I've been following this thread closely as I'm dealing with a similar mixed-use conversion situation. One thing I want to emphasize that hasn't been mentioned enough is the importance of getting a professional appraisal at the time of conversion. When I converted part of my rental property to personal use, my CPA strongly recommended getting an official appraisal to establish the fair market value of each portion at the conversion date. This documentation became crucial for calculating the proper basis adjustments and will be essential when I eventually sell. The appraisal cost me about $500, but it's already saved me potential headaches. The appraiser was able to break down the value by floor/section, which made the allocation between business and personal use much cleaner for tax purposes. Without this documentation, I would have been making educated guesses that could easily be challenged in an audit. For anyone dealing with these conversions, I'd highly recommend budgeting for a professional appraisal. It's a small cost compared to the potential tax implications of getting the basis calculations wrong.

Great question about the appraisal timing and specialization! I actually used a certified appraiser who had experience with investment properties and specifically mentioned tax-related valuations when I called around. This was important because they understood the need to allocate values between different portions of the property and document the methodology clearly. I was fortunate to get the appraisal done within about 30 days of my conversion date, but my appraiser mentioned that retrospective appraisals are possible if you need documentation after the fact. They can use market data from around the conversion date to establish what the fair market value would have been at that time. Obviously, it's better to get it done contemporaneously, but don't panic if you're realizing you need this documentation months later. The key is finding an appraiser who understands that this isn't just for lending purposes - it's for tax compliance. They need to be comfortable with the level of detail and documentation the IRS would expect. When I called around, I specifically asked about their experience with Section 280A mixed-use properties and tax-related valuations. The ones who knew what I was talking about were definitely the right choice! The $500 I spent has already paid for itself in peace of mind, and I know it will be invaluable when I eventually sell and have to deal with the depreciation recapture calculations.

Great advice from everyone here! Just to add another perspective - I went through something similar with a workers' comp settlement in 2021. The IRS sent me a CP2000 notice about 16 months after I filed, even though workers' comp settlements are clearly non-taxable under IRC Section 104(a)(1). What really helped me was having everything organized beforehand like Ethan suggested. I had copies of the settlement agreement, the court order approving it, and a letter from my attorney explaining the tax treatment. When the notice came, I was able to respond within a week with all the supporting documentation. The key thing I learned is that the IRS automated matching system doesn't distinguish between taxable and non-taxable income reported on 1099s - it just sees a mismatch and generates a notice. But once you provide the proper documentation showing why the income isn't taxable, they usually close the case pretty quickly. Mine was resolved in about 6 weeks after I sent my response. Don't stress too much about it - you have legitimate grounds and good documentation. Just be prepared to explain your position clearly if they do contact you.

I'm dealing with a similar situation right now! I received a personal injury settlement in 2023 and my attorney issued a 1099-MISC even though we both agreed the settlement wasn't taxable. Reading through all these responses has been incredibly helpful - especially the advice about organizing documentation now rather than waiting. One thing I'm curious about - has anyone here actually tried filing an amended return proactively to include the 1099-MISC with an explanation, rather than waiting for a potential CP2000 notice? I'm torn between being proactive and just waiting it out like most people seem to suggest. My new CPA says either approach is fine, but I'm leaning toward waiting since there's no additional tax due anyway. The timeline everyone's mentioned (1-2 years for notices) actually makes me feel better. At least I know roughly when to expect something if it's coming, and I can use that time to get all my documentation perfectly organized like Adaline and Effie described.

Great question! I actually dealt with this exact scenario when I helped set up a promotional sale for a local retailer. The key thing to remember is that sales tax is calculated on the actual selling price, not the original retail price. For your 1-cent item with a 7.25% tax rate, the calculation would be $0.01 × 0.0725 = $0.000725, which rounds to $0.00. So effectively, no sales tax would be collected on that individual penny item. However, make sure you understand your state's specific rounding rules - some states round at the line-item level while others round at the total transaction level. Most modern POS systems handle this automatically, but it's worth double-checking your settings. Also, keep good records of your promotional pricing for your own business analysis, even though from a tax standpoint it's treated just like any other sale. The promotional price is your actual revenue for tax reporting purposes. Good luck with driving foot traffic to your shop!

