Solution manual for Pearson Federal Taxation 2018 Individuals 31st Edition by Thomas Pope 0134532600 9780134532608

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• ISBN 10:0134532600 

• ISBN 13:9780134532608 

• Author:Thomas Pop 

 Assists readers in mastering the principles of taxation with the latest tax regulations

The Rupert/Pope/Anderson series is unsurpassed in blending technical aspects of the most recent federal taxation mandates with maximum readability and relevance for readers. Containing strong pedagogical tools that enable readers to apply tax principles within the text to real-life situations, and tax information from 2016 and early 2017,Pearson’s Federal Taxation 2018 Individuals, 31st Edition provides a better teaching and learning experience for all.

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Pearson Federal Taxation 2018 Individuals 31st  Table of contents:

Chapter 1 An Introduction to Taxation
Learning Objectives
Chapter Outline
History of Taxation in the United States
Objective 1
Early Periods
Revenue Acts From 1913 to the Present
Revenue Sources
Types of Tax Rate Structures
Objective 2
The Structure of Individual Income Tax Rates
The Structure of Corporate Tax Rates
Marginal, Average, and Effective Tax Rates for Taxpayers
Determination of Taxable Income and Tax Due
Other Types of Taxes
Objective 3
State and Local Income and Franchise Taxes
Wealth Transfer Taxes
The Federal Gift Tax
The Federal Estate Tax
Other Types of Taxes
Criteria for a Tax Structure
Objective 4
Equity
Certainty
Convenience
Economy
Simplicity
Objectives of the Federal Income Tax Law
Economic Objectives
Encouragement of Certain Activities and Industries
Social Objectives
Income Tax Reform Proposals
Entities in the Federal Income Tax System
Objective 5
Taxpaying Entities
Individuals
C Corporations
Taxation of C Corporations
Double Taxation of C Corporation Earnings
Flow-Through Entities
Partnerships
S Corporations
Limited Liability Companies
Limited Liability Partnerships
Other entities
Trusts
Tax Law Sources
Objective 6
Enactment of a Tax Law
Objective 7
Steps in the Legislative Process
Administration of the Tax Law and Tax Practice Issues
Objective 8
Organization of the Internal Revenue Service
Enforcement Procedures
Selection of Returns for Audit
Audit Procedures
Statute of Limitations
Interest
Penalties
Administrative Appeal Procedures
Components of a Tax Practice
Objective 9
Tax Compliance and Procedure
Tax Research
Tax Planning and Consulting
Financial Planning
Computer Applications in Tax Practice
Objective 10
Tax Return Preparation
Tax Planning Applications
Tax Research Applications
Problem Materials
Discussion Questions
Problems
Tax Strategy Problem
Case Study Problem
Tax Research Problem
Chapter 2 Determination of Tax
Learning Objectives
Chapter Outline
Formula for Individual Income Tax
Objective 1
Basic Formula
Definitions
Income
Exclusion
Gross Income
Deductions for Adjusted Gross Income
Adjusted Gross Income
Deductions from Adjusted Gross Income
Itemized Deductions and the Standard Deduction
Personal and Dependency Exemptions
Taxable Income
Tax Rates and Gross Tax
Credits and Prepayments
Tax Formula Illustrated
Deductions From Adjusted Gross Income
Objective 2
Itemized Deductions
Deductible Items
Itemized Deduction Floors
Standard Deduction
Loss of the Standard Deduction
Limitation on the Standard Deduction
Personal Exemptions
Dependency Exemptions
Requirements for All Dependents
Identification Number
Citizenship
Joint Return
No Dependent
Additional Requirements for Qualifying Children
Relationship Test
Age Test
Abode Test
Support Test
Requirements for Other Relatives
Relationship Test
Gross Income Test
Support Test
Tie-Breaker Rules for Dependency Exemptions
Multiple Support Agreements
Parental Release
Child Credit
Determining the Amount of Tax
Objective 3
Filing Status
Joint Return
Surviving Spouse
Head of Household
Single Taxpayer
Married Filing Separately
Abandoned Spouse
Children with Unearned Income
Business Income and Business Entities
Objective 4
Treatment of Capital Gains and Losses
Objective 5
Definition of Capital Assets
Tax Treatment of Gains and Losses
Provisions Applicable to Higher-Income Taxpayers
Objective 6
Tax Planning Considerations
Objective 7
Shifting Income Between Family Members
Splitting Income
Maximizing Itemized Deductions
Filing Joint or Separate Returns
Factors to Be Considered
Innocent Spouse Provision
Separate Liability Election
Electing to Change to a Joint Return
Compliance and Procedural Considerations
Objective 8
Who Must File
Due Dates and Extensions
Use of Forms 1040, 1040EZ, and 1040A
System for Reporting Income
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problems
Chapter 3 Gross Income: Inclusions
Learning Objectives
Chapter Outline
Economic, Accounting, and Tax Concepts of Income
Objective 1
Economic Concept
Accounting Concept
Tax Concept of Income
Administrative Convenience
Wherewithal to Pay
Gross Income Defined
Form of Receipt
Indirect Economic Receipt
To Whom is Income Taxable?
Objective 2
Assignment of Income
Allocating Income Between Married People
Income of Minor Children
When is Income Taxable?
