New requirement for shareholder basis statement

Technical topics regarding tax preparation.
#21
JAD  
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In 2008, a client's 2006 return was audited. He had over 40 partnership entities. The first thing the auditor wanted to see was the basis schedules. She wanted a historical summary, not just the annual info. Around the time that he had reached 20 entity investments, I had thought to pull this information together. She couldn't believe I had it. Ever since then, I've been tracking basis in Excel for federal, fed AMT, CA, CA AMT, for each K-1 investment and disclosing basis in the tax return.
 

#22
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Tenletters: Thank you, thank you, thank you, for the two links in your Post #20, above. How in the world did you locate those two items? And during busy season, too!

Has anybody reading this been in discussion with the LB&I team about their work and the thirteen resulting campaigns?

Has anybody reading this ever even heard of the IRS's Large Business and International division?
 

#23
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Never heard of them and the first word "Large" generally puts my clients out of their realm. But we'll see. I sent my first S corp return and coinciding personal return yesterday. The personal return has the basis statements that Drake produced. If less than $60,000 interests this department I think they need to change their name. But it's there.
 

#24
makbo  
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Harry Boscoe wrote:"It's only been a requirement if a current year taxable loss is being claimed," says makbo.
Do you mean "only" as in "other things didn't require it" or do you mean "only" as in "in prior years"?

I mean "only" as in "only this if that", which I suppose you could re-phrase as "this only if that". I mean "been" as in "prior years".
 

#25
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Around the time that he had reached 20 entity investments, I had thought to pull this information together.

Not sure why you didn’t think to pull it together when he had just one…
 

#26
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All, this is crazy, especially when we are not preparing business returns. I have some questions:

1) Is this for a parnerships and S corps?
2) Are you only doing this when there is a loss?
3) What are you doing for clients who get their K-1s from other preparers?

Thank you.
 

#27
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wwwcpa1biz wrote:All, this is crazy, especially when we are not preparing business returns.

But you are preparing a return for a business person, right? I think Schedule E Part II qualifies as a "business return".
 

#28
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All, this is crazy, especially when we are not preparing business returns.


How is it crazy?

How do you know if the loss is deductible on the 1040?

How do you know if the distribution isn’t in excess of basis on the 1040?

You should never, ever prepare a 1040 that involves an S-corp or partnership without having a basis worksheet on file. A basis worksheet prepared by you. That does not change if another preparer prepares the entity return.
 

#29
JAD  
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Jeff, #25. Back then, no one was talking about the issue. I knew he had a substantial investment in each entity. I just hadn’t tracked the detail. One year, I finished the return with some time left in the budget, and I used that time to pull the data together.

Jeff, #28 above. I completely agree.
 

#30
MWPXYZ  
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I wonder if Form 6198(s) filed with Form 1040 would be "good enough" . If there is enough of an amount "at risk" there must be enough basis.

except maybe when the aggregation allowed under 465(c )(2)(B) and (3)(B) would make the 6198 irrelevant.

Which is probably a rarity.
 

#31
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Considering the questions *still* being asked about this project, I think it behooves us to reread the instructions from page 2 of the 2018 Schedule E, which are the source of [most of] the issues being raised:
Income or Loss From Partnerships and S Corporations
— Note:
If you report a loss, receive a distribution, dispose of
stock, or receive a loan repayment from an S corporation, you
must
check the box in column
(e)
on line 28 and attach the required basis
computation. If you report a loss from an at-risk activity for
which
any
amount is
not
at risk, you
must
check the box in column
(f)
on
line 28 and attach
Form 6198
(see instructions).
OOPS!
Last edited by Spell Czech on 12-Mar-2019 5:44pm, edited 1 time in total.
 

#32
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Herewith instead the following, as well, too, in addition:
Income or Loss From Partnerships and S Corporations — Note: If you report a loss, receive a distribution, dispose of stock, or receive a loan repayment from an S corporation, you must check the box in column (e) on line 28 and attach the required basis computation. If you report a loss from an at-risk activity for which any amount is not at risk, you must check the box in column (f) on line 28 and attach Form 6198 (see instructions).
 

#33
makbo  
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Spell Czech wrote:Herewith instead the following, as well, too, in addition:

Is there a point to your last two posts? If so, I have no idea what it is. :?:
 

#34
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Is there a point? Yeah, the point is that I'm stumbling all over myself. Thanks for noticing!
 

#35
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Harry Boscoe wrote:Tenletters: Thank you, thank you, thank you, for the two links in your Post #20, above. How in the world did you locate those two items? And during busy season, too!

Has anybody reading this been in discussion with the LB&I team about their work and the thirteen resulting campaigns?

Has anybody reading this ever even heard of the IRS's Large Business and International division?


I have been on a couple of conference calls that included them. And I think some representatives were at the IRS Nationwide Tax Forums last year. It isn't anything new. Just a department that most people seldom come in contact with.
Because on T.A. ten was the most you were allowed
 

#36
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"Just a department that most people seldom come in contact with." So I wonder why they have been charged with sending out soft letters RE stock basis. None of my clients even come close to the definition of a large business, and I would think that's probably true of most one and two member S corps. With identity theft so rampant and constant warnings about scams, it would seem to be a better idea to have a letter like this come from a department that is more recognizable, or at least for which a client fits the definition of the word.
 

#37
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It seems to me that the IRS's Large Business and International Division isn't the bunch that's been charged with sending out the "soft letters," but rather that they are the group that has charged/allowed/enabled/authorized/armed the troops in the trenches to create these soft letters, etc.

The "Campaigns" undertaken by the LB&I Division are enumerated and detailed somewhere here online, and the strong hint is that those people don't really walk on the same ground we walk on, if you get my drift.
Last edited by Harry Boscoe on 14-Mar-2019 6:45pm, edited 1 time in total.
 

#38
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There's a draft of the "soft letter" that will advise our clients of our omission of the basis computation attachment from their individual returns. It's available on the internet, but it can't be copied. Probably for security reasons... :lol: :lol: :lol: :lol: :lol: :lol: :P

Also, there's a version - draft or sample or whatever, I don't know - of a computation of an S corporation shareholder's tax basis, probably stock and debt owed him/her by the S corporation, that might *might* **might** be what they're looking for. Starts with beginning of year tax basis, i.e., it appears not to be cumulative from the beginning of time....
 

#39
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Harry, that actually brings us back to my original question of whether or not the documents prepared with my software was acceptable for what they are asking for. Do you have a link to the sample stock and debt format?
 

#40
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You might be able to find something that might help you do what the Sch E instructions might be telling you you have to do on pages 4 and 6 of the instructions for the S Corp K-1: https://www.irs.gov/pub/irs-pdf/i1120ssk.pdf

I am not in a position to judge whether this might be what your software gives you, or not. :cry:
 

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