sure if IRS will catch this before the refund gets processed. Client is aware of the situation. First time this has happened. Very embarrassing.

Thanks for the reply. My client pays the real estate taxes, maintains out buildings for storage of equipment and pays property and liability insurance and consults with tenant regarding land usage-so ongoing profit motive. Payment arrangement is combination of flat cash amount per acre with potential bonus based on crop yield and other contingencies. Considering taking 199A and treating income as non SE.

If farmer/landlord (who does not materially participate in the farm operation) has cash rent arrangement with tenant, it would appear that the activity does not rise to the level of a trade or business for purposes of Sec 199A deduction and the income would be reported on Sch E and not be subject to SE tax. Correct? If the arrangement is crop-share where the landlord does materially participate it would appear that the activity does rise to the level of a trade or business for purposes of Sec 199A deduction and the income would be reported on Sch F subject to SE tax. Correct? Is there an arrangement whereby the landlord could get the Sec 199A deduction but not have the income subject to SE tax? In other words, the activity and arrangement would qualify as a trade or business for purposes of 199A, but not rise to the level of material participation for purposes of SE tax?

Taxpayer, married 2 children. Wife had family coverage through her employer Jan-Jun. Family moved in July when husband got new job-no medical coverage. Wife did not work after June 2017; stayed home to care for children. H&W got coverage thru Market Place Aug-Dec. Application for coverage to include children was re-routed to MO Medicaid. After 4 month delay they only gave taxpayer's one week deadline to provide additional documentation. Unfortunately, they were out of town and did not get the notice until time to reply had expired. Result-no coverage for the children from Jul-Dec. They finally did get full family coverage starting in Jan 2018. Any relief for penalty in 2017? art

Employee excludes his 25 % share of medical insurance premiums under company qualified plan. He will be retiring later this year. Under company plan the employer will continue to pay 75% and the employee pays 25% after retirement. Employee wants to pay the balance of his entire share of this year's premium on a pre-tax basis. He also wants to pay all of his share of next years premiums on a pre-tax basis before he retires in 2017. I have never head of anyone trying to do this. Has anyone run across this before? Your thoughts? Art

Pastor makes several overseas missionary trips each year. He is a dual status taxpayer in that he receives a W-2 for his "wages" but pays SE tax on his earnings. Pastor's wages are reported in box 1 with no other entries on W-2 except for parsonage allowance in box 14. The church does not withhold FIT or pay in Medicare or SS. For SE tax he is allowed to deduct his 2106 expenses after applying the tax free % from clergy 1 worksheet.The church synod pays for the air fare and room accommodations only. He pays for everything else. My question concerns the use of State Dept M&IE allowance tables to substantiate these deductions much like the CONUS tables for travel in US. For example in he travels to India and the State Dept tables allow $90/day can he claim that without a paid receipt, just a daily log entry with the business purpose of missionary teaching/preaching? If so, then could he use those expenses (after applying the 50% limit) in computing his SE tax? Is my understanding correct? Art

After 2016 was filed taxpayer informs me he when out to the market place to get his insurance for 2016 rather than purchasing it privately as he had done in prior years and comes in with 1095-A. On the return as filed $4328 of SEHI was claimed. My fault for not asking beforehand. Anyway after completing the 8962 and calculating the repayment of $274 PTC he loses out on $4194 of SEHI deduction. Comparing 2015 and 2016 he actually winds up paying about $500 more for his insurance through the Market place (bronze level), pays back $274 of PTC and will owe about $494 of additional tax. Does this make sense?

Ringers, If the rental property were not available till Jan 2017 would anything be deductible in 2016? Held over till 2017? or just plain lost? artp

Taxpayer bought a house for rental property in Dec 2016 closing on 12/09/16 and took out mortgage receiving 1098 showing interest $216.18, Mortgage Insurance premiums $1972.25 and points $2130.38. She held it out for rent in 2016, but was no able to get a lease signed until Jan 2017. Occupancy will start 04/01/2017. Is any of this deductible in 2016 on Sch E? or Sch A ? or does she have to wait till 2017?

Is there any way to get your password updated other the calling their 800#? I have been trying for 4 days and keep getting message that they can not respond and call back later. artp

Taxpayer is building a 50x50 ft. structure next to his existing residence. This structure will include a completely finished living abode-kitchen, bath, bedroom ect and will also service as a garage, workshop and storage area. The living abode will meet all codes requirements for a dwelling unit as he plans to use it as a residence for an elderly family member. If he decides to install a geothermal heating/cooling system in the structure will it qualify for 30% energy credit? My concern is that although the structure may meet the definition of “dwelling unit” he may not meet the test “used as a residence by the taxpayer”. I would welcome your input on this as I have never had this situation before.

One further thought. Does the fact that the brother can not deduct the $18K loss ($30K-$12K=$18K) have any effect on Mom's basis that gets passed on to the son for that 50%? Is that $18K just lost out to everyone?

Thanks for the reply. There were no improvements made.

Taxpayer (son) sold investment real estate acquired by gift (quit claimed deed) from Mom. Sales price to unrelated party was $60,000. Mom inherited 50% interest in the property from her father. The other 50% went to Mom’s brother. Property was valued at $66,000 in the estate. Several years later when value was depressed Mom bought her brother’s 50% interest for $12,000. Question: What is son’s basis in the property? Does he get date of death value for 50% interest that his mother purchased from her brother or is that 50% based on the $12,000 that she paid?

In 2013 taxpayer agrees to purchase a small tract of ground FMV $35,000. He gives the seller $15,000 in cash and he agrees to do excavating work for the seller (on an unrelated project) as payment for the balance of the purchase price. Taxpayer personally owns the excavating equipment that he uses on his farm. He is not a contractor and does not do excavating work as a business. Taxpayer should have reported $20,000 of barter income in 2012, Correct? If so, would he then have a tax basis in the property of $35,000? If he sells the property 2015 for $55,000 he would report a capital gain of $20,000 assuming the property was held for investment. Correct? Problem: If taxpayer did not report the gain in 2013 and refuses to amend the return how do you report the sale in 2015? I would appreciate feedback on this as I not sure how to handle this. Thanks, Art