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Contents

Profile

Roy,

Thanks for filling out your profile and welcome to the board. I look forward to your contributions based on your many years of experience.

Tom Taocpa 14:36, 3 February 2008 (CST)

Roy, Thanks for inviting me to contact you. My name is Dan and I am a EA out of Colorado and have several S Corporation clients. I have usually dealt with stock transactions where shareholders are buying stock directly from the corporation and/or making capital contributions and therefore gain basis in the S Corp for loss pass through and non-taxable distribution purposes. Now I have a new situation wheere and existing shareholder purchased shares directly from another shareholder. I am trying to determine what the changes are for each shareholders S Corp Basis for tax purposes and what the accounting entries in the corporate books are for this transaction. Any insight you could provide would be extremely helpful. If you would like an outline of the facts in the case I would be happy to provide those as well. Thanks, Dan


Okay Dan, first, in situation where one shareholder sells to another shareholder it just like IBM, no entries are made on the books of the corporation.

Second, on the shareholder basis worksheet included in most tax preparation program you would increase the buying shareholder's basis by the amount paid to the other shareholder for the stock. This increases his basis in the S Corporate Stock he now owns, his he had previously and the new shares he purchased.

The selling shareholder's basis is what was paid for the stock originally, plus and minus the income, gains and losses, (plus or minus other adjustments such as non taxable income and expenses) during the perios(s) he own the shares.

The buying share's basis is the computed the same way, except you add the amount he paid for the seller's shares.

If, you don't have a basis worksheet, let me know and give me an email address and I will sent you one.

If you have more questions about this let me.

Ray, Thanks so much. Exactly what I was looking for. I am sure I will have more questions but that is it for now. Dan


ATNOL worksheet

did you get the links that I provided? Kevinh5


Construction Loan Points

Thanks a lot for your response. Just wonder, in this case, do you think if I could expense the 1st year's amortization as that's the pre-construction period? Or do I need to capitlize that as well?Kerrypoon 18:56, 25 March 2008 (CDT)

Loan Points

Received your advice, thanks. Really appreciate your efforts in answering questions.Kerrypoon 00:24, 26 March 2008 (CDT)

Insurance question

Roy - I realize Kenk has posted before, but we don't have profiles on Kenk or Puru. And I don't know about you, but Puru seems to be dispensing some advice that leaves something to be desired. At least you are posting with authority and I have been trying to as well. Puru doesn't and I am very suspicious of his background based on some of his more recent posts. TomTaocpa 10:58, 2 April 2008 (CDT)

Thanks

Roy - Thank you. I've contacted Tim Doyle the moderator about him and so has Belle. I think he needs to go. TomTaocpa 18:34, 2 April 2008 (CDT)

Roy,

I want to thank you for your comment earlier today.

"RoyDaleOne (talk|edits) said: 

3 April 2008

In my way of thinking; 1. In 2008, redo loans to personal name(s), (Note the S Corp can guarantee the loans and pledge the equipment as collateral.)

2. Suspended losses are freed up and may create an NOL 2008, or reduce income taxes in 2008."

I was thinking that is what they need to do for 2008. Is it just me...isn't this stupid? They can put the loans in their name and then turn around and make the loan to the corporation. We end up in basically the same place. Of course they need to show the interest income, but then they have the expense to offset it. It seems like you are just moving things from one pocket to another.

What are your thoughts on this?

regards,

Cindylee 20:33, 3 April 2008 (CDT)cindylee


Advice with client

Roy,

My client can't understand how he would have a disposition in 2006, and have debt relief income, if the loan stayed in his name, the title stayed in his name, and in 2007, my client pays the loan off on the truck himself. He makes some valid points to consider, but the transaction still "tastes" like a disposition in 2006 to me. When I try to explain how the 179 recapture would be taxed at regular income tax rates as well as SE tax on the other income line of the Schedule C, he doesn't think I know what I'm talking about.

This guy has two separate Schedule C's and was referred to me late last year. He got me his 2006 information with less than a week to go before the extension deadline (Oct. 15th). We barely made the filing deadline. When I asked him about the decrease in income in the trucking business, he mentioned that he had basically stopped his trucking business in the middle of the year, and that he had deeded his truck to his son and that his son had assumed the loan on his truck. I informed the client that we would have to amend his return to show the disposition of the asset (to get his books closed). At the time he said fine. After lots of research to make sure that the transaction was being treated correctly, I informed him on what it was going to cost him (the taxes on the disposition). This week I get the "real facts", (after the client visits the bank)that the loan was always in his name, he paid it off himself in 2007, and the title to the asset always remained with him.

Basically I'm not comfortable with the fact that I was given one set of facts a few months ago and new facts this week. I have told the client that if indeed there is a 2006 disposition (which I'm honestly not sure of after the new information I've been given by him), then I will have to prepare a 2006 amended return. I also advised him that I would not, and could not prepare a 2007 tax return for him if he did not sign the 2006 amended return. The client owes big bucks on his 07 taxes, but doesn't have the money to pay them anyway, so I've told him that the best I can do is file an extension for him for 2007, resolve the issue on his truck transaction and determine whether or not the 06 return needs to be amended, and that I really feel that he needs to find someone else who can take care of him better, or in other words, find someone else to prepare the 07 return later this year. I don't believe that the client will sign an 06 amended return, if indeed one is needed, anyway. What do you think Roy? I appreciate your insights. They are thoughtful and reflective, and I need another CPA's outside view on the situation. How would you handle this? Thanks.

Profile Updated!

Sorry for the inconvenience.

Roy,

My name is Mary and I have updated my profile. Can you give me any guidance on my posting? I spoke with a CPA friend of mine last night, and we are both stumped. This is in reference to my posting yesterday about the liabilities section of a K-1 on a Form 1065. Any help you can give me will be greatly appreciated. Thanks Mary

Hello, Roy

Roy, shoot me an email if you want to grab lunch sometime. My office is in Longwood.

Hey Roy..

Hey there Roy, still got me curious about a schedule T.... You are right this is a state requirement in MN for CPAs to hold records of returns for 7 years. My understanding is I must go by the "stricter" guidelines in compliance. Nancy Shoemake

1250 Gain

THANKS so much.

I have had it on Part III of the 4797 for the entire time, but having received some confusing information from the temp prof, I've asked the question of others and have been unable to get any kind of agreement on the answer!

MUCH appreciated. Really.


michelle

Schedule A 1045

Roy,

First, thank you for the disussion this past week on Sch A Form 1045.

I would appreciate your opinion on the original issue I raised. That is, does one include nonbusiness capital loss carryovers from previous years in Line 2 of Schedule A (which is nonbusiness capital losses), or only include the current year nonbusiness capital loss amounts.

Thank you. Dave

NOL Calculations

Roy,

I find this very interesting that you do not use Schedule A. Don't you have to use it when filing for clients?

Regardless, I took all your numbers and populated them into my own software for Schedule A, and sure enough it results in the same NOL of $-22,000.

Let's assume that instead of $1000 of nonbusiness capital loss, there was $100,000 of nonbusiness capital loss (and all of it was from carryover from previous years, due to prior years $3000 capital loss limitations.) Whould you include that $100,000 in your calculations? And what would be the NOL in this situation?

Thanks.

NOL Calculations

Roy,

Using all other numbers in your example, what is the NOL calculation if the client had $100,000 in nonbusiness capital gain losses (instead of $1000)? My software brings the NOL down to $77,000. Is that correct? And the final question: is it correct to reduce the NOL down to this level, if these nonbusiness capital losses were from other years? It just does not seem right to me, since these previous years losses did not contribute to the AGI loss from which the NOL is calculated.

Thanks.

