Talking with TaxSpeaker: Video 61
1. I have an S-Corp client that has a profit in box 1 and a 1231 loss shown in box 9 of the 2018 K-1. The profit exceeds the 1231 loss. I was under the understanding that the QBI would include the net of these amounts. My software is ignoring the 1231 loss and saying that the QBI only includes the profit amount. Is the software correct and the QBI is only the profit and doesn’t include the 1231 loss? I previously took your QBI and 1040 courses. Is there anywhere in either of the manuals that discusses the specific items that are included in QBI?
2. I have a client who paid way more than 10k in property taxes during 2018. The client has three businesses, two of which are a loss situation and one of which is very profitable. The two unprofitable businesses utilize different portions of the home – for which I have created an 8829 for each. After going through the 8829 worksheet in the instructions – I believe the worksheet is severely flawed and I will not be using it. From what I have researched, I believe that the 8829 for real estate taxes line 11 should not be limited to $10k – only what flows through to Schedule A should be limited to this amount as Code Section 164 states that the limitation does not apply to taxes that are paid or accrued in the carrying on of a trade or business - In this case: the portion of the real estate taxes attributable to the businesses run from the client’s home office. My program does not allow me to enter more than $10,000 on line 11. I would just go ahead and enter the excess amount on the newly created line 17 for “excess real estate taxes” (which I do not believe should have been added to the form) but this extra amount is then disallowed for my client since the two businesses with the home office deduction had a loss in 2018. This is a major deduction for my client and makes a very large difference on the return. Am I correct in my belief that the 8829 should not limit the amount of real estate taxes that are deductible on line 11? What would you recommend I do in this situation? The only option I see is to paper file the return and have the client sign a form stating their understanding that this position may be disallowed under audit but that I believe we have a defensible argument. Please help.
3. With the new partnership rules, what do you suggest in this situation. Two brothers have farmed together for many years and split everything and reported their half on schedule F under safe harbor rules.. Should they start filing a partnership return?
4. I have a huge dilemma, and I am hoping that you could help me. If I have an extension for a couple which is good til October 15....and a joint return was filed at the end of April, can this be changed to a MFS return by October 15th? Since the new extension time is October 15th? I know that once a return is filed jointly you usually cannot make it MFJ, but a huge error was made and this needs to be changed. One of the couple was on Obamacare and had to repay back the entire premium because they got married last year. In all the darn stuff that I read and on page 5 of form 8962...you couldn't file MFS unless you had certain exceptions or you had to repay the entire thing, so I took this as repaying the entire thing....well it can actually be limited. Or is there some way that a gross injustice can be argued for such a return to be amended?
5. Client has $40,000 left on primary residence mortgage. Wants to refinance to take equity & payoff loan ($400,000) on commercial rental property (Single owner LLC on Schedule E) to reduce interest rate from 5% to 3.5%. Would 10-T election make interest on new home loan attributable to rental property loan payoff deductible on Schedule E?
6. I have a client with 2 new LLC’s in 2018 (the returns are on extension). In 2018 we elected for them to be taxed as ‘S” Corps. I prepare the corporate returns and someone else prepares the personal returns. Each corporation purchased profitable businesses and the owners put in personal funds I accounted for as loans. I reached out to the personal return preparer to determine the best way to handle depreciation (bonus v 179 v useful life) in order to determine the best tax handling of this for the members (husband and wife) tax situation. That we agreed upon however, the personal return preparer is saying to put the loans in Additional-Paid-In-Capital. I believe that APIC is additional Capital paid in for stock purchased so being LLC’s there is no stock issued by the entities. I have not seen this before and have not found a colleague who has. Your thoughts would be appreciated.
7. Taxpayer is a farm consultant. Also does quite a bit of farm real estate
brokerage. Is he an SSTB? Could he be a real estate professional?
8. A taxpayer is a crop scouting business. Is he an SSTB? Could he be a
real estate professional?
9. Can a QOF containing a rental real estate property, rent the property to a related party of a partner or shareholder, if it is FMV?
10. What was the reasoning for eliminating like-kind exchanges on personal property? By using increased Section 179 deductions to offset the phantom income of the treatment of the trade-in value as a sale, there are decreased profits on the Schedules C or F resulting in less self-employment tax going into the coffers not to mention the reduction in the capability of contributing to pension plans by the taxpayers. I have contacted my US Representative (who is a CPA) regarding this matter to no avail. I have not heard many complaints about this issue but to me it is huge. Am I missing something?
11. Now that we have new rules governing Section 1031 exchanges, what are the mechanics involving an exchange of a residential rental or commercial property that contains some personal property like furniture and or appliances?