Archive for 24. August 2010

S Corp Shareholder Sells – Short Year Accounting

24. August 2010 by admin.

Taxpayer decided to sell his stock in the company, as opposed to an asset sale.  This means the buyer has the responsibility to prepare the corporate tax return.  Taxpayer has agreed to do an accounting of the year up to the date of sale and present this information to the buyer.           In the contract, please add the following for tax purposes:       

The existing shareholders and the new shareholder(s) elect to allocate income and expenses as if the corporation’s tax year consisted of two separate tax years, the first of which ends on the date of the existing shareholders’ termination.

     Attached to a timely filed return original return will be the statement “Corporation elects under Section 1377(a)(2) and Regulations Section 1.1377-1(b) to treat the tax year as if it consisted of two separate tax years.  Shareholders’ entire interest was terminated by sale.  The corporation and each affected shareholder consent to the corporation making the election.”      Additionally, the statement “Section 1377(a)(2) Election Made” will be entered at the top of each affected shareholders Schedule K-1. 

Posted in Sub S Corporations, LLC's, Income Tax | 2 Comments »

Pools & Hot Tubs Deduction

24. August 2010 by admin.

There is a great deal of mis-conception about the deductibility of Hot Tubs & Pools. 

First, you must have a doctor’s prescription. 

Second, how much did it really cost you?  The theory is the Pool or Hot Tub has added value to the home.  Let’s say the item cost $15,000.  It has not added $15,000 to the value of the home.  It’s like buying a new car.  Drive it off the lot and its worth less than when you purchased it. 

Let’s assume it has an added value to the home of $10,000.  That means you lost $5,000. 

You lost $5,000 BUT you must divide that by the number of people in the home.  If 4 people live there, your deduction is only worth $1,250. 

The deduction is included in medical expense which is limited by 7.5% of your Adjusted Gross Income. 

 

Posted in Newsletter Topics, Income Tax, General | 5 Comments »

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