Dave

Audit help

Hi RoyDaleOne,

Thank you for posting to my thread Discussion:Audit_help_-_Accrual_vs_Completed_Contract. Your reply recommended that I contact you directly. So here I am. Do you need any further information regarding my matter?

--Incognito 13:03, 28 April 2008 (CDT)

Thank you for posting to my Discussion page. Your 1st suggestion was comforting because that is exactly what I did when the auditor first brought it up.

As part of the IDR they had asked for the accrual-to-cash conversion workpapers. I pointed out to the auditor that there was only an immaterial difference between the two methods of accounting because the net changes in A/R & A/P essentially offset. (I was also hoping to throw her off the path of the 481(a) adjustment--that is where my client will feel the pain).

No, I have not provided the cash-to-accrual change in actg method workpapers.

Firm doing taxes?

Doing taxes is just part of our business. I'm not sure I completely understand the question?

-OmahaGold01

Audit

Hello Roy!!

I tried to respond to your email and it bounced back. I am working with the client in need of audited financials and hope to have you some information. I emailed him in Jax. Do you travel to Jax for audits?

Thank you again and as soon as I hear back from him I will let you know :)

Sandysea

Audit

Hi Roy;

I wondered if you would please send me another email or respond if you are interested in talking with my client about his audit needs.

Thanks again and hope everything is great with you and yours!

SandySea

Firm doing tax returns

Thank you for the response.

In reading several of the questions posted on the different forums, I have seen multiple questions which I would consider "elementary" (some by EAs). Obviously those asking the questions do not consider the question elementary. Are you letting them know the same things you are telling me?

If this is a forum designed for tax pros, would it make a difference as to how much of a "pro" you consider yourself? I can readily admit there are things I do not know when it comes to tax prep. and that is why I am asking the question. Questions you ask I may have dealt with in the past and already know the answer so would I tell you that you should not be preparing tax returns even though you consider yourself a "pro"?

I am not trying to downplay your credibility whatsoever because I understand that you have done this all your life and it is how you make a living. If individuals are going to demean those who ask questions they believe are "elementary" then what good is the forum? I posted a question several weeks ago re: 529 plans and nobody was able to give me an answer. Obviously, this question wasn't "elementary" or I would have been chastised by you already I would think?

-OmahaGold01

529 Question

Thanks for the help on the 529 question, but I needed the information before 12/31/07. I was able to get in touch with some of the foremost 529 experts and received the answer I was looking for.

Thank you again though.

-OmahaGold01

audit

Roy;

You can call me or you can email the client directly. Sent an email to the cfl.rr.com account.

His name is Daryl Burrows and needs the audit asap.

You can call me at my office if you like

772-770-2148

Sandysea

Tax Court Exam

Well, I was thinking of using the tax almanac forums if it was okay with T Doyle and the community at large. That way we could get the most input. And quite frankly, I need the networking. I don't know anyone personally that has practiced or has any interest in practicing before the tax court.

TheTinCook 05:59, 1 May 2008 (CDT)

Hey, I just wanted to thank you again for helping me with my question. I just happen to learn about Tax Almanac recently this year. I Have been preparing tax return since i was 19 years old. My father was an EA, My mother was an EA. And i have been EA for 10 years. My father and mother retired in 1993. Well, i am still learning. thanks alot.

Fired the client

Roy, I wanted to make sure you saw this and see what you thought. Thanks.

I fired the client.

I filed an extension for him for 2007, but will not be preparing his 2007 tax return. I've been unable to obtain clear facts with numerous issues regarding his business, specifically, who the truck was actually sold to in 2007 (was it the son who started to make the payments in 2006, or an unrelated third party buyer). I was given a different set of "facts" this spring than what I was given last fall when the 2006 return was prepared. I'm debating whether to prepare an amended 2006 return to give to the taxpayer, and if so, how to show what transpired. If the son is the one who actually bought the truck in 2007 (which again I haven't been able to ascertain), then I think that there was definitely a disposition in 2006, and that I need to prepare an amended return showing the disposition on the 4797. If the truck was actually sold in 2007 to an unrelated third party, then the question becomes should I still prepare a 2006 amended return, but instead of showing a disposition, show the business use falling below 50% on part IV of the 4797? The taxpayer has told me that the truck sat in lot with a for sale sign on it, but he has also said that the truck was being used by the son in a separate business (and the son was making the payments on the truck). I am fairly certain that the taxpayer will NOT sign and mail a 2006 amended return, regardless of what's on it. The taxpayer appears to be set on reporting the sale in 2007. At this point, I'm simply protecting myself against any future liablilty and trying to accurately report what's happened on the return, but with the different facts given, this is proving difficult. Any thoughts or suggestions?

Fired the client

Yeah, once 80% of my aggravation is gone, I'll have to get a new hobby I guess. Would you still show an 06 disposition on an amended (if this were you)? Thanks Roy

I agree

Roy,

I absolutely agree with your line of thinking regarding the ownership issues and the vehicle. I'm worried/wondering about whether or not I would have a BU% less than 50% issue in 2006, since one would basically be taking the stance that the asset was not actually "sold" until 2007 (and again I don't know who did end up with it in all actuality)? Would one want to give the client an amended return for 06 using Part IV of the 4797? I know the son supposedly started making the payments at the end of April 06 and the taxpayer has said that a portion of the time, the truck sat in a lot with a for sale sign in it, but the son also started using the truck in a separate business operation, hence my question.

Prepaid Patent Costs

Roy, Can you please elaborate on your post? Discussion:Deducting_prepaid_expenses

--PVVCPA 18:23, 19 May 2008 (CDT)

Mbaqb

Thanks for responding Roy, I wasn't around for a few days. It's a semi-truck that we're talking about, but I agree with your thinking.

I agree

Roy, I agree not enough facts were really given by the doctor. He may have ultimately got his answer, I don't know. But, I hope that he learned overall that the tax area is not one to dabble in! He did seem to put in more effort that some non-pros that come on here. CrowJD 13:00, 27 May 2008 (CDT)

Sec 179 Discussion

Where am I going wrong on this one? My client purchases equipment solely for the purpose of leasing it out. No maintenance to speak of on the equipment based upon their P&L. How could this qualify for 179 treatment? If you disagree with me as to the treatment of these expenses on PY returns, please advise why instead of giving a general response.I would truly appreciate it.

Regards,

Chase

Thank You!

You are right I totally misunderstood.

CONDO

Roy, I am looking for an ocean front condo on Anna Maria. Do you know of any bankers or repos in that area that may have some inventory?

Thanks for any help you may give.

Phil.

form 1045 schedule A

Roy:

I read some posts from your regarding this schedule. I have a quick question. Line 6 "nonbusiness deductions", I am confused if I should include state taxes. $53K out of $87K of itemized deduction is related to state taxes paid due mostly due to K-1 received for business profits. page 6 of instructions clearly says include itemized deductions but in () except state income taxes on business profits. The $53K was an estimated payment and also includes some amount for interest and dividends.

So how do I figure amount to inclulde on line 6? If I include my full amount on schedule A than line 1 and ultimately (NOL) is severly reduced eventhough I do have some nonbusiness income (dividends, interest) and capital gains to offset.

thanks!

Rev Proc 2002-18

Per the Rev Proc, the agent gets to pick the method. Percentage of Completion and Completed Contracts are both permissible methods. Are these their only choices? I wonder which they would choose?

The books were kept on a straight accrual basis...all WIP booked to COGS and all Billings booked to Sales. They wouldn't select this method, would they?

