Don't forget about the Medical Expense deduction! If you're itemizing deductions and paying medical expenses for someone who qualifies as your dependent (which sounds like your mom would), you can deduct those expenses that exceed 7.5% of your AGI. This could include portions of her assisted living costs that are for medical care, prescription medications, medical equipment, etc.

I went through something very similar with my grandmother's annuity last year. One additional strategy you might consider is making estimated tax payments for Q4 2024 if you haven't already transferred the annuity back to your mom yet. This can help reduce any underpayment penalties and spread out the tax burden. Also, when you do transfer ownership back to her, make sure you get proper documentation from the annuity company about the effective date of the transfer. This will be crucial for determining which tax year the income should be reported in going forward. Since you're looking for a tax professional, I'd specifically seek out an Enrolled Agent (EA) rather than just a regular tax preparer. EAs are federally licensed and have more specialized training in complex situations like this. They can also represent you before the IRS if any questions come up about your dependency claim or the annuity reporting. The dependency exemption combined with potentially qualifying for the Child and Dependent Care Credit that others mentioned could significantly offset your unexpected tax liability. Document everything carefully - keep records of all payments you make for her care, the annuity statements showing payments going to her account, and any medical expenses you pay on her behalf.

Have you looked into whether your 401k plan allows for loans instead of hardship withdrawals? Many plans let you borrow up to 50% of your balance (max $50,000) for a primary residence purchase. The huge advantage is there's NO tax penalty since it's not a withdrawal - you're borrowing from yourself. You do pay interest, but you're paying it to your own 401k account. Usually you have to repay within 5 years, but some plans extend this to 15-30 years for home purchases. My wife and I did this for our down payment and it worked great. Just be aware that if you leave your job, you'll typically need to repay the full loan quickly or it converts to a distribution with all the penalties.

I went through this exact situation two years ago and want to share what I learned. You're absolutely right to be concerned about that penalty - it's brutal. The math on maxing out traditional 401(k) contributions to "offset" the withdrawal penalty doesn't work the way you're thinking, unfortunately. Here's why: When you contribute to traditional 401(k), you get a tax deduction that reduces your current year's taxable income. But when you do the hardship withdrawal, you're paying taxes PLUS the 10% penalty on that withdrawn amount. These are separate transactions that don't cancel each other out. What you'd essentially be doing is: putting money in tax-deferred → immediately taking it back out and paying taxes + penalty on it. You'd lose money on this strategy. Instead, seriously look into these alternatives: 1) 401(k) LOAN if your plan allows it (no penalty, you pay interest to yourself) 2) Check if you have any old IRAs - first-time homebuyer exception lets you withdraw $10K penalty-free 3) Look into state/local first-time buyer programs before touching retirement funds The 401(k) loan route saved me about $7,000 in penalties when I bought my house. Just make sure you understand the repayment terms and what happens if you change jobs.

Just went through a very similar situation with an inherited rental property last year, and I can share what I learned from working with my tax attorney. Your cost basis calculation is actually straightforward once you break it down: the 1/3 you inherited gets stepped-up basis at fair market value on the date of death, and the 2/3 you purchased from the other heirs has a basis equal to what you actually paid them. These two amounts get combined for your total property basis. Regarding IRS scrutiny - they do pay closer attention to rental properties because of the ongoing depreciation deductions, but as long as your numbers are reasonable and well-documented, you shouldn't have issues. The key is keeping detailed records of everything: the death certificate, probate documents, property appraisal (as close to date of death as possible), all purchase agreements with the other beneficiaries, payment records, and your basis calculations. The standard 3-year audit window applies from when you file your return, though it can extend to 6 years if they believe you've substantially underreported income. For inherited property basis calculations, this is rarely an issue unless the numbers look completely unreasonable. One tip: if you paid significantly more or less than the appraised value for the other shares, be prepared to explain why. Market conditions, family agreements, or timing differences are all valid reasons, but having documentation helps if questions arise later.

I've been through a similar inheritance situation with a rental property, and the key is treating it as two separate transactions for basis calculation purposes. Your 1/3 inherited portion gets the stepped-up basis (fair market value at date of death), while the 2/3 you purchased has a basis equal to what you actually paid the other beneficiaries. The IRS does scrutinize rental properties more closely because of depreciation deductions, but they're mainly looking for obviously inflated basis claims or missing documentation. As long as your calculations are reasonable and well-supported, you should be fine. For the audit timeline, it's typically 3 years from when you file, but can extend to 6 years if they suspect substantial underreporting of income. In practice, basis challenges on inherited property are rare unless the numbers seem way off. Documentation-wise, keep everything: death certificate, probate papers, property appraisal (get one as close to date of death as possible), all purchase agreements with the other heirs, payment receipts, and your detailed basis calculations. If you paid significantly different from appraised value for the other shares, document the reasoning - family negotiations, market timing, etc. One thing I learned - consider getting a professional appraisal specifically dated at the time of death if the probate appraisal was done months later and market values changed. It's worth the cost for the stronger documentation.

