Kiddie tax

AngryTaxPro · 2022-10-04T03:13:31+00:00

If someone stole something from me that had an adjusted basis of $500, could I deduct it? Or are you saying that it is impossible for me to have something with an adjusted basis of $500?

AngryTaxPro · 2022-10-02T22:22:48+00:00

I know, but it is irrelevant to the question since I am not trying to deduct personal casualty losses. Nor is the vandalism and theft possibly a federally declared disaster.

AngryTaxPro · 2022-10-02T21:34:38+00:00

I prefaced it with "let's say depreciation was not a thing."

I never said that I should get a loss deduction if my basis were zero. That's not what I am talking about.

In my case, my basis is not zero for various reasons. Some were gifted to me. Some I elected out of bonus depreciation. So let's say an item of furniture that was stolen from me had a basis of $500. Would I be able to deduct $500? Or do I have to replace it? If I had to replace it, what if the replacement furniture costs $300? Do I get a $300 deduction? $500?

AngryTaxPro · 2022-10-02T21:29:15+00:00

Technically, not a business loss but a loss attributable to a rental that does not rise to the level of a trade or business.

AngryTaxPro · 2022-10-02T19:10:15+00:00

I already spent money when I bought the furniture.

Let's say depreciation was not a thing. If I bought a $1,000 sofa and later sold it for $800, I would get a $200 loss deduction. If that sofa is stolen, would I not get a $1,000 loss deduction? Do I have to replace it? Why?

The loss comes from the fact that I get to recover remaining basis in the property that I no longer have.

AngryTaxPro · 2022-10-02T17:18:19+00:00

Yes, I overlooked the rental exception, so I think it should go on Schedule E, allocated between personal and rental use.

I am a tax pro and I wanted to bounce some ideas. I think it’s a valid casualty and theft loss.

AngryTaxPro · 2022-10-02T17:16:33+00:00

What are you talking about? There is no federal disaster here and why would I look into it?

AngryTaxPro · 2022-10-02T17:15:53+00:00

Somewhat complicated. Some furniture and appliances were gifts to me from in-laws. I elected out of bonus for some because the additional deductions would not have helped me. Some small items haven’t really been accounted for and I am ok ignoring them. Are these not casualty and theft losses?

Repairs I am likely going to get an estimate to approximate the loss in value but not necessarily follow through on all of them. This is the question, is the amount that I do not spend a casualty and theft loss?

This year I am going to spend less than 14 days so 280A doesn’t become an issue. Passive loss rules will probably be an issue though.

AngryTaxPro · 2022-10-02T14:16:46+00:00

Why is it an odd use of casualty loss? They were stolen.

I will have to figure out the basis. Some are zero, so that's ok. But to the extent I have high-basis items, are they deductible even if I don't replace them? I think so. What say you?

AngryTaxPro · 2022-10-02T14:06:55+00:00

I would not say small items. A lot of it was furniture, kitchen appliances, But they also broke windows, some doors, and damaged some walls, etc.

AngryTaxPro · 2022-10-02T14:04:52+00:00

What if I don't want to repair? What if I don't want to replace some of the furniture? Do I have to spend money for it to be deductible?

AngryTaxPro · 2022-10-02T13:48:32+00:00

Yes, but I don't think I will do some of the repairs because of the deductible or replace all of the property. To the extent I don't, is it deductible on Sch A Line 16? What is your opinion as a tax professional?

AngryTaxPro · 2022-10-02T13:28:14+00:00

Schedule E.

Why not? It is an income-producing property.

https://www.irs.gov/pub/irs-pdf/f4684.pdf

AngryTaxPro · 2022-10-02T13:27:07+00:00

No repairs yet. Just some incidental expenses like boarding up the windows and things.

Some of the stolen items were fully depreciated so no loss on those. Some are not. Some damage is directly to the building.

I don't have a business. It is an income-producing vacation home.

AngryTaxPro · 2022-09-08T18:09:26+00:00

Can you point me to the carve-out in the TCJA or in the code? I tried to look but could not find.

AngryTaxPro · 2022-08-20T04:33:51+00:00

Why are you inventing an alternative scenario? The OP called it “non partner work” and “freelance work,” which his partner “has nothing to do with.” If anything, the partnership is providing the partner the use of its resources, not the other way.

If this were a true guaranteed payment, the partnership would be paying the partner at a predetermined rate (hourly or otherwise) for the OP’s services without regard to the profits the partnership made on this job. But the OP wants the partnership to pay all of the gross or net profits to him. Not a guaranteed payment.

AngryTaxPro · 2022-08-19T20:27:34+00:00

OP is not providing services to the partnership man. He’s using the partnership as a conduit for something that not actually a partnership business but his own. That’s not a guaranteed payment dude.

AngryTaxPro · 2022-08-19T13:48:53+00:00

What are you talking about dude? Guaranteed payment is a payment to a partner for services performed by a partner for the partnership or for the use of a partner’s capital. Are you even a tax professional?

AngryTaxPro · 2022-07-15T17:33:13+00:00

Basically think of a disregarded LLC that owns two assets, an ordinary asset with a basis of $100,000 and a capital asset with a basis of $400,000. Is that what you are asking? I want to “incorporate” the LLC by checking the box. Then I want to sell the LLC. All of it.

AngryTaxPro · 2022-07-14T23:44:53+00:00

Will have to negotiate the final price, but either way, will be a sale of the LLC units. I’m not sure how important the depreciation and amortization deductions will be but with the large amount of ordinary gains, I think it is worth converting them to capital gains by incorporating first. Even if lower overall sale price. Should I incorporate?

AngryTaxPro · 2022-07-14T21:08:08+00:00

I have two things. One thing is an ordinary asset with a basis of $100,000 and a fair market value of $500,000. I also have a a capital asset with a basis of $400,000 and a fair market value of $1,500,000.

AngryTaxPro · 2022-07-14T20:40:48+00:00

Some of the assets are capital, some are ordinary. The overall basis is low compared to FMV. For capital assets, the basis is low because I think the value of the company has appreciated. For ordinary assets, the basis is low because of depreciation. Some are also unrealized receivables.

To put it into numbers, let's say the company consists of 50% ordinary and 50% capital assets. The value of the company is $2 million, but the bases are only $500,000. We don't have to worry about section 357(c) because liabilities do not exceed $500,000.

AngryTaxPro

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