West Federal Taxation 2005 Business Entities, Professional Version

by Smith, James E.; Raabe, William A.; Maloney, David M.; Willis, Eugene

• ISBN13: 9780324220919
• ISBN10: 032422091X
• Format: Hardcover
• Copyright: 2004-05-18
• Publisher: South-Western College/West

Summary

Edited by authors of the market-leading West Federal Tax Series, the 2005 Edition of Advanced Business Entity Taxation provides thorough and adequate coverage of all relevant tax codes and regulations, emphasizing the high-interest and multidisciplinary aspects of taxation for the second tax course. Designed with the AICPA model tax curriculum in mind, this text presents the second federal taxation course from a business entity perspective. It is an ideal follow-up to WFT: Taxation of Business Entities or any first course in taxation that uses the business entities approach. This course is intended for accounting or finance majors who take it to fulfill curriculum requirements, and for students likely to sit for the CPA or CFA Exams. Visit the Product Website @ http://wft.swlearning.com.

Table of Contents

Preface	iii
PART ONE The World of Taxation
Introduction to Taxation	1	(1)
The Structure of Taxes	3	(1)
Tax Rates	3	(1)
Tax Bases	4	(1)
Types of Taxes	4	(12)
Taxes on the Production and Sale of Goods	4	(2)
Global Tax Issues: Why Is Gasoline Expensive? It Depends on Where You Live	6	(1)
Tax in the News: How Not to Avoid a Sales Tax	7	(1)
Employment Taxes	7	(2)
Death Taxes	9	(1)
Gift Taxes	9	(2)
Tax in the News: At What Cost a Dreamliner?	11	(1)
Property Taxes	11	(1)
Tax Fact: Property Taxes---It Matters Where You Live!	12	(1)
Tax Fact: What Is the U.S. Tax Burden?	13	(1)
Taxes on Privileges and Rights	13	(1)
Income Taxes	14	(2)
Income Taxation of Business Entities	16	(3)
Proprietorships	16	(1)
Tax in the News: When to Tax the Visitor	17	(1)
Corporations	18	(1)
Partnerships	18	(1)
S Corporations	18	(1)
Limited Liability Companies and Limited Liability Partnerships	19	(1)
Dealings between Individuals and Entities	19	(1)
Tax Planning Fundamentals	19	(9)
Overview of Tax Planning	19	(1)
A General Framework for Income Tax Planning	20	(1)
Tax Minimization Strategies Related to Income	20	(2)
Tax Minimization Strategies Related to Deductions	22	(1)
Tax Minimization Strategies Related to Tax Rates	23	(2)
Tax Minimization Strategies Related to Credits	25	(1)
Thinking Outside the Framework	26	(2)
Understanding the Federal Tax Law	28	(8)
Revenue Needs	28	(1)
Economic Considerations	28	(1)
Tax Fact: Who Pays the Federal Income Tax?	29	(1)
Social Considerations	30	(1)
Equity Considerations	30	(3)
Political Considerations	33	(1)
Influence of the Internal Revenue Service	34	(1)
Tax Fact: The Costs of Complexity	35	(1)
Influence of the Courts	35	(1)
Summary	36	(1)
Suggested Further Readings	36	(1)
Problem Materials	37
Working with the Tax Law	1	(1)
Tax Sources	2	(17)
Statutory Sources of the Tax Law	2	(1)
Tax Fact: Measuring Tax System Complexity	3	(4)
Global Tax Issues: Tax Treaties	7	(1)
Administrative Sources of the Tax Law	7	(4)
Judicial Sources of the Tax Law	11	(1)
Tax in the News: Potpourri of News about the IRS	12	(7)
Working with the Tax Law---Tax Research	19	(14)
Identifying the Problem	19	(1)
Refining the Problem	20	(1)
Locating the Appropriate Tax Law Sources	21	(2)
Assessing Tax Law Sources	23	(1)
Tax in the News: Internal Revenue Code: Interpretation Pitfalls	24	(2)
Arriving at the Solution or at Alternative Solutions	26	(1)
Communicating Tax Research	27	(1)
Follow-Up Procedures	27	(1)
Computer-Assisted Tax Research	27	(3)
Tax Fact: An Electronic IRS	30	(3)
Suggested Further Readings	33	(1)
Problem Materials	34
PART TWO Structure of the Federal Income Tax
Gross Income	1	(1)
The Tax Formula	3	(1)
Components of the Tax Formula	3	(1)
Gross Income---What Is It?	4	(3)
Economic and Accounting Concepts of Income	4	(2)
Tax in the News: What Is Income?
