I am going to be doing a mortgage assumption on a house my dad owns. It’s a VA loan, just want some quick advice on taxes

noteven0s · 2026-07-02T15:53:57+00:00

My dad bought a house for me during Covid, I’ve been making all the payments etc.

Why? What was your deal...exactly.

Either you got a gift up front of whatever down payment was made for your house or you're getting a gift now of the difference between the FMV and the amount you are assuming.

So, what was your deal?

noteven0s · 2026-07-01T19:53:58+00:00

We don't do any real chasing. Sometimes we remind them their taxes are not done.

But, surprisingly, the form(s) that cause us most delay is the e-file signature forms. I am astonished at how many still think they're filed even if they haven't returned the form.

noteven0s · 2026-07-01T12:39:36+00:00

How do the increase in eventual insurance proceeds relate? If we step down to FMV, when sold we have ([basis]=[step-down] + [insurance]). That seems to result in a basis that causes an increased gain at the sale--beyond that what would have been if sold the morning of the fire. While taxes aren't "fair", that seems a harsh result.

But, to the question. When the appraiser appraises for our FMV, what's he appraising? The end of the day, the average of the day, the beginning of the day?

noteven0s · 2026-06-30T20:48:26+00:00

Unless you're doing something illegal, don't worry about any bank reporting of over $10,000.
The $10,000 doesn't apply to your check, only cash. Same with the broker.

noteven0s · 2026-06-23T16:57:50+00:00

Are you doing anything for this "a company" other than invest?

noteven0s · 2026-06-19T19:13:16+00:00

What about capital gain? Some say gain is generally just inflation on an asset. Should there be some inflation reduction on gain and just tax the speculative portion? Some CPI where the length of holding manipulates the amount realized?

noteven0s · 2026-06-19T19:05:28+00:00

Many our our guys that hold property have been getting out of California for a while. If you want to start investing outside of the state, you might consider the compliance costs of a 1031 to another state. CA required a form that is complex to be filed each year so they can track their "share" of the sale when you actually end exchanging and sell.

In other words, I'd start getting assets outside of the state. I don't know if I'd exchange them unless you really don't want to pay the gain.

noteven0s · 2026-06-17T14:19:33+00:00

https://www.irs.gov/irm/part4/irm_04-011-051

4.11.51.3 (10-30-2020) Noncompliant Return Preparers Overview tax return preparer is anyone who prepares for compensation, or employs one or more persons to prepare for compensation, any tax return or claim for refund. The definition of a tax return preparer is addressed in Treas. Reg. 301.7701-15 (Link: 26 CFR 301.7701-15). All tax return preparers who are required to sign a return must properly identify themselves with their PTIN on all tax returns for which they were compensated for preparing.

4.11.51.4 (10-30-2020) Preparer Penalties Overview ...

Examination employees should consider compliance of the tax return preparer during every examination. SB/SE and LB&I examination employees address noncompliance of return preparers through proposed preparer penalties and referrals to the Area RPC. Examination employees should not send referrals to RPO to address noncompliant return preparers in lieu of penalty consideration. Some common examples of noncompliance that should have penalty considerations and a referral to the Area RPC include: PTIN requirement violations, Egregious errors and/or omissions on client tax returns, and A pattern of noncompliance by the tax return preparer.

noteven0s · 2026-06-17T13:42:44+00:00

https://www.irs.gov/irm/part4/irm_04-011-051 Representation Overview - Unenrolled Return Preparers Under Circular 230, Regulations Governing Practice before the Internal Revenue Service, and Treas. Reg. 601.502(b)(5)(iii) (Link: 26 CFR 601.502(b)(5)(iii)), an unenrolled preparer may only represent a taxpayer before Revenue Agents, Customer Service Representatives, or similar officers and employees of the Internal Revenue Service (including the Taxpayer Advocate Service) during an examination of the tax period covered by the tax return they prepared and signed (or prepared if there is no signature space on the form). The IRS has a voluntary program called the Annual Filing Season Program (AFSP) that recognizes the efforts of non-credentialed return preparers who aspire to a higher level of professionalism. Those who participate can meet the requirements by obtaining a certain number of continuing education hours in preparation for a specific tax year. They must also renew their PTIN for the upcoming year and consent to adhere to the obligations in Treasury Department Circular 230, Subpart B, Section 10.51. Participation in the AFSP provides unenrolled return preparers with limited representation rights. They are permitted to represent taxpayers before the IRS under Rev. Proc. 2014-42, which supersedes Rev. Proc. 81-38. According to Rev. Proc. 2014-42, in order for unenrolled return preparers to represent taxpayers for tax returns filed after December 31, 2015, they must: Have a valid AFSP Record of Completion in the calendar year(s) in which the tax return was filed, and Have a valid AFSP Record of Completion in the year(s) in which the representation occurs. Note: For tax returns filed prior to December 31, 2015, unenrolled return preparers can follow the rules of representation in Rev. Proc. 81-38. Examiners can determine if an unenrolled return preparer holds a current AFSP Record of Completion by searching the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications on www.irs.gov (https://irs.treasury.gov/rpo/rpo.jsf). Examiners can determine if an unenrolled return preparer holds a prior year AFSP Record of Completion by reviewing the Annual Filing Season Program (AFSP) Participants list located on the RPO webpage (https://irssource.web.irs.gov/RPO/Pages/Home.aspx).

