McGraw-Hill's Taxation of Individuals and Business Entities, 2016 Edition

Cover
Title Page
Copyright Page
Dedications
About the Authors
Acknowledgments
Table of Contents
1 An Introduction to Tax
	Who Cares about Taxes and Why?
	What Qualifies as a Tax?
	How to Calculate a Tax
	Different Ways to Measure Tax Rates
	Tax Rate Structures
		Proportional Tax Rate Structure
		Progressive Tax Rate Structure
		Regressive Tax Rate Structure
	Types of Taxes
		Federal Taxes
			Income Tax
			Employment and Unemployment Taxes
			Excise Taxes
			Transfer Taxes
		State and Local Taxes
			Income Taxes
			Sales and Use Taxes
			Property Taxes
			Excise Taxes
		Implicit Taxes
	Evaluating Alternative Tax Systems
		Sufficiency
			Static vs. Dynamic Forecasting
			Income vs. Substitution Effects
		Equity
			Horizontal vs. Vertical Equity
		Certainty
		Convenience
		Economy
		Evaluating Tax Systems—The Trade-Off
	Conclusion
2 Tax Compliance, the IRS, and Tax Authorities
	Taxpayer Filing Requirements
		Tax Return Due Date and Extensions
		Statute of Limitations
	IRS Audit Selection
		Types of Audits
			After the Audit
	Tax Law Sources
		Legislative Sources: Congress and the Constitution
			Internal Revenue Code
			The Legislative Process for Tax Laws
			Basic Organization of the Code
			Tax Treaties
		Judicial Sources: The Courts
		Administrative Sources: The U.S. Treasury
			Regulations, Revenue Rulings, and Revenue Procedures
			Letter Rulings
	Tax Research
		Step 1: Understand Facts
		Step 2: Identify Issues
		Step 3: Locate Relevant Authorities
		Step 4: Analyze Tax Authorities
		Step 5: Document and Communicate the Results
			Facts
			Issues
			Authorities
			Conclusion
			Analysis
			Client Letters
			Research Question and Limitations
			Facts
			Analysis
			Closing
	Tax Professional Responsibilities
	Taxpayer and Tax Practitioner Penalties
	Conclusion
3 Tax Planning Strategies and Related Limitations
	Basic Tax Planning Overview
	Timing Strategies
		Present Value of Money
		The Timing Strategy When Tax Rates Are Constant
		The Timing Strategy When Tax Rates Change
			Limitations to Timing Strategies
	Income-Shifting Strategies
		Transactions between Family Members and Limitations
		Transactions between Owners and Their Businesses and Limitations
		Income Shifting across Jurisdictions and Limitations
	Conversion Strategies
		Limitations of Conversion Strategies
	Additional Limitations to Tax Planning Strategies: Judicial Doctrines
	Tax Avoidance versus Tax Evasion
	Conclusion
4 Individual Income Tax Overview, Exemptions, and Filing Status
	The Individual Income Tax Formula
		Gross Income
			Character of Income
		Deductions
			For AGI Deductions
			From AGI Deductions
		Income Tax Calculation
		Other Taxes
		Tax Credits
		Tax Prepayments
	Personal and Dependency Exemptions
		Dependency Requirements
			Qualifying Child
			Qualifying Relative
	Filing Status
		Married Filing Jointly and Married Filing Separately
		Qualifying Widow or Widower (Surviving Spouse)
		Single
		Head of Household
			Married Individuals Treated as Unmarried (Abandoned Spouse)
	Summary of Income Tax Formula
	Conclusion
	Appendix A: Dependency Exemption Flowchart
	Appendix A: (Part II)
	Appendix B: Qualifying Person for Head of Household Filing Status
	Appendix C: Determination of Filing Status Flowchart
5 Gross Income and Exclusions
	Realization and Recognition of Income
		What Is Included in Gross Income?
			Economic Benefit
			Realization Principle
			Recognition
		Other Income Concepts
			Form of Receipt
			Return of Capital Principle
			Recovery of Amounts Previously Deducted
		When Do Taxpayers Recognize Income?
			Accounting Methods
			Constructive Receipt
			Claim of Right
		Who Recognizes the Income?