The Answer Is Important to Both the Employer and the Employee	6	(1)
Comparison of the Accounting and Tax Concepts of Income	6	(1)
Form of Receipt	7	(1)
Year of Inclusion	7	(6)
Taxable Year	7	(1)
Accounting Methods	7	(2)
Planning Strategies: Cash Receipts Method	9	(1)
Special Rules for Cash Basis Taxpayers	10	(1)
Tax in the News: Congress Rescues Lottery Winners from Constructive Receipt Problems	11	(1)
Special Rules for Accrual Basis Taxpayers	12	(1)
Income Sources	13	(6)
Planning Strategies: Prepaid Income	13	(1)
Personal Services	13	(1)
Income from Property	14	(1)
Tax Fact: How Much and What Type of Income?	15	(1)
Tax in the News: The 2003 Tax Act
Yields Dividends	16	(1)
Tax Fact: Business Income and Loss	17	(1)
Income Received by an Agent	17	(1)
Planning Strategies: Techniques for Reducing Gross Income	18	(1)
Specific Items of Gross Income	19	(11)
Global Tax Issues: From ``All Sources'' Is a Broad Definition	19	(1)
Imputed Interest on Below-Market Loans	19	(3)
Tax Benefit Rule	22	(1)
Tax in the News: Loans To Executives Prohibited	23	(1)
Interest on Certain State and Local Government Obligations	23	(1)
Planning Strategies: State and Municipal Bonds	24	(1)
Improvements on Leased Property	24	(1)
Life Insurance Proceeds	25	(1)
Planning Strategies: Life Insurance	26	(1)
Income from Discharge of Indebtedness	26	(3)
Gains and Losses from Property Transactions	29	(1)
Suggested Further Readings	30	(1)
Problem Materials	31
Business Deductions	1	(1)
Overview of Business Deductions	2	(2)
Ordinary and Necessary Requirement	2	(1)
Reasonableness Requirement	3	(1)
Planning Strategies: Unreasonable Compensation	4	(1)
Timing of Expense Recognition	4	(3)
Cash Method Requirements	5	(1)
Planning Strategies: Time Value of Tax Deductions	6	(1)
Accrual Method Requirements	6	(1)
Disallowance Possibilities	7	(7)
Public Policy Limitations	7	(1)
Political Contributions and Lobbying Activities	8	(1)
Excessive Executive Compensation	9	(1)
Disallowance of Deductions for Capital Expenditures	9	(1)
Investigation of a Business	10	(1)
Transactions between Related Parties	11	(2)
Lack of Adequate Substantiation	13	(1)
Expenses and Interest Related to Tax-Exempt Income	13	(1)
Charitable Contributions	14	(3)
Property Contributions	15	(1)
Limitations Imposed on Charitable Contribution Deductions	16	(1)
Tax Fact: What Ten Percent Ceiling?	17	(1)
Research and Experimental Expenditures	17	(1)
Expense Method	17	(1)
Deferral and Amortization Method	18	(1)
Other Expense Rules	18	(2)
Interest Expense	19	(1)
Taxes	19	(1)
Cost Recovery Allowances	20	(15)
Overview	20	(1)
Tax Fact: Cost Recovery by Any Other Name	21	(1)
Modified Accelerated Cost Recovery System (MACRS)	21	(1)
Eligible Property under MACRS	21	(2)
Cost Recovery for Personal Property	23	(1)
Tax in the News: Accelerated Depreciation for Fire Sprinklers	24	(3)
Tax in the News: Tax Law Benefits Kentucky Horse Breeders	27	(1)
Cost Recovery for Real Estate	28	(1)
The MACRS Straight-Line Election	29	(1)
Election to Expense Assets under § 179	29	(1)
Global Tax Issues: A Simplified Tax System for Australian Small Businesses	30	(1)
Business and Personal Use of Automobiles and Other Listed Property	31	(3)
Alternative Depreciation System (ADS)	34	(1)
Amortization	35	(1)
Planning Strategies: Structuring the Sale of a Business	35	(1)
Depletion	36	(3)
Intangible Drilling and Development Costs (IDC)	36	(1)
Depletion Methods	37	(1)
Planning Strategies: Switching Depletion Methods	38	(1)
Cost Recovery Tables	39	(4)
Suggested Further Readings	43	(1)
Problem Materials	44
Losses and Loss Limitations	1	(1)
Bad Debts	2	(4)
Tax Fact: Just How Good Is Your Credit?	3	(1)
Specific Charge-Off Method	3	(1)
Tax in the News: Whose Loss Is It?	4	(1)
Business versus Nonbusiness Bad Debts	4	(1)
Loans between Related Parties	5	(1)