Objective 3
Cash Method
Constructive Receipt
Exceptions
Accrual Method
Prepaid Income
Hybrid Method
Items of Gross Income: Sec. 61(a)
Objective 4
Compensation
Business Income
Gains from Dealings in Property
Interest
Tax-Exempt Interest
Series EE Savings Bond Exclusion
Rents and Royalties
Improvements by Lessees
Dividends
Dividends Defined
Stock Dividends
Capital Gain Dividends
Constructive Dividends
Alimony and Separate Maintenance Payments
Pensions and Annuities
Qualified Retirement Plan Annuities
Simplified Method
Plan Comparison
Advance Payments
Income From Life Insurance and Endowment Contracts
Income From Discharge of Indebtedness
Income Passed Through to Taxpayer
Other Items of Gross Income
Prizes, Awards, Gambling Winnings, and Treasure Finds
Illegal Income
Unemployment Compensation
Social Security Benefits
Married Filing Separately
Married Filing Jointly
Single Taxpayers
Insurance Proceeds and Court Awards
Recovery of Previously Deducted Amounts
Tax Benefit Rule
Claim of Right
Tax Planning Considerations
Objective 5
Shifting Income
Alimony
Prepaid Income
Taxable, Tax-Exempt, or Tax-Deferred Bonds
Reporting Savings bond Interest
Deferred Compensation Arrangements
Compliance and Procedural Considerations
Objective 6
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problems
Tax Strategy Problems
Tax Form/Return Preparation Problem
Case Study Problems
Tax Research Problem
Chapter 4 Gross Income: Exclusions
Learning Objectives
Chapter Outline
Items that are Not Income
Objective 1
Unrealized Income
Self-Help Income
Rental Value of Personal-Use Property
Selling Price of Property
Major Statutory Exclusions
Objective 2
Gifts and Inheritances
Life Insurance Proceeds
Surrender or Sale of Policy
Dividends on Life Insurance and Endowment Policies
Awards for Meritorious Achievement
Scholarships and Fellowships
Distributions from Qualified Tuition Programs
Payments for Injury and Sickness
Employee Fringe Benefits
Employer-Paid Insurance
Section 132 Fringe Benefits
Employee Awards
Meals and Lodging
Meals and Entertainment
Employee Death Benefits
Dependent Care
Adoption Expenses
Educational Assistance
Cafeteria Plans
Advantage of Fringe Benefits
Availability of Tax-Favored Fringe Benefits to Business Owners
Foreign-Earned Income Exclusion
Income from the Discharge of a Debt
Discharge in Bankruptcy and Insolvency
Student Loan Forgiveness
Home Mortgage Forgiveness
Exclusion for Gain from Small Business Stock
Other Exclusions
Tax Planning Considerations
Objective 3
Employee Fringe Benefits
Self-Help Income and Use of Personally Owned Property
Compliance and Procedural Considerations
Objective 4
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problems
Chapter 5 Property Transactions: Capital Gains and Losses
Learning Objectives
Chapter Outline
Determination of Gain or Loss
Objective 1
Realized Gain or Loss
Amount Realized
Adjusted Basis
Recovery of Basis Doctrine
Recognized Gain or Loss
Basis Considerations
Objective 2
Cost of Acquired Property
Uniform Capitalization Rules
Capitalization of Interest
Identification Problems
Property Received as a Gift: Gifts After 1921
Effect of Gift Tax on Basis
Property Received From a Decedent
Carryover Basis Rules-Special Rule for 2010
Community Property
Property Converted From Personal Use to Business Use
Allocation of Basis
Basket Purchase
Common Costs
Nontaxable Stock Dividends Received
Nontaxable Stock Rights Received
Definition of a Capital Asset
Objective 3
Influence of the Courts
Other Irc Provisions Relevant to Capital Gains and Losses
Dealers in Securities
Real Property Subdivided for Sale
Nonbusiness Bad Debt
Tax Treatment for Capital Gains and Losses of Noncorporate Taxpayers
Objective 4
Capital Gains
Net Short-Term Capital Gain
Net Long-Term Capital Gain
Lower Rates for Adjusted Net Capital Gain (ANCG)
Adjusted Net Capital Gains (ANCG)
Collectibles Gain
Sec. 1202 Gain
Capital Losses
Net Short-Term Capital Loss
Net Long-Term Capital Loss
Capital Losses Applied to Capital Gains by Groups
Tax Treatment for Net Capital Gain and Qualified Dividends
The 3.8% Net Investment Income Tax (NIIT)
Tax Treatment of Capital Gains and Losses: Corporate Taxpayers
Objective 5
Sale or Exchange
Objective 6
Worthless Securities
Securities in Affiliated Corporations
Retirement of Debt Instruments
Original Issue Discount
Market Discount Bonds Purchased After April 30, 1993
Options
Patents
Requirements for Capital Gain Treatment
Substantial Rights
Definition of a Holder
Franchises, Trademarks, and Trade Names
Lease Cancellation Payments
Payments Received by Lessor
Payments Received by Lessee
Holding Period
Objective 7
Property Received as a Gift
Property Received from a Decedent
Nontaxable Exchanges
Receipt of Nontaxable Stock Dividends and Stock Rights
Justification for Preferential Treatment of Net Capital Gains
Mobility of Capital
Mitigation of the Effects of Inflation and the Progressive Tax System
Lowers the Cost of Capital
Tax Planning Considerations
Objective 8
Selection of Property to Transfer by Gift
