Every year the IRS issues new regulations and publishes new tax forms. There is one new form, Form 7203, that you may start seeing with your borrower’s most recent individual income tax returns. This form can be extremely helpful for your cash flow analysis of S corporation shareholders. What is Form 7203? If you have…
We recently received a call to the Bukers Hotline from a banker who was analyzing her borrowers 2020 Form 1040. She noted the whitepaper detail for Line 2a Tax-Exempt Interest listed a partnership that the borrower was a partner in as the source for the tax-exempt interest income. Is it cash flow? It depends. The…
Here’s the Issue We recently received a great question to the Bukers Hotline from an analyst who was spreading her borrower’s tax returns in the Bukers Taxanalysis and BTA Pro software. The borrower operated multiple rental properties through an LLC; for this article let’s call this ABC Rentals, LLC. The borrower provided the analyst with…
We frequently receive questions on the Bukers Hotline about spreading and properly analyzing K-1s received by individual borrowers, including this most recent question about an “Other Increase” that deserves to be highlighted. A recent caller was analyzing a borrower’s K-1 from an S-corporation and the caller found a shareholder’s basis worksheet attached to the K-1….
We have received many great questions on the Bukers Hotline recently, including a question about a Shareholder’s Basis Worksheet that a lender received with her borrower’s S-corporation K-1. If you have a borrower who is a shareholder in an S-corporation, you are now more likely to find a shareholder’s basis calculation included with either your…
We’ve recently received a great question via the Bukers Taxanalysis hotline that deserves some explanation. The caller asked us to explain what is being presented in Sections M and N on the Schedule K-1 of Form 1065, and specifically if they affect the cash flow of the borrower. Section M Section M states whether or…
Many of our users have called the hotline asking if Box 14 (self-employment earnings) on the partnership Schedule K-1 should be included as cash flow to an individual. Since we receive this question often, we felt it was worth explaining in greater detail in our newsletter. At first glance, Box 14 (self-employment earnings) may seem…
Schedule E, page 2, column (k) shows nonpassive income of $135,460. The Form 1065 Schedule K-1 shows two types of distributions on line 19. One distribution is shown in the amount of $75,000 with the letter “A” in front of it. The second distribution is in the amount of $20,000 and has the letter “C”…
The Tax Cuts and Jobs Act of 2017 changed the tax deductibility of unreimbursed employee business expenses for most individuals. Specifically, the deductibility of unreimbursed employee expenses on Form 2106 is now limited to Armed Forces reservists, qualified performing artists, and a few other groups of taxpayers. Assuming that lenders won’t often receive a qualifying…
Due to recent tax reform, there has been a change in the tax law for net operating losses (NOLs). While the cash flow treatment of NOLs remains the same, its appearance on tax returns may be different. Before the recent tax reform, NOLs could either be carried back two years or carried forward twenty years….