Worthless Securities	6	(1)
Tax in the News: Kmart Investors Left with Worthless Stock	6	(1)
Small Business Stock	6	(1)
Casualty and Theft Losses	7	(6)
Planning Strategies: Maximizing the Benefits of §1244	7	(1)
Definition of Casualty	8	(1)
Definition of Theft	8	(1)
Planning Strategies: Documentation of Related-Taxpayer Loans, Casualty Losses, and Theft Losses	9	(1)
When to Deduct Causalty Losses	9	(1)
Measuring the Amount of Loss	10	(1)
Casualty and Theft Losses of Individuals	11	(2)
Net Operating Losses	13	(2)
Introduction	13	(1)
Tax Fact: The Utility of the NOL Deduction	14	(1)
Carryback and Carryover Periods	14	(1)
Tax in the News: Increasing the Amount of the Net Operating Loss Deduction	15	(1)
The Tax Shelter Problem	15	(3)
Tax in the News: With Tax Shelters in the Spotlight, Taxpayers Should Be Cautious!	16	(2)
At-Risk Limitations	18	(1)
Passive Loss Limits	19	(17)
Classification and Impact of Passive Income and Loss	19	(2)
Tax Fact: The Declining Interest in Limited Partnerships	21	(2)
Taxpayers Subject to the Passive Loss Rules	23	(1)
Activity Defined	24	(1)
Material Participation	25	(4)
Rental Activities	29	(2)
Interaction of At-Risk and Passive Activity Limits	31	(1)
Special Rules for Real Estate	31	(2)
Tax in the News: Tax Breaks Make the Difference	33	(1)
Disposition of Passive Activities	34	(1)
Planning Strategies: Utilizing Passive Losses	35	(1)
Suggested Further Readings	36	(1)
Problem Materials	37
PART THREE Property Transactions
Property Transactions: Basis, Gain and Loss, and Nontaxable Exchanges	1	(1)
Determination of Gain or Loss	3	(5)
Realized Gain or Loss	3	(1)
Tax in the News: Reevaluating Your Investment Strategy	4	(3)
Recognized Gain or Loss	7	(1)
Nonrecognition of Gain or Loss	7	(1)
Recovery of Capital Doctrine	8	(1)
Basis Considerations	8	(11)
Determination of Cost Basis	8	(3)
Gift Basis	11	(1)
Planning Strategies: Gift Planning	12	(2)
Property Acquired from a Decedent	14	(1)
Tax in the News: Effect of 2001 Tax Legislation on the Basis of Inherited Property: Bad News/Good News!	15	(1)
Planning Strategies: Property from a Decedent	16	(1)
Disallowed Losses	17	(1)
Planning Strategies: Avoiding Wash Sales	18	(1)
Conversion of Property from Personal Use to Business or Income-Producing Use	18	(1)
Summary of Basis Adjustments	19	(1)
General Concept of a Nontaxable Exchange	19	(3)
Like-Kind Exchanges---§1031	22	(7)
Planning Strategies: Like-Kind Exchanges	22	(1)
Like-Kind Property	23	(1)
Exchange Requirement	24	(1)
Boot	24	(1)
Tax in the News: Not Receiving the Whole Thing in a Trade	25	(1)
Tax in the News: Baseball Commissioner Inadvertently Encourages §1031 Exchanges	26	(1)
Basis and Holding Period of Property Received	26	(3)
Involuntary Conversions---§1033	29	(3)
Planning Strategies: Recognizing Involuntary Conversion Gains	30	(1)
Involuntary Conversion Defined	30	(1)
Replacement Property	31	(1)
Time Limitation on Replacement	31	(1)
Other Nonrecognition Provisions	32	(2)
Transfer of Assets to Business Entity---§§ 351 and 721	32	(1)
Exchange of Stock for Property---§1032	33	(1)
Certain Exchanges of Insurance Policies---§1035	33	(1)
Exchange of Stock for Stock of the Some Corporation---§1036	33	(1)
Rollovers into Specialized Small Business Investment Companies---§ 1044	33	(1)
Sale of a Principal Residence---§ 121	34	(1)
Transfers of Property between Spouses or Incident to Divorce---§ 1041	34	(1)
Suggested Further Readings	34	(1)
Problem Materials	35
Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions	1	(1)
General Considerations	2	(2)
Rationale for Separate Reporting of Capital Gains and Losses	2	(1)
Tax in the News: Switching Funds Creates a Loss	3	(1)
General Scheme of Taxation	4	(1)
Capital Assets	4	(3)
Definition of a Capital Asset	4	(2)
Tax in the News: An Artist's Dilemma	6	(1)
