Top Federal Tax Issues for 2026 CPE Course: Module 2

Author: Jane Ryder, Greg White

Go deeper on pass-through entities, PTET, and real estate tax planning. Module 2 covers S corporation shareholder basis and Form 7203, partnership basis, PTET elections and reporting, and planning strategies for real estate transactions. Best for practitioners who need practical guidance on basis, pass-through reporting, depreciation, passive activity rules, vacation rentals, like-kind exchanges, and real estate sales

Publication Date: December 2025

Topics Covered

• Form 7203 Overview
• S Corporation Basis Adjustments for COVID Benefits
• Stock Block
• Allocating Pass-through Items
• Possible Compliance Exposure from Form 7203
• S Corporation Basis Limitations
• Initial Basis of an Investment in an S Corporation
• Reconstructing Basis for S Corporation Shareholders
• Partner’s Capital account Analysis
• Schedule K-1 Loss Limitations for Partners
• Effect of contributing or distributing assets to partners
• TCJA Changes to the Tax Treatment of Partnership Deductions
• Taxable Distributions in Excess of Basis
• Original Basis of a Partnership Interest
• Outside Basis of a Partnership Interest: Categories of Acquisition
• Partner’s Share of Liabilities
• General Rules for Amounts Not at Risk
• General Rules for Passive Activity Losses
• Partnership Distributions
• Guaranteed Payments
• Unreimbursed Partnership Expenses
• Debt-Financed Partnership Acquisition or Contribution
• Pre-Contribution Gain
• Alternative Rule for Calculating Basis
• COVID-19 Benefits Reported on Form 1065
• Sale of a Partnership Interest
• Basis Divided Among Properties
• Tax Planning for Partnership Losses
• State Treatment of PTET Elections
• IRS Notice 2020-75
• Tax Planning for PTET Credits
• Federal and State Tax Benefits of PTET Elections
• New Burdens on Tax Preparers Related to State PTET Elections
• Purchasing Real Property
• Fast Depreciation
• Repairs Versus Capitalizable Improvements
• Like-Kind Exchanges
• Debt-Financed Distributions: Partnership Refinances
• Tracing Interest Expense
• Qualified Business Income Deduction
• Self-Employment Tax and Real Estate
• Vacation Rentals
• Passive Activities
• Maturity: Sales, Exchanges, and Step-Ups
• Like-Kind Exchanges

Learning Objectives

• Identify basis basics for shareholders, partners, and limited liability company (LLC) members
• Describe specific business transactions that may cause basis problems
• Identify best practices for correcting or reconstructing basis if needed
• Recognize how to handle basis calculations for asset contributions or distributions
• Determine tax practitioners’ exposure and responsibilities related to basis
• Describe how to calculate and track accurate inside and outside partnership basis
• Explain how to develop tax strategies to maximize utilizing pass-through losses
• List and describe the items that make up basis from initial investment to the final buyout
• Explain how to maintain important worksheets to substantiate basis records or reconstruct missing basis records
• Explain the tax implications of contributing or taking assets out of the partnership
• Describe the fundamentals of PTET elections and the federal tax savings
• Describe valuable tax planning and tax plan timing schedules for PTET clients
• Explain how to correctly report a PTET payment on the federal Schedule K-1 for partners and S corporation shareholders
• Recognize how to evaluate tax professional exposure when working with PTET elections and missed opportunities
• Identify the best depreciation method for real estate improvements
• Describe how to allocate the purchase price of real estate in the most advantageous manner
• Identify and apply the rules for de minimis expensing
• Recognize and apply changes made to interest deductibility
• Identify the express limit with respect to the Code Sec. 179 “qualified real property” rule and partial dispositions
• Identify hurdles that must be cleared in order for a repair to be expensed
• Identify rental real estate that qualifies for the Code Sec. 199A QBID
• Recognize which real estate is subject to self-employment tax
• State the rules for vacation rentals
• Describe when the “Augusta rule” allows S corporation shareholders to rent part of their personal residences to their S corporations (without paying taxes)
• Identify the special passive activity rules that apply to rental real estate
• Describe strategies for reducing taxes on the sale of real estate
• Identify the “Big 3 rules” for like-kind exchanges
• Recognize the portion of “repair days” that is classified as personal use
• Identify one of the common exceptions to the per se rule

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (14 hours)

Program Prerequisites
None

Advance Preparation
None