Passive Activity Loss Reporting: Strategies for Pass-Throughs and Impact of New NII Tax Regulations

Leveraging Latest Federal Guidance and Rulings to Establish Material Participation

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

Conducted on Tuesday, May 20, 2014

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will provide accounting and tax advisors to pass-through entities with a thorough review of the latest passive activity loss guidance and the impact of the IRS final regulations for net investment income tax (NIIT) reporting. The panel will prepare advisors to maximize permissible use of passive losses.

Description

IRS rules significantly limited taxpayer deductions of passive activity losses for decades, but IRS standards continue to evolve through administrative guidance and rulings.The latest major change for pass-through tax reporting for 2013 and beyond are the new NIIT regulations.

Though the final regs weren't released until late Nov. 2013, the Service permits taxpayers to rely on them or the prior proposed regs for tax years up to Jan. 1, 2014. The rules particularly impact taxpayers with net passive income, which is now subject to the added 3.8% NIIT.

Advisors should review the client's level of participation in their activities, reevaluate prior elections of passive activity grouping, and consider new groupings to reduce NIIT exposure consistent with IRC 469 material participation standards. NIIT regs allow taxpayers to regroup activities in the first year they meet the applicable MAGI level and have net investment income.

Careful planning and adherence to the IRC regulations and a thorough grasp of new developments are essential to ensure that taxpayers with passive interests can deduct as much as possible for losses, on current, amended and future tax year returns.

Listen as our panel of veteran tax advisors offers compliance strategies for maximizing deductions within passive activity loss limitations, including consideration of the NIIT impact.

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Outline

  1. Overview of federal passive activity loss rules, including new NIIT regulations
  2. Latest developments, including new investment activity tax impacts
    1. Real Estate professional
    2. Estate and Trust considerations
  3. Material participation by LPs and LLC members
  4. Practical issues from compliance work and audits

Benefits

The panel will review the state of passive activity loss rules and significant developments, including:

  • Opportunities with the new NIIT for taxpayers utilizing passive activities, and what should be done this year.
  • Implications of the proposed regulations on the definition of an “interest in a limited partnership as a limited partner” for purposes of determining material participation in an activity under Sect. 469.
  • The seven tests for proving material participation in a passive entity and reconciling conformity issues for passive losses under conflicting state tax regs.
  • The impact of the NIIT final regulations for tax planning and reporting for clients with passive activity losses and income.

Faculty

Barnett, Robert
Robert S. Barnett, CPA
Partner
Capell Barnett Matalon & Schoenfeld

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and...  |  Read More

Michala P. Irons
Michala P. Irons
Barnes & Thornburg

Ms. Irons assists individuals, businesses, and nonprofit organizations with federal tax planning. She previously...  |  Read More

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