NOL

Hello RoyDaleOne, 

    After ready all of the sections on NOL I find your answer to be the closest to answering my question. To sum it up, do I assume after filling out Sch A of the 1045 is that you can not deduct Nonbusiness capital gains in excess of your net Nonbusiness items (nonbusiness income less nonbusiness deductions).  Lert me explain.
    I have -2408 in Capital losses ( no gains, but I have 12,121 nonbusiness deductions and 18,316 nonbusiness income.)  In the end I have more nonbusiness income than I do the combined amount of nonbusiness deductions and capital losses, therefore my orignial NOL from Schedule C should not be offset. Is my assumption correct.  After filling out the form Line 1 remains unchanged.
    I'm new at this site so if possible would you please emal me at Laureen@LaureenOliver.com.  Thank you for your help.

discussion irs 183 code

Thank you for your reply. When I file an appeal with the Appeals Office, can I represent myself at the meeting with the Appeals Office Personnel, and then they would agrue my case with the IRS?

Thank you again for any adviseSebrofs 15:52, 11 July 2008 (CDT)

Negative Checking Balance on BS

Hi RoyDaleOne, My name is Nathalie Tran, a new member today. I'm a rookie (1st month) CPA in Orange County California.

Pls help: I have a Bal Sheet (accrual) with a checking account that has negative balance ($1,800). Can I present on 1120S Sch L the negative bank balance? If not, please advise.

Thank you much for your time.

Nathalie

1913

So, do you have one of those framed and hanging in your office? Natalie 18:34, 29 August 2008 (CDT)Natalie

Hi Roy,

Thanks for responding and providing me with the LTR Ruling 200646014. In this instance the ex wife did not claim the exemptions and the IRS agent is disallowing them to the husband because the form was not recieved and is now considered not timely. I still cant find anything that says the form does need to be timely filed? Any other thoughts?

Aprreciate it.

Gordon cpagp1040@aol.com

You mentioned you were sent a worksheet for to calculate an NOL for AMT purposes. Is it available for another person. Thanks much. Ted L 14:19, 29 September 2008 (CDT)

RE: Tax Tools

I already subscribe to Tax Tools, an excellent program I could not do without. Thanks for thinking of me.

Death&Taxes 08:49, 12 January 2009 (CST)

SORRY ABOUT SHOUTING BUT WOULD APPRECIATE ANY COMMENT ON TOPIC.

Thank you!

we're always looking for anti-SPAM people to help out keeping the site up to decent standards. Kevinh5

Bankruptcy/Rental

Thank you for you comments on the bankruptcy mortgage. Unfortunately, I guess I still don't get it. Is the disposition of the rental by bankruptcy taxable to at the individual level? I've read pub 908 over and over. I thought that debts discharged in bankruptcy were non-taxable. Some are saying to report the $21K gain on the 4797 and pay tax on it. Others are saying to report the gain/disposition but then not pay tax on it (not sure how one would show this). Still others are saying to disregard altogether. It appears as if the board can not even come to an agreement as to whether or not this is a taxable event (to the individual) let alone how to report it. Can you provide any further help as to what you would do and how you would report it? Thanks a million!

Rental BK follow up

I would guess you do not have a any reportable gain, however:

1. How was the property disposed? (Sale or foreclosure)2. Who disposed of the property? (trustee or tp)

don't really know - it all ran through the bankruptcy courts and the loan was discharged there

3. What was the FMV of the property at time of disposal?

In this market, who knows? No appraisal however on the BK paperwork it shows "current value of debtors interest" as $52K.

4. Did the taxpayer receive anything from the "sale"? only the discharge of the mortgage.

The answers were parsing hairs.... My only frustration on this board. Really hard to pin things down when deep down I know that we are all just trying to do a good job as professionals.

So if there is no gain to report by the individual, pick up the adjusted basis as the sales price on the 4797 (to show no gain) with a sale date of ? and do not file a 982.

Thank you again. I'm sure you are very busy (I know I am)

debt

So - do not file 4797 for the disposition. In summary, (I should note they have no credits, capital loss carryforwards or NOL carryforwards) use tax attributes to reduce the remaining basis in the property form $30K to zero on the 982 with the appropriate statements attached. They have no other attributes to reduce. What happens to the remaining $21K (from the original $51K)of debt forgiveness? Just ignore it due to the chapter 7?

Where are you from in Indiana?

By the way, not trying to be a pain in the... I would gladly pay a consulting fee to certain members of this board.

Forum Award

RoyDaleOne - I agree so I just added to your user page the Forum Award as you certainly deserve to be recognized for all of your very good posts. As you know, this is something others add to a users page. Very surprised you had not yet been designated as such. Michaelstar

Distributing of contributed property from partnership

Hi RoyDale,

When you have a chance could you possible followup on my previous question this morning regarding tax consequences regarding distribution of contributed property to partner. Any guidance would be Greatly appreciated!! Thank you, Sandra

LJ

RoyDale,

Thanks, for your input - it's a great service you are providing, and I hope it is fun for you.

I haven't been able to find this specific situation in the Code and IRS materials.

1. We agree that the client, a business entity, is entitled to deduct the full cost of the properties in one way or another. We propose to pass through to the three members the market value, say $300,000, as charitable contribution on Sch K. We will deduct the remainder as loss on disposition of property.

3. Regarding whether an appraisal is required: The attorneys are insisting that the client get an appraisal. However, Pub 561 "Determining the Value of Donated Property" says that "You do not need an appraisal if the property is ... stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business." We would like to talk the attorneys out of the appraisal because the property is clearly "property held primarily for sale to customers in the ordinary course of your trade or business". What do you think?

4. Origially we were thinking of the developed properties as "inventory", but I see from your input in another discussion "Building condos - land development costs" that they don't qualify for inventory treatment under the Code. Therefore, would you not use Schedule A to input Cost of goods sold? Would you use 4797 "ordinary gains and losses"?

Any input would be appreciated. Thank you. Lynele

LJ

Roy,

Thank you SO much for your input.

I got some more information on the situation, but I suspect it doesn't change anything. The donation was actually not houses, but land with infrastructure that never went "vertical". More like work-in-process. I suspect that does not change the discussion?

Lynele

Lynele

Lynele

I agree it does not change anything.

Please put four ~ in a row so I don't have to hunt for your discussion page.

Thanks

Hello. I'm the one who posted the question about the prior tax preparer who made adjustments on line 25 (adjustments to shareholders equity). I really appreciate your response as I'm at a loss as to what to do. If I were to amend 2005, there would be an increase to net income of about $8,000. I'm not sure about 2006 yet as I'm awaiting a copy of that return. Have you ever encountered something like this? The retained earnings doesn't tie to the schedule M-2 for those years either. The company was an S-Corp from day one and has never had anything odd like non-taxable income, etc.

Anything you have on this is GREATLY appreciated!!

Roy: Thanks for your input on the various topics where Sec 1234A would come into play. It is a Code Section, thus it is the law. There seems to be quite a bit of confusion re older regulations and the like. You seem to have it down and have done a good job of informing the board of the law on this subject.

C. Scott

Adjustment to Shareholders' equity

Hi again, You responded to a question I posted about an error made by a previous preparer on the 2004 & 2005 returns on line 25 of the Schedule L. I'm trying to fix this in 2008 but I am really struggling with how to do this. Would it be best to make the adjustment to the beginning retained earnings balance even though it won't tie to the prior year ending retained earnings? The errors consist of several things, but primarily by unreimbursed expenses incurred by the shareholders that weren't posted in prior years to their loan account and the expense/asset accounts.

Your help on this is very much appreciated!! :) ~~

linking to copyright material

hey roy,

you asked "TexCPA would you please explain about the link to copyright material?

so Trillium responded:

Generally, unless the info you want to link to specifically prohibits you from linking to it, a link to an article or other material that is under copyright is fine. It's posting the material itself here that's problematic. For a little more info, see TA policy page and TA T&C.