Statutory Expansions	6	(1)
Sale or Exchange	7	(6)
Worthless Securities and § 1244 Stock	8	(1)
Retirement of Corporate Obligations	8	(1)
Options	8	(1)
Patents	9	(2)
Franchises, Trademarks, and Trade Names	11	(1)
Lease Cancellation Payments	12	(1)
Holding Period	13	(3)
Tax in the News: Cancellation of a Lease Agreement	13	(1)
Special Holding Period Rules	14	(1)
Global Tax Issues: Trading ADRs on U.S. Stock Exchanges	15	(1)
Short Sales	15	(1)
Tax Treatment of Capital Gains and Losses of Noncorporate Taxpayers	16	(9)
Capital Gains	16	(1)
Tax Fact: Beneficial Tax Treatment for Capital Gains	17	(1)
Planning Strategies: Timing Capital Gains	17	(1)
Global Tax Issues: Capital Gain Treatment in the United States and Other Countries	18	(1)
Planning Strategies: Gifts of Appreciated Securities	19	(1)
Capital Losses	19	(3)
Tax Fact: Detrimental Tax Treatment for Capital Losses	22	(1)
Planning Strategies: Matching Gains with Losses	23	(1)
Small Business Stock	23	(1)
Global Tax Issues: Capital Gain Treatment and Non-U.S. Stock	24	(1)
Tax Treatment of Capital Gains and Losses of Corporate Taxpayers	25	(1)
Section 1231 Assets	25	(5)
Relationship to Capital Assets	25	(1)
Tax Fact: Capital Gains for the Wealthy?	26	(1)
Property Included	27	(1)
Property Excluded	27	(1)
Casualty or Theft and Nonpersonal-Use Capital Assets	27	(1)
Tax in the News: Sale of ``Campus'' Land Yields Potential Long-Term Capital Gain	28	(1)
General Procedure for § 1231 Computation	28	(2)
Section 1245 Recapture	30	(4)
Tax in the News: More Depreciation and More Depreciation Recapture	33	(1)
Section 1245 Property	33	(1)
Observations on § 1245	34	(1)
Planning Strategies: Depreciation Recapture and § 179	34	(1)
Section 1250 Recapture	34	(5)
Computing Recapture on Nonresidential Real Property	35	(1)
Computing Recapture on Residential Rental Housing	36	(1)
Unrecaptured § 1250 Gain (Real Estate 25% Gain)	36	(2)
Planning Strategies: Selling Depreciable Real Estate	38	(1)
Additional Recapture for Corporations	38	(1)
Exceptions to §§ 1245 and 1250	39	(2)
Gifts	39	(1)
Death	39	(1)
Global Tax Issues: Exchange for Foreign Property Yields Recognized Recapture Gain	40	(1)
Charitable Transfers	40	(1)
Certain Nontaxable Transactions	40	(1)
Like-Kind Exchanges and Involuntary Conversions	40	(1)
Reporting Procedures	41	(1)
Planning Strategies: Timing of Recupture	41	(1)
Summary	42	(1)
Suggested Further Readings	42	(1)
Problem Materials	42
PART FOUR Business Entities
Corporations: Organization, Capital Structure, and Operating Rules	1	(1)
An Introduction to Corporate Tax	2	(8)
Global Tax Issues: Choice of Organizational Form When Operating Overseas	3	(1)
Double Taxation of Corporate Income	3	(1)
Tax Fact: Corporations Are Successful in Reducing the Relative Size of Their Tax Burdens	4	(2)
Tax in the News: What Effects Will the Dividend Tax Cut Have?	6	(1)
Comparison of Corporations and Other Forms of Doing Business	6	(1)
Tax in the News: Corporate Tax Breaks	7	(1)
Nontax Considerations	8	(1)
Limited Liability Companies	9	(1)
Entity Classification	9	(1)
Planning Strategies: Consolidated Groups May Utilize Check-the-Box Regulations	9	(1)
Organization of and Transfers to Controlled Corporations	10	(13)
In General	10	(1)
Transfer of Property	11	(1)
Stock	12	(1)
Control of the Corporation	12	(2)
Planning Strategies: Utilizing § 351	14	(2)
Global Tax Issues: Does § 351 Cover the Incorporation of a Foreign Business?	16	(1)
Assumption of Liabilities---§ 357	16	(3)
Planning Strategies: Avoiding § 351	19	(1)
Basis Determination and Other Issues	20	(2)
Recapture Considerations	22	(1)
Planning Strategies: Other Considerations When Incorporating a Business	23	(1)
Capital Structure of a Corporation	23	(4)
Capital Contributions	23	(1)
Debt in the Capital Structure	24	(1)