			Assignment of Income
			Community Property Systems
	Types of Income
		Income from Services
		Income from Property
			Annuities
			Property Dispositions
		Other Sources of Gross Income
			Income from Flow-through Entities
			Alimony
			Prizes, Awards, and Gambling Winnings
			Social Security Benefits
			Imputed Income
			Discharge of Indebtedness
	Exclusion Provisions
		Common Exclusions
			Municipal Interest
			Gains on the Sale of Personal Residence
			Fringe Benefits
		Education-Related Exclusions
			Scholarships
			Other Educational Subsidies
			U.S. Series EE bonds
		Exclusions That Mitigate Double Taxation
			Gifts and Inheritances
			Life Insurance Proceeds
			Foreign-Earned Income
		Sickness and Injury-Related Exclusions
			Workers’ Compensation
			Payments Associated with Personal Injury
			Health Care Reimbursement
			Disability Insurance
		Deferral Provisions
	Income Summary
	Conclusion
	Appendix: 2014 Social Security Worksheet from IRS Publication 915
6 Individual Deductions
	Deductions for AGI
		Deductions Directly Related to Business Activities
			Trade or Business Expenses
			Rental and Royalty Expenses
			Losses
			Flow-through Entities
	Deductions Indirectly Related to Business Activities
		Moving Expenses
		Health Insurance Deduction by Self-Employed Taxpayers
		Self-Employment Tax Deduction
		Penalty for Early Withdrawal of Savings
		Deductions Subsidizing Specific Activities
			Deduction for Interest on Qualified Education Loans
			Deduction for Qualified Education Expenses
		Summary: Deductions for AGI
	Deductions from AGI: Itemized Deductions
		Medical Expenses
			Transportation and Travel for Medical Purposes
			Hospitals and Long-Term Care Facilities
			Medical Expense Deduction Limitation
		Taxes
		Interest
		Charitable Contributions
			Contributions of Money
			Contributions of Property Other Than Money
			Charitable Contribution Deduction Limitations
		Casualty and Theft Losses on Personal-Use Assets
			Tax Loss from Casualties
			Casualty Loss Deduction Floor Limitations
		Miscellaneous Itemized Deductions Subject to AGI Floor
			Employee Business Expenses
			Investment Expenses
			Tax Preparation Fees
			Hobby Losses
			Limitation on Miscellaneous Itemized Deductions (2 percent of AGI Floor)
		Miscellaneous Itemized Deductions Not Subject to AGI Floor
		Phase-out of Itemized Deductions
		Summary of Itemized Deductions
	The Standard Deduction and Exemptions
		Standard Deduction
			Bunching Itemized Deductions
		Deduction for Personal and Dependency Exemptions
		Taxable Income Summary
	Conclusion
	Appendix A: Calculation of Itemized Deduction Phase-out for 2015
	Appendix B: Personal Exemption Phase-out Computation for 2015
7 Investments
	Investments Overview
	Portfolio Income: Interest and Dividends
		Interest
			Corporate and U.S. Treasury Bonds
			U.S. Savings Bonds
		Dividends
	Portfolio Income: Capital Gains and Losses
		Types of Capital Gains and Losses
			Unrecaptured §1250 Gain
			Collectibles and §1202 Gain
			Netting Process for Gains and Losses
		Limitations on Capital Losses
			Losses on the Sale of Personal-Use Assets
			Capital Losses on Sales to Related Parties
			Wash Sales
		Balancing Tax Planning Strategies for Capital Assets with Other Goals
	Portfolio Income Summary
	Portfolio Investment Expenses
		Investment Expenses
		Investment Interest Expense
			Net Investment Income
		Net Investment Income Tax
	Passive Activity Income and Losses
		Passive Activity Definition
		Income and Loss Categories
		Rental Real Estate Exception to the Passive Activity Loss Rules
		Net Investment Income Tax on Net Passive Income
	Conclusion
8 Individual Income Tax Computation and Tax Credits
	Regular Federal Income Tax Computation
		Tax Rate Schedules
		Marriage Penalty or Benefit
		Exceptions to the Basic Tax Computation
			Preferential Tax Rates for Capital Gains and Dividends
			Net Investment Income Tax
			Kiddie Tax
	Alternative Minimum Tax
		Alternative Minimum Tax Formula
			Alternative Minimum Taxable Income (AMTI)
			AMT Exemption
			Tentative Minimum Tax and AMT Computation
			General AMT Planning Strategies
	Employment and Self-Employment Taxes
		Employee FICA Taxes Payable
		Self-Employment Taxes
		Employee vs. Self-Employed (Independent Contractor)
			Employee vs. Independent Contractor Comparison
	Tax Credits
		Nonrefundable Personal Credits
