Has anyone considered the "claim of right" doctrine as an alternative to Form 4684? If you included the money that was stolen in your income in a prior year, you might be able to take a deduction under Section 1341 instead of as a theft loss.

I'm really sorry to hear about the wire transfer fraud - that's devastating for any small business. Based on what you've described, you should definitely be able to claim this as a business theft loss on Form 4684 Section B since it occurred in your partnership LLC. A few key points for your situation: 1. **Multi-year spreading**: Yes, if the loss exceeds your business income, you can carry it forward as a Net Operating Loss (NOL) indefinitely under current rules, though limited to 80% of taxable income each year. 2. **Partnership flow-through**: The loss will flow through your Schedule K-1s to your personal returns. Since it's a business loss, your $175k AGI won't limit the deduction like it would for personal casualty losses. 3. **Documentation is crucial**: Make sure you have a police report, bank documentation of the fraudulent transfer, correspondence about recovery efforts, and evidence of the criminal intent behind the fraud. One thing to verify - make sure the wire transfer truly meets the IRS definition of "theft" (criminal taking through deception/false pretenses). Wire fraud typically qualifies, but having solid documentation of the criminal nature is essential. Consider consulting with a tax professional who has experience with partnership returns and theft losses, especially given the significant amount involved. The IRS may scrutinize larger theft loss claims more closely.

I completely agree with the advice to have your sister handle this herself. As someone who works in banking compliance, I can tell you that third-party endorsed checks for large amounts like $25,000 are almost always going to cause problems. Most banks have strict policies against accepting third-party checks over certain thresholds - usually somewhere between $1,000-$5,000 depending on the institution. Even if your bank accepts it, they'll likely place an extended hold (7-10 business days minimum), require additional documentation, and possibly file a Currency Transaction Report since it's over $10,000. From your perspective, the deposit would show up as income in your account, which could trigger tax reporting requirements. Even though you'd be giving the money back to your sister, the IRS systems don't automatically know that - they just see a large deposit to your account. Your sister's "bank account issues" really need to be clarified. If it's something simple like a closed account, she can open a new one. If it's something more serious like garnishments or liens, then you definitely don't want to get involved as it could make you appear to be helping her hide assets. The safest approach is to tell her she needs to deposit it herself or cash it at the issuing bank. Most banks will cash their own checks even for non-customers, though they'll charge a fee.

You're absolutely making the right decision by not getting involved in this situation. As someone who's seen similar scenarios play out, I can tell you that "bank account issues" is often code for more serious financial problems that you definitely don't want to inherit. Beyond all the excellent points about tax complications and bank policies that others have raised, there's another angle to consider: if your sister's inheritance gets mixed up with your finances in any way, it could potentially complicate things for both of you down the line. Inheritance money sometimes gets scrutinized during divorces, bankruptcy proceedings, or other legal situations. The cleanest approach is always to keep financial transactions separate and transparent. Your sister received the inheritance, so she should be the one to deposit it. If her current bank won't work with her, literally any other bank will open an account for someone with a $25,000 deposit to make. You're being a good sister by wanting to help, but sometimes the best help is steering someone toward handling their financial affairs properly rather than taking shortcuts that could cause bigger problems later.

I went through something very similar when my grandfather passed and left behind a huge collection of vintage postcards and military memorabilia. One thing I learned that might help - keep detailed records of everything you research for values, even if you don't sell certain items right away. Take photos of the items with any identifying marks, serial numbers, or condition details. Save screenshots of comparable sales from eBay "sold listings" or auction sites with dates. This documentation becomes crucial if you sell items later or if the IRS ever questions your valuations. Also, consider selling higher-value items in different tax years if it makes sense for your mom's overall tax situation. Since each sale is a separate taxable event, spreading them out might help manage the tax impact, especially with that higher collectibles rate that Sean mentioned. The most important thing is getting that fair market value established at the time of your father's passing - everything else flows from there. Sorry for your loss, and I hope this helps make the process a bit easier for your family.