Tax in the News: Conflict Arises between Corporations and Their Shareholders	25	(2)
Corporate Operations	27	(7)
Deductions Available Only to Corporations	27	(3)
Planning Strategies: Organizational Expenditures	30	(1)
Determining the Corporate Income Tax Liability	30	(1)
Tax Liability of Related Corporations	31	(1)
Controlled Groups	32	(2)
Procedural Matters	34	(4)
Filing Requirements for Corporations	34	(1)
Tax Fact: Sources of Federal Government Revenues	35	(1)
Estimated Tax Payments	35	(1)
Reconciliation of Taxable Income and Financial Net Income	35	(2)
Summary	37	(1)
Suggested Further Readings	38	(1)
Problem Materials	38
Corporations: Earnings & Profits and Dividend Distributions	1	(1)
Corporate Distributions---In General	2	(2)
Tax in the News: Why Are We Paying Dividends?	3	(1)
Earnings and Profits (E & P)---§ 312	4	(9)
Computation of E & P	4	(3)
Summary of E & P Adjustments	7	(1)
Allocating E & P to Distributions	7	(5)
Planning Strategies: Corporate Distributions	12	(1)
Property Dividends	13	(2)
Property Dividends---Effect on the Shareholder	13	(1)
Property Dividends---Effect on the Corporation	14	(1)
Constructive Dividends	15	(6)
Types of Constructive Dividends	16	(1)
Tax in the News: The $6,000 Shower Curtain: Compensation or Constructive Dividend?	17	(1)
Tax Fact: Executive Compensation: Amount and Composition	18	(1)
Tax in the News: Hard Work Pays Off!	19	(1)
Tax Treatment of Constructive Dividends	19	(1)
Planning Strategies: Constructive Dividends	20	(1)
Stock Dividends	21	(2)
Global Tax Issues: Deemed Dividends from Controlled Foreign Corporations	22	(1)
Stock Redemptions	23	(1)
Tax in the News: Redemptions of Publicly Traded Stock	24	(1)
Restrictions on Corporate Accumulations	24	(1)
Suggested Further Readings	25	(1)
Problem Materials	25
Partnerships and Limited Liability Entities	1	(1)
Overview of Partnership Taxation	2	(8)
Tax Fact: Partnership Power	3	(1)
Forms of Doing Business---Federal Tax Consequences	3	(2)
What Is a Partnership?	5	(1)
Partnership Taxation and Reporting	5	(1)
Tax Fact: Look at All the LLCs	6	(2)
Partner's Ownership Interest in a Partnership	8	(2)
Formation of a Partnership: Tax Effects	10	(7)
Gain or Loss on Contributions to the Partnership	10	(1)
Exceptions to Nonrecognition	11	(1)
Tax Issues Related to Contributed Property	12	(2)
Inside and Outside Bases	14	(1)
Tax Accounting Elections	15	(1)
Initial Costs of a Partnership	15	(2)
Operations of the Partnership	17	(13)
Reporting Operating Results	17	(2)
Tax Fact: What Do Partnerships Do?	19	(1)
Partnership Allocations	19	(2)
Basis of a Partnership Interest	21	(3)
Partner's Basis, Gain, and Loss	24	(2)
Loss Limitations	26	(1)
Planning Strategies: Make Your Own Tax Shelter	27	(2)
Tax Fact: Whose Money Are We Losing?	29	(1)
Transactions between Partner and Partnership	30	(3)
Planning Strategies: Formation and Operation of a Partnership	30	(1)
Guaranteed Payments	30	(1)
Other Transactions between a Partner and a Partnership	31	(2)
Partners as Employees	33	(1)
Planning Strategies: Transactions between Partners and Partnerships	33	(1)
Limited Liability Entities	33	(4)
Limited Liability Companies	33	(2)
Global Tax Issues: Partnerships Around the World---and Beyond	35	(1)
Limited Liability Partnerships	36	(1)
Summary	36	(1)
Suggested Further Readings	37	(1)
Problem Materials	37
S Corporations	1	(1)
An Overview of S Corporations	3	(2)
Tax Fact: The Business of S Corporations	3	(2)
Qualifying for S Corporation Status	5	(6)
Planning Strategies: When to Elect S Corporation Status	5	(1)
Definition of a Small Business Corporation	5	(2)
Planning Strategies: Beating the 75-Shareholder Limit	7	(1)
Making the Election	7	(1)
Shareholder Consent	8	(1)
Planning Strategies: Making a Proper Election	8	(1)
Loss of the Election	9	(1)
Planning Strategies: Preserving the S Election	10	(1)