Thanks for thinking about it, though!

Trillium 10:51, 11 March 2009 (CDT)


(FYI, I'm referring to your post in the Casino discussion.)

hope you are having a good season!

TexCPA 00:55, 13 March 2009 (CDT)

SELF DIRECTED IRA

No, I don't act as trustee, usually a bank or brokerage firm does. If the person wants to buy real estate inside an IRA, there are a few companies that specialize in that, but I try to steer my clients away from putting all their eggs in one basket. Kevinh5

Your Latin...

"Vermis Orca Patefacio Non" Very Awesome!

Harry Boscoe 14:36, 27 April 2009 (CDT)

Cancellation of debt under terms of will

Dear Roy,

Thank you for all of your input. I know your time is valuable and I appreciate your responses. They have been a great help to me.

Howard Litz

Lunch?

Roy,

Sorry I didn't get back to you sooner as I admittedly have not been on the site for awhile. I would like to grab lunch if you're still interested as I would certainly like someone to refer clients to when the issues are over my head. I'm based in Longwood, so just let me know when would work for you if you're interested. Thanks.

Steve Davis

that was supposed to have been taken as a joke

and not directed toward you. Sorry if it seemed like I was. Kevinh5

Section263a

Roy, thanks for your post cautioning me to heed Section 263a rules with regard to the Inventory valuation for a bakery client of mine. I was 'unconsciously unaware' (ie., clueless) of this code section, but following your post I've done some research online. What I think to be the case is that this section does not apply to manufacturing entities under $10,000,000 in sales. My client had gross receipts under $3 million, so it looks like I don't have to worry about this section. Do I have this right? Thanks much Anchorman 09:15, 29 July 2009 (CDT)

Bakery and 263a

I took a master's degree level Tax Research course in college about 4 years ago and I still get freaking dizzy reading the code!!! But let me ask you this: my client is a commercial baking company. No reselling or retailing. They make bread and rolls which are sold through retail grocery stores. Knowing that, where can you point me (specific lines) in 263a that would apply to this taxpayer's situation? Thanks again! Anchorman 11:54, 29 July 2009 (CDT)

LLC to C Corp

Roy, Thanks for your question, which I answered with a recent updated post on the Tax Discussion Forum. Thanks Anchorman 17:14, 30 July 2009 (CDT)

Astjul Reponse

Hi Roy:

New to this forum & appreciate your thoughts....Do you know of anything specifically on point? All preliminary research leads me to business bad debt but all relative to "installment sale".

I have IRS id# & name but not in writing. This change is a result of an ongoing audit. I am in negotiations right now with office audit agent.

This is my argument....not saying I am 1000% correct right now because I have yet to find anything specifically on point but looking.

Why would it be a business bad debt under Sect 166?

Taxpayer reports & pays tax in full in 2006 on ordinary gain because of depreciation recapture. Doesn't get paid the full selling price...if IRS disallows my business bad debt in 2008 by either claiming it is a non-business bad debt or complete disallowance the $80k will be lost & gone forever if I am out of statute.

Alternatively could I argue that it became worthless in 2006 when they "started" to refuse to make payments????

Any thoughts

Thanks

ASTJUL reply to installment information posted 10:12 CDT

Thank you Roy. Was getting hung up "installment sale" when I should have been researching the "installment obligation". After looking in the right direction I see that I have no choice but to put this in the year of default.

Thank you again!!!

From AstJul - Can I bother you again???

Hey Roy:

If you don't mind your answer was so on point to my last question.....

1) Auditor is disallowing a NOL CF election on my amended return for "S" Corp Loss - long story 2005 out of statue for carryback. She was very sly auditing 2006 "asked for" 2005 & 2004 but never opened the years & then let the SOL run by issuing a change on 5/14. Anyway if I lose on the NOL CF election which is just about certain 

       A) Researched adding back the disallowed loss to TP's "S" Corp basis - what I found is saying no based upon 172(b) but....???  Reasoning by IRS is Basis is reduced regardless of tax benefit to shareholder. Do you know of anything out there that was argued & won to the contrary?

       B) If same TP contributed over 400k on initial investment to "S" Corp originally as $50 in stock & rest as loan do you think I can argue successfully (because IRS is saying no to loan really equity) Sect 1244 because it was his initial investment.  Think this maybe an uphill battle auditor is hanging her hat on 1-1244(d)-2 but I am arguing he put the $$ in initially & this is not a subsequent increase to stock.

Thank you in advance if you have time to get back to me. Large IRS adjustment trying to offset some of it.

Regards

Julia

Roy, you pump me up!!

What brought on your kind words? Was I too harsh once? Did you kick the dog and need to atone? I hope I'll be able to stick to the topic a little better in the future. And I hope I'll never run out of PBR. Frankly, not a day doesn't go by that I don't think about things that never were. Have a kick-ass weekend, RDO. Harry Boscoe 10:37, 10 October 2009 (CDT)

RoyDaleOne,

I am not familiar with responding to messages to my username. I am guessing that I have to post a message on your "my talk" page.

I will respond later tonite or tomorrow.

JingleRock123 20:18, 30 October 2009 (CDT)

Roy, you wrote: "I am always glad when you are on the job, I know I only have a 1% chance to disagree. Thanks for your excellence excellent comments on point. I also thank you for correcting me evry every time I need correction, which is way to too often."

You are two kind, Roy.

Harry Boscoe 23:10, 30 October 2009 (CDT)

RoyDaleOne,

I am confused as well.

It is obvious that the drafters of 280A did not have fractional-interest properties in mind; pretty much the same can be said of time-shared arrangements.

What they did have in mind is a single, free-standing dwelling unit with 2, 3, or 4 co-owners. Aggregating personal days by each of the co-owners, as required by 280A(d)(2) for purposes of the 14 day/10% test for treatment as a “residence” in 280(A)(d)(1), would not typically present an hardship.

However, a larger project, with a larger group of co-owners – perhaps several hundred or several thousand, makes aggregating all of the personal days and rental days impractical/impossible. The Project Manager tracks occupancy for all of the units, but does not track personal days/rental days for any of the units; such Manager is not in a position to distinguish between “guest or family usage or rental below FMV” and “rental” usage. (Is the TP to distribute copies of 280A to each of the co-owners to document why the TP is requesting personal usage and rental usage data be provided to strangers??? Does the TP sue the co-owners to “encourage” them to provide such data??? Is the TP liable for any inaccuracies, fraud or otherwise, in such data???)

Furthermore, counting combined usage for all co-owners is not fair. Why should the TP’s income tax liability be directly impacted by usage decisions made by each of the co-owners??? To the extent that there is co-ownership turnover, income tax planning is made more difficult (actually, more problematic for smaller projects). Why should the “rental days” number for the project not be correlated, even on a percentage basis, with the gross rental income realized by each of the co-owners that elects to rent???

Lastly, counting combined usage for all co-owners in larger projects emasculates the “14-day” minimum (actually, this is a 15-day minimum for personal usage) in 280A(d)(2). This is due to: counting all of the personal days makes the minimum of 15 a “joke”; and the 10% of rental days rule for some properties (for “resort” fractional-interest properties, the ratio of personal days to rental days may be 5x or 6x) may be a “joke” as well. Thus, by (almost) definition, all of the co-owners treat their dwelling unit as a “residence”. Was this intended?

Note: In the Craig & Luttman article, when discussing the “tax-free rent rule”, there is the following: “Few timeshare owners are likely to qualify for the tax-free rent situation since Section 280A(g) determines compliance with the less-than-15-days per year rental requirement based on the number of rental days for the entire “dwelling unit,” not a given timeshare owner’s portion of the unit.” The first part of 280A(g) definitely refers to 280A(d)(1) and 280A(d)(2); to me, it makes sense to calculate rental days using the same method used for qualifying the unit as a “residence”. Was it intended to make the “tax-free rent rule” not apply to larger projects?

