Tax questions

[m2m]

Hello experts!  Your help, please!

Trying to help friends with below concerns.

1.  College courses taken winter term Jan-Mar 2012.  Very low AGI.  Better to take tuition deduction Form 8917?  Or education credit Form 8863?

2.  Single self-employed NYC resident, Schedule C income below combined standard deduction + exemption. Tax preparer did NYC -202S UBT return - is this required?

3.  NYC co-op apartment purchased 14 years ago was a second residence until changed to rental in January 2011.  Deprecation amount on Schedule E, 2011 tax year was based on 1997 cost basis.  Should it have been based on the FMV in Jan 2011? If yes, what to do? Also, what  for tax year 2012? (Not submitted yet, requested extension.)

I thank you very much!  My friends thank you very much!!

[mwcpa]

"1. College courses taken winter term Jan-Mar 2012. Very low AGI. Better to take tuition deduction Form 8917? Or education credit Form 8863?"

Run the numbers both ways to see... and look for state benefits that may exist....

2. Single self-employed NYC resident, Schedule C income below combined standard deduction + exemption. Tax preparer did NYC -202S UBT return - is this required?

NYC UBT is based upon the "schedule" C profits allocable to NYC.  There are "requirement" to file located here... www.nyc.gov/html/dof/html/business/ubt.shtml and www.nyc.gov/html/dof/downloads/pdf/12pdf/business_tax_forms/nyc-202-instr_2012.pdf
"For tax years beginning in 2009 or later, any individual or unincorporated entity that carries on or liquidates a trade, business,  profession or occupation wholly or partly within New York City and has a total gross income from all business regardless
of where carried on of more than $95,000 (prior to any deduction for cost of goods sold or services performed) must file an Unincorporated Business Tax Return."

3. NYC co-op apartment purchased 14 years ago was a second residence until changed to rental in January 2011. Deprecation amount on Schedule E, 2011 tax year was based on 1997 cost basis. Should it have been based on the FMV in Jan 2011? If yes, what to do? Also, what for tax year 2012? (Not submitted yet, requested extension.)

Depreciation basis is based on the "lower" of the FMV or the cost of the property when personal property is converted into business property. 

Examples.
Home was purchased in 1997 for 100K and there have been NO capital improvements (for ease)... in 2011 it was worth 1,000K.  The depreciation base is the 1997 price.
Home was purchased in 1997 for 1,000K and there have been NO capital improvements (for ease)... in 2011 it was worth 100K. The depreciation base is the 2011 FMV.

[m2m]

Good morning MW,

Thank you!  My friends thank you!!

On the NYC -202S UBT return:
    Tax preparer is an EA, claims to have been an IRS agent for many years; does a lot of     business because of these credentials.  The law you stated says UBT required for gross     income of $95K or more.  And this EA did a UBT for friend whose income was below     standard deduction and exemption, combined. Unbelievable!

Examples on the depreciation are great! Wish the basis was on the 2011 FMV; does not really matter because will give it all back when property is sold - correct?

MW - Thanks again for being on this board, for teaching/helping us, participants in this 'classroom'.  Have a great day!

[m2m]

Hello again MW,

    "1. College courses taken winter term Jan-Mar 2012. Very low AGI. Better to take tuition     deduction Form 8917? Or education credit Form 8863?"

    You advised to - "Run the numbers both ways to see... and look for state benefits that
     may exist.."

I was going to run the numbers both ways - but upon reviewing 8863 instructions, student does not meet the academic period/workload requirement, so cannot claim the Refundable American Opportunity Credit. 
* But can still qualify for the non-refundable education credit on form 8863 - correct?  
* In addition, can tuition deduction Form 8917 be claimed? Probably not, but thought better
   to ask.

Thank you so very much!

[mwcpa]

for education... one or the other in the same dollars, not both..

also, UBT... I often have those who are not "required" file actually file for a number of reasons... business loans, "extra" proof to show they are in business, the statute of limitations clock starts to run, other non tax related disclosure reasons, etc..... not being required does not mean one should not file it....

[m2m]

MW - You are the best!

Thank you.... and have a great day/week!!