User talk:Riley2
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Business gifts
Hello Riley2
Thanks for your input on the business gifts issue. I labelled it as promotion on my client's tax return.
Holly Halvorsen EA Illinois
inherited IRA
Thank you Riley2! You confirmed what I had found out. I really appreciate and respect your opinion!
-TaxAssistCPA
Mileage case
Riley2 thank you very much for your many responses. Could you point me/us in the direction where I would find details of CROWTHER v. COMM., 4 AFTR 2d 5295 (269 F.2d 292), (CA9) as you mentioned in a discussion about whether mileage was deductible. Thank you.
Riley2
Hello Riley2, just wanted to say thanks for all your input. You always manage to give clear, concise answers. Was wondering, is most of your knowledge from experience in the field. I'm assuming so, but also wondering if there is any one resource you use for your research, etc. Thanks again.
Skhyatt 17:28, 3 February 2006 (CST)
Child Tax Credit in case of divorce
Riley2:
I have read several of your posts and you seem to be very knowledgable.
This is a new one on me. Mom and dad are divorced. Court decree says dad gets exemption and that mom can take the child tax credit. Child lives with mom all year.
Can she in fact take the child tax credit?
Thank you.
Ron Pickrell
Research material
Interested to see that you use the PPC deskbooks. I currently have the CCH MTG and of course use the online resources here. I was considering subscribing to the PPC 1040 deskbook online version. Being that I'm just now getting back into preparing taxes, I don't want to go overboard on my spending, but would you say the PPC program is a worthwhile investment?
Extraterritorial Income Exclusion
Thanks for your reply under Section 927 the partnership would qualify to the deduction. All of the nuts were sold within one year.
Rental Property Write Off of Balance of Points and Escrow Fees\
HELLLLLLLLLLLLLLLLLLLLP!
Hi, I've been reading your answers to various subjects and need some of your exptertise. Can you please read my question in the discussions about the Rental Property amortization problem and the writing off of such. I can't seem to find an answer anywhere.
Thank you so much. Diana Fields
Depreciation Recapture
Please address when you have time. Thanks. --Solomon 20:32, 7 February 2006 (CST)
Passive loss carryover
Thanks for your reply Rely2.
I read that in 469 (i)1 also.What stumped me is that when it discusses the active participation requirement it states in () "and if any portion of the loss or credit arose in another taxable year, (they must have been active)in such other taxable year"
Since he was active when the loss arose, I was thinking he might qualify.
I appreciate your help.
Lsuper
Ps This is the first time I am using Tax Almanac- I hope you get this response.
To File a Fake SSN or ITIN
One of my clients is an iligal alien, but she worked in the united states using her name and a Fake Social Security Number,
She did have some income in 2005 She want's me to fill out form W-7 and get her a ITIN. How do I go about this her W-2 shows the fake SSN. do I submit this Number or leave it blank and atach form W-7 to the return.
HOH TP paying 100%of both homes
Riley, thanks, I do agree that that is the interpretation. Taxpayer did however live in the Maryland home, was in the military and claimed HOH last year, this year however he is running his own business in San Diego. It just seems a bit unfair since he is paying 100% of costs for both households, not married and never been. The reason why children are in Maryland
Taxing Lady i.e. cruise ship wages
Taxing Lady i.e. cruise ship wages
Thanks for the input, this is same conclusion I had reached, but appreciate the code info. 12:19, 14 February 2006 (CST)
Truck Exchange
Would appreciate addressing this. Thanks.
Riley2, Thanks for answering my question about tax implications of the non-qualified annuity that my wife and I received an inheritance from. In your response you said, "amounts received in excess of basis". I assume "basis" means what he paid to purchase the annuities....is that correct? Thanks again for your responses!
clients younger brother is under 19
hi riley i posted the issue of whether a brother or sister who is married here in the u.s. can take his or brother has dependent on their tax return. they told me they have sent the required money to mexico for the exemption, i was leary in giving them a straight answer. thank you rac
Trust filing
I have a client that turned all stocks and bonds over to a trust a 'guarentor trust' he called it. I looked it up on irs website and it says that this particular trust can be filled under a 1040 if all income is claimed by idividual. However, the lawyer that set up the trust had the trust establish its own EIN#. So do I file this under the individual or the trust?
Thanks from Lexbrooklynae
Thank you for taking the time to answer my last inquiry concerning redemptions. I appreciate it.
ALCPA
The departing partners were bought out by the partnership.
3115
Question. Have a client changing from accrual to cash. Net adjustment will be a decrease in income by $53,000. Can he take in all in one year as a 481(a) adjustment?
Mike Emerson
Zero Coupon Bonds
Thank you, Riley2 for the quick response. I am grateful for your help. Chaser
A general Thank you
Riley2, thank you for your participation in this discussion forum. Being a sole practitioner, your technical references and answers almost give the feeling of having a partner to bounce off of. Browsing the forum has provided many links for researching answers for client's, how do you keep the code sections so readily available in your mind? Thank you!
Hello Riley2 -
Can you please help me. We own an undivided interest in some land with many family members. When we sell the land, can we each individually do a 1031 exchange?
Thanks, ax158 Mary
1031 Like Kind Exchange
Hello Riley2 -
Can you please help me. We own an undivided interest in some land with many family members. When we sell the land, can we each individually do a 1031 exchange?
Thanks, ax158 Mary
Vermont taxes--thanks
Thanks for your help on the Vermont Property Transfer Tax. My research materials (Kleinrock) were a little foggy on the area.
Have a great day. Tom Kissinger, CPA; trkcpa@gmail.com
Land Purchase
Would appreciate your knowledge. Solomon--Solomon 18:46, 9 March 2006 (CST)
thank you for your response.
military reserve related travel
Hi Riley, Thank you for your answer-but where do I find Sec. 62(a)(2)(E)? I tried the irs code but couldn't locate it. naejhcokNaejhcok 17:26, 15 March 2006 (CST)
Hi Riley2. I read your response and want to make sure I understood what you said. It sounded like you said a receipient of UK National Pension who is a resident in US is exempt from taxation here. Sec 17 of the treaty provides that a US resident receiving such a pension (similar to our soc sec)is required to report such income on her Form 1040. I confirmed this with the IRS. The treaty does not relieve the US from taxing such pension income and it is irrelevant that the pension would not be taxable had the taxpayer resided in Britian. The treaty is designed to prevent double taxation and states that any tax imposed will be where the taxapayer is a resident. You may be saying the same thing but I just wanted to clarify it. Thanks. HSpeck
E1 vs H1 Visas
First of all, I want to thank you for all your valuable answers you post to this website - you have a wealth of knowledge that I both value and admire.
Where can I find information on the different types of visas?
I have a few Norwegian clients, some with E1 visas, and one with an H1 visa. He is going back to Norway at the end of this month and I have to file 2005 taxes and (I think) prepare a 1044C for him to leave the country.
Is there another good publication that you can point me to besides the US-Norway treaty and IRS Publ 519?
Thanks, Brenda Sandefur Brensan 22:06, 18 March 2006 (CST)
ESA To 529
Thanks for the info! Denise
Lawsuit
Thank you for your response. The lawsuit was due to an employee claiming back injury, causing the employer (self-employed but now an S-corp) to pay out attorney fees, medical expenses and a settlement. I was just wondering if this would be deductible. Thank you again for your help. Diane
SECTION 179 PASS THROUGH
Riley2,
In a previous discussion you indicated that Section 179 could be used against an individuals other business income unless in came through a pass through.
I had understood that a partnership could pass section 179 deductions through to partners in excess of operating income, as long as the partners had other business income, even wages??
Can you expand further on your understanding as to when, or when not this excess can be passed though???
Any help at all, Thanks, Wimmercpa
sep catchup
I was under the impression that "elective deferrals" were not the same as "catch up contributions".therefore, i am still confused. Anyone have any ideas to help me out?
Can preparer sign return for Tax Payer
Thanks a lotInagpurwala 23:12, 31 March 2006 (CST)
Hats off to you
Riley2, I envy your tax/accounting knowledge. Your responses are insightful and thorough. I'm amazed that you can reel off IRC sections and the like. Most of us have a grasp on certain tax related issues, but your command of the tax code is extraordinary. Is there any tax topic that you don't feel comfortable discussing? I don't think I'm alone in saying that a lot of us defer to your expertise. By the way, how long have you've been practicing? chris2laneChris2lane 15:43, 2 April 2006 (CDT)
Non-cash Charitable deduction
Hello Riley2, Question concerning Timeshare contribution. Would Use of Property- Partial Interest not apply here because the donor does not own the property, he owns shares that gives him the privilege to stay at a place for, say, one week? I would be inclined to take the deduction. Haven't looked at any court cases though.
Max 401k
Riley2, How do I compute the amount for elective deferrals based on the 80k wages paid to sole shareholder s corp employee for 2006. What is the max deductible for corp. Thank you.
Riley, I love you. You have solved my problem
1031 and go zone...
Riley- You are one of the most knowlegable persons on this site....I just wish you were closer to B'ham,Al so you could be my accountant! here is my question: I placed a 1Br condo in 1/97 into a rental activity with an AMT basis of 87,000. I would like to sell it(I can expect to get 450,000 (less a mortgage payoff of 100,000) and exchange it (WITH A 3RD PARTY AGENT) on a newer/bigger 2Br unit. The new unit is "go zone eligible" - it will be finished and be placed into a rental in feb 2007. It is under construction and i would be buying at this time a unit owned by a "pre-construction buyer"...the developer will title it to me when it is finished in feb at which time i would put a mortgage on it for 300,ooo. What would be my basis starting out on the new unit? Would I still be able to take the one time 50% depreciation based on the this amount?...I am somewhat hesitant because of recapture rules.(its alot of $$ to recapture) Also, is there a "tax-free" way to convert this 4-5 years later as a primary residence? Thanks--Gordons1 21:09, 15 April 2006 (CDT)
1031 and go zone...
Riley- You are one of the most knowlegable persons on this site....I just wish you were closer to B'ham,Al so you could be my accountant! here is my question: I placed a 1Br condo in 1/97 into a rental activity with an AMT basis of 87,000. I would like to sell it(I can expect to get 450,000 (less a mortgage payoff of 100,000) and exchange it (WITH A 3RD PARTY AGENT) on a newer/bigger 2Br unit. The new unit is "go zone eligible" - it will be finished and be placed into a rental in feb 2007. It is under construction and i would be buying at this time a unit owned by a "pre-construction buyer"...the developer will title it to me when it is finished in feb at which time i would put a mortgage on it for 300,ooo. What would be my basis starting out on the new unit? Would I still be able to take the one time 50% depreciation based on the this amount?...I am somewhat hesitant because of recapture rules.(its alot of $$ to recapture) Also, is there a "tax-free" way to convert this 4-5 years later as a primary residence? Thanks--Gordons1 21:09, 15 April 2006 (CDT)
1031 Exchange Basis
Thank you for your response. I thought the assumption of $50,000.00 should be added to the adjusted basis of property 1 but, the client said, "He was told? You know how that goes. I agree with you know I have support thanks again for your response. LEE
Self-charged interest
Dear Riley2,
Thank you for your response. You always answer my questions with conciseness and clarity. Thanks.
Howardlcpa 20:10, 31 May 2006 (CDT)
HowardLCPA
K-1 Passive Income and Loss
When a shareholder has an interest in two S-Corps and is considering prior year passive losses from one entity to net against current year passive income for another entity, would you consider the shareholder's basis at each entity separately for recognizing losses or consider the basis for both entities combined? The shareholder does not have sufficient basis on the S-Corp that has produced losses, but does have sufficient basis on the S-Corp with income and sufficient basis when viewed in aggregate.
Any thoughts? Thanks.
K-1 Passive Income and Loss
When a shareholder has an interest in two S-Corps and is considering prior year passive losses from one entity to net against current year passive income for another entity, would you consider the shareholder's basis at each entity separately for recognizing losses or consider the basis for both entities combined? The shareholder does not have sufficient basis on the S-Corp that has produced losses, but does have sufficient basis on the S-Corp with income and sufficient basis when viewed in aggregate.
