Description
South-Western Federal Taxation 2018: Individual Income Taxes Edition 41 by William H. Hoffman EBOOK PDF Instant Download
Table of Contents
Title Page
Copyright Page
Preface
Brief Contents
Contents
Part 1: Introduction and Basic Tax Model
Chapter 1: An Introduction to Taxation and Understanding the Federal Tax Law
The Big Picture: Family and Taxes—A Typical Year
APPROACHING THE STUDY OF TAXATION
What Is Taxation?
Taxation in Our Lives
The Relevance of Taxation to Accounting and Finance Professionals
How to Study Taxation
Concept Summary: Individuals and Taxes
A BRIEF HISTORY OF U.S. TAXATION
Early Periods
Revenue Acts
Historical Trends
TAX SYSTEM DESIGN
Legal Foundation
The Basic Tax Formula
Tax Principles
MAJOR TYPES OF TAXES
Property Taxes
Transaction Taxes
Ethics & Equity: Making Good Use of Out-of-State Relatives
Taxes on Transfers at Death
Gift Taxes
Income Taxes
Employment Taxes
Other U.S. Taxes
Concept Summary: Overview of Taxes in the United States
Proposed U.S. Taxes
Global Tax Issues: VAT in USA?
TAX ADMINISTRATION
Internal Revenue Service
The Audit Process
Statute of Limitations
Interest and Penalties
Tax Practice
Global Tax Issues: Outsourcing of Tax Return Preparation
UNDERSTANDING THE FEDERAL TAX LAW
Revenue Needs
Economic Considerations
Social Considerations
Equity Considerations
Political Considerations
Influence of the Internal Revenue Service
Influence of the Courts
Summary
Refocus on the Big Picture: Family and Taxes—A Typical Year
Chapter 2: Working with the Tax Law
The Big Picture: Importance of Tax Research
TAX SOURCES
Statutory Sources of the Tax Law
Administrative Sources of the Tax Law
Ethics & Equity: Reporting Tax Fraud
Judicial Sources of the Tax Law
Concept Summary: Federal Judicial System: Trial Courts
Concept Summary: Judicial Sources
Other Sources of the Tax Law
WORKING WITH THE TAX LAW—TAX RESEARCH TOOLS
Commercial Tax Services
Using Electronic (Online) Tax Services
Noncommercial Electronic (Online) Tax Services
WORKING WITH THE TAX LAW—TAX RESEARCH
Identifying the Problem
Refining the Problem
Locating the Appropriate Tax Law Sources
Assessing the Validity of Tax Law Sources
Financial Disclosure Insights: Where Does GAAP Come From?
Arriving at the Solution or at Alternative Solutions
Communicating Tax Research
WORKING WITH THE TAX LAW—TAX PLANNING
Nontax Considerations
Components of Tax Planning
Tax Avoidance and Tax Evasion
Follow-Up Procedures
Tax Planning—A Practical Application
TAXATION ON THE CPA EXAMINATION
Preparation Blueprints
Regulation Section
Chapter 3: Tax Formula and Tax Determination; An Overview of Property Transactions
The Big Picture: A Divided Household
TAX FORMULA
Concept Summary: Tax Formula for Individuals (Components Integrated into the Text)
Components of the Tax Formula
Tax Formula—Correlation with Form 1040
STANDARD DEDUCTION
Basic and Additional Standard Deduction
Individuals Not Eligible for the Standard Deduction
Special Limitations on the Standard Deduction for Dependents
PERSONAL EXEMPTIONS
DEPENDENCY EXEMPTIONS
Qualifying Child
Concept Summary: Tiebreaker Rules for Claiming Qualified Child
Qualifying Relative
Ethics & Equity: Discovering Lost Dependency Exemptions
Other Rules for Dependency Exemptions
Comparison of Categories for Dependency Exemptions
Concept Summary: Tests for Dependency Exemption
Phaseout of Exemptions
Ethics & Equity: Whose Qualifying Child Is He?
Child Tax Credit
FILING STATUS AND FILING REQUIREMENTS
Filing Status
Global Tax Issues: Filing a Joint Return
Ethics & Equity: Abandoned Spouse?