This is such a timely question! I just went through this exact situation with my small electronics repair shop when I did a "penny part" promotion last month. What I learned is that you're absolutely right to think about this carefully - the tax calculation on ultra-low prices can be confusing. In my experience, most POS systems handle this by calculating tax on the total transaction amount and rounding to the nearest cent. So your 1-cent item at 7.25% would indeed result in zero tax collected for that individual item. However, I'd recommend calling your state's sales tax department to confirm the specific rounding rules in your jurisdiction, since they can vary. One tip: I found it helpful to run a few test transactions through my POS system before launching the promotion to see exactly how it handles the calculations. That way you'll know what to expect and can explain it to customers if they ask. Also, keep detailed records of the promotion period for your own business analysis - it's useful data even if the tax implications are minimal. The promotion worked great for driving foot traffic, by the way! Hope yours does too.

Has anyone used Vanguard or Fidelity for their solo 401k or other small business retirement plans? Do they help with setup?

I went through this same decision process last year for my S Corp. After researching extensively and consulting with a retirement plan specialist, I ended up going with a Solo 401(k) instead of a Keogh Plan. Here's what I learned: Keogh Plans are largely obsolete for S Corps. The term "Keogh" technically refers to qualified plans for self-employed individuals, but since S Corp owners are employees of their corporation (even if they're the sole owner), you don't qualify for traditional Keogh arrangements anyway. For S Corps, your main options are: 1. Solo 401(k) - Simple setup, high contribution limits, minimal admin costs 2. Traditional 401(k) with profit sharing - If you have employees 3. SEP IRA - Easy but lower contribution limits 4. Defined benefit plan - Complex but highest contribution potential The Solo 401(k) ended up being perfect for my situation. I set mine up through Schwab in about 2 weeks, and I can contribute up to $69,000 annually (2024 limits) between employee deferrals and employer contributions. No Form 5500 filing required until assets hit $250k. Skip the Keogh research rabbit hole - focus on Solo 401(k) vs. other modern options that actually apply to S Corps.

One thing I'd add that hasn't been mentioned yet - make sure to check if Colombia has any specific inheritance tax or reporting requirements that could affect the timing or structure of the inheritance. Some countries require certain paperwork to be filed before assets can be transferred to foreign heirs. Also, since you're dealing with beachfront property, consider whether there might be any restrictions on foreign ownership in Colombia that could complicate the inheritance process. Some countries have limitations on non-residents owning coastal property. It might be worth consulting with a Colombian attorney or tax advisor who specializes in cross-border inheritances to make sure everything is handled properly on both sides. The last thing you want is to have compliance issues in Colombia that could delay or complicate receiving the inheritance, especially when you're trying to plan for US reporting requirements. Good luck with everything - foreign inheritance can be complicated but it sounds like you're being proactive about understanding the requirements!

Just wanted to add another perspective on the timing aspect that might be helpful. When my father-in-law passed away in the Philippines, we discovered that the fair market value for US tax purposes is determined on the date you actually receive the inheritance, not when the person passes away or when the will is read. This ended up being important because there was about an 18-month delay between his death and when we actually received the property due to Philippine probate procedures. The property value had increased significantly during that time, which pushed us over the $100k threshold for Form 3520 reporting. So even though your husband's estimated share is currently around $80k, if there are delays in the Colombian inheritance process and the property appreciates in value, you might end up crossing that reporting threshold by the time you actually receive it. It might be worth keeping track of the property's value over time and having a plan for Form 3520 filing just in case. Better to be prepared than caught off guard if the inheritance ends up being larger than expected when it's finally received.