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Technical topics regarding tax preparation.
#1
jon  
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minnesota
Medical professional basically closed his practice in the fall of 2017. January of 2018 we removed ourselves from performing services, he owed money and was not really able to explain what and why of what was going on. He understood signed the agreement and we left. He had contracted for a bunch of leasehold improvements and the contractor had sued him for payment and we had been served and gave the information requested to the contractor's attorney (previously discussed it with my insurer). Two weeks ago he showed up at the office with a certified check for the balance owed and asked if we could do business and personal returns for 2017 and 2018. I said we could if he could get the information to do it. He walked away from his medical practice - debt for the leaseholds and the leaseholds the main thing. He said he assumed the 1245 property was turned over to the note holder or the landlord, but he was never informed of the transaction??? He thought there was a sheriff sale??

Per the county records there was a sheriff sale of his house which listed the mortgage holder and creditors as getting the home in May, 2019.

HE NEVER USED AN ATTORNEY THROUGH ANY OF THIS?? That was one of the reasons I left. He claims he did not get any information- the county shows the foreclosure for the mortgage was at $121,000 - the mention of other creditors I think means when it is sold the "other" creditors get to split the excess, should be $200,000+. This will all take place in 2019. There is no personal tax on his residence - the only refinance was 10 years ago to put an addition on.

Can I just clear out all assets against all liabilities(notes) at the end of 2018? Cash Basis taxpayer - by the end of 2018 there should be almost 0 except a State MNCARE tax left over from 2017.

Is there anyway to look for information on the business assets and get any accounting for them - do I need it?

2019 - amount not known to me on subsequent sale of his residence that may have gone to other creditors - does that give him basis in his S Corp (business operation). He never filed bankruptcy so he may hear from creditors after home proceeds, and 1245 property settlements are settled? I think the landlord is the only one who would be left??

His wife died in 2019 and his mental state was probably affected by that, she was in memory care for five years.

Any ideas of where to look for information would be holpful!!

Thanks
 

#2
mscash  
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28-Apr-2014 1:26pm
Location:
Modesto, California
I think he should consult a bankruptcy attorney and a family counselor to get his head back on straight and his affairs in order.
 

#3
jon  
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1535
Joined:
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Location:
minnesota
How would that affect 2017 and 2018? 2019 possible help with bankruptcy if any gains - I think the business gains or loss will be calculated at the S Corp level. You do have a point though in 2019 if I can get the details of what got paid to the S Corp creditors does that change the position in the S Corp?? I thought the S Corp would show the sale price as debt that was not paid and write off the assets basis against it. I do not think the gain would be much - but to the extent my guy paid those debts on home liquidation that could be a loss - 2019 not much income. In 2018 and 2019 he started withdrawing from retirement funds - not chased after anything else by creditors. Although they probably were waiting for house sale that was probably this month.

I have talked to his children and they have said there is nothing you can do. The daughter was not pleased with father at all, but no one told me the entire story..

I will keep digging.

Thanks
 

#4
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1174
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21-Apr-2014 7:09pm
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NC
Curious.... seems to me if you do a simple close of books as if he went under, there should be a large loss.

he has most likely no income.... where is the risk to simply attempt to help him out?

I feel like we as accountants should help people in need , to an extent.

I have done jobs like this over my career. Never liked it but it has to be done. Let’s not talk about accuracy.

It’s a given, accuracy is not possible but a large loss or small loss , rarely matters in cases like this.
 

#5
jon  
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1535
Joined:
3-May-2014 11:11am
Location:
minnesota
I think a close out, really 1120S for 2017 and 2018, can be done thanks to the banker that I know who sent us bank statements. My client owed a bunch for leasehold improvements and a corresponding debt(not to landlord, but contractor) that he was sued for. I do not think a large loss, but it would be nice to now when and if and how the debts were settled. I do not think I will go with anything final, but will probably resign at the end - maybe no one will ever know what really has happened. The friendly banker said why did I not contact the attorney for the contractor (who I know) for details - no thanks. My guy just disappeared from the business scene for a year plus, did not even tell suppliers, people with direct payments, or customers. If nothing hits the checkbook and clears - that is all I am recording. The contractor if not satisfied by what they got has a suit against the landlord who probably will if necessary can go after my guy. I think the building he was in was for medical - there is no doubt his space was made one of the nicest and more easily rented. I think everything was/will be handled from that end. My job do the 1120Ss on the cash basis - not marked final(maybe).
 


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