Taxation for Business Entities, with eBook Access Code

A Practical Approach, 2027 Edition

AvGregory A. Carnes,Suzanne Youngberg

Häftad, Engelska, 2026

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Utgivningsdatum:2026-09-23
Format:Häftad
Språk:Engelska
Antal sidor:1 040
Upplaga:2
Förlag:John Wiley & Sons Inc
ISBN:9781394448487

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Finansiering inom Ekonomi och Ledarskap
Bolagsskatt inom Juridik

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Table of ContentsDEDICATION IIIBRIEF CONTENTS VLEARNING THE BIG PICTURE OF TAX TO BE A VALUEDPROFESSIONAL VIWHAT ARE OUR STORIES? VIIWHAT MAKES OUR APPROACH TO LEARNING TAXDISTINCTIVE? IXASSESSMENT XIIICONNECTING TO THE PROFESSION XVAN INTERACTIVE, MULTIMEDIA LEARNINGEXPERIENCE XVIIPREPARING FOR THE CPA EXAM XVIIIFOR INSTRUCTORS XIXACKNOWLEDGMENTS XXTABLE OF CONTENTS XXIPart I Introduction to Business Entities1 Basics of Business EntityTaxation 1-11.1 Basics of Business Entity Taxation 1-6Business Lifecycle 1-6Legal Forms of Business 1-8Tax Classifications for Businesses 1-91.2 Tax Compliance for Business Entities 1-10Filing Requirements 1-10Taxpayer Penalties 1-121.3 Review of Fundamentals of PropertyTransactions 1-19Gains and Losses from Sales andDispositions 1-19Classification of Assets 1-31Spotlight on the Law: Classification of an Asset: Sell Now orLater? 1-33Holding Period 1-351.4 Review of Section 1231 Assets 1-37Netting Section 1231 Gains and Losses 1-38Depreciation Recapture Rules 1-411.5 Review of Qualified Business IncomeDeduction 1-58Qualified Business Income 1-58Rental Real Estate 1-59Determining the Qualified Business IncomeDeduction (Steps 1–5) 1-59Determining the Qualified Business IncomeDeduction (Steps 6–7) 1-64Determining the Qualified Business IncomeDeduction (Step 8) 1-66Minimum QBI Deduction 1-67Advanced Topics—Drilling Down 1-682 Taxation of Business Entities:Strategies and Planning 2-12.1 The Basics of Tax Planning 2-3Tax Planning: The Big Picture 2-3Tax Planning Opportunities 2-62.2 Tax Avoidance vs. Tax Evasion 2-12Tax Evasion 2-13Spotlight on the Law: Is the Tax LawUnconstitutional? 2-15Tax Ethics 2-152.3 Tax Rules vs. GAAP 2-172.4 Tax Professional Responsibilities 2-19Circular 230 2-19Statements on Standards for Tax Services (SSTS) 2-222.5 Professional Taxation as a Career 2-24The Role of a Tax Professional 2-25Characteristics of Successful Tax Professionals 2-25Artificial Intelligence in Taxation 2-26Part II Taxation of Corporations3 Fundamentals of CorporateTaxation 3-13.1 Taxation of Corporate Formations 3-5Section 351 Requirements 3-5Receipt of Boot 3-8Basis Issues 3-9Debt Relief 3-12Holding Period Rules 3-14Capital Contributed, No Stock Received 3-163.2 Taxation of Costs Incident to Formation 3-17Organizational Expenses 3-18Start-Up Costs 3-19Syndication Costs 3-19Spotlight on the Law: When to Capitalize OrganizationalExpenses 3-213.3 Corporate Taxable Income 3-22Corporate Income Tax Formula 3-22Corporate Deductions 3-243.4 Other Corporate Tax Issues 3-37Capital Gains and Losses 3-38Accounting Methods and Periods 3-39Reconciliation of Retained Earnings 3-51Passive Loss Rules 3-52Corporate Alternative Minimum Tax 3-533.5 Penalty Taxes 3-55Accumulated Earnings Tax 3-56Computing the Accumulated Earnings Tax(AET) 3-57Personal Holding Company (PHC) Tax 3-603.6 Business Tax Credits 3-64Foreign Tax Credit 3-64General Business Credit 3-65Business Investment Credits 3-724 Corporate Taxation:Distributions, Redemptions, andLiquidations 4-14.1 Distributions Taxed as Dividends 4-4Dividend Rules for Shareholders 4-4Stock Dividends 4-8Constructive Dividends 4-104.2 Earnings & Profits 4-12Earnings & Profits Computation 4-12Using E&P to Determine the Amount ofDividends 4-154.3 Property Distributions 4-20Property Distributions—Corporate TaxConsequences 4-20Property Distributions—Shareholder TaxConsequences 4-22Property Distributions—Liability Greater thanFMV 4-244.4 Stock Redemptions 4-26Redemption Consequences vs. DividendConsequences 4-27Qualified Redemptions 4-28Spotlight on the Law: Which Is Better—Qualified StockRedemption or Dividend? It Depends! 