I'm sorry for your family's loss. Dealing with inherited collections can feel overwhelming on top of everything else you're going through. One additional consideration that might help - if any items in the collection have significantly appreciated since your father's passing, you might want to prioritize selling those first while documenting their current values. The step-up basis everyone mentioned is locked in at the date of death, but if items continue to appreciate after that date, you'll owe taxes on gains from that stepped-up value forward. Also, keep in mind that if your mom is over 65 or has lower income, she might qualify for the 0% capital gains rate on regular investments, but unfortunately that doesn't apply to collectibles - they're still subject to the higher collectibles rate regardless of income level. For the items you're keeping for sentimental value, consider having those appraised too if they're valuable. If something happens to them later (theft, damage, etc.), having that post-death valuation documented could be important for insurance purposes. The suggestion about spreading sales across tax years is smart, especially since you mentioned this could total $3,000-5,000. Breaking that into smaller chunks annually might help manage the overall tax impact for your mom.

Just be careful about distinguishing between actual improvements and regular maintenance. I made this mistake and claimed basic repairs as capital improvements, which triggered a small audit. Things like painting, fixing leaks, replacing broken fixtures with similar ones, etc. don't count. Only upgrades that substantively improve value or extend useful life qualify.

Great question about documentation! I went through this exact situation a few years back. Here's what I learned works best: Create a dedicated "Home Improvements" folder (physical or digital) for each project. Include: 1) Original contracts/estimates, 2) Final invoices with detailed descriptions, 3) Before/after photos with dates, 4) Permits and inspection certificates, 5) Canceled checks or credit card statements showing payments. For your existing projects with vague descriptions, definitely contact those contractors for more detailed invoices. Most will provide them if you explain it's for tax documentation. If they won't, create your own summary document listing what was actually done, materials used, and square footage affected. One tip I wish I'd known earlier: when you pay contractors, write the specific improvement details in the memo line of your check (e.g., "240 sq ft deck replacement - cedar boards & hardware"). This creates an additional paper trail that's harder to dispute. The key is proving these were substantial improvements that added value to your home, not just repairs or maintenance. Keep everything organized by year and project type - your future self will thank you!

Great question about employment agreements! My CPA recommended keeping it fairly simple but professional. I created a basic written agreement that outlines: 1. **Specific job duties** - Instead of vague "administrative work," I list things like "data entry for client contact database," "social media post scheduling," and "invoice preparation" 2. **Work schedule expectations** - Not rigid hours, but general expectations like "approximately 8-10 hours per week" and "flexible schedule around school commitments" 3. **Compensation structure** - Clear hourly rate and payment schedule (I pay bi-weekly via direct deposit) 4. **Performance standards** - Basic expectations about quality, deadlines, and communication The agreement doesn't need to be overly complex, but having something in writing shows the IRS that this is a legitimate employment relationship, not just an informal family arrangement. My CPA also suggested including a clause about maintaining confidentiality for client information, which adds another layer of business legitimacy. I also keep a simple job description document that I update as tasks evolve. This helps justify the compensation and shows that the work is genuinely necessary for my business operations. The key is treating your kids like you would any other employee in terms of documentation, even though the relationship is more flexible. It might feel overly formal at first, but it really helps establish the legitimacy of the arrangement if you ever need to defend it.

This is such a comprehensive discussion! As someone who's been considering this strategy for my own 1099 contracting situation, I wanted to add one important consideration that hasn't been mentioned yet. If you're planning to hire multiple children, be aware that there's a cumulative effect on your business income that could potentially push you into different tax brackets or affect other deductions. While each child can earn up to the standard deduction amount tax-free, you're still reducing your business income by the total amount paid to all of them. For example, if you hire two kids at $13,000 each, that's $26,000 less in business income. This could affect your eligibility for certain tax credits or deductions that have income thresholds. It's generally still beneficial, but it's worth modeling the overall impact on your tax situation before committing to specific amounts. Also, something I learned from my research - if you're married and file jointly, your spouse's income also factors into some of these considerations. The strategy works great for sole proprietors, but the overall household tax picture can be more complex than just the business deduction calculation. Definitely echo everyone's advice about getting professional help to make sure you're optimizing your entire tax situation, not just this one strategy!