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Four Tiers of Loss Limitations: A Guide to the Rules for Pass-Through Entities (FTL4)

  • Format Self-Study Download
  • Credits 4.00
  • Level Intermediate
  • Field of Study Taxes (4)

Overview

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.



Major Topics:

  • The Inflation Reduction Act of 2022
  • 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 excess business loss limitation of the Tax Cuts and Jobs Act of 2017 (new §461(l)), American Rescue Plan Act, and Inflation Reduction Act

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 §461(l) created 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

Who should take this course:

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.

Basic familiarity with loss allowance rules of pass-through entities

None

Yes

No

No

QAS Approval Surgent
IRS Approval Surgent
CFP Approval Surgent
CTEC Approval Surgent
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