4-31Advanced Topic—Drilling Down 4-34Tax Consequences to Corporations 4-36Partial Liquidations 4-38Advanced Topic—Drilling Down 4-394.5 Corporate Liquidations 4-42Tax Effects for Shareholders 4-42Tax Effects for Corporations 4-43Limitations on a Corporation’s LossRecognition 4-44Parent–Subsidiary Liquidations 4-485 Corporate Taxation:Related Corporations andReorganizations 5-15.1 Controlled Groups 5-4Limitations on Controlled Groups 5-4Other Characteristics of Controlled Groups 5-5Parent-Subsidiary (P-S) Controlled Groups 5-5Brother-Sister (B-S) Controlled Groups 5-95.2 Affiliated Groups and Consolidated Returns 5-14Definition of Affiliated Groups 5-14The Consolidation Process 5-19Advantages and Disadvantages of Electingto Consolidate 5-21Computing Consolidated Taxable Income 5-24Stock Basis of Subsidiary 5-275.3 Corporate Reorganizations 5-30Types of Reorganizations 5-31Spotlight on the Law: Friendly Fire or HostileTakeover? 5-32Types of Qualified (Tax-Deferred)Reorganizations 5-32Judicial Doctrines 5-38Tax Consequences of QualifiedReorganizations 5-395.4 Preservation of Tax Attributes 5-44Earnings & Profits Limitation 5-45NOL Limitations 5-46Part III Taxation of Flow-Through Entities6 Partnership Taxation: Formation,Basis, and Income 6-16.1 Definitions Related to Partnerships 6-4Characteristics of Partnerships 6-4Limited Liability Companies 6-4Check-the-Box Regulations 6-56.2 Taxation of Partnership Formations 6-8 Carnes_FM.indd 22 24-04-2026 11:15:04TABLE OF CONTENTS xxiiiQualifications to Defer Gains and Losses 6-8Receipt of Boot 6-9Receipt of a Profits Interest 6-10Basis 6-11Holding Period and Other Tax Characteristics 6-116.3 Impact of Partnership Debt on Partner’s Basis inPartnership Interest 6-14Transactions that Affect Debt Basis 6-14Allocating Recourse Debt and NonrecourseDebt 6-16Temporary Benefit of Debt Basis 6-176.4 Taxation of Partnership Income and GuaranteedPayments 6-19Timing of Income to Partners 6-19Guaranteed Payments 6-20Spotlight on the Law: Guaranteed Payments in Relation tothe QBI Deduction 6-22Fringe Benefits for Partners 6-23Character of Partnership Tax Items 6-23Basis in Partnership Interest and CapitalAccount 6-286.5 Use of Partnership Losses 6-32Basis Hurdle 6-32At-Risk Hurdle 6-32Passive Loss Hurdle 6-33Combining the Three Hurdles: Basis, At-Risk, andPassive Loss 6-36Excess Business Losses 6-386.6 Permitted Tax Years for Partnerships 6-39Required Tax Year 6-40Exceptions to Required Tax Year 6-42Advanced Topic—Drilling Down 6-436.7 Related-Party Rules 6-45Disallowance of Related-Party Losses 6-46Evaluating Related-Party Transactions 6-46Preservation of Unrealized Ordinary Income 6-49Payments to a Partner 6-507 Partnership Taxation: Distributions,Sales, and Advanced Topics 7-17.1 Built-In Gains and Losses 7-5Tax Consequences of Built-In Gains and Losses 7-5Tax Reporting of Built-In Gains and Losses 7-7Character of Gain or Loss on Sale of CertainContributed Assets 7-8Combining the BIG/BIL Rule with the ContributedAsset Rules 7-97.2 Distributions from a Partnership 7-13Tax Consequences to Partnerships forDistributions 7-13Ordering Rules for Partnership Distributions 7-14Tax Consequences to Partners for CurrentDistributions 7-15Tax Consequences to Partners for LiquidatingDistributions 7-17Holding Period Rules for PartnershipDistributions 7-20Character of Gain or Loss for Distributed Assets 7-21Spotlight on the Law: The Flexibility of Partnerships 7-227.3 Retirement Distributions 7-24Section 736(a) vs. Section 736(b) Payments 7-24Evaluating Retirement Distributions 7-25Tax Consequences of Section 736(a) and Section736(b) Payments 7-277.4 Sale of a Partnership Interest 7-30Assets that Affect the Character of Gain/Loss fromSale of a Partnership Interest 7-31Partnerʼs Gain or Loss on Sale of PartnershipInterest 7-32Other Dispositions of Partnership Interests 7-357.5 Advanced Topic (Drilling Down)—DisproportionateDistributions 7-38Hot Assets for Partnership Distributions 