You Forgot to File an S-Election

An S corporation is a flow through entity under the tax code. Instead of the corporation paying its own taxes, the liability “flows through” to the shareholders.  They report the activity and pay the taxes on their tax returns. While the exact requirements are beyond the scope of this post, one of the things you have…

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Form K-1 and the Gain / Loss Schedule

If you sold a publicly traded partnership (PTP) during the year your K-1 will include a sales schedule that provides two important pieces of information.  If you don’t know to look for it, you might miss these two items: Basis Adjustments.  “Basis” is the sum of the amount you paid to buy the PTP, plus your…

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Individual Shared Responsibility Payments

The latest example of the insane complexity of the US tax system will be infuriating taxpayers this April.  Its called “Shared Responsibility Payments” and if you don’t have health insurance you might have to pay.  It is the latest provision of Obamacare to go into effect and represents a penalty to those who went without…

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OCTOBER 15!!!

Last call.

Divorced Parents

Two situations regarding children and the tax deductions and credits that go with them: Situation 1 — Parent does not claim their minor child as a dependent but paid medical expenses on their behalf during the year.  Is that parent entitled to deduct the medical expenses? The answer is yes.  If one parent claims the child…

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Why Isn’t This A Passive Activity?

In a prior post I began addressing some of the issues that face taxpayers who receive a K-1 form from a hedge fund or other publically traded partnership.  This time I want to focus on a footnote that shows up on some K-1s that indicates that the partnership or LLC is not a passive activity. …

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When Business Loans Go Bad

September 30, 2014 Statistics show that most small businesses do not survive. Often, these companies finance their operations by borrowing money from the owners.  What happens to these loans if the company goes out of business?  If there is no hope of collecting on the debt, can the lender at least get a tax deduction? The answer…

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Form K-1 and Section 475(f)

September 23, 2014 Schedule K-1 presents interesting challenges for individual taxpayers. Where they were once invested in mutual funds, many people now own a piece of investment vehicles that operate as an LLC or a partnership. A mutual fund issues a 1099-DIV and the tax reporting is usually a simple matter.  An LLC issues a K-1…

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If spouses file separate returns, who deducts the mortgage interest?

September 10, 2014 In order to answer this question, you have to answer two others: Who has title to the property? Who provided the money? The title holder is the person obligated to make the payments.  If you are not obligated, you are not entitled to the deduction. In order to be eligible for a tax deduction you had…

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Shareholder Tax on Corporate Distributions

First, an important difference between S corps and C corps: S Corporations The shareholders of an S corporation pay tax on the earnings of the company. Distributions of S corporation earnings are tax free to the shareholders. C Corporations The C Corporation pays the tax on the earnings of the company. Distributions of C corporation earnings are taxable…

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