Field of Study:
This course addresses the practical aspects of §469 and the needed skill to handle pragmatic issues. Fundamentals are reviewed,
planning opportunities identified, creative strategies discussed and evaluated along with remaining traditional approaches. The
goal of this instructive program is to understand and solve problems under §469, with emphasis on tax savings ideas. Readers will
overview the proper administration of this complex and often cumbersome provision.
After completing this course you will be able to:
- Recognize the broad impact of the §469 limitation provision.
- Specify the mechanics of the passive loss rules, recognize the impact of §469 to appropriate deductions, identify what type of income may be offset by passive losses and then, determine a passive loss.
- Identify passive losses under §469.
- Recognize the suspension of disallowed losses, identify ways to ultimately "free up" passive losses, specify the treatment of passive credits including potential basis adjustment, and determine a fully taxable disposition indicating the impact of related party transactions.
- Identify the impact and tax consequences of a fully taxable disposition (FTD).
- Identify which clients are or are not subject to the passive loss rules.
- Identify how to avoid the application of the passive loss rules through material participation, and factors under the TRA ’86 that were considered in determining whether the taxpayer’s involvement in the operation of the activity is regular, continuous, and substantial.
- Specify tests provided by the initial February 19, 1988 regulations on material participation noting how these tests provide useful §469 categories, determine participation and how to keep appropriate records of participation in an activity, identify exceptions to the definition of what counts toward material participation, specify the husband and wife rule associated with the passive loss rules, determine annual material participation.
- Recognize special applications of the material participation rule.
- Recognize the history and rationale of the definition of “activity.”
- Identify the importance of the original undertaking rule used to determine an activity.
- Determine the differences between the temporary and the final simplified activity regulations noting their key elements.
- Recognize the importance of the passive activity audit guide as a tool to avoid audit.
- Determine the differences between passive activities and nonpassive activities under §469.
- Recognize the uncertain initial characterization of an activity and its potential recharacterization.
- Recognize the tax treatment of a passive loss including its identification, netting and suspension.
- Specify reasons why disallowed passive activity losses must be allocated among all the taxpayer’s activities producing a loss during the tax year, determine how to allocate disallowed passive activity losses and how it may be applied to multiple activities, identify the ratable portion of a loss and the ratable portion of a passive activity deduction under §469, and recognize significant participation activities noting how to determine loss, if any.
- Identify passive activity gross income.
- Recognize the income characterization impact of a taxpayer’s relationship to an activity.
- Identify specialty items and unique rules that complicate the calculation of gross passive income.
- Determine tax attributes and subsequent events that can cause a re-calculation of gross passive income.
- Determine a “passive activity deduction,” noting how it is processed under §469, and aggregate qualified residence interest using §469(j)(7), specify passive activity deductions with other deduction limitations and identify effects the coordination rule has on the determination of passive activity deductions.
- Recognize how to account for losses on disposition according to Reg. §1.469-2T(d)(5), and cite instances that require such a loss to be allocated, determine a negative §481 adjustment, and specify exceptions to the passive activity deduction.
- Determine “passive activity credits” and the regular tax liability allocable to passive activities, cite the $25,000 allowance according to the regulations, identify a closely held corporation’s passive activity credit net active income for the tax year and under §469, and determine how passive activity limitations apply to credits and how to allocate disallowed credits.
- Specify circumstances where separate identification of credits is required and the order of credit limitations, cite the special rule for partners and S corporation shareholders, determine how passive activity credits match with other limitations, and identify the tax treatment of carryover passive activity credits.
- Identify items received from pass-through entities as passive or non-passive according to the passive loss rules, determine a taxpayer’s participation and the application of §469 to payments to partners as outsiders and as partners, specify the tax consequences of cash payments in liquidation of a partner’s interest, and identify categories of cash payments in such a liquidation.
- Recognize items and events that uniquely adjust or allocate passive losses for pass-through entities and their owners.
- Recognize the application and ordering interaction of §469 with other Code sections
General understanding of federal income taxation.
Type of Delivery Method:
Recommended CPE Credits:
Final examination expiration date:
The program participant will have one year from the date of purchase to complete the course and final examination.
Web CPE is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org