Great question about the SEP IRA setup! You're absolutely right to be confused - the multiple business scenario isn't well explained in most resources. Here's what I learned after going through something similar: You do need to aggregate ALL your self-employment income across all businesses first, including losses. So your calculation would be: $121,254 (Business A) + $4,912 (Business B) - $65,783 (Business C) = $60,383 total net profit Then subtract your $6,100 in unreimbursed partnership expenses = $54,283 From there, subtract half your SE tax ($4,275 ÷ 2 = $2,138) = $52,145 adjusted net SE income Your SEP contribution limit would be 20% of $52,145 = approximately $10,429 per partner. This is your individual limit - your wife would calculate hers the same way. The businesses with SEPs can make these contributions for you, but you could also roll over funds between SEP accounts if needed. One thing that caught me off guard: make sure both businesses with SEPs contribute proportionally if you're going to max out. The IRS wants to see that SEP contributions don't discriminate between different employee classes, even when you're the only "employee.

This is such a timely question! I just went through this exact scenario with my CPA last month for my 2024 taxes. One thing I'd add to the excellent explanations already given - make sure you're using the correct self-employment tax calculation when you aggregate across multiple businesses. Since you mentioned having three partnership LLCs, each business should be reporting its share of SE income/loss on your personal return, and the SE tax gets calculated on the combined amount. Also, a heads up on timing: if you haven't already set up the SEP for Business C (the one with the loss), you might want to consider it for future years when it becomes profitable again. You can establish a SEP anytime before your tax filing deadline (including extensions), so there's flexibility there. The $10,429 limit that others calculated sounds right based on your numbers. Just remember that's your personal limit - your wife gets her own identical limit assuming she has the same SE income allocation from the partnerships. One last tip: keep detailed records of which business makes each SEP contribution. It'll make tax prep much easier next year, especially if you end up splitting contributions between Business A and B.

I'm a tax professional who has helped many families navigate this exact situation. You're absolutely correct that you don't need to report these 1099-C forms on the estate tax return. When debt is cancelled after death, it's not considered taxable income to either the deceased person or their estate. The key factors in your case are: 1) Your mother passed away in 2019, 2) The 1099-Cs are issued in her name/SSN (not the estate's EIN), and 3) The debt cancellation occurred after her death. This clearly falls under the IRS guidance that post-death debt cancellation is not taxable. Since the estate is insolvent, you're in an even stronger position - there's no scenario where these would create any tax liability. I'd recommend keeping the 1099-C forms with your estate records along with a brief note explaining why they weren't reported, referencing IRS Publication 4681. This creates a clear paper trail if there are ever any questions. The IRS computer systems might generate an automated notice about "unreported income," but these are easily resolved with a simple explanation that the debt was cancelled after the taxpayer's death. Don't let that possibility stress you - it's a common occurrence that's quickly cleared up. You're handling this correctly by being thorough and seeking guidance. Keep good documentation, but rest assured these forms don't create any additional filing requirements or tax obligations for you as executor.

I'm dealing with a very similar situation with my mother-in-law's estate. She passed in 2020 and we just received several 1099-C forms in her name totaling about $3,800 for debts that were cancelled in 2023. What really helped me understand this was speaking with our estate attorney, who explained that the timing is everything here. Since the debt cancellation occurred after death, it's not considered income to either the deceased person or their estate. The creditors still have to issue the 1099-C forms because that's their legal requirement, but it doesn't create a tax obligation for us. I ended up creating a simple documentation file that includes: copies of all the 1099-C forms, a one-page summary explaining why they're not being reported (with reference to IRS Publication 4681), and a timeline clearly showing her death date versus the debt cancellation dates. This way if the IRS ever questions it, I have a clear paper trail showing I was aware of the forms and made an informed decision. Since your mom's estate is insolvent, you're in an even clearer position - there's really no scenario where these would create any tax liability. Just keep good records and don't stress about it. The fact that you're being careful and asking questions shows you're handling your executor duties responsibly.