Mastering Section 263A UNICAP Reporting for Partnerships and S Corporations: Getting K-1 Disclosures Right

Navigating Requirements for Tiered Partnerships, Footnote Disclosures and Interest Capitalization

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


Conducted on Thursday, September 8, 2016

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax preparers and advisers with detailed guidance on the reporting requirements and traps to avoid in calculating and allocating capitalized costs under the the uniform capitalization (UNICAP) rules of IRC Sect. 263A on partnership returns. The panel will focus particularly on the UNICAP allocations and disclosures in a tiered partnership situation, explain specific K-1 calculations and footnote disclosures, and review treatment of costs commonly found in tiered partnerships, such as royalties.

Description

The UNICAP rules of IRC 263A, which require taxpayers to capitalize all direct costs, and certain indirect costs, properly allocable to the production of certain property produced by the taxpayer, presents particular responsibilities and challenges for tax advisers preparing partnership and S corporation tax returns. IRS Notice 88-99requires partnerships to include K-1 footnotes reporting capitalized interest expense and production expenditures subject to Section 263A capitalization.

For tiered partnerships, the tax reporting challenges become even more difficult for both upper-tier and lower-tier partnerships. Tax advisers must fully understand the additional calculation and reporting requirements that partnerships require in allocating capitalized costs, especially those related to interest. K-1 disclosure is especially important when the adviser preparing the partnership’s Form 1065 does not also prepare the partners’ returns.

Determining which costs are “properly allocable” to the production of covered property can create significant challenges for tax professionals and advisers. The rules governing capitalization of interest as an allocable cost are particularly complex and can have a measurable impact on the amount of interest costs that can be currently deducted versus those interest costs that must be capitalized. Capitalization rules also play a significant role in calculating ending inventory and cost of goods sold.

Listen as our experienced panel provides a comprehensive guide to the specifics of reporting Section 263A UNICAP for partnerships, including practical examples, an illustration of UNICAP computations, and best practices for planning and compliance with Sect. 263A regulations.

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Outline

  1. Basic UNICAP rules applied to partnerships
  2. Tiered partnerships required K-1 calculations and disclosures
  3. Items most specific to partnerships (royalties, mineral rights)
  4. Real estate interest capitalization

Benefits

The panel will discuss these and other important issues:

  • UNICAP calculation challenges specific to partnerships
  • What disclosures does IRS Notice 88-99 require for advisers preparing partnership returns
  • What language should the footnote disclosures include
  • Interest reporting
  • K-1 calculations and disclosures for non-producing partnerships

Faculty

Jolaine L. Hill, CPA
Jolaine L. Hill, CPA

Director
Katz Sapper & Miller

Ms. Hill is primarily responsible for tax compliance issues that include the technical review of tax returns. She...  |  Read More

Gary Markowitz
Gary Markowitz

Mr. Markowitz worked as in IRS agent for 34 years auditing C-corporations, S-corporations, partnerships, and individual...  |  Read More

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