Thanks,
Michael Nichols
TAX TOOLS
HOW DO YOU GET THE OCCUPATIONAL TAX TOOLS
depreciation error
Riley2
I am woundering what your opinion is on this topic I placed a couple of weeks ago. I have presented my case to the client and he does not want to file the amended return for 2003 because he does not want to reextend the statue for 3 more years. I want to file the amended return and disclose it error made by me, adjust the nol c/f at that time. Client want me to just adjust the nol c/f on the 2005 1120. Asset was sold in 05/2006. ps - the missed depreciation for 2002 is $23,988 and 2003 is $36,755.
link to post
http://www.taxalmanac.org/index.php/Discussion:Depreciation_calculation_error
Thank you Michael Michaelstar 20:29, 5 June 2006 (CDT)
Long Term Gain on Intangibles
Thanks for that quick response.
Steve DeReus Steved@bao.com 11:11, 6 June 2006 (CDT)
Answer to my question regarding limitation on defined benefit plan
Riley2
Thanks from Beth for your answer to my question on limitation for deductions re: defined benefit plan. Looked in 404(a)(8)(c) and there it was.
I am still trying to manuever myself around on this website so I hope you actually get this message.
Thanks again Riley2Beth 20:42, 8 June 2006 (CDT)
I was reading your answer to the LLC s question. I have a two clients who formed LLC and the did the check the box and an s election. They are LLC taxed as s's. They now want to form an LLC to run operations of both LLC's (they are painters) all personal property will be transfered to the new LLC and all wages of the painters will be paid from the new LLC and the old LLC's will received payments for manangement of the new LLC and then each owner of the old LLC's will be paid salary.
Do you have any thoughts on this as far as it being ok to have the new LLC pay the old LLC so manage and the old LLC's pay salary to the managers (owners ).
thanks again
Cparev 16:34, 13 June 2006 (CDT)
Can an S corp own an LLC
Hi Riley2:
Thank you very much for your response. It appears that you take the time to answer many of our questions. It is greatly appreciated. How did you know this answer? I searched several data bases and could not get a clear cut answer.
Marcenia 12:18, 14 June 2006 (CDT)Marcenia
U.S. Workers Overseas: Hired Guards
Is it possible for a consultant, performing services in a foreign country for a United States based agency, to avoid the imposition and tax expense of witnessing an increase in compenstation in order to cover a U.S. Embassy mandated security requirement. The responsibility for obtaining and paying security guards is a stated agency requirement.
The agency maintains that the IRS directed the procedure of adding the cost of providing security in the compensation of the consultant, thereby increasing overall income for tax purposes. It was suggested that a new law or code established this requirement. I have never heard of a U.S. Tax code that dictates such. Does such a regulation exist? If so, can you direct me to it?MARIKAI 22:24, 19 June 2006 (CDT)
Ponzi Scheme
Thanks for the feedback. My inclination was to treat the loss as a casualty loss. No claims have been filed. Its a complicated mess! Client received some payments in 2005. Then discovered the scam in 2006. Borrowed money to make the investment. Etc... Why do they never listen to the CPA!
Riley2:
I really need help on this one. Todate I cannot determine if there are any regulations regarding this issue. Moreover, no one seems to know if the U.S. Tax Code dictates in this area. Is it possible for a consultant, performing services in a foreign country for a United States based agency, to avoid the imposition and tax expense of having his income increased in order to allow the firm to pay for the expense of the armed guards. Since it is a U.S. Embassy mandate the consultant cannot refuse the protection. The responsibility for obtaining and paying security guards is a stated agency requirement.
The agency maintains that the IRS directed that they (agency) add the cost of providing security in the consultant's compensation; the result of course is in increase in income for tax purposes, without benefit of a deduction. It was also suggested that a new law or code established this requirement. Does such a regulation exist? If so, can you direct me to it? I am really flying blind here. Thanks. MARIKAI 21:22, 22 June 2006 (CDT)
Form 8910 Alternative Motot Vehicle Credit
I am concerned for 3 reasons. 1) The vehicle I am looking at purchasing does not appear to have any incremental cost differece (all the suburbans can burn E85). 2) The energy code says methanol not ethanol. 3) The energy code says only cabable of operation on alternative fuel. Not sure if this mean only capible or capible of only burning alternative fuel.
Lastly how do I come up with the credit amount? There is no incremental value that I am aware of, do I use the max (5000)or??
Any help would be greatly appreciated.
Deductability of below FMV rent question?
Can you tell me exactly where this is stated in the regulations? Account Lady Accountlady 08:15, 8 July 2006 (CDT)
Followup on answer for Widow home sale
The property was purchased prior to 1976. How does this change the outcome?
Thanks! Beth
CANCELLATION OF DEBT
WOULD YOU EXPLAIN WHAT YOU MEANT BY YOUR RESPONSE ABOUT THE COMPROMISE OF DEBT? IF THE DEBTORS CAME TO AN AGREEMENT FOR SETTLEMENT CAN THEY ISSUE THE CANCELLATION OF DEBT NOTICE?
LLC FILINGS
your answer to my question was; no to the 1065 and yes to the 568. Does this mean that you would not allocate the interest and taxes through either entity and just file a blank 568? thanks for your help.
Ken k
hi Riley2
I noticed your comments on foreign gift tax and they were right on!!!!
Can i ask you some few follow up questions?
1) you have said that if foreign gift (from non US person to US person) occured in the US (U.S Situs) then it is subject to U.S gift tax law
2) therefore I assume foreigner must pay gift tax for gift over $11000 annually (say occured from 2002-2005)
3) but if the foreigner never sets his foot on US soil and has no other assests in the US
4) Will US be able to collect the balance from the donee (US citizen)? or how else can US collect the difference?
hi Riley2
I noticed your comments on foreign gift tax and they were right on!!!!
Can i ask you some few follow up questions?
1) you have said that if foreign gift (from non US person to US person) occured in the US (U.S Situs) then it is subject to U.S gift tax law
2) therefore I assume foreigner must pay gift tax for gift over $11000 annually (say occured from 2002-2005)
3) but if the foreigner never sets his foot on US soil and has no other assests in the US
4) Will US be able to collect the balance from the donee (US citizen)? or how else can US collect the difference?
hi Riley2, can you help? I read your reply, you are super Knowledgeable!
So what happens when nonresident alien's gift is subject to US gift tax and said nonresident never sets foot in US and has no assets in US? Does that mean IRS can go after the resident donee? Is this codified in the IRC?
Type of Entity
--Solomon 20:45, 20 August 2006 (CDT)
Riley, would appreciate your advise. My son just formed a C corp and bought a rental - residental- property. He will be buying another 10 to 15 rentals little by little. These are not financed. He is the sole stockholder.
Profits mostly will go into acquiring other properties so if he remained a C corp probably would not have a problem with accumulated earnings tax.
Assuming both ways - he will have someone manage them so he would not have much participation or he will manage them and materially participate.
Would he be better off staying as a C or electing S corp status or go to an LLC. Thanks so much for your help.
Type of Entity
--Solomon 20:52, 20 August 2006 (CDT)
He will be managing them.
Catch-Up IRA
Thanks a lot for your answer. Do you happen to know what IRS code, or publication that I can find the rulings that catch-up IRA is NOT tax deductible. Thanks again for your help in this matter.
Can A Purchase Contract Be Exchanged
Three years ago I bought several "presale" condominium units in a project in Las Vegas. I planned to keep these units as investment property. During this period I bought and maintained several other investment units that were in fact placed in service (evidence of my intent to also keep the pre-construction condos as investment properties). However, due to market conditions I exchanged the units into property in another state, and now want to exchange the purchase contracts as well. It is my belief that I CAN exchange the purchase contracts because I clearly bought the units as investment property three years ago. I cannot find clear guidance on the subject in IRS regs, but in the Starker case [Starker v. U.S. 602 F2d 1342 (9th Cir 1979)] the court concluded that a contract to acquire property (which itself is a bundle of rights) should be treated as equivalent to the rights associated with ownership of real property. Do you agree?
Thank you in advance.
dan lowenthal
Goodwill
Do you have a tax code section to support the sale of created goodwill being a capital asset? I am looking for concrete documentation and can not lay my hands on a definative code section.
ThanksRoy 12:20, 27 September 2006 (CDT)
Appreciation
I just want to thank you for all your help on the board. --Solomon 08:59, 1 October 2006 (CDT)
Thanks!
Thank you senor for your wise and kind comments re: my client with foreign source pension income!
Bobbybill
NOL carryover
Riley2 - I would really appreciate your infinite wisdom. If you have time, could you look at my post titled NOL carryover? Thanks in advance!
Is a SEP and ERISA covered plan
Hi there, I noticed you made a comment on 7/27 which says a SEP is an ERISA covered plan. Can you share with me any resources where this is documented? The dept of labor is willing to help me with a specific matter IF I'm able to prove to them that SEP's are covered under ERISA. Any pointers would be GREATLY appreciated!!! Thanks in advance. Plz send your reply to adrienne_custode@hotmail.com.
Date of Death
Hello Riley
I am a investment advisor in Arkansas I have a client that owns around $290,000 of WMT stock, I am looking into her cost of selling this stock in taxes, I understand the cap. gains but her husband died early this year 06, they bought this stock in the early 80's so they have almost a 0 basis in this stock. the stock was held in a joint Ten. account at the time of death and now only in her name, my question is does she get a stepped up base on half of the stock to the date of death making her basis in the stock about half of 290,000 (145,ooo) now, Customer also lives in Arkansas. Thanks for any advise you can give.
annuity 1035 exchange
Your input on Feb 22 06 reguarding the tax on an annuity was just what I am looking for a client. I have not been able to locate Greene v. Commissioner, 85 TC 1024. Please point me in the right direction.
Thank you, David
Looking for a CPA to validate S/W package I am building
Hi Riley,
I was browsing this forum for CPA's that really understand Real Estate related tax matters (depreciation 1031 exchanges,...).
I am S/W executive that has started a S/W startup focused on RE investors (We are still in stealth mode). Our first set of applications are focused on helping investors with RE Tax related process.
I am looking for an accountant to spend a day or so to try out our product and give their professional opinion on the validity of our approach calculations.
Is that something you'd be interested in. If so please leave me your contact info like an (e-mail and/or phone #) at my e-mail address.
Thanks.
bookkeeper3wks@yahoo.com
loo
Your response to liquidating assets
Your response regarding liquidating assets was 'Truthseeker, to summarize -- unless the LLC makes a check the box election to be taxed as a corporation, the state law conversion of the corporation to an LLC (interspecies conversion) is treated as a liquidation of the corporation for tax purposes. This means all the assets of the corporation are treated as being sold at FMV, then distributed to the shareholders as a taxable liquidating dividend.'
My question: How is this recorded? If assets at cost are 1500 and accumulated depreciation is 1000 then how do you record the distribution as well as the asset sale?
Db Accum Dep 1000 Db Loss 500 Cr Asset 1500
Db Retained earnings 1500 Cr ?
I am very confused about how to record this transaction. Please help. Also, does the shareholder receive a 1099-DIV for a liquidating dividend? Please excuse my ignorance, but I have never dealt with this issue before.Rudolphacctg 20:00, 17 December 2006 (CST)
like kind exchanges
yes, if you know the citation that would be great! Thanks Jkalseim jami@cpa1.net
Regulation 1.161-1(b)
Riley,
Thanks for the post in my thread on divorce & mortgage interest. Quick question, is Regulation 1.161-1(b) in the wiki somewhere to your knowledge? I'd love to put a hyperlink to it in the thread.
--Lostbyirs 22:32, 29 December 2006 (CST)
capital gains
My client is a non-resident of Puerto Rico and wants to sell her property there. Can she defer capital gains taxes by reinvesting in PR or the mainland US?
Thanks
Riley2,
THANKS for the guidance on the S-Corp bankruptcy. For some stupid reason, we cannot get anyone to give us a quote on these returns and no one seems too interested in doing them! We have 3 years' worth to file. So, since I am a CPA and do do tax work on the side (away from my full-time job of essentially a "controller" without that specific title), I have decided to attempt the preparation of these returns. I was not aware that there was not a separate taxable entity created in this situation! I mostly deal with individual income tax return in my tax practice. So, I am going to try to work on these 3 returns in the next week or so before I get crazy with individuals!!
Thanks Cathy "countesst" Countessa 00:38, 24 January 2007 (CST)
1099-c forgiveness
Thank you for your reply. It was extrememly helpful.
Will
Partnership Interest
Riley2, thanks for your help w/my question on Partnership Interest. Maybe you can provide insight into this more detailed question regarding the same transaction???