Filing Requirements
TAX DETERMINATION
Tax Rates
Computation of Net Taxes Payable or Refund Due
Kiddie Tax—Unearned Income of Children Taxed at Parents’ Rate
TAX RETURN FILING PROCEDURES
Selecting the Proper Form
The E-File Approach
When and Where to File
Modes of Payment
GAINS AND LOSSES FROM PROPERTY TRANSACTIONS— IN GENERAL
GAINS AND LOSSES FROM PROPERTY TRANSACTIONS—CAPITAL GAINS AND LOSSES
Definition of a Capital Asset
Determination of Net Capital Gain
Treatment of Net Capital Loss
Taxation of Net Capital Gain
TAX PLANNING
Maximizing the Use of the Standard Deduction
Dependency Exemptions
Taking Advantage of Tax Rate Differentials
Income of Certain Children
Refocus on the Big Picture: A Divided Household
Part 2: Gross Income
Chapter 4: Gross Income: Concepts and Inclusions
The Big Picture: Calculation of Gross Income
GROSS INCOME—WHAT IS IT?
Definition
Global Tax Issues: From ‘‘All Sources’’ Is a Broad Definition
Recovery of Capital Doctrine
Economic and Accounting Concepts
Comparison of the Timing of Income Rules for Tax and Accounting
Form of Receipt
YEAR OF INCLUSION
Taxable Year
Accounting Methods
Special Rules Applicable to Cash Basis Taxpayers
Ethics & Equity: Should the Tax Treatment of Government Bonds and Corporate Bonds Be Different?
Exceptions Applicable to Accrual Basis Taxpayers
Global Tax Issues: Tax Credit Neutralizes Foreign Income Taxes
INCOME SOURCES
Personal Services
Income from Property
Global Tax Issues: Do Dividends from Foreign Corporations Warrant Special Treatment?
Income Received by an Agent
Income from Partnerships, S Corporations, Trusts, and Estates
Concept Summary: Taxation of Income and Distributions
Income in Community Property States
ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
Alimony and Separate Maintenance Payments
Concept Summary: Tax Treatment of Payments and Transfers Pursuant to Divorce Agreements and Decrees
Imputed Interest on Below-Market Loans
Concept Summary: Effect of Certain Below-Market Loans on the Lender and Borrower
Concept Summary: Exceptions to the Imputed Interest Rules for Below-Market Loans
Ethics & Equity: Taxing ‘‘Made-Up’’ Income
Income from Annuities
Prizes and Awards
Group Term Life Insurance
Unemployment Compensation
Social Security Benefits
TAX PLANNING
Tax Deferral
Reporting Conflicts
Shifting Income to Relatives
Accounting for Community Property
Alimony
Refocus on the Big Picture: Calculation of Gross Income
Chapter 5: Gross Income: Exclusions
The Big Picture: Exclusions
STATUTORY AUTHORITY
GIFTS AND INHERITANCES
Legislative Intent
Employer Payments to Employees
Employee Death Benefits
LIFE INSURANCE PROCEEDS
General Rule
Accelerated Death Benefits
Ethics & Equity: Should the Terminally Ill Pay Social Security Taxes?
