Four Tiers of Loss Limitations: A Guide to the Rules for Pass-Through Entities

Overview

FAIRMONT CLUSTER CLASS

Owners of S corporations and partnerships are subject to numerous limitations on pass-through losses, each with unique rules, applications, and complexities. With the increae in popularity of pass-through business entities, it is essential for CPAs to understand the complexities and interactions of these pass-through loss limitations.

Highlights

Examine the four tiers of business loss limitations, including basis, at-risk, passive activity, and excess business loss rules, with practical guidance on applying OBBBA updates and navigating complex loss limitation provisions.

Prerequisites

Basic familiarity with loss allowance rules of pass-through entities

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 limitations and their interactions in one course.

Objectives

After attending this presentation, participants will be able to:

• 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 §461(1) create by the Tax Cuts and Jobs Act of 2017 and understand the limitation calculation and resulting carryforward
• Analyze the hierarchy of the loss limitations with examples of the application of the four tiers of losses and how they interact
• Use case studies to reinforce the learning objectives