Two unrelated parties formed a 50/50 Real Estate Partnership (AB Partnership) last year. I will call him Partner A and the other person is Partner B. During Year 1, each Partner contributed $145K in Cash, secured total Recourse Debt in the amount of $880K (or $440K each), each withdrew cash in the amount of $165K and had a Tax Loss in the amount of $30K (or $15K each). So, each had a tax basis in the Partnership of $405K inclusive of recourse debt or a negative -$35K on the K-1.
During Year 2, Partner A exchanged his 50% Share to Partner C for zero dollars while old Partner B & new Partner C refinanced the Recourse Debt so that Partner A was removed. I am not sure it matters but Partner A & Partner C are brothers.
Based on the above scenario, I plan on filing two separate 1065's for 2006 under the same FEIN# and Partnership name. The first will be a short year w/Partners A & B and the second a short year w/Partners B & C both filed under Partnership AB. I drew this conclusion from reading Sec. 1.708-1 and Sec. 301.6109-1(d) (2) (iii). Also, the new Partnership AB and Partners B & C will get the tax basis of Assets and Capital Accounts from the old Partnership (Sec. 1.704-3 (a)(3)(i).
1)Can you confirm or provide insight into the effective or constructive termination of the Partnership as a result of a 50% exchange by Partner A? Does it matter that Partner A & C are brothers and no money was exchanged?
2)Also, it appear that Sec. 704 (c) property does not apply because neither Partner contributed property (other than Cash) to the original Partnership. Can you confirm my proposed treatment of Assets & Capital Accounts for new AB Partnership?
3) Does the exchange described above create a tax Gain or Loss for Partner A on his personal tax return? If so, what is the deemed Gain/Loss from the above numbers?
4)Could I eliminate the personal Gain w/a 754 election by stepping up the basis to cover the negative capital account? Does it present any other issues?
5) Does Form 8308 "Sale or Exchange of Certain Partnership Interests" accompany the first Partnership Tax Return.
Restitution Payments
Back in April of '06 I posted a question concerning restitution payments and whether or not they are deductible. You said if they were pursuant to a criminal penalty, they were not deductible. Does that remain the case if the tax returns were amended and the income was claimed that is being repaid through restitution? It doesn't seem right that the restitution and the tax should be being paid?
EMPLOYMENT TAX ON QUALIFIED ISO's
Thank You, Riley2 - Just to clarify - Is the "spread" between the grant price & the exercise price, ie, the "deemed compensation" in the year of excercise, subject to FICA/M'CARE tax. in the year of exercise.
Riley,
And if the loss is from a K1 partnership.
Will that count or not?
Thank you.
Minister's housing allowance and Additional child tax credit
Riley - are you saying that the Pub 972 worksheet is incorrect? My software is working off of Pub 972 worksheet. No mention of minister's housing allowance anywhere. I spoke to Lacerte and they mentioned I could override the earned income amount by adding the Housing allowance in an override section of their program -- they were non-committal about doing it though (ie. they don't give tax advice, but will show tax preparers way to get a different answer if they feel they need to override the program.)
In your posts, you mentioned EIC and Child Tax Credit definitions of earned income. However, you did not mention Additional Child Tax Credit definition of earned income. Logic would say it is the same as Child Tax Credit, but perhaps they have a third definition to cover Additional Child Tax Credit earned income?
Thanks, Illini
Illini 11:53, 12 February 2007 (CST)
CORP STOCK
HELLO RILEY2
YOU WROTE A US corporation's stock has US situs for estate tax purposes, but not for gift tax purposes. ITS IS VERY INTERSTING CAN YOU ADVISE ME THE SOURCE WERE I CAN LOOK IT UP WE HAVE A U.S. C CORPORATION WITH A FEW FOREIGN OWNERS AND WE WOULD LIKE TO TANSFER IT TO A TRUST IS THERE NO GIFT TAX
Where can I read the text of Greene v. Commissioner, 85 TC 1024.
1035 Exchange
You recently directed someone to Greene v. Commissioner, 85 TC 1024. I cannot find this on the web. Can you direct me to a link where I can read the text?
chuckutter
code V on w-2
one of our client has code v on w-2, that amount on code v is already included in his w-2 income, how should we report it ?, He has other espp shares which he sold last year in 2006, but employer did not report all the transaction on code V on w-2, only a part of it reported on w-2 as code V. Question is why they did not report all transaction on code v though all of income from sale of espp stock is included in w-2 income ? do we need to do anything else diffrent for the amount reported as code V ? pl. advise, thank you.
Box 14 DCP-CAS, not decutable as an itimized deduction?
Riley2, to confirm, box 14 dcp-cas is not an amount that can be an itemized deduction? I am a little confused becuase many items that can be listed in box 14 can be itemized such as charitable contributions and CA SDI, correct?
Thanks!
Profile
Riley, you have obviously been contributing to this forum for a long time, and very valuable insights. Could you please fill in something in your [profile] so that others will be encouraged to do the same? Thanks Kevinh5
Joint ownership of condo with brothers
I have joint ownership of a condo with my two brothers. One of my brothers has asked the other two of us to buy him out. We have owned the property since 2004. The two of us that still live in the condo took over payments in October of 2006. The brother that wants to be bought out wants to know how much equity he has in the property. What is the best way to determine his equity, and how would we go about paying him? Additionally what is the best way for the three of us to split up the home mortgage interest. Each one of us would take the standard deduction if we did not claim the mortgage interest. If it were split up equally between the three of us, we would still take the standard deduction. If one of us takes the full mortgage interest, how can I determine the splitting of the return equally. Note: The ones not taking the mortgage interest will still get a return if they do not itemize.
Quick Question
Hi - I saw that you were very helpful on other persons inquiries, maybe you can help me
My wife had a primary residence, but we sold it and separated in June 2006. My divorce was finalized by year end 2006. The mortgage was in both our names and it was paid from a joint account (i was primary). The house payments were made from my income only. She did not make any deposits into that account (i can prove that).
We had a separation agreement put into place that separated our assets and addressed tax issues. I reviewed the agreement today and it doesnt address property that we sold; rather it addresses property that we jointly own at time of tax filing. While its not in writing anywhere, i told her that she could deduct 50% of our mortgage interest based on this separation agreement (we both misunderstood what the sep agreement said).
Do IRS regulations permit her to deduct this 50% interest expense, even though she did not contribute any money towards those payments? We lived in Maryland.Sctybones 15:12, 19 February 2007 (CST)
thanks
thanks very much for the quick response!
THANKS FOR ANSWER
Hi:
Thanks for clear concise answer on aggregation rules. I was unaware.
I appreciate your help
Marvin Nasses
Heal of Household
Thanks for your answer on 2/28/07 regarding the my client who has a grandchild living with her along with her daughter claims the child, but cannot be a HH. I thought possibly the the grandmother would have a qualifying child for HH since she maintains the household, but cannot claim the exemption since the daughter needs the exemption. Is there any situation where the grandmother could be HH and not take exemption? Thanks for all your help.Teddy1 23:00, 28 February 2007 (CST)
CALIFORNIA TRUST
Thanks for the info. I assume you are a CA CPA. True? john@frankcpa.net Jf-okla 09:44, 2 March 2007 (CST)
Your research
Riley,
I know you are a bank of information. Do you have a research database you get this info showing the code? I know a lot of it is from past experience but I was wondering if you have a good database or keep a spreadsheet of codes and pubs relating to certain topics.
Thanks,
Brian
EITC credit and housing allowance
Hi Riley2, I was wondering if you would answer another question regarding EITC and ministers housing allowance. I am puting together resource notes on the subject of ministers and wanted to know what happened in 2002 or what changed to allow ministers to exclude housing allowance from EITC calculation if they had an approved form 4361? Was there a new ruling?
I also wanted to thank you for answering my questions with precise info, it's a great help during tax season.
TLF
754
Hello Riley,
How do you record on the tax return a disposition of an asset that has a 754 step-up associated with it?
Assume the non-754 adjusted cost basis for the asset: a building, land & improvements along with associated depreciation gets recorded via 4797 but how do you dispose of the remaining 754 - seems ackward to run it through the 4797 - it is subject to depreciation?
I know the annual depreciation is specifically allocate, in this case, to one partner, an estate. 754 via inheritance.
I also know that the 754 will eventually reduce the 1231 gain allocable to the estate.
Another interesting item - if the 754 basis reduction turns a gain into a loss - is there limitations on the loss - seems like the IRS would not want high valuations on buildings & land for estates in which the estate can subsequently turn around & upon disposition sell the asset for a loss??
Also you noted in the discussion forum that a partnership does not record the increase on the balance sheet but was also unclear about this if the tax return's K-1 are tax basis or gaap.
If you do not record the adjustment on the tax return balance sheet than how would you get it off in a disposition - it is recorded on the balance sheet??
Thank you in advance for any help.
can a sole prop. owner or his wife or his kids be considered as employee and issue w-2
hi i came across a case that one bookkeeper is putting the owner and his wife as employees of the same business. as far as i remember that sole prop can not be employee of his/her business. can u please give any reference for so that i can explain it better. thanks a lot
Pushpinder Kumar
early bird?
It looks like your most recent post was about three hours ago. I think you're on the East coast, so that would mean the time you posted it was about 3 a.m.? Am I close? It makes laugh when I realize I'm still working at 12 or 1 a.m. and I see these early-bird posts from the other side of the U.S. Natalie 05:10, 14 March 2007 (CST)Natalie
My client received a SSA-1099 issued to her child's SSN (age 10). Do I need to report on mother's return or child's return or non-taxable for both?
It would be appreciated you will reply.
married in 06 sold 2 homes in 2 years
I was looking for specific information on my situation and this discussion seemed close but not exact. Could I resurrect an old topic? My husband and I married in 2006 and we each had our own home which we lived in for 4 years respectively. We put our homes on the market shortly after we married and we never lived in each other's home (we moved in to a family member's home). We meet the regulations for code 121 individually but my home sold in Nov 2006 and his home didn't sell until Jan 2007. So the question is do we file MFS for 2006 and 2007 so that I can use my 250k exclusion this year and he can use his 250k in 2007???? We don't want to file jointly and then miss out on the exclusion for his sale next year. (What makes this more frustrating is that the homes took so long to sell and his buyer kept extending the closing date - so it fell into the next year!) Your help is greatly appreciated.
UUGGGHH HOW I HATE TO DISAGEE
I usually just go my merry way...hehe
I thought however that non government pensions were taxed in the country of origin, but the government pensions were taxable in the US by US residents....I don't do ANY of these, but this was my understanding of the law as it pertains to resident aliens...please do let me know if I am wrong....international tax is what I am trying to specialize in due to my involvement with many....thank you my friend :)
Sandysea
Payments for foreign exchange students
Riley,
In response to your posting on this issue, if the taxpayer doesn't have documentation on his out of pocket costs, is there some other way of determining whether there is taxable income? New client receives $1200/month from the parents of two foreign exchange students and doesn't have receipts on his actual costs. Any reference to the IRS code?
Waynecpa 11:50, 22 March 2007 (CST)Wayne
Thanks
Thanks for the infoJeffcpa@comcast.net 15:04, 23 March 2007 (CST)
I'm kinda new here, today was was second post, not having much luck getting responses to my post, any suggestions?
clarification of an old discussion
I hope you don't mind me contacting you directly, but I was reading an old discussion, and I've gotten my hand slapped for rejuvenating old discussions before. The discussion: www.taxalmanac.org/index.php/Discussion:Repairs_on_Investment_Property You and Taxref and Blubby had a very informative thread going, but there were a couple of references that I wish it would have said more about. Blubby's comment: To the contrary, it appears to me that Carey must make an election to capitalize on the 2005 return or take the expenses as an itemized deduction in 2005, or the benefit will be lost. I am interested in learning more about how to make this election. I have a client who started an LLC to fix up houses and resell them. Hence, this is a business, and there is no question of Schedule C vs D. However, since he purchased the house in 2006 and has not sold it yet, I would like to capitalize everything I possibly can. From reading the above thread, it seems to confirm that I can capitalize repairs as well as improvements. The above excerpt seems to indicate that I can make an election the 2006 return to also capitalize mortgage interest and property taxes. If I am reading this correctly, are you aware of such an election? I have tried to contact Blubby and Taxref with no luck. Thanks in advance, and if this post was too intrusive of me, I apologize. WWTaxes Wwtaxes 15:57, 31 March 2007 (CST)wwtaxes
50% support of dependent
Thanks for the help.Mark Eason 23:25, 2 April 2007 (CDT)
recapture of depreciation on business rental property being sold
my client has commercial small mall that that is totaly rented to small stores, do we have to recapture depreciation, he has owned this for 5 years, if so how do we do thisRrschmitter@netsync.net 10:10, 7 April 2007 (CDT)
thank you
Bob
Installment Sale and Unstated Interest
Hi Riley2:
I hate to bother you, but I posted a question on the board and was hoping you would respond. Forgive me, if this is not the proper thing to do. And, if so, just ignore this.