Transfer for Valuable Consideration
SCHOLARSHIPS
General Information
Timing Issues
COMPENSATION FOR INJURIES AND SICKNESS
Damages
Ethics & Equity: Tax Treatment of Damages Not Related to Physical Personal Injury
Concept Summary: Taxation of Damages
Ethics & Equity: Classifying the Amount of the Claim
Wrongful Incarceration
Workers’ Compensation
Accident and Health Insurance Benefits
EMPLOYER-SPONSORED ACCIDENT AND HEALTH PLANS
Medical Reimbursement Plans
Long-Term Care Insurance Benefits
MEALS AND LODGING
General Rules for the Exclusion
Ethics & Equity: Employee Meals
Other Housing Exclusions
EMPLOYEE FRINGE BENEFITS
Specific Benefits
Cafeteria Plans
Flexible Spending Plans
General Classes of Excluded Benefits
FOREIGN EARNED INCOME
Concept Summary: Employee Fringe Benefits
Global Tax Issues: Benefits of the Earned Income Exclusion Are Questioned
INTEREST ON CERTAIN STATE AND LOCAL GOVERNMENT OBLIGATIONS
CORPORATE DISTRIBUTIONS TO SHAREHOLDERS
General Information
Stock Dividends
EDUCATIONAL SAVINGS BONDS
EDUCATION SAVINGS PROGRAMS (§ 529 AND § 530 PLANS)
Qualified Tuition Program
Coverdell Education Savings Account
QUALIFIED ABLE PROGRAMS (§ 529A PLANS)
TAX BENEFIT RULE
INCOME FROM DISCHARGE OF INDEBTEDNESS
TAX PLANNING
Life Insurance
Employee Fringe Benefits
Investment Income
Refocus on the Big Picture: Exclusions
Part 3: Deductions
Chapter 6: Deductions and Losses: In General
The Big Picture: Calculation of Deductible Expenses
CLASSIFICATION OF DEDUCTIBLE EXPENSES
Classifying Deductions
Authority for Deductions
Deduction Criteria for § 162 and § 212
Personal Expenses
Business and Nonbusiness Losses
Reporting Procedures
DEDUCTIONS AND LOSSES—TIMING OF EXPENSE RECOGNITION
Importance of Taxpayer’s Method of Accounting
Cash Method Requirements
Accrual Method Requirements
Time Value of Tax Deductions
DISALLOWANCE POSSIBILITIES
Public Policy Limitation
Global Tax Issues: Overseas Gun Sales Result in Large Fines
Ethics & Equity: Medical Marijuana: Trade or Business Activity or Illegal Operation?
Political Contributions and Lobbying Activities
Excessive Executive Compensation
Investigation of a Business
Concept Summary: Costs of Investigating a Business
Hobby Losses
Concept Summary: Common Questions from the IRS Concerning Hobbies/Business with Losses
Rental of Vacation Homes
Concept Summary: Vacation/Rental Home
Expenditures Incurred for Taxpayer’s Benefit or Taxpayer’s Obligation
Disallowance of Personal Expenditures
Ethics & Equity: Personal or Business Expenses?
Disallowance of Deductions for Capital Expenditures
Transactions between Related Parties
Substantiation Requirements
Expenses and Interest Relating to Tax-Exempt Income
TAX PLANNING
Vacation Homes
Hobby Losses
Concept Summary: Classification of Expenses
Do Deduction Limits Affect Executive Compensation?
Refocus on the Big Picture: Calculation of Deductible Business Expenses and Tax Planning
Chapter 7: Deductions and Losses: Certain Business Expenses and Losses
The Big Picture: Losses
BAD DEBTS
Specific Charge-Off Method
Concept Summary: The Tax Treatment of Bad Debts Using the Specific Charge-Off Method
Business versus Nonbusiness Bad Debts
Loans between Related Parties
Concept Summary: Bad Debt Deductions
WORTHLESS SECURITIES AND SMALL BUSINESS STOCK LOSSES
Worthless Securities
Small Business Stock (§ 1244 Stock) Losses
LOSSES OF INDIVIDUALS
Events That Are Not Casualties
Theft Losses
When to Deduct Casualty Losses
Measuring the Amount of Loss
Ethics & Equity: Is Policy Cancellation an Escape Hatch?