Selection of Property to Transfer at Time of Death
Compliance and Procedural Considerations
Objective 9
Documentation of Basis
Reporting of Capital Gains and Losses on Schedule D
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problems
Chapter 6 Deductions and Losses
Learning Objectives
Chapter Outline
Classifying Deductions as for Versus from Adjusted Gross Income (AGI)
Objective 1
Criteria for Deducting Business and Investment Expenses
Objective 2
Business or Investment Activity
Activity Engaged in for Profit
Trade or Business Versus Investment Classification
Legal and Accounting Fees
Ordinary Expense
Necessary Expense
Reasonable Expense
Expenses and Losses Incurred Directly by the Taxpayer
General Restrictions on the Deductibility of Expenses
Objective 3
Capitalization Versus Expense Deduction
General Capitalization Requirements
Election to Deduct Currently
Capitalization of Deduction Items
Expenses Related to Exempt Income
Expenditures Contrary to Public Policy
Bribes and Kickbacks
Fines and Penalties
Expenses Relating to an Illegal Activity
Other Expenditures Specifically Disallowed
Political Contributions and Lobbying Expenses
Business Investigation and Preopening Expenses
Proper Substantiation Requirement
Objective 4
When an Expense is Deductible
Objective 5
Cash Method
Prepaid Expenses
Prepaid Interest
Accrual Method
All-Events Test
Economic Performance Test
Special Disallowance Rules
Objective 6
Wash Sales
Substantially Identical Stock or Securities
Basis of Stock
Transactions between Related Parties
Related Parties Defined
Disallowed Losses
Unpaid Expenses
Hobby Losses
Deductible Expenses
Order of the Deductions
Vacation Home
Residence Defined
Allocation of Expenses
Allocation Formula
Nominal Number of Rental Days
Nominal Number of Personal Use Days
Expenses of an Office in the Home
Tax Planning Considerations
Objective 7
Hobby Losses
Unreasonable Compensation
Timing of Deductions
Compliance and Procedural Considerations
Proper Classification of Deductions
Objective 8
Proper Substantiation
Business Versus Hobby
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Required:
Comprehensive Problems
Tax Strategy Problems
Tax form/Return Preparation Problems
Case Study Problem
Tax Research Problems
Chapter 7 Itemized Deductions
Learning Objectives
Chapter Outline
Medical Expenses
Objective 1
Qualified Individuals
Taxpayer’s Dependent
Children of Divorced Parents
Qualified Medical Expenses
Diagnosis, Cure, Mitigation, Treatment, or Prevention of Disease
Range of Deductible Medical Services
Medical Procedures Affecting Any Function or Structure of the Body
Transportation Essential to Medical Care
Qualified Long-Term Care
Capital Expenditures for Medical Care
Costs of Living in Institutions
Medical Insurance Premiums
Amount and Timing of Deduction
Timing of the Payment
Limitation on Amount Deductible
Medical Insurance Reimbursements
Taxes
Objective 2
Definition of a Tax
Deductible Taxes
State and Local Income Taxes
State and Local Sales Taxes
Personal Property Taxes
Real Estate Taxes
Apportionment of Taxes
Real Property Assessments for Local Benefits
Self-Employment Tax
Nondeductible Taxes
Interest
Objective 3
Definition of Interest
Charge for Services
Bank Service Charges and Finance Charges
Classification of Interest Expense
Active Trade or Business
Passive Activity
Investment Interest
Investment Interest
Net Investment Income
Personal Interest
Qualified Residence Interest
Acquisition Indebtedness
Home Equity Indebtedness
Points Paid as Qualified Residence Interest
Qualified Residence
Student Loan Interest
Timing of The Interest Deduction
Prepaid Interest
Interest Paid with Loan Proceeds
Discounted Notes
Interest Owed to a Related Party by an Accrual Method Taxpayer
Imputed Interest
Charitable Contributions
Objective 4
Qualifying Organization
Type of Property Contributed
Contribution of Long-Term Capital Gain Property
Contribution to a Private Nonoperating Foundation
Unrelated Use Property
Certain Intangibles
Contribution of Ordinary Income Property
General Rule
Donation of Inventory by a Corporation
Contribution of Services
Deduction Limitations
Overall 50% Limitation
30% Limitation
20% Limitation on Capital Gain Property Contributed to Private Nonoperating Foundations
Contributions for Athletic Events
Applying the Deduction Limitations
Application of Carryovers
Special Rules for Charitable Contributions Made by Corporations
Pledges Made by an Accrual Method Corporation
Limitation Applicable to Corporations
Summary of Deduction Limitations
Casualty and Theft Losses
Objective 5
Miscellaneous Itemized Deductions
Objective 6
Certain Employee Expenses
Expenses to Produce Investment Income
Cost of Tax Advice
Reduction of Certain Itemized Deductions
Tax Planning Considerations
Objective 7
Medical Expense Deduction
Working with the 10% of Agi Floor
Multiple Support Agreements
Interest Expense Deduction
Deduction for Charitable Contributions
Election to Reduce the Amount of a Charitable Contribution
Donation of Appreciated Capital Gain Property
