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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1783
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I am trying to help a friend out. In 2010, she short saled

Resolved Question:

I am trying to help a friend out. In 2010, she short saled a rental property, in which she received a 1099-C from the lenders in excess of $232,309.09. She did not receive a 1099-S from the escrow company, which needs to be reported as well on the tax return, and that amount was $130,000. So, there are two separate transactions: 1099-C and Form 4797 in disposition of the property. Where confusion lies is, since she missed her election on Form 982 for business indebtedness exclusion, is how to calculate the basis for Form 4797. The IRS says take the purchase price ($351,883) - depreciation recapture- cancellation of debt (COD). She is not entirely insolvent ($77,397.38) [Cancellation of debt - insolvency amount]. Is that the correct way to calculate adjusted basis? Furthermore, for the 1099C amount, Form 982, report the difference ($77,3797.38) as rental income on Schedule E, since she is not entirely insolvent and missed her opportunity for exclusion of business indebtedness. Is this right? Thanks.

Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.

Anne :

Hi

Anne :

do you know if this is a recourse loan?

Customer:

Please clarify.

Customer:

Box 5 is checked.

Customer:

Thanks, XXXXX XXXXX by the way. I have gotten so many different responses.

Anne :

Ok thank you

Anne :

that helps

Customer:

I'm a fellow tax practitioner, by the way.

Customer:

I am stumped on this.

Anne :

Please give me a few minutes to get my ducks in a row

Customer:

No problem Anne, thank you. I'm Steve.

Anne :

Hi Steve

Customer:

I would be willing to pay more than $30 if you can assist on this one lol

Customer:

The IRS has given me ten different answers.

Anne :

We'll see how well I do then..........but no pressure, right? lol

Customer:

No pressure. Just need a new set of eyes on it.

Customer:

Complex tax law dept couldn't even answer.

Anne :

The basis of the home is the purchase price, plus any improvements made during the time your friend owned the home, less the cost of sale (sales commission, transfer tax, etc) less depreciation

Customer:

Yep, we're on the same page so far.

Anne :

There is a very simple worksheet to figure this........I have it at my office..........I ALMOST have it memorized, but I'd rather find it for you

Customer:

The cancellation of debt is what is throwing me off and when the IRS said to include it.

Anne :

may take a few minutes though

Customer:

No, Anne, I know that part. I have no problem figuring that out for her.

Anne :

ok.........this is how this works

Customer:

IRS said to determine insolvency and include that or reduce the basis on Form 4797..that's what confused me.

Anne :

Amount realized (the $ amount of the canceled debt, of FMV, whichever is LESS)

Anne :

subtract the basis from the amount realized

Anne :

this will give you the loss on the foreclosure that goes to form 4797

Customer:

The COD and to include that in the adjusted basis seems very wrong.

Anne :

I'm working on line 21 entry

Customer:

To include COD in the adjusted basis seems very wrong.

Anne :

Please tell me what you are referring to as "COD"

Anne :

oh.......Cancelleation of Debt..............sorry

Anne :

This first step is figuring the loss on the foreclosure/cancellation of debt

Customer:

anne, is there any way to enhance the chat log? I can barely read it

Anne :

We can change the format..........give me a minute to do that

Expert:  Anne replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Anne replied 1 year ago.
Ok, we can still talk back and forth, but I'm hoping this is easier for you to read.
Customer: replied 1 year ago.


Yes.


 

Customer: replied 1 year ago.


Yes. I have the purchase price, depreciation amount, cancellation of debt amount, and the price that it was sold, if that helps. I just don't think the COD needs to be included in the adjusted basis.


 

Expert:  Anne replied 1 year ago.
Good.

We are doing 2 different transactions here.

The first one (where you use the lesser of the COD or FMV) gives you the loss you can take to Form 4797, since foreclosures/short sales are treated as sales for tax purposes.

The 2nd step is to calculate how much of the canceled debt your friend must include in taxable income on line 21.

I'm working on that now, but I'm hoping the above explanation helps clarify things a little
Customer: replied 1 year ago.


I agree Anne, but line 21 or Schedule E, since it was a rental?

We're on the same page so far.

Customer: replied 1 year ago.


I agree Anne, but line 21 or Schedule E, since it was a rental?

We're on the same page so far. Remember, this is for a prior year, so no election of business indebtness is applicable.

Expert:  Anne replied 1 year ago.
yes, I remembered.

The sale of business property and foreclosures and short sales are handled in the same manner (up to a point) as a regular sale.

Since this was business property, you're going to be using form 4797 and line 21

I'm trying to find something similar to the worksheet I told you about, or an explanation in layman's terms that will keep us on the same page, however, I'm finding this is not an easy task to find it.
Customer: replied 1 year ago.


Thanks Anne. I just need guidance on the adjusted basis. The cancellation of debt is really throwing it off and is that part of the equation. You got all the "numbers," right?

Expert:  Anne replied 1 year ago.
yes.........and I found the worksheets...........they are on the top left hand side of page 5 of Publication 544

I think if you go there we can work through this for you.
Expert:  Anne replied 1 year ago.
You will need some explanations going through this.

You need to do both parts of the worksheet.

The first part is for the gain/loss on the short sale, which I was trying to explain before.
Customer: replied 1 year ago.

Part 1, Line 1: $352,458.88

Part 1, Line 2: $130,000.00

Part 1, Line 3: $222,458.88 (different from 1099C given)

 

Part 2, Line 4: $130,000.00

Part 2, Line 5: $0

Part 2, Line 6: $130,000.00

Part 2, Line 7: ? (recapture depreciation, not sure what else to include here. This is where the IRS said we had to include COD. I don't agree.)

Expert:  Anne replied 1 year ago.
I'm sorry I'm taking so long.........but I don't know the figures the way you do and I have to keep looking back.

$352,000 is this what she sold the property for, or is that her original purchase price

What is entered on the 1099C
Customer: replied 1 year ago.


$130,000 is what she sold it for.


 


1099C is $232,309.09

Expert:  Anne replied 1 year ago.
Ok, can you please give me each box of the 1099C that is filled in and what is in them?

Also, if I understand you, HER original purchase price was $352,458.88?
Customer: replied 1 year ago.

Hi Anne:

Two separate 1099C's:


 


Box 1: 4/26/10


Box 2: $68,189.35


Box 2 (on other 1099C): $164,119.74


Box 5: Checked on both.


Box 7: FMV $0


 


Original purchase price: $351883

Expert:  Anne replied 1 year ago.
How did she get 2 1099C's on the same property?
Customer: replied 1 year ago.


1st and 2nd mortgage.


 


I owe you a drink, a meal, and your favorite gift, Anne!

Expert:  Anne replied 1 year ago.
Ok, we can do this...........although I have never seen a 1099C with FMV 0 when you're talking about rental property.

However, this is not going to be quick......it will take thought and alot of conversing back and forth............I'm willing to put in the time, but right now I don't have it.......there's alot more to this than you were led to believe, however, looking at the 4797 form , page 2 May help you a little (real property is section 1250 property for the form 4797)

If you plug in the numbers for lines 20-24 that might help you.........since she sold at a loss there is no depreciation recapture.

Can we pick a time and date to come back together and figure this out for you?
Customer: replied 1 year ago.


Anne,


 


Sure. I feel bad, because this is worth more than $35. Is there any other way we can converse about this?

Customer: replied 1 year ago.


Anne,


 


Sure. I feel bad, because this is worth more than $35. Is there any other way we can converse about this?


 


You tell me when is good for you.

Expert:  Anne replied 1 year ago.
We can go back to the chat room format, or stay here.......those are our only 2 options.

I'm generally a night owl...........I'm in MI and we're on EST. It is 6:14 where I am..........

Where are you, and what's your best time of day?
Customer: replied 1 year ago.

The chat room format is just so small to read.


 


I'm in California. It's 3 hours earlier. Later in the week is better for me.

Expert:  Anne replied 1 year ago.
Ok..........you can address your question to Annelew12554, and I'll see it......I pop on and off throughout the day.

Please try to fill in the 4797 form for the lines I mentioned. I think it might help you begin to see the whole picture.

I'll wait for your response then.
Customer: replied 1 year ago.


Anne,

 

Thanks! I am just confused why the IRS told me to include the Cancellation of Debt income in the Form 4797, but I will fill it out.

 

How do I address the question to just you?

 

THANK YOU SO MUCH FOR YOUR EFFORTS!

Expert:  Anne replied 1 year ago.
Hi I'm back.....was going to give you a little background info

the selling price on Form 4797 line 20 will be the $ amount on the 1099C's. Technically, that is what SHE sold the property for.

line 21 her cost includes any improvements she made to the property from the date she purchased it until the date she "sold' it.

line 22 is the depreciation taken. Technically land is not depreciable, and the value of the land should have been pulled out of her cost basis. You can find this out by looking at one of her tax returns to see if the depreciable $ amount = her full purchase price. If it doesn't, then the difference should be the land.

That should help you when you look at that form


Now, for the worksheets...........on worksheet 1 you are calculating the amount of canceled debt that should go on line 21. However, I still can't believe that box 7 would be"0". Please check both of the 1099C's and see if at least one of them has a value in box 7. If neither do, then I would ask whoever is shown as the company that forgave the debt reissue a 1099C with a value in box 7. If I remember correctly, it was eventually sold for $130,000, and FMV of real property is NEVER $0. Even vacant land has a value.

Eventually she will have a loss on the 4797, and a portion of the forgiveness of debt (from worksheet 1) will be taxable to her on line 21.

There will be no schedule E transactions, UNLESS she was renting the property immediately before the short sale.....so I think I saw the date on the 1099C as April 10??? So if she had renters in there from Jan-April 9, then she will have Schedule E income and expenses for THAT period of time.

I hope that this helps you with the theory anyway............I'm sure it will take some time to soak in..........when we are done,.you will have competed the tax course on Cancellation of Debt. lol

Read this over. I know you will have questions on it..........

If you continue on from here........your next posting will show in my que, and you won't have to worry about contacting me directly.........the JA program will do that once you post again.
Customer: replied 1 year ago.
Anne, thank you so much for all your efforts!

I figured out most of it, but I am puzzled why the sales price would be the cancelled debt amount. She short sale'd it for $130,000.... Does that not play into the equation at all? No, 1099s was issued.

You mentioned depreciation did not need to be recaptured if it is a loss...still true?

The way I see it is a loss on 4797 and some income, because she was not completely insolvent.

Reissue, even if it was tax year 2010?

Customer: replied 1 year ago.
When I say 1099s, I mean from the escrow company and they said they could not find it, which means it was never issued.
Expert:  Anne replied 1 year ago.
I'm sorry, I thought the bank sold it.......I misunderstood that point...........

then you're correct, and her sale price is $130,000

Yes, there's no depreciation recapture when you sell a a loss.

Yes........if there's no FMV on either one.........you notice that you need that value for worksheet 1 line 2. You could hand write $130,000 as the FMV, but the problem is that IRS got the one with the $0 in the FMV box...........be sure to double check both of the 1099C's and see if its on at least 1 of them.