I have an installment sale going. Rental property sold to a buyer that is using it for personal-use.
I am reading under SEC 483.. Unstated Interest and Original Issue Discount. It says that the treatment of unstated interest and OID rules do not apply to a debt given in consideration for a sale of personal-use-property. I don't think I have ever read that before. Does that mean that if the buyer is using the property as a personal residence, that you do not have to charge interest?
To further complicate, the buyer did not make any payment in 2006. Is there anything that I have to do? Just show no payment and carry the F6252 into 2007? I feel like I should put in a statement or something. No reposession at this time. I just don't want to miss anything with this return. Thank you so much for all the help you have given me. I really appreciate it.
Bell
Simple IRA Limit
Riley, You answered my question a year ago regarding Simple IRA limit to the 3% matching (Thank you very much). You referred me to S Rept No. 104-281 (PL 104-188), p.70. Pardon my ignorance, but where do I go to find that research? I'm not sure what that refers to. Thank you for all you contribute to Tax Almanac. -Susan77 Email susanpaynecpa@comcast.net
Resident alien/Non Resident alien
Hi Riley.
HELP!!! Under the subject "Can I file as married filing joing with a non resident alien wife living with me" (1/30/06) you stated you can file as head of household if your wife is on a J, Q, F, or M Visa. My client - husband on H-1 visa - resident alien. Wife J-1 visa - has been here since 2004. She plans on staying working for 2 years in a disadvantage area. They have a child born in 2006, with SS#. Can I file HOH for the husband? and 1040NR for the spouse?
Appreciate your comments - I can explain more if necessary.
CTurner555
Non resident/resident alien
Hi Riley2.
Just realized I didn't at the tildes so that you could respond to my question; trying so now; thanks again CTurner555Cindy 16:26, 13 April 2007 (CDT)
Tax Treatment of Addional Income as a Result of Cash-Basis to Accrual-Basis Accounting Methods
Riley,
So it is true you can spread out the additional tax over 4 years?
Clay
LLC Liquidation
Hi Riley 2, Bill Crowe of this message board emailed me that I should contact you because you might know about the ins and outs of liquidation of an LLC. Are you willing to communicate with me regarding a CA LLC that went out of business 12/31/06? I am a tax professional, EA. Have been preparing this LLCs tax returns for a few years. Thanks for your reply. Don't want to bug you if you don't have the time nor inclination to get down to brass tacks with me. Thanks, Robi
U.S. Supreme Court
I did not know if permissible to post this link on the board. When you have time, would you believe this decision would apply to an oil rig worker - thus keeping his tax home at his residence rather than the rig. I know in general a mariner's tax home is his residence rather than the vessel. If worthy of your consideration, perhaps you would post a response on the board. Thank you. McDermott vs Wilander
--Solomon 20:12, 21 April 2007 (CDT)
Hi Riley, Could you please comment on a post?
(JR1 mentioned that you may know why distributions from paid in capital are not allowed).
Thanks! Viking 18:56, 24 April 2007 (CDT)
Capital Contribution Question
Hi Riley,
I need your help. If a particular LLC had 2 Capital contributions as follows:
$120,000 Partner A $100 Partner B
But the Operating agreement specified 50/50 is the ownership percentage. Then the partnship had losses of $121k.
How does this affect the LLC's Tax return and the K1??
The Capital Contribution is $121,000 correct ?
Under K1 section L of Partner A what would be his percentags of Income/ Loss/ Capital ? would it be 50% or 99% ?
What about section N of Partner A: What would be capital account for the guy who put in 120K ?? would it be 120k or 50% of 121k ?
Thanks very much.
Surface Damage ??
I'm sorry to bother you but I read one of your comments in regards to surface damage. I have a client who received a check for $20,000 for surface damage and their basis in the land is $75,000 before the damages. I am confused as to whether I report the $20,000 as ordinary income or just reduce their basis to (75,000-20,000) = $55,000. I tried searching for the below case you mentioned but I was unable to find it. Any help would be greatly appreciated. You are really one of the only ones I pay attention to on this site...
Lawrence v. U.S., (1983, DC WY) 53 AFTR 2d 84-1489 , 574 F Supp 177 , 84-1 USTC 9138 , affd & revd(1987, CA10) 59 AFTR 2d 87-424 , 808 F2d 1374 , 87-1 USTC 9116.
Bankruptcy and gain on abandonment of property
In several discussion posts you have noted the difference between the Cancellation of Debt income and the gain created on abandonment of property. Whether the debt is recourse or not determines the breakdown of what is COD and what is taxable gain. A chapter 7 bankruptcy does effectively make the COD income non-taxable, but in the process wipes out all the basis of the property abandoned. As a result, this leaves a gain on abandonment that I believe you define as taxable on form 4797 even in title 11 cases.
In my research I came across the following:
"According to the majority of courts that have decided or considered this issue, particularly the Eighth Circuit, an abandonment of property from an estate while the bankruptcy case is still pending does not result in a taxable sale, exchange, or other disposition. In the leading case from the Eighth Circuit, the bankruptcy court determined that an abandonment of property constituted a transfer upon the termination of the estate within the meaning of Code Section 1398(f)(2). In re Olson, 100 B.R. 458, 463 (Bankr. N.D. Iowa 1989), aff'd, 930 F.2d 6 (8th Cir. 1991). Courts favoring the majority position generally follow the reasoning set forth in In re Olson. The IRS follows the holding of In re Olsen as well.
OBSERVATION: The government benefits from this treatment because it shifts the tax burden to the debtor who, upon the subsequent disposition of the abandoned property, may recognize a taxable gain that will result in a non-dischargeable, post-petition tax liability."
This seems to indicate in this circumstance that the 4797 gain is excluded as well and reported on form 982 along with the COD income. My confusion comes from whether the individual has the right to exclude or only the estate - or does it matter? The 1099-A came in under the debtor's SSN and the bankruptcy trustee did not file a 1041 because "the estate had no items of income".
Do you agree with the above interpretation, or am I just looking for the answer I want too hard?
Bgcpa 11:47, 14 May 2007 (CDT)
Stepped Up Basis
Just wanted to say thanks...my research leaned on yes but it wasn't black and white...just wanted to hear it from another source.
Hotel Transfer
Just wanted to say thanks so much for your response to my question and sorry I was so long responding. When I went to get more information and we discussed it more thoroughly I think the issue has now been resolved. But thanks again . . . greatly appreciated!
CowTownCPA
ADA disabled access credit
Hmm - thanks for the info. I don't think what my client is purchasing has anything to do with access for the disabled. He's asking about a purchase of a defibrillator and if there is some tax benefit on his 1120S for that purchase. Other than depreciation, I don't see what else there could be. ? Well, gotta give him credit for trying.
LLC To S Corporation - Debt Exceeds Basis
On June 16, 2006 you replied the to the article regarding Debt exceeding basis. Your reply stated the Ninth Circuit Allows a trasferor to issue a self-created note to increase basis in a Section 351 transfer situation. Do you have the citation of that particular case. Thanks
Work Opportunity Tax Credits
Regular Tax 586,243 and AMT Tax 539,671 . Thank You
Louis
Riley2,
Thank you for helping me clarify my questions with regards to the excess Roth IRA contributions. This is my first time using the discussion form.
Thank you again, Dan
Retrieved from "http://www.TaxAlmanac.org/index.php/User:Riley2"
Recharacterization of excess contribution to Roth Ira
A taxpayer who files their return by the due date (Apr 15) has six months (1Oct 15) to recharacterize the excess contribution and allocable net income/loss.
My question is do they also have to file a 1040x in addition to to Form 8606?
Dan
You mentioned 2002-9 and 2004-11 and that the allowed or allowable rules have been softened. I reviewed both and the form 3115, bur I am not sure what to do. Got a client who sold duplex in 2006. Duplex was not reported on Sch E for any year that it was owned (2004-2006), apparently because the losses would not have increased the refund to the client, so the preparer saved them the preparation fee of preparing Sch E. Now I am left picking up the pieces. I was going to calculate the depreciation allowable and recapture, but I noticed your post and I heard something through the grapevine that things may be changing on this. Thanks! 16:14, 1 August 2007 (CDT)~~
Allowed or allowable
You mentioned 2002-9 and 2004-11 and that the allowed or allowable rules have been softened. I reviewed both and the form 3115, bur I am not sure what to do. Got a client who sold duplex in 2006. Duplex was not reported on Sch E for any year that it was owned (2004-2006), apparently because the losses would not have increased the refund to the client, so the preparer saved them the preparation fee of preparing Sch E. Now I am left picking up the pieces. I was going to calculate the depreciation allowable and recapture, but I noticed your post and I heard something through the grapevine that things may be changing on this. Thanks! 16:14, 1 August 2007 (CDT)~~
Gift Tax: Gift / Sale of partial interest in real estate
Hello Riley2
I have been reading a lot of the gift tax discussions on this forum and keep seeing your name coming up and you seem to be consistently providing answers with which I agree. If you would be so kind to comment on this post I would be very pleased to hear your thoughts
http://www.taxalmanac.org/index.php/Discussion:Gift_Tax:_Partial_interest_of_real_estate
Thanks in advance.
Best Regards,
Brad G BradleyCPA 09:35, 14 August 2007 (CDT) Dallas
Please help with topic
Hello Riley2,
Although I've never posted to this forum until today, I frequently search the topics to resolve tax questions that I have, and you seem to be the guru that everyone looks to for answers. I'm sorry if I'm not following forum etiquette, but I posted a question earlier today titled "COD - Reduction of Tax Attributes", and I'm desperate for an answer. I work alone, and don't have as many resources as I did when I worked with other practitioners. I've searched Kleinrock pretty extensively, and I think I'm handling the situation correctly, but I'm nervous about getting caught in a net of technicality. If you have time, will you please read my post and reply?
Many thanks! Melanie
hi Riley2,
i just posted a new message on the following discusstion link to ask you a question:
http://www.taxalmanac.org/index.php/Discussion:Inheritance_or_gift_from_foreign_national
it is rather urgent as i am currently in China and don't know what to do. thank you for giving me some suggestions.
cck
Settlement for emotional distress
My client is receiving a structured settlement for emotional distress. She is only receiving a percentage and her attorneys are receiving the rest. Is she required to include their portion in her income? Also, is she only required to report the amount received in the current year?
Thanks for any help!
Form 4797 Residential Rental Sale
Hi Riley2. I have a quick (and likley embarrassingly easy) question for you regarding Form 4797. I have a client that sold a residential rental that is subject to unrecaptured 1250 gain. I am new at Proseries and used the asset diposition worksheet for Sched E. It linked the gain to Part III of Form 4797 as if it were Section 1250 property, but shouldn't it go to Part I? The rental was purchased in 1996 and sold in 2005 so it should be Section 1231 property shouldn't it? I can't figure out if I made a mistake with Proseries. Thanks very much for any assistance you can provide.
Thank you
Thanks for helping me out regarding the reporting method for the CCorp contractor. You're awesome, Riley. BethAZ 01:41, 13 September 2007 (CDT)
passive losses
Thanks for your reply for my discussion about suspended losses. This taxpayer is materially and actively participates. He has over 12 properties and spends probably 60 hours per week on them. So the question can he deduct the suspended losses on a property that was converted to 1031. All current losses are deductible on the real estate. bob Fendrick (bobfend@bellsouth.net) Bobfend 13:00, 25 September 2007 (CDT)
Riley, are you in the Academy
Off all topics note: I wondered if Dennis and you may be in academia? It's admirable how you have gotten so comfortable in that most opaque of Codes, the IRC. Were you a reporter for a Congressional committee for tax writing? Not being nosy, but there is a technique and talent for it that only comes with long and intense practice. It's fascinating how people approach questions on this forum. I'm basically trained to see what I can make the law to be (as we are allowed to do in common law), some here, particularly Kevin, are extremely rigid (I'm not casting aspersions on that, it's the foundation). Well, I admire your responses, they are truly surgical in precision; they get me motivated to spend some time actually reading that Code (note, not looking up, but reading the darn thing). Ciao.
