The IRS is so backed up rn its not even funny. My friend works there and says they're still processing returns from last summer 😬

Ugh, I feel your pain! Been dealing with a similar 810 freeze since April and it's absolutely maddening. The fact that your transcript shows everything processed correctly but they're still holding onto $6,541 is just cruel. At least you got the in-person verification done - I'm still waiting for my appointment. Have you tried reaching out to your congressperson's office? I know it sounds extreme but sometimes they can light a fire under the IRS when normal channels aren't working. The taxpayer advocate service might also be worth a shot since you're going on almost a year now 😤

Has anybody used TurboTax to handle this kind of mixed-use property situation? I'm wondering if it can correctly track the suspended passive losses from year to year when a property changes from full rental to mixed-use...

I want to add another important consideration that hasn't been mentioned yet - the short-term rental classification could actually work in your favor for future years. Since you mentioned most rentals will be weekend getaways averaging less than 7 days, this income would be classified as non-passive under IRC Section 469(c)(7) if you provide substantial services. If you're actively managing the property (cleaning, maintenance, guest services, etc.) and the average rental period is 7 days or less, the rental income becomes ordinary business income rather than passive rental income. This means you could potentially use those suspended passive losses from last year against OTHER passive income sources, while treating your current short-term rental as active business income. However, this creates a mixed situation where your prior losses remain passive (from when it was traditional rental) while current income is active - so they still can't offset each other. But it might open up better deduction opportunities for current year expenses and depreciation since you'd be treated as actively engaged in the rental business. Worth discussing with a tax professional who understands both passive activity rules AND short-term rental classifications!

Anyone know if the tax treatment is different for federal vs state settlements? I got both from my case.

I went through this exact situation about two years ago with a $85k wrongful termination settlement. Here's what I learned the hard way: First, don't wait for your former employer to send tax forms - they might not, or they might send them late. My employer didn't send anything until I contacted them in February asking about it. The key thing is getting a clear breakdown of what each portion represents. My settlement had: - $45k for lost wages (taxed as regular income, got a W-2) - $25k for emotional distress (taxable as ordinary income since no physical injury) - $15k for punitive damages (also taxable as ordinary income) One thing that really helped me was keeping detailed records of everything - all the paperwork, correspondence, medical bills if you had any stress-related health issues. Even if those don't qualify as "physical injuries" for tax-free treatment, having documentation helps if questions come up later. Also, don't forget about estimated taxes! If your settlement is large enough, you might need to make quarterly payments to avoid penalties. I got hit with an underpayment penalty because I didn't realize this. My biggest recommendation is to set aside about 30-35% of the taxable portions right away for taxes. Better to have too much saved than to scramble come tax time.

Code 810 is definitely frustrating but you're not alone! I went through this last year and it took about 10 weeks to resolve. The key thing is to NOT panic - the IRS will eventually process your return. In the meantime, make sure to check your mail daily for any correspondence and keep checking your transcript for updates. The good news is that once it moves, you'll usually see your refund within a week or two. Hang in there! 💪

I feel your pain! Been dealing with a 810 code for about 8 weeks now and it's incredibly stressful when you're counting on that refund. From what I've learned lurking in these forums, the 810 freeze is basically the IRS saying "hold up, we need to double-check something" - could be anything from verifying your identity to matching up your income with what employers reported. The waiting is the worst part because you can't really do much to speed it up. Just keep checking your transcript weekly for any changes and definitely respond immediately if you get any mail from them. I've heard some people say calling helps but honestly most folks here say the phone reps just tell you to wait it out. Stay strong! 🙏

Great discussion everyone! As someone who's dealt with tax compliance issues professionally, I wanted to add one more practical consideration for your assignment. The IRS has something called the "reasonable basis" standard for tax positions. Even if the technical rules might allow a deduction, you need a reasonable basis for taking that position. In this case study, the lack of documentation creates a situation where there's no reasonable basis to claim the loss occurred as described. This is actually a perfect example of why tax preparation isn't just about knowing the rules - it's about understanding what positions you can reasonably defend. A good tax professional would refuse to prepare a return claiming this deduction without proper documentation, regardless of what the technical rules say. For your case study analysis, you might want to mention that this situation highlights the difference between what's theoretically possible under tax law versus what's practically advisable. It's a distinction that becomes really important when you're working with real clients and real consequences. Your professor will probably appreciate seeing that you understand both the academic side and the professional responsibility aspects of tax practice.

As a tax professional who's seen similar cases, I want to emphasize something that might help with your assignment: the IRS actually has a specific burden of proof framework for theft losses that your textbook might not fully cover. Under IRC Section 165(c)(3), theft losses require what's called "objective evidence" of the theft. The IRS Revenue Ruling 72-112 specifically addresses situations where taxpayers claim theft without police reports. The ruling essentially states that while a police report isn't absolutely mandatory, the taxpayer must provide "clear and convincing evidence" that a theft occurred. In your case study, the woman would need to explain why she didn't report a $7,200 theft to police or insurance. Without a reasonable explanation (like fear of retaliation, being undocumented, etc.), the IRS would likely view this as fabricated. For your assignment, you might want to research Treasury Regulation 1.165-8(d), which outlines the specific documentation requirements for theft losses. It's more detailed than most textbooks cover and shows the complexity behind what seems like a simple deduction. The key insight for your professor: this case perfectly illustrates why tax law requires both meeting technical requirements AND providing adequate substantiation. Both elements must be satisfied for any deduction to be valid.