This course addresses the practical aspects of section 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 section 469, with emphasis on tax savings ideas. Readers will overview the proper administration of this complex and often cumbersome provision.
Delivery Method: Online Interactive Self Study
Prerequisites: General understanding of federal income taxation.
Advanced Preparation: None
Policies: Click here
Field of Study: Taxes
Passing Score: 70%
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Chapter 1: Overview
1. Explain the broad impact of the section 469 limitation provision by:
a. Contrasting it to prior law loss treatment and differentiating between the former and current treatment of losses;
b. Detecting the prior tax shelter problem and showing at least two of Congress's motives and rationales in passing section 469;
c. Describing several economic decision-making changes caused by the limitation;
d. Identifying income and loss into two categories; and
e. Demonstrating the central concept of investor activity participation as the basis for determining the allowance of a passive loss.
2. Describe the mechanics of the passive loss rules, apply section 469 to appropriate deductions, identify what type of income may be offset by passive losses and then, process a passive loss using four calculation steps.
3. Find and identify passive losses under section 469 by:
a. Using the three "bucket" analogy of section 469 to:
(i) annually categorize a client's income showing the limitation's impact, and
(ii) define "passive items" and "material participation" under section 469;
b. Locating portfolio income based on items deemed nonpassive under the Code; and
c. Listing five circumstances that allow for special treatment of income and loss.
4. Explain the suspension of disallowed losses, identify two ways to ultimately "free up" passive losses, describe the treatment of passive credits including potential basis adjustment, and define a fully taxable disposition indicating the impact of related party transactions.
5. Summarize the impact and tax consequences of a fully taxable disposition (FTD) by:
a. Defining an entire interest disposition, particularly for a partnership or grantor trust;
b. Determining the allowance of suspended losses upon installment sale, exchange, gift or death;
c. Clarify the ordering of recognized tax attributes upon a FTD; and
d. Identifying ways to escape the application of the FTD and other passive loss rules particularly for closely held corporations and personal service corporations that change their operations and nature.
6. Determine which clients are or are not subject to the passive loss rules by:
a. Detecting two types of corporations to which section 469 applies and summarizing the elements of their Code definitions;
b. Clarifying the general rental activity rule exception listing two eligibility requirements
c. Defining "pre-enactment interest," "qualified interest" and "pre-enactment activity" identifying their section 469 "phase in" treatment; and
d. Specifying section 469's effective date and describing the IRS's application authority under 469(l).
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CPA: Suitable for all CPAs
IRS: Enrolled Agents Program Number 263UK-T-00100-14-S