Operational Rules	11	(18)
Computation of Taxable Income	12	(1)
Tax Fact: A ``Small'' Business Corporation	13	(1)
Allocation of Income and Loss	13	(1)
Planning Strategies: Salary Structure	14	(1)
Tax Treatment of Distributions to Shareholders	15	(3)
Planning Strategies: The Accumulated Adjustments Account	18	(1)
Tax Treatment of Property Distributions by the Corporation	19	(1)
Shareholder's Basis	20	(2)
Planning Strategies: Working with Suspended Losses	22	(1)
Treatment of Losses	22	(1)
Planning Strategies: Loss Considerations	23	(2)
Tax on Pre-Election Built-in Gain	25	(1)
Planning Strategies: Managing the Built-in Gains Tax	26	(1)
Passive Investment Income Penalty Tax	27	(1)
Tax Fact: No Double Taxation?	28	(1)
Other Operational Rules	28	(1)
Summary	29	(2)
Tax Fact: The S Corporation Economy	30	(1)
Suggested Further Readings	31	(1)
Problem Materials	31
PART FIVE Special Business Topics
Multijurisdictional Taxation	1	(1)
The Multijurisdictional Taxpayer	2	(1)
U.S. Taxation of Multinational Transactions	3	(17)
Sources of Law	4	(1)
Tax Fact: U.S. Income Tax Treaties in Force	5	(1)
Planning Strategies: Treaty Shopping	6	(1)
Tax Issues	7	(1)
Tax in the News: Sourcing Income in Cyberspace	8	(2)
Planning Strategies: Sourcing Income from Sales of Inventory	10	(1)
Tax Fact: Income Subject to U.S. Tax, Foreign-Source Taxable Income, Current-Year Foreign Taxes, and Foreign Tax Credit: Tax Years 1993--1998	11	(2)
Planning Strategies: Utilizing the Foreign Tax Credit	13	(5)
Tax Fact: Who Are These CFCs?	18	(1)
Planning Strategies: Avoiding Constructive Dividends	18	(2)
Crossing State Lines: State and Local Income Taxation in the United States	20	(9)
Sources of Law	21	(1)
Tax Issues	22	(1)
Tax in the News: Britney, You Need to Pay Your Tax	23	(1)
Planning Strategies: Nexus: To Have or Have Not	23	(4)
Tax in the News: State Deficits Change How Revenue Departments Work	27	(1)
Planning Strategies: Where Should My Income Go?	28	(1)
Common Challenges	29	(5)
Authority to Tax	29	(1)
Tax in the News: States in a Bind on Sales/Use Tax on Internet Sales	30	(1)
Division of Income	30	(1)
Tax Fact: The OECD's Tax Haven Blacklist	31	(1)
Transfer Pricing	31	(1)
Tax in the News: A Move to the Beach for U.S. Corporations Seeking a Vacation from U.S. Tax Rules	32	(1)
Tax Havens	32	(1)
Planning Strategies: Holding Companies Make Other States Angry	33	(1)
Interjurisdictional Agreements	33	(1)
Suggested Further Readings	34	(1)
Problem Materials	34
Business Tax Credits and Corporate Alternative Minimum Tax	1	(1)
Tax Policy and Tax Credits	2	(1)
Tax Fact: Where Have All the Credits Gone?	3	(1)
Specific Business-Related Tax Credit Provisions	3	(11)
General Business Credit	3	(1)
Tax in the News: A Credit That Went Up in Smoke	4	(2)
Tax Credit for Rehabilitation Expenditures	6	(2)
Work Opportunity Tax Credit	8	(1)
Welfare-to-Work Credit	8	(1)
Research Activities Credit	9	(2)
Disabled Access Credit	11	(1)
Credit for Small Employer Pension Plan Startup Costs	11	(1)
Credit for Employer-Provided Child Care	12	(1)
Global Tax Issues: Sourcing Income in Cyberspace---Getting It Right When Calculating the Foreign Tax Credit	13	(1)
Foreign Tax Credit	13	(1)
Corporate Alternative Minimum Tax	14	(17)
The AMT Formula	14	(3)
Tax Fact: The Reach of the AMT	17	(1)
Tax in the News: The AMT and the Folks at the IRS	18	(1)
Tax Preferences	18	(1)
AMT Adjustments	19	(2)
Tax in the News: Municipal Bonds and the AMT	21	(4)
Planning Strategies: Avoiding Preferences and Adjustments	25	(1)
Adjusted Current Earnings (ACE)	25	(3)
Computing Alternative Minimum Taxable Income	28	(1)
Planning Strategies: Optimum Use of the AMT and Regular Corporate Income Tax Rate Difference	28	(1)
AMT Rate and Exemption	29	(1)
Planning Strategies: Controlling the Timing of Preferences and Adjustments	29	(1)
