Comprehensive Pass-Through Owners' Basis and Distribution Rules 2024

Overview

Pass-throughs (S corporations and Partnerships) are the most popular choice of newly formed business entities. However, for years, taxpayers and their preparers have struggled to calculate, update, and maintain the pass-through entity owners’ tax basis information in each investment correctly. Calculating and accounting for tax basis and adequately reporting the impact of operating and liquidating distributions for these entities are among the most frequently cited audit deficiencies. Taxpayers have also misapplied the tax rules when calculating the gain or loss from the sale of the interest. Recently, the IRS initiated enforcement initiatives designed to audit owners of pass-through entities regarding their calculations of tax basis and their tax treatment of distributions. This course will teach you how to properly account for both items for your clients who own an interest in a partnership or an S-corporation. Learn to identify the most common mistakes and errors and report these items correctly before your client is audited.

Highlights

• Understand the four loss limitation rules applied on the owner's individual income tax return (i.e., basis, at-risk, passive, and excess business loss limitations)
• Determine how to calculate an owners' initial tax basis of his pass-through entity
• Learn how to correctly make annual adjustments to a pass-through owners' tax basis
• Identify what constitutes a debt basis for an S corporation shareholder
• Learn the tax ramifications of repaying loans to S corporation shareholders

Prerequisites

Basic understanding of individual income taxation

Designed For

CPAs, tax preparers, and other financial professionals looking to expand and update their understanding and knowledge.

Objectives

• Calculate the stock and debt basis of S corp shareholders
• Calculate the basis for partners and members of a partnership
• Calculate pass-through losses allowed to an owner by applying the four-loss limitations (basis, at-risk, passive, and excess business loss limitations)
• Determine the tax consequences of operating and liquidating distributions out of partnerships and S-corporations
• Determine if payment from a pass-through entity is treated as a distribution for tax purposes

Preparation

None