Description

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.

Instructor: Michael Frost, CPA

Target Audience

Experienced practitioners who desire a refresher on loss limitations and an analysis of the new rules. Inexperienced practitioners who desire to learn the basics of all four pass-through loss limitations and their interactions in one course.

Course Objectives

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 §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

Use case studies to reinforce the learning objectives

Subjects

The OBBBA

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 excess business loss limitation of the Tax Cuts and Jobs Act of 2017 (new §461(l)), American Rescue Plan Act, and Inflation Reduction Act

Prerequisites

Basic familiarity with loss allowance rules of pass-through entities