			Child Tax Credit
			Child and Dependent Care Credit
			Education Credits
		Refundable Personal Credits
			Earned Income Credit
			Other Refundable Personal Credits
		Business Tax Credits
			Foreign Tax Credit
		Tax Credit Summary
		Credit Application Sequence
	Taxpayer Prepayments and Filing Requirements
		Prepayments
			Underpayment Penalties
		Filing Requirements
			Late Filing Penalty
			Late Payment Penalty
	Tax Summary
	Conclusion
9 Business Income, Deductions, and Accounting Methods
	Business Gross Income
	Business Deductions
		Ordinary and Necessary
		Reasonable in Amount
	Limitations on Business Deductions
		Expenditures against Public Policy
		Political Contributions and Lobbying Costs
		Capital Expenditures
		Expenses Associated with the Production of Tax-Exempt Income
		Personal Expenditures
		Mixed-Motive Expenditures
			Meals and Entertainment
			Travel and Transportation
			Property Use
			Record Keeping and Other Requirements
	Specific Business Deductions
		Domestic Production Activities Deduction
		Losses on Dispositions of Business Property
		Business Casualty Losses
	Accounting Periods
	Accounting Methods
		Financial and Tax Accounting Methods
		Overall Accounting Method
			Cash Method
			Accrual Method
		Accrual Income
			All-Events Test for Income
			Taxation of Advance Payments of Income (Unearned Income)
			Unearned Service Revenue
			Advance Payment for Goods
		Inventories
			Uniform Capitalization
			Inventory Cost-Flow Methods
		Accrual Deductions
			All-Events Test for Deductions
			Economic Performance
			Bad Debt Expense
			Limitations on Accruals to Related Parties
		Comparison of Accrual and Cash Methods
		Adopting an Accounting Method
		Changing Accounting Methods
			Tax Consequences of Changing Accounting Method
	Conclusion
10 Property Acquisition and Cost Recovery
	Cost Recovery and Basis for Cost Recovery
		Basis for Cost Recovery
	Depreciation
		Personal Property Depreciation
			Depreciation Method
			Depreciation Recovery Period
			Depreciation Conventions
			Calculating Depreciation for Personal Property
			Applying the Half-Year Convention
			Applying the Mid-Quarter Convention
		Real Property
			Applicable Method
			Applicable Convention
			Depreciation Tables
		Special Rules Relating to Cost Recovery
			Immediate Expensing
			Listed Property
			Luxury Automobiles
		Depreciation for the Alternative Minimum Tax
		Depreciation Summary
	Amortization
		Section 197 Intangibles
		Organizational Expenditures and Start-Up Costs
		Research and Experimentation Expenditures
		Patents and Copyrights
		Amortizable Intangible Asset Summary
	Depletion
	Conclusion
	Appendix: MACRS Tables
11 Property Dispositions
	Dispositions
		Amount Realized
		Determination of Adjusted Basis
			Gifts
			Inherited Property
			Property Converted from Personal Use to Business Use
		Realized Gain or Loss on Disposition
		Recognized Gain or Loss on Disposition
	Character of Gain or Loss
		Ordinary Assets
		Capital Assets
		§1231 Assets
	Depreciation Recapture
		§1245 Property
			Scenario 1: Gain Created Solely through Cost Recovery Deductions
			Scenario 2: Gain Due to Both Cost Recovery Deductions and Asset Appreciation
			Scenario 3: Asset Sold at a Loss
		§1250 Depreciation Recapture for Real Property
	Other Provisions Affecting the Rate at Which Gains Are Taxed
		Unrecaptured §1250 Gain for Individuals
		Characterizing Gains on the Sale of Depreciable Property to Related Persons
	Calculating Net §1231 Gains or Losses
		§1231 Look-Back Rule
	Gain or Loss Summary
	Nonrecognition Transactions
		Like-Kind Exchanges
		Definition of Like-Kind Property
			Real Property
			Personal Property
			Property Ineligible for Like-Kind Treatment
		Property Use
		Timing Requirements for a Like-Kind Exchange
		Tax Consequences When Like-Kind Property Is Exchanged Solely for Like-Kind Property
		Tax Consequences of Transfers Involving Like-Kind and Non-Like-Kind Property (Boot)
		Reporting Like-Kind Exchanges
		Involuntary Conversions
		Installment Sales
		Gains Ineligible for Installment Reporting
		Other Nonrecognition Provisions
		Related-person Loss Disallowance Rules
	Conclusion
12 Compensation
	Salary and Wages
		Employee Considerations for Salary and Wages
			Tax Withholding
		Employer Considerations for Salary and Wages
			Deductibility of Salary Payments
	Equity-Based Compensation
		Stock Options
