Question: Sandra, a partner in TRX, LLC, received a Schedule K-1 (Form 1065) with $45,000 in Box 19, Code C. The instructions for this current distribution indicate that this is the partnership’s adjusted basis of property immediately before it was distributed to Sandra. Besides the adjusted basis, what does her tax preparer need to know to complete the new Form 7217, Partner’s Report of Property Distributed by a Partnership, that should be filed with her Form 1040, U.S. Individual Income Tax Return?

Answer: Sandra and her preparer also need to know her outside basis in the partnership so it can be compared to the adjusted basis of the property reported on Schedule K-1. The fair market value of the property on the distribution date is also required to complete the form.

Form 7217, as it applies to current distributions, is a new form (2024) that reports the adjusted basis of property distributed from a partnership to a partner. Although a cash distribution in excess of outside basis may result in immediate gain recognition, current distributions of noncash property (such as real estate or equipment) generally do not cause either the partner or the partnership to recognize gain or loss on the distribution.

Instead, the partner’s basis in the distributed property cannot be more than the partner’s outside basis before the distribution (reduced by any cash distributions). Thus, the partnership’s adjusted basis in the property carries over to the partner to the extent of the partner’s outside basis so that recognition of gain or loss is deferred.

In other words, a partner’s basis in the distributed property is the smaller of:

• The partnership’s adjusted basis immediately before the distribution, or
• The adjusted basis of their partnership interest (outside basis) reduced by any cash distributed in the same transaction.

The partner may recognize gain or loss at a later time, such as when they dispose of the property [§732(a)].

Taxpayers can deduct either their standard deduction or itemized deductions from their adjusted gross income (AGI) to calculate their taxable income. The key being one or the other, not both.

The standard and itemized deductions are in essence a layer of tax-free money the government allows taxpayers for cost-of-living expenses. Generally, taxpayers deduct the amount that gives them the lowest tax, which is usually the higher amount. However, there are instances when they are required to use one method over the other.

Standard deduction amounts are set amounts that are increased annually for inflation. The amounts vary by filing status, age and blindness. Taxpayers age 65 or older and/or blind receive an additional amount to add to their regular standard deduction.

For determining age, taxpayers are considered age 65 the day before their birthday. For example, Tillie turns age 65 on Jan. 1, 2026. For tax purposes, Tillie is considered age 65 on Dec. 31, 2025, and is eligible for the increased standard deduction in 2025.

In general, because the standard deduction amounts are known amounts, taxpayers with income levels below their standard deduction generally do not have a filing obligation. Where itemized deductions are not known amounts, causing taxpayers who itemize to have a filing obligation.

For 2025 and 2024 the standard deduction per filing status is:

Description	2025	2026
Standard
MFJ, QSS	$30,000	$29,200
HOH	$22,500	$21,900
S, MFS	$15,000	$14,600
Additional for Age or Blind
MFJ, QSS	$1,600	$1,550
S, HOH, MFS	$2,000	$1,950
Dependents
The greater of:	$1,350 or $450 plus earned income	$1,300 or $450 plus earned income

For example: For 2025, Tillie is 55 and single, her standard deduction is $15,000. If she is age 65 or older her standard deduction is $17,000 ($15,000 + $2,000). If Tillie is also blind, her standard deduction jumps to $19,000 ($15,000 + $2,000 + $2,000).

Itemized deductions are specific personal expenses the IRS allows taxpayers to deduct. They include:

• Medical and dental expenses over 7.5% of AGI
• Taxes paid such as state and local income taxes, sales taxes, real estate taxes, and personal property taxes based on the value of the item
• Mortgage interest paid on two homes, within limits
• Gifts to qualifying charities
• Casualty and theft losses
• Other itemized deductions paid such as gambling losses to the extent of winnings.

Itemized deductions are reported on Schedule A, Itemized Deductions, then carried to Form 1040, U.S. Individual Income Tax Return, Line12. Where the standard deduction is reported directly on Form 1040, Line 12, no other schedule is required.

