Owners of S corporations and partnerships are subject to various limitations on pass-through losses, each with unique rules, applications, and complexities. As many businesses are reporting losses as a result of COVID-19, it is essential for tax practitioners to understand the mechanical aspects of each limitation and how they coordinate to provide effective planning for loss utilization in future periods.
Learning Objectives
- Understand how the activity of an entity and distributions are handled when basis limitations exist for partnership interest and S corporation stock
- Analyze at-risk amounts for disallowed losses and demonstrate understanding of how the amount and character of suspended amounts are determined
- Understand passive loss limitations and how character and the number of suspended losses are determined
- Analyze excess business loss limitations created by the Tax Cuts and Jobs Act of 2017 and understand the limitation calculation and resulting carryforward amounts
Major Topics
- Limitation 1: Basis limitations will be reviewed in detail with computational examples and include insights into similarities and differences between calculations for partnership interests and S corporation stock
- Limitation 2: Detailed at-risk limitation computational examples will be reviewed, and the mechanical features of partnerships and S corporation activities will be compared and contrasted
- Limitation 3: Passive loss limitation mechanics will be outlined in detail and discuss computations where there are a mix of entity structures owned by a taxpayer
- Limitation 4: Excess business losses will be presented from a mechanical perspective
