Description

Hurdles to Deducting a Loss Workshop is designed for tax professionals who advise owners of pass-through entities. The program examines the loss limitation rules in the order they generally apply, including basis limitations under Section 704(d) and the S corporation rules, the at-risk rules under Section 465, and the passive activity loss rules under Section 469. The program also addresses grouping and aggregation elections and their impact on the application of these limitations.

Through instructor-led discussion, research exercises, client fact patterns, and case studies, participants will apply the loss limitation rules and evaluate their impact on the deductibility of losses from pass-through entities. Participants will work through practical scenarios involving shareholder and partner basis, at-risk limitations, passive activity rules, and suspended losses to identify potential limitations and determine the amount of loss that may ultimately be deductible.

Learning Objectives

Differentiate between the basis, at-risk, and passive activity loss limitation regimes, including the order in which each limitation applies.
Compute shareholder stock and debt basis in an S corporation and partnership outside basis, considering income allocations, distributions, and changes in liabilities.
Calculate a shareholder’s and partner’s at-risk basis and the amount of loss deductible under the at-risk rules, including the treatment of suspended losses.
Analyze shareholder and partner debt arrangements to establish whether they create outside basis, at-risk basis, or both.
Apply the material participation tests to classify income or loss from an activity as passive or nonpassive.
Explain the treatment of suspended passive losses upon the disposition of a passive activity.
Identify activities that may be grouped as a single economic unit and distinguish grouping under the passive activity rules from aggregation under Section 199A.
Assess client fact patterns to establish the deductible loss across all three limitation regimes and identify strategies to restore basis.