Personal Casualty Gains and Losses
Concept Summary: Casualty Gains and Losses
Statutory Framework for Deducting Losses of Individuals
Concept Summary: Statutory Framework for Deducting Losses of Individuals
RESEARCH AND EXPERIMENTAL EXPENDITURES
Expense Method
Deferral and Amortization Method
DOMESTIC PRODUCTION ACTIVITIES DEDUCTION
Operational Rules
Eligible Taxpayers
NET OPERATING LOSSES
Carryback and Carryover Periods
Computation of the Net Operating Loss
Concept Summary: Computation of Net Operating Loss
Recomputation of Tax Liability for Year to Which Net Operating Loss Is Carried
Calculation of the Remaining Net Operating Loss
TAX PLANNING
Small Business Stock (§ 1244 Stock) Losses
Casualty Losses
Net Operating Losses
Refocus on the Big Picture: Losses
Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
The Big Picture: Calculating Cost Recovery Deductions
Concept Summary: Depreciation and Cost Recovery: Relevant Time Periods
DEPRECIATION AND COST RECOVERY
Nature of Property
Placed in Service Requirement
Cost Recovery Allowed or Allowable
Cost Recovery Basis for Personal Use Assets Converted to Business or Income-Producing Use
MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS): GENERAL RULES
Concept Summary: MACRS: Class Lives, Methods, and Conventions
Personalty: Recovery Periods and Methods
Financial Disclosure Insights: Tax and Book Depreciation
Concept Summary: Statutory Percentage Method under MACRS
Realty: Recovery Periods and Methods
Straight-Line Election
Concept Summary: Straight-Line Election under MACRS
MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS): SPECIAL RULES
Election to Expense Assets (§ 179)
Ethics & Equity: Section 179 Limitation
Additional First-Year Depreciation (Bonus Depreciation)
Using § 179 and Bonus Depreciation Effectively
Concept Summary: Using both § 179 and Bonus Depreciation
Business and Personal Use of Automobiles and Other Listed Property
Concept Summary: Listed Property Cost Recovery
Alternative Depreciation System (ADS)
REPORTING PROCEDURES
AMORTIZATION
DEPLETION
Intangible Drilling and Development Costs (IDCs)
Depletion Methods
TAX PLANNING
Cost Recovery
Amortization
Cost Recovery Tables
Refocus on the Big Picture: Calculating Cost Recovery Deductions
Chapter 9: Deductions: Employee and Self-Employed-Related Expenses
The Big Picture: The First Job
EMPLOYEE VERSUS INDEPENDENT CONTRACTOR
Concept Summary: Employee versus Independent Contractor
EMPLOYEE EXPENSES—IN GENERAL
TRANSPORTATION EXPENSES
Qualified Expenses
Computation of Automobile Expenses
TRAVEL EXPENSES
Definition of Travel Expenses
Away-from-Home Requirement
Restrictions on Travel Expenses
Combined Business and Pleasure Travel
MOVING EXPENSES
Distance Test
Concept Summary: Meeting and Not Meeting the Distance Test
Time Test
Concept Summary: Qualifying for the Moving Expense Deduction
Treatment of Moving Expenses
EDUCATION EXPENSES
General Requirements
Employer or Legal Requirements to Keep a Job
Maintaining or Improving Existing Skills
Global Tax Issues: Expatriates and the Moving Expense Deduction
Concept Summary: Condition for Deducting Regular Education Expenses
What Expenses Are Allowed?
Deduction for Qualified Tuition and Related Expenses
Other Provisions Dealing with Education
Concept Summary: Tax Consequences of Provisions Dealing with Education
ENTERTAINMENT AND MEAL EXPENSES
Overall Limit (The 50 Percent Rule)
Types of Entertainment Expenses
Restrictions on Deductibility
Ethics & Equity: Your Turn or Mine?