			Employee Considerations for Stock Options
			Employer Considerations for Stock Options
		Restricted Stock
			Employee Considerations for Restricted Stock
			Employer Considerations for Restricted Stock
		Equity-Based Compensation Summary
	Fringe Benefits
		Taxable Fringe Benefits
			Employee Considerations for Taxable Fringe Benefits
			Employer Considerations for Taxable Fringe Benefits
		Nontaxable Fringe Benefits
			Group-Term Life Insurances
			Health and Accident Insurance and Benefits
			Meals and Lodging for the Convenience of the Employer
			Employee Educational Assistance
			Dependent Care Benefits
			No-Additional-Cost Services
			Qualified Employee Discounts
			Working Condition Fringe Benefits
			De Minimis Fringe Benefits
			Qualified Transportation Fringe
			Qualified Moving Expense Reimbursement
			Cafeteria Plans and Flexible Spending Accounts (FSAs)
			Employee and Employer Considerations for Nontaxable Fringe Benefits
		Tax Planning with Fringe Benefits
		Fringe Benefits Summary
	Conclusion
13 Retirement Savings and Deferred Compensation
	Employer-Provided Qualified Plans
	Defined Benefit Plans
		Vesting
		Distributions
		Nontax Considerations
	Defined Contribution Plans
		Employer Matching
		Contribution Limits
		Vesting
		After-Tax Cost of Contributions
		Distributions
		After-Tax Rates of Return
		Roth 401(k) Plans
		Comparing Traditional Defined Contribution Plans and Roth 401(k) Plans
	Nonqualified Deferred Compensation
		Nonqualified Plans vs. Qualified Defined Contribution Plans
		Employee Considerations
		Employer Considerations
	Individually Managed Qualified Retirement Plans
	Individual Retirement Accounts
		Traditional IRAs
			Contributions
			Nondeductible Contributions
			Distributions
		Roth IRAs
			Contributions
			Distributions
		Rollover from Traditional to Roth IRA
		Comparing Traditional and Roth IRAs
	Self-Employed Retirement Accounts
		Simplified Employee Pension (SEP) IRA
			Nontax Considerations
		Individual 401(k)s
			Nontax Considerations
	Saver’s Credit
	Conclusion
14 Tax Consequences of Home Ownership
	Personal Use of the Home
		Exclusion of Gain on Sale of Personal Residence
			Requirements
			Exclusion of Gain from Debt Forgiveness on Foreclosure of Home Mortgage
		Interest Expense on Home-Related Debt
			Limitations on Home-Related Debt
			Mortgage Insurance
			Points
		Real Property Taxes
	Rental Use of the Home
		Residence with Minimal Rental Use
		Residence with Significant Rental Use (Vacation Home)
		Nonresidence (Rental Property)
			Losses on Rental Property
	Business Use of the Home
		Direct vs. Indirect Expenses
		Limitations on Deductibility of Expenses
	Conclusion
	Appendix A: Sample Settlement Statement for the Jeffersons
	Appendix B: Flowchart of Tax Rules Relating to Home Used for Rental Purposes
15 Entities Overview
	Entity Legal Classification and Nontax Characteristics
		Legal Classification
		Nontax Characteristics
			Responsibility for Liabilities
			Rights, Responsibilities, and Legal Arrangement among Owners
	Entity Tax Classification
	Entity Tax Characteristics
		Double Taxation
			After-Tax Earnings Distributed
			Some or All After-Tax Earnings Retained
			Mitigating the Double Tax
		Deductibility of Entity Losses
	Other Tax Characteristics
		Converting to Other Entity Types
	Conclusion
16 Corporate Operations
	Corporate Taxable Income Formula
		Accounting Periods and Methods
	Computing Corporate Regular Taxable Income
		Book–Tax Differences
			Common Permanent Book–Tax Differences
			Common Temporary Book–Tax Differences
		Corporate-Specific Deductions and Associated Book–Tax Differences
			Stock Options
			Net Capital Losses
			Net Operating Losses
			Charitable Contributions
			Dividends Received Deduction
		Taxable Income Summary
		Regular Tax Liability
			Controlled Groups
	Compliance
		Consolidated Tax Returns
		Corporate Tax Return Due Dates and Estimated Taxes
	Corporate Alternative Minimum Tax
		Preference Items
		Adjustments
			Depreciation Adjustment
			Gain or Loss on Disposition of Depreciable Assets
			ACE Adjustment
			AML NOL Deduction (ATNOLD)
			Alternative Minimum Taxable Income (AMTI)
			AMT Exemption
			Alternative Minimum Tax
	Conclusion
17 Accounting for Income Taxes
	Objectives of Accounting for Income Taxes and the Income Tax Provision Process
	Why Is Accounting for Income Taxes So Complex?
