Can you explain the 1031 exchange a bit more? Does it completely eliminate the depreciation recapture or just postpone it? And are there time limits for finding the next property?

A 1031 exchange doesn't eliminate depreciation recapture - it postpones it. The depreciation you've taken gets factored into your new "basis" in the replacement property. There are definitely time limits - you have 45 days from the sale of your property to identify potential replacement properties (in writing), and you must close on the new property within 180 days of selling the old one. You also need to use a qualified intermediary to hold the funds between sales - you can't touch the money yourself. And the replacement property must be of equal or greater value to defer all tax. These exchanges can be complex, but when done correctly, they're one of the most powerful wealth-building tools for real estate investors.

That's painful! Did you try talking to a tax professional about filing amended returns for the years you could still amend (usually last 3 years) to at least get some benefit from the depreciation you were taxed on?

1 That's a really good point about the withholding! I'll definitely ask her if she received the full $25,500 or if taxes were already taken out. The tax paperwork they gave her was kind of confusing - it had both USD and CAD amounts on it, but I'm not sure if it showed whether any Canadian taxes were withheld. Do you know if the US-Canada tax treaty affects the withholding rate at all? Someone mentioned treaty rates in another comment.

17 Yes, the US-Canada tax treaty can definitely affect the withholding rate! The standard non-resident withholding for prizes in Canada is 25%, but the treaty might reduce that depending on the specific type of income. For certain prizes and winnings, it could be reduced to 15%. The paperwork with both USD and CAD is typical. They would have used the exchange rate on the day of the win to calculate the Canadian tax withholding. If you look carefully, there should be a line item showing "non-resident withholding tax" or something similar. It's crucial to know this amount for filling out Form 1116 correctly to claim the foreign tax credit.

8 That's actually not correct. US citizens and residents are taxed on their worldwide income regardless of where it's earned. Both your $500 poker winnings from Mexico and the OP's cousin's $25,500 game show winnings from Canada are reportable on US tax returns. The US is one of the few countries that taxes based on citizenship rather than just residency or the source of income. You were technically required to report that $500 poker winning as "Other Income" on your tax return. For small amounts like that, it's unlikely to trigger any issues, but for larger amounts like $25,500, failing to report could potentially lead to penalties if discovered.

5 Oh crap really? Nobody ever told me that before. I thought income earned outside the US stayed outside the US tax system. So I should have reported my Mexico poker winnings? Will I get in trouble for this?

I did find some old trade confirmations in my email, but there are still about 8 positions I can't track down. Would it be risky to just make my best guess based on when I think I bought them? I'm pretty sure they were all purchased in 2019, which would make them long-term anyway.

Making a reasonable estimate is acceptable when you truly don't have the records, but you should document how you arrived at your estimate. I'd recommend noting the method you used (like "estimated based on account statements showing position existed as of X date") in your tax file. The IRS generally allows good faith estimates when original records aren't available. Since you believe they're from 2019, they would indeed be long-term holdings. Just be consistent in your approach, and if you later find the actual information, you can file an amended return if there's a significant difference.

It absolutely affects your tax rate! Short-term gains (held less than 1 year) are taxed at your ordinary income rate, which could be up to 37% depending on your bracket. Long-term gains (held more than 1 year) are taxed at either 0%, 15%, or 20% depending on your income level. That's a massive difference! This is why determining the correct term is so important.

How do you handle this on the actual tax forms? Is there a specific place to note that you're only claiming a portion of what's on the 1098 because of split ownership?

Good question! On Schedule A (itemized deductions), you'll enter only your portion of the deductible mortgage interest, not the full amount shown on the 1098. Many tax software programs have a field for "amount from 1098" and then another field for "amount you're deducting" where you can enter the lower figure. Some tax professionals recommend attaching a brief statement explaining the situation - something like "Claiming X% of mortgage interest based on legal ownership percentage and $750K loan limit." This isn't strictly required but can help prevent questions if you're audited.

The basic principles are the same - you split based on your legal ownership percentage and the $750K cap applies to each person individually. The big difference is that unmarried co-owners each get their own $750K limit, whereas married filing separately couples have to split one $750K limit between them. So if you and your girlfriend have, say, a $1.2M mortgage with 50/50 ownership, you could each potentially deduct your full 50% of the interest (since each of your portions falls under the individual $750K limit).

That's brilliant! I never thought about the library. There's a pretty big public library about 15 minutes from my office. Do you know if they typically just have the common forms or would they have something specific like W2 Copy A?

Libraries typically focus on the forms that individuals need (1040, schedules, etc.) rather than business forms like W2 Copy A. However, larger libraries with business resource centers might have them or can tell you where to get them locally. Your best bet is probably the SCORE office if you have one nearby. They specifically support small businesses and usually have more specialized business tax forms or connections to get them quickly.

Can confirm this works. But watch out for the "trial" subscriptions that auto-renew! I did this last year and ended up getting charged for 3 months of payroll service before I noticed and cancelled.