Compliance and Procedural Considerations
Objective 8
Medical Expenses
Charitable Contributions
Proper Substantiation
Documentation of Property’s FMV
Contribution of Used Motor Vehicles, Boats, and Airplanes
Taxes
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problems
Chapter 8 Losses and Bad Debts
Learning Objectives
Chapter Outline
Transactions that may result in Losses
Objective 1
Sale or Exchange of Property
Expropriated, Seized, Confiscated, or Condemned Property
Abandoned Property
Worthless Securities
Demolition of Property
Classifying the Loss on the Taxpayer’s Tax Return
Objective 2
Ordinary Versus Capital Loss
Section 1231 Property
Losses on Sec. 1244 Stock
Disallowance Possibilities
Passive Losses
Objective 3
Computation of Passive Losses and Credits
Passive Income and Losses
Carryovers
Taxable Disposition of Interest in a Passive Activity
Carryovers from a Former Passive Activity
Credits
Definition of a Passive Activity
Identification of an Activity
Material Participation
Limited Partnerships
Working Interest in an Oil and Gas Property
Taxpayers Subject to Passive Loss Rules
Closely Held C Corporations
Personal Service Corporation
Material Participation by PSCs and Closely Held C Corporations
Publicly Traded Partnerships
Real Estate Businesses
Other Rental Real Estate Activities
Active Participation
Limitation on Deduction of Rental Real Estate Loss
Casualty and Theft Losses
Objective 4
Casualty Defined
Identifiable Event
Sudden, Unexpected, or Unusual Events
Theft Defined
Deductible Amount of Casualty Loss
Measuring the Loss
Limitations on Personal-Use Property
Netting Casualty Gains and Losses on Personal-Use Property
Casualty Gains and Losses Attributable to Business and Investment Property
Timing of Casualty Loss Deduction
Theft
Insurance and Other Reimbursements
Disaster Losses
Bad Debts
Objective 5
Bona Fide Debtor-Creditor Relationship
Related-Party Transactions
Third Party Debt
Taxpayer’s Basis in the Debt
Debt Must be Worthless
Nonbusiness Bad Debts
Definition of a Nonbusiness Bad Debt
Tax Treatment
Partial Worthlessness
Business Bad Debts
Accounting for the Business Bad Debt
Recovery of Bad Debts
Deposits in Insolvent Financial Institutions
Net Operating Losses
Objective 6
Computing The Net Operating Loss for Individuals
Add Back any Nol Deduction
Add Back any Capital Loss Deduction
Add Back the Deduction for Personal Exemptions
Add Back Excess of Nonbusiness Deductions over Nonbusiness Income
Carryback and Carryover Periods
Election to Forgo Carryback Period
Loss Carryovers from Two or More Years
Recomputation of Taxable Income in The Carryover Year
Tax Planning Considerations
Objective 7
Bad Debts
Casualties
Net Operating Losses
Compliance and Procedural Considerations
Objective 8
Casualty Losses
Net Operating Losses
Worthless Securities
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problem
Chapter 9 Employee Expenses and Deferred Compensation
Learning Objectives
Chapter Outline
Classification and Limitations of Employee Expenses
Objective 1
Nature of the Employment Relationship
Employer–Employee Relationship Defined
Importance of Proper Classification
Litigation Issues and Administrative Enforcement
Limitations on Unreimbursed Employee Expenses
2% Nondeductible Floor
Exceptions to the 2% Floor
Travel Expenses
Objective 2
Deductibility of Travel Expenses
Reimbursed Expenses
Unreimbursed Expenses
Definition of Travel Expenses
General Qualification Requirements
Away-from-Tax-Home Requirement
Business Versus Pleasure
Foreign Travel
Additional Limitations on Travel Expenses
Transportation Expenses
Objective 3
Definition and Classification
Treatment of Automobile Expenses
Reimbursement of Automobile Expenses
Entertainment Expenses
Objective 4
50% Disallowance for Meal and Entertainment Expenses
Classification of Expenses
Criteria for Deduction
“Directly Related” Expenses
“Associated With” Expenses
Substantiation Requirements
Business Meals
Entertainment Facilities and Club Dues
Business Gifts
Limitations on Entertainment Tickets
Reimbursed Employee Business Expenses
Objective 5
Moving Expenses
Objective 6
Expense Classification
Definition of Moving Expenses
Direct Moving Expenses
Nondeductible Indirect Moving Expenses
Treatment of Employer Reimbursements
Education Expenses
Objective 7
Classification of Education Expenses
General Requirements for a Deduction
Office in Home Expenses
Objective 8
General Requirements for a Deduction
Deductions and Limitations
Deferred Compensation
Objective 9
Qualified Pension and Profit-Sharing Plans
Types of Plans
Pension Plans
Profit-Sharing Plans
Roth-Type Plans
Stock Bonus Plan
Qualification Requirements for a Qualified Plan
Tax Treatment to Employees and Employers
Employee Retirement Payments
Limitation on Employer Contributions
Nonqualified Plans
Distinguishing Characteristics of Nonqualified Plans
Unfunded Deferred Compensation Plans
Restricted Property Plans
Election to Be Taxed Immediately
Employee Stock Options
Incentive Stock Option Plans
Employer Requirements
Employee Requirements