Collectible definition
Riley, I have a question for you regarding the definition of a "collectible" pursuant to section 408(m). A wedding invitation is not explicitly named in the statute, but I was wondering how you would interpret 408(m)(2)(F) ("any other tangible personal property specified by the Secretary for purposes of this subsection"). What exactly does that mean? As an aside, perhaps a 50-year old wedding invitation might be considered an antique, and thus fall within the plain-meaning of the statute? I would be interested to hear you thoughts. BTW - who is Dennis?
Foreign tax question - Please help.
Hello Riley2;
I have read some of your comments on the foreign tax forums and I was very impressed with your answers and your knowledge on the subject. I would like to know how to get in touch with you as I have a personal foreign tax issue to deal with and would like to speak with someone who knows what they are talking about... I have tried talking to 2 other CPA's who just didn't have any experience with foreign tax issues and were not able to provide me with straight answers. Please reply to voleygirl184@hotmail.com if you could give me your office number or your direct email I would greatly appreciate it.
Thank You; Jessica.
repo 121 property
Riley2 do you have to do an amended 1040x if not sold within 1 year of repo since you are no longer taking the 121 and are reporting all income on the Sch D
Section 1033
Riley - thanks a bunch. I spent a long time looking for what you provided.JRohle 15:24, 6 November 2007 (CST)
wow--you were right on. I cannot thank you enough.
--tom2
Gift of the entire bank account
Hi Riley2,
I really appreciate if you can help me on this. I want to ask your comment on 30 January 2007 (pasted below) I want to know how "gift of the entire bank account" should be done. Does it mean the donor can wire transfer the entire amount to the donee and close the account? Or any other ways of making a gift of the bank account? My local bank does not know what I exactly I should do.
Thank you.
==
Riley2 (talk|edits) said: 30 January 2007 I believe that cash on deposit in the United States is considered to be intangible property under Internal Revenue Code § 2511(b)(2)(A). However, cash in a safe deposit box is considered to be tangible property. See Rev. Ruling 55-143. I believe that a check drawn on a U.S. bank and presented for payment in the United States becomes tangible property when it is presented for payment and honored by the bank. The obvious solution to the check problem is to simply make a gift of the entire bank account.
Gift Tax
Riley,
This year exemption is 12K. Here is the qiestion if non-US citizen/resident wire transfer into US bank account to US citizen/resident 12K in dec of one year as a gift. Also will wire transfer additional 12K in Jan. of the second year as a gift, would exemption apply to both years. Is there any holding period should be between wire transfers. What needs to be filed with IRS?
I was reading your post about California quasi trust rule. Could you point me towards more info on this. When I search the web I find your post. I am dealing with a property sale that has two tennants holding a Life estate.
Thanks
PAP
my "problem client" post
Hello Riley,
Can you please help me understand your comment about a preparer not completing a 1045a for an NOL generated on a 2005 return?
Are you saying that because a TP is not required to claim an NOL even if there is one?
If no 1045a was filed with the 05 return, can the client use that NOL in 2006? Does '05 have to be amended first?
Thanks for your help. I can be reached at newtaxguy@yahoo.com
The New Tax Guy
mortgage interest deduction
I was wondering if you do tax returns. I have a unique situation about Mortgage/Living together condition. My buddy has the mortgage in his name, however Im on the title only. I pay 53%, and think Im entitled to the mortgage int deduction. Curious for more info if possible. I will supply my email/phone number if you can help
thanks mike
G4 capital gain
Hi I am buying property from a Person on G$ visa, He is not in the US right now. Titile company wants to hold 10% taxes of the sale price (FRIPTA). But Seller is bring some other titile company which is claiming that G$ visa people doesnot have to pay withholding. But i am scared in case IRS put lien on this property later on. Please help...............
Help with a tax question
Riley, you seem to really know your stuff. I have a quick question. My wife is Mexican and we are married. She is a non us resident and her father (who is also a non us resident) transferred > 100,000 in U.S. Treasury notes to HER (not me) in 2004. We forgot to 'declare' it on our 2004 year ending 1040 and the issue is now possibly coming up. My question for you is this: since her father who is a non u.s. resident passed her non cash U.S. Treasury notes, this should be exempt from the gift tax. Is that correct?
Please email me at hombredeass@hotmail.com if you can.
Thanks
Quit-Claim Deed
Hi Riley2, Thanks for your reply to my post and YIKES! I thought I should reply to your answer regarding the quit-claim situation privately because of the possible consequences the "good son" faces. How would the IRS find out about this mess? What can I do to assist my client now that he's already got himself (POSSIBLY) in hot water? He told me "someone" told him all he had to do was file a Form 709. Again Riley2, thanks so much for taking the time to help me out here. You can either answer on the discussion board or email me at rmcgrobi@concentric.net. Thanks, Robi Robi 01:32, 24 January 2008 (CST)
Gauranteed Payments...Need to bill more for these! :) need help!
Hi,
You seem to be the one on the know when it comes to Guaranteed payments. I have read through the numerous posts and can not get one thing clear:
Assume I have 2 member LLC with 50/50 profits interest organized on Jan 1, 2007 with $50 K contributed by both A and B @ inception. During the year One transaction takes place in which AB, LLC grosses $50 K from consulting services.
Scenario A - A and B take no distributions and AB, LLC has no deductions. In this case the ending capital accounts for tax purposes are $75 and $75
Scenario B - Same as above only AB, LLC takes a $25,000 cash deduction as a GP to A.
What would be the tax basis capital accounts FYE 12/31/2007 for AB, LLC and A and B respectively? Also, what would my steps be in this 1065?
I think the ending capital accounts under scenario B would be:
A = $50 B = $50
The entry would be:
DR CR
Member's Equity ( Distributions Member A) $50,000
Cash $50,000
To record Initial Cash being transfered to A
Adjusting entry
Guaranteed Payment ( Member A) $50,000
Member's Equity ( Contributions Member A) $50,000
Thereby leaving both member's accounts untapped for the GP.
Please try to respond soon
ps pardon the spelling :)
Kindest Regards GA
Quit Claim Deed
Hi Riley2, I left you a private message re the quit claim deed. Also left a message on the tax question forum addressed to "Riley2 re quit claim deed" an hour after you were last on the board. Do you have time to respond to me? I see you were on the board just one hour before I checked to see if you had posted anything to me. I understand if you don't want to get more involved in assisting me with this matter. We are all busy right now. Thanks for your expertise. Robi 21:09, 25 January 2008 (CST)
Question about your firm
Hi Riley, I saw your comments in the CPA vs. EA discussion and i would like to know more about your firm. More specifically, i'd like to know how your role as a CFP plays into your activities at your firm, if you don't mind sharing at some point. I am currently a candidate for the California CPA and i'll be going for my CFP after i receive my CPA license. I work for a CPA firm in the Bay Area.
Thanks, Phoenix
Tips paid out
In regards to your discussion on tips paid out (in 2006), is an employer allowed to require a specific amount of tips paid out from waitstaff? Some of my tax clients work for a restaurant who requires them to pay out 30% of their tips, yet reports all of their tips on their W2s. I can't see how this is allowed. Thank you for any information you may have that will allow me to help them stop their employer from doing this. We currently deduct the required amount "above the line", but don't think this should be reported on their W2 in the first place.
Mortgage Interest Deduction
You seem to have a better understanding than most on this site! My issue is similar to previous posts with one twist. Father has loan for a home in his company name. The Daughter and Son-in-Law move in and assume all mortgage payments (paid directly to the financial institution), bills, repairs, etc. Are they able to claim the interest deduction as equitable or beneficial owners? Thanks Riley
1099A
Dear Riley2 I have the same situation as San Diego and I am practicing in California on Box #2 the amount is for $394,912.15 and box #4 the amount is $315,000.00 on box #5 it states No that my client is not personally liable according to what I have read I must report a sale the sales price would be $394,912.15 against my client's purchase price or basis if their is a gain she must pay tax on and if there is a loss well they cannot deduct this. Does this sound right to you???
Mozko 13:17, 27 February 2008 (CST)Humberto Garza
1099-A
Could you look at my follow up? Thanks!
could you please comment on a post?
I posted for the first time. Searching for "gift by wire transfer" brings up the post. I would appreciate it if you could comment specifically on this post as you have commented on similar posts before. Thank you.
If you have a minute?
Hi Riley - if you have a minute and the inclination, will you look at my question:
http://www.taxalmanac.org/index.php/Discussion:Nobody_knows_the_3115_I%27ve_seen.
Thanks so much and hope your tax season is going well. Beth 21:46, 11 March 2008 (CDT)
Paramedic per diem deductions
Hi Riley, I work for at least 2 and sometimes 3 different EMS services as a paramedic. They are all approximately 30 mins from my home and I work 24 hour shifts. It is my understanding that I can claim up to $30/24 hr shift for per diem expense. Is that true? And if so, where will I find it in the IRS tax publications for documentation purposes? Is there a limit to the number of shifts per year that I can claim, because many times I work a minimum of 3 and sometimes 5 shifts per week. Thanks very much for your input. It is greatly appreciated.Emtp3195 18:46, 13 March 2008 (CDT)
website depreciation
Hello. I noticed you mentioned the IRS had an informal white paper regarding the correct depreciation of web site costs. Would you know how I could obtain a copy of such? I tried the IRS web site with no luck and would prefer to have some written documentation before taking a depreciation position.
Thank you kindly in advance. Cpa2biz 07:22, 18 March 2008 (CDT)
Riley,
I found the answer to my question above but am not aware of how to remove the question from list. Sorry for any inconvenience.
Australian pensions and US taxes
Hello Riley2,
I've been reading the discussion of last year regarding the case of an Australian resident and the excellent advice you give. I'm wondering what the situation is when the reverse happens. That is, an Australian citizen works in Australia for the New South Wales government ( at a university), leaves to immigrate to the US, becomes a US citizen also, and now is eligible (over age 60)for the government pension in Australia. Is this taxable in the US or not? Article 19 seems to hold because the receiver is an Australian citizen as well as a US citizen, but the situation is very unclear.
Should I start a new topic on this one, perhaps?
Peterm6389 16:57, 27 March 2008 (CDT)
Unearned income for dependent child, need to file?
Hi Riley2, would you please help me with the following situation.
Hi I have a similar situation like Tsponhour, where my children have unearned income more than $850, and they both received 1099Bs. If I were to include my children's income with my return where should I include the 1099-B. I cannot figure this out. Should I include them in Sche D. Pls advise. thanks
you are amazing
I continued to be amazed by your vast knowledge...thank you..
ponzi scheme/theft loss
Hi Riley: thanks for your help. I spoke with the auditor's supervisor this a.m. and he said the way they are classifying this is the income from the phones is "separate" from the theft loss therefore subject to 10% agi. He is using 165 (c) (3). This is very frustrating. Told him to forward it to appeals as it doesn't appear they are going to change their decision.
Thanks for any input Nancy
Corp dissolution
I think I answered too quick & may be over my head here. I have done a number of dissolutions, but I haven't been involved with revoking one. I think your advice of seeking an attorney was the proper one.
Riley2 thanks for taking the time to answer my question. This is my first time on TaxAlmanac.....not sure if I'm doing this the proper way. I replied to your reply with another question. Wasn't sure if I was supposed to reply directly to you or not.
ASAP PLEASE Form 4361 Need Help PLEASE
Filing form 4361 Please email your response to me at JimShelt66@msn.co since i cannot leave a question since I am not a cpa and such Thanks
Hi my name is James and I have a question for you that maybe you can help me answer.
I am a new pastor and have been told about filing for exempt from seca. I know that it states that you have to be opposed to SS benefits and such.
This part is confusing so I will paste what I read
Many ministers have paid Social Security taxes as a result of secular employment. If they exempt themselves from Social Security by filing a timely Form 4361, will they lose all benefits that would have been paid as a result of their secular employment? The answer is no. An exemption from Social Security only applies to services performed in the exercise of ministry, and so exempt ministers will receive benefits based on their secular employment (assuming that they otherwise qualify). In most cases, eligibility for benefits requires at least forty quarters of coverage.