Conclusion: Applying 280A to larger projects is like trying to insert a round object in a square hole.

JingleRock123 23:28, 30 October 2009 (CDT)

TWO OPTIONS

RoyDaleOne,

I have been thinking that you and I have been using similar thought processes ever since your post of 20 October to my thread ("Just think I get credit for someone else business use!!! Not....").

Let me address your question about 280A not applying to the situation of: 0 weeks personal use; 1 week rental use. In 280A(a), you have the general rule -- except as provided in this section, no deductions for use of a dwelling unit used as a "residence". However, in 280A(e)(1), you have guidance for allocating expenses between personal use and rental use for situations involving at least one day of personal use. So, 280A applies at least to situations involving 1 day to 14 days of personal use; obviously, these are situations not covered in the general rule. Is it such a stretch to include 0 personal days???

It is understood that there would be no Sch A deductions when involving 0 weeks personal use.

JingleRock123 10:47, 1 November 2009 (CST)

TWO OPTIONS << unlike last time, this heading is correct

RoyDaleOne,

Sorry about the post not matching the heading last time.

When a dwelling unit is wholly-owned, 280A is almost perfect (the screw-up in 280A(e)(2) re: Sch A deductions has been twice remedied by the Tax Court). However, when the "dwelling unit" is co-owned, there are complications: let n be the number of co-owners; the complications increase, perhaps geometrically, as n increases from 2 to a large number.

As you know, the problem lies in 1) counting only the personal/rental days of the TP; or 2) counting all of the personal days and all of the rental days for all of the co-owners. You mentioned some court cases citing Option 1; could you post the citations?

I think you are correct in referring to the 1.163-10T(p)(6) special rule for time-sharing arrangements. Of course, the subject is "qualified residence interest" which the qualification thereof depends on the count of personal days. However, why does the special rule give such explicit guidance to use Option 1 when counting rental days??? Is such advice to be used somewhere???

JingleRock123 11:14, 1 November 2009 (CST)

CORRECTION

RoyDaleOne,

At the end of my 2nd sentence in my 2nd paragraph, I meant to say "... as n increases from 1 to a large number."

JingleRock123 21:38, 1 November 2009 (CST)

Hi


Please do me a favor Sir

I think the "Bizzer.com" is a good resource for tax education and CPE. I tried to trace to its web based on your reference in the discussion but I could not find it--I found its web but it did seem not working. I could not get to its contents. It seems that the homepage left idle for a long time. Do you have any idear? My e-mail is dsj3232@hotmail.com Thanks in advance

David Jeong

Jeff-Ohio's profile

is the same as JasmineCPA's profile. They are one and the same. Kevinh5

Jeff-Ohio and JasmineCPA are quickly wearing out their welcome

and when that happens, I'd expect to see a new dynamic duo enter the forum who don't do any of their own thinking and don't do any research. The other day I was accused of being rude in some posts and responses, so I have backed off. I totally get mad when someone can't do their own thinking. LIke when someone gives them a formula to apply and then the numbers change they have to come back and ask for the new answer. I thought tax professionals were supposed to be good at math? LOL. I'm not responding to any more of Jasmine/Jeff's questions. I imagine that others will make a similar decision soon. JR1 is very near to that decision himself. While we're willing to help, in the end the person getting paid should do a little work. Kevinh5

Fresh Air

Roy, thank you for taking the time to leave me a message complimenting me on my posts to the discussions on this forum. I enjoy the discussion, and have been in this business for a long time so I think I understand some of the concepts. If I can add something of value that will help others understand, then I will. DaveFogel 15:52, 19 December 2009 (CST)

Form 1023 ATX

Thanks Roy. I try to be useful.

I can't find anything on the ATX website that refers to 1023 software. Do you have a link to anything regarding that? The IRS is coming out with their own web based 1023 preparation software in 2010 (IRS Notice: http://www.irs.gov/pub/irs-pdf/n1382.pdf ). It's called Cyber Assistant. Anyone who uses it will only have to pay a $200 application fee, which makes it very attractive to any organization. Those 1023 application fees have increased a lot recently.

The only 1023 tax software I've been able to find is http://www.abacustaxsoftware.com/ and they've never responded to any of my inquiries. I called and asked them for a demo version, but they said they don't do that. I decided it wasn't worth dealing with a company like that.

CPAdavid 08:05, 28 December 2009 (CST)

PLR

Roy, thanks so much for the article. It is spot on! I am home sick today, and of all things, I read the TaxAlmanac and saw your great link. I responded in the discussion thread, but I really truly appreciate your thoroughness. KatieBrewer 14:12, 4 January 2010 (CST)

Thanks so much, Roy. I deeply appreciated your help.

Bill

P.S. How's the weather down there?

I am interested in something I saw you discuss from back in 2008. I have a client who is totally blind, and receives SSDI disability insurance. Because of a job layoff, he is looking for employment. However, it is likely that he will only make $12/hr or so.

Here's the issue. Can he utilize 401(k) contributions, Section 125, etc. to lower his taxable income, and thereby keep receiving SSDI benefits? He is currently not receiving SSDI because his earnings are too high. However, it is likely that he will have a significant drop in earnings and would like to be able to continue to collect his disability.

I saw where this was discussed in the context of Social Security, but I don't know if this applies to Social Security Disability Insurance. As a blind worker, he cannot earn more than $1,640 per month and continue to receive disability benefits.

Alternatively, I guess he could negotiate a lower hourly wage with his employer to keep the disability benefits!

Thanks for your help. I am also a CPA. Hcase 18:46, 10 January 2010 (CST)

ATNOLD worksheetMDTaxgal 15:07, 20 January 2010 (CST)

I'm reading you post and I even added my own query but no response...Did you ever get a worksheet to use...i'm desperate for some kind of help - IRS kicked back my 1045 and wants me to submit recalculated 6251's for all five years I'm carrying back the 2008 NOL. Appreciate your consideration.

MDTaxgal

areid@compassionatetax.com

Vehicle expense-unusual

Hi Roy What is IMO? I have often wondered, when self-employed, why the vehicle doesn't have to be registered to the business in order to claim the expenses. Have you ever seen this raised as an IRS issue. The way they are putting new restrictions on things I can't help be think this will eventually become one of them.

Car in S Corp shareholder name, deduct in S Corp?

I've been researching this issue for one of my clients, he purchased a >6,000 truck for his business and wants the Sec 179 deduction for the truck. He's a 50% shareholder with his wife, the car and loan are in both their names. He has AMT issues if it's taken on 2160. In Dec 09 you posted "The auto should be in the name of the S Corporation for the S Corporation to take depreciation." - do you have a citation on where this is required, or have you had experience with this issue in audit. I appreciate your insight. I'm new to the discussion and have found them very helpful.970Taxes 21:01, 2 March 2010 (CST)

Investment vs Development Property

Roy,

I appreciate your help. This developer is my former employer (now a client) so I'm quite aware of the transaction history.

As I explained in my last post, a portion of the property at the time of acquisition was considered inventory (ready-to-develop) and another portion was considered Land Holding property (future development). Were it not for bank requirements, the Holding portion wouldn't have been purchased from the related party LLC until the time of development (in order to treat appreciation as capital gains).

Because of the bank requirements, the S Corp purchased the land as an investment, with the intent to resell it to another related party S-Corp Developer at a future date, and thus have CG instead of Ord Inc.

Well, obviously appreciation never panned out. As you stated, they'd be better off if it had been included in inventory, as it would be an ordinary loss as opposed to a capital loss.

