Interested in training for your team? Click here to learn more

Section 461(l) Excess Business Loss Limitations: Calculating and Preparing Form 461, Deficient IRS Guidance

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

This program is included with the Strafford CPE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Tuesday, January 7, 2025

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926
Add to your calendar

This webinar will provide tax advisers with a practical exploration of the loss limitation rules of Section 461(l). The panel will discuss what items are included or excluded in the business loss calculations, the effect of such a loss and its carryover to other taxable years, and the interactions with the passive activity loss rules and the Section 199A pass-through business income deduction.

Description

The Tax Cuts and Jobs Act (TCJA) introduced the excess business loss (EBL) limitation rules of Section 461(l). Originally scheduled to sunset Dec. 31, 2025, along with many other TCJA provisions, and suffering a suspension under the CARES Act for 2018-2020, a combination of extensions under the American Rescue Plan Act and the Inflation Reduction Act moved its expiration date to Dec. 31, 2028. Although extended, there remain unanswered questions concerning applying Section 461(l) requirements and how this legislation interacts with other tax provisions.

The law disallows the current deduction of any EBLs, a statutory creation under Section 461(l). These losses are generally the excess of the taxpayer's aggregate deductions attributable to trades or businesses over the sum of (1) the taxpayer's aggregate gross income or gain attributable to such trades or businesses and (2) $305,000 ($610,000 in the case of a joint return) for 2024. In other words, net business losses may offset only up to $305,000 or $610,000 of investment income and other non-business income.

Significant questions have arisen over whether various tax items are business or non-business for this purpose, such as wages and salaries, gain on the sale of partnership interests or S corporation stock, cancellation of debt (COD) income, the Section 199A pass-through business income deduction, and (ironically) certain losses from the disposition of business property.

EBLs are carried forward as a net operating loss (NOL), but there is some uncertainty and debate over how to apply the carryover rules. The NOL can offset only up to 80 percent of pre-NOL taxable income in the carryover year. Although several identified technical corrections exist for Section 461(l), there is still a lack of official guidance, and a relative scarcity of academic or practitioner commentaries on critical issues.

Listen as our experienced panel provides a practical guide to the current state of Section 461(l) as it applies to non-corporate taxpayers.

READ MORE

Outline

  1. Section 461(l) overview
  2. Effect of EBL and carryover
  3. Calculating EBL
  4. Interactions with other Code provisions
  5. Items awaiting future IRS guidance

Benefits

The panel will discuss these and other relevant topics:

  • Other Code provisions that may be analogous and help in computing EBL
  • Treatment of partnership and S corporation items for their partners and shareholders
  • The intersection of EBL with Section 199A qualified business loss carryovers
  • Impact of Section 461(l) on passive and non-passive activities

Faculty

Lopez, Liliana
Liliana Lopez
Tax Managing Director, Private Client Services
BDO USA

Ms. Lopez is a Tax and Accounting Senior Manager in Greater New York City Area at BDO. She performs Tax...  |  Read More

Singal, Shashi
Shashi Singal, CPA, MSA, CA
Tax Partner
Anchin

Ms. Singal is a Tax Partner in Anchin’s Consumer Products Group with more than 20 years of expertise in...  |  Read More

Vercelli, Lydia
Lydia Vercelli, CPA, TEP
Tax Managing Director
BDO USA

Ms. Vercelli is a CPA and a Registered Trusts and Estates Practitioner (TEP) with the Society of Trust and Estate...  |  Read More

Attend on January 7

CPE credit processing is available for an additional fee of $39.
CPE processing must be ordered prior to the event. See NASBA details.

Cannot Attend January 7?

CPE credit is not available on downloads.

CPE On-Demand

See NASBA details.