		Objectives of ASC 740
		The Income Tax Provision Process
	Calculating the Current and Deferred Income Tax Expense or Benefit Components of a Company’s Income Tax Provision
		Step 1: Adjust Pretax Net Income for All Permanent Differences
		Step 2: Identify All Temporary Differences and Tax Carryforward Amounts
			Revenues or Gains That Are Taxable after They Are Recognized in Financial Income
			Expenses or Losses That Are Deductible after They Are Recognized in Financial Income
			Revenues or Gains That Are Taxable before They Are Recognized in Financial Income
			Expenses or Losses That Are Deductible before They Are Recognized in Financial Income
		Identifying Taxable and Deductible Temporary Differences
			Taxable Temporary Difference
			Deductible Temporary Difference
		Step 3: Compute the Current Income Tax Expense or Benefit
		Step 4: Determine the Ending Balances in the Balance Sheet Deferred Tax Asset and Liability Accounts
	Determining Whether a Valuation Allowance Is Needed
		Step 5: Evaluate the Need for a Valuation Allowance for Gross Deferred Tax Assets
		Determining the Need for a Valuation Allowance
			Future Reversals of Existing Taxable Temporary Differences
			Taxable Income in Prior Carryback Year(s)
			Expected Future Taxable Income Exclusive of Reversing Temporary Differences and Carryforwards
			Tax Planning Strategies
			Negative Evidence that a Valuation Allowance Is Needed
		Step 6: Calculate the Deferred Income Tax Expense or Benefit
	Accounting for Uncertainty in Income Tax Positions
		Application of ASC 740 to Uncertain Tax Positions
			Step 1: Recognition
			Step 2: Measurement
		Subsequent Events
		Interest and Penalties
		Disclosures of Uncertain Tax Positions
		Schedule UTP (Uncertain Tax Position Statement)
	Financial Statement Disclosure and the Computation of a Corporation’s Effective Tax Rate
		Balance Sheet Classification
		Income Tax Footnote Disclosure
			Computation and Reconciliation of the Income Tax Provision with a Company’s Hypothetical Tax Provision
			Importance of a Company’s Effective Tax Rate
		Interim Period Effective Tax Rates
	Convergence of ASC 740 with International Financial Reporting Standards
	Conclusion
18 Corporate Taxation: Nonliquidating Distributions
	Taxation of Property Distributions
	Determining the Dividend Amount From Earnings and Profits
		Overview
		Dividends Defined
		Computing Earnings and Profits
			Nontaxable Income Included in E&P
			Deductible Expenses That Do Not Reduce E&P
			Nondeductible Expenses That Reduce E&P
			Timing Items Requiring Separate Accounting Methods for E&P Purposes
		Ordering of E&P Distributions
			Positive Current E&P and Positive Accumulated E&P
			Positive Current E&P and Negative Accumulated E&P
			Negative Current E&P and Positive Accumulated E&P
			Negative Current E&P and Negative Accumulated E&P
		Distributions of Noncash Property to Shareholders
			Corporate Tax Consequences of Noncash Distributions
			Liabilities
			Effect of Noncash Property Distributions on E&P
	Constructive Dividends
		The Motivation to Pay Dividends
	Stock Dividends
		Tax Consequences to Shareholders Receiving a Stock Dividend
			Nontaxable Stock Dividends
			Taxable Stock Dividends
	Stock Redemptions
		The Form of a Stock Redemption
		Redemptions That Reduce a Shareholder’s Ownership Interest
			Redemptions That Are Substantially Disproportionate
			Complete Redemption of the Stock Owned by a Shareholder
			Redemptions That Are Not Essentially Equivalent to a Dividend
		Tax Consequences to the Distributing Corporation
		Trends in Stock Redemptions by Publicly Traded Corporations
	Partial Liquidations
	Conclusion
19 Corporate Formation, Reorganization, and Liquidation
	Review the Taxation of Property Dispositions