I did have a secular job for 22 years in which I did pay SS taxes. I was told that the above post means that I can still receiev benefits from Social Security from those previous years of secular employment even tho I filed for exemtion status.
I am not trying to sound confused on whether I believe in SS or not. But what I am trying to find out is it true you can still receive benefits from previous years of secular employment? Or do you loose all those 22 years of paying in SS taxes?
I do not want to be mislead into believing to file for exempt because you have those previous 40 quarters paid and still can get the benefits. I am sorry if it sounds so confusing but literally I am confused about the whole exempt thing as well. I do not really fully understand it. Like I said one part says you have to against SS and I was told that you could also be exempt because you meet the first requirement of being an ordained mimister.
Hope you can help me settle this issue. Thanks James Shelton Please email me you reply since I cannot leave a question without being a cpa and such email at jimshelt66@msn.com
Firefighters deducting meal expenses
Riley, Quick question. I read the Swagler decision as well as your posts in a 2006 discussion on the ability of a firefighter to deduct the costs of meals consumed at the station. My department has a written policy covering On Duty Meals. It appears to meet most of the conditions that led to denial in the Swagler decision EXCEPT for the funds remaining in the employers custody. In fact it states "the City shall not be responsible for the collection of funds." However, it does state that "Fire Administrative shall establish the procedures for implementing the common mess and Company Officers (line supervisors) will be responsible to implement and supervise the program"
On the face of it this policy appears to "sort of" meet the requirements since members are required to participate and city supervisor implement it. On the other hand the lack of city custody of funds appears to be a requirement that is clearly not met.
Your thoughts are respectfully solicited and your help greatly appreciated.
Dave
on the item of sale of goodwill under the installment method
Rile2. Hi this is TAXCAT on the subject of sale of goodwill under the installment method. JUst want to make sure I am handling this correctly. Here are the specifics.
Sold a small eating establishment's assets including the goodwill.
the goodwill had a value on the books of 50,000(cost of 50K no amortization taken-- held greater than 1yr)) and it was sold for 60,000 for a gain of 10K.
2007 is year of the sale and that is the year i am doing.
should i first report this on form 6252 part I? (no money yet recieved on the goodwill portion of the assets.)
line 5 60K line 6 0 line 7 60k line 8 50k line 9 0 line 10 50k line 11&12 0 line 13
Statutory Employee and Health Insurance Deduction
On May 31, 2008 you had the following exchange related to a question concerning the Lacerte tax program and the SEP-IRA Plan for Statutory_Employee (http://www.taxalmanac.org/index.php/Discussion:SEP-IRA_Plan_for_Statutory_Employee)
Q. Lacerte will not compute a SEP-IRA deduction for my client since he has no self-employment earnings. Lacerte assures me that my client is not eligible for a SEP-IRA deduction -- even though his Schedule C net is over $300,000. Is Lacerte right about this?
A. Lacerte is absolutely wrong about this. For purposes of retirement plan and self-employed health insurance deductions, a statutory employee’s SE income is his schedule C net. See Sec. 401(c)(2)(A)(iii).
I am having the same problems with our TaxWorks software. I have referred to the code section you referenced and searched in vain for additional information on statutory employee deductions related to se earnings (ie. health, dependent care, retirement plan contributions) Do you have any additional information you can give me that will assist my research? Assuming you use the Lacerte program, how did you override the program? I can get our program to accept an override if I put the net earnings from Schedule C directly on the form Schedule SE, however this results in additional SE taxes? This does not appear to be the correct handling based on my research of the instructions.
Appreciate any assistance.
Dprtcc 10:56, 22 July 2008 (CDT)
Officers life insurance premiums
Riley2,
Could you take a look at my post on the deductibility of officers/ key man insurance where the company is not directly or indirectly the beneficiary of the policy. CCH has a cite for this but, only in their Master Tax Guide, but only in reference to their Federal Tax Reporter.
Thanks.
Life Estate Sale
I read your reference (Reg ~1.1014-5(a)(3)). However, it did not have an example of the gain/loss when Mom (who holds the life estate) and daughter (who holds the remainder interest), both sell their interests to an unrelated party.
Can you shed some light?
Thanks.
Jabspd 22:01, 6 August 2008 (CDT)
Sorry about that Riley
I'm getting an education myself sitting here reading over this, I happen to have the book I mentioned. CrowJD 15:41, 15 August 2008 (CDT)
CA Short Sale / Deed in Lieu
Hi Riley, I have a client who moved to CA in Feb. 2005 and purchased a home for $360,000. Received a job offer, listed CA house for sale for $395,000, and moved back to PA (where he also owns a home) in mid May 2006. House was listed for sale through Feb 2007 with no luck and was turned into a rental in Apr. 2007 through present. Client has $11,342 suspended loss from 2007 and $7,083 in depreciation was taken. Current mortgage balances total $297,900. Expects to list at $225,000. Q: What tax implications would we be looking at if my client decided to sell short or sign a deed in lieu? My thought was that it is CA non-recourse "acquisition" debt so no COD income. Would the basis be reduced by the $72,900 COD ($297,900 mtg bal. - $225,000 sale price) before reporting the sale of the rental property? If so, would you use the actual sale price $225,000 or the mtg. balance $297,900 as the sale price? Suspended losses are written off upon the sale/forclosure? I appreciate your help. --CKEA 10:43, 17 September 2008 (CDT)
You replied to a post of mine about 2 weeks ago. Can you please give me clarity on this same issue Riley2. You are correct of course about the Netherlands treaty not containing resourcing rules. I have studied Article 25 in detail and in this case all is up to the Netherlands to give a credit or exempt the income. The Netherlands have said to my client's foreign tax preparer that the refund they gave is final. So, despite the fact that the Netherlands still has a substantial amount withheld, is my client still liable for the full amount of tax assessed on the US return for the year of the withholding? If this is so, essentially he will be double taxed but since it is US source income, he has to pay taxes in the US and then deal with the Netherlands as his own issue? I will post my question and your reply below.
Thanks Riley2.
ForeignTaxes (talk|edits) said:
10 September 2008
I have a client who is a citizen of the Netherlands, resident alien in the US for tax purposes. He works in the US, paid by the Netherlands. I understand this makes his income US Source income. The Netherlands withheld taxes for 2007, then later paid back less than half of the amount withheld. They said there is no way to get back the amount they have. For 2008, no income taxes are being withheld and all taxes due will go to the US. Estimated taxes are being paid. What happens in this case? One IRS article says the foreign credit cannot be given on US taxes for US source income. Another says: "The United States is a party to tax treaties that are designed, in part, to prevent double taxation of the same income by the United States and the treaty country. Many treaties do this by allowing you to treat U.S. source income as foreign source income." The Netherlands is one of these countries. My question is, can I claim a foreign tax credit for my client for the amount withheld by the Netherlands?
Riley2 (talk|edits) said:
11 September 2008
We have resourcing rules in some of our treaties that enable us to treat US source income as foreign source income. For example, our treaty with Belgium contains such a resourcing rule. I don’t believe that the treaty with the Netherlands contains a resourcing rule. See Article 25.
spreadsheet
Can you shoot me a copy of the spreadsheet you use to figure the state tax accrual?
taxability of inheritated annuity
Hi Riley 2,
I was reading the discussion regarding taxability of annuities to beneficiaries. I just want to confirm with you that if the owner has never annuitized the annuity, then upon death, the beneficiary would be taxed on the distribution of the annuity less basis. The same would result if the owner took periodic withdrawals from the annuity. In periodic withdrawals,the interest is taxed first. the balance of the distribution would be taxable to the beneficiary in excess of basis. thank youMdhcpa7 09:50, 26 September 2008 (CDT)
Depreciation of Web Site Development Costs
Riley2,
I have read several of your responses re depreciation of web site development costs. Please let me know if there were any more latest development re the same. I have an oil & gas client who is spending at least $100K on web site development together with logo design, etc. My thoughts are segreating the costs relating to the two "projects", if feasible, and amortize costs re web site over 3 years and costs re logo design, etc., over 15 years under IRC Sec 197 (same as that for trademark?). Appreciate your comment on this. Thank you.Kyp 12:50, 1 October 2008 (CDT)
Thank you.
Riley2, I just wanted to thank you personally for helping me out on the 1031 question. I hadn't ever analyzed one before -- I don't have too much in the way of real estate investors. So I really appreciate your input and I am clear with the basics on this now. Have a good one !
Reaquisition of Real Property and 1031 Issue
Hi Riley,
Real property was sold on an installment basis in 2006. Buyer never made any payments (besides down payment) and both parties have agreed to let the seller get the property back. There would probably be no problem handling this as a 1038 repossession, but the buyer used this property in conjunction with a 1031 deferral.
From the buyer's perspective, if the current transaction is treated as a repossession, he will have to recognize his 1031 gain. Are my thoughts correct on this?
From the seller's perspective, if the current transaction is treated as a repurchase, he will have to recognize the remaining installment gain from the original sale. (Per Pub 537, this transaction would not be a repossession if the seller repurchased the property from the buyer.) Are my thoughts correct on this?
Can a transaction be structured so that neither party will have to recognize all of their deferred gains?
Thanks, Jeff Gilkey 18:28, 7 October 2008 (CDT)
Hey Riley2, do you recommend taking a MS Tax after passing CPA, CFP and EA exams. Thanks.
Thank you
Riley2,
I just wanted to thank you for helping me and others with questions to sometimes difficult problems. I am learning a lot from your responses and enjoy very much reading them.
I very much appreciate your help earlier this year and earlier this week with a case I had not seen before. As I mentioned in some of my posts that you answered, I was having some difficulties with vision due to illness. Your assistance as well as others is invaluable to me and is greatly appreciated. You are truly a credit to our profession.
Again, my heartfelt thanks. Tom O'ConnorTaocpa 21:52, 16 October 2008 (CDT)
I appreciate your reply about the Diaster payments for my bait and tackle client. However, rev Rul 91-19 deals with dental prosthetics unless I'm mistaken. Di you mention the wrong number? Also, I can't find a reference to CCA 200111044. What is your source? Thank you.
Denise Robertson
Certified Financial Planner ®
Thanks!
Thanks alot, Riley2. I now know who to contact re: partnership questions.
Manitowoc08 JaneB 09:38, 27 October 2008 (CDT)
1033 partially taxable conversion
I have reviewed the discussions on the topic of 1033 conversions, and have seen your comment about the lack of tracing rules for 1033 transactions, so that the taxpayer can take the proceeds from the 1033 conversion and hold on to it before investing the funds (or new funds/debt) in to a new asset. My question is what happens when there is a year or two that separates the conversion and the purchase of the new asset if the price of the new asset doesn't require the full sales proceed amount - is the partial gain on the original conversion reported by amending the return that included the 1033 election, or is it reported in the year the new asset was purchased?
Thanks.
Deferral issue
Riley - this is something that I thought of in order to find a savings and possibly get a client - it has not been done yet and it may not be.. remember to ask the next q that tilts the balance - if we do this they will more likely than not blow covenants i their financing agreements - thank you for the insight - I have only posted here a few times and if I recall you have responded on a couple of the posts -
Form 706 - Partnerhsip interest
Riley2 - I already replied to your response but just wanted to make sure that you get the message. Thank you so much for taking the time to answer my question. Really appreciate it.
Based on what I've read on this site, I know you are very knowledgable when it comes to estate and trust. Do you offer seminars or courses related to this area? If so, please let me know. I would like to attend.
Thanks much.
Short Sale on 2 rental properties
Hi Riley2, I am perplexed by the following situation and based on previous posts of yours, I know you can help if time allows. I have a client who had to short sale 2 rental properties, she received 1099 COD for both and wants to claim insolvency which would alleviate the income from being reported. My dilemma is whether the ordinary loss from the sale should be reported on 4797? With the exclusion of income due to insolvency and realizing a loss, is that double dipping? How should this be handled?
?
Thanks for your response. We are in Colorado.
This may be a repeat because I'm new at this and not sure if you received the first one. Anyway, this is let you know that this is a Colorado resident.
Bobh 17:42, 24 January 2009 (CST)
COD INCOME
Hi Riley2-
Thanks for information on ARS 33-729.
