Talking with TaxSpeaker: Video 56
1. My annual software subscription is expiring next month. I was wondering if Bob still recommends Bit Defender and Bitlocker over Norton?
2. I have an older client who build a house in 71, moved in 2006, and sold the house in 17. Can they exclude any of the gain? They paid the property tax, and insurance on the house from 06 to 17, their disabled son lived in it. They did not live in the house for the past 10 years. Found a website that said they could use a % of the time it was their main home and exclude part of the gain, but didn’t find any of that on IRS. It was never claimed as a rental.
3. I have a question for Bob on non-resident state income. If you travel around the country teaching classes (like the Taxspeaker seminars) do you have to file state tax returns for all those different states you teach classes in? Is there any different situations that could change that, such as they buy the class online or they pay you in person when you go to that state?
4. I have a client who has a C Corporation that is incorporated in North Dakota. The client used to live and work in ND. As long as I have know the taxpayer and have been preparing his taxes, he has lived and worked in South Dakota. This year he has decided he wants to make SD his state of incorporation. The only shareholders in the corporation are himself and his children. This would be considered an F Reorganization. From research that I have read, this is a tax-free reorganization that is treated as "one" corporation and carries on the same characteristics. I have also read that the old or transferor corporation needs to be liquidated for federal tax purposes.
a. My first question is - how do I handle this for taxes? Do I prepare two tax returns or one? If it is one tax return, do I attach a statement notifying IRS of the F Reorganization?
b. Secondly, the father wishes to gift stock to one of his kids but has decided to hold off til this is done. When you think he could start doing this?
5. Mr. Jennings, I have been attending your 1040 tax seminars since 2012. I finally have a question that I need your expert opinion. I have a client that has purchased property in Mexico. He was required to pay a significant L.V.A. tax when he purchased. My question: Is the L.V.A. tax reported and limited to the $10,000 maximum? Or, is it listed as "other taxes" on line 6 of Schedule A and not subject to the $10,000 limitation? In my research I have received answers both ways. Turbo Tax in 2017 listed it as a Line 6 "other tax" but for 2018 is not specific. Help!! My client has called again. We filed the original 2018 returns limiting the L.V.A. to the $10,000 but my client wants to amend if it is reasonable to report L.V.A. on Line 6 of Schedule A.
6. I have a question for Bob and Ron Roberson if possible… I have two clients that have 1065 K-1’s with amounts in Box 11, codes F & G [951(A) income & 965(a) inclusion]… My software (ProSeries) and UltraTax software as well are not handling these input lines… I’ve put in some research (Including your manual) on these code sections. I basically understand there is foreign income and/or a tax that needs to be reported. But I cannot find and workpapers or logistics on how to report these amounts on the 1040’s…Box 16 of the K-1’s have also populated with date, which only stirs my grey matter a little more. I’m guessing it’s related to the box 11 amounts.
7. I can really use your opinion on this issue, as soon as possible. I am battling a client on an expenditure he made to a commercial roof, either in 2015 or 2016. I capitalized this as a betterment or a new roof over 39 years on an extended return filed 9-2016. My client says he did not replace the roof. The roof leaked so bad the tenants threatened to move out. He paid $80,000 to completely reseal the existing roof, putting this coating on top of the entire (whole) existing roof. The building is 300 feet x 60 feet. Building cost $480k 20 years ago and is worth 680K now. Have you seen this before? Is this expensed as a repair or capitalized over 39 years?. I capitalized this as a betterment or new roof over 39 years
8. We have attended many of your webinars and are potentially looking to change our document management software. Our last tech class with TaxSpeaker was in 2014/2015 and I imagine things have changed since then. We wanted to see if Bob or his staff had some specific recommendations or would be willing to share what software they use.
9. 1031 Exchange…The calculation refers to "assuming a debt" on the new property. Most of the time my client takes out a loan on the new property but never assumes the prior owners mortgage. Does "assuming a debt" refer to you financing the new property? Also, do you have an indept class on 1031 exchanges in your own words? Most just restate IRS publication's wording.
10. Employee Parking- Have you seen the seen anything on this since Notice 2018-99? Do we need to apply this for 2018 or just for taxable years beginning after January 1, 2019? Do you think there will be a small employer exception to this when the final regs come out? For small employers, this seems like a petty issue for the IRS.
11. Hi - I’m a CFP who is looking to improve tax strategies with my clients, but never fully wanting to go into tax preparation. I know the basics of what triggers taxes and some basic strategy. I saw a course on the CFP CE website for an in depth look at the 1040. When on the website it looked like I might need to have a better base knowledge of personal tax. Would this be a course for me?
12. New client age 86. He received a full distribution of an IRA in 2017 and paid taxes on it in 2017. He subsequently put the money back into another Traditional IRA account in 2018 and is now receiving payments from that account. No tax free rollover as the roll over period had expired. He received a 1099R for the amount he received in 2018. Does he have to get the money out of that IRA and put it in something else? I'm going to show he had basis on the IRA so he doesn't pay taxes on it again in 2018 but not sure if that is correct either. Any suggestions???
13. How do you check/review returns? Do you have a checklist and, if so, would you mind sharing? Do you use excel or some other report to reconcile consolidated 1099s, 1099-INT, 1099-DIV, K-1, etc. ?
14. I have a client is a farm management consultant. He manages farms for absentee owners full time. My second question is can he qualify as a Re professional? The first question is does Bob think this is an SSTB? My second question is can he qualify as a Re professional? Seems to me he is no different than a commercial property manager.
15. When a residential rental property is converted to short term rental a la AirBnB, the activity becomes a business activity and is reported on Schedule C. Does that mean that the rental unit must be converted from residential rental property depreciating over 27.5 years, to commercial property depreciating over 39 years? If so, how is the change in depreciation calculated and reported?
16. Will this tax strategy pass an IRS audit? Start a traditional LLC and transfer ownership of a new home and mortgage into the LLC. Determine fair market value rent and pay rent to the LLC. All expenses of that home become 100% deductible, including property taxes, insurance, upkeep, utilities, and repairs. It would appear you could beat the $10k state and local tax limitation on schedule A and the $750k mortgage limitation. What I’m I missing?... You do lose the 121 exclusion, however a 1031 exchange would appear to be end around….What happens upon death of Mom and Dad? Assets inside the LLC would not increase in value, however would the value of the LLC units in the hands of the kids increase to fair market value? If so it would appear the kids would be able to sell the home inside the LLC and pay no tax because of the increase in outside basis. Again, what I’m I missing?...Just to be clear, the renters and owners of the LLC are the same.
17. We are struggling with QBI and real estate. We are not clear on when to make a grouping election and when not to. Additionally we don’t know how to make the election. We understand from your previous video that grouping for QBI is a different election than grouping for a real estate professional. We also understand from your previous video that the election is made annually and there is no “down side”.
a. Can you only group when you are claiming the Safe Harbor method
b. If you don’t qualify for the Safe harbor because one of your properties has a triple net lease can you still group under the assumption that the rentals as a whole rise to the level of a trade or business
18. I have a client who is majority owner in 12 pharmacies, some rentals, and restaurants. At one time many years ago, he was a pharmacist but he does not work as a pharmacist in these businesses anymore. For the pharmacy K-1s that are all S Corps, in regards to QBI, would you obviously still have to say he is a specified service trade or business. Or is this something that I could possibly win if I say he is not.
19. Can you take 100% bonus depreciation or Sec 179 on the trade-in value above boot?