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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: A good day Date: 4/7/2011 10:44 PM
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or - Why I do this

So today's (or is it this year's?) story features a widow. Husband died a couple of years ago and their tax preparer of many years followed suit late last year. A friend of hers refers her to me for her 2010 taxes.

At first, it seems pretty ordinary for a retired widow: interest, dividends, social security, some pension income - all well organized. Then there's a rental property.

I start dropping all of the info into my tax program almost by rote. I get to the rental and realize I need to pick up depreciation from last year's return. She brought the last 3 years returns, as I requested.

So I open up that return and start praying that the prior preparer was kind enough to include depreciation schedules with the return. I don't find them. I look at the 2008 return, hoping to find them there. No luck. Ditto for 2007.

I take a closer look at the 2009 schedule E. No depreciation expense. None on 2008 or 2007, either. No wonder I can't find the depreciation schedules.

So I call up the client and ask her when they bought the rental house. She couldn't remember exactly, but was pretty sure it was 1961 or 1962. They lived in it for a couple of years, then moved to the house she currently lives in and started renting out the former residence.

Does she remember claiming depreciation on the house? Oh, yes. It was fully depreciated many years ago. I thank her for the info and head back into the return.

And then it hits me like a ton of bricks. It's not fully depreciated any more. Her husband died in 2008. The property got a step up in basis at that time. And she gets to start depreciating the property all over again. Being in California - a community property state - it's even better. The WHOLE property gets a step up, not just his half.

I take a quick look at Zillow just to get a idea of the house's value so I can run some rough numbers. Claiming the depreciation saves her a couple thousand dollars in tax. And I can amend the prior two years to get a couple thousand for each of those years as well.

Then I get to make one of the easier phone calls of the season, to let her know what I found. She is absolutely astounded. After reassuring her several times that this is perfectly legal, she agrees to get an appraisal as of the date of death and to let me amend the prior returns.

I've now got a very happy client, I'm feeling pretty good to catch something like that, and I get paid to boot. It doesn't get much better than this.

--Peter
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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113025 of 121219
Subject: Re: A good day Date: 4/8/2011 12:32 AM
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I've now got a very happy client, I'm feeling pretty good to catch something like that, and I get paid to boot. It doesn't get much better than this.

--Peter

===================================
Especially if the oldest year in question is 2008, which is still open after 4/15. No protective claim with a slap-dash DIY estimate of value needs to be done.

Bill

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113026 of 121219
Subject: Re: A good day Date: 4/8/2011 1:57 AM
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I've now got a very happy client, I'm feeling pretty good to catch something like that, and I get paid to boot. It doesn't get much better than this.

--Peter
===================================
Especially if the oldest year in question is 2008, which is still open after 4/15. No protective claim with a slap-dash DIY estimate of value needs to be done.


Don't knock those slap-dash last minute protective claims! My "good day" story dates from a date almost exactly two years ago. Back in 2004, taxpayer learned that a family member had vanished while owing the TP a seven figure amount. (Loan was documented at the time it was made.) Over the next months, it was learned that the missing person had looted all of his personal assets and was facing multiple civil and criminal charges. At the time TP (and I) believed that the only recourse was to claim a non-business bad debt deduction.

Fast forward to early 2009. Bernie Madoff's exploits are all over the news. The IRS issues guidance for taxpayers claiming losses due to "investments" with Madoff. Light bulb goes off... maybe we can claim the loss as a casualty. Quickly contact client for more information. Client received a court judgment in his favor in early 2005. One week to go before statute of limitations expires on 2005. How much was the judgment for? Client gives me the number and I file the amended return as well as amended returns for all of the years from 2002 forward (NOL). As expected, the IRS asks for more documentation than just my 2-3 sentence explanation of why a seven-figure deduction suddenly appeared. I get copies of the loan documentation, court judgment, news articles regarding the various legal difficulties facing the (now) fugitive should he be found. As I'm preparing the reply to the IRS, I realize that I made a mistake. The court judgment included three items: principal, court costs, and about a year's worth of unpaid interest. I could see claiming the lost principal and court costs, but the unpaid interest had never been reported as income, so it couldn't be a loss. I alerted client that IRS would probably disallow part of the claim.

Strange thing happens next. The examiner who was reviewing the claim doesn't do anything about it. The amended returns for the years other than 2005 were returned as unprocessible pending resolution of the casualty claim. Every time we inquired about the status of the 2005 return we're told "gives us another 6-8 weeks". Finally after 18 months and the intervention of the taxpayer advocate, the casualty claim is accepted as filed - including the unpaid interest.