Nonqualified Stock Option Plans
Readily Ascertainable Fair Market Value
No Readily Ascertainable Fair Market Value
Plans for Self-Employed Individuals
Simplified Employee Pensions (SEP IRAs)
Simple Retirement Plans
Individual Retirement Accounts (IRAs)
Traditional IRA
Roth IRA
Coverdell Education Savings Account
Health Savings Accounts
Tax Planning Considerations
Objective 10
Moving Expenses
Reimbursed Amounts
Providing Nontaxable Compensation to Employees
Rollovers to Roth IRA
Compliance and Procedural Considerations
Objective 11
Substantiating Travel and Entertainment Expenses
Reporting Employee Business Expenses
Reporting Moving Expenses
Reporting Office in Home Expenses
Qualification of Pension and Profit-Sharing Plans
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problem
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problem
Chapter 10 Depreciation, Cost Recovery, Amortization, and Depletion
Learning Objectives
Chapter Outline
Depreciation and Cost Recovery
Objective 1
General Considerations
Common Rules of All Systems
Types of Property
Capitalization Versus Expense
Conversion of Personal-Use Property
Depreciation Methods
Calculation of Depreciation
Tangible Personal Property: Classification and Recovery Rates
Section 179 Expensing Election
Bonus Depreciation
Use of the Mid-Quarter Convention
Year of Disposition
Real Property: Classification and Recovery Rates
Qualified Leasehold Improvement Property
Straight-Line (Method) Election Under MACRS
Alternative Depreciation System
MACRS Restrictions
Personal-Use Assets
Listed Property Rules
Recapture of Excess Cost Recovery Deductions
Limitations on Luxury Automobiles
Depreciating Mixed-Use Automobiles
Trucks, Vans, and Suvs
Additional Computations for Leased Vehicles
Amortization
Objective 2
Sec. 197 Intangibles
Classification and Disposition of Intangible Assets
Research and Experimental Expenditures
Computer Software
Developed Computer Software
Purchased Computer Software
Leased or Licensed Computer Software
Depletion, Intangible Drilling and Development Costs
Objective 3
Depletion Methods
Cost Depletion Method
Percentage Depletion Method
Treatment of Intangible Drilling and Development Costs
Tax Planning Considerations
Objective 4
Alternative Depreciation System Under Macrs
Use of Units of Production Depreciation
Structuring a Business Combination
Compliance and Procedural Considerations
Objective 5
Reporting Cost Recovery, Depreciation, Depletion, and Amortization Deductions
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problem
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problem
Chapter 11 Accounting Periods and Methods
Learning Objectives
Chapter Outline
Accounting Periods
Objective 1
Required Payments and Fiscal Years
Changes in the Accounting Period
Returns for Periods of Less than 12 Months
Overall Accounting Methods
Objective 2
Cash Receipts and Disbursements Method
Capitalization Requirements for Cash-Method Taxpayers
Accrual Method
All-Events Test
Economic Performance Test
Hybrid Method
Inventories
Objective 3
Determination of Inventory Cost
LIFO Method
Lower of Cost or Market Method
Cycle Inventory Valuation
Special Accounting Methods
Objective 4
Long-Term Contracts
Costs Subject to Long-Term Contract Rules
Completed Contract Method
Percentage of Completion Method
Modified Percentage of Completion Method
Look-Back Interest
Installment Sales Method
Computations Under Sec. 453
Disposition of Installment Obligations
Repossessions of Property Sold on the Installment Basis
Installment Sales for More Than $150,000
Installment Sales Between Related Persons
Deferred Payment Sales
Indeterminate Market Value
Imputed Interest
Objective 5
Imputed Interest Computation
Accrual of Interest
Gift, Shareholder, and Other Loans
Change in Accounting Methods
Objective 6
Amount of Change
Reporting the Amount of the Change
Obtaining IRS Consent
Tax Planning Considerations
Objective 7
Accounting Periods
Accounting Methods
Installment Sales
Compliance and Procedural Considerations
Objective 8
Reporting Installment Sales on Form 6252
Procedures for Changing to LIFO
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problems
Tax Form/Return Preparation Problem
Case Study Problems
Tax Research Problems
Chapter 12 Property Transactions: Nontaxable Exchanges
Learning Objectives
Chapter Outline
Like-Kind Exchanges
Objective 1
Like-Kind Property Defined
Character of the Property
Location of the Property
Property Must Be the Same Class
Property of a Like Class
Non–Like-Kind Property Exchanges
Exchange of Securities
A Direct Exchange Must Occur
Three-Party Exchanges
Nonsimultaneous Exchange
Receipt of Boot
Property Transfers Involving Liabilities
Basis of Property Received
Like-Kind Property Received
Non–Like-Kind Property Received
Exchanges Between Related Parties
Transfer of Non–Like-Kind Property
Holding Period for Property Received
Like-Kind Property
Boot
Involuntary Conversions
Objective 2
Involuntary Conversion Defined
Threat of Condemnation
Conversion Must Be Involuntary
