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Outside Basis: Determining, Documenting, and Reconstructing for Partners, Members, and Shareholders

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

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Conducted on Tuesday, July 25, 2023

Recorded event now available

or call 1-800-926-7926

This webinar will walk tax practitioners through the process of calculating outside basis for partners, members, and shareholders of pass-through entities. Our panel of federal taxation experts will point out the differences between S corporation and partnership calculations, discuss IRS audit flags, and explain how to reconstruct outside basis when necessary.

Description

Determining outside basis is one of the most complex yet critical components of flow-through entity taxation. The recent addition of tax basis capital reporting requirements emphasizes the fact that extensive audits of flow-through entities by the IRS will continue. These examinations concentrate on distributions and losses in excess of basis.

Outside basis is a partner's interest in a partnership, while inside basis is the partnership's investment in a partnership. Additional contributions, assumption of liabilities, and taxable and nontaxable income can increase a partner's basis. In contrast, distributions, a reduction in liabilities, and partnership losses and nondeductibles will decrease a partner's basis. Documenting these transactions from the initial entry into a partnership until the partners' exit is critical. This information is necessary to calculate distributions in excess of basis and the deductibility of losses.

All partners and shareholders should update and retain outside basis schedules. However, prior miscalculations, loss of documentation, or the acquisition of a new client can all create the need to reconstruct prior outside basis for a partner or member. Understanding how to best recapture this information using prior returns and client data is key.

Listen as our panel of dispute resolution experts explains the importance of determining, documenting, and reconstructing outside basis if needed to properly determine amounts available for loss deductions and to calculate gains and losses upon the disposition of an interest in a flow-through entity.

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Outline

  1. Outside basis: introduction
  2. Determining
    1. Calculating
    2. LLCs vs. S corporations
    3. Distributions
    4. Handling losses in excess of basis
  3. Documenting
  4. Reporting
  5. Reconstructing
  6. Avoiding audit flags

Benefits

The panel will cover these and other critical issues:

  • Properly documenting outside basis calculations
  • How outside basis is calculated for shareholders, partners, and members
  • Avoiding IRS audit flags for basis examinations
  • Best practices for reconstructing and correcting outside basis for partners and shareholders
  • Calculating losses in excess of basis and carryforward schedules

Faculty

Alfonsi, John
John T. Alfonsi, CPA
Managing Director
Cendrowski Corporate Advisors

Mr. Alfonsi has 25 years of tax consulting, business valuation, litigation support and forensic accounting experience....  |  Read More

Dyer, Marcus
Marcus E. Dyer, CPA, JD
Principal, Team Leader of Tax Controversy
Withum Smith+Brown

Mr. Dyer manages and reviews all aspects of federal and state tax compliance for C-corporation, S corporation and...  |  Read More

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