OTHER EMPLOYEE EXPENSES
Office in the Home
Miscellaneous Employee Expenses
CONTRIBUTIONS TO RETIREMENT ACCOUNTS
Employee IRAs
Self-Employed Keogh (H.R. 10) Plans
CLASSIFICATION OF EMPLOYEE EXPENSES
Accountable Plans
Nonaccountable Plans
Reporting Procedures
Improving the Tax Position of Employees
LIMITATIONS ON ITEMIZED DEDUCTIONS
Miscellaneous Itemized Deductions Subject to the 2 Percent Floor
Miscellaneous Itemized Deductions Not Subject to the 2 Percent Floor
TAX PLANNING
Employment Status
Implications of Misclassifying Workers
Transportation and Travel Expenses
Education Expenses
Refocus on the Big Picture: The First Job
Chapter 10: Deductions and Losses: Certain Itemized Deductions
The Big Picture: Impact of Itemized Deductions on Major Purchases
MEDICAL EXPENSES
Medical Expenses Defined
Capital Expenditures for Medical Purposes
Medical Expenses Incurred for Spouse and Dependents
Transportation, Meal, and Lodging Expenses for Medical Treatment
Amounts Paid for Medical Insurance Premiums
Year of Deduction
Reimbursements
Health Savings Accounts
TAXES
Deductibility as a Tax
Property Taxes
State and Local Income Taxes and Sales Taxes
INTEREST
Allowed and Disallowed Items
Restrictions on Deductibility and Timing Considerations
Classification of Interest Expense
Concept Summary: Deductibility of Personal, Student Loan, Mortgage, and Investment Interest
CHARITABLE CONTRIBUTIONS
Criteria for a Gift
Qualified Organizations
Ethics & Equity: An Indirect Route to a Contribution Deduction
Time of Deduction
Record-Keeping and Valuation Requirements
Concept Summary: Documentation and Substantiation Requirements for Charitable Contributions
Global Tax Issues: Choose the Charity Wisely
Limitations on Charitable Contribution Deduction
Concept Summary: Determining the Deduction for Contributions of Appreciated Property by Individuals
MISCELLANEOUS ITEMIZED DEDUCTIONS
OTHER MISCELLANEOUS DEDUCTIONS
COMPREHENSIVE EXAMPLE OF SCHEDULE A
OVERALL LIMITATION ON CERTAIN ITEMIZED DEDUCTIONS
TAX PLANNING
Effective Use of Itemized Deductions
Use of Medical Deductions
Timing the Payment of Deductible Taxes
Protecting the Interest Deduction
Ensuring the Charitable Contribution Deduction
Refocus on the Big Picture: Itemized Deductions Can Reduce the After-Tax Cost of Major Purchases
Chapter 11: Investor Losses
The Big Picture: Investor Loss Limitations Affect the Viability of Certain Investment Opportunities
THE TAX SHELTER PROBLEM
AT-RISK LIMITS
Concept Summary: Calculation of At-Risk Amount
PASSIVE ACTIVITY LOSS LIMITS
Classification and Impact of Passive Activity Income and Losses
Taxpayers Subject to the Passive Activity Loss Rules
Rules for Determining Passive Activities
Concept Summary: Tests to Determine Material Participation
Interaction of the At-Risk and Passive Activity Loss Limits
Special Passive Activity Rules for Real Estate Activities
Concept Summary: Treatment of Losses Subject to the At-Risk and Passive Activity Loss Limitations
Ethics & Equity: Punching the Time Clock at Year-End
Dispositions of Passive Interests
INVESTMENT INTEREST LIMITATION
Limitation Imposed
Concept Summary: Passive Activity Loss Rules: Key Issues and Answers
Computation of Allowable Deduction
OTHER INVESTMENT LOSSES
Concept Summary: Common Investment Loss Limitation Rules
TAX PLANNING
Using Passive Activity Losses
Planning with the Investment Interest Limitation
Effect of the Additional Tax on Net Investment Income
Refocus on the Big Picture: Investor Loss Limitations Can Significantly Affect Investment Returns
Part 4: Special Tax Computation Methods, Payment Procedures, and Tax Credits
Chapter 12: Alternative Minimum Tax
The Big Picture: The Presence or Absence of the AMT
INDIVIDUAL ALTERNATIVE MINIMUM TAX
Alternative Minimum Taxable Income (AMTI)
Ethics & Equity: Accelerating Expenses in an AMT Year
AMT Formula: Other Components
AMT Adjustments
Concept Summary: Summary of AMT Adjustment Provisions
AMT Preferences
Ethics & Equity: Large Families and the AMT
Illustration of the AMT Computation
AMT Credit
Concept Summary: Summary of AMT Preference Provisions
Concept Summary: AMT Adjustments and Preferences for Individuals
CORPORATE ALTERNATIVE MINIMUM TAX
Small Corporations and the AMT
AMT Adjustments
AMT Preferences
Exemption Amount
Other Aspects of the Corporate AMT
TAX PLANNING
Avoiding Preferences and Adjustments
Controlling the Timing of Preferences and Adjustments
Other AMT Tax Planning Strategies
Refocus on the Big Picture: The Presence or Absence of the AMT
Chapter 13: Tax Credits and Payment Procedures
The Big Picture: Education Tax Credits
TAX POLICY CONSIDERATIONS
OVERVIEW AND PRIORITY OF CREDITS
Refundable versus Nonrefundable Credits
General Business Credit
Treatment of Unused General Business Credits
SPECIFIC BUSINESS-RELATED TAX CREDITS
Tax Credit for Rehabilitation Expenditures
Work Opportunity Tax Credit
Research Activities Credit
Low-Income Housing Credit
Disabled Access Credit
Credit for Small Employer Pension Plan Startup Costs
Credit for Employer-Provided Child Care
OTHER TAX CREDITS
Earned Income Credit
Tax Credit for Elderly or Disabled Taxpayers
Foreign Tax Credit
Adoption Expenses Credit
Child Tax Credit
Credit for Child and Dependent Care Expenses
Ethics & Equity: Is This the Right Way to Use the Credit for Child and Dependent Care Expenses?