Tax Treatment of Gain due to Involuntary Conversion into Boot
Realized Gain
Gain Recognized
Basis of Replacement Property
Severance Damages
Replacement Property
Functional-Use Test
Replacement with Like-Kind Property
Taxpayer-Use Test
Obtaining Replacement Property
Time Requirements for Replacement
Sale of Principal Residence
Objective 3
Principal Residence Defined
Sale of more than One Principal Residence within a Two-Year Period
Ownership and Use Tests
Change Due to Employment, Health, or Unforeseen Circumstances
Nonqualified use After 2008
Involuntary Conversion of a Principal Residence
Tax Planning Considerations
Objective 4
Avoiding the Like-Kind Exchange Provisions
Sale of a Principal Residence
Election Provision
Property Used as Residence and for Business
Compliance and Procedural Considerations
Objective 5
Reporting of Involuntary Conversions
Reporting of Sale or Exchange of a Principal Residence
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problem
Tax Form/Return Preparation Problems
Case Study Problem
Tax Research Problems
Chapter 13 Property Transactions: Section 1231 and Recapture
Learning Objectives
Chapter Outline
Overview of Basic Tax Treatment for Sec. 1231
Objective 1
Net Gains
Net Losses
Five-Year Lookback Rule
Tax Rate for Net Sec. 1231 Gain
Applying the Five-Year Lookback Rule
Section 1231 Property
Objective 2
Section 1231 Property Defined
Real or Depreciable Property Used in Trade or Business
Timber
Coal or Domestic Iron Ore
Livestock
Unharvested Crops and Land
Involuntary Conversions
Condemnations
Other Involuntary Conversions
Procedure for Sec. 1231 Treatment
Objective 3
Recapture Provisions of Sec. 1245
Objective 4
Purpose of Sec. 1245
Section 1245 Property
Application of Sec. 1245 to Nonresidential Real Estate
Recapture Provisions of Sec. 1250
Objective 5
Purpose of Sec. 1250
Section 1250 Property Defined
Unrecaptured Section 1250 Gain
Taxation of Gains on Sale or Exchange of Depreciable Real Property
Depreciable Real Property Placed in Service Before 1981
Depreciable Real Property Placed in Service After 1980 and Before 1987
Depreciable Real Property Placed in Service After 1986
Low-Income Housing
Additional Recapture for Corporations
Objective 6
Summary of Secs. 1231, 1245, and 1250 Gains
Recapture Provisions—Other Applications
Objective 7
Gifts of Property Subject to Recapture
Transfer of Property Subject to Recapture at Death
Charitable Contributions
Like-Kind Exchanges
Involuntary Conversions
Installment Sales
Section 179 Expensing Election
Conservation and Land Clearing Expenditures
Intangible Drilling Costs and Depletion
Gain on Sale of Depreciable Property Between Related Parties
Purpose of Sec. 1239
Related Parties
Tax Planning Considerations
Objective 8
Avoiding the Recapture Provisions
Transfer Property at Death
Compliance and Procedural Considerations
Objective 9
Reporting Sec. 1231 Gains and Losses on Form 4797
Reporting Gains Recaptured as Ordinary Income on Form 4797
Reporting Casualty or Theft Gain or Loss on Form 4684
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problem
Chapter 14 Special Tax Computation Methods, Tax Credits, and Payment of Tax
Learning Objectives
Chapter Outline
Alternative Minimum Tax
Objective 1
AMT Computation
AMT Tax Rates and Brackets
AMT Exemption Amount
AMT Tax Preference Items
AMT Adjustments
Itemized Deductions
Standard Deduction and Personal Exemptions.
Timing Differences
AMT Credits
Credits That Reduce AMT
Minimum Tax Credit (MTC)
Summary Illustration of the AMT Computation
Self-Employment Tax
Objective 2
What Constitutes Self-Employment Income
Personal and Business Tax Credits
Objective 3
Use and Importance of Tax Credits
Value of a Credit Versus a Deduction
Nonrefundable Personal Tax Credits
Child and Dependent Care Credit
Qualifying Employment-Related Expenses
Credit Rate and Amount
Other Sources of Tax Benefits for Dependent Care
Tax Credit for the Elderly and Disabled
Adoption Credit
Child Tax Credit
Higher Education Costs Tax Credits
American Opportunity Tax Credit.26
Lifetime Learning Credit
Residential Energy Credits
Residential Energy Efficient Property (REEP) Credit
Qualified Retirement Savings Contributions Credit (“Saver’s Credit”)
Foreign Tax Credit
Allowable FTC
Treatment of Unused Credits
Business Related Tax Credits
General Business Credits
Tax Credit for Rehabilitation Expenditures
Business Energy Tax Credits
Work Opportunity Credit
Employer-Provided Child Care Credit
Disabled Access Credit
Credit for Increased Research Activities
General Business Credit Overall Limitation
Refundable personal Credits
Earned Income Credit
Provisions Related to Health Insurance
Objective 4
Health Insurance Premium Assistance Credit (Also Known as Premium Tax Credit)
Shared Responsibility Payment
Payment of Taxes
Objective 5
Withholding of Taxes
Withholding Allowances and Methods
Computation of Federal Income Tax Withheld
Estimated Tax Payments
Required Estimated Tax Payments
Tax Planning Considerations
Objective 6
Avoiding the Alternative Minimum Tax
Avoiding the Underpayment Penalty for Estimated Tax
