@tagteam wrote:   Since, as a result of the gift, the brothers will take their father's basis, holding period, and depreciation deduction (recapture liability), why would it not follow that they would also have to take their father's type of use into consideration? Is there authority stating otherwise? Because I don't see anything in section 121 that would apply the tacking rules to the non-qualified use rule.  It just says    " (B) Gain allocated to periods of nonqualified use For purposes of subparagraph (A), gain shall be allocated to periods of nonqualified use based on the ratio which— (i)  the aggregate periods of nonqualified use during the period such property was owned by the taxpayer, bears to (ii)  the period such property was owned by the taxpayer."   I agree the intent was probably to prevent the owner of a rental property from converting a taxable sale into a less-taxable sale by gifting the property.  But I don't see it in that section.  (Curiously, the inherited step-up rules supersede all of this and would make the sale completely nontaxable no matter how much depreciation was taken, so one could equally ask from the other side, if Congress wants to tax taxpayer B for non-qualified use by taxpayer A, why didn't Congress carve out an exception in the step-up rule.)   Also, there is the gift of equity to consider.  If the father has exceeded his gift exclusion limit, then the gain gets taxed twice, once as a gift and once by the operation of the non-qualified period rule against the gift recipient.  That doesn't sound fair.   Bottom line, I figure that if Congress wanted depreciation AND the non-qualified use period to follow the property to the new owner, they should have said so.  As far as I can see it just says "the period such property was owned by the taxpayer" and these taxpayers won't have a non-qualified use during the time when they own it.    But I am not a lawyer nor an EA.  I almost kept myself out of this one, and I probably should have. ... View more

@tagteam wrote: @Hal_Al wrote: @AmeliesUncle  No citation.  I'm going by the cost basis, in a gift, being the giver's  basis; which I believe includes the giver's holding period, and depreciation previously  taken by the giver. Per Section 1223(2), the holding period of the donee would include the holding period of the donor provided the donee also takes the donor's adjusted basis per Section 1015(a).  I would tend to think, in that case, everything else would follow, including the type of use, but I cannot seem to locate any authority for that proposition (i.e., that the type of use carries over with the gift).   On the other hand, Section 1223(2) would appear not to be applicable in the event the FMV was used as the donee's basis. In that instance, the donee's holding period would appear to begin as of the date of the gift.   I don't see that as being an answer to whether the gain is subject to the non-qualified use rules under §121(b)(5), because section (b)(5)(B) only talks about ownership by the taxpayer, and not holding period. Certainly the brothers would have their father's cost basis, including depreciation to deal with.       Consider the following 3 situations.   (1) The father has used the property as a rental for 30 years, moves back into the home for 2 years as his main residence, then sells it.  Original cost basis was $100,000 with $20,000 allocated to land value, the property is fully depreciated.  Property sells for $500,000.  Due to the non-qualified period rules, the father can only exclude 20/32 of his gain (the 12 years between 2008 and 2020 are non-qualified).  The total gain is $480,000.  The first $80,000 is taxed as recaptured depreciation. Of the remaining $400,000 of gain, $250,000 is eligible for the father's exclusion and $150,000 is taxed as LTCG.   (2) The father's details are the same, but the father gifts the home to his sons, who live in the home for 2 years as their main home.  They qualify for the exclusion and the non-qualified period rules do not apply.  The total gain is $480,000.  The first $80,000 is taxed as recaptured depreciation. Of the remaining $400,000 of gain, it is all eligible for the exclusion, and assuming the brothers are each 50% owners, they can each exclude the $200,000 of gain on their share.  (But they each pay recapture on $40,000.)   (3) The father's details are the same, but the father gifts the home to his sons, who live in the home for 2 years as their main home.  They qualify for the exclusion but we will apply the non-qualified period rules in this example.   Due to the non-qualified period rules, they can only exclude 20/32 of his gain (the 12 years between 2008 and 2020 are non-qualified).  The total gain is $480,000.  The first $80,000 is taxed as recaptured depreciation ($40,000 per brother).  Of the remaining gain, $150,000 is eligible for the exclusion (half to each brother as LTCG) and $250,000 is eligible for the exclusion.   Certainly scenario 3 is closest to 1 in terms of how much money the IRS gets.  But section 121 still only says owner, not holding period. (Section 121 does cover depreciation in (d)(6).)     So go see an Enrolled Agent or other experienced licensed tax professional before you decide what to do. ... View more

