Based on your specific situation with the significant income difference ($142k vs $24.3k) and each having custody of your biological children, I'd strongly recommend running the numbers both ways before deciding. The income disparity might initially make MFS seem attractive, but you'll likely lose more in credits than you'd save. Key things that will hurt you with MFS: no Earned Income Credit (which your wife might otherwise qualify for), no education credits if either child is college-bound, reduced Child Tax Credit benefits, and the requirement that if one spouse itemizes, both must itemize. Since each child is now living with their biological parent, you can each claim your respective child as a dependent regardless of filing status. However, the Child Tax Credit phases out at much lower income levels for MFS filers. Given that you're living separately and have custody arrangements already sorted, you might benefit from consulting a tax professional who can model both scenarios with your actual numbers. The "married filing separately" vs "married filing jointly" decision in separation situations often comes down to very specific calculations that generic advice can't capture. Also keep in mind that if you do end up divorcing, this year's filing decision could impact next year's estimated payments and withholding calculations.

One additional consideration that might be relevant to your situation - if either of you contributed to retirement accounts like traditional IRAs or 401(k)s, the deduction limits are significantly different for MFS status. For married filing separately, the ability to deduct traditional IRA contributions phases out completely at much lower income levels if either spouse has a workplace retirement plan. At your $142k income, you'd likely lose the ability to deduct traditional IRA contributions entirely if filing separately (assuming you have a 401k at work). Your wife at $24.3k would still be able to make deductible contributions, but the overall household retirement savings tax benefits could be reduced. Also, since you mentioned you're in the process of separating, don't forget about the dependency exemption aspect. While you can each claim your biological children as dependents, make sure you coordinate who claims any other potential dependents or qualifying relatives to avoid conflicts with the IRS. The timing of your separation during the tax year can also affect certain deductions - for example, if you paid any medical expenses for your wife or her daughter before the separation, those might only be deductible if you file jointly. Same goes for any educational expenses you might have paid on behalf of her daughter.

Just to add some clarity for everyone asking about documentation - the IRS Publication 529 specifically outlines what records you need to keep for gambling losses. For online platforms like Robinhood, your account statements are usually sufficient IF they clearly show the dates, amounts, and nature of each transaction. However, if you were using prediction markets or betting platforms that don't provide detailed tax reporting, you should definitely create a gambling log. Include the date, type of wager, amount bet, amount won/lost, and the platform used. Keep screenshots of your betting history if possible. One thing I haven't seen mentioned yet - if your total gambling losses exceed $5,000 in a year, you'll need to file Form 4797 in addition to reporting on Schedule A. This is often overlooked but can cause issues during an audit. Also remember that even if you can't deduct all your gambling losses this year (because they exceed your winnings), you can't carry them forward to future years like you can with capital losses. Gambling losses are use-it-or-lose-it each tax year.

One thing I'd add that might be relevant for your Robinhood situation - be very careful about wash sale rules if any of your election bets involved buying and selling the same or substantially identical securities within 30 days. This can actually disallow some of your capital losses temporarily. I made this mistake last year when I panic-sold some defense stocks right before the election, then bought them back a week later thinking I was being smart. The IRS wash sale rule kicked in and I couldn't deduct those losses on my 2024 return - they got added to my cost basis instead. It's a common trap that a lot of people fall into during volatile periods like elections. If you were doing rapid trading on similar securities or ETFs based on election predictions, definitely review your transactions for potential wash sales. Robinhood should flag these on your 1099-B, but it's worth double-checking since it can significantly impact your deductible losses.

This thread has been incredibly helpful! I'm dealing with a similar partnership property distribution situation and had no idea about Form 8308 requirements or the Section 754 election implications. One additional consideration I'd mention - make sure you review your partnership agreement's language around distributions before proceeding. Some agreements have specific valuation methods or approval processes that must be followed, even for distributions at book value. We discovered our agreement required unanimous consent for any property distributions, which we had overlooked initially. Also, regarding the K-1 footnotes, I found it helpful to include a brief description of the property being distributed (e.g., "Distribution of Unit 2A, 1-bedroom apartment") in addition to all the financial details everyone has mentioned. This makes it crystal clear what specific asset was distributed, which can be important if the IRS has questions later or if the partner needs to reference the distribution for future tax purposes. The documentation suggestions about getting an appraisal are spot-on. Even though it's an additional expense, it's much cheaper than dealing with an IRS challenge down the road if they question your valuation.