Cash-Flow Considerations
Use of General Business Tax Credits
Foreign Tax Credits and the Foreign Earned Income Exclusion
Compliance and Procedural Considerations
Objective 7
Alternative Minimum Tax (AMT) Filing Procedures
Withholdings and Estimated Tax Payments
General Business Tax Credits
Nonrefundable Personal Tax Credits
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problem
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problem
Chapter 15 Tax Research
Learning Objectives
Chapter Outline
Overview of Tax Research
Objective 1
Steps in the Tax Research Process
Objective 2
Importance of the Facts to the Tax Consequences
Objective 3
Creating a Factual Situation Favorable to the Taxpayer
The Sources of Tax Law
Objective 4
The Legislative Process
The Internal Revenue Code
Treasury Regulations
Proposed, Temporary, and Final Regulations
Interpretative and Legislative Regulations
Authoritative Weight
Citations
Administrative Pronouncements
Revenue Rulings
Revenue Procedures
Letter Rulings
Other Interpretations
Technical Advice Memoranda
Information Releases
Announcements and Notices
Judicial Decisions
Overview of the Court System
The U.S. Tax Court
Small Cases Procedure
Acquiescence Policy
Published Opinions and Citations
U.S. District Courts
U.S. Court of Federal Claims
Circuit Courts of Appeals
U.S. Supreme Court
Precedential Value of Various Decisions
Tax Court
U.S. District Court
U.S. Court of Federal Claims
Circuit Courts of Appeals
Forum Shopping
Dictum
Tax Treaties
Tax Periodicals
Tax Services
Objective 5
The Internet as a Research Tool
Objective 6
Keyword Searches
Search by Citation
Noncommercial Internet Services
Citators
Objective 7
Using the Citator
Professional Guidelines for Tax Services
Objective 8
Treasury Department Circular 230
AICPA’s Statements on Tax Standards
SSTS No. 1—Tax Return Positions
SSTS No. 2—Answers to Questions on Returns
SSTS No. 3—Certain Procedural Aspects of Preparing Returns
SSTS No. 4—Use of Estimates
SSTS No. 5—Departure from a Position Previously Concluded in an Administrative Proceeding or Court Decisions
SSTS No. 6—Knowledge of Error: Return Preparation and Administrative Proceedings
SSTS No. 7—Form and Content of Advice to Taxpayers
Sample work Papers and Client Letter
Objective 9
Problem Materials
Discussion Questions
Problems
Comprehensive Problem
Tax Strategy Problem
Case Study Problem
Tax Research Problems
Chapter 16 Corporations
Learning Objectives
Chapter Outline
Definition of a Corporation
Objective 1
Similarities and Differences between the Taxation of Corporations and Individuals
Similarities
Differences
Specific Rules Applicable to Corporations
Objective 2
Capital Gains and Losses
Corporate Capital Loss Limitations
Dividends-Received Deduction
Net Operating Losses
Charitable Contributions
Compensation Deduction Limitation for Publicly Held Corporations
U.S. Production Activities Deduction
Computation of Tax
Objective 3
Computation of Taxable Income
Computation of Regular Tax
Special Rule for Personal Service Corporations
Computation of the Corporate Alternative Minimum Tax (AMT)
Computation of AMTI
AMT Adjustments
Exception to AMT for Small Corporations
Penalty Taxes
Accumulated Earnings Tax
Personal Holding Company Tax
Computation of Personal Holding Company Tax
Computation of Tax for Controlled Groups
Brother-Sister Controlled Group
Parent-Subsidiary Controlled Groups
Combined Controlled Groups
Consolidated Returns
Tansfers of Property to Controlled Corporations
Objective 4
Section 351 Nonrecognition Requirements
Basis Considerations
Stock Received by the Transferor
Property Received by Transferee Corporation
Treatment of Liabilities
Nonrecognition of Gain
Exceptions
Corporate Capital Structure
Earnings and Profits
Objective 5
Calculation of Earnings and Profits
Current Versus Accumulated E&P
Noncash Distributions
Objective 6
Tax Consequences to the Shareholders
Tax Consequences to the Distributing Corporation
Stock Redemptions
Determining Whether a Redemption is a Dividend or Capital Gain
Substantially Disproportionate
Not Essentially Equivalent to a Dividend
Complete Termination
Corporate Distributions in Complete Liquidation
Objective 7
Tax Consequences to the Liquidating Corporation
Distribution of Assets
Sale of Assets
Limitation on Loss Recognition
Tax Attributes
Tax Consequences to the Shareholders
Section 332: Liquidation of a Subsidiary Corporation
Gain and Loss Considerations
Basis Considerations
Tax Planning Considerations
Objective 8
Capital Structure and Section 1244
Dividend Policy
Use of Losses
Charitable Contributions
Dividends-Received Deduction
Reduced Taxes on Taxpayer Stock Sales
Compliance and Procedural Considerations
Objective 9
Filing Requirements
Schedule M-1 and M-2 Reconciliations
Schedule M-3 Reconciliation
Maintenance of E&P Records
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problems
Chapter 17 Partnerships and S Corporations
Learning Objectives
Chapter Outline
Types of Pass Through Entities
Objective 1
Partnerships
S Corporations
