IRS New S Corporation Initiative: Losses in Excess of Basis, Taxable Distributions, Handling the Examination

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, February 17, 2021

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will discuss what the IRS expects to find in its audit of Subchapter S corporations. Our panel of tax experts will focus on complying with current basis, distribution, and documentation requirements and explain how to handle a Subchapter S examination for tax practitioners working with these entities and their shareholders.

Description

The IRS has on-going compliance campaigns targeting S corporations under its Large Business & International Division (LB&I). Of these, basis examinations may be the most worrisome for tax practitioners.

The rules for calculating basis are complex but essential for deducting losses. Partners' loans are often used to increase basis in a partnership. For S Corporation shareholders, these rules are not so liberal. The LB&I is aware that some S corporation shareholders are deducting losses above basis and perform basis audits of shareholders reporting significant losses. Beginning and ending loan balances have been added to Schedule K-1 for 2020, making excess deductions easier to find and track.

Additionally, the IRS is also focusing on another area of noncompliance, distributions to shareholders that should be taxed, including distributions that are actually dividends, distributions of appreciated property, and distributions in excess of basis.

With S corporations under such scrutiny, tax advisers working with Subchapter S corporations must understand how to report basis, distributions, and built-in gains properly. Tax practitioners must not only grasp how to tax S corporation shareholders properly; they must also understand how to represent these taxpayers throughout an IRS examination.

Listen as our panel of S corporation experts reviews the current IRS focus on S corporation shareholders, including audits of basis, distributions, high net worth taxpayers with flow-through entities, and built-in gains, including how to document and comply with current guidelines properly.

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Outline

  1. IRS' S corporation campaign
  2. Distributions to shareholders
  3. Losses in excess of basis
  4. New shareholder debt reporting on Schedule K-1
  5. The examination process

Benefits

The panel will review these and other key issues:

  • Whether loans can be used to increase an S corporation shareholder's basis
  • How built-in gains are calculated and taxed
  • How to calculate and document shareholders' basis in S corporations
  • What increases a shareholder's chance of being selected for an audit?
  • How can taxpayers best prepare for an IRS examination of S corporation records?

Faculty

Alberty, Jeffrey
Jeffrey Alberty, CPA
S Corporation & Cooperatives Issue Practice Group Coordinator
Internal Revenue Service

Mr. Alberty is a subject matter expert on the IRS LB&I S corporations & Cooperatives Practice Network. He is a...  |  Read More

Bird, Chris
Chris Bird, EA, CFP

Founder
Chris Bird Seminars

Mr. Bird has been in the financial business for over 30 years. He started his career with a degree in Accounting and a...  |  Read More

Jamison, Robert
Professor Robert W. Jamison, CPA

Professor Emeritus of Accounting
Indiana University

Mr. Jamison is Professor Emeritus of Accounting at Indiana University, Purdue University, Indianapolis (IUPUI). His...  |  Read More

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