Tax in Action: Practical Strategies for Tax Pros

Limited Partner or Not? Why Courts Are Split on Your Tax Bill

Jeremy digs into what actually makes someone a partner for federal tax purposes, tracing the definition back to the Supreme Court's Tower and Culbertson decisions and the "hypothetical liquidation" test for capital interests. From there, he unpacks the messier question of self-employment tax on partnership income: the undefined "limited partner as such" exception under IRC Section 1402(a)(13), and the current circuit split between the Tax Court's functional analysis (Renkemeyer, Soroban) and the Fifth Circuit's state-law approach in Sirius Solutions, with Denham Capital Management still pending at the First Circuit. * (00:00) - Partnerships Recap Goals (01:27) - LLC Members Case Study (03:17) - Are Partners Equal (05:11) - Who Counts As Partner (10:14) - Tower Case Principles (14:48) - Culbertson Intent Test (17:30) - Congress Defines Capital Interest (26:26) - Capital Interest Explained (28:47) - General Versus Limited Partners (30:18) - Self Employment Tax Basics (33:19) - Limited Partner Definition Fight (36:06) - Key Court Cases Split (48:47) - New Cases Jurisdiction Issues (52:12) - Back To LLC Example (55:02) - Takeaways Next Episode Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

When Does Co-Ownership Become a Partnership

Two friends sharing a short-term rental, a married couple flipping houses, siblings splitting the income from a property they own together: any of these could be a partnership for federal tax purposes, often without the owners realizing it. This episode works through how federal tax law defines a partnership, when one actually forms, and why mere co-ownership does not automatically create one, drawing on Subchapter K, the regulations, and foundational cases like Tower and Culbertson. It also separates two regimes that frequently get conflated, the qualified joint venture under Section 761 and the community property LLC exception under Revenue Procedure 2002-69, and closes with a framework for making the call. * (00:00) - Rental Friends Scenario (01:36) - Why Partnership Status Matters (02:28) - Aggregate Versus Entity (04:22) - Goals For This Episode (05:51) - IRS Partnership Definition (09:12) - Mere Co Ownership Tests (14:10) - LLCs And Entity Rules (17:20) - When A Partnership Forms (23:22) - Supreme Court Guidance (27:45) - Court Factors Checklist (33:50) - Electing Out Of Subchapter K (39:41) - Spouse Exceptions Explained (49:08) - Two Step Decision Framework (54:31) - Case Study Short Term Rental (57:01) - Key Takeaways And Wrap Up Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

Cracking Open the Shell: How S Corp Asset Sales Actually Work

A buyer who wants a business but not its liabilities will often buy the assets instead of the stock, and that one decision reshapes how the entire deal gets reported. This episode breaks down the S corporation asset sale from the ground up: allocating the purchase price across seven asset classes using the residual method under Section 1060, reporting it on Form 8594, and handling goodwill and other Section 197 intangibles. It also covers why each asset's character drives the gain that passes through to shareholders, and what documentation has to be locked down before you prepare a single return. * (00:00) - Stock vs Asset Sales (03:32) - Course Goals Overview (06:04) - Lighthouse Example Setup (13:16) - Why Buyers Prefer Assets (16:29) - Section 1060 Basics (25:36) - Residual Method Classes (32:17) - Goodwill and Going Concern (40:45) - Personal Goodwill Cases (42:57) - Form 8594 Reporting (47:53) - Elections 338 and 336 (50:08) - Due Diligence Checklist (53:18) - Workflow and Wrap Up Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

S Corp Ownership Changes: What Every Tax Advisor Needs to Know

When ownership in an S corporation changes hands, the tax consequences routinely catch both clients and their advisors off guard. Jeremy walks through the two critical questions that drive correct reporting — who or what acquired the stock, and when did the transfer actually occur for tax purposes — and explains how the answers determine whether a transaction is treated as a capital sale, a stock redemption, or a distribution. He also covers the two close-the-books elections available under IRC Section 1377(a)(2) and Reg. 1.1368-1(g), and why locking in those elections before filing — ideally before the transaction closes — can make a significant difference in how income gets allocated between outgoing and incoming shareholders. Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]

The S Corp's Three Ledgers: Retained Earnings, AAA, and Stock Basis

S corporations maintain three separate ledgers — retained earnings, AAA, and shareholder stock basis — and each one answers a different question about the entity and its owners. Understanding why they diverge, and which one actually governs whether a distribution is taxable or a loss is deductible, is where a lot of tax professionals run into trouble. Jeremy walks through the mechanics of all three, including Form 7203, the order-of-operations rules for calculating stock basis, and what's really going on when a practitioner misclassifies distributions in excess of basis as shareholder loans. * (00:00) - Why S Corps Are Hybrid (02:20) - Three Key Ledgers (06:35) - Retained Earnings Basics (10:52) - IRS Scrutiny of Retained Earnings (15:13) - AAA Explained and Origins (21:43) - AAA vs Retained Earnings (27:29) - Stock Basis and Common Mistakes (36:23) - Capital Contributions and Form 7203 (43:37) - Basis Ordering Rules and Elections (48:55) - Worked Example and Wrap Up Jeremy's Article on S Corp Ledgers https://www.jwells.tax/p/the-three-ledgers-of-an-s-corporation [https://www.jwells.tax/p/the-three-ledgers-of-an-s-corporation] Connect with Jeremy https://www.linkedin.com/in/jwellstax [https://www.linkedin.com/in/jwellstax] https://www.steadfastbookkeeping.com [https://www.steadfastbookkeeping.com/] Subscribe on YouTube https://www.youtube.com/@TaxinAction [https://www.youtube.com/@TaxinAction] Earn CPE for Listening to This Podcast https://www.earmark.app/ [https://www.earmark.app/] This podcast is a production of Earmark Media [http://earmark.me/]