Handbook for Mastering Basis, Distributions, and Loss Limitation Issues for S Corporations, LLCs, and Partnerships
Thursday, December 2, 2021
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.
- Determine initial basis and organizing tax-free under §351 and §721
- Understand what affects basis and how to treat distributions
- Pass the four loss limitation hurdles to deduct pass-through losses
- Applicable coverage of any basis considerations within any recent tax legislation enacted before the presentation
- Discuss new pass-through basis calculations required as attachments to certain individual returns
- Executor’s new IRS form for disclosing basis in certain distributed property; what about the basis of a property distribution from a trust?
- How §179 limitations affect basis and how tax-benefit rule is applied
- Basis implications of personal assets converted to business use
- How to calculate basis of inherited and joint tenancy property
- Excess business losses and the new NOL rules, as updated by the CARES and Tax Relief Acts of 2020
- The new tax basis reporting requirement for partnerships and 2020 presentation changes made to Forms 1065 and 1120-S Schedule K-1
- S corporations: Beware of final IRS regulations regarding “open debt”; determine how to calculate basis; worksheets are included; 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 doesn’t apply to S corporations; learn to apply the complex basis ordering rules and special elections that can have a big tax result; discuss loss limitation rules in depth; when you can have a taxable dividend in an S corporation; understand distributions of cash and property; understand the post-termination transition rules, and temporary new TCJA post-termination rules for eligible corporations, which will be important for S Corps returning to C corps
- LLCs and partnerships: Learn the detailed rules of §704 for preventing the shifting of tax consequences among partners or members; learn to calculate basis under §704 & for “at-risk” under §465; recognize how recourse, nonrecourse, and qualified nonrecourse debt can create significantly different tax results; learn the difference between basis and “at-risk basis”; review §754 step-up in basis rules; the economic effect equivalence test or “dumb-but-lucky” rule; learn to apply the complex rules of distribution of cash vs. property, TCJA cleans up the basis treatment of charitable contributions and foreign taxes paid