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Recent IRS Rules for S Corporations: Activity and Basis Reporting, NRAs, QBI, and IRS Basis Audits

Note: CLE credit is not offered on this program

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

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Conducted on Thursday, August 31, 2023

Recorded event now available

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This webinar will address the latest Subchapter S corporation tax issues. Our panel will discuss the requirements to include basis schedules and separate activity reporting in Form 1120-S, nonresident aliens and ESBTs, and preparing for the current IRS initiative focusing on audits of S corporation basis.

Description

Basis adjustment is the biggest S corporation issue for IRS audits and the focus of the latest IRS initiative. Having up-to-date basis schedules for S corporations is critical. Form 1120-S requires submission of basis schedules with the return. Practitioners may need to calculate or update these schedules.

Notice 2019-66 did away with the requirement that partnerships must separately report activities, but the IRS did not afford S corporations this same relief. Section 465 limits the amount of deductible losses owners can claim based on amounts at risk. If the corporate items of income, loss, or deduction reported on Schedule K-1 are from more than one activity covered by the at-risk rules, the corporation must report information separately for each activity. Activity-by-activity reporting creates a burden for many S corporations, yet tax advisers and return preparers must be familiar with the at-risk rules and handle the reporting requirements appropriately each year.

Similar to other businesses, the recent tax law provided S corporations with the benefit of a QBI deduction. There are steps tax practitioners can take to help maximize this deduction. And since there are substantial penalties for noncompliance, proper reporting for the flow-thru deduction on Schedules K and K-1 reporting is essential.

Before recent tax reform, an ESBT (electing small business trust) beneficiary had to be an eligible S corporation shareholder. Now, a nonresident alien can be a potential current beneficiary of an ESBT without being a disqualified shareholder.

Listen as our panel of experts covers the latest developments with S corporations, including basis and at-risk reporting, NRAs as shareholders of ESBTs, Section 1371(f) regulations, and other recent developments.

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Outline

  1. Basis reporting
  2. Separate reporting of activities
  3. Specific IRS challenges to S corporations
  4. Nonresident aliens as ESBT beneficiaries
  5. QBI calculations and reporting
  6. Section 1371(f) regulations
  7. Other S corporation developments

Benefits

The panel will review these and other key issues:

  • Updating basis schedules to prepare for IRS challenges
  • Calculating and reporting QBI flow-through items
  • Handling separate reporting of activities
  • Current court cases and challenges to S corporations

Faculty

Homsi, Eric
Eric Homsi
Counsel
Crowell & Moring

Mr. Homsi is a counsel in the firm's Tax Group, resident in the New York office. His practice concentrates...  |  Read More

Skabelund, Samantha
Samantha Skabelund
Attorney
Crowell & Moring

Ms. Skabelund is an associate in the Tax Group and resident in the firm’s Washington, D.C. office. She practices...  |  Read More

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