Shareholder and Partnership Basis Issues

Learning Objectives

• To define the term basis.
• To discuss the components of the basis for a partner.
• To investigate the components of the basis for an S-corporation shareholder.
• To explain the at-risk rules.
• To define how debt basis works.
• To discuss how to track shareholder loans and their impact on a basis.
• To analyze how to use Form 7203.

Course Description

The basis of a partner in a partnership and of an S Corp shareholder are similar, and the basis for each type of business serves the same purposes. When deductions or losses are passed through to either a partner or shareholder, the calculated basis puts a limit on tax deductions.

Basis in a flow-through business is key to deducting losses and calculating gains or losses on disposition. Certain losses deductible by partners in partnerships are not deductible by S corporation shareholders.

Shareholders track their basis using accumulated adjustment accounts, while partners use capital accounts. Both are increased by flow-through income, contributions of cash or property, and reduced by distributions and deductions. Similarly, both owners are also subject to at-risk rules before loss deductions are allowed.

Planning techniques are available to increase the basis in these flow-through entities to deduct current-year losses. Ordering rules for loss deductions and restoration of basis are complex.

Tax practitioners need to understand the similarities and differences in basis calculations for owners of both partnerships and S corporations to report annual flow-through income and deductions and ultimately the gain or loss on the disposition of these entities.

This CPE/CE tax course will cover all a practitioner needs to know about calculating the basis for shareholders of S-corporations and partners in a partnership. In particular, it will cover new items such as the new Form 7203 from the IRS, for tracking the basis of S-Corp shareholders.

In this CPE/CE course speaker will also cover the differences in basis tracking between the 2 types of entities and discusses best practices for practitioners.

Answers to the following major questions are provided in this CPE/CE Tax Webinar:

• What is the basis?
• What are the simple examples to set the stage?
• What is a partnership basis?
• What are the partnership amounts at risk?
• What is an S-corporation basis?
• What are S-corporation shareholder loans?
• How to track basis -- new Form 7203?

Overview

• What is Basis?

  10 mins
• Amount At-Risk

  13 mins
• Partnership Basis

  21 mins
• Partnership Debts

  27 mins
• S-Corporation Basis and Debt

  30 mins
• Shareholder Loans

  36 mins
• Loan repayments

  40 mins
• Schedule E, Page 2

  43 mins
• PPP and Basis

  52 mins