If they give you the line that they don't know it...........have them look at the SEV on the tax bill and double it........that would be close........and since you need that figure, I wouldn't let them get by with that.........


I agree with you that you should have a loss on 4797 and there should be a positive entry on line 21
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1783
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you Anne! This is what I thought. I just got confused when the IRS said you have to include the COD in the equation of Form 4797- that is what threw me! Thank you!
Expert:  Anne replied 1 year ago.
Thank you for the accept. the excellent rating and your generous bonus!

I actually missed that you were a fellow tax pro, and all this time I couldn't figure out how you could catch on so quickly.......

Forgive me, since I'm sure I didn't need to write as if you were the typical lay person..........you were patient to put with up me on that point.

Please feel free to ask for me by name if I can ever help you again.
Customer: replied 1 year ago.


Hi Anne!

No problem.

In the event that this chain of event causes a Net Operating Loss, and since 2009 cannot be amended (statute passed), the only way to capture it is to carry it forward to 2010 and 2011 and beyond...is that your feeling, as well? Thanks!

Expert:  Anne replied 1 year ago.
Hi Steve

I apologize for the delay in answering your question, however, I wound up partaking of the local hospital's B&B service this weekend and just got home.....Asthma in the springtime.......ugh.

In order for your friend to be able to waive the carryback period, she must have filed timely, including extensions. Since she didn't do this, she MUST carry her loss first back to 2009 &2008, even though those are "closed years".

Nevertheless, in claiming the NOL carryover from 2010 to later years, the taxpayer is required to reduce the NOL by whatever would have been absorbed in the carryback years, notwithstanding that it may be too late for the taxpayer to get refunds for the carryback years. This has been upheld by many court decisions. As a result, you must take the 2010 NOL, carry it back to 2009 and 2008 to see how much would have been absorbed in those years, in order to determine how much of the NOL, if any, carries forward to 2011.

See . Sec. 6511(d)(2)

I'm sure this wasn't the answer you were expecting, or hoping for, but I hope it helps nevertheless to steer you in the right direction.
.
Customer: replied 1 year ago.
Anne:

Sorry to hear.

She actually did file 2010 on time on 2011. Once again, I am getting different answers from the IRS re NOL. She can either opt to carry it back or she can carry it forward, they said. I had another client where he did not file on time for 2009, so the IRS said you can only carry it forward.

I am familiar with how NOL works. I am just concerned that the NOL is done properly and unfortunately, I am getting mixed answers again.

Thanks.
Expert:  Anne replied 1 year ago.

I apologize...........I thought she hadn't filed 2010..........but apparently she filed it without the 1099C's is that correct?

 

Even so, the waiver to forego the carryback was supposed to be filed with the 2010 return..........

 

If your friend didn't file the waiver, and the IRS caught the error with the 1099C's, then you might be able to effectively argue that the time was extended due to the IRS changes which opened up that year.

 

I can't speak to why the IRS would tell you to just carry the NOL forward.........they wrote the book.......literally..........

 

Do I believe that she would be better off carrying it forward? Absolutely. Would I do it without carrying it back first? No.........as an EA I can't do that.

 

If you call the IRS and they tell you to carry it forward.......be sure to get the person's name & #.

Customer: replied 1 year ago.
She did not fine the 1099-s, since it was not issued to her.
Expert:  Anne replied 1 year ago.
Did she have the 1099C's?
Customer: replied 1 year ago.
Yep, but tax preparer did not do due diligence. She was not completely insolvent. So, if she filed 2010 on time, she can opt to carry back or carry forward, right? I missed your long reply. No, you are right. I wouldn't either. Carry back and then carry forward is correct.
Expert:  Anne replied 1 year ago.
The waiver to forgo the carryback period must be filed with the original return.

Those are IRS's rules.........and one would think that they (the IRS) would know that. They literally wrote the book.......

As an EA, I would not be able to NOT carry the losses back first (although I would hope very hard that they wouldn't have made a difference)

All I can do at this point is tell you the law...........whether you can recoup anything from the original preparer if it does, in fact, make a difference if she has to carry it back instead of forward, I don't know.
Customer: replied 1 year ago.

Hi Anne,


 


A follow up to our discussion... the IRS confirmed a timely filed 2010 tax return would result in a NOL and carry back two years.


 


Do you usually use a Form 1045 or do you think I can use just the 1040X reflecting the NOL carryover losses?

This is getting too deep!


 


Thanks,


 


Steve

Expert:  Anne replied 1 year ago.
No, you have to use the 1045 (please don't ask me the instructions.......its been a while, and I freely admit they're NOT my favorite form) and , depending on what state she's in, you may have to file a state 1045 (we do here in MI)

However, the bright side is that if carrying the NOL back doesn't give her a benefit, THEN you can carry it forward. Remember, NOL is not deductible against SE tax (I forgot this only once.........which is why I try to remember to tell preparers that..........it wasn't a pretty scene, since the person was TOTALLY self employed)

This friend REALLY owes you.........I hope you like her alot...........lol

I have a "sleep study tonight"..........ugh........I'm sick of doctors......and they keep scheduling more and more appts......

My point was, I won't be available tonight if you have another question, but I'll check back tomorrow........

Best of luck to you in the meantime.....

Anne
Customer: replied 1 year ago.

Grrr!

Once again, the IRS tells me wrong information. They said I can either do the Form 1045 or the Form 1040X. I'm amending 2008 and 2009 tax returns to reflect the NOL.


 


LOL, I am married, just trying to make sure due diligence is done on the tax return.



Thanks,


 


Steve

Customer: replied 1 year ago.

Anne,


 


We cannot use Form 1045. It should've been used by 2012 in this case, and we missed the opportunity. Concur?

Expert:  Anne replied 1 year ago.
Hi Steve

Yes, you're right.....however, you must still attach a computation of the NOL using Form 1045, Schedule A, and Schedule B if applicable. All I know off the top of my head about NOL's is that I have ALWAYS had to do the 1045 form.......the rest I generally look up.

Good research.......I had forgotten that if you missed the time frame you had to use the 1045 attached to the 1040X.

When you finally finish this return.......you will be the "go to guy" in your office for NOL's lol
Customer: replied 1 year ago.
I am glad that you have stuck with me on this. I was ready to pull my hair out when you said the Form 1045 had to be done. I have never done one. What I am seeing is a lot of folks are getting the 1099c years later after their short sale.

Anyways, I have the worksheets that show the computation of the NOL...do you think that is good enough?

Thanks!
Expert:  Anne replied 1 year ago.
You're welcome.


Geesh, I wish I could tell you something you'd like to hear for once.......but you're going to have to fill out the actual 1045 form, however, since you have the worksheets filled out, hopefully the 1045 shouldn't be that hard to finish out.



Customer: replied 1 year ago.
actually Lacerte has the NOL worksheet filled out for the most part...just not sure what year to do it for. How much to you for review?
Customer: replied 1 year ago.
actually Lacerte has the NOL worksheet filled out for the most part...just not sure what year to do it for. How much to you for review? I will block all names and Id's
Expert:  Anne replied 1 year ago.
Hi Steve

I now have to make a confession..........taxes I understand, computers, well, lets just say my 7 year old grandson knows more than I do............so if you can make it easy for me to get at, I'll be happy to review it..... you'll have to give me a day or so though............when I review something, I REVIEW it.........

As for price, ..I've never set my own price here.....honestly don't know what sounds fair to you.............so how about we haggle that out later...........ok?
Customer: replied 1 year ago.
Hi Anne,

How much time do you need? I am going to attempt the 1045 this weekend.
Expert:  Anne replied 1 year ago.
Should be only a day ...........

I've never heard of your program, so if I have questions re: where the computer got a certain figure, are you ok with that?

A quick review so I have all of the numbers (again) in one place would be helpful too.
Customer: replied 1 year ago.
Anne, what forms do you need for each year? I will pay $400.
Expert:  Anne replied 1 year ago.
Sold.......but now the pressure is on to do at least a $400 job........lol

ok.......lets start with the NOL worksheets for each year....(I'm assuming you're looking at 2008 & 2009)

Depending on how much information I can glean from the worksheets (again, I don't know your software) I may or may not have to ask for additional forms.
Customer: replied 1 year ago.
Anne,

Actually 2008, 2009, and 2010. I will provide as much info as I can but be warned I have never done a 1045.
Expert:  Anne replied 1 year ago.
That's ok........You've done exceptionally well so far.......and its been a while since I've done one by hand (which is how I will have to check this one...........us "oldies" still find the best way to check something is to put it on the form by hand, and most people would be amazed at how many times we still do this)

I'm sure that we can put our heads together and make sure the return is correct.
Customer: replied 1 year ago.
Anne, do we have to be in chat feature to send you attachments?
Expert:  Anne replied 1 year ago.
I honestly don't know.......and my grandson isn't here.lol.........but I THINK you can download them and send me a link maybe?
Expert:  Anne replied 1 year ago.
I can try calling my friend who is a computer whiz.........no guarantees I'll get her...or even that she can help, but I can ask her for ideas if you need me to.
Customer: replied 1 year ago.
I am driving so I will check when I get home. Thanks!
Expert:  Anne replied 1 year ago.
ok........I'll look for something from you later.

I've also heard that you can contact JA service help and they can help you get that information to me...if you can't link it to me, that would probably be the best way to get help .
Customer: replied 1 year ago.
I just don't know how to send Attachments through here but I will figure it out.
Expert:  Anne replied 1 year ago.
Ok, I'll be watching for them.
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1783
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Anne, customer service told me to emailXXX@XXXXXX.XXX and you'd get the attachments. Let me know.
Customer: replied 1 year ago.
Anne,

What you have is the scenario based on selling price of $130k and purchase price of $351,883 without recapturing of depreciation. If you feel we need to recapture depreciation, please adjust accordingly and depreciation amount of $36,576.

Another email coming your way...
Expert:  Anne replied 1 year ago.
Steve

I don't have them yet....but I sent an email to the mods, and one in particular who has ALWAYS been very responsive and helpful, so I expect I will have an answer tomorrow.

I will be gone in the morning but I should be home by late afternoon, early evening. I really appreciate the down payment (Bonuses count more) and I understand that this all hinges on my getting your forms. I don't know if I can make your weekend deadline....but my intention is to be able to walk you through the form......especially if your worksheets have the complete information. I will do my best to get them to you ASAP.

Again, thank you....I promise I will email as soon as I get home and let you know if I got the forms. Once I have them, I should be able to work on them tomorrow night.

Anne
Customer: replied 1 year ago.
Anne,

No rush.
Expert:  Anne replied 1 year ago.
Whew....although I will start to work on them as soon as I get them.

The mod that I mentioned was so helpful? I emailed her specifically, along with the generic email. She has never failed to answer me, and I've called on her alot.

I'm sure its a product of my not knowing where to go to find them.....(I checked my email, and they weren't there...but if memory serves me correctly, they have a special place I have to sign in on, or something like that. Just so you know....I'm called "the bulldog" at work because I never give up.....how else do you learn?)

We will keep in touch...