This is exactly the kind of situation where having a solid understanding of partnership tax law becomes critical. I went through a similar property distribution two years ago with our 5-partner real estate LLC, and there are a few additional considerations that haven't been fully addressed yet. First, regarding the Section 734 adjustment that @KylieRose mentioned - even if you don't have a Section 754 election in place, you should seriously consider whether making it now makes sense. The election applies to the tax year it's made, so you could still benefit from basis adjustments on this distribution. With 15% appreciation, the math might work in your favor, especially if you have other depreciable assets in the partnership. Second, don't overlook the potential for "hot assets" in your distribution. Even though you're distributing real property, if there are any Section 1245 or 1250 recapture amounts, or if the property generates ordinary income, there could be complications. Make sure your tax professional reviews whether any portion of the distribution could be treated as ordinary income rather than capital. Finally, consider the timing of this distribution relative to your partnership's tax year end. If you're distributing near year-end, you'll want to make sure all the depreciation allocations are properly calculated through the distribution date. This affects both the partnership's final depreciation deduction and the basis of the distributed property. The K-1 reporting everyone has discussed is spot-on, but I'd add that you should also consider providing the departing partner with a detailed statement showing exactly how their final capital account was calculated. This becomes invaluable documentation if there are ever questions about the transaction.

Great thread! I've been wrestling with Form 6252 calculations myself. One thing I learned the hard way is to always double-check whether you're dealing with a "qualifying installment sale" versus a regular installment sale - the rules can be different. Also, for anyone still struggling with the calculations, don't forget that if the installment sale involved depreciation recapture, that portion gets recognized in the year of sale regardless of when payments are received. This can throw off your principal vs. interest allocations if you're not accounting for it properly. The IRS also has some specific rules about minimum interest rates (imputed interest under Section 483) that kick in if the stated rate is too low. Worth checking if your sale meets those thresholds, especially for family transactions or sales without adequate stated interest.

This is such a comprehensive thread - thank you everyone for sharing your experiences! As someone who's been preparing returns for about 8 years, I can definitely relate to the confusion around Form 6252 calculations. One additional tip that might help: I always create a reconciliation worksheet that ties back to the original sale agreement. This helps catch errors early and makes it easier to explain the calculations to clients. I track the original sale price, down payment, total contract price, and gross profit percentage, then verify that each year's calculations tie back to these base numbers. Also, for anyone dealing with balloon payments or other non-standard payment structures, remember that the gross profit percentage stays constant throughout the installment period, but you need to recalculate the interest portion for each payment based on the outstanding principal balance at that time. The key is consistency - whatever method you use in year one, stick with it for the entire installment period unless there's a compelling reason to change (like correcting an error). The IRS really doesn't like to see calculation methods changing randomly from year to year. Has anyone dealt with situations where the buyer defaulted partway through the installment period? The calculation adjustments for repossessions can get really tricky!

I went through something very similar with my S-corp last year - had a massive negative adjustment that made me panic. Turns out it was due to inconsistent tracking of shareholder loans and distributions over multiple years. The key thing I learned is that this adjustment is essentially the IRS form trying to force your balance sheet to balance when there are discrepancies between your books and tax reporting. In my case, we had been treating some owner draws as distributions when they should have been recorded as loan repayments, which created a snowball effect over time. My advice: Don't just ask your CPA to explain it - ask them to show you a detailed reconciliation of every component that makes up that -$1,015,382. They should be able to break it down line by line. If they can't or won't do that, it might be time to find a new CPA who specializes in S-corp taxation. Also, this is a good reminder to track your shareholder basis carefully going forward. That large negative adjustment could potentially impact your basis calculation, which affects how much you can take in distributions without tax consequences.

I've been through this exact scenario with my S-corp and that negative adjustment definitely warrants attention. In my experience, these large adjustments usually stem from one of three main issues: (1) distributions that weren't properly tracked as reducing shareholder basis, (2) inconsistent depreciation methods between book and tax records, or (3) shareholder loans that weren't correctly classified. The good news is this adjustment itself won't directly impact your current year tax liability since S-corp income flows through to your personal return via K-1. However, it could significantly affect your shareholder basis calculation, which is crucial for future distributions and loss deductions. I'd strongly recommend requesting a detailed breakdown from your CPA showing exactly what transactions or discrepancies are creating that -$1,015,382 figure. A competent CPA should be able to provide a line-by-line reconciliation. If they can't explain it clearly, that's a red flag about either their S-corp expertise or the quality of your underlying bookkeeping. Also, consider having them prepare a comprehensive shareholder basis schedule going back to when you elected S-corp status. This will help ensure you're properly tracking your basis for future tax planning and distribution decisions.