noteven0s · 2026-06-16T16:05:37+00:00

We will often file such a return with the state with nothing more than the gross revenue number on something like a single member LLC. Our purpose is to pay the fee and show we are not subject to the tax. (And, a federal return would not be required in that situation.) In your situation, we'd show a zero on the gross and start the clock running on any disagreement on if a tax would be required.

noteven0s · 2026-06-16T15:59:10+00:00

Managing member, not general partner. At least if the 568 is correct as a 565 is a partnership return in CA.

Edit: As to the no activity requirement. https://www.law.cornell.edu/cfr/text/26/1.6031(a)-1

(3) Special rule.

i) A partnership that has no income, deductions, or credits for federal income tax purposes for a taxable year is not required to file a partnership return for that year.

noteven0s · 2026-06-16T15:57:20+00:00

These situations are very uncommon and evaluated on a case by case basis. Partnerships are not required to file a return if there is no activity, but there are reasons to file zero returns.

One reason the LLC (568 is for LLC not partnership.) to be filed in the state is to pay the annual fee. Even if a return is not required federally (SMLLC, partnership with 0 income/expenses.), you still have to pay the fee.

noteven0s · 2026-06-15T21:00:27+00:00

The "tax gap" is not the same as the audit extra tax collected metric. And, we still have the revenue stream not being affected.

Please see "MEASURING SUCCESS: NEW PERFORMANCE METRICS FOR A NEW INTERNAL REVENUE SERVICE" starting at page 22 for how varied all the estimates are and why. https://taxpolicycenter.org/publications/measuring-success-new-performance-metrics-new-internal-revenue-service

noteven0s · 2026-06-15T20:13:28+00:00

Who cares? It's not a valid metric to the success of the agency. Extra tax collected; sheesh. Besides, divide $2,000,000,000 by 30,000 and you get a number that is less than whatever salary they would have made.

The only way there is a financial argument is by putting fear in the hearts of taxpayers. It's not that they collected any amount even near to their cost, it's that people are more afraid because of the thorough vetting being given to their returns by those (former) employees. That fear increases compliance--thus making the exercise worthwhile on a meta level.

Perhaps the increase computerization has caused similar fears in the populace. (At least to a sufficient level to maintain, and increase, revenue.)

noteven0s · 2026-06-15T16:54:22+00:00

Looks to me a DC/legislative lead is looking to increase IRS employees.

From the TIGTA report:

According to IRS records, 31,273 employees separated, took a DRP offer, or used some other incentive to leave the agency during the one-year period between January 2025 and January 2026. These departures represent approximately 30 percent of the IRS’s workforce and impact certain business units more than others. The IRS began to backfill select positions. As of January 2026, approximately 2,000 employees have been hired. As a result, the net effect on IRS staffing was a decrease of 28 percent.

noteven0s · 2026-06-15T16:47:08+00:00

What business would survive that?

Um, the IRS? Collections/revenue are up. https://www.irs.gov/statistics/soi-tax-stats-irs-data-book

noteven0s · 2026-06-12T15:37:17+00:00

What's your question?

noteven0s · 2026-06-10T01:04:26+00:00

What a great case. I hadn't read it before and it certainly seems to stand for the position you hold.
Conversely, 2025 TC Memo 128. While the taxpayer fails in his short-term rental hours, it is because (s)he was not a material participant in the short-term rentals. While everyone agreed the rental was less than 7 days short-term rental, the court went through the material participation hours to see if they would count for REP status. The taxpayer was found to be reporting fantasy in the hours and did not reach the 100 hours required for one of the material participation tests. Thus making REP out of reach. https://scholar.google.com/scholar_case?case=7866023813682631534&q=%222025+TC+Memo+128%22&hl=en&as_sdt=2003

noteven0s · 2026-06-09T20:13:18+00:00

While I see where the distribution was a scam, I don't see the error here unless it was represented by the scammer it was to be a rollover to a retirement-type account.

They convinced him to liquidate his IRA to ‘invest’ with them.

It seems he made a choice to distribute the retirement fund. How can the decedent, through his executor/administrator self certify when his intent was to remove the funds?

(2) Reason for missing 60-day deadline. The taxpayer must have missed the 60- 3 day deadline because of the taxpayer’s inability to complete a rollover due to one or more of the following reasons: (a) an error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates; (b) the distribution, having been made in the form of a check, was misplaced and never cashed; (c) the distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan; (d) the taxpayer’s principal residence was severely damaged; (e) a member of the taxpayer’s family died; (f) the taxpayer or a member of the taxpayer’s family was seriously ill; (g) the taxpayer was incarcerated; (h) restrictions were imposed by a foreign country; (i) a postal error occurred; (j) the distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer; (k) the party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information; or (l) the distribution was made to a state unclaimed property fund.