Thank you
Customer: replied 1 year ago.
Do you have your own tax practice?
Expert:  Anne replied 1 year ago.
No.....I've worked for a large firm for 26 years........but I'm always open to new opportunities.....you thinking about opening a firm in MI? lol
Customer: replied 1 year ago.
Sure!
Expert:  Anne replied 1 year ago.
Well, you might want to call it something other thanCustomer#39;s tax service.........lol
Customer: replied 1 year ago.
Lol, it is called ION Your Life, as you will see.
Expert:  Anne replied 1 year ago.
???? Is this anything like "big brother is watching?"
Customer: replied 1 year ago.
My wife came up with the name of the biz.
Expert:  Anne replied 1 year ago.

Very creative....does this mean that you own your own business? (and don't worry....I'm not planning on moving to CA....I'm pretty happy where I am........well, except for tornadoes........and blizzards...which I actually like......there's a certain beauty to it.....except I would like to like them from HOME and not work.......and the high unemployment........and rising crime rate, and...................maybe having big brother watching out wouldn't be so bad after all...........lol)

 

I'll talk to you tomorrow.........let you know where we stand

Expert:  Anne replied 1 year ago.
Steve

I got an answer from the moderators.....they claim they never got your worksheets.

I wrote back, said you sent them last night (although on my end, any email address is replaced by all "x"s......told them that I couldn't even tell if you had the correct email to send them to, since I couldn't see it, asked them what do we do now.

I hope you hear from them, because I'm sure that you are probably VERY frustrated right now, and I'm feeling your pain.

I will update you when I know anything, and I hope you will keep me updated also.
Expert:  Anne replied 1 year ago.
Ok...the mods have given me the email addresses for you to post your forms to. (Yes, I know you probably used one of the email addresses before, but I know very little about computers, but I don't get some of my phone messages either, or not for a day or 2....."they" tell me its the price we pay for being high tech........and now you know why I REALLY miss my rotary dial phone.........and if you tell me you don't know what one is..........I'll be REALLY disappoined in you Steve.)

The email addressess are:

experts@pearl.com

or


support@pearl.com

I sincerely XXXXX XXXXX they have already told you HOW to send the actual forms.........that part is too high tech for me.

Please let me know when you have sent them again, and I will certainly let you know when I get them.
Customer: replied 1 year ago.
Hi Anne: Ok, they gave me a different email address, but I will try that one tomorrow.

Yes, I know what a rotary phone is. I was around when that was around lol. It reminds me of a friend's son and he didn't even know what a Walkman was or a cassette lol
Customer: replied 1 year ago.

Anne,

 

Can you ask them why, when I called customer service, they gave me a completely different email address? It's worse than the IRS that the answers are not the same.

 

Those kinda things bug me.

 

Thanks,

 

Steve

Customer: replied 1 year ago.
Anne,

What else am I supposed to put in the email, besides the worksheets?
Expert:  Anne replied 1 year ago.
I hear you. I specifically asked if there were particular instructions, and all I got back was if you send it toXXX@XXXXXX.XXX, they will send it on to me, and if you send it toXXX@XXXXXX.XXX, customer support will forward it to me.

It looks like experts @ pearl.com is a more direct route. At least it skips customer service .

Glad you were around for the rotary phone....my kids grew up with one (because mine still worked) and my favorite part was that I could "unplug" the ringer during family dinners.

Want to make a 15 yr old girl crazy? Unplug her from her fifth appendage....the phone...in any of its forms.....

Not only did she have to eat her own dinner (and more than 2 HUGE bites were required) she had to wait for her BROTHERS to be done. I always knew the lay of the land without asking. If they ate 1 green bean at a time.....it was a rough day........lol

I think this whole process has been a "1 green bean at a time" kind of thing.
Customer: replied 1 year ago.

Anne,


 


Sorry to hear about all your family issues.


 


I have sent XXXXX@XXXXXX.XXX the attachments. Please let me know when you get them.


 


Thanks,


 


Steve

Expert:  Anne replied 1 year ago.
I will let you know as soon as I get them.......I don't know why they don't show me the email you sent it to. I'm assuming it was experts @ pearl.com.

I will send them an email immediately.

Sorry for the story..........just trying to take the sting out of the frustration of my not receiving your forms.......
Customer: replied 1 year ago.
XXX@XXXXXX.XXX was original email they gave me....


Guess what.... The same friend referred me three people that had similar circumstances, so we have to get good.
Expert:  Anne replied 1 year ago.

They automatically "x" out the email to me..........even though its OUR email...........part of their program.

I contacted the expert moderators.............they have nothing yet.

I'm trying to contact a friend who knows alot more about computers (she sets up web pages)

My only other idea is to actually fill out the form 1045 together...........talking it all out.......generally, once you do 1 or 2, you get the idea.

You have the figures to plug in from your worksheets...........I have brushed up on my NOL knowledge.............it would be a pain, in the sense that we would be emailing back and forth,...........but, you have the added benefit of talking it all out............together.
That's generally how we would have done it in my office.......at least 2 of us would first talk about whether or not there really was an NOL (you really have one.....sometimes computers try to give one to people with only investment losses....NOT an NOL)

Other than waiting another day to see if your email will got through (although I would have thought it would be immediate)...........or waiting for my friend to call back........

I'm out of ideas...............I'm willing to work this through.........whatever it takes........

You have any ideas?

Customer: replied 1 year ago.
Anne, I am on the phone with customer service right now....stay tuned.
Customer: replied 1 year ago.
Anne, I have left the office already, but they told me to email it while I am on the phone with them. So, I will do that tomorrow. Thanks!
Expert:  Anne replied 1 year ago.
Thank heaven!..........I'll let you know.....
Customer: replied 1 year ago.
Anne, I am not feeling well today. I will send tomorrow.
Expert:  Anne replied 1 year ago.
That's fine.,....thanks for the update..........and I hope you feel better tomorrow........

Thanks for keeping me in the loop too.
Customer: replied 1 year ago.

Hi Anne:

Well, I sent it four times to them while I was on the phone with them. Let me know if you received it.


 


Thanks.

Expert:  Anne replied 1 year ago.
Hi Steve

Sorry I couldn't get back to you before, but at least in my neck of the woods, the JA website was down.

I have talked to a couple of experts here who say that if you upload the forms to "Media fire" then you can send me the link. They also said that it was very easy for them to not only see the forms you send.........but that I can send you back forms via "Media Fire".

It sounds like this is going to be the easiest (and obviously the quickest) way to get the information to me.
Expert:  Anne replied 1 year ago.
Ok....I was able to get more about how the media fire website works.

You go to register at www.mediafire.com (it takes two minutes) and upload the documents. At that point, you will then provide me with the link to view the documents.

This by passes all of the emails, etc that you have sent the docs to so many times (and I still don't have them), and I got this website from another expert/s who tell me it works like a charm.

When I still didn't have anything from you, I put out a general call for help to other experts, and this is what many of them use, and highly recommend .

Again, I can't tell you how sorry I am that you have experienced so much frustration trying to get the forms to me...................

By using the media fire program, you will by pass the need to go through the moderators and the email.

Steve, I finally see light at the end of the tunnel.........and should this type of situation come up again, I will refer the customer to media fire first.

Anne
Customer: replied 1 year ago.

http://www.mediafire.com/#xalry2lm85my4

 

Anne,

 

Ok, give this a try. You might need my email address, XXXXX@XXXXXX.XXX and the password XXXXX XXXXX You also might just want to try the same email address that I am using for JustAnswer. I just changed it.

 

I also got an email from support and they told me to email them the documents, which I did--hopefully you got it both ways.

 

Thanks,

 

Steve

Expert:  Anne replied 1 year ago.
I finally have your forms!!!! I see you have the 1045's filled out....................I will check them over.............and let you know what I think............

(doing happy dance because I finally got your forms)
Customer: replied 1 year ago.
Great, Anne! I have no clue how to do the 1045...FYI.
Expert:  Anne replied 1 year ago.
Hi Steve

You're first going to have to correct your 4797 form.

The only thing that should go in Part I is the land, because land is never depreciable. Hopefully, the tax pro that originally started the depreciation, pulled out the land value so that you can figure the %. If not, you can jump straight to the 2nd page, 1250 property, although its not as accurate.

You will need to fill in the sales price, her cost, her depreciation, less her costs of sale.

I have given you a rough draft here..........but I REALLY need to know if you can see it.....alot of our conversations from here on depend on us BOTH being able to see the forms.

www.mediafire.com

Please let me know if you can see the form 4797 (I accidentally put 2 in, but they are exactly the same form........you only need to look at one)
Customer: replied 1 year ago.
Anne, I will not get to this till tomorrow. Depreciation even if there is a loss? She paid $371k roughly And sold it for $130k.I don't think depreciation was calculated correctly- 340k does not sound right.Do you want the entire returns for 08, 09, 10 barring all her info?I do not see yours.
Customer: replied 1 year ago.
Anne, not clear of why you are skipping part I, because it was held more than a year and it was used in business. Also, you mentioned before no depreciation recapture because of a loss.

Am I missing something?

Thanks.
Customer: replied 1 year ago.
Anne, remember she had the rental property for several years and thus the whopping loss should be in its entirety, with NOL two years and then carryforward. I did not see your 4797. I downloaded the app on my IPhone. Also, do we fix depreciation for 2008 and 2009, despite it being past the statute of limitation? I see $340,000 was used all these years- not sure how that number came up. Please advise.

We will figure this out- just always have seen losses on rental on Part I- who knows if that is right. Plus, remember it was sold at a loss, so depreciation recapture may or may not apply.
Expert:  Anne replied 1 year ago.
My apologies Steve. I see that IRS has revamped the form. For as long as I can remember, Section 1231 property (generally land) was recorded on page 1, part , and the rental home itself was reported on page 2 since it is 1250 property.

I see now that they only want you to use page 2 if you sold the property at a gain.

Long term memory still kicks in quicker than short term memory, which is why its better to have more than one pair of eyes. You were right on the Form 4797. However, I don't see an entry for depreciation, and since the law reads that you must adjust the basis for depreciation allowed, or allowable, you will need to make that depreciation adjustment for all of the years the home was rented.

Once you get the depreciation figure, your numbers will of course change. However, the THEORY will remain the same, so I will work on this over the weekend.........and then for the life of me I have no idea yet how I'm going to send you any completed forms.

I too was unable to access any of your forms through media fire. The forms I did receive were forwarded to my email via theXXX@XXXXXX.XXX.

I will see if there's a way for us to use the media fire (your email was, of course, "x"d out) still, there should be a way to use the mediafire option.........but first I want to sit down and think about the NOL, do some worksheets by hand, and make sure we're all on the same page.



I will continue to work on this during the weekend
Customer: replied 1 year ago.
Anne,I am glad we are doing this together. My quandary now is, do I fix depreciation and calculate it correctly or go with the previous preparer's amount of $340k. We are amending 2008 and 2009 only for the NOL.I will give you both amounts.My email address is the one I used to sign up for Justanswer. It is my "name" @ Mac.com. That is mediafire
Expert:  Anne replied 1 year ago.
I'm glad we're doing this together too.........I have "called in the troops" (people I work with and trust)........we will hash it out first.......then I will tell you what we decided .......and why.....and you & I can hash it out again..........(I want to be sure I don't miss anything, which is why I asked for the troops.)