	Tax-Deferred Transfers of Property to a Corporation
		Transactions Subject to Tax Deferral
		Meeting the Section 351 Tax Deferral Requirements
			Section 351 Applies Only to the Transfer of Property to the Corporation
			The Property Transferred to the Corporation Must Be Exchanged for Stock of the Corporation
			The Transferor(s) of Property to the Corporation Must Be in Control, in the Aggregate, of the Corporation Immediately after the Transfer
		Tax Consequences to Shareholders
		Tax Consequences When a Shareholder Receives Boot
		Assumption of Shareholder Liabilities by the Corporation
			Tax-Avoidance Transactions
			Liabilities in Excess of Basis
		Tax Consequences to the Transferee Corporation
		Other Issues Related to Incorporating an Ongoing Business
			Depreciable Assets Transferred to a Corporation
		Contributions to Capital
		Section 1244 Stock
	Taxable and Tax-Deferred Corporate Acquisitions
		The Acquisition Tax Model
	Tax Consequences to a Corporate Acquisition
		Taxable Acquisitions
		Tax-Deferred Acquisitions
		Judicial Principles That Underlie All Tax-Deferred Reorganizations
			Continuity of Interest (COI)
			Continuity of Business Enterprise (COBE)
			Business Purpose Test
		Type A Asset Acquisitions
			Forward Triangular Type A Merger
			Reverse Triangular Type A Merger
		Type B Stock-for-Stock Reorganizations
	Complete Liquidation of a Corporation
		Tax Consequences to the Shareholders in a Complete Liquidation
		Tax Consequences to the Liquidating Corporation in a Complete Liquidation
			Taxable Liquidating Distributions
			Nontaxable Liquidating Distributions
	Conclusion
20 Forming and Operating Partnerships
	Flow-through Entities Overview
		Aggregate and Entity Concepts
	Partnership Formations and Acquisitions of Partnership Interests
		Acquiring Partnership Interests When Partnerships Are Formed
			Contributions of Property
			Contribution of Services
			Organization, Start-up, and Syndication Costs
		Acquisitions of Partnership Interests
	Partnership Accounting Periods, Methods, and Tax Elections
		Tax Elections
		Accounting Periods
			Required Year-Ends
		Accounting Methods
	Reporting the Results of Partnership Operations
		Ordinary Business Income (Loss) and Separately Stated Items
			Guaranteed Payments
			Self-Employment Tax
		Net Investment Income Tax
		Allocating Partners’ Shares of Income and Loss
		Partnership Compliance Issues
	Partner’s Adjusted Tax Basis in Partnership Interest
		Cash Distributions in Operating Partnerships
	Loss Limitations
		Tax Basis Limitation
		At-Risk Limitation
		Passive Activity Loss Limitation
			Passive Activity Defined
			Income and Loss Baskets
	Conclusion
21 Dispositions of Partnership Interests and Partnership Distributions
	Basics of Sales of Partnership Interests
		Seller Issues
			Hot Assets
		Buyer and Partnership Issues
			Varying Interest Rule
	Basics of Partnership Distributions
		Operating Distributions
			Operating Distributions of Money Only
			Operating Distributions That Include Property Other Than Money
		Liquidating Distributions
			Gain or Loss Recognition in Liquidating Distributions
			Basis in Distributed Property
			Partner’s Outside Basis Is Greater Than Inside Basis of Distributed Assets
			Partner’s Outside Basis Is Less Than Inside Basis of Distributed Assets
			Character and Holding Period of Distributed Assets
	Disproportionate Distributions
	Special Basis Adjustments
		Special Basis Adjustments for Dispositions
		Special Basis Adjustments for Distributions
	Conclusion
22 S Corporations
	S Corporation Elections
		Formations
		S Corporation Qualification Requirements
		S Corporation Election
	S Corporation Terminations
		Voluntary Terminations
		Involuntary Terminations
			Failure to Meet Requirements