Education Tax Credits
Energy Credits
Credit for Certain Retirement Plan Contributions
Concept Summary: Tax Credits
PAYMENT PROCEDURES
Employers
Self-Employed Taxpayers
AFFORDABLE CARE ACT PROVISIONS
Individual Shared Responsibility Payment
Premium Tax Credit
Additional Medicare Taxes on High-Income Individuals
TAX PLANNING
Foreign Tax Credit
Credit for Child and Dependent Care Expenses
Adjustments to Increase Withholding
Adjustments to Avoid Overwithholding
Refocus on the Big Picture: Education Tax Credits
Part 5: Property Transactions
Chapter 14: Property Transactions: Determination of Gain or Loss and Basis Considerations
The Big Picture: Proposed Sale of a House and Other Property Transactions
DETERMINATION OF GAIN OR LOSS
Realized Gain or Loss
Concept Summary: Realized Gain or Loss
Recognized Gain or Loss
Concept Summary: Realized and Recognized Gain or Loss
Nonrecognition of Gain or Loss
BASIS CONSIDERATIONS
Determination of Cost Basis
Gift Basis
Inherited Property
Disallowed Losses
Concept Summary: Wash Sale Rules
Conversion of Property from Personal Use to Business or Income-Producing Use
Summary of Basis Adjustments
Concept Summary: Adjustments to Basis
TAX PLANNING
Cost Identification and Documentation Considerations
Selection of Property for Making Gifts
Selection of Property for Inheritances
Disallowed Losses
Ethics & Equity: Washing a Loss Using an IRA
Refocus on the Big Picture: Proposed Sale of a House and Other Property Transactions
Chapter 15: Property Transactions: Nontaxable Exchanges
The Big Picture: Alternative Uses of Property
GENERAL CONCEPT OF A NONTAXABLE EXCHANGE
LIKE-KIND EXCHANGES—§ 1031
Like-Kind Property
Exchange Requirement
Concept Summary: Delayed § 1031 Exchange
Ethics & Equity: A Delayed § 1031 Like-Kind Exchange: If At First You Don’t Succeed, Try Again
Boot
Basis and Holding Period of Property Received
Reporting Considerations
INVOLUNTARY CONVERSIONS—§ 1033
Involuntary Conversion Defined
Computing the Amount Realized
Replacement Property
Concept Summary: Involuntary Conversions: Replacement Property Tests
Time Limitation on Replacement
Nonrecognition of Gain
Reporting Considerations
SALE OF A RESIDENCE—§ 121
Principal Residence
Requirements for Exclusion Treatment
Calculation of the Exclusion Amount
Exceptions to the Two-Year Rules
Involuntary Conversion and Using §§ 121 and 1033
TAX PLANNING
Like-Kind Exchanges
Involuntary Conversions
Sale of a Principal Residence
Refocus on the Big Picture: Alternative Uses of Property
Chapter 16: Property Transactions: Capital Gains and Losses
The Big Picture: Managing Capital Asset Transactions
GENERAL SCHEME OF TAXATION
CAPITAL ASSETS
Definition of a Capital Asset (§ 1221)
Ethics & Equity: Sculpture as a Capital Asset
Effect of Judicial Action
Statutory Expansions
SALE OR EXCHANGE
Worthless Securities and § 1244 Stock