Give me a few days though, ok?
Expert:  Anne replied 1 year ago.

Hi Steve

I'm starting to sink my teeth into this project now...........First, on Form 4797, HER sales price is the $ amount "forgiven".........($232,309) not the $`130,000 the bank sold it for......by the time the bank sold it, she no longer owned it, so she couldn't have sold it for any price. Please see below:

 

If I had a foreclosure on a rental property, how do I report this?


The sales price will be the amount of the entire outstanding debt in box 2. Figure your gain or loss by subtracting your adjusted basis in the property from the sales price.

 

 

Once you correct her selling price, you will still have an NOL, but it won't be NEARLY as much as you had before:

 

Although I am going to use the figure you have for the cost basis, I going to assume that you added the $ of the improvements she made to the home during the time she owned it, and that your subtracted the depreciation taken over the years.

 

So here's what your 4797 should look like:

 

Gross sales price ($232,309) less her adjusted cost basis ($351,883) will give you a loss of $119,574)

 

This will, of course, change all of your figures on your worksheets.........(I'm hoping that they will update automatically once you change the 4797)

 

In the meantime, I've got a call out to the mods to find out why we can't see uploads from each other on media file

Customer: replied 1 year ago.

Anne, I disagree with you. She short sale'd the rental hence why it led to the bank agreeing and cancelled the debt. She did not get a 1099-s, but I do have the final HUD reflecting the short sale. I also talked to the realtor and confirmed the transaction.

 

What started this whole thing is that the previous tax preparer completely claimed insolvency on her 1099-C that she received in 2010; however, the transaction of the short sale never was reported.

 

When I got involved, a short sale was confirmed by the title company as well as realtor, but she never got a 1099-S. Furthermore, she isn't completely insolvent.

 

I'm not sure what you are seeing in your state, but here, I'm seeing foreclosures/short sales happen (3 years ago) and now clients are receiving the 1099-C's three years later...it's like after the lender decided to wash their hands from it, they are stinging the client with the 1099-C.

 

So, in a nutshell, three separate transactions: 1) Proper disposition of the asset, 2) address correctly the cancellation of debt and not be completely insolvent, and 3) address NOL.

 

Thanks.

Expert:  Anne replied 1 year ago.
Hi Steve

I wrote an answer to you last night, but I don't see it here...........so I'm writing it again.

First, I'm glad that you feel free to disagree with me...........partly because I'm not always right, and mostly because I think we learn so much more by discussing the tax laws.

So, with that in mind, let me put it to you this way, and see if it makes any difference in your thinking.

Your friend received $130,000 off of what she owed the bank, Plus she received the benefit of the $ amount of the canceled debt.

Short selling the home did not completely cover her debt, but it did reduce it by the $130,000..

Had she not been able to short sell the property, she would have still been on the hook for the whole $ amount.

Let me know if stating it this way helps you.
Customer: replied 1 year ago.
Anne, I get what you are trying to get at. However, the fact remains and it shows the property sold at $130k.

Your reasoning does have merit- it may explain why there was no 1099 S for the transaction.

I am confused more than ever because the IRS told me to use the 130k price several times and I was going to include documentation of those facts. I have just never seen the 1099c used as sales price.

Feel free to disagree too- want to learn! I got three more of these after this one.
Expert:  Anne replied 1 year ago.
I have to leave the forum for a while.............but you know I'll be back........

I just have one question for you................let's say that your friend was not able to sell the property at all..............

how would you have handled the transaction with the 1099C and the 4797?
Customer: replied 1 year ago.

No problem. It would have been treated as a 1099-a, which is treated like a sale. Form 4797 would have been reported, where FMV would have been the sales price and her original basis would have been the cost basis. From my experience, when abandoned, there is no 1099 C usually.The 1099C would not be applicable then; although, some practitioners and I disagree and some actually prepare the Form 982 and cancellation to, because they don't believe the client did not get the 1099c.Anne, what is the purpose of a short sale then? The seller still has to sign and acknowledge they agree to attempt to sell it at, 130k in this case. Two separate transactions as mentioned.Thanks for your help !

 

Anne, I saw this on another answer on the forum. It goes more into the 1099C as a separate transaction, which we know and will do.

 

What is your adjusted cost basis in the rental property? Adjusted cost basis is the original cost add improvements less depreciation allowed or allowable.

 

When you short sale, you will sell it at a below cost price(in most cases). Hence, you will have loss on sale of the property.

 

I will upload you the Final HUD when I get to the office, but everyone is interpreting this cost basis differently. I can see validity in what you are saying and there are some that are agreeing with you, but then there are some that are saying what I'm saying---very confusing!

Customer: replied 1 year ago.

Anne,


 


I just called the IRS re our "discussion" about the sales price. As I mentioned, the settlement statement shows that the sales price was $130,000 and my friend's realtor was in negotiation with the bank for a buyer to buy it at $130k, which was the value of the property at the time.


 


Thus, our sales price of $130k is the correct amount to report on the Form 4797. I have to recapture depreciation and add sales commission into it, but the sales price on Form 4797 is still $130k. It explains why the cancellation of debt of 1099-C was $232,309.09, because without the sale, the lender wouldn't have cancelled the debt.


 


Hope that makes sense. The IRS said "Who told you that the sales price was the 1099-C amount? That is wrong." Various websites have different answers...I cannot blame you. This is tough stuff!


 


So, I will adjust the numbers to include depreciation and sales price and re-send you (probably via email) the NOL stuff. But, for now, you should use depreciation in the amount of $36,726, sales price is $130,000, sales commission $6,500, and sales price of $351,883. So, the adjusted basis should be roughly $308,657. You still have not answered me if we should amend the depreciation to accurately report it, since $340,000 (cost basis) does not seem right. We cannot amend 2008 and 2009 to change that for a refund, but I would think, I would just change it to keep them happy. I usually use a 80-20% rule, so that means $281,506.40 is the building portion, but please advise.


 


Thanks!

Expert:  Anne replied 1 year ago.
Thank you for those figures.............believe it or not, I was going to ask you if a HUD statement had been issued........(glad you gave me the numbers, since we've been unable to see what the other uploads into mediafire)

My first instinct for the depreciation would be no..........but I will see if I can find anything in writing for you.l
Customer: replied 1 year ago.

Anne,


 


My email address (the one used to sign up for JustAnswer) is the email address on Mediafire and the password XXXXX XXXXX Can you see if you can get in?

Thanks for your help, as always! I'm glad we are making some headway...this is driving me nuts of the inconsitent stories that the IRS is telling me. Like I said, I have four more after this one lol.


 


 

Expert:  Anne replied 1 year ago.
They have always "x"d out your email address.............so I'm not sure how you will ever get that by the mods........

However, on your depreciation........the answer is no.........do not correct it....the following is from Pub 946 (depreciation)

How Do You Correct Depreciation Deductions?

If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. See Filing an Amended Return , next. If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. See Changing Your Accounting Method , later.

 

You're not going to change your accounting method since the house has aready changed owners, and you can't file an amended return, because its past the time limit for an open year: this is also from pub 946

 

If an amended return is allowed, you must file it by the later of the following.

  • 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. A return filed before an unextended due date is considered filed on that due date.

  • 2 years from the time you paid your tax for that year.

Expert:  Anne replied 1 year ago.

Ok........we're on the same page again............if a HUD statement was filed (and obviously it was) then you're right, you do have to use that for the 4797.

Let me work for a while with the figures you have given me, and I'll check back and let you know what I think, ok?

 

I used to use the 80/20 split too, but land in MI has risen a little............that may not be true in CA though, so I'll use your %

Expert:  Anne replied 1 year ago.
Hi Steve

I heard from the moderator who understands how media fire works.....she will help me (us) tomorrow..........I know this is asking alot, but could you rough out a 2010 1040 with the NOL and since hopefully we will have access to media fire, I will then be able to really put together the 1045.

I assume the selling price on the HUD statement is $130,000?

Thanks

Anne
Customer: replied 1 year ago.

Hi Anne,

 

When you say rough out the 2010 1040, what do you mean? I can always scan it to you and send it to you like the last time.

 

Please clarify and I'd be happy to do.

 

Yes, the HUD statement says the selling price is $130,000.

 

Thanks,

 

Steve

 

http://www.mediafire.com/#xalry2lm85my4

 

PS:XXXXXX

Expert:  Anne replied 1 year ago.
Ok........I can't see the HUD statement ..........yet,..... but I sent the link to Lori (my favorite mod) and told her she could contact you, since you are very motivated to use this web site to make it easier for both of us. I have a date with a surgeon to remove about a 1" spot on my face that is non lethal cancer, but needs to come out (I hope they do it today....I really don't want to go back)

That's why I suggested Lori contact you......I will check in later today as soon as I feel a little better............shouldn't take long

Anne
Customer: replied 1 year ago.

Hi Anne,


 


Ok, happy surgery! I didn't include the HUD statement in the Mediafire, but I will now. I did include the first two pages of the 1040.


 


Thanks!


 


---Steve

Expert:  Anne replied 1 year ago.
Thanks Steve

I haven't reviewed everything yet.......give me a couple of days.....like you, I want this done right

I'll get back with you soon.

Anne
Customer: replied 1 year ago.

Anne, no problem! Yes, I want it done right--it irritates me that it was not done right the first time, but this is complicated stuff. Hope you got Lori's email.


 


Did you have the surgery?


 


---Steve

Expert:  Anne replied 1 year ago.
Sort of........it was deeper than he thought, so he did the excising , but he somehow left the top alone.........the stitches will dissolve, and I need to now go to a dermatologist to have the top part "shaved" off so there won't be a big scar............

I think it sounds worse than it is or will be.........and I'm trying not to give TMI........ but since I don't have insurance, this should be cheaper than going through a plastic surgeon. In a way it was ingenious of him.

Little sore tonight though........but this too shall pass.

I assume you have a 982 for this lady.........I don't think I'll need it, but you will have to file it with the 1040. I only ask because it wasn't included, and there was no mention of it in the 1040 notes.

When I have 1099C's for a client and they're not 100% taxable, I normally make a note on line 21 (ex: 1099C $232309......see 982, or note 1, or whatever) then I put the taxable amount on the far right in the $ column.

That way, you've acknowledged the 1099C's to the IRS, and you've explained why they aren't;t 100% taxable........I've had good luck with not getting letters stating I didn't report the 1099C's using this method.......so I thought I'd pass it on.
Customer: replied 1 year ago.
Anne,

Yes, thanks! Lacerte (Tax program) often includes it in statement 1 and statement 2 (in this case), so if you want to see it, I can include it.

What else do you need? It seems like we're having good success by having it forwarded to you. I just wish we could use Mediafire.com. We still can.
Expert:  Anne replied 1 year ago.
I don't know why media fire won't work for us. I created an account, and i know you created an account. Even Lori (the mod), when she tried it, told me that it just went back to HER files.

