OT - almost $6,000 mistake

[Gretel]

Just sharing. I feel so blessed. This is the first time I am dealing with a sale of a residence that includes OIH (almost 50%). I divided all the numbers to report two sales, one with Sec. 121 exclusion, one as biz sales. There are other complications too such as the need to file form 3115. While I am mulling over the results my memory kicks in since years ago I heard somewhere that the IRS changed the rules for the sale of a residence with OIH. Puh, I almost made a very costly mistake. Now I am going to sleep over that tax return and will tackle the other complications tomorrow.

[RitaB]

Good for you

That's why I won't do returns with a client present. I don't think of everything I need to think of sometimes. Good for you, Gretel.

My "whew" moment: I lost four sheets of paper I needed to do three partnerships for an attorney. No clue what happened to them. I searched for a couple of hours, no luck. First place I looked was all the folders stacked up where I am waiting on people to bring missing items. (Some mumbling ok cussing was heard.) Even went thru the trash.

Anyway, I called him and fessed up. He laughed and said, "Rita, don't give it another thought. If I had a nickel for every time I misplaced something, I would lose the nickels, too. I'll fax you another copy."

Grace is just most wonderful thing, and I sure needed it.

[Gretel]

I sure have done this plenty of times, it is such an awful feeling. Twice in my 12 years of being in business did I give my file to the client along with their own stuff. Second time happened this year with a new very nervous, picky client. Client left, I went to the bathroom, came back to finish up and e-file the return and her file was nowhere to be found. I searched everywhere and just hoped she had it, which she did.

[Lion]

I wrote a lengthy email with questions to a client. Received back her forwarded email from 19 March where she'd given me most of that info. I'd flagged it in red back then, but didn't print it out. Very embarrassing. Emailed her back how sorry I was for the confusion. Still needed to know the FMV and "new" values for her Goodwill donations, though. (Hey, she was rushing me!) Again, why I sleep on it and proofread the next day.

[geekgirldany]

It is nice when you have a whew! moment. I've had my few this year.

[Roland Slugg]

I heard somewhere that the IRS changed the rules for the sale of a residence with OIH.

Well, I believe it was Congress who changed the rules, but you're right. Now the T/P only reports gain on an otherwise excludable sale of residence equal to the depreciation taken for rental or business use of the home (including OIH) since May 6, 1997.

This applies only if the business use was of part of the residence building. If there was a separate, stand-alone building on the same land, and it was used entirely for business or rental purposes, then you do have to allocate the selling price as if there were two separate sales, and the sale of the business structure is taxable.

[Gretel]

Thanks for your caution, Roland. Things are overlooked easily. It was within the same building.