Matthew J. Mcbride's Answers

I UNDERSTAND SUBCHAPTER S CORP CAN'T BE INCLUDED IN A LIVING TRUST. HOW SHOULD SUB S CORPS. BE HANDLED AS RESPECTS A TRUST?

Actually, a living trust, as that term is usually used, is a grantor trust for income tax purpose during the live of the grantor. As such, the trust is disregarded for income tax purposes, including a determination of eligibility for S corporation status. So long as the trust is a grantor trust (living trusts, typically are), and the grantor is an eligible S corporation shareholder, there is no problem with the trust owning a portion of an S corporation. Care needs to be given to the...

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Is it necessary to file Federal Income tax and WI state income tax forms on an irrevocable trust that earned only $295 in income

There is no requirement to file a Form 1041 (federal income tax return for a trust) if the gross income is under $600 (see the instructions to Form 1041, page 4 under "Who Must File"), and there is no taxable income. As a practical matter, it might be a good idea to file the return, even if one is not required. I would not guarantee that the IRS wouldn't send a notice if the trust has filed in the past, and does not file for this year. As for Wisconsin, I don't know the answer. IRS...

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Is it to my advantage to open a LLC or C Corporation or S Corporation, or none at all?

It is very difficult to give off the cuff advice about what, if any, legal entity someone should form. There is a lot that needs to be known about your income level, your plans as far as having health insurance, a retirement plan, employees, etc. in the future, your exposure to liability.... Based on your facts, it really sounds as if you should be categorized as an employee and have taxes withheld from your pay (which would probably be less tax for you, if the "employer" is paying all...

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Can I sell my house in monthly payments in the form of a no intrest loan.

If you claim that there is no interest on these payments, the IRS will argue against that notion (and so would my inner-accountant). In reality, what you're doing is selling your home for less than what you claim, and collecting interest. Internal Revenue Code Section 483 and Section 1274 specify that some portion of the payments you are receiving will be taxed as interest income (imputed interest), not as captial gain, or gain on the sale of a primary residence, subject to the exclusion you...

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Payable on death accounts

First, I am only licensed in Michigan, and do not pretend to know the laws of every state. That being said, generally a Will does not direct where POD accounts go. These designations on bank accounts (at least here in Michigan) cause the accounts to pass outside of probate. The Will only directs how probate assets are adminstered. I would be surprised if anyone other than your step-father has a legal right to those accounts.

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What forms, documents or letters must be submitted by the donor & recipients for tax accounting purpose for "gifting?"

Generally, none. I am answering from a pure federal transfer tax perspective here, and not from a Medicaid or government assistance perspective. The person making a gift is required to file a Form 709 for any gifts which exceed $13,000 in 2009 to any one recipient. If the gifts are for $13,000 or less, per recipient, there is no required reporting. If the gifts are of something other than cash, without a readily ascertained value, there may be strategic advantages to filing Form 709, but...

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Do I still have to pay 2008 taxes for an S-corp if I sold my shares in May 08?

The simple answer is yes, you are responsible for the tax items of the S corporation through the date of sale. You should have received (or will be receiving) a K-1 for your share of the S corporation profits and losses through the date of sale. Whether you took salary or distributions from the company is completely irrelevant to this analysis. As for the loan, it depends on how the sale trasaction was structured. I'd get a good CPA, who is experienced with S corporations, and make sure...

I'm purchasing life insurance. I would like to pay by gifting the premiums to my adult children. them own it? or irrivocable?

If estate taxes are really a concern (I think a lot of people incorrectly believe they will have an estate tax liability upon death, but that is something a tax professional would need to advise you on, based on your specific situation), then you may want to talk to an estate planning attorney about an irrevocable life insurance trust ("ILIT"). These trusts are designed to do what you seem to be attempting to accomplish here.

Is there a tax liability in selling house, with life time occipanvcy for $118,000.Husband 78, wife 68. On tax form?

I assume that by "lifetime occupancy" you are saying that you have owned the home and lived in it, as your primary residence, for at least 2 of the past 5 years, correct? There is an exclusion from taxable income, equal to $250,000 ($500,000 for married couples) of gain on the sale of a primary residence. If you've owned the home and lived in it for at least 2 of the last 5 years, you can probably exlude up to $500,000 of gain. With a selling price of $118,000, you obviously do not have...

Can I sue a tax consulting firm that I hired to represent me at an IRS exam for which they failed to adequately represent me

Ronald, the name of one organization sprung into my mind when I read this as well. The sad thing is, I have had clients say to me, "but this guy from [national company] says they can do things you have said can't be done". To a desperate person in tax trouble, it might seem like a good idea to buy into the promises, but...read the original question here.