I am starting to really dig into this today. Since this turned out to be a little more complicated than even I though, one of the first things I'm going to do is find the 1099C/Foreclosures online course through Block. I don't want to say that anyone has been misguided yet..............not until I can get to the bottom of all of this....................

I hope you don't mind waiting a few more days. Once I get the theory completely in my head again..............I do have a friend who uses your software, so I'll probably go to her office and we can talk it over together and enter it again, and see if our #'s match.

I know this is taking longer than expected (getting the forms was half of it) but I also know that this will be your "blueprint" for the other clients, and I want to make sure that blueprint is correct.

Talk to you soon

Anne
Customer: replied 1 year ago.
Anne,

That's no problem. I want this to be done perfectly and yes it is not as easy as we both thought, but then again, tax returns never are!

Do you need 2009 and 2008 tax return, as well?

What program do you use? Lacerte is great, but it's quite costly, too, but well worth it, in most cases. It's the first program that I ever came across, besides Turbo Tax, but as far as tax professionals, it was the first one that my first boss that did taxes had and the next firm had it too--so I just kept it.

Thanks and have a great weekend!

PS: How are you recovering?
Expert:  Anne replied 1 year ago.
Yes, 2008 and 2009 would help alot. I will notify Lori..........she was able to get the other forms to me via email...........so I'll have her contact you again, ok?

I have no tax program here at home...........since I work for Block, I use their's during tax season..........and I'm stubborn enough since I started in the days we hand wrote....to NOT have any tax program here at home......however, there's another reason other than stubbornness........I think if you do a form by hand, you understand the theory and how it flows together MUCH better.

You're paying me a fair amount of money......I feel I owe it to you (just like I do to my tax clients) to TRULY understand your tax situation so that I can advise you and give you the best tax information re: short sales

I will tell you right now that not everything I told you, and not everything the IRS told you was correct ( my error was to tell you to put the 1099C on line 21-that's only applicable if its personal property. this is business property........the IRS was correct when they said to put it on Schedule E.............However this should be handled on the 4797....) I am in the process of gathering all of the information...........once I have it worked out in my head, (and double checked by one of my co workers), I'll get back with you...........

Oh, and the pain from yesterday is almost gone........and thanks for asking. Its been a rough few years health wise...........but I'm still here........which is good, because when I frustrate my kids, they LOVE to shake their fingers at me and tell me "Listen old lady....just remember I have a say in to WHICH nursing home you go to!!! lol)

By the way...........I now understand why your wife chose the name for your business that she did...........VERY clever
Customer: replied 1 year ago.
Anne,

Ah, the truth comes out that you work for "Block." Nothing against you for that.

I appreciate your honesty. Yes, please have Lori contact me and I will forward her the original as well as amended tax returns, minus the names.

In regards XXXXX XXXXX comment regarding the IRS and reporting it on Schedule E, I think that is room for interpretation. She stopped renting it in 2009, a year before the short sale, so why would we have to report the 1099-C amount on Schedule E? I have seen it both ways, and some just flat out say "If one stopped renting it, it should go as ordinary income on line 21."

Anne, if it goes on the Form 4797, and we add the cancellation to the property sales price ($130k), there might be a gain and that does not seem right at all.

I strongly feel that the short sale transaction should generate a loss and some of that loss would be absorbed up from the cancellation of debt- insolvency amount, since she wasn't entirely insolvent as the previous preparer had done. From there, any NOL would be carried back to 2008 and 2009 and we go from there. There was no 1099-S generated, and the title company acknowledged that...the very fact they said they had to recreate one, tells me they didn't have it.

I don't know how many foreclosures and/or short sales you have seen in your neck of the woods, but in California it happened a lot. I have NOT seen 1099-S's, 1099-C's, when there should've been, and I have also seen a lot of 1099-A's be completely ignored by previous tax practioners. You would think the IRS would contact the taxpayer via CP 2000 or audit.

In my circle of tax practitioners, we all had a discussion of how to handle the 1099-C, if one wasn't given to the taxpayer. The overwhelming response was to prepare the Form 982 and the cancellation and have the taxpayer prepare the insolvency worksheet, because the belief was that the taxpayer probably would get a 1099-C or got one, and it just got lost in the mail. It was true, in several cases, because when they would go through escrow, a lot of times escrow wouldn't care to ask for a good address to mail--once they are done, they are done. Now, it seems like we are having to back peddle, because 1099-C's were not issued then but now.

The real stinger is that my friend received the 1099-C. The others I have did not receive a 1099-C the same year, so it is treated a lot differently. It seems as if more and more a short sale would generate a 1099-C, because you have a new buyer and the bank would have to "eat" the difference, so they would just send a 1099C to the taxpayer. I've seen some get it, some don't. Luck of the draw.


Thanks for all your help and thanks for the compliment about the name.

Expert:  Anne replied 1 year ago.
I know you probably don't believe this right now, but I've actually done quite a few returns with a 1099C........however, all of my "cheat sheets" are at the office.........(those cheat sheets help alot and make me sound really smart...........sure wish I could remember every line of them.......lol)

I am conferring with an associate tomorrow, who just happened to take a 3 hour course on NOL's today...........she just didn't think she'd be able to use it this quickly.......lol

For the most part, we are on the same page.........the sale will generate a loss, and the 982 will help with the 1099C's.

The cancellation of debt would have been on Sch E IF she had retained the property, (and I let myself go there for a few minutes....but only for a FEW minutes)but in your case, she didn't (but that's where the IRS got it, and I wanted to explain that) Since she no longer owns the property, the COD goes on line 21...........I just wanted to let you know WHY the IRS said it should go on Sch E........

.

I'm meeting my co worker at 1pm (my time) tomorrow, so hopefully I will have 2008 & 2009 in hand.............and did you also do a 982 for her? If so, can you send that too? We will be putting theory to paper tomorrow (anyone who's been around 20+ years works just like I do.......figure out the theory, and put it to paper......THEN you can run it through the computer)Do you by any chance know how much she payed on the principle?

Lori sent these instructions for Media Fire.........and I'm passing them on to you.

Ok I made you a video of how it works where you're sharing a file from media fire:

http://screencast.com/t/nhpkNf3W


You just go to My Files, then you check the checkbox for the file you want to select. A new menu pops up at the top, and you can choose "share" then the new box pops up, you choose "copy link" and then you just go to the question page, right click and choose "paste" and the link appears on the question page.

I think what he is doing is just going to My Files and then copying the link in the browser window at the top which would not take you to any particular file.

You're welcome for the compliment............it certainly made sense........and it shows your wife has a sense of humor..........something I think by now you have noticed I admire.......

PS............if all goes well, and Congress doesn't dismantle the IRS, I might actually have a better job offer than Block........after 26 years there...........yay!!!! Keep your fingers cross for me..........and your legs, your eyes, your toes, etc etc etc

Anne
Customer: replied 1 year ago.
Anne,

I did not get this till much later, unfortunately.

MediaFile---I did all that. I sent you the link when we originally tried it. You said it did not work.

Let me know.
Expert:  Anne replied 1 year ago.

Steve

 

I don't know if I got the returns through media fire.........I'm at the office, and while this website is not blocked, that one is.

 

However, I do have some questions for you.

 

1-Why does Form 4797 show $221883 loss, but 1040 line14 only shows $185307?

 

2-What is the breakdown of the Schedule A deductions.

 

3-Where does the loss on Schedule D come from? Mutual funds, etc?

 

Since I'm at the office, if you could just list what the Schedule A break down was by number..........not try to send me the form, and just answer the other questions, that would be great!

 

Thanks

Also, where did you get the $152130 in non business income. According to the 1040 you sent me for 2010, she had $2 in interest, and $1184 in non taxable interest income. I'm a little confused by your numbers, and at this point, instead of trying to get the forms....which we both know has been a nightmare, can we just talk it out..........Meaning can you give me the line #'s and the $ amounts on the Schedule A, and do the same thing with Schedule D (and also include what the loss was from, whether it was personal or business), and the same with the non business income?

Anne

 

Expert:  Anne replied 1 year ago.

I just edited my answer, asking for some more information.....so I'm hoping you see the edited portion.

 

Anne

Customer: replied 1 year ago.
Anne,

I won't get to this till later.

But,

1- use lower number. It was including depreciation.

3- Yes

I will send you rest- send me reminder to email myself all of her stuff so I can see it on my home computer.

Thanks!
Expert:  Anne replied 1 year ago.

Steve

 

I hope you meant that YOU would send yourself an email reminder. This is the only way I can contact you.

 

Anne

Customer: replied 1 year ago.
Anne,

Be specific what you need from 2008 and 2009.
Expert:  Anne replied 1 year ago.
Steve

I put the theory to the paper.......went in to the office, talked out the theory with another preparer who's been there 35 years, (who originally wanted the 2008 & 2009 1040 forms, until we talked it out and she decided, along with me, that those forms will make no difference.) Then we both put it through the computer, and got the same answer from both the computer and my paper forms. So I'm feeling pretty confident........

Since we have such problems with uploading the forms (and I have no scanner) let me talk you through the changes I made and why....

First, on your Federal 1040 Statement 1, Line 21. Since 2010 IS the year of the NOL, you can't have a NOL Loss carryover from ANY other year UNLESS there is more than 1 year with an NOL.

Since we were dealing only with 2010, your line 21 entry should be $77397. (You must also attach form 982 showing how you arrived at that figure)

Form 4797.....even though you couldn't amend 2009 or 2008 to correct the depreciation, you followed the rule of "allowed or allowable" and adjusted her basis by the $ amount of the depreciation she SHOULD have claimed, which was the correct way to do that. I agreed with your 4797 form.

Now for the 1045

Really all you need is the 1045A (I am shortening up the instructions per line for the sake of space)

line 1 states to enter line 41 from the 1040 ($36999)
line 2 & 4 non bus cap losses as a positive # $ 2043

line 6 non bus deductions $ 33206

* I calculated line 6 as being the Schedule A less thhe State tax paid

line 8 investment income $ 2
line 9 $ 33204
line 15,16,18,19 22 loss from Sch D (pos fig) $ 2043
Line 25 NOL $(1752)


This should be your final 1045A form (and you may file just this form)

The one thing about NOL's not being fair is that they are reduced every year by the personal exemption amount. This means that carrying this NOL amount back will give her no tax benefit since her exemption exceeds her carryback.

The one good thing I found (which you probably already know) is that since she received no benefit from the Sch D $2043 loss, she does get to carry this over to 2011, and that is still an open year. So she may gain some benefit by your amending her 2011 return and putting in the carryover.

I know this was very different than what you were expecting............but when I finallly sat down this after noon and REALLY worked on it, the peices just began to fall into place again.

I hope this gives you the blue print you were looking for.......

Anne
Expert:  Anne replied 1 year ago.
Hi Steve

I'm sure you will have alot of questions...........I just wanted you to know I will be gone from the forum for most of the day tomorrow.....

