February 9, 2017

S Corporation shareholders should be aware, the IRS Large Business and International division (LB&I) has announced a new IRS Compliance Campaign.

The campaign focuses on various issues, including S Corporation Losses Claimed in Excess of Basis. It has come about as a response to the IRS’s concern that S Corporation shareholders are claiming losses and deductions in instances where they do not have sufficient stock, or debt basis, in the S Corporation.

To carry out the campaign, LB&I has established criteria and provided assistance to revenue agents as part of their issue-based examinations. They are also sending letters to encourage taxpayers to correct their situations, are conducting outreach to stakeholders, and are creating a new form for S Corporation shareholders to calculate their correct basis.

If you are the owner of a pass-through entity (S Corporation, Partnership & Trust), now is the time to prepare and review basis calculations to make sure you are taking the appropriate losses. This will be a focus area during the IRS’s examinations.

Clark Nuber will be monitoring changes to the Compliance Campaign and will post updates as they become available. Please contact Rene Schaefer with questions.

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This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.