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Four Tiers of Loss Limitations: A Guide to the New Rules for Pass-through Entities (SVP2)

  • 06/23/2020
  • 8:00 AM - 11:30 AM
  • Live Webinar

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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.

Learning 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 new §461(l) created by the Tax Cuts and Jobs Act of 2017 and understand the limitation calculation and resulting carry forward
  • Analyze the hierarchy of the loss limitations with examples of the application of the four tiers of losses and how they interact

Major Topics:

  • 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 new excess business loss limitation of the Tax Cuts and Jobs Act of 2017 (new section 461(l))

Designed For: 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.
Level: Intermediate

Instructor: John Sherrick

Developer: Surgent

Area of Study: 4 Taxes     

Prerequisite: Basic familiarity with loss allowance rules of pass-through entities


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