Here's what I did earlier today..........I decided to take the 1040, the HUD statement, and some of the information you had provided in communications with me, and figure out the NOL from just that.......sort of like a "second look" that Block is so big on advertising
So.......that's how I finally approached this whole thing........and THAT'S when it fell into place for me..........I started at 8 AM and had it all done before I met my co worker this afternoon......

I'm still wondering where you got the $15,000+ as non business income.......working strictly from the 1040,. the only non business income was the $2 in interest income.

I will check back with you when I return tomorrow night.....I knew this would take some time for you to wrap your head around.............and I think you know me well enough by now to know that you can ask anything and we'll talk it out.
Customer: replied 1 year ago.
Hi Anne,

I won't get to this till Monday, but initial questions:

Where do you see the $15000+ as non business income? Can you tell me which attachment that you see that?

You mentioned the 1045S.....can we still use that, considering that it should've been filed a year after the return? I think the amended return is the only way one we can use.

How did you get line 21? (Other Income) I have the insolvency amount and I subtracted that from the total cancellation of debt income.

So, there's no net loss carryback?

Thanks, XXXXX XXXXX everything, so I'm pretty sure I'll answer my own questions, but maybe you'll respond before that too.

Thanks again!
Expert:  Anne replied 1 year ago.
Hi Steve

I saw the $152000 on page 2 of your 1045 online lines 7 &8.....which should be "nonbusiness income other than capital gains". I don't know how you arrived at that figure, since the only non business income on the 1040 was the $2 in interest.

You must attach the 1045A to your 1040X.

Your line 21- In your very first posting you said " She is not entirely insolvent ($77,397.38)" and that was the figure that you started with, but then on Form 1040 Statement 1, you subtracted $10,175 as a NOL Carryover. If 2010 is the only NOL we are speaking of, then you can't carry anything over in the year of the NOL.

Now, if there's another NOL year that you hadn't mentioned, you could carryover an NOL from THAT year, but never in the year in which the NOL arises.

Line 21 , I admit I went from the 1040 only..........and your $67222 could be correct.......but you would need to word it differently, such as "difference between insolvency and COD". I did not have the 982 so I told you I was assuming that was correct, and you sounded pretty confident of that figure.

Finally, no, there's no NOL carryback that would benefit her. The carryback number would be $1752, and her exemption would take care of that $ amount.

Let me know if I missed anything..............My 1040 (with the changes described above...namely line 21) matches yours up to line 21.. With my line 21 being $77,397, her line 22. 37 &38 are all ($2839)

I used your $34160 figure for Sch A, and line 41 (starting point for NOL Schedule A) is ($36,999)
Customer: replied 1 year ago.
Hi Anne,

Before finalizing, can I send you the complete amendment and 1045s, ensuring we are on the same page?

I will pay the $200 additional when I get home.

Thanks,

Steve
Expert:  Anne replied 1 year ago.
Of course you can.............if you feel like going through having the mods forward it .....

That's why I decided to just give you the line #'s and $ amounts.............you can try Media Fire again, and if not, give me the line #'s and $ amounts, and I'll plug them into a form I can print off the IRS site.

Either way, I'm more than happy to check everything over.........


Anne
Customer: replied 1 year ago.
Thanks, Anne!

So, you mean the 1045, Schedule A? But, not the 1045, right?

Thanks!
Expert:  Anne replied 1 year ago.
right!
Customer: replied 1 year ago.
Anne,

I found out the $152k amount. It is the difference between the cancellation of debt of $68,189.35 and $164,119.74 minus the insolvent amount of $154,911.71. I was told and have done this many times, where I show the entire cancellation and then subtract the insolvent amount. Is there another way to show that? That's what is causing the huge NOL of nonbusiness income.

---Steve
Customer: replied 1 year ago.
Anne,I found out the $152k amount. It is the difference between the cancellation of debt of $68,189.35 and $164,119.74 minus the insolvent amount of $154,911.71. I was told and have done this many times, where I show the entire cancellation and then subtract the insolvent amount. Is there another way to show that? That's what is causing the huge NOL of nonbusiness income, because she is not completely insolvent and there is still income after the cancellation.I'm now getting $80,598 as nonbusiness income, which is the difference between the cancellation of debt - insolvency + refund from prior year + interest. ($77,397 + $3,199 + $2). Lacerte generates one normal ($80,598) and one for AMT...the AMT one is showing as $77,787.NOL is $34,956.Thanks!Our numbers on the 1045 are a little different now, because of this, and the NOL is larger, so do you still think we can't carry it back?---Steve
Expert:  Anne replied 1 year ago.
Let me check something out before I lead you down the yellow brick rd, but I do know for sure that you can't use the $154,917 as non business income.
Customer: replied 1 year ago.
We still need to show the cancellation of debt income on line 21 as we discussed, but how do we take out the amount that she is insolvent?Dozens and dozens of tax practitioners have agreed that you report it all and then subtract the amount of insolvency. Maybe, it goes back to having put it on Schedule E...We may just have to include a letter of explanation, explaining that line....that's what I am thinking, thus we are not showing the entire amount of cancellation and showing the insolvent amount. It's the insolvent amount that is throwing it off. Thoughts? I can just put $77,397 on line 21 and explain in the letter of how it was derived--thus we are acknowledging the cancellation in some fashion.Let me know. Thanks!
Customer: replied 1 year ago.
Anne,

On Lacerte, there is a screen for net operating loss. I was able to over-ride, it so to speak, where I can exclude the nonbusiness income on the NOL. As a result, it shows $2 for nonbusiness income. Line 21 remains $77,397 and under a supporting document, it does show the entire cancellation of debt income minus insolvency.

So, now I have the same NOL as you....

Let me know your thoughts.

By the way, in general, when is NOL being able to be carry-backed and when is it not? I know you told me, but need to know for future ones whether it can be carrybacked.
Expert:  Anne replied 1 year ago.
Hi Steve

Yes......these are exactly the figures that I have.....($2 non business income, $77,397 on line 21) These figures are the ones I calculated by hand and checked by putting them through our (Block's) program.

I know it stinks that she's gone through all of this and has no carryback/carryforward of the NOL, however, you were able to reduce her taxable income $ for$ on the 982 and you saved her from paying tax on more than $150,000 . That's a "win" in my book

As for the NOL carryback rule, here it is:

The NOL MUST be carried back UNLESS there is a note in a TIMELY FILED RETURN (including extensions) stating that the tax payer waives the carryback option. Then you may carry it all forward.

So now, you're the "go to guy" for 1099C's and NOL's ..........

Are you ready to take on the next ones?

I don't know about you........but this old gal's brain needs a good rest for tonight.

Should you need me again.......you know where I am.............in MI..........dodging tornadoes for the next few days.............so far...........so good
Customer: replied 1 year ago.
Anne,Thanks! Why couldn't we do an NOL carryback on this one? She did file 2010 on time.In other words, how do you make determination you can or cannot carryback?I have another one I am starting in similar situation.Thanks!
Expert:  Anne replied 1 year ago.
Technically she can.............however, one of the rules for NOL's state ,that they are decreased every year by your personal exemption amount, and in this case, her exemption amount is greater than the NOL carryback figure of $1752, so she will get no benefit from the NOL carryback.

Its starting to storm again here............and since I live in the country, should my electricity go off, I'm not exactly at the top of Consumers Energy priority list..........but I will check back tomorrow some time. (I hope........they tell us we will have strong to severe storms for the next few days..........)

This is why I LOVE living in the mid west.........I love the big thunder storms......and I love the big blizzards..........assuming of course, that everyone has a place to go to get out of the weather.....(believing that everyone has a place to go is one of the last "magical thinking" vices I allow myself) I've already drugged my dog, Maggie, since she doesn't share my love of storms.......and our other dog is deaf and could care less if it storms or not...........lol

I will talk to you soon..........

Anne
Expert:  Anne replied 1 year ago.
Hi Steve

I just wanted to check in and see if we were still on the same page........I know you have a few other people in the same situation..............if you need to bounce ideas off of me.....I'll be around.....

Anne
Customer: replied 1 year ago.
Hi Anne!

Yes, I think we are....still trying to determine when you can do a carryback and when you can't.

Hope you are ok, considering the storms...
Expert:  Anne replied 1 year ago.
Well, we lived through last night's storms..........lol

I'm sorry, I'm a sucker for Mother Nature.. Thunderstorms and blizzards have a beauty all their own..........

I think the question you should be asking is not WHEN you can do a carryback, but when you MUST do a carryback.

IF a return is filed timely (including extensions), the taxpayer has the CHOICE of carrying back the NOL or he/she can sign a waiver to forgo the carryback period.

To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3).

If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months of the due date of the return (excluding extensions). Attach a statement to your amended return, and write “Filed pursuant to section(NNN) NNN-NNNN2” at the top of the statement.

 

Once you choose to waive the carryback period, it generally is irrevocable. If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year.

 

Note: the time frame for the tax payer to make this choice is by the due date of the return, plus extensions.

 

Does this help?

 

Anne

Anne, Master Tax Preparer
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Customer: replied 1 year ago.
Well, don't feel alone, I find thunderstorms and rainstorms quite interesting too--even though we don't get many of them here.Yes, it does help. I DID NOT know that the NOL cannot be more than the exemption amount. What you helped with this one, is the nonbusiness income jumped out, and that shouldn't have been there. I still am curious about that.Anne, can you direct me to the publication that says about the NOL and how it cannot be more than the exemption amount? This will provide me usefulness for the next one I do. Thanks!
Expert:  Anne replied 1 year ago.
Thank you very much for the payment Steve. You have no idea how much my creditors are thankful to you also.........

If you look at page 3 of Pub 536, in the middle column, it speaks to "disallowed items" and gives you an example:

Certain Deductions are not allowed when calculating an NOL:


Nonbusiness net short-term capital loss $1000

Nonbusiness deductions


(standard deduction, $5950)minus

nonbusiness income (interest, $425)

$5525

.......


Deduction for personal exemption $3900

______


Total Adjustments to the loss $10,325

Another way to think of these is "add backs".........

After doing enough 1045A's, I just remember that the NOL must AT LEAST be more than the personal exemption.......

Since back when I was doing so many NOL's many of our clients were still itemizing deductions, and you had to split off the business from the non business deductions........(yes, I know this ages me) so I just remembered that the NOL had to at least be more than the personal exemption, and if it was, then I would look at the other "add backs"

I hope this helps.

Anne




Customer: replied 1 year ago.
You're welcome, Anne!

Yes, it does help, thank you! So, if the NOL is larger than the exemption amount, then you can carry it back two years? The new one I'm working on did not have a cancellation of debt issue-- it was just not calculated correctly in terms of the 1099-A.
Expert:  Anne replied 1 year ago.
You can try...remember the rest of the "add backs" are the standard deduction, and the non business income.

If they itemized, you'd have to add back everything but the business deductions (W2 withholdings, 2106, etc) which is what we did with your lady friend.

I'm assuming the 1099-A is not on her personal residence.