Special Rule—Retirement of Corporate Obligations 16-8 Options
Options
Concept Summary: Options: Consequences to the Grantor and Grantee
Patents
Franchises, Trademarks, and Trade Names (§ 1253)
Concept Summary: Franchises: Consequences to the Franchisor and Franchisee
Lease Cancellation Payments
HOLDING PERIOD
General Rules
Special Holding Period Rules
Special Rules for Short Sales
Concept Summary: Short Sales of Securities
TAX TREATMENT OF CAPITAL GAINS AND LOSSES OF NONCORPORATE TAXPAYERS
Capital Gain and Loss Netting Process
Qualified Dividend Income
Alternative Tax on Net Capital Gain and Qualified Dividend Income
Concept Summary: Income Layers for Alternative Tax on Capital Gain Computation
Treatment of Net Capital Losses
Concept Summary: Final Results of the Capital Gain and Loss Netting Process and How They Are Taxed
Reporting Procedures
TAX TREATMENT OF CAPITAL GAINS AND LOSSES OF CORPORATE TAXPAYERS
TAX PLANNING
Importance of Capital Asset Status
Planning for Capital Asset Status
Global Tax Issues: Capital Gain Treatment in the United States and Other Countries
Effect of Capital Asset Status in Transactions Other Than Sales
Stock Sales
Maximizing Benefits
Year-End Planning
Refocus on the Big Picture: Managing Capital Asset Transactions
Chapter 17: Property Transactions: § 1231 and Recapture Provisions
The Big Picture: Depreciation Recapture
SECTION 1231 ASSETS
Relationship to Capital Assets
Property Included
Property Excluded
Special Rules for Certain § 1231 Assets
General Procedure for § 1231 Computation
Concept Summary: Section 1231 Netting Procedure
SECTION 1245 RECAPTURE
Section 1245 Property
Observations on § 1245
SECTION 1250 RECAPTURE
Section 1250 Recapture Situations
Concept Summary: Comparison of § 1245 and § 1250 Depreciation Recapture
Unrecaptured § 1250 Gain (Real Estate 25% Gain)
Ethics & Equity: The Sale of a ‘‘Cost-Segregated’’ Building
CONSIDERATIONS COMMON TO §§ 1245 AND 1250
Exceptions
Other Applications
Concept Summary: Depreciation Recapture and § 1231 Netting Procedure
Global Tax Issues: Depreciation Recapture in Other Countries
SPECIAL RECAPTURE PROVISIONS
Special Recapture for Corporations
Gain from Sale of Depreciable Property between Certain Related Parties
Intangible Drilling Costs
REPORTING PROCEDURES
Ethics & Equity: Incorrect Depreciation and Recognized Gain
TAX PLANNING
Timing of § 1231 Gain
Timing of Recapture
Postponing and Shifting Recapture
Avoiding Recapture
Refocus on the Big Picture: Depreciation Recapture
Part 6: Accounting Periods, Accounting Methods, and Deferred Compensation
Chapter 18: Accounting Periods and Methods
The Big Picture: Accounting Period and Method
ACCOUNTING PERIODS
Specific Provisions for Partnerships, S Corporations, and Personal Service Corporations
Ethics & Equity: Who Benefits from the Change in Tax Year?