There are times when taxpayers may be required to use one type of deduction over the other. The most common example of this is when married couples file separately under the married filing separate (MFS) filing status. In these cases, if one spouse itemizes, the standard deduction for the other spouse is $0. Meaning if one spouse itemizes, the other must also itemize. Otherwise, both spouses could use the MFS standard deduction.

Nonresident alien taxpayers who are required to file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, are not eligible to use the standard deduction. Instead, they can use their itemized deductions.

There are pros and cons to taxpayers using either their standard or itemized deductions. The biggest benefit to using the standard deduction is taxpayers do not have to keep track of their itemized deductions unless there are state benefits for doing so. While using itemized deductions generally means a larger deduction causing taxable income to be lower.

The IRS has a tool at its website to help taxpayers determine the amount of their standard deduction. To use this tool taxpayers will need their date of birth, spouse’s date of birth and filing status along with basic income information including amounts and adjust gross income.

The determination to use the standard deduction or itemized deduction for a taxpayer needs to be made on a taxpayer-by-taxpayer basis. What is correct for one taxpayer might not be automatically correct for another taxpayer.

Has a tax client ever told you, “You’re too expensive”? That’s a common fear when adjusting your fees during tax season. No one wants to hear clients tell them they’re too expensive.

Here’s how to overcome it:

1. Explore, don’t react

It can be offensive to hear a client tell you, “You’re expensive,” when you know how hard you work and how qualified you are to do the job. Use this opportunity explore what they’re expressing behind the words.

2. Remember, “expensive” is relative

A $1 million home to someone with a $1 billion in the bank can be “cheap.” Everyone defines what’s expensive to them based on their perspective. When someone says something is expensive, it usually means they don’t see or understand the value yet, or they’re comparing your service to something else.

3. Find the comparison

Here’s an easy response: “Our pricing is Dynamic based on our capacity and each client’s unique tax situation. Is there another service you’re comparing our prices to?”

The common comparisons are:

1. Do-it-yourself tax software

   “The online preparer assisting you may not know your tax history or your specific industry to maximize your available tax strategies. In many cases, they also can’t support you throughout the year after your filing.”

2. Other tax preparers in the area

   “The same tax forms for two different people can require wildly different levels of effort based on the firm’s workflow, experience and the complexity of your financial life.”

   A house cat and a mountain lion are related but are two different animals and can’t truly be compared. Similarly, it’s difficult to compare tax filings for two different clients, even if they’re using the same tax forms.

3. Advisory or tax planning packages vs. tax-only packages

   “Those are two different service levels with vastly different outcomes for you. Your taxes are filed either way, but if the price includes tax planning/advisory, it includes strategic help to reduce your taxes legally based on your unique qualifications.”
   If you compare a tax-only engagement with a tax advisory or planning engagement, this is another apples-to-oranges exercise.

4. Registered U.S. preparers vs. outsourced work

   “It can be practically difficult to have an ongoing dialog with someone based outside the U.S. in a different time zone. There also can be significant data, security or logistical considerations to understand when sending your data outside the country”.

We live in a globally connected world. A preparer outside the U.S. could be the perfect solution for some clients, but clients should at least understand the potential tradeoffs.

4. Identify progress

Once the client realizes that not all “tax fees” are created equal, ask them what progress they specifically want to make in their next filing.

Do they want to minimize their tax liability through legal tax strategies? Do they want someone to finally explain what their accounting numbers really mean and how to improve them? Do they want someone to use their numbers to help them make informed business decisions? Do they want someone to help maximize their retirement income in a tax-advantageous way? Or do they really just want the cheapest possible tax filing?

5. Give them options

At this point, if the client really wants help, you can give them two or three options for engaging with you this year and tie the options directly to the level of support they want and the progress they want to make.

Focusing the options on helping them make progress on the specific things they care about will ensure they see value in your pricing. The quote you give them will no longer be perceived as expensive.

This response framework is the key to positioning your value in the client’s mind. Without educating the client and connecting your fees to outcomes they care about, they will default to comparing you to whatever is easiest.

That’s fine. It’s not their job to know taxes in and out. It’s our job in the industry to educate clients and provide genuine help.

How much revenue could you add this year if you repositioned your value with just 10-50 clients? Start there and see your margins build. It will create a foundation for profitability in the long term.