Have fun!
Customer: replied 1 year ago.
Anne,Back to my lady's friend case...In the cost basis, I just included the cost price of how much she originally paid for it. There were commissions of $6,500 that was paid out in terms of the short sale when it took place.This alters the NOL to $8252...based on what we discussed, it does change things about carryback!What are your thoughts?Thanks!Anne, I'm adding to the thread here---does the NOL cannot be more than the standard or itemized deduction? She itemized the year we are discussing. I'm sure you saw the HUD with the commissions---just wondering how we both came up with that number and forgot the commissions paid to short sale the house.
Customer: replied 1 year ago.

Anne, did you get my last reply?

Expert:  Anne replied 1 year ago.
Yes, and no

I say yes because I see it now.......and no, because if we have a question pending, such as yours.........the system will lock us out of answering any other questions until we take care of the follow up.........

In this case, for some reason, the system failed.....and I apologize for that........and I'm glad you know me well enough by now to know that I would have gotten back with you had I known you posted.

I did see the commission, but I also read this from one of your previous posts:

So, I will adjust the numbers to include depreciation and sales price and re-send you (probably via email) the NOL stuff. But, for now, you should use depreciation in the amount of $36,726, sales price is $130,000, sales commission $6,500, and sales price of $351,883. So, the adjusted basis should be roughly $308,657.

I JUST threw away my paper forms for this problem last night. However, you're correct in that if we didn't follow through and take the sales commission, then that would increase her NOL. but if we used the $308,657 figure as her basis, then the adjustment was already made.

I also did some additional research over the last couple of days, and I found that I did tell you to put the amount of the canceled debt on line 21. That was incorrect. It DOES go on Schedule E , because it was rental property. (It kills me when I'm wrong and the IRS is right.....lol) but that part nagged at me .....and no matter how much I tried to ignore the nagging, it wouldn't go away........so I did what I always do when something nags at me.........I looked it up.........and it wasn't really all that easy to find....(at least in the way I search for things)........but in the end I did find it, and the $77,000+ should go on Schedule E

My apologies for that mistake.

Customer: replied 1 year ago.

Anne,


 


Yes, I knew you would reply, just making sure, because I saw your other posts.


 


Ok, in regards XXXXX XXXXX E and reporting it on there. So, does that mean we report the entire income, take out the insolvent amount, and still put on Form 982 the amount we are excluding?


 


The NOL is larger than the exemption amount, according to my calculations, so does that mean we still can carry it back? I am getting different answers on the carryback...some IRS people tell me that if you timely filed the return (which in this case it is), you have to carry it back two years. Others are saying no. Then, some are saying if you did not file timely, you cannot carry it back, because you did not do it within the time frame specified. This is MOST important, and I'm gettng different answers, because I have others that I'm going to begin working on that have timely filed, their NOL is large, and I need to know what is what.


 


How much does my $400 extend me to other cases? :)


 


Thanks!

Expert:  Anne replied 1 year ago.
No You put the $77,000 on Schedule E , send the 982 and still cover it in notes like you were going to before.

let me see if I can find something in writing re: NOL carrybacks..........its not enough to just say because Anne said so........lol

I'm glad you posted again though......because I WOULDN'T have answered you again since somehow your posting slipped through the cracks.........here's how JA works...(for future reference)

If you post to me, I CAN NOT get by JA to post ANYTHING until I answer you. So if you see me posting other things, then I did not get your post and it fell through JA's system.

To the best of my knowledge, this is the first time a posting fell through the cracks....but they've having alot of problems with their system, so I don't promise anything.....except that if you post and I see it.......I'll answer........ok?

Let me see what I can find
Customer: replied 1 year ago.
Thanks Anne!Ok, let me know because the NOL is bigger than the exemption amount. I do not like the answers are inconsistent that the IRS is giving me.Are you enjoying the weekend? By the way, so you would put the entire 1099c amount on Schedule e, have another line for insolvent amount, which is how the $77k is derived? Nothing should be on line 21 then.On another client, he did not file on time for 2009 (not filed till 2012) hence the IRS gave me in writing that he could only carry it forward. Who knows. Complex tax law department still gives different answers.
Expert:  Anne replied 1 year ago.

Ok.....I hate all of these inconsistencies also. So I went on a quest to find a ruling that had some meat to it.

You may carry the NOL forward for the guy who didn't file his 2009 return since you have it in writing.........but DON'T use that as a blueprint.

Here is IRS's section/law re: NOL carryovers (which will mean the guy who gave you the ok to carry it forward for the person who didn't file)

A section 172(b)(3) election to waive all of the carryback periods with respect to an NOL “must be unequivocal and unambiguous. Powers v. Commissioner , 43 F.3d 172, 176 (5 th Cir. 1995). In the absence of a line item or check off block on a tax form to indicate waiver of the carryback period, this intent is communicated by an express and unambiguous written statement from the taxpayer indicating that the taxpayer is foregoing the carryback period. A taxpayer’s method of reporting an NOL on the taxpayer’s tax returns does not constitute a binding election with regard to that NOL. In Garland v. Commissioner , T.C.Memo 1993-190, the taxpayers noted NOL carryovers on their Schedule C forms for various taxable years but did not file any timely statements electing to fore go the carryback period with regard to such NOLs. Under these circumstances, no valid election to fore go the carryback periods was made.

I've looked at a lot of web sites, but this one gives the BEST description I could find, and came from http://www.legalbitstream.com/irs_materials.asp?pl=i9\

If that's not enough, let me know.......but that worked for my money. (I could find lots of examples, directives, etc in IRS pubs, etc, but I wanted the actual code section that had some meat to it)

As for the lady with the COD that goes to Sch E, you're right........no entry on line 21 for her........As for whether or not you want to mention "Less amount insolvent...see attached 982", on the Sch E, that's sort of a personal decision. I've talked to pros here, and they're running a LITTLE less than 50/50 (with no mention of the insolvency on Sch E with a small lead ...I personally wouldn't do it, but some of the preparers I respect very much would. So that one is your call, its your return)

Line 21 is for personal COD....not business......(my mistake........sorry)

As for the NOL being bigger than the exemption.....that is always my first landmark (just for me....other people use other reminders) the next thing I look at is whether they itemized or not...if they didn't, then I see if the NOL is bigger than the exemption + the standard deduction.

If they itemized.........then I generally pull out the worksheets........

Yes, I'm enjoying the weekend..Thanks for asking.....we're having a cook out at our home tomorrow, and we celebrate my youngest grandson's 8tth birthday on Monday........what are your plans?

As for payments between you and me.........you've always been fair with me..........and I try to give you everything you ask for........alot of what you ask for I do for my fellow preparers for free all the time........so for now, if you throw me $15 every so often, (which was my original payment for your question....but in bonus form, I get a tad extra) my creditors may actually send you a Christmas Card.....

I'm certainly not looking for payment for every single follow up......and JA states you can ask as many follow up questions as you want for free...........so we're sort of between the 2 extremes.

If that doesn't work for you, let me know....I think we both know that we work together pretty well. ..

Customer: replied 1 year ago.

Hi Anne,


 


Ok, so in English, you're telling me that if one does not opt to forego the carryback, then they cannot carry it back, especially since it wasn't timely filed? Did I read that correctly?


 


If that is the case, that seems unfair, because the return was filed on time and had it been done correctly, I'm sure something would've discussed regarding the NOL.


 


Weekend...not much, wife is working, I'm cleaning---getting carpets cleaned next week, so have to clean house a bit and trying to work, as well, and catch up. However, a friend is having a BBQ tomorrow, so we'll be going to that.


 


Yes, I'm ok with that arrangement.


 


Thanks!


 


---Steve

Expert:  Anne replied 1 year ago.
I think you misread what I said.............in plain english, I said if one does not opt out of the carryback by the due date of the return, then they MUST carry the NOL back first.

I agree tax law is not always fair.........and there are times it REALLY gets to me because people do things that are not EXACTLY illegal, but what they do is certainly not within the INTENT of the law......THOSE drive me NUTS!!

However, this law (at least everything I've read) is pretty cut and dried.......if you don't make the election by the due date of the return to fore go the carryback, then you have no choice, you MUST carry it back.

Please re read what I quoted to you again......and if you're still not sure what it says, we'll talk some more ......

We cleaned our house, only to have the party fall through........(one grandchild was acting up so much that she's grounded from EVERYTHING,......and her participation in the Memorial Day Parade is even on the line......can't blame the parents....she's quite a handful and has been known to be very mean to other children, although she's been in counseling and had been doing better, so I think this will be a short relapse)

My daughter and children are too busy painting their new house so they can move...and we will see them tomorrow at her house for cake & ice cream for her youngest boy, Aden, who will be 8. We have to make the lemon cake (since its his favorite but only he, my husband, and I like lemon cake...she's making chocolate for everyone else)
Customer: replied 1 year ago.

Hi Anne,


 


Yes, I misread it for sure! Thank you. That's what happens when you are reading it on the "road," as it were.


 


So, are you going to help me figure out what the NOL is for 2010 for the lady, in light of the sales commission and it making the NOL larger than the exemption. It's probably pretty close, if we add the exemption plus standard deduction, so we may not have to do a carryback. I'm just trying to get a road map, because the next one definitely will be more than the exemption plus standard deduction, and plus I don't want to keep bugging you.


 


Thanks!

Expert:  Anne replied 1 year ago.
Yes......but didn't she itemize deductions? I don't know if I can pull my papers out of the garbage .....(I honestly just threw them out today......)

Here's what I remember off the top of my head (which means there's a 50/50 chance I'm right) but it seems to me that even if you don't get a benefit from carrying the NOL back, it is reduced by the personal exemption anyway. (We won't go into whether or not that's fair.....at least until we figure out if I'm right.......or wrong......) It sticks in my head because I was really angry that the tax payer lost that $ amount of the NOL......but as I said, its been a while...........so we'll discover together how good my memory is, or if I'm just getting too old to continue to prepare taxes..........lol

Give me until later in the week........you can post what you find.......and I'll respond, but I won't be able to give you my full attention for a few days yet.......but I'll do the same thing I did before........I'll do it by paper first, and see when my friend works again.....(she's getting ready to teach a class on NOL, so she didn't mind going over this with me.......it refreshed both of our memories.)
Customer: replied 1 year ago.

No problem, Anne. Hi, by the way!


 


Here's what I have, with adding the sales commission in the cost basis. Her NOL is now $8,252.


 


Does that mean we have to reduce that by the personal exemption amount? If that is the case, then the NOL is $4,602 (8,252-3650).


 


That's where my confusion lies...how does one determine if you are able to carry it back or not. The other one I'm working on, the NOL is a lot larger, so how do you determine if you can carry it back? I know what you are telling me, but technically, I'm not comprehending it, and I'm trying.


 


Hope you had a good weekend!

Expert:  Anne replied 1 year ago.
Don't feel bad..........I probably shouldn't just talk off the top of my head anyway......It was just that I remember thinking how unfair the rules for NOL's are (so be prepared for that part....that the rules for NOL's are unfair....)

However, I've been around a while, so its possible that some of the more "unfair" rules for NOL's have been updated.