Selecting the Tax Year
Changes in the Accounting Period
Taxable Periods of Less Than One Year
Mitigation of the Annual Accounting Period Concept
Ethics & Equity: Special Tax Relief
ACCOUNTING METHODS
Permissible Methods
Cash Receipts and Disbursements Method—Cash Basis
Global Tax Issues: Tax Accounting Methods as Well as Tax Rates in Foreign Countries Are Important Co
Accrual Method
Concept Summary: Accruals Under the Economic Performance Test
Financial Disclosure Insights: Tax Deferrals from Reserves
Hybrid Method
Change of Method
Ethics & Equity: Change in Accounting Method
SPECIAL ACCOUNTING METHODS
Installment Method
Concept Summary: Interest on Installment Sales
Disposition of Installment Obligations
Interest on Deferred Taxes
Electing Out of the Installment Method
Long-Term Contracts
INVENTORIES
Determining Inventory Cost
Global Tax Issues: Inventory Acquired from a Foreign Subsidiary
Ethics & Equity: Preserving the LIFO Reserve
The LIFO Election
Special Inventory Methods Relating to Farming and Ranching
TAX PLANNING
Taxable Year
Cash Method of Accounting
Installment Method
Completed Contract Method
Inventories
Refocus on the Big Picture: Accounting Period and Method
Chapter 19: Deferred Compensation
The Big Picture: A Taxpayer Who Saves
QUALIFIED PENSION, PROFIT SHARING, STOCK BONUS, AND CASH BALANCE PLANS
Types of Plans
Concept Summary: Defined Benefit Plan and Defined Contribution Plan Compared
Ethics & Equity: Uneven Compensation Playing Field
Qualification Requirements
Tax Consequences to the Employee and Employer
Limitations on Contributions to and Benefits from Qualified Plans
Section 401(k) Plans
RETIREMENT PLANS FOR SELF-EMPLOYED INDIVIDUALS AND THEIR EMPLOYEES
Coverage Requirements
Contribution Limitations
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
General Rules
Concept Summary: Keogh Plan and SEP Compared
Penalty Taxes for Excess Contributions
Taxation of Benefits
Concept Summary: Comparison of IRAs
NONQUALIFIED DEFERRED COMPENSATION PLANS
Underlying Rationale for Tax Treatment
Tax Treatment to the Employer and Employee
Ethics & Equity: The ‘‘Jock Tax’’ Is Spreading
RESTRICTED PROPERTY PLANS
Substantial Risk of Forfeiture
Special Election Available
Employer Deductions
STOCK OPTIONS
Incentive Stock Options
Financial Disclosure Insights: Accounting for Executive Compensation
Nonqualified Stock Options
TAX PLANNING
Deferred Compensation
Qualified Plans
Self-Employed Retirement Plans
Individual Retirement Accounts
Comparison of § 401(k) Plan with IRA
Concept Summary: Section 401(k) Plan and IRA Compared
Nonqualified Deferred Compensation (NQDC) Plans
Stock Options
Concept Summary: Incentive Stock Options and Nonqualified Stock Options Compared
Flexible Benefit Plans
Liquidating Retirement Assets
Refocus on the Big Picture: A Taxpayer Who Saves
Part 7: Corporations and Partnerships
Chapter 20: Corporations and Partnerships
The Big Picture: Choice of Business Entity
CHOICE OF ENTITY
Nontax Considerations
Concept Summary
General Tax Consequences of Different Forms of Business Entities
Check-the-Box Election
CORPORATIONS
Corporate Legal Concerns
Individuals and Corporations Compared—An Overview
Specific Provisions Compared
Deductions Available Only to Corporations
Determination of Corporate Tax Liability
Corporate Filing Requirements
Reconciliation of Corporate Taxable Income and Accounting Income
Concept Summary: Summary of Income Tax Consequences
FORMING THE CORPORATION
Transfers to Controlled Corporations
Capital Contributions
Ethics & Equity: Selective Incorporation
OPERATING THE CORPORATION
Dividend Distributions
Global Tax Issues: Transferring Assets to Foreign Corporations—Forget § 351?
Other Corporate Considerations
THE S ELECTION
Qualification for S Status
Operational Rules
Ethics & Equity: Income Tax Basis That Does Not Change?
PARTNERSHIPS
Nature of Partnership Taxation
Concept Summary: A Comparison of Some of the Attributes of S and C Corporations
Partnership Formation and Basis
Partnership Operation
TAX PLANNING
Corporate versus Noncorporate Forms of Business Organization
Regular Corporation versus S Status
Use of an Entity to Reduce the Family Income Tax Burden
Refocus on the Big Picture: Choice of Business Entity
Appendix A: Tax Rate Schedules and Tables
Appendix B: Tax Forms
Appendix C: Glossary
Appendix D-1: Table of Code Sections Cited
Appendix D-2: Table of Regulations Cited
Appendix D-3: Table of Revenue Procedures and Revenue Rulings Cited
Appendix E: Practice Set Assignments— Comprehensive Tax Return Problems
Appendix F: Table of Cases Cited
Appendix G: Tax Formulas
Appendix H: Present Value and Future Value Tables
Index
