This had me stumped

It is becoming more difficult finding time for blogging now that the tax season is moving into high gear.

To make things more difficult, I’ve had two never-before-encountered tax situations arise for two of my clients.

DROUGHT-RELATED SALE OF LIVESTOCK
One client bought a half interest in a cattle business and they formed a new Limited Liability Company. A few months afterward there was a drought and they had to sell off a large part of the herd. This caused a recovery of my client’s investment, but created a potential taxable gain. There is a provision, however, that, under certain conditions, a drought-related sale of livestock qualifies as an involuntary conversion and enables the sellers to avoid paying tax on all or part of the the gain if they reinvest in replacement livestock within a specified time. A lot of research was necessary for this situation.

CANADIAN FORM NR4 INCOME FROM ESTATE
Another client had a Canadian Form NR4 which baffled me. I finally consulted with a Canadian accountant who explained that one line represented Canadian Taxable Income and Canadian Tax withheld. Another line represented U.S. Income and U.S. tax withheld. I decided that it should go on Schedule E, page 2 as Income from a Trust or Estate, but assumed that there would be a problem since a Canadian Estate would not have a U.S. ID number. The Canadian accountant said they probably did have a U.S. ID.

Later when I was looking at the Form again, I discovered a nine-digit number just below the address of the company that issued the form—so that solved my dilemma.

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This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.