Although I agree with your statement that the loans for home purchases are considered non recourse debt, I can't find a revenue ruling, case, etc. Do you know of any rulings or cases? Since CA law is similar to AZ, maybe you are familiar with some CA cases. Thanks so much for your help.
Marvin
Theft Loss in an Annuity
Riley, I have a client that had two non-qualified variable annuities in 1998. One he canceled and one he kept. Both had Madoff losses that will probably qualify as "theft loss" in the future. I know if he used the loss of the annuity that he cashed out of that he could take it as a line item deduction without the 2% limit (because it is a theft loss). The question: Since he is taking this loss as "a theft loss" could he use this loss in the way approved by the IRS to use such theft loss to deduct against future earnings for twenty years? Thanks John
Riley, by the way he disposed of one of the variable annuities in 2008 and the other he still owns.
Life Insurance
I suppose that you are the editor. I am a CPA that simply wants clarification. I have not worked with life insurance topics before.
But what really seems out of line is that you allow "direct deposit" questions on the forum but take mine down? Is it because I haven't completed a proflile? What is the real issue?
I really appreciate your fedback in this regard. I do not want to get a CP2000 for this. Would it be better to report as recourse and do the 982. The TP is not sure of the recourse and non recourse and has no docs, I do agree that since it was an investment and not a residence it probably was recourse. My response tou yours before the HOA response was:
OK according to the TP it is non recourse but I do agree, waiting for loan doc's and will probably find so, they did not live in home it was a property to flip.
In the case of full recourse the selling price is then the lesser of FMV or debt outstanding, basis is what was paid plus selling expenses which results in a huge loss and debt forgiveness is picked up as income and 982 is filed to extent of insolvency. That will take care of a CP2000. Is this disposition reported on Schedule D or 4797.
I have not had a foreclosure issue before hence my ignorance in the matter.
Oklahoma exempt tribal income.
Someone please tell me who qualifies for this, the law is not clearly defined. The Oklahoma tax law states that:
If the tribal member's principal residence is on "Indian Country" as defined in 18 U.S.C. Section 1151, the income earned on Indian Country may be deducted. Legally acknowledged Indian country must be within the jurisdiction of the tribe of which he or she is a member.
However, there are 5 different definitions in the 18 U.S.C. Section 1151 defining "Indian Country".
Oklahoma does not have actual "reservations" and hasn't for a long time. Although Oklahoma is considered to be Indian Country.
With no actual reservations who exactly qualifies for this exemption?
Foreign Earned Income Exclusion
Hi Riley2,
I need your help. Would you please read my question and reply? I’d like know what your thoughts are. Thank you so much.
http://www.taxalmanac.org/index.php/Discussion:Foreign_Earned_Income_Exclusion_Case
Tax help
Hi Riley:
I am not versed in membership interests. Are you available to consult and prepare returns?
Thank you
Income from Embezzelment
Hi Riley2,
Can you point me in the direction of your source for this topic? It seems that every answer creates another question. Perhaps if I have the source in front of me I can answer them all at one time. I really appreciate your help. I am glad that I do not encounter these every day.
RLS 12:34, 6 February 2009 (CST) Robin
SS Benefits
Riley, I appreciate your responses to my questions regarding SS benefits. Your assessment about my confusion is somewhat correct. My confusion isn’t in the terminology, but the determination of gross income. I’m aware of how SS comes into play with gross income as it relates to filing requirements. I also understand 86 as it governs the taxability of SS benefits. I’m getting hung-up with the mechanism that determines gross income as it pertains to taking SS benefits into account for this determination.
Your direction to 86(1) lead me to interpret that one half of the SS benefits (taxable or not) are considered gross income. In that case, an individual whose only income is 12K of SS benefits has 6K gross income. This income would also be nontaxable (doesn’t meet the filing requirement). The 6K exceeds the 3500 limit. Parent cannot be claimed as a QR.
I thought I had it nailed – with your help - but your last response seems to say different and that is confusing me…again.
When computing gross income, the amount that would have been included on line 20b of line 1040 if the dependent had filed a return would be included in the gross income test.
If I were to follow this line, then a person who’s sole income in 12K of SS benefits would have no gross income (none of the benefits would be on taxable on 20b). This person would pass the 3500 gross income test since he had none.
I apologize if it seems that the light bulb refuses to go off in my head for something so simple, but sometimes it hard to decipher just a simple answer in the Pub or IRC. My initial read of Pub 17 lead me to initial conclusion that the SS wouldn’t count, but it just seem right to me. I did check the code, I even glanced at 86 before you had mentioned it. It was right around then that my brain turned to mush and I opted to post the question.
Again, I appreciate your responses. You are quite amazing. - Rick
Rgtaxservice 00:17, 9 February 2009 (CST)rgtaxservice
Partnership Redemption Need Help
Riley2 -
I know that you are the tax expert around here. I have a tough question regarding partnership redemption. I cannot find anything on this website, court cases, or publications. This is the situation.
Four partner partership. Entered into contract to purchase a building worth 1.25 million. Prior to closing on the property, one of the partners got out. He was a 30% partner. There were no assets in the company whatsoever. The other partners paid the leaving partner $35K redemption from their personal monies. This amount was based on what his basis would be in the building. I know the partner has a gain on distribution, but because there are no 1231 assets to step-up where is th 35K accounted. The redemption documents read as the partnership is buying out his interest for the money. I feel that there should be goodwill recorded on the partnership's books over 15 years. However, I cannot find any documentation.
Any suggestions?
Thank you in advance.
Thank you
Thank you for the references.
Japplegateea 08:30, 1 March 2009 (CST)
Step Up in Basis
Riley2- You seem like an expert for this forum... I have a question - Partnership community property state and spouse of partner dies. Will surviving spouse receive step up in basis? Will other partners of partnership received step-up in basis? Renee
Thanks. You gave me the same answer that my attorney/consultant did. No estate tax return was filed at father's death, so I'm assuming that no QTIP election was made since it would have to have been made on the return.
Home buyers credit
Riley,
I can't find IRC Sec 36 on TA regarding the home buyers credit. Can you point me to where it states that the payback isn't required even if the taxpayer elects to treat a 2009 home purchase as being purchased on December 31, 2008?
The text of the AR&R Act 2009 summary reads that the payback obligation is eliminated for purchases after Jan 1, 2009. My client purchased the home in Jan 09 and would like to take advantage of the credit this year if there is repayment requirement.
Thanks. - Rick
Rgtaxservice 00:24, 22 February 2009 (CST)rgtaxservice
(my edit) - I think I found it - It's 36 2(i), if I'm reading my legaleze properly.
Riley2, The more of your comments I read, the more impressed I am at the depth and breadth of your tax expertise. So, I'm following up with you directly regarding a recent post I made. It brought several answers from several people, but because I posted the question in bits and pieces, I'm not sure anyone got a full grasp of the situation.
My client, a lawyer working for a legal clinic, put up $35,000 to help pay off an existing debt of the clinic, plus another $50,000 as a down payment toward his equity in the firm. "Both amounts were due upon signing the stock purchase agreement. No stock was ever issued" (quoting my client). Client and the owner of the clinic parted ways, and client never recovered either the loan or the stock investment. He consulted other attorney's about collecting, but "there was no guarantee that he would prevail", and the prospective legal fees precluded him from pursuing further.
Riley2, you recommended claiming a Sec 165 c 2 loss. Would this be your recommendation for the whole $85,000 or just part? Why would it be better than claiming a business bad debt loss on Form 4797, as another suggested?
If you could take a moment to simply shoot me a 1 or 2 line reply, I'd really appreciate it. Anchorman 14:33, 23 February 2009 (CST)
Survivor annuity
Hello Riley2, I have a question. I have a Civil service employee who passed away, and spouse and 2 minor children are receiving the annuity. When working through the Simplified Method worksheet, who's ages do I use? The spouse's only, or the spouse and the two children added together???
The employee died in 2007. The 1099-R shows the total contributions by the deceased employee and also shows the amount of employee contributions in box 5. When I work through the worksheet, I'm not coming up with the amount in box at all. The 1099 instructions say the box 5 amount is supposed to be what you can deduct in the current year.
I'm not sure what to do. Any comments would be appreciated.
Thanks, Pam in KC aka Tipper
Part Gift / Part Sale
Rather than bring the discuss back to the top by posting .... I just want to say thank you for the response!
Snowbird 15:18, 1 March 2009 (CST)
First time home buyers credit when former personal residence was located outside the US
Can a couple (US citizens) claim the first time homebuyers credit when their former personal residence was located outside the United States? They purchased a home in the US in 2008 and sold their personal residence in Canada in 2007.Chris773 20:03, 5 March 2009 (CST)
COMPLEX TRUST
Riley2
I had one more question that I added to our discussion of the distribution. See Complex Trust-Discretionary Distribution.
Thanks,
BusTax101BusTax101 10:25, 6 March 2009 (CST)
Manners
Riley,
I just read your reply on the thread with the question regarding the simple trust. Thank you very much for not only sharing your vast knowledge but also for the gracious tone of your posts. I have never "heard" any sarcasm or criticism in your tone, which is refreshing. Thank you. JAD 23:07, 9 March 2009 (CDT)
I see you have experience in the accumulated earnings tax for C corps - I have none. I have some questions for you if you would be so kind. I have a small corp client who now had an abnornmally great year and now has Accum Earn > 250k (350k) My questions are... is the extra tax automatically assessed? hardly ever assessed? assessed only if no explanation attached? My clients are planning to buy real estate - will a statement suffice or should they have "appropriated" an amount and is it too late to "appropriate" the amount as of 12/31/08? Any advice you could give me would be greatly appreciated. - Thanks
HELP WITH ACCUMULATED EARNINGS TAX EXPERIENCE
I see you have experience in the accumulated earnings tax for C corps - I have none. I have some questions for you if you would be so kind. I have a small corp client who now had an abnornmally great year and now has Accum Earn > 250k (350k) My questions are... is the extra tax automatically assessed? hardly ever assessed? assessed only if no explanation attached? My clients are planning to buy real estate - will a statement suffice or should they have "appropriated" an amount and is it too late to "appropriate" the amount as of 12/31/08? Any advice you could give me would be greatly appreciated. - Thanks TAXGALS2 11:29, 12 March 2009 (CDT)
Bargain Sale of an Easement
Riley2 A few weeks ago you left this comment on one of my questions.
"In addition, no deduction can be claimed for a bargain sale of an easement (other than a qualified conservation easement)"
Do you know of an IRS pub that states this? The client is in the process of signing papers on the sale of the easement and the seller wants a letter from our non-profit client acknowledging the excess value of amount paid for the easement as a gift.
bargain sale of easement
My apologies, forgot to sign my name
VBoudwin
Hope this helps
You've dropped alot of knowledge on me over the years, both directly and indirectly. I wanted to return the favor.
The instructions for line 14f (540A) are pretty explicit that you can't make adjustments for pensions earned in other states. Pub 1005 states pretty much the same thing. I tried scanning the RCT to see find something related to 401(k)s and 'basis', but I came up empty handed.
It's too bad that 18000 is too vague or there isn't a section of the code that addresses this issue directly.
- Rick Rgtaxservice 22:16, 15 March 2009 (CDT)rgtaxservice
1031 tax free exchanges
If someone owns real estate in their own name can they do a 1031 tax free exchange for real estate that is in an LLC's name?
active participation for the 25000 rental real estate deduction
Hi Riley2,
You seem to be quire popular so I was hoping you could clarify your answer to whether an LLC member can meet the active participation test in order to qualify to deduct the $25000 rental real estate loss. It was the same question that Ekcpa had.
Quickfinder states that a limited partner cannot meet the active participation test. You answered, "Don't believe that there is a problem with an LLC member claiming the $25,000 special allowance unless he would qualify as a limited partner under partnership law."
That is my dilemna. The IRS consistently has equated LLC members with limited partners and so even though I have been doing alot of reading on this, I still don't know if it would be allowed, per the IRS. Can you shed any more light on this?
Thanks in advance for your help.
Maria- Mdhcpa7
1099a and homebuyer credit
Riley - first off let me say thank you for all the times you post on this site. I am a one person start up CPA practice and this has been an invaluable resource for me.
I wanted to confirm two things. My client received a 1099A: Box 2 $241, Box 3 $262 and not personally liable (CA mortgage). The tricky item is that they have taken depreciation on the 8829 in prior years. My understanding from the search the yellow box and pub 544 is that the sales price is $241 less the basis in the house which is $341. The only thing reported on schedule D is the depreciation recapture and the 982 does NOT have to be filled out. Is my understanding correct? I assume there is no way to NOT report the taxable situation the depreciation recapture creates.
