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Posted by boostm3 on March 10, 2008, 10:58 am
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> taxpayer has, somewhat reluctantly, agreed to help her mother and aunt
> substantially remodel a small rental bungalow so that it might once again be
> rented. Aunt and mother stand back and do nothing, and taxpayer has all the
> interaction with the contractor, etc. Property is owned by mother and aunt,
> and not at all by taxpayer. Taxpayer will receive a small amount for her
> efforts, say $5,000.00. Is this self employment income to taxpayer? She is
> not in the business of renting property (this or others) owned by her, nor
> is she in the business of remodeling.
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, >>
> << nor can it used, for the purpose of avoiding penalties >>
> << that may be imposed upon the taxpayer. >>
> << >>
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what I generally do in these cases which have multiple interpretations
is enter it in turbo tax both ways, and see which comes out better for
myself, the tax payer. Seems to me you have 3 options:
1) Take it as a gift and do not report it at all,
2) Take it as income, but assuming your not in the building trades
profession, report it on line 21 as 'Other Income'.
3) Take it as Self Employment income. If you do, you may be able to
funnel other deductions under the Self Employment banner and in some
cases, it will reduce your taxes. But youll also likely have to pay
Self Employment tax in addition to Income Tax.
How is it possible to have the same income treated in 3 such different
ways? Well, I think youll find, over time, accountants would respond
to your question so that all three interpretations would be
represented.. And thats one of the problems with our tax laws.. theyre
very Ambiguous, and Interpretation is 90% of the game.. So, so long as
you can make a case and justify the way you handled the money from a
tax perspective, youll be ok.. At the worst, it may be Disallowed.
So, which should you do? Id probably take it as a Gift, and not
report it at all!
========================================= MODERATOR'S COMMENT:
Please delete all non-essential parts of the message you are responding to.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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