As for your question of how can you tell if you can carry it back or not........remember to first ask yourself when MUST you carry it back..........also, remember that an NOL is NEVER applied to SE tax, so that is another clue I use when trying to decide which will be more beneficial.......carrying the NOL back, or carrying the NOL forward......

Other than that, all I can tell you is that by the time you've done the NOL worksheets for your friend and the other people that you have suddenly "inherited", you'll be the one on this side of the equation..........helping others figure out how to decide whether to claim an NOL carryback or carryforward....and you won't need me anymore.......lol
Customer: replied 1 year ago.

Nah, I'll always pick your brain on stuff, because it's always good to get another opinion, especially after the complex tax law department gave me such different answers.


 


Thankfully, Lacerte has calculated all the things you cannot apply and I'm getting saavy about what can and what cannot apply.


 


So, regarding my lady friend, can I indulge you to help me and determine if we MUST carry it back? If so, then I will have to amend 2009 and have fun with that! :)


 


Thanks Anne!

Expert:  Anne replied 1 year ago.
Well, thank you for the compliment........you're welcome to pick my brain as long as I still have one.....(there are times I have had to borrow my coworkers brains, since mine would suddenly go on strike after 13 hours in the office....)

As for your friend..........without re reading everything, what I remember is that she filed her 2010 timely...whether her tax pro practiced due diligence or not...it was still filed

She received the 1099C's in 2012....a full 2 years past the filing date..........however, regardless of the fact that she didn't receive the 1099C's until 2 years after she filed......she obviously did not make the decision to fore go the carryback period. Therefore, she MUST carry the NOL back first.

I did do some research on whether or not the IRS took into consideration the fact that the 1099Cs were not received until 2 years later, and what I found was that some banks do not "charge off" some accounts for 5 years or more (something about banking laws and having to give the customer "x" number of years to rectify the bill)......at which point they issue a 1099C, sometimes with the current year on them, and sometimes with dates more than 5 years previously........and no matter where they looked, the preparers could not find any provision in the carryback rules that even addressed this issue...

Feel free to pursue this avenue if you like, but I could find nothing

Let me know .............oh........and I dug the paperwork out of the trash........lol

Just a "heads up" ......its supposed to storm here pretty much all week and I mean STORM........if I'm not around, it means my power went out......which will really be bad since its also going to be hot and humid......

Wait.......I'm talking to someone in CA where its ALWAYS hot...maybe not humid........but always hot...............lol
Customer: replied 1 year ago.
Anne,

She filed the 2010 tax return on time in 2011, but there was nothing on the return about the sale of the rental property. Furthermore, the cancellation of debt was completely wiped out, or showed that she was completely insolvent, which after further review, she is not.

So, with your help, we were able to amend and show the sale of the rental property, which generated a loss, she is NOT completely insolvent, and you and I were almost complete with the return, when we did not factor in the sales commission. With the addition of the sales commission, it created a larger NOL than the exemption amount.

So, now I'm not sure how far back we carry back the NOL. If you can provide me some guidance on how to calculate that, let me know. My first inclination is to just re-amend 2009, and show the NOL of $8,252, and then whatever is left, move over to 2010. I will still have to do a Form 1045, I imagine and 1045 Schedule A and B, but that's where I am stuck. I don't do many NOL's, as you can see, but again, if you can provide me a blueprint on it, then I can take it from there. As I mentioned, all the numbers you gave me for the 1045 Schedule B, Lacerte had, as well, and I know what I'm reading.

Maybe, what I should do, is amend 2009, to carry back the NOL, provide you the worksheets, re-amend 2010 to determine how much of the NOL is left, and provide the worksheets to you as well.

Like I said, the NOL is $8,252, so how far back do I carryback the NOL? Is there a rule? You said it has to be more than the exemption amount, which we both know changes a little every year, which is why I'm not sure how far back do I carry it back. We might have to amend 2008, 2009, and there may not be anything left for 2010...that's where I'm confused.

Please tell me what you need, so I can provide it for you. Thanks!

PS: I understand about the storms! No worries. I just need a bit more help on this and I promise I will leave you alone afterwards lol
Expert:  Anne replied 1 year ago.
Hey........don't ever feel like you're bothering me.....you have become my creditors FAVORITE JA customer.........lol

Let me work on this as I can, and I will get back with you when things around here calm down........literally.....lol
Customer: replied 1 year ago.

Anne,


 


No problem!


 


When you say creditors favorite JA? What do you mean? Just curious.

Expert:  Anne replied 1 year ago.

It means I finally have some money to pay my bills.(creditors)........they're getting pretty tired of hearing that "tax season is coming"..........in fact, one of them actually suggested that I get a REAL job...because I have REAL bills.......(I never thought of tax prep as a pretend job) ..

In response to your question re: how far do you have to carry the NOL back......the correct answer is 2 years, and then, if there's any left over, you can carry it forward for 20 years.......without that waiver attached to the 2010 1040 stating that she wanted to waive the carryback option, then you MUST carry it back to the 2 preceding year's tax return

Anne

Customer: replied 1 year ago.
Hi Anne!

Ok, I'll make sure to contribute something to help you this time around.

I'm going to work on this today, where the 2010 NOL of $8,252 goes all the way back to 2008, whatever is left to 2009, and whatever is left to 2010...correct?

Please have Lori email me, so I can send you files for the original returns of 2008, 2009, as well as the amended returns.

I'm assuming that we will have to do the Form 1045 for all three years, correct? I'm going to attempt that, as well, but if you could help, I'd appreciate it!

This shouldn't take long....I don't think!

Thanks,

Steve
Expert:  Anne replied 1 year ago.
I'll pass the information onto Lori...........I'm sort of hoping she'll hook you up with someone that can talk you through posting it on Media Fire..........it would sure be nice if we could use that..

I'll send her the email today.............but it also might help if you also send it so that she has your email to reply to.........her email address is Lori @pearl.com
Customer: replied 1 year ago.

Anne,


 


I am about to send Lori an email with two attachments. One is the amended returns for 2008 and 2009 along with the NOL worksheets. The other attachment is the Form 1045 alone.


 


I carried back the NOL back to 2008, and of the $8,252, $6,157 was absorbed in 2008 and $2,095 in 2009. Nothing was left over for 2010. It resulted in no change in 2008, because her taxable income was already zero, and in 2009, it resulted in a refund of $525. So, the first attachment shows all that.


 


The second attachment is my attempt at the Form 1045. You will see question marks in some areas of it, because I'm not clear what to put there. Please double check everything for accuracy, and of course, if anything is wrongfully inputted in, please let me know.


 


Again, I just need a road map on this and this NOL isn't so large, where I can grasp things and pick up what you are trying to do.


 


I will pay you $100 upon completion of your assistance with this....


 


Thanks!

PS: How's the weather? It's overcast here today and looks like it might rain.

Expert:  Anne replied 1 year ago.
I'm telling you Steve......my creditors are going to make you man of the year!

Right now we have the calm before the storms again.........so that works for me.

I will try to get to these tomorrow.......t I think I told you I have a fairly busy week.........but I will do the best I can........

Anne
Customer: replied 1 year ago.

No problem, Anne! Have a great weekend!


---Steve

Expert:  Anne replied 1 year ago.
Thanks you too!
Customer: replied 1 year ago.
Let me know when you have made some progress.
Expert:  Anne replied 1 year ago.
I will............just been a busy week........after this weekend things should quiet down again....

Sorry for the delay....

.......
Expert:  Anne replied 1 year ago.
Steve

I will be at the office tomorrow...........so that I can check my answers.......

I am confused that you still show an NOL carryover of $10,000+ for 2010. I thought we had this conversation that you can't have a carryover of an NOL in the year OF the NOL.

Since you told me that you had matched all of figures (before we discovered that I used the wrong cost basis) so I'm assuming the one that you sent was the old one?
Customer: replied 1 year ago.
Anne,Where do you see that? I did not do anything. All I know is the $8252. I did not add anything in 2010 beyond what we discussed.The program automatically calculates the NOL at $8252 for 2010 after reporting the sale of the house for a loss and the cancellation of debt. I did not touch anything else.I went back to 2008 and added the NOL of $8252 for 2010 and thus it absorbed some in 2008 and 2009. There should be none for 2010 if I did it right....double, triple check my work!Thanks.
Expert:  Anne replied 1 year ago.

Fed1040 line 21 has $67222, and you statement 2 shows :

COD $77397
NOL carryover $10175
______
$67222

Customer: replied 1 year ago.

Anne,


(I have edited this response several times).

 

The attachments you should have recieved (in order) are the amended 2008, 2009 returns, showing the entire NOL caryback in 2008, and absobring only some of it, and then the rest in 2009. I included the worksheets as well.

 

The second attachment is the Form 1045 and my attempt and my question marks on what to put in a certain box.

 

We know that is not right.... How do we show the NOL for 2010 then? The worksheets are just worksheets. It does not show on the 1040 I don't think.... I am trying to understand how we report it accurately on 2010 what we need and then we carry it back to 2008 and 2009. The program automatically may show on 2010 on line 21 COD the 77397. The worksheets are not shown usually...

 

I had to come back to the office...for something else. You are looking at an old form, I think, because on line 21 I have 77,397 and no mention of NOL.

 

I just forwarded Lori my 2010 amended files that I think are important for you to see...as I mentioned, there is no mention of the NOL that you spoke of in 2010 on line 21, just the cancellation of debt.

 

At the end of all this, I need help on what to send to the IRS since we are amending 2008, 2009, and 2010. Do I send in the 1040X, 1045, what do I send, because the time has passed for a timely filed election to carryback, so my understanding is the 1040X and make sure to notate it is for a carryback loss. Please let me know.

 

Thanks!

Expert:  Anne replied 1 year ago.
are you at your office right now?
Customer: replied 1 year ago.
No, why?
Expert:  Anne replied 1 year ago.

how far away is it? Can you tap into both your voice messages and faxes from home?

Customer: replied 1 year ago.
10 minutes.
Expert:  Anne replied 1 year ago.
can you tap into your voice messages and faxes from home?
Customer: replied 1 year ago.
Voice messages yes, faxes no, why? Do you want to call me?I can forward my calls to my cell phone.My fax line is tied to my copier, but I have an efax too.Why all the questions, Anne?
Expert:  Anne replied 1 year ago.
Please know that I cannot contact you outside of JA. My contract prevents direct contact....but I never ask questions like that without a good reason.
Customer: replied 1 year ago.

No worries, Anne. I respect that. I was referring to the fact that I was at the office and wanted to send you some other information that might be helpful that you can assist me on this case. I don't think I included everything....please let me know. We both have worked on this one too long, and sometimes I don't even know what I send lol

Expert:  Anne replied 1 year ago.
Thank you.........I'll let you know when I get them
Expert:  Anne replied 1 year ago.
Thank you for the additional forms.....

You are correct that the NOL is "used up" by tax year 2009, so unfortunately there is nothing to carry over to future years.
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1783
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Expert:  Anne replied 1 year ago.
Thank you very much for your generous bonus!!

Please feel free to ask for me by name if I can help you in the future.

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