1040 Sch F Farming Activity to 1120

[ea_rva aka acctgtaxmatters]

Received my clients 2022 1120 & 1040 Sch F farming activity info for 2022 last night. Historically they report sawmill inc & exp under a corporation on 1120. They also have farming activity (chickens & livestock) that historically has been reported on 1040 Sch F. They have always kept/provided separate inc/exp records for these entities.

In there email explanation the say that it's become "increasingly more difficult to keep non-farm and farm business items separate" and are "needing to bring the farm business under the umbrella (of the corp). 

I don't think this is a reasonable request and not even sure it's in their best interest or proper to do this - no time to research this for sure. What's troubling is that I should have heard on Jan 1 2022 that their bookkeeping was becoming difficult...not 1 year and 10 months later.

I am leaning towards telling them this and also since they did not meet my 09/20/23 doc request deadline their return will be late and to go back through their 2 business bank statements for 2022 to sort out what is what.

Please help! What are your thoughts on how to handle?

[Skylane]

My first reaction is to fire them....   but assuming they're long-term clients/friends/relatives. Stuff like this happens when people get overwhelmed, or life gets in the way..........    It 'sounds' like the operations are combinable to some extent and I assume the ownership is the same, but that's your call... 

[ea_rva aka acctgtaxmatters]

Thanks for that perspective. Husband 100% shareholder of Corp, 50/50 on the farm. 1) Is it simply additional paid in capital to the Corp 2) would wife have to then be a shareholder?? 3) I would have to manually add in all the Sch F assets correct? 4) and all the attributable loans related to the farm would have to be booked on the Corp side?

[PATAX]

@Skylane @ea_rva aka acctgtaxmatters I agree with Skylane. It is easier to get a bee with honey, than with vinegar. I also was getting ready to fire a client, but they have been with me for many years, since I was a child I have known them, so I took the Beatles advice and just "let it be". It is a little more work for me and a PITA, but sometimes that happens.

[ea_rva aka acctgtaxmatters]

@PATAX @Skylane

I called them and we walked through it all. PITA for sure but they are hard working folks. This will simplify things for them. Thanks again for helping me to reset!

[PATAX]

You're welcome

[Skylane]

" PITA for sure but they are hard working folks"  

Glad you worked it out....  Blame the IRS, et al.  for overcomplicating everything!   Remember when we could do this with a pencil & eraser?