The story isn't over yet. The fugitive was found, but there weren't any assets recovered. We're still waiting for the IRS to process the other years, but at least this time we know the name of the examiner who is handling the case and she has all of the returns and appears to want to close out the matter expeditiously.

As Peter said when he started his post... it's the stories like these that keep us going.

Ira

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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113027 of 121219
Subject: Re: A good day Date: 4/8/2011 12:14 PM
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When I saw "ptheland" on the "Best of" list, I clicked because I thought, "Peter is a smart guy. It's worth my time to read anything he writes."

Well, this is a perfect example. Another great post, Peter.

I have a question for you.

DH's mother (MIL) died in late 2009. MIL was living in an assisted living facility, but MIL's second son was still living in her house. This son died last year. MIL's estate still is not settled. The house is in a depressed area of northern Idaho. Not a single house in that town sold within the past year (according to Zillow.com and Realtor.com).

MIL's estate was too small to be subject to estate tax. I'm pretty sure that DH's sister (SIL), who is an accountant running a business in the town, did not get an appraisal on the house when her mother died.

Since nobody is living in that house now, is it possible to claim depreciation on it?

Thanks,

Wendy

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113028 of 121219
Subject: Re: A good day Date: 4/8/2011 12:37 PM
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Since nobody is living in that house now, is it possible to claim depreciation on it?

Depreciation is an allowable expense only when the property is used to produced income, in this case, as a rental.

Phil
Rule Your Retirement Home Fool

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113030 of 121219
Subject: Re: A good day Date: 4/8/2011 12:52 PM
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When I saw "ptheland" on the "Best of" list, I clicked because I thought, "Peter is a smart guy. It's worth my time to read anything he writes."

I don't know about "anything" he writes. Sometimes bits and pieces seem to be worthwhile.

Since nobody is living in that house now, is it possible to claim depreciation on it?

Not unless it is being rented out or somehow used to produce income.

--Peter

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Author: TheTortoise One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113031 of 121219
Subject: Re: A good day Date: 4/8/2011 2:23 PM
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Peter ... Ira ... et al. ... you guys (ladies included) do good work!


Sadly, it's not all that common in today's world (or maybe it never was) -- and I'm proud to know you.

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Author: lethean Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113032 of 121219
Subject: Re: A good day Date: 4/8/2011 2:43 PM
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Peter, Ira, and others ...

More stories. Please?

ML

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113033 of 121219
Subject: Re: A good day Date: 4/8/2011 3:13 PM
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More stories. Please?

Well, 90% (or 95%, or maybe 99.9%) of them are more like:

The client came in on time, brought most of what I needed to do their return. Gave me the missing item a few days later. Their taxes ended up being about what they expected. They thank me for my time, pay my fee and leave, never to be seen again until next year.

Somewhat less than half include some whining and moaning about how badly the government does at spending tax money responsibly. I politely nod my head and continue with the tax return.

All in all, not very good as a story.

--Peter

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113034 of 121219
Subject: Re: A good day Date: 4/8/2011 3:44 PM
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lethean
Date: 4/8/2011

"Peter, Ira, and others ...

More stories. Please?"


I like the stories, too, but at this time of year, that is asking a lot.

Just my $0.02.

Regards, JAFO

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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113035 of 121219
Subject: Re: A good day Date: 4/8/2011 5:28 PM
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Two client lines that stand out in my mind from my one season doing tax prep are:

"How fast can I get my rapid refund? I've got a truck payment to make."

And

"No tengo número de Seguridad Social."

--fleg

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Author: nwvic Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113036 of 121219
Subject: Re: A good day Date: 4/8/2011 8:42 PM
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I like the stories, too, but at this time of year, that is asking a lot.

Agreed. Ask again after the 18th. Or maybe after the 19th so the hangover is better. ;-)

Foolish regards,

Vic
ancora imparo

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Author: bookie71 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113042 of 121219
Subject: Re: A good day Date: 4/9/2011 11:24 PM
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The best thing about this occupation is that you get paid to talk to folks you really like at least once a year. I have some I talk to for several hours (I don't charge for b/s or hunting & fishing stories).

I am now doing some of the great grandkids of my older clients - how great it is. :-)

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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 113121 of 121219
Subject: Re: A good day Date: 4/14/2011 9:39 PM
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Peter, that one widow makes it worth what you do. I always felt that way when I uncovered situations similar to this, wherein the taxpayer, by amending two previous years' returns, would get a windfall. I know you have a fan for life! In addition, just think of all the people she is going to tell about this and you!!!

Congratulations!!!

Donna

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