Schedule F for MFJ H&W in a community property state - Critical Diagnostic ref #11350

Forum|Forum|2 years ago
October 3, 2023
1 reply
10 views

Hi, all,

I have a client with a first-year schedule F and a critical diagnostic that says "taxpayers who wholly own a farm as community property...may treat the farm as a single farm..."

This is my case. If it were otherwise, I would have to file two schedule F's or a partnership return. Next year it will be in an LLC taxed as a partnership.

How do I resolve the diagnostic, or will I be able to e-file this return despite the diagnostic?

Thanks, Michael

Lacerte Tax

This topic has been closed for replies.

Best answer by Karl

For the future for us to help you better, can you give the diagnostic # and the whole text of the diagnostic? The easiest way I've found to get the whole text selectable to copy-paste is to PDF the diagnostics report (or a preparer file copy). Then we'd be better able to weigh in on whether that diagnostic could be suppressed in efile.

If I understand your request correctly, is this activity 1) profitable and 2) subject to SE tax? Is your client in a community property state?

If there aren't SE tax considerations, can you just choose to assign it to either the husband or the wife? I'd ask the client if they have a preference.

If there are SE tax considerations, I'd probably just reenter a second SchF, apportion 50% and give one to the husband and one to the wife.

K

Karl

Answer

Intuit Community Champion

For the future for us to help you better, can you give the diagnostic # and the whole text of the diagnostic? The easiest way I've found to get the whole text selectable to copy-paste is to PDF the diagnostics report (or a preparer file copy). Then we'd be better able to weigh in on whether that diagnostic could be suppressed in efile.

If I understand your request correctly, is this activity 1) profitable and 2) subject to SE tax? Is your client in a community property state?

If there aren't SE tax considerations, can you just choose to assign it to either the husband or the wife? I'd ask the client if they have a preference.

If there are SE tax considerations, I'd probably just reenter a second SchF, apportion 50% and give one to the husband and one to the wife.

*If this (or another answer/reply) solves your problem, please click "Accept as Solution" to get this post out of the "Unanswered" queue of posts.*

M

mhlesterAuthor

Level 4

Hi, Karl,

Thank you for your reply.

The farm (actually, a ranch being populated with various livestock) is not yet generating revenue so there is no profit. I believe the activity is subject to self-employment tax, but the taxpayer has no net self-employment income. The client is in Texas, which is a community property state.

Assigning it to one or the other of the spouses removes the diagnostic.

abctax55

Level 15

Rather than assigning it to one/or the other.... why not pick 'joint'? It's the third choice, right after taxpayer or spouse.

HumanKind... Be Both

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