Seminar

Mastering Basis and Loss Limitations on Pass-Through Entities

  • Friday, November 13, 2020

    8:30am – 4:30pm
    (Registration: 8:00am)
  • Buena Vista

    661 S. DuPont Highway
    New Castle, DE 19720
  • 8
    CREDITS
    Taxes

Surgent's Mastering Basis Issues for S Corporations, Partnerships, and LLCs

 The most difficult concepts to master when dealing with flow-through business entities are the basis and distribution concepts. Major error and malpractice issues occur if the CPA does not fully understand the impact of these rules. This course is designed to focus on the practical applications of these rules.

Four Tiers of Loss Limitations: A Guide to the New Rules for Pass-through Entities
Owners of S corporations and partnerships are subject to numerous limitations on pass-through losses, each with unique rules, applications, and complexities. With the increase in popularity of pass-through business entities, it is essential for CPAs to understand the complexities and interactions of these pass-through loss limitations.

Objectives

  • Determine initial basis and organizing tax-free under §351 and §721
  • Discuss what affects basis and how to treat distributions
  • Pass the loss limitation hurdles to deduct pass-through losses
  • Analyze how basis in an ownership interest in a pass-through entity is established
  • Discuss how activity of the entity, distributions, and optional adjustments increase or decrease basis
  • Discuss when basis is "at-risk" under section 465, and the resulting loss disallowance and carryforward related to basis that is not at-risk
  • Define passive activities under section 469 and exceptions to the passive loss rules
  • Discuss when and how aggregation of activities should be used to avoid the passive loss rules
  • Analyze new §461(l) created by the Tax Cuts and Jobs Act of 2017 and understand the limitation calculation and resulting carryforward
  • Analyze the hierarchy of the loss limitations with examples of the application of the four tiers of losses and how they interact


 

Highlights

  • Applicable coverage of any basis considerations within the Tax Cuts and Jobs Act, or other recent tax legislation enacted before the presentation
  • Discuss new pass-through basis calculations required as attachments to certain individual returns
  • Excess business losses and new rules for NOLs
  • How §179 limitations affect basis and how the “tax-benefit” rule is applied 
  • S corporations: Beware of final IRS regulations regarding “open debt” of S corporations; understand the effect of stock basis and debt basis and IRS’s recent focus on “at-risk basis” for shareholders; recognize how AAA applies or does not apply to certain S corporations; learn to apply the complex ordering rules and special elections that can have a big tax result; become aware of when you can have a taxable dividend in an S corporation; understand distributions of cash and property and post-termination transition rules, and temporary new TCJA post-termination rules for eligible corporations
  • LLCs and partnerships: Learn the detailed rules of §704 for preventing the shifting of tax consequences among partners or members; determine how to calculate basis under both §704 and for “at-risk” under §465; recognize how recourse, nonrecourse, and qualified nonrecourse debt can create significantly different tax results; review §754 step-up in basis rules; and learn how TCJA cleans up the basis treatment of charitable contributions and foreign taxes paid
  • Tier 1: Basis limitations for S corporation shareholders and partners
  • Tier 2: Section 465 at-risk limitations for S corporation shareholders and partners, including the impact of debt, indemnities, guarantees, and shareholder/partner agreements
  • Tier 3: Section 469 passive loss limitations and exceptions to the limitations
  • Tier 4: The new excess business loss limitation of the Tax Cuts and Jobs Act of 2017 (new section 461(l))

Additional Information

Designed For

CPAs who prepare both individual and flow-through business entity tax returns and need a thorough grasp of these significant issues, as well as those who want to learn about the four pass-through loss limitations, their interactions, and the new rules.

Vendor

Surgent

Advanced Preparation

None

Credits

8.00 Taxes

Prerequisite

Experience in business taxation and basic familiarity with loss allowance rules of pass-through entities

Instructor

Dennis P. Riley

Course Number

20MBLL/NC

Level of Knowledge

Intermediate

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