My second issue, is that the taxpayer is the one who owned the house that was abandoned (only his name on the deed). His spouse bought a new home in 2009 (only her name is on the deed). My understanding that they still do NOT qualify for the credit since it has to do with marital status at the time you bought it not with whose name is on the deed, am I understanding correctly?
Thank you in advance - I feel that I have an understanding of both these issues but just would like some confirmation that my thought process is correct.
BearAcct 12:53, 6 April 2009 (CDT)BearAcct
Mortgagee Bid In Foreclosure
Hi;
I saw you responded to my post regarding mortgagee bid in foreclosure and referenced reg 1.166-6(b). I thought this says you should compare the fair market value to the obligations of the debtor to determine gain or loss. You mentioned comparing fair market value to the bid and isn't the bid presumed to be FMV in the absence of other proof?
Thanks,
Ted
Company involved in Flooring activity, both commerically and residentail construction. DPAD eligible?
No reduction in tax rates. Instead, you get a credit on your 2009 tax return for earned income. The credit is 6.2% of earned income, not to exceed $800.
Thanks for the response. Can you tell me where I can read about your answer above?
I am still confused about the credit. I know people including myself whose Federal taxes withheld are lower on each check. So if we get the entire $800 back in our checks by year end, then will we not get the credit on the 2009 tax return?
I am also wondering if many of us will owe taxes since we are not paying in as much even though our income is the same or more for 2009.
Thanks,
Jim
Need help with Form 982 and COD
Hello Riley:
I would appreciate your help in resolving a form 982 issue I've been having with my client. I would appreciate it if we can set up a time when we can talk. Although I read all the discussion in the yellow box. I want to ensure that I'm doing it correctly. My # is 407-592-4597 and email is yarivelez@yahoo.com.
Thank you Riley.
Tax attorney suggestion
Hi Riley2 - first I want to thank you for every post and comment you have ever placed here. Your contributions are extremely valuable. With respect to my recent post, do you know of a tax attorney (I live in San Diego) that could help with this issue? My client has asked that I find one who we can use based on my suggestion. It would be nice that they be in the San Diego area who knows the issue of partnership abandonments but I do not consider where they practice a deciding factor. You can email me at mskeane641@cox.net. I will not give your email address out.
NRA to NRA query (from "Paris")
Hi Riley,
I note your very informative answers.Would appreciate with some leads on the following case :
Facts: 1)H (husband), is a NRA, married to W (wife), also an NRA .(Non-Treaty domiciled property in community) 2)H and W own a joint bank account in the State of NYK with Rights of Survival. 3)H and W own a joint broker account in the State of NYK with right of survival 4)H is the sole contributor to the NYK bank account by way of his employer directly transfering the funds to the Joint account (employment not connected with a trade/business in the US). 5)H is the sole contributor to the NYK broker account by way of receiving US shares from his employer(employment not connected with a trade/business in the US)
Questions : 1.Would H’s contribution to the joint bank account be defined as "intangible assets" ? 2 Would H’s contribution to the joint broker account be defined as "intangible asset" ? 3.Are there any gift tax implications on the incoming funds/shares ? 4.Are there any gift tax implications if the couple wire funds (not shares)from their joint US bank or joint US Broker to a joint account outside the US ? 5.Are there any gift tax implications if the couple wire funds to separate accounts outside the US.
Thank you . Paris 08:10, 16 May 2009
above comment re-posted after reverting change by that user that wiped out all prior messages - Trillium 12:15, 16 May 2009 (CDT)
NRA to NRA query
Hi Riley,
Apologies for writing again.
Any chance you can look at my previous NRA to NRA query and give me some leads re thought process?
Thank you .
Riley2,
Thank you for taking the time to respond. The key question we are trying to determine is if the recharacterization of non-passive to passive losses has any basis in law as being a change in accounting method. I have reviewed Reg § 1.469-2T(c)(5)(i) and can see where "such income shall be treated as passive activity income if and only if such activity is a passive activity for the year of the change" but cannot locate anything that says the re-characterization itself is an accounting change. Could it be an error correction?
Thanks, kemcpaKemcpa 12:07, 26 May 2009 (CDT)
Litigation Settlement-1041
I added another question-your thoughts?PAULHA 16:24, 8 June 2009 (CDT)
Trademark royalties
Riley2, I've read many of your posts regarding royalty payments and SE tax, but I'm interested if there are any unique twists to the treatment of royalties paid for trademark licenses. I've created a new discussion that I'd appreciate you to chime in on.
http://www.taxalmanac.org/index.php/Discussion:Trademark_Royalties
Thanks
Riley thanks for the information on the revenue ruling, it was right on.
Riley:
Quick question - is there any way to avoid capital gains for a person that owns stock in a public company that is taken private (ie all stockholders of a certain date are awarded $30/share and the stock was delisted from the NYSE)?
Thanks for any and all assistance.Huskies 01:44, 16 June 2009 (CDT)
Guarnateed payments to C corp
Riley2- Thanks for responding to my question regarding guaranteed payments from June 16th. So there is no way around claiming the GP in the corp? I do understand the rules of GP and partner picking these up on 1040. However, he has already paid tax on these when he received these wages from the corp via W-2. GP was $119,000 in 2008 and corp paid him wages of $98,000 partner paid withholding of $17,000 already. Picking up GP results in additonal tax of $15,000. So essentially this was bad advice from previous CPA on the organization of his company and who should receive GP.
Thanks Vic24Vic24 07:30, 17 June 2009 (CDT)
Partnership distribution
Hi, Riley2! I wanted to ask you a question directly on this partnership distribution that we were discussing in a forum previously. You seemed to have the most input on the topic, so I thought I'd run this by you.
So, I've determined that the distribution would certainly fall under section 731, but there's another problem that I'm not sure how to work around.
This partnership has two pass-through entities as the "partners"; the pass-through entities are S-Corps, in which the client and his wife each have 50% ownership.
To illustrate, say I have a partnership called "Gibberish, Ltd". The partners in "Gibberish, Ltd" are "Nonsense, Inc." and "Crappola, Inc." My husband and I each have 50% share in "Nonsense, Inc." We also have 50% share each in "Crappola, Inc."
How would a property distribution work in a situation like this? Please tell me if I am over-analyzing this, or if I'm right to be hesitant about it.
Thanks, Tara Tdinter1 14:19, 29 June 2009 (CDT)
first time home buyer 2008-2009
Hi Riley, Just wondered what your thoughts were on this scenario: Taxpayer A buys home in 2008, qualified for $7500 repayable loan.
Taxpayer A gets engaged to Taxpayer B (single never owned a home) and plan to marry in 2009.
A sells house to B in 2009, still not married at time of sale, for no gain on the sale. A may have repay all or a portion of the $7500 on the 2009 return.(based on 5405 instructions)
B would qualify for the $8000 credit and not have to repay as long as B meets the 36 months residence test.
A and B marry near the end of 2009. A and B file married filing joint return for 2009. They file 2 5405 forms... OR would they file MFS to keep the waters clear? I see nothing that says which way they would need to file.
IRS Sec 36 and 2009-12 notice seem to say this scenario is allowable.
Have you seen anything contradicting this?
first time home buyer 2008-2009
Sorry, I forgot to sign the page.Rbl291CPA 09:39, 29 June 2009 (CDT)
First Time homebuyer among brothers
Thank you for your input.
In the case I presented, does the fact that B is only buying one-half and A is retaining 50 % ownership preclude B from taking the credit.
Rhencek 11:09, 8 July 2009 (CDT)
Contingent of a CPA Healthcare Practice
I read that you are a tax research mgr. Please call me at 317-452-4620 or email at marty@baltsbiz.com. I will be glad to pay you for your services. This sale is totally confusing to me.
Thanks,
Marty Larch
Fraud restitution
Fraud restitution
Riley can you please help me. I have a question with my 2008 taxes I got caught up with a white collar crime and had to pay 180,000 in restitution in 2008. Is this money I paid to the government tax deductable for 2008? If so where do I claim it on my taxes? The government wiped me out so paid I can’t even afford to hire an accountant. Thank you Ps: I am also going to prison so I don’t think the restitution is considered a penalty Can you please email me at cpenta@mail.com
Fraud restitution
Fraud restitution
Riley can you please help me. I have a question with my 2008 taxes I got caught up with a white collar crime and had to pay 180,000 in restitution in 2008. Is this money I paid to the government tax deductable for 2008? If so where do I claim it on my taxes? The government wiped me out so bad I can’t even afford to hire an accountant. Thank you Ps: I am also going to prison so I don’t think the restitution is considered a penalty Can you please email me at cpenta@mail.com
CPA Needed
I have someone who is looking for a CPA in Southern California, preferably in the Southbay area. I was wondering where in Cali are you So I can give this person your contact info. Unfortunately, I do not have any details. I do know it will be dealing with an individual return and possibly a business return..What kind I'm not sure.
Thanks. Genskitty
insolvency exclusion
is inslovency exclusion rules applay on rental property also?
easy Link title
I noticed in a prior posting that you noted most purchase money mortgages in Calif are non recourse. However, I believe a refinance may be recourse.??? I have a 1099-A showing my taxpayer as personally liable on the debt (recourse) amd it was a refinanced loan. No 1099-C yet Your thoughts as you seem to be well briefed on this subject.
Cost Depletion of Oil & Gas Property
Hello Mr.Riley2:
I have posted the following question on general tax forum but I am concerned that it might not be answered. I pasted this question below to get your attention. In case you might want to contact me, my e mail is cpasjkim@swbell.net and telephone is 713-932-0018. Thanks a lot
I have a client who invested in oil/gas working interest in Texas as a non-operator in 2008.
They paid for the working interest as follows: About 5 producing wells $2.2 Million Pipeline 0.5 Million Undrilled acres 1.0 Million
They also drilled about 3 new wells during 2008 after purchase.
I booked all Revenue, AFE and JIB transactions by then producing wells (5) as well as newly drilled wells (3) for 2008.
$2.2 million was allocated to each of the producing wells (5) and 1 Million was charged as a lump sum to the undrilled acres in the purchase and sales agreement (PSA).
Though "assignment of lease and bill of sales" list legal description of the all the leases assigned, the leases of this undrilled acre and the 5 producing wells were not identifiable in the PSA.
The purchase price they agreed for each producing well(total price of 2.2M) includes well equipment,Proved Developed reserve(PDP) for the well as well as Proved Undeveloped reserve(PUD) of the reservoir the well belongs to.
We also assigned value for the well equipment for each 5 producing well out of 2.2 Million on estimated basis.
I believe the following questions have to be answered to prepare tax report and financial statement correctly.
First, we need to allocate the purchase price to each newly drilled well in 2008 for cost depletion calculation purposes for the property. The new wells can be drilled on the reservoir of already producing properties or they can be drilled on the undrilled acres. Though we can identify the location of the new well by searching Texas Railroad Commission website, the taxpayer has trouble to identify which property the new wells were drilled under because they can not identify the lease location of the reservoir of already producing wells and the undrilled acres they purchased on a map. We need this information to plug in cost basis, current year production or sales and beginning reserve to calculate cost depletion for the property using the formula (cost depletion=cost basis times current year production or sales/beginning reserves). I believe this information can be obtained from the seller. But seller seems not cooperating.
Secondly, the taxpayer is reluctant to obtain PUD reserve for each well as of 12-31-08 due to prohibitive expense involved. But the seller provided us year end PDP reserve for all producing wells including newly drilled ones.
Is there any alternative to resolve this problem to calculate cost depletion, equipment depreciation and IDC amortization for financial & tax reporting purposes without knowing the missing information? Or must I have this information from the taxpayer to prepare tax & financial statement correctly?
Can you help me to resolve this? It will be greatly appreciated.
Thanks Dcdkim 15:59, 24 October 2009 (CDT)
LLC interest redemption by the p-ship - GW?
A member redeems its partial interest in an investment LLC, LLC pays cash (creates some related debt)- How can the LLC benefit from payments made in excess of member's basis? there are no substantial hard assets; working capital cash to pay payroll. Income is derived from managing the clients' accounts (LPs). The value in excess of basis represents the future earnings potential from services. can LLC book GW and amortize it?
