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 §351 and §721
- Discuss what affects basis and how to treat distributions
- Pass the loss limitation hurdles to deduct pass-through losses
Major Topics
- 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
- Excess business losses and NOLs
- Tax Basis Capital Account Reporting Requirements
- 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 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 legislation cleans up the basis treatment of charitable contributions and foreign taxes paid
