Handbook for Mastering Basis, Distributions & Loss Limitation Issues for S Corporations, LLCs & Partnerships

Overview

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.

Learning Objectives: 

• Determine initial basis and organizing tax-free under Sec. 351 and Sec.721. 
• Understand what affects basis and how to treat distributions. 
• Pass the four loss-limitation hurdles to deduct pass-through losses. 
• 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 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 Sec. 704 for preventing the shifting of tax consequences among partners or members.  
• Learn to calculate basis under Sec.704 and for at-risk under Sec. 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 Sec. 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 and the basis treatment of charitable contributions and foreign taxes paid.

Major Topics:

• Timely coverage of breaking tax legislation 
• Applicable coverage of any basis considerations within any recent tax legislation 
• Pass-through basis calculations required as attachments to certain individual returns 
• Executor's form for disclosing basis in certain distributed property: What about the basis of a property distribution from a trust? 
• How Sec. 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 qualified and joint-tenancy property 
• Tax-basis capital account reporting requirements