A finished ACC-465 Topic 8 loss limitation position memo example, testing an S corporation owner's $90,000 loss against the basis, at-risk and passive limits and defending a restructured position the rules support. Searches like "acc 465 topic 8 assignment example", "acc465 topic 8 sample" and "acc-465 topic 8 example" land here.
What a finished ACC-465 Topic 8 loss limitation position memo looks like
The finished memo sets out the owner's position and then tests it in the order the Code applies the limits. Basis comes first: her stock basis is $30,000, and a guarantee of the corporation's $100,000 bank loan adds no debt basis, because under section 1366(d) and the regulations only debt the corporation owes directly to the shareholder counts. As proposed, $30,000 is deductible and $60,000 is suspended and carried forward. The memo then prices an alternative: if she borrows $60,000 personally and lends it to the corporation on a documented note, her debt basis and her amount at risk under section 465 both rise, and the full loss clears both limits. Material participation keeps it outside the passive rules of section 469. The excess business loss limit in section 461(l) is noted as indexed.
How an ACC-465 Topic 8 example is structured
The memo states the position under review, then defends or narrows it limit by limit. Its opening paragraph gives the owner's claim in her words and the memo's conclusion, that the claim fails as proposed and succeeds once restructured. The facts follow, with the loan documents described precisely, since who owes whom decides the basis question. Three analysis sections come next in statutory order: basis, amount at risk, then passive activity, each ending with the portion of the loss that survives it. A section on the restructured loan tests it against the same three limits and names the conditions it must meet to count, among them a written note, stated interest and repayment terms. A short section warns that repaying a loan whose basis the loss has reduced produces income later. The closing paragraph states the defended position and the authority behind each step.
Limits applied in statutory order
Basis, amount at risk and passive activity are tested in sequence, because a loss suspended by an earlier limit never reaches the later ones in that year.
A guarantee that adds no basis
The memo explains that guaranteeing the bank's loan leaves the corporation owing the bank, not the owner, so her debt basis stays at zero.
Suspended loss carried forward
The $60,000 blocked by basis is not lost; it waits until basis is restored in a later year, and the memo records it that way.
The restructured loan tested too
A direct $60,000 loan to the corporation is run through all three limits before the memo relies on it, rather than assumed to work because it resembles familiar planning.
Repayment consequences stated in advance
Because the loss reduces the new debt basis, later repayment produces income, and the memo presents the plan as changing timing rather than removing tax.
Where marks go in ACC-465 Topic 8
Positions defended only against the limit a paper happens to know fail here, since the rubric expects every applicable limit to be tested. A memo that allows the full $90,000 because the owner is personally liable to the bank has treated a guarantee as debt basis, which is the error this fact pattern is written around. Testing passive activity before basis reverses the statutory order and can report a loss as allowed that basis already blocked. Papers that call the $60,000 permanently lost misread the carryforward. Restructuring offered without the conditions a shareholder loan must meet, a real note, interest and repayment terms, recommends something a reviewer could collapse. Ignoring the income that later repayment triggers presents a timing benefit as a permanent one. Citing no section for any limit leaves a planning position with nothing to stand on.
Get an ACC-465 Topic 8 example written to your instructions
Send the ACC-465 Topic 8 instructions, the rubric and the owner and entity facts your section supplied. A custom example is written to them, with the proposed position stated, each limit applied in order, any restructuring tested against the same rules and the surviving position defended with its citations, in 24 to 48 hours. The first one is free. Coursework support only.
ACC-465 Topic 8 questions, answered
Why does a guarantee not create basis for an S corporation owner?
Because the regulations on S corporation debt basis look for bona fide indebtedness of the corporation that runs directly to the shareholder. A guarantee leaves the corporation owing the bank, and the owner is only contingently liable. If she later pays the bank under the guarantee, the answer changes from that point. Partnerships follow different rules for liabilities, which is one reason entity form matters here.
What happens to a loss suspended by the basis limit?
It carries forward and can be deducted in a later year when the owner has enough basis to absorb it, for example after the corporation earns income or she contributes capital or lends money directly. The memo records the $60,000 as suspended so it is not forgotten. An owner who sells the stock before restoring basis generally loses the benefit of the suspended amount.
Is the restructured loan a recommendation to borrow?
No. It is a coursework illustration of how the limits respond to different facts, and a real decision to borrow involves risks and circumstances the example leaves out. The memo tests the restructured loan against each limit to show that a planning position is defended by rules rather than by resemblance to familiar planning. Anyone considering such a step needs a qualified adviser applying current law.