Minimum Tax Credit	29	(1)
Other Aspects of the AMT	30	(1)
Planning Strategies: The Subchapter S Option	31	(1)
The Individual Alternative Minimum Tax	31	(1)
Tax in the News: Your Most Serious Tax Problem	32	(1)
Suggested Further Readings	32	(1)
Problem Materials	33
Comparative Forms of Doing Business	1	(1)
Forms of Doing Business	3	(3)
Principal Forms	3	(1)
Tax in the News: Should You Check That Box?	3	(1)
Tax in the News: Professional Service Firms and Organizational Form	4	(1)
Limited Liability Companies	4	(1)
Tax Fact: Revenue Relevance of Corporate versus Individual Taxpayers	5	(1)
Nontax Factors	6	(2)
Capital Formation	6	(1)
Limited Liability	6	(2)
Other Factors	8	(1)
Single versus Double Taxation	8	(3)
Overall Impact on Entity and Owners	8	(1)
Tax in the News: Eliminating Double Taxation: Entity versus Owner Options	9	(1)
Alternative Minimum Tax	10	(1)
Planning Strategies: Planning for the AMT	11	(1)
State Taxation	11	(1)
Minimizing Double Taxation	11	(5)
Making Deductible Distributions	11	(1)
Tax in the News: Who Pays Corporate AMT?	12	(1)
Not Making Distributions	13	(1)
Return of Capital Distributions	14	(1)
Electing S Corporation Status	14	(1)
Tax Fact: Number of Income Tax Returns Filed by Different Types of Taxpayers (in Millions)	15	(1)
Conduit versus Entity Treatment	16	(5)
Effect on Recognition at Time of Contribution to the Entity	16	(1)
Effect on Basis of Ownership Interest	17	(1)
Effect on Results of Operations	17	(2)
Effect on Recognition at Time of Distribution	19	(1)
Effect on Passive Activity Losses	19	(1)
Effect of At-Risk Rules	19	(1)
Tax Fact: Partnership Income Tax Returns: Profits versus Losses	20	(1)
Effect of Special Allocations	21	(1)
Disposition of a Business or an Ownership Interest	21	(3)
Sole Proprietorships	22	(1)
Partnerships and Limited Liability Entities	23	(1)
C Corporations	23	(1)
Planning Strategies: Selling Stock or Assets	24	(1)
S Corporations	24	(1)
Overall Comparison of Forms of Doing Business	24	(7)
Planning Strategies: Choosing a Business Form: Case Study	31	(1)
Suggested Further Readings	31	(1)
Problem Materials	32
PART SIX Taxation of Individuals
Introduction to the Taxation of Individuals	1	(1)
The Individual Tax Formula	3	(7)
Tax Fact: The Government's Interest in Our Work	3	(1)
Components of the Tax Formula	4	(2)
Global Tax Issues: Citizenship Is Not Tax-Free	6	(2)
Application of the Tax Formula	8	(1)
Special Limitations for Individuals Who Can Be Claimed as Dependents	9	(1)
Personal and Dependency Exemptions	10	(6)
Personal Exemptions	10	(1)
Dependency Exemptions	10	(2)
Planning Strategies: Multiple Support Agreements and the Medical Expense Deduction	12	(2)
Planning Strategies: Problems with a Joint Return	14	(1)
Phase out of Exemptions	14	(1)
Tax in the News: How to Subtly Pluck the Chicken	15	(1)
Tax Determination	16	(4)
Tax Table Method	16	(1)
Tax Rate Schedule Method	16	(1)
Planning Strategies: Shifting Income and Deductions across Time	17	(1)
Computation of Net Taxes Payable or Refund Due	17	(1)
Tax Fact: The Tightening Tax Squeeze	18	(1)
Unearned Income of Children Under Age 14 Taxed at Parents' Rate	19	(1)
Planning Strategies: Income of Minor Children	20	(1)
Filing Considerations	20	(5)
Filing Requirements	21	(1)
Tax Fact: What Form of Tax Compliance Is Right for You?	22	(1)
Filing Status	22	(1)
Global Tax Issues: Filing a Joint Return	23	(2)
Overview of Income Provisions Applicable to Individuals	25	(1)
Tax in the News: Assessing the Efforts to Reduce the Marriage Penalty	25	(1)
Specific Inclusions Applicable to Individuals	26	(2)
Alimony and Separate Maintenance Payments	26	(1)
Prizes and Awards	27	(1)
Unemployment Compensation	28	(1)
Social Security Benefits	28	(1)
Specific Exclusions Applicable to Individuals	28	(6)
Gifts and Inheritances	28	(1)