But, they've reported it for 2 years as an investment property, including reporting the interest expense as investment interest expense.

If there was a case to reclassify it as inventory that would be helpful, but considering the following info, I'm not sure it's necessary:

- There will be no basis to take the capital loss in 2010.

- When the debt is written off in 2010, the COD income will only be taxable to the extent we took losses in excess of stock basis in 2009 (debt basis will be reduced to zero with cancellation).

- The losses in excess of stock basis (again utilizing debt basis) will be taken in 2009 as we adjust inventory to FMV, creating large COGS/ordinary losses. (side note - you seemed to indicate you didn't think the development inventory was subject to lower of Cost or Market. Any validity to that?)

So at the end of the day we have:

- Ordinary loss in 2009 to the extent of remaining Stock basis (minimal) plus debt basis.

- Capital loss ($14M) in 2010 on short sale of investment property. But again, there's no basis to take this loss, so I'm not sure I care about the character of the loss.

- COD income in 2010. No assets at time of cancellation. Only liabilities are the cancelled debts. All COD income is exempt from Gross Income due to insolvency, except to the extent basis is needed to be restored.

Loss in 2009 = Income in 2010.

Am I missing something?

I appreciate your help.

Thanks

Jimmer 13:01, 22 March 2010 (CDT)

So What Next?

First of all I'm floored that I've been inappropriately treating land development costs as inventory for 10 years. In my first position as a staff accountant in a public accounting firm, I was taught to use the inventory method for residental lot sales.

I've always applied 263A, but reported an inventory of lots. Fortunately, I've never had the occasion to adjust lot inventory to a lower market value until now.

So, the law is pretty clear, particularly the Pierce ruling, but as far as nuts and bolts go, do I show the land formerly known as inventory as an "other asset" on the 1120S balance sheet. And if not cost of goods sold, where do I report the basis of sold lots?

Sorry for these trivial questions, but I've really been thrown for a loop.

Jimmer 18:25, 22 March 2010 (CDT)

Thanks so much,

I really appreciate your help. That does help the timing of the loss.

Jimmer 22:46, 22 March 2010 (CDT)

COD Income - S Corp

Hi Roy,

I promise this is the last question I'm going to ask you directly outside the context of the forum.

I noticed in a discussion thread on COD income, you mentioned COD income doesn't increase Shareholder Basis, and I was hoping you could clarify a situation for me:

This is going to sound like the taxpayer in the last question I asked you, but it's actually a related taxpayer who liquidated a developer S-Corp in 2009.

Losses were taken prior to 2009 against all Stock basis, plus $500K of losses were taken against debt basis (shareholder loans).

Those loans along with bank loans were cancelled in 2009. At the time of the cancellation, there were no assets, and $2.6M of debt. There was also $2.1M of losses that were booked in 2009 (sale of remaining land).

I booked the $2.6M of COD income, which created $500K of net income for the year, which I thought restored shareholders' basis to 0 at time of liquidation, which I thought was nice and clean.

Based on your comment though, I'm wondering if instead, the entire $2.6M was exempt from gross income because of insolvency, the $2.1M loss was nondeductible for lack of basis, and upon liquidation the $500K of negative basis (caused by the cancellation of the shareholder notes) created a capital gain for all the shareholders.

This would actually be a preferred treatment - Capital gain vs the Ordinary Income I've recognized, but I'm wondering if that's the correct treatment.

Thanks again,

Jimmer 18:33, 24 March 2010 (CDT)

S Corporation

Well, that's the point, I suppose. Does the ordinary (COD) income restore basis, or does each shareholder restore (?) their basis with a capital gain equal to the amount their recognized losses have exceeded their basis?

I've prepared the return with ordinary income, but now I'm wondering if it could, and more importantly, should be capital gain income to the shareholders.

Jimmer 08:19, 25 March 2010 (CDT)

Sub S Shareholder and no salary

Sorry I know you have answered this in the past, my questionis if I I put the compensation on schedule C...with no expenses , will that not raise a flag with the IRS..pls let me know

Late filing Election to amortize

Hi Roy -

I'm asking you this first, because you seem knowlegable in the area and seem to have the same take as I do on most of this start-up/operational expense stuff. I will probably put out as a new discussion to see if I can get a quick answer, too (need to get these returns done and maybe you're taking a well-deserved vacat)...

Has anyone ever filed an initial business return late? If so, can you still take start-up & organizational expense deduction as an expense or amortize? If I'm reading the regs right, you must make the election(s) by the due date of the return (plus extensions). So if you're filing late, you cannot make the election? If I try to expense, IRS could come back and disallow amortization. So do we just "lose" these deductions, since we're filing late?

Thanks for any help.

Bad Debt Write Off- Your Reply

Roy,

Just to let you know the facts again, or may be I don't know how to explain but here it is.

Client an LLC has investment in a real esate entity. The balance sheet is like this

Cash: XXX Investment in ABC: XXX Due from XYZ (not a partner or member some unrelated party): 700K. This has been the balance sheet since 2005 and only changes is cash and investments account.

I think the due from unrelated party is from some sale of real estate and when the market went Kaput the debtor just said "screw you" I don't have money to pay. You are in Florida you know how transactions went couple years ago when the real estate market was hot. All people wanted was to "sell sell sell"

The liabilities are just

Due to Shareholder: xxx which I reclassed to contributions and got rid off the due too.

Now my question is

I write this receivable off as nothing was paid so I beleive it is a capital loss: is this correct? and secondly do I have attach any statement.

I hope this clarifies a lot.

Thanks Sidd

Notice of Deficiency

In reply to your message about the client’s interest on the yacht loan, I will assume that your argument for deducting the interest on the yacht is that the yacht was the taxpayer’s second residence (not primary residence) within the meaning of IRC §163(h)(4)(A)(i)(II).

I recommend filing a petition with Tax Court, which will send the case to Appeals for settlement pursuant to Rev. Proc. 87-24. You may need assistance preparing the petition because you need to make sure that it is properly captioned in view of the taxpayer’s death. Is there someone who is properly authorized to represent the taxpayer’s estate?

DaveFogel 09:48, 20 June 2010 (CDT)

1065 filing issues

Ikkiira 16:22, 2 November 2010 (CDT) I read the discussion about when to file and timing but am still uncertain and could use some assistance. fact:1. 1. Partnership A owned by xyz. A is a calendar year filer. 2. Xyz contribute ownership of A to Partnership B and C on 10/14/10. 3. Partnership B and C contribute Partnership A to final partnerhip Z and A is terminated on 10/15/10.

Date to file final return for A should be 1/31/11- is this right?ownership of A by B and C was for 1 day.

k-1 to file with final return would show xyz 1/1-10/14 and B and C for 1 day on 10/15- is this right? When Z files its normal return it will show receipt of assets of A on termination.

Thanks for your help

ikkiira

Child's investment income

How about a child, age 19 --2009, and has more than $1,900 of investment income (has about $2,000). My Tax Book seems to say to use Form 8615. Form 8814 instructions seems to say that we can't use Form 8814 for this client.

Info about preceding note

FYI, Roy, the note just before mine came from User:Cpaea (I'm sure you know how to check the "history" tab to get that info, but I figured I'd save you the time), who has now started a new discussion to ask the question: Discussion:Child, age 19--2009, w/ investment income over $1,900. Trillium 16:39, 13 November 2010 (CST)

How to report Cancelled debt for S Corp

HiRoy, ````

An s corporation own business rental property received 1099C (COD) . Ther is 2 shareholders 50% each .

My question is how to report his on proseries from 1120S? Do we report 982 and insolvency statement on form 1120S or on form 1040 since the COD will pass through shareholders ? Do you have any resources that clarify more ,how is the new act " americn recovery and reinvestment tax act of 2009 will help in this case ? is the insolvency test on the s corp level or Individual level ?