Limited Liability Companies
Limited Liability Partnerships
Taxation of Partnerships6
Objective 2
Formation of a Partnership
Section 721: Nonrecognition Rules
Basis of a Partnership Interest
Section 752 Basis Adjustments
Negative Basis Rule
Holding Period for a Partnership Interest
Basis of Partnership Assets
Book Accounting Considerations
Organizational and Syndication Fees
Partnership Operations
Special Allocations
Allocation of Partnership Income, Deductions, Losses, and Credits to Partners
Basis Adjustments for Operating Items
Limitations on Losses and Restoration of Basis
Passive Activity Loss Limitations
Transactions Between a Partner and the Partnership
Guaranteed Payments
Partnership Distributions
Nonliquidating Distributions
Sale of a Partnership Interest
Recognition of Gain or Loss
Section 751 Ordinary Income Treatment
Other Special Treatments
Optional and Mandatory Basis Adjustments
Electing Large Partnerships
Partnership Elections
Tax Year Restrictions
Cash Method of Accounting Restrictions
Taxation of S Corporations
Objective 3
Qualification Requirements
100-Shareholder Limitation
Type of Shareholder Restrictions
Subsidiaries of S Corporations
One Class of Stock Restriction
Election Requirements
Termination Conditions
Revocation of S Corporation Status
General Effective Date
Specified Revocation Date
Involuntary and Inadvertent Terminations
Election After Termination
S Corporation Operations
Basis Adjustments to S Corporation Stock
S Corporation Losses and Limitations
Restoration of Basis
Other S Corporation Considerations
Distributions of Cash and Property to Shareholders
Tax Year Restrictions
Treatment of Fringe Benefits
Corporate Tax on Built-in Gains
Tax on Excess Net Passive Income
Sale of S Corporation Stock
Tax Planning Considerations
Objective 4
Use of Operating Losses
Income Shifting Among Family Members
Optional Basis Adjustment Election Under Sec. 754
Compliance and Procedural Considerations
Objective 5
Partnership Filing Requirements and Elections
Partnership Elections
Reporting Partnership Items on Form 1065
S Corporation Filing Requirements and Accounting Method Elections
Reporting S Corporation Items on Form 1120S
Comparison of Alternative Forms of Business Organizations
Problem Materials
Discussion Questions
Issue Identification Questions
Problems
Comprehensive Problem
Tax Strategy Problems
Tax Form/Return Preparation Problems
Case Study Problems
Tax Research Problems
Chapter 18 Taxes and Investment Planning
Learning Objectives
Chapter Outline
Investment Models
Objective 1
The Current Model
Investment with No Taxation
The Current Model
Changes to Assumptions
The Deferred Model
Annualized ATROR
Capital Assets
Comparing Current and Deferred Models
The Exempt Model
The Pension Model
Comparing Exempt and Pension Models
Deductible IRA Versus Roth IRA
Multiperiod Strategies
Summary and Comparison of Basic Investment Models
Other Applications of Investment Models
Objective 2
Flow-Through Entity Versus C Corporation
The Flow-Through Model
The C Corporation Model
Comparing the Flow-Through and C Corporation Models
Current Salary Versus Deferred Compensation
The Employee’s Point of View
The Employer’s Point of View
Comparing the Employee’s and Employer’s Views
Summary
Implicit Taxes and Clienteles
Objective 3
Problem Materials
Discussion Questions
Problems
2016 Tax Tables and Rate Schedules 2017 Withholding Tables (Partial)
Appendix A Tax Research Working Paper File
Tax Research File
Determine the Facts
Identify the Issues
Locate Applicable Authorities
Evaluate Authorities
Analyze the Facts in Terms of Applicable Authorities
Communicate Conclusions and Recommendations to Others
Appendix B Tax Forms
Facts for Sole Proprietorship (Schedule C)
Appendix C MACRS Tables
Appendix D Glossary
Appendix E AICPA Statements on Standards for Tax Services Nos. 1–7
Preface
History
Ongoing Process
Statement on Standards for Tax Services No. 1, Tax Return Positions
Introduction
Statement
Explanation
Statement on Standards for Tax Services No. 2, Answers to Questions on Returns
Introduction
Statement
Explanation
Statement on Standards for Tax Services No. 3, Certain Procedural Aspects of Preparing Returns
Introduction
Statement
Explanation
Statement on Standards for Tax Services No. 4, Use of Estimates
Introduction
Statement
Explanation
Statement on Standards for Tax Services No. 5, Departure from a Position Previously Concluded in an Administrative Proceeding or Court Decision
Introduction
Statement
Explanation
Statement on Standards for Tax Services No. 6, Knowledge of Error: Return Preparation and Administrative Proceedings
Introduction
Statement
Explanation
Statement on Standards for Tax Services No. 7, Form and Content of Advice to Taxpayers
Introduction
Statement
Explanation
Appendix F Index of Code Sections
Appendix G Index of Treasury Regulations
Appendix H Index of Government Promulgations
Appendix I Index of Court Cases
Appendix J Subject Index
2017 Tax Rate SchedulesIndividual Taxpayers

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