@Critter-3 wrote: Make sure that they still withhold NY taxes on the bonus  so you are not in trouble and I hate to also mention that NY uses the total annual income figure to calculate the non resident taxes ... not fair but that is what it is.  Or just make an estimated payment online at the NY tax web site.  The maximum state plus city tax is slightly under 12%, unless your total income is more than $2 million.  If you made an estimated payment of 12% to the state, and it was too much, you would get a refund when you file your return.  ... View more

@Critter-3 wrote: Make sure that they still withhold NY taxes on the bonus  so you are not in trouble and I hate to also mention that NY uses the total annual income figure to calculate the non resident taxes ... not fair but that is what it is.  NY is not going to tax all the person's Florida income, but it will use the total income to determine things like the tax bracket and applicability of the standard deduction and personal exemption.  For example, if the bonus is $1000, and you had no other income, it would not be taxed in NY because it is less than the personal exemption. However, if your income from other states would put you in a certain NY tax bracket, then the bonus will be taxed at that rate.  ... View more

Unfortunately, this is one of the exceptions to the general rule that income is taxed when you receive it.  The bonus will be taxable in NYC since it was earned for work performed in NYC, even though it was paid after you moved away.   What happens is, for your 2021 tax return, you will file a non-resident tax return for NYS, on which you report and pay NY taxes on your NY-source income only.  If you also filed a tax return for your home state, you include the bonus as taxable income but your home state would give you a credit for the tax you paid in NY so you don't get double-taxed.  But since you will be moving to Florida and Florida does not have a personal income tax, this won't be an issue.   ... View more

Bad plan. You and your dad cannot avoid the tax consequences of his rental activities by putting the house in your name for two years.  Get competent legal and tax help before you do this. ... View more

It doesn't matter any more.  It is too late to re-e-file a rejected tax return.  You will need to print your return and mail it to the IRS, don't forget to also print and mail your state return to your state.  Fix the error if you know what it is, before you mail your returns, if you can.  If the rejection reason was something minor, like a wrong birthdate, the IRS will process your tax return anyway.  If it was something important, the IRS will contact you for more information.   ... View more

Under the tax code, every dollar you receive is presumed to be taxable income unless you prove otherwise.  If audited, I think you would have a tough case here.   However, this may not be self-employment income.  If you are "engaged in an ongoing trade or business" this is self-employment income.  You must pay income tax and 15% self-employment tax on the net profit, but you can deduct legitimate and reasonable business expenses.  If this is a hobby, you don't have to pay SE tax, but you can't deduct your expenses.   More on hobby or business is here. https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a-hobby/L5NClTTtK   If this is a hobby, you report it under other uncommon income, using any version of Turbotax.  If this is a business, you need a schedule C, and you have to use Deluxe or higher.  (If you are filing online and you want to deduct expenses against the income, you need the Self Employment version.) ... View more

The deadline has nothing to do with Tax Products Group.  The IRS will not allow consumer tax software packages to e-file after the final October 15 deadline.  You have to print and mail your tax return, or see a tax professional who uses professional level software that can e-file after October 15.   If you wish to use Turbotax, you will have to print and file your return by mail.  This method does not allow you to pay your fees by deducting them from your refund, so you will have to pay first with a credit or debit card.  You will then get your full direct deposit from the IRS with no subtractions from Turbotax for filing fees or service charges.  ... View more