Learn the Key Issues in Maintaining Tax Basis Capital Accounts
Partnerships must now report all partners’ capital accounts on a tax basis. After a few false starts, the IRS has settled on use of the “transactional” approach to tax basis capital accounts. This seems fairly simple at first impression. The entries for specific transactions are made on a tax basis. Capital falls out from these entries. However there are many transactions that present challenging interpretations for capital account reporting.
This session will examine the reasons for use of tax basis capital, as the reasons will allow a “logical” interpretation of how entries should be made. It will address basic transactions, but also issues such as reporting the effects of PPP loans, opportunity zone investments, section 734 and 743 basis adjustments, distributions that trigger partner section 704(c) gain, and disguised sale transactions.
This two-hour CPE course, presented by James Hamill, CPA, Ph.D., presents an approach to dealing with transactions of a partnership that do not lead to an immediate answer to the proper tax capital reporting.
Publication Date: September 2021
Designed For
CPAs, EAs, return preparers, tax attorneys and other tax professionals who advise clients who may be subject to the passive loss rules or the NIIT will benefit from this insightful webinar.
Topics Covered
- Background — Why it Matters
- Regulatory guidance on capital account reporting
- IRS guidance in Form 1065 instructions
- Alternate views of the reasons for tax basis capital reporting and why that matters
- How to record specific transactions
Learning Objectives
- Identify the purpose of tax basis capital reporting
- Recognize how maintaining both book and tax capital can help in reporting transactions
- Determine how to approach reporting for specific transactions
- Describe which IRS Form provides final guidance with respect to tax basis reporting is included in the instructions
- Identify what year an S Corporation Shareholder required to report basis if a distribution was made or a loss was reported
- Recognize what amount "substantial" basis reductions is defined to be greater than
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
Basic understanding of federal income taxation.
Advance Preparation
None
Instructor
James R. Hamill
Dr. Hamill is the Director of Tax Practice at Reynolds, Hix & Co., P.A., in Albuquerque, New Mexico. He is the author of more than 36 CPE courses and more than 100 articles in professional tax journals and writes a weekly column on tax issues for the Albuquerque Journal. He has lectured on structuring tax transactions throughout the country for international CPA firms, State CPA Societies, and numerous other organizations. He has developed and instructed webinars on a variety of tax topics over the past 10 years. He is a CPA in New Mexico, a past Chair of the New Mexico Society of CPAs, and has 40 years of experience in tax practice.