7-38Testing to Determine if the Distribution IsProportionate 7-39Tax Consequences of a DisproportionateDistribution 7-40Comparing a Proportionate and DisproportionateDistribution 7-427.6 Advanced Topic (Drilling Down)—OptionalAdjustment to Basis of Partnership Assets (Section754 Elections) 7-44Section 754 Election 7-44Section 754 and Sales of Partnership Interests 7-45Section 754 and Partnership Distributions 7-48Substantial Built-In Losses 7-50Allocation of Basis Adjustments 7-517.7 Advanced Topic (Drilling Down)—Distributions ofBuilt-In Gain Property 7-57Distribution of Built-In Gain Property 7-57Distribution of Other Property to BIG Partner 7-588 Taxation of S Corporations 8-18.1 Eligibility Rules and ShareholderRequirements 8-4Eligibility Rules 8-4Shareholder and Other Requirements 8-58.2 Election Requirements and Terminations 8-11Election Requirements 8-11Termination of the S Election 8-168.3 Taxation of S Corporation Income 8-18Timing of Income to Shareholders 8-18Amount of Tax Items Reported toShareholders 8-18Character of S Corporation Tax Items 8-19Reasonable Compensation 8-2424Carnes_FM.indd 23 24-04-2026 11:15:04xxiv TABLE OF CONTENTS8.4 Shareholder’s Basis in S Corporation Stock andLoss Limitations 8-26Order of Adjustments to Stock Basis 8-26Debt Basis 8-28Spotlight on the Law: Is Gain Recognized When a Loan IsRepaid to a Shareholder? 8-29At-Risk Basis and Passive Losses 8-29Excess Business Losses 8-30Advanced Topic—Drilling Down 8-308.5 Taxation of S Corporation Distributions 8-33Tax Consequences of Distributions for theCorporation 8-33Tax Consequences of Distributions for theShareholder 8-37AAA Bypass Election 8-41Post-Termination Transition Period 8-428.6 S Corporation Taxes 8-45Built-In Gains Tax 8-45Net Passive Investment Income Tax 8-51LIFO Recapture Tax 8-52Part IV Choice of Business Entity9 Choice of Business Entity 9-19.1 Business Structures 9-5Legal Forms of Business 9-6Tax Classifications for Businesses 9-79.2 Characteristics of Tax Entities 9-13Ability to Raise Capital 9-14Limited Liability 9-15Double Taxation of Income 9-16Retaining Income at Lower CurrentTax Cost 9-17Entity Formation 9-18Taxation of Distributions: Gain to Owner andEntity 9-19Ownerʼs Basis for Entity-Level Debt 9-21Taxation of Fringe Benefits 9-23Application of Passive Loss Rules 9-25Alternative Minimum Tax 9-26Eligibility for QBI Deduction 9-269.3 Comparison of Partnerships/Limited LiabilityCompanies and S Corporations 9-28Similarities between Tax Laws for Partnerships/LLCsand S Corporations 9-28Differences between Tax Laws for Partnerships/LLCsand S Corporations 9-29Spotlight on the Law: S Corporations and Self-EmploymentTax 9-319.4 Dispositions of Ownership Interests andConversions to Other Entity Types 9-35Sale of an Ownership Interest 9-36Liquidation of an Ownership Interest 9-39Converting from One Entity Form to Another EntityForm 9-45Part V Special Topics10 Taxes on the FinancialStatements 10-110.1 Basics of Accounting for Income Taxes 10-5Book-Tax Differences 10-6GAAP Rules (ASC 740) 10-1210.2 Determining the Income Tax Provision 10-16Identify Permanent and Temporary Differences andCarryovers (LO2 Step 1) 10-19Calculate the Current Income Tax Expense or Benefit(LO2 Step 2) 10-24Determine the Deferred Income Tax Expense orBenefit (LO2 Step 3) 10-25Evaluate the Need for a Valuation Allowance (LO2Step 4) 10-36Assess the Need of a Reserve for Uncertain TaxPositions (LO2 Step 5) 10-3910.3 Tax Disclosures in the Financial Statements 10-42Balance Sheet 10-42Income Statement 10-43Footnotes 10-43Spotlight on the Law: Are Investors Concerned aboutTransparency in Tax Footnotes? 10-4610.4 Disclosures in the Tax Return 10-47Schedule M-1 Items 10-47Schedule M-3 10-5010.5 Special Issues 10-50Different Taxes and Taxing Jurisdictions 10-51Different Timing for Income Tax Provision vs. TaxReturn Preparation 10-5211 Income Taxationof Trusts and Estates 11-111.1 Overview of Income Taxation of Trusts andEstates 11-5Trust 11-5Components of a Trust 11-6Operating Rules for Trusts 11-8Estates 11-8Spotlight