Tax in the News: Begging as a Tax-Disfavored Occupation	29	(1)
Scholarships	29	(2)
Damages	31	(1)
Workers' Compensation	32	(1)
Accident and Health Insurance Benefits	32	(1)
Educational Savings Bonds	33	(1)
Itemized Deductions	34	(18)
Medical Expenses	35	(1)
Tax in the News: Average Itemized Deductions	36	(3)
Taxes	39	(1)
Global Tax Issues: Deductibility of Foreign Taxes	40	(1)
Planning Strategies: Timing the Payment of Deductible Taxes	40	(1)
Interest	41	(3)
Charitable Contributions	44	(2)
Global Tax Issues: Choose the Charity Wisely	46	(1)
Tax in the News: Spring Cleaning and Charitable Contributions	47	(2)
Miscellaneous Itemized Deductions Subject to Two Percent Floor	49	(1)
Other Miscellaneous Deductions	50	(1)
Overall Limitation on Certain Itemized Deductions	50	(2)
Planning Strategies: Effective Utilization of Itemized Deductions	52	(1)
Individual Tax Credits	52	(6)
Adoption Expenses Credit	52	(1)
Child Tax Credit	53	(1)
Credit for Child and Dependent Care Expenses	54	(1)
Education Tax Credits	55	(2)
Earned Income Credit	57	(1)
Suggested Further Readings	58	(1)
Problem Materials	59
Individuals as Employees and Proprietors	1	(1)
Employee versus Self-Employed	2	(4)
Factors Considered in Classification	3	(2)
Tax in the News: Self-Employed or Employed? Misclassification Can Be Costly!	5	(1)
Planning Strategies: Self-Employed Individuals	5	(1)
Exclusions Available to Employees	6	(14)
Advantages of Qualified Fringe Benefits	6	(1)
Employer-Sponsored Accident and Health Plans	6	(1)
Medical Reimbursement Plans	7	(1)
Long-Term Care Benefits	8	(1)
Meals and Lodging Furnished for the Convenience of the Employer	8	(2)
Group Term Life Insurance	10	(1)
Qualified Tuition Reduction Plans	11	(1)
Other Specific Employee Fringe Benefits	12	(1)
Tax in the News: Employees Lose Some under ``Use or Lose Plans''	13	(1)
Cafeteria Plans	13	(1)
Flexible Spending Plans	14	(1)
General Classes of Excluded Benefits	14	(4)
Taxable Fringe Benefits	18	(1)
Foreign Earned Income	19	(1)
Employee Expenses	20	(22)
Transportation Expenses	20	(2)
Travel Expenses	22	(3)
Planning Strategies: Transportation and Travel Expenses	25	(1)
Moving Expenses	25	(2)
Global Tax Issues: Expatriates and the Moving Expense Deduction	27	(1)
Planning Strategies: Moving Expenses	27	(1)
Education Expenses	27	(2)
Planning Strategies: Education Expenses	29	(1)
A Limited Deduction Approach	30	(1)
Entertainment Expenses	31	(1)
Planning Strategies: Entertainment Expenses	32	(1)
Other Employee Expenses	33	(2)
Tax in the News: One Side Effect of 9/11	35	(1)
Classification of Employee Expenses	36	(1)
Tax in the News: Software-Based Expense Management	37	(1)
Planning Strategies: Unreimbursed Employee Business Expenses	38	(1)
Contributions to Individual Retirement Accounts	38	(2)
Tax Fact: The Vacillating Popularity of IRAs	40	(2)
Individuals as Proprietors	42	(7)
The Proprietorship as a Business Entity	42	(1)
Income of a Proprietorship	42	(1)
Deductions Related to a Proprietorship	42	(2)
Retirement Plans for Self-Employed Individuals	44	(1)
Tax Fact: Increasing Popularity of Keogh Plans	45	(1)
Planning Strategies: Important Dates Related to IRAs and Keogh Plans	46	(1)
Planning Strategies: Factors Affecting Retirement Plan Choices	47	(1)
Accounting Periods and Methods	47	(1)
Estimated Tax Payments	48	(1)
Hobby Losses	49	(3)
General Rules	49	(1)
Presumptive Rule of § 183	50	(1)
Determining the Amount of the Deduction	50	(2)
Suggested Further Readings	52	(1)
Problem Materials	52
APPENDIXES
Tax Rate Schedules and Tables	1	(1)
Tax Forms	1	(1)
Glossary of Key Terms	1	(1)
Table of Code Sections Cited	1	(1)
Table of Regulations Cited	1	(8)
Table of Revenue Procedures and Revenue Rulings Cited	9
Table of Cases Cited	1	(1)
Present Value and Future Value Tables	1	(1)
Subject Index	1