You seems have a lot of experience, please share with young student.

Thanks ,happy holiday.

June ````

How to report Cancelled debt for S Corp

HiRoy, ````

An s corporation own business rental property received 1099C (COD) . Ther is 2 shareholders 50% each .

My question is how to report his on proseries from 1120S? Do we report 982 and insolvency statement on form 1120S or on form 1040 since the COD will pass through shareholders ? Do you have any resources that clarify more ,how is the new act " americn recovery and reinvestment tax act of 2009 will help in this case ? is the insolvency test on the s corp level or Individual level ?

You seems have a lot of experience, please share with young student.

Thanks ,happy holiday.

June ````

Schedule T

Roy - What was schedule T?

- Rick - Rgtaxservice 22:57, 24 January 2011 (UTC)

"Thanks for your input" I was leaning toward 27.5 years and then thought that 15 years was the best recovery period for the new driveway for a residential rental house. Is there an easy way for me to find Letter Ruling 8848039 that was done Sept. 2, 1988?Cpaea 17:50, 9 February 2011 (UTC)

Permission errors

Not being able to post to talk pages, and sometimes not being able to start new discussions, is a website-wide intermittent glitch that is scheduled to be fixed at the next site maintenance. Alternate method of leaving a message: Click the "edit this page" tab above, go way to the bottom of the edit box, after all other messages, type two equals signs [==] and then your message title, and then type two more equals signs and a return. Then type your message and click the "save page" button.

Trillium 21:28, 9 February 2011 (UTC)

Loan Allocations Upon Repayment

Roy, I have read many of your posts over the years and recently followed a thread about home mortgage interest allocations. Several members in our office have been having a discussion about re-allocation upon the partial repayment of a mix use loan.

When a T/P pays down a mortgage which has been allocated for several uses, where does "acquisition interest" fall in the Loan Repayment timing order given in Pub 535:

1. Personal Use

2. Investments & passive activities

3. Passive rental R/E activities

4. Former passive activities

5. Trade or Business use and low-income housing

The argument is that "acquisition interest" is not personal use interest because of the definition in Sec 163(h)(2)D which specifically states "any qualified residence interest . . ." is NOT personal interest.

If acquisition & equity interest is not one or the five items listed under the Loan Repayment timing order, we could reduce the acquisition debt in any order that best suits the T/P's situation.

However, I believe that the Sec 163(h)(2)D may be simply distinguishing items that do not qualify for the interest deduction; which means this section is not referencing the "Personal Use" listed in Pub 535 under Loan Repayment order.

Would you consider that acquisition debt is "Personal Use" and must be eliminated first when re-allocating?

We currently have a client with a sizable amount allocated to investment debt, and also some acquisition debt. The investment debt is merely creating investment interest carryovers which we feel he may never be able to use. He has managed to pay off a substantial amount of the loan, and we would like to re-allocate to reduce the investment allocation.

We are trying to locate a reference that says we can first reduce the investment allocation before reducing the acquisition interest allocation.

Your thought would be most appreciated! Thanks for your time, Mike

YES! Roy, we are most interested in your final statement "qualified residence debt is not subject to the tracing rules the taxpayer can allocate the debt reduction to the acquisition debt or not."

I have throughly read and studied Sec. 163 & 168. I could find no reference to qualified reference debt not falling under the tracing rules. How can I find court cases you reference related to this?

Thanks again for your guidance, Mike Mactoolsix 15:54, 20 February 2011 (UTC)

Roy,

Thanks again for your information. I can't believe how many times I read and reread section 163-8T and didn't catch that sub-section (m) had exactly what we were looking for.

Mike

Partnership question

Tony 17:28, 2 March 2011 (UTC) Hi Roy, My name is Tony(Tony2000 in Tax Almanac) and in a review of previous questions about partnership distributions your name came up as a Partnership Tax Guru. I have a small one person practice in rural WI specialising in small businesses. I only have clients with businesses. A few times a year I need the help of another more experienced professional to discuss issues with and help resolve more complex problems. I for many years had a relationship with an individual who retired two years ago. I if you are interested, I would be interested in developing a consulting arrangement with you.

The question below was posted last night and has had no responses. In addition to the info below is also a fact that I ommitted. That fact is that the assets distributed to the partner also are the exact same assets contributed to the partnership by the same partner earlier in the same year. No depr was claimed on these assets becasue they were considered placed in service and disposed of within the same tax year.




In the event of a partnership ceasing operations, incurring a current year ordinary loss, and then distributing the remaining asssets in complete liquidation: Beginning of year basis 10,000, current year ordinary loss (5,000), adjusted basis of assets distributed to partner in complete liquidation 9000.

Result is the adjusted basis of assets received = 9,000, and the current year deductible loss = (1,000).

Please assume no at risk issues, and no contributed property with basis not equal to fmv issues.


The k-1 preparer provided me with a basis workpaper listing the beginning basis = 10,000 - adjusted basis of assets distributed of 9,000 leaves a remaining basis of 1,000 before considering the current year loss of (5,000). The current year loss of (5,000) is limited to the 1,000 mentioned above and the remaining loss of (4,000) is to be considered an unallowed loss due to basis limit, and it is lost forever since the partnerhip has ended.

The k-1 preparer tells me that the the basis of the assets received = 9,000 and is to be considered a carry over basis to the partner.

In a complete liquidation do you not consider the current year loss of (5,000) first, and then value the assets distributed according to the remaining basis?

If that is true the current year deductible loss = (5,000), because it would not be limited. That would leave a remaining basis of 5,000 (Original beginning of year basis of 10,000 less current year loss of (5,000) = remaining basis of 5,000. The basis of the assets distributed is then adjusted(allocated) to the remaining partner basis of 5,000.

All of the examples and scenerios I have read regarding complete liquidating partnership distributions all begin with basis just before distributing assets, and current year income and loss is never mentioned. I assume that is because in the case of a complete liquidation the ordering rule changes and the final liquidating asset distributions are considered the last thing to happen, and the last thing to account for.

What is correct, or what material may I read to check on this? Tony 17:28, 2 March 2011 (UTC)

Talk page work-arounds

Hi, Tony2000 seems to be blanking out his talk page, including the header which provides the link to add new posts. If you encounter that with him or others, in lieu of clicking the link you can click the little tab at the top of the page that's labelled "+" (in between "edit this page" and "history" along the top of the page).

I have, actually, just fixed Tony's page to put the header back in, but I mention this in case he blanks it out again.

By the way, you could also consider posting your response to his active discussion, for everyone else's benefit, too, and in case others want to chime in: Discussion:Pship Liq distr & cy loss ordering rule.

Hope that helps,

Trillium 17:41, 2 March 2011 (UTC)

Agency or insurance company

RDO--I would agree with you if this was an insurance company that I used in my example. The insurance agency does not issue policies. Most of the time, the insured pays the insurer directly. Never goes thru the agency books. Sometimes, the agency does not have direct bill capacity, and collects the premiums. But, in the end, they only report the commissions.

Roy--I did read the rev rule

Two distinguishing things. First, the agent was legally allowed to put the premiums into his general account, not the "insurance trust account". He had the ability to mix with ordinary expenses. Hence my comment about being an insurance company. In my home state, you lose your license for this. This arrangement also allowed the underwriter to be bound by the actions of X. The other key phrase was "not as an agent for another".

Very interesting RR, and I am glad you did point this out to me.

COD - Scorp

Hi Roy -

THank you for your response. Sincerely appreciated, but my client is holding me over the barrel to get this done this weekend.

The bank reduced the LOC by $50,000 via letter (no 1099).

Therefore, we have COD income of $50,000.

I fill out the 982 showing the $50,000 and DO NOT report in anywhere else on the taxc return. Question is, on Part II - nothing seems to fit. There are no assets, there is a small amount of income (without the $50,000), and the S/h has no basis with $30K in suspended losses, but you said that is completely not applicable.

Do you agree I need to show the company is insolvent through a financial statement and if so, does it matter that the reason the liaibilites are greater than the assets is due to a $300,000 loan receiveable from the S/H?

Such a mess....your time is very much appreciated.

1099

Roy, I believe you may have misunderstood my post. I was not looking for an answer, I had just posted a question that I found a little humorous on a thread that was for silly things from clients (I had already answered that person on that forum that she would not be getting a 1099 for charging her child rent).

Sorry if you took it the wrong way and thank you for taking the time to research.

CathysTaxes 15:56, 12 April 2011 (UTC)

Prtnshp

I know you're ready to throw me out the window, but could you assist me in composing a request letter of what I need from E&Y?

I started based on our previous conversations and just want to make sure I'm not missing anything.

You're great Roy - Enjoy learning from you

Letting you know a discussion you posted to has been moved

Discussion:Audit Question has been moved from the tax forum to the accounting forum on your recommendation.

Trillium 16:58, 11 May 2011 (UTC)

Harry's summer school

I've noted your request to move the latest installment of Harry's weekend "summer school" discussions over to chat. This discussion certainly has gotten a slow start. However, as it's the weekend, and especially because several of Harry's prior installments of the "summer school" series have served to nicely summarize some of the more complex issues that get asked repeatedly... I thought maybe we could give it the weekend to try to develop as a tax question. I'll check back on it Sunday night and shift it to Chat if it hasn't gotten any serious consideration by that time.

Sound okay to you?

Trillium 15:38, 25 June 2011 (UTC)

Hope you don't mind...

RDO: I hope you don't mind my little tidying up the thread about the 163 question. Spell Czech

Thanks for your response. Do you have any reference for your conclusion?

A topic you posted to recently has been moved

The emailing clients and client consent discussions that were started in the tax forum yesterday were moved over to they Practice Management forum, since they are practice management topics (as defined in the Discussion Forum Index. You posted in at least one of those, and Michaelstar has recently reminded me that it would be considerate to let people know when discussions are moved.

You can still find it via the "my contributions" link in the upper right corner of your screen.

Trillium 12:21, 2 November 2011 (UTC)

A Thank You Back!

Roy - Than you very kindly for your message. I appreciate your involvement and look forward to our posts and knowledge as well. Have a safe and prosperous 2012. Happy New Year to you and your family. Michaelstar

1 year x 40

Roy, thanks for your help on various posts along the way, really appreciate your experience and expertise. More importantly, really appreciate your laugh out loud comment on 1 year of experience x 40. I feel exactly that way every time tax season starts winding down!!!

Stevet 14:30, 17 April 2012 (UTC)Partnerships

RoyDaleOne,

What is the name of the book you recommend for partnerships? I have seen you reference it previously, but neglected to write it down.

Thanks for your help, Steve

Wasn't sure where to put the tilde's. Stevet 14:30, 17 April 2012 (UTC)

Changing from Percentage of Completion to Completed Contract Method - Form 3115

Hi Roy,

I am trying to find some exception whereby I can justify the use of the automatic change procedures for filing Form 3115 to change from percentage of completion to completed contract method for accounting for long-term contracts. I am hoping you may have some ideas.

My client (year-end 9/30/11) filed form 3115 this way on 2/27/12 after filing an extension for his return believing himself to be timely. Unfortunately, the Service disagrees with him and has denied the application for the year-end. At this point the return has been completed and filed as per the change, as well as that of the shareholders and will cause much... distress... if they have to change it back for the 2011 year end.

Any thoughts?

Many thanks! Rusty Phoenix16146 18:46, 8 May 2012 (UTC)

Hi Roy,

I'm not sure if I'm correctly asking this (per tax alamanc interface)... but if I am and you get the message and if you have time and are inclined, would you mind commenting on something?

In a post from a few years ago, you indicated that previously you'd used UltraTax and been very happy with it but that you now use ATX because UltraTax is too expensive given size of your current 500-returns practice.

I've been very happy personally with ATX (and think either it gets better or I get further up learning curve, etc each year)...

But still I wonder if/when spending (in my case), an extra $15,000 a year on UltraTax would be worth it.

Any comments? For example, can you describe what would cause you to return to UltraTax (if anything?)

Jack

P.S. Read your recent post on CP2000 notices. I have experienced the same pain many times over last year... Ugh

Sorry, I think I was supposed to live four tildes at end of message.

JackTraffic 14:59, 12 May 2012 (UTC)

Sole Practitioner Audit

Hi Roy- I'm a sole practitioner and I've recently made the move to start my own practice. I have an opportunity to perform a financial statement audit and had some questions. I started to search and came across your post on the thread about sole practitioners performing audits. I really needed some advice and clarity on what a sole practitioner should do when performing an audit in order to stay in compliance with the AICPA quality control standards. If you have anything to share on this topic I would greatly appreciate it.

Thanks much, Alex

Sole Practitioner AuditNorthcpas 03:12, 11 September 2012 (UTC)

Hi Roy- I'm a sole practitioner and I've recently made the move to start my own practice. I have an opportunity to perform a financial statement audit and had some questions. I started to search and came across your post on the thread about sole practitioners performing audits. I really needed some advice and clarity on what a sole practitioner should do when performing an audit in order to stay in compliance with the AICPA quality control standards. If you have anything to share on this topic I would greatly appreciate it.

Thanks much, AlexNorthcpas 03:17, 11 September 2012 (UTC)

Thank you Royal.

Much appreciated!

ZL

RoyDaleOne, The note is for $438,750 and was issued on Aug. 23,2012 and is payable Aug. 23, 2017. I calculate the present value by using the AFR to be $401,945. Looking at Form 6252, line 21 it says do not include unstated interest, yet there are no payments received so how do I use the above amounts to determine what the installment income is for 2012 and beyond until payment in 2017 and utilize Form 6252?

Hi Roy:

I am new to the forum as of yesterday. I appreciate your response. Any insight you can provide is appreciated. Many thanks. JohnPerryMason 19:33, 13 December 2012 (UTC)

Has anyone noticed...

Roy, on the current thread re lease cancellation, you posted this: Because of the actual or potential nature of the comments that have been posted in this thread, I will not be commenting on possible areas of investigation for tax savings. And I do have some ideas because I have had similar situations in my practice.

Probably I should butt out, but I can't help myself. Why exactly would you not offer up your suggestions on this matter? That is what TA is all about. I saw your concerns in General Chat, but still... Podolin 23:29, 13 December 2012 (UTC)

My apologies...

...if you take offense at my simple curiosity about the background of your question in the Tax Forum. If I had *intended* to be rude, I would feel less bad.

Harry Boscoe

Lease cancellation

Mostly, I was not seeking an apology. I just did not understand your reasoning. I do now. Thanks for the reply. Podolin 19:18, 22 December 2012 (UTC)

End of the forum

You may have heard by now that the Tax Almanac ( www.taxalmanac.org ) web site forum is permanently closing its doors effective June 1. Perhaps you have seen the pink bombshell “Important Service Announcement” when logging in.

Long-time TA user ChrisV2 has volunteered to set up a new website where TA users may continue the discussion. The site is up and running now and has an active base of contributors.

We invite you to take a look www.taxprotalk.com and join your fellow TA refugees.

Frankly (TA member and new member of TaxProTalk)

Frankly 15:55, 3 May 2014 (UTC)

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