			Excess of Passive Investment Income
		Short Tax Years
		S Corporation Reelections
	Operating Issues
		Accounting Methods and Periods
		Income and Loss Allocations
		Separately Stated Items
		Shareholder’s Basis
			Initial Basis
			Annual Basis Adjustments
		Loss Limitations
			Tax Basis Limitation
			At-Risk Limitation
			Post-Termination Transition Period Loss Limitation
			Passive Activity Loss Limitation
		Self-Employment Income
		3.8% Net Investment Income
		Fringe Benefits
	Distributions
		Operating Distributions
			S Corporation with No C Corporation Accumulated Earnings and Profits
			S Corporations with C Corporation Accumulated Earnings and Profits
			Property Distributions
			Post-Termination Transition Period Distributions
		Liquidating Distributions
	S Corporation Taxes and Filing Requirements
		Built-in Gains Tax
		Excess Net Passive Income Tax
		LIFO Recapture Tax
		Estimated Taxes
		Filing Requirements
	Comparing C and S Corporations and Partnerships
	Conclusion
23 State and Local Taxes
	State and Local Taxes
	Sales and Use Taxes
		Sales and Use Tax Nexus
		Sales and Use Tax Liability
	Income Taxes
		Income Tax Nexus
			Public Law 86-272
			Income Tax Nexus for Other Business Types or Nonincome- Based Taxes
			Economic Income Tax Nexus
		Entities Included on Income Tax Return
			Separate Tax Returns
			Unitary Tax Returns
		State Taxable Income
		Dividing State Tax Base among States
			Business Income
			Nonbusiness Income
		State Income Tax Liability
		Non (Net) Income-Based Taxes
	Conclusion
24 The U.S. Taxation of Multinational Transactions
	The U.S. Framework for Taxing Multinational Transactions
		U.S. Taxation of a Nonresident
		Definition of a Resident for U.S. Tax Purposes
		Overview of the U.S. Foreign Tax Credit System
	U.S. Source Rules for Gross Income and Deductions
		Source of Income Rules
			Interest
			Dividends
			Compensation for Services
			Rents and Royalties
			Gain or Loss from Sale of Real Property
			Gain or Loss from Sale of Purchased Personal Property
			Inventory Produced within the United States and Sold Outside the United States (§863 Sales)
		Source of Deduction Rules
			General Principles of Allocation and Apportionment
			Special Apportionment Rules
	Treaties
	Foreign Tax Credits
		FTC Limitation Categories of Taxable Income
			Passive Category Income
			General Category Income
		Creditable Foreign Taxes
			Direct Taxes
			In Lieu of Taxes
			Indirect (Deemed Paid) Taxes
	Planning for International Operations
		Check-the-Box Hybrid Entities
	U.S. Anti-Deferral Rules
		Definition of a Controlled Foreign Corporation
		Definition of Subpart F Income
		Planning to Avoid Subpart F Income
	Proposals for Change
	Conclusion
25 Transfer Taxes and Wealth Planning
	Introduction to Federal Transfer Taxes
		Beginnings
		Common Features of Integrated Transfer Taxes
	The Federal Gift Tax
		Transfers Subject to Gift Tax
			Valuation
			The Annual Exclusion
		Taxable Gifts
			Gift-Splitting Election
			Marital Deduction
			Charitable Deduction
		Computation of the Gift Tax
			Prior Taxable Gifts
			Unified Credit
	The Federal Estate Tax
		The Gross Estate
			Specific Inclusions
			Valuation
			Gross Estate Summary
		The Taxable Estate
			Administrative Expenses, Debts, Losses, and State Death Taxes
			Marital and Charitable Deductions
		Computation of the Estate Tax
			Adjusted Taxable Gifts
			Unified Credit
	Wealth Planning Concepts
		The Generation-Skipping Tax
		Income Tax Considerations
		Transfer Tax Planning Techniques
			Serial Gifts
			Bypass Provisions
			The Step-Up in Tax Basis
		Integrated Wealth Plans
	Conclusion
Appendix A Tax Forms
Appendix B Tax Terms Glossary
Appendix C Comprehensive Tax Return Problems
Appendix D Code Index
Subject Index