Discussion:Basis in business phones
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Nancyshoemake (talk|edits) said: | 31 January 2008 |
| I have a client that invested $43000 in public pay phones back in the late 1990's. It was a business that was one of those "too good to be true" deals. Anyway we are trying to recoop the loss and the IRS is telling me because the taxpayer paid for the phones with inheritance monies that we have no "tax basis" in the phones and therefore can not deduct the phones. Now, why would that matter? They were given monies and they used those monies to purchase phones. They have a basis in the phones. I don't understand this "tax basis" idea. Can someone help? | |
Death&Taxes (talk|edits) said: | 31 January 2008 |
| Makes no sense at all unless it wasn't his inheritance. | |
RoyDaleOne (talk|edits) said: | 31 January 2008 |
| Well, when was the phones placed in service? Late 90's?
How was the business reported on the TP return? Why is the IRS involved? Audit? | |
Fuzzy Faced Leader (talk|edits) said: | 31 January 2008 |
| This is a possible IRS reasoning. The inheritance was obtained tax free. That is, it was "income" received without having to pay income tax on it. Accordingly, it was like having funds invested in a tradiitonal IRA, and won't be taxed until it is withdrawn. Now, if the money is invested in phones, it retains a zero basis, not taxable until subject to a taxable event. Then, when the phones are sold, any gain received over -0- would be taxable.
OK, this is the logic, I'll let the professionals tear it apart. | |
| 31 January 2008 | |
| when a person owns a tax-free municipal bond fund and they reinvest the tax-free dividends, don't they increase the taxpayer's basis? Of course they do. Tax free sources of funds can still create basis. | |
Nancyshoemake (talk|edits) said: | 31 January 2008 |
| Kevin...i agree....somehow she has this mindset that because the monies paid to purchase the phones were not "taxable earnings" to him....then he should not be able to deduct this. It shouldn't matter what funds were used to purchase a phone .....that is the basis....the cost of the phones....period. Right? She is focused on a tax basis...do you understand that? | |
| 31 January 2008 | |
| did you ever look at your other thread? | |
Death&Taxes (talk|edits) said: | 31 January 2008 |
| The easy answer to her problem is that someone else paid tax on that money and had to die to give it to your client. | |
Nancyshoemake (talk|edits) said: | 31 January 2008 |
| this stuff makes one crazy!!! Between this auditor fighting over tax basis...bs stuff and another auditor not allowing management fees because an IRA is not taxable....I spend so much of my time fighting over stuff to help them figure it out!!! It is frustrating | |
| 31 January 2008 | |
| So I'm curious - the auditor is questioning depreciation of equipment, and you showed an invoice/receipt/cancelled checks and they still don't agree? Or is there more to the story? | |
| 31 January 2008 | |
| Code Sec. 1014(a)(1) The basis of property acquired from a decendent by inheritance is the fair market value of the property at the date of the decedent's death...or alternate date if elected.
The fair market value of cash is the face value of the cash. I.E., $1,000,000 in cash has a FMV of $1,000,000 so the basis of the cash to the beneficiary is $1,000,000. | |
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