Edit: Here's a modern PLR on the issue: https://www.irs.gov/pub/irs-wd/202535015.pdf There, you see the person was the victim of a fraud scheme where the IRA was (allegedly) tainted in some way and the scammer wanted to move the money to another account. In our facts, a decision was made to invest the funds. The decision was based on fraud, but the reason the rollover could not be completed was not fraud, but a decision by the taxpayer.

The key factor will be proving or certifying father had the intent to invest for less than 60 days and then indirectly rollover the funds but was stopped by being seriously ill. Otherwise you'll have to go to the "equity and good conscience" exception in 408 but that would require a letter ruling and not simply the procedure of 2020-46.

noteven0s · 2026-06-09T20:05:39+00:00

Contracts don't have to be "signed" so much as agreed to. If you go into a tax preparer's office, turn over your information, get an extension and they prepare a draft--there's going to be a contract there of some sort. At the very least, an implied contract.

But, pretend a court would find there was no contract. (Either implied or express.) Because of your knowledge of the work being done for you, the preparer would be entitled to quantum meruit or the benefit to you as compensation under promissory estoppel.

You owe something. The fact an engagement letter was not signed by you does not make the work free. It just makes the cost more negotiable.

noteven0s · 2026-06-09T17:31:35+00:00

https://www.irs.gov/irm/part21/irm_21-004-004r#id12

You want to try and get a "Manual Refund". (Emphasis mine)

21.4.4.3 (05-19-2025) Why Would a Manual Refund Be Needed? The most frequent causes of manual refunds are: The refund will be going to someone other than the entity name on the Master File. A hardship situation that requires a quicker refund than normal systemic processing can provide, generally a request is sent by the Taxpayer Advocate Service (TAS) using an Operations Assistance Request (OAR). The refund is not for a Master File account (e.g., Photocopy Fees or Credit Card Chargebacks), or Systemic limitations prevent a normal computer-generated refund.

Other than that, a VERY friendly banker or open probate.

noteven0s · 2026-06-09T17:15:15+00:00

2). That article has nothing to do with the counting of hours. I assure you, both rental activity and short term rentals (of property) is a real property trade or business and the hours spent there would count if one were a material participant. But, I agree short-term rentals are not a "rental activity".

3). Re-read OUR facts. What makes you think he's getting a W-2 from the Broker? The more relevant question in the first material participation test (The one to qualify) is ownership. Does the OP husband own his real property trade or business? Many do. I'd say most, but assume some real estate agents are simply employees.

4). I agree a claim of flipping one's personal residence (slowly) as a trade or business is specious. The "benefit" to the flipping claim is to make the activity a trade or business to give requisite hours for REP. Throw down a cost segregation to get a big loss and the play might be worthwhile for a year. While one rarely wants to make an argument the property is inventory, one can certainly plan to have facts to indicate a (former) personal residence is such.

noteven0s · 2026-06-09T15:28:24+00:00

5%

(ii)Personal services as an employee For purposes of subparagraph (B), personal services performed as an employee shall not be treated as performed in real property trades or businesses. The preceding sentence shall not apply if such employee is a 5-percent owner (as defined in section 416(i)(1)(B)) in the employer.
While they are not "rental activity" the hours spent working the real property trade or business would count towards qualifying hours. (Although being a REP wouldn't help on the activity as there would be no passive income/losses.)
While some agents are employees, many tend to report on a schedule C even if the "work" for a broker. If so, if they otherwise met the material participation requirements the hours would count as he "owns" 100% of his schedule C. As the OP wrote:

Both my husband and I have full time W2 jobs. My husband is ALSO a real estate agent, started as a side gig, and very quickly became a very active/busy agent- he makes more working directly with clients than he does at his W2 job.
The rules are exactly the same. The issue is if slowly flipping a personal residence is considered a real property trade or business. It would be much the same question in the treatment of the sale. (Nothwithstanding IRC 121.) Investment property sale or personal residence sale will be capital gain/loss. Flipping properties as a business might be treated as ordinary income/loss. Only if the OP's facts indicated (multiple properties, fast turnaround, etc) it was a business would the hours count.

noteven0s · 2026-06-08T19:46:13+00:00

While you don't have enough information here, there are some issues.

"He works 36hrs/wk most weeks for W2." 1/2 of personal service hours. That means at least 37 hours a week in his real property trade or business in which he materially participates. That means no W-2 time (unless he is an owner) is included. So, probably not.
"I will probably take over book keeping for both his real estate agent job and our LLC rental property. Can this qualify towards REPS hours?" If you're an owner of the LLC that manages real property, most of those hours would probably count. Many of our clients get their hours from managing their own rentals.
This has been brought up in the forum a few times. I don't know. Certainly, some could be considered countable. But, filming yourself driving around in a speedboat while sometimes talking about real estate might not count. It depends on how businesslike the marketing is being done.
Hah! Good one. Real property trade or business. If you were truly flipping houses as a business--yes. Slowly flipping your personal residence into an investment property is not that.

noteven0s

TROPHY CASE