Prentice Hall's Federal Taxation 1999

by Kramer, John L.; Pope, Thomas R.

• ISBN13: 9780136468783
• ISBN10: 0136468780
• Format: Hardcover
• Copyright: 1998-05-01
• Publisher: Pearson College Div

Summary

Contains coverage of Tax Planning Considerations -- using corporations to split income, timing of distributions, using an S corporation to when liquidating, qualifying the estate for the installment payment of estate taxes, etc.; and Compliance and Procedural Considerations -- important due dates for filing, penalty avoidance, elections to file, etc. Features special chapters on consolidated tax returns and international taxation.

Table of Contents

PREFACE	xi
CHAPTER 1 TAX RESEARCH	1-1
Overview of Tax Research	1-2	(1)
Steps in the Tax Research Process	1-3	(2)
Importance of the Facts to the Tax Consequences	1-5	(1)
Ability to Design a Factual Situation Favoring the Taxpayer	1-6	(1)
The Sources of Tax Law	1-6	(18)
The Legislative Process	1-7	(1)
The Internal Revenue Code	1-8	(1)
Treasury Regulations	1-9	(2)
Administrative Interpretations	1-11	(3)
Judicial Decisions	1-14	(9)
Tax Treaties	1-23	(1)
Tax Periodicals	1-24	(1)
Tax Services	1-24	(3)
United States Tax Reporter	1-25	(1)
Standard Federal Tax Reporter	1-25	(1)
Federal Tax Coordinator 2d	1-26	(1)
Law of Federal Income Taxation (Mertens)	1-26	(1)
Tax Management Portfolios	1-27	(1)
CCH federal Tax Service	1-27	(1)
Citators	1-27	(5)
Commerce Clearing House Citator	1-27	(3)
Research Institute of America Citator 2nd Series	1-30	(2)
Computers as a Research Tool	1-32	(1)
Statements on Responsibilities in Tax Practice	1-32	(4)
Sample Work Papers and Client Letter	1-36	(1)
Problem Materials	1-36
Discussion Questions	1-36	(1)
Problems	1-37	(4)
Case Study Problem	1-41	(1)
Tax Research Problems	1-41
CHAPTER 2 CORPORATE FORMATIONS AND CAPITAL STRUCTURE	2-1
Organization Forms Available	2-2	(5)
Sole Proprietorships	2-2	(1)
Partnerships	2-3	(1)
Corporations	2-4	(3)
Tax Definition of Common Business Entity Forms	2-7	(2)
Check-The-Box Regulations	2-7	(2)
Legal Requirements for Forming a Corporation	2-9	(1)
Tax Considerations in Forming a Corporation	2-10	(2)
Section 351: Deferring Gain Or Loss Upon Incorporation	2-12	(15)
The Property Requirement	2-13	(1)
The Control Requirement	2-13	(3)
The Stock Requirement	2-16	(1)
Effect of Sec. 351 on the Transferors	2-17	(3)
Effect of Sec. 351 on Transferee Corporation	2-20	(1)
Assumption of the Transferor's Liabilities	2-21	(3)
Other Considerations in a Sec. 351 Exchange	2-24	(3)
Choice of Capital Structure	2-27	(5)
Characterization of Obligations as Debt or Equity Capital	2-27	(1)
Debt Capital	2-28	(1)
Equity Capital	2-29	(1)
Capital Contributions by Shareholders	2-30	(1)
Capital Contributions by Nonshareholders	2-31	(1)
Worthlessness of Stock or Debt Obligations	2-32	(2)
Securities	2-32	(1)
Unsecured Debt Obligations	2-33	(1)
Tax Planning Considerations	2-34	(2)
Avoiding Sec. 351	2-34	(2)
Compliance and Procedural Considerations	2-36	(1)
Reporting Requirements Under Sec. 351	2-36	(1)
Problem Materials	2-37
Discussion Questions	2-37	(1)
Issue Identification Questions	2-38	(1)
Problems	2-38	(5)
Comprehensive Problem	2-43	(1)
Case Study Problems	2-43	(1)
Tax Research Problems	2-44
CHAPTER 3 THE CORPORATE INCOME TAX	3-1
Corporate Elections	3-2	(3)
Choosing a Calendar or Fiscal Year	3-2	(2)
Accounting Methods	3-4	(1)
General Formula For Determining the Corporate Tax Liability	3-5	(1)
Computing a Corporation's Taxable Income	3-5	(17)
Differences Between Individual and Corporate Taxable Income	3-6	(1)
Sales and Exchanges of Property	3-7	(2)
Business Expenses	3-9	(5)
Special Deductions	3-14	(6)
Exceptions for Closely-held Corporations	3-20	(2)
Computing a Corporation's Income Tax Liability	3-22	(2)
General Rules	3-22	(1)
Personal Service Corporations	3-23	(1)
Controlled Groups of Corporations	3-24	(6)
Why Special Rules Are Needed	3-24	(1)
What Is a Controlled Group?	3-25	(3)
Application of the Controlled Group Test	3-28	(1)
Special Rules Applying to Controlled Groups	3-28	(1)
Consolidated Tax Returns	3-29	(1)
Tax Planning Considerations	3-30	(4)
Compensation Planning for Shareholder-employees	3-30	(2)
Special Election to Allocate Reduced Tax Rate Benefits	3-32	(1)
Using No1 Carryovers and Carrybacks	3-33	(1)
Compliance and Procedural Considerations	3-34	(7)
Estimated Taxes	3-34	(3)
Requirements for Filing and Paying Taxes	3-37	(1)
When the Return Must Be Filed	3-37	(1)
Tax Return Schedules	3-37	(4)
Problem Materials	3-41
Discussion Questions	3-41	(1)
Issue Identification Questions	3-42	(1)
Problems	3-42	(6)
Tax Form/return Preparation Problem	3-48	(1)
Case Study Problems	3-49	(1)
Tax Research Problems	3-50
CHAPTER 4 CORPORATE NONLIQUIDATING DISTRIBUTIONS	4-1
Nonliquidating Distributions in General	4-2	(1)
Earnings and Profits (E&P)	4-3	(6)
Current Earnings and Profits	4-3	(4)
Distinction Between Current and Accumulated E&p	4-7	(2)
Nonliquidating Property Distributions	4-9	(5)
Consequences of Nonliquidating Property Distributions to the Shareholders	4-9	(1)
Consequences of Property Distributions to the Distributing Corporation	4-10	(2)
Constructive Dividends	4-12	(2)
Stock Dividends and Stock Rights	4-14	(2)
Tax-free Stock Dividends	4-15	(1)
Tax-free Stock Rights	4-15	(1)
Effect of Nontaxable Stock Dividends on the Distributing Corporation	4-16	(1)
Taxable Stock Dividends and Stock Rights	4-16	(1)
Stock Redemptions	4-16	(13)
Effect of the Redemption on the Shareholder	4-17	(2)
Attribution Rules	4-19	(2)
Substantially Disproportionate Redemptions	4-21	(1)
Complete Termination of the Shareholder's Interest	4-22	(2)
Redemptions Not Essentially Equivalent to a Dividend	4-24	(1)
Partial Liquidations	4-24	(2)
Redemptions to Pay Death Taxes	4-26	(2)
Effect of Redemptions on the Distributing Corporation	4-28	(1)
Preferred Stock Bailouts	4-29	(2)
Sec. 306 Stock Defined	4-29	(1)
Dispositions of Sec. 306 Stock	4-30	(1)
Redemptions of Sec. 306 Stock	4-30	(1)
Exceptions to Sec. 306 Treatment	4-31	(1)
Stock Redemptions By Related Corporations	4-31	(3)
Brother-Sister Corporations	4-31	(2)
Parent-Subsidiary Corporations	4-33	(1)
Tax Planning Considerations	4-34	(3)
Avoiding Unreasonable Compensation	4-34	(1)
Bootstrap Acquisitions	4-35	(1)
Timing of Distributions	4-36	(1)
Compliance and Procedural Considerations	4-37	(1)
Corporate Reporting of Nondividend Distributions	4-37	(1)
Agreement to Terminate Interest Under Sec. 302(b)(3)	4-38	(1)
Problem Materials	4-38
Discussion Questions	4-38	(1)
Issue Identification Questions	4-39	(1)
Problems	4-40	(6)
Case Study Problems	4-46	(1)
Tax Research Problems	4-46
CHAPTER 5 OTHER CORPORATE TAX LEVIES	5-1
The Corporate Alternative Minimum Tax	5-2	(12)
The General Formula	5-2	(1)
Definitions	5-2	(2)
Tax Preference Items	5-4	(1)
Adjustments to Taxable Income	5-5	(2)
Adjusted Current Earnings (ACE) Adjustment	5-7	(5)
Minimum Tax Credit	5-12	(1)
Tax Credits and the AMT	5-12	(2)
Personal Holding Company Tax	5-14	(9)
Personal Holding Company Defined	5-14	(1)
Stock Ownership Requirement	5-15	(1)
Passive Income Requirement	5-15	(4)
Determining the PHC Penalty Tax	5-19	(1)
Avoiding the PHC Designation and Tax Liability by Making Dividend Distributions	5-20	(2)
PHC Tax Calculation	5-22	(1)
Accumulated Earnings Tax	5-23	(9)
Corporations Subject to the Penalty Tax	5-23	(1)
Proving a Tax-Avoidance Purpose	5-24	(1)
Evidence Concerning the Reasonableness of an Earnings Accumulation	5-24	(5)
Determining the Accumulated Earnings Tax Liability	5-29	(2)
Accumulated Earnings Tax Calculation	5-31	(1)
Tax Planning Considerations	5-32	(3)
Special AMT Elections	5-33	(1)
Eliminating the ACE Adjustment	5-33	(1)
Avoiding the Personal Holding Company Tax	5-33	(1)
Avoiding the Accumulated Earnings Tax	5-34	(1)
Compliance and Procedural Considerations	5-35	(1)
Alternative Minimum Tax	5-35	(1)
Personal Holding Company Tax	5-35	(1)
Accumulated Earnings Tax	5-35	(1)
Problem Materials	5-35
Discussion Questions	5-35	(3)
Issue Identification Questions	5-38	(1)
Problems	5-38	(6)
Tax Form/Return Preparation Problem	5-44	(1)
Case Study Problems	5-44	(1)
Tax Research Problems	5-45
CHAPTER 6 CORPORATE LIQUIDATING DISTRIBUTIONS	6-1
Overview of Corporate Liquidations	6-2	(2)
The Shareholder	6-2	(1)
The Corporation	6-3	(1)
Definition of a Complete Liquidation	6-3	(1)
General Liquidation Rules	6-4	(6)
Effects of Liquidating on the Shareholders	6-5	(1)
Effects of Liquidating on the Liquidating Corporation	6-6	(4)
Liquidation of a Controlled Subsidiary Corporation	6-10	(4)
Requirements	6-11	(1)
Effects of Liquidating on the Shareholders	6-12	(1)
Effects of Liquidating on the Subsidiary Corporation	6-13	(1)
Special Shareholder Reporting Issues	6-14	(2)
Partially Liquidating Distributions	6-14	(1)
Subsequent Assessments Against the Shareholders	6-15	(1)
Open Versus Closed Transactions	6-15	(1)
Installment Obligations Received by a Shareholder	6-16	(1)
Special Corporate Reporting Issues	6-16	(1)
Expenses of the Liquidation	6-16	(1)
Treatment of Net Operating Losses	6-17	(1)
Recognition of Gain or Loss When Property Is Distributed In Retirement of Debt	6-17	(1)
General Rule	6-17	(1)
Satisfaction of the Subsidiary's Debt Obligations	6-17	(1)
Tax Planning Considerations	6-18	(2)
Timing the Liquidation Transaction	6-18	(1)
Recognition of Ordinary Losses When a Liquidation Occurs	6-19	(1)
Using Sec. 332 to Obtain a Double Tax Exemption	6-19	(1)
Avoiding Sec. 332 in Order to Recognize Losses	6-20	(1)
Compliance and Procedural Considerations	6-20	(1)
General Liquidation Procedures	6-20	(1)
Section 332 Liquidations	6-20	(1)
Plan of Liquidation	6-21	(1)
Problem Materials	6-21
Discussion Questions	6-21	(2)
Issue Identification Questions	6-23	(1)
Problems	6-24	(4)
Case Study Problems	6-28	(1)
Tax Research Problems	6-29
CHAPTER 7 CORPORATE ACQUISITIONS AND REORGANIZATIONS	7-1
Taxable Acquisition Transactions	7-2	(8)
Asset Acquisitions	7-2	(2)
Stock Acquisitions	7-4	(6)
Comparison of Taxable and Tax-Free Acquisitions	7-10	(3)
Taxable and Tax-Free Asset Acquisitions	7-10	(1)
Comparison of Taxable and Tax-Free Stock Acquisitions	7-11	(2)
Types of Reorganizations	7-13	(2)
Tax Consequences of Reorganizations	7-15	(4)
Target or Transferor Corporation	7-15	(1)
Acquiring or Transferee Corporation	7-16	(1)
Shareholders and Security Holders	7-16	(3)
Acquisitive Reorganizations	7-19	(14)
Type A Reorganization	7-19	(6)
Type C Reorganization	7-25	(3)
Type D Reorganization	7-28	(2)
Type B Reorganization	7-30	(3)
Type G Reorganization	7-33	(1)
Divisive Reorganizations	7-33	(6)
Divisive Type D Reorganization	7-33	(6)
Type G Divisive Reorganization	7-39	(1)
Other Reorganization Transactions	7-39	(2)
Type E Reorganization	7-39	(1)
Type F Reorganization	7-40	(1)
Judicial Restrictions on the Use of Corporate Reorganizations	7-41	(2)
Continuity of Proprietary Interest	7-41	(1)
Continuity of Business Enterprise	7-42	(1)
Business Purpose Requirement	7-42	(1)
Step Transaction Doctrine	7-43	(1)
Tax Attributes	7-43	(4)
Assumption of Tax Attributes	7-43	(1)
Limitation on Use of Tax Attributes	7-44	(3)
Tax Planning Considerations	7-47	(1)
Why Use a Reorganization Instead of a Taxable Transaction?	7-47	(1)
Avoiding the Reorganization Provisions	7-48	(1)
Compliance and Procedural Considerations	7-48	(1)
Section 338 Deemed Liquidations	7-48	(1)
Plan of Reorganization	7-48	(1)
Party to a Reorganization	7-48	(1)
Ruling Requests	7-49	(1)
Problem Materials	7-49
Discussion Questions	7-49	(1)
Issue Identification Questions	7-50	(1)
Problems	7-51	(7)
Case Study Problems	7-58	(1)
Tax Research Problems	7-59
CHAPTER 8 CONSOLIDATED TAX RETURNS	8-1
Source of the Consolidated Tax Return Rules	8-2	(1)
Definition of an Affiliated Group	8-3	(1)
Requirements	8-3	(1)
Comparison with Controlled Group Definitions	8-4	(1)
Should a Consolidated Return Be Filed?	8-4	(1)
Advantages of Filing a Consolidated Tax Return	8-4	(1)
Disadvantages of Filing a Consolidated Tax Return	8-5	(1)
Consolidated Taxable Income	8-5	(5)
Income Included in the Consolidated Tax Return	8-6	(2)
Affiliated Group Elections	8-8	(1)
Termination of the Affiliated Group	8-8	(2)
Computation of the Affiliated Group's Tax Liability	8-10	(2)
Regular Tax Liability	8-10	(1)
Corporate Alternative Minimum Tax Liability	8-10	(1)
Consolidated Tax Credits	8-10	(1)
Foreign Tax Credit	8-11	(1)
Intercompany Transactions	8-12	(7)
Property Transactions	8-12	(6)
Other Intercompany Transactions	8-18	(1)
Dividends Received by Group Members	8-19	(2)
Exclusion Procedure	8-20	(1)
Consolidated Dividends-Received Deduction	8-20	(1)
Consolidated Charitable Contributions Deduction	8-21	(1)
Net Operating Losses (Nols)	8-22	(10)
Current Year Nols	8-22	(1)
Carrybacks and Carryforwards of Consolidated NOLs	8-23	(1)
Carryback of Consolidated NOL to Separate Return Year	8-24	(1)
Carryforward of Consolidated NOL to Separate Return Year	8-25	(1)
Special Loss Limitations	8-26	(6)
Consolidated Capital Gains and Losses	8-32	(2)
Section 1231 Gains and Losses	8-32	(1)
Capital Gains and Losses	8-32	(2)
Stock Basis Adjustments	8-34	(1)
Tax Planning Considerations	8-35	(1)
100% Dividends-Received Deduction Election	8-35	(1)
Estimated Tax Payments	8-35	(1)
Compliance and Procedural Considerations	8-36	(2)
The Basic Election and Return	8-36	(1)
Parent Corporation as Agent for the Affiliated Group	8-37	(1)
Liability for Taxes Due	8-38	(1)
Problem Materials	8-38
Discussion Questions	8-38	(2)
Issue Identification Questions	8-40	(1)
Problems	8-41	(5)
Tax Form/Return Preparation Problem	8-46	(1)
Case Study Problems	8-47	(1)
Tax Research Problems	8-47
CHAPTER 9 PARTNERSHIP FORMATION AND OPERATION	9-1
Definition of a Partnership	9-2	(2)
General and Limited Partnerships	9-2	(2)
Overview of Taxation of Partnership Income	9-4	(1)
Partnership Profits and Losses	9-4	(1)
The Partner's Basis	9-4	(1)
Partnership Distributions	9-5	(1)
Tax Implications of Formation of a Partnership	9-5	(7)
Contribution of Property	9-5	(5)
Contribution of Services	9-10	(2)
Organizational and Syndication Expenditures	9-12	(1)
Partnership Elections	9-12	(3)
Partnership Taxable Year	9-12	(3)
Other Partnership Elections	9-15	(1)
Partnership Reporting of Income	9-15	(2)
Partnership Taxable Income	9-15	(1)
Separately Stated Items	9-15	(2)
Partnership Ordinary Income	9-17	(1)
Partner Reporting of Income	9-17	(3)
Partner's Distributive Share	9-17	(1)
Special Allocations	9-18	(2)
Basis for Partnership Interest	9-20	(4)
Beginning Basis	9-21	(1)
Effects of Liabilities	9-21	(2)
Effects of Operations	9-23	(1)
Special Loss Limitations	9-24	(2)
At-risk Loss Limitation	9-24	(1)
Passive Activity Limitations	9-25	(1)
Transactions Between a Partner and the Partnership	9-26	(3)
Sales of Property	9-26	(1)
Guaranteed Payments	9-27	(2)
Family Partnerships	9-29	(1)
Capital Ownership	9-29	(1)
Donor-donee Allocations of Income	9-30	(1)
Tax Planning Considerations	9-30	(1)
Timing of Loss Recognition	9-30	(1)
Compliance and Procedural Considerations	9-31	(2)
Reporting to the IRS and the Partners	9-31	(1)
Irs Audit Procedures	9-32	(1)
Problem Materials	9-33
Discussion Questions	9-33	(1)
Issue Identification Questions	9-34	(1)
Problems	9-35	(8)
Tax Form/Return Preparation Problem	9-43	(1)
Case Study Problems	9-43	(1)
Tax Research Problems	9-44
CHAPTER 10 SPECIAL PARTNERSHIP ISSUES	10-1
Nonliquidating Distributions	10-2	(6)
Recognition of Gain	10-2	(2)
Basis Effects of Distributions	10-4	(3)
Holding Period and Character of Distributed Property	10-7	(1)
Nonliquidating Distributions with Sec. 751	10-8	(4)
Section 751 Assets Defined	10-8	(1)
Exchange of Sec. 751 Assets and Other Property	10-9	(3)
Terminating an Interest in a Partnership	10-12	(15)
Liquidating Distributions	10-12	(4)
Sale of a Partnership Interest	10-16	(3)
Retirement or Death of a Partner	10-19	(2)
Exchange of a Partnership Interest	10-21	(1)
Income Recognition and Transfers of a Partnership Interest	10-22	(1)
Termination of a Partnership	10-22	(4)
Mergers and Consolidations	10-26	(1)
Division of a Partnership	10-27	(1)
Special Forms of Partnerships	10-27	(5)
Tax Shelters and Limited Partnerships	10-27	(1)
Publicly Traded Partnerships	10-27	(1)
Limited Liability Companies	10-28	(1)
Limited Liability Partnerships	10-29	(1)
Electing Large Partnerships	10-29	(3)
Tax Planning Considerations	10-32	(1)
Liquidating Distribution or Sale to Partners	10-32	(1)
Problem Materials	10-33
Discussion Questions	10-33	(1)
Issue Identification Questions	10-34	(1)
Problems	10-35	(9)
Case Study Problems	10-44	(1)
Tax Research Problems	10-45
CHAPTER 11 S CORPORATIONS	11-1
Should an S Election Be Made?	11-3	(1)
Advantages of S Corporation Treatment	11-3	(1)
Disadvantages of S Corporation Treatment	11-3	(1)
S Corporation Requirements	11-4	(3)
Shareholder-Related Requirements	11-4	(1)
Corporation-Related Requirements	11-5	(2)
Election of S Corporation Status	11-7	(6)
Making the Election	11-8	(1)
Termination of the Election	11-9	(4)
S Corporation Operations	11-13	(6)
Taxable Year	11-13	(1)
Accounting Method Elections	11-14	(1)
Ordinary Income or Loss	11-14	(2)
Special S Corporation Taxes	11-16	(3)
Taxation of the Shareholder	11-19	(5)
Income Allocation Procedures	11-19	(1)
Loss and Deduction Pass-Through to Shareholders	11-20	(3)
Family S Corporations	11-23	(1)
Basis Adjustments	11-24	(2)
Basis Adjustments to S Corporation Stock	11-25	(1)
Basis Adjustments to Shareholder Debt	11-26	(1)
S Corporation Distributions	11-26	(5)
Corporations Having No Earnings and Profits	11-26	(1)
Corporations Having Accumulated Earnings and Profits	11-27	(4)
Other Rules	11-31	(2)
Tax Preference Items and Other AMT Adjustments	11-31	(1)
Transactions Involving Shareholders and Other Related Parties	11-32	(1)
Fringe Benefits Paid to a Shareholder-Employee	11-32	(1)
Tax Planning Considerations	11-33	(3)
Election to Allocate Income Based on the S Corporation's Accounting Methods	11-33	(1)
Increasing the Benefits From S Corporation Losses	11-34	(1)
Passive Income Requirements	11-35	(1)
Compliance and Procedural Considerations	11-36	(2)
Making the Election	11-36	(1)
Filing the Corporate Tax Return	11-36	(1)
Estimated Tax Payments	11-37	(1)
Consistency Rules	11-38	(1)
Sample S Corporation Tax Return	11-38	(1)
Problem Materials	11-38
Discussion Questions	11-38	(2)
Issue Identification Questions	11-40	(1)
Problems	11-40	(7)
Tax Form/Return Preparation Problem	11-47	(1)
Case Study Problems	11-47	(3)
Tax Research Problems	11-50
CHAPTER 12 THE GIFT TAX	12-1
Concept of Transfer Taxes	12-2	(1)
History and Purpose of Transfer Taxes	12-2	(1)
The Unified Transfer Tax System	12-3	(1)
Unified Rate Schedule	12-3	(1)
Impact of Taxable Gifts on Death Tax Base	12-3	(1)
Unified Credit	12-4	(1)
Gift Tax Formula	12-4	(2)
Determination of Gifts	12-4	(1)
Exclusions and Deductions	12-4	(1)
Gift-Splitting Election	12-4	(1)
Cumulative Nature of Gift Tax	12-5	(1)
Unified Credit	12-6	(1)
Transfers Subject to the Gift Tax	12-6	(10)
Transfers for Inadequate Consideration	12-7	(1)
Statutory Exemptions from the Gift Tax	12-7	(3)
Cessation of Donor's Dominion and Control	12-10	(1)
Valuation of Gifts	12-11	(2)
Gift Tax Consequences of Certain Transfers	12-13	(3)
Exclusions	12-16	(2)
Amount of the Exclusion	12-16	(1)
Present Interest Requirement	12-16	(2)
Gift Tax Deductions	12-18	(4)
Marital Deduction	12-18	(2)
Charitable Contribution Deduction	12-20	(2)
The Gift-Splitting Election	12-22	(1)
Computation of the Gift Tax Liability	12-23	(2)
Effect of Previous Taxable Gifts	12-23	(1)
Unified Credit Available	12-24	(1)
Comprehensive Illustration	12-25	(1)
Background Data	12-25	(1)
Calculation of Tax Liability	12-25	(1)
Basis Considerations for a Lifetime Giving Plan	12-25	(2)
Property Received By Gift	12-26	(1)
Property Received At Death	12-27	(1)
Below-Market Loans: Gift and Income Tax Consequences	12-27	(2)
General Rules	12-27	(2)
Tax Planning Considerations	12-29	(1)
Tax-Saving Features of Inter Vivos Gifts	12-29	(1)
Negative Aspects of Gifts	12-30	(1)
Compliance and Procedural Considerations	12-30	(3)
Filing Requirements	12-30	(1)
Due Date	12-31	(1)
Gift-Splitting Election	12-31	(1)
Short-Form Gift Tax Return	12-31	(1)
Liability for Tax	12-31	(1)
Determination of Value	12-31	(1)
Statute of Limitations	12-32	(1)
Problem Materials	12-33
Discussion Questions	12-33	(1)
Issue Identification Questions	12-34	(1)
Problems	12-34	(3)
Tax Form/Return Preparation Problems	12-37	(1)
Case Study Problems	12-38	(1)
Tax Research Problems	12-39
CHAPTER 13 THE ESTATE TAX	13-1
Estate Tax Formula	13-2	(3)
Gross Estate	13-2	(1)
Deductions	13-3	(1)
Adjusted Taxable Gifts and Tax Base	13-3	(1)
Tentative Tax on Estate Tax Base	13-4	(1)
Reduction for Post-1976 Gift Taxes	13-4	(1)
Unified Credit	13-5	(1)
Other Credits	13-5	(1)
The Gross Estate: Valuation	13-5	(3)
Date-of-Death Valuation	13-5	(2)
Alternate Valuation Date	13-7	(1)
The Gross Estate: Inclusions	13-8	(10)
Comparison of Gross Estate with Probate Estate	13-8	(1)
Exclusion for Family-Owned Businesses	13-9	(1)
Property in Which the Decedent Had an Interest	13-9	(1)
Dower or Curtesy Rights	13-10	(1)
Transferor Provisions	13-10	(3)
Annuities and Other Retirement Benefits	13-13	(1)
Jointly Owned Property	13-14	(1)
General Powers of Appointment	13-15	(1)
Life Insurance	13-15	(1)
Consideration Offset	13-16	(1)
Recipient Spouse's Interest in QTIP Trust	13-17	(1)
Deductions	13-18	(5)
Debts and Funeral and Administration Expenses	13-18	(1)
Losses	13-19	(1)
Charitable Contribution Deduction	13-19	(1)
Marital Deduction	13-20	(3)
Computation of Tax Liability	13-23	(2)
Taxable Estate and Tax Base	13-23	(1)
Tentative Tax and Reduction for Post-1976 Gift Taxes	13-23	(1)
Unified Credit	13-23	(1)
Other Credits	13-24	(1)
Comprehensive Illustration	13-25	(2)
Background Data	13-25	(1)
Calculation of Tax Liability	13-26	(1)
Liquidity Concerns	13-27	(3)
Deferral of Payment of Estate Taxes	13-28	(1)
Stock Redemptions to Pay Death Taxes	13-29	(1)
Special Use Valuation of Farm Realty	13-30	(1)
Generation-Skipping Transfer Tax	13-30	(1)
Tax Planning Considerations	13-31	(4)
Use of Inter Vivos Gifts	13-31	(1)
Use of Exemption Equivalent	13-32	(1)
What Size Marital Deduction is Best?	13-32	(1)
Use of Disclaimers	13-33	(1)
Role of Life Insurance	13-34	(1)
Qualifying the Estate for Installment Payments	13-34	(1)
Where to Deduct Administration Expenses	13-35	(1)
Compliance and Procedural Considerations	13-35	(1)
Filing Requirements	13-35	(1)
Due Date	13-35	(1)
Valuation	13-35	(1)
Election of Alternate Valuation Date	13-35	(1)
Documents to be Included with Return	13-36	(1)
Problem Materials	13-36
Discussion Questions	13-36	(1)
Issue Identification Questions	13-37	(1)
Problems	13-38	(3)
Comprehensive Problems	13-41	(1)
Tax Form/Return Preparation Problems	13-42	(1)
Case Study Problems	13-43	(1)
Tax Research Problems	13-44
CHAPTER 14 INCOME TAXATION OF TRUSTS AND ESTATES	14-1
Basic Concepts	14-2	(2)
Inception of Trusts	14-2	(1)
Inception of Estates	14-2	(1)
Reasons for Creating Trusts	14-2	(1)
Basic Principles of Fiduciary Taxation	14-3	(1)
Principles of Fiduciary Accounting	14-4	(3)
The Importance of Identifying Income and Principal	14-4	(1)
Effects of State Law or Terms of Trust Instrument	14-5	(1)
Principal and Income: The Uniform Act	14-5	(1)
Categorization of Depreciation	14-6	(1)
Formula for Taxable Income and Tax Liability	14-7	(3)
Gross Income	14-7	(1)
Deductions for Expenses	14-7	(2)
Distribution Deduction	14-9	(1)
Personal Exemption	14-9	(1)
Credits	14-10	(1)
Distributable Net Income	14-10	(3)
Significance of DNI	14-10	(1)
Definition of DNI	14-11	(1)
Manner of Computing DNI	14-12	(1)
Determining a Simple Trust's Taxable Income	14-13	(3)
Allocation of Expenses to Tax-Exempt Income	14-13	(1)
Determination of DNI and the Distribution Deduction	14-14	(1)
Tax Treatment for Beneficiary	14-15	(1)
Short-Cut Approach to Proving Correctness of Taxable Income	14-15	(1)
Effect of a Net Operating Loss	14-16	(1)
Effect of a Net Capital Loss	14-16	(1)
Comprehensive Illustration: Determining a Simple Trust's Taxable Income	14-16	(3)
Background Data	14-17	(1)
Trustee's Fee	14-17	(1)
Distribution Deduction and DNI	14-17	(1)
Trust's Taxable Income	14-18	(1)
Categorizing a Beneficiary's Income	14-19	(1)
Determining Taxable Income for Complex Trusts and Estates	14-19	(5)
Determination of DNI and the Distribution Deduction	14-19	(1)
Tax Treatment for Beneficiary	14-20	(4)
Effect of a Net Operating Loss	14-24	(1)
Effect of a Net Capital Loss	14-24	(1)
Comprehensive Illustration: Determining a Complex Trust's Taxable Income	14-24	(4)
Background Data	14-24	(1)
Trustee's Fee	14-25	(1)
Distribution Deduction and Dni	14-25	(2)
Trust's Taxable Income	14-27	(1)
Additional Observations	14-27	(1)
Income in Respect of a Decedent	14-28	(2)
Definition and Common Examples	14-28	(1)
Significance of IRD	14-28	(2)
Grantor Trust Provisions	14-30	(4)
Purpose and Effect	14-30	(1)
Revocable Trusts	14-31	(1)
Post-1986 Reversionary Interest Trusts	14-32	(1)
Retention of Administrative Powers	14-32	(1)
Retention of Economic Benefits	14-32	(1)
Control of Others' Enjoyment	14-33	(1)
Tax Planning Considerations	14-34	(1)
Ability to Shift Income	14-34	(1)
Timing of Distributions	14-34	(1)
Property Distributions	14-34	(1)
Choice of Year-End for Estates	14-35	(1)
Deduction of Administration Expenses	14-35	(1)
Compliance and Procedural Considerations	14-35	(1)
Filing Requirements	14-35	(1)
Due Date for Return and Tax	14-35	(1)
Documents to Be Furnished to IRS	14-36	(1)
Sample Simple and Complex Trust Returns	14-36	(1)
Problem Materials	14-36
Discussion Questions	14-36	(1)
Issue Identification Questions	14-37	(1)
Problems	14-38	(2)
Tax Form/Return Preparation Problems	14-40	(1)
Case Study Problems	14-41	(1)
Tax Research Problems	14-42
CHAPTER 15 ADMINISTRATIVE PROCEDURES	15-1
Role of the Internal Revenue Service	15-2	(3)
Enforcement and Collection	15-2	(1)
Interpretation of the Statute	15-2	(1)
Organization of the IRS	15-2	(3)
Audits of Tax Returns	15-5	(7)
Percentage of Returns Examined	15-5	(1)
Selection of Returns for Audit	15-5	(3)
Alternatives for a Taxpayer Whose Return Is Audited	15-8	(3)
Ninety-Day Letter	15-11	(1)
Litigation	15-11	(1)
Requests for Rulings	15-12	(3)
Information to Be Included in Taxpayer's Request	15-13	(1)
Will the IRS Rule?	15-13	(1)
When Rulings Are Desirable	15-14	(1)
Due Dates and Penalties	15-15	(4)
Due Dates for Returns	15-15	(1)
Extensions	15-15	(1)
Due Dates for Payment of the Tax	15-16	(1)
Interest on Tax Not Timely Paid	15-16	(1)
Penalties	15-17	(2)
Estimated Taxes	15-19	(3)
Payment Requirements	15-19	(2)
Penalty for Underpaying Estimated Taxes	15-21	(1)
Exceptions to the Penalty	15-22	(1)
Other More Severe Penalties	15-22	(6)
Negligence	15-22	(1)
Substantial Understatement	15-23	(2)
Civil Fraud	15-25	(1)
Criminal Fraud	15-26	(2)
Statute of Limitations	15-28	(4)
General Three-Year Rule	15-28	(1)
Six-Year Rule for Substantial Omissions	15-28	(2)
When No Return Is Filed	15-30	(1)
Other Exceptions to Three-Year Rule	15-30	(1)
Refund Claims	15-31	(1)
Liability for Tax	15-32	(2)
Joint Returns	15-32	(1)
Transferee Liability	15-33	(1)
Tax Practice Issues	15-34	(3)
Statutory Provisions Concerning Tax Return Preparers	15-34	(1)
Rules of Circular 230	15-35	(1)
Tax Accounting and Tax Law	15-36	(1)
Problem Materials	15-37
Discussion Questions	15-37	(1)
Issue Identification Questions	15-38	(1)
Problems	15-38	(3)
Case Study Problem	15-41	(1)
Tax Research Problems	15-41
CHAPTER 16 U.S. TAXATION OF FOREIGN-RELATED TRANSACTIONS	16-1
Jurisdiction to Tax	16-2	(1)
Taxation of U.S. Citizens and Resident Aliens	16-3	(10)
Foreign Tax Credit	16-3	(5)
Foreign-earned Income Exclusion	16-8	(5)
Taxation of Nonresident Aliens	16-13	(5)
Definition of Nonresident Alien	16-13	(2)
Investment Income	16-15	(1)
Trade or Business Income	16-16	(2)
Taxation of U.S. People Doing Business Abroad	16-18	(17)
Domestic Subsidiary Corporations	16-19	(1)
Foreign Branches	16-19	(1)
Foreign Corporations	16-19	(3)
Controlled Foreign Corporations	16-22	(9)
Special Foreign Corporation Forms	16-31	(1)
Foreign Sales Corporations	16-31	(3)
Domestic International Sales Corporations	16-34	(1)
Tax Planning Considerations	16-35	(4)
Deduction Versus Credit for Foreign Taxes	16-35	(1)
Election to Accrue Foreign Taxes	16-36	(1)
Special Earned Income Elections	16-37	(1)
Tax Treaties	16-37	(1)
Special Resident Alien Elections	16-38	(1)
Compliance and Procedural Considerations	16-39	(1)
Reporting the Foreign Tax Credit	16-39	(1)
Reporting the Earned Income Exclusion	16-39	(1)
Filing Requirements for Aliens and Foreign Corporations	16-39	(1)
Fsc and Disc Filing Requirements	16-40	(1)
Problem Materials	16-40
Discussion Questions	16-40	(1)
Issue Identification Questions	16-41	(1)
Problems	16-42	(4)
Tax Form/Return Preparation Problems	16-46	(1)
Case Study Problems	16-47	(1)
Tax Research Problems	16-47
APPENDICES
APPENDIX A Tax Research Working Paper File	A-1
APPENDIX B Completed Tax Forms	B-1
APPENDIX C MACRS and ACRS Tables	C-1
APPENDIX D Glossary	D-1
APPENDIX E Statements on Responsibilities in Tax Practice (SRTPs)	E-1
APPENDIX F Comparison of Tax Attributes for C Corporations, Partnerships, and S Corporations	F-1
APPENDIX G Credit for State Death Taxes	G-1
APPENDIX H Acturial Tables	H-1
APPENDIX I Index of Code Sections	I-1
APPENDIX J Index of Treasury Regulations	J-1
APPENDIX K Index of Government Promulgations	K-1
APPENDIX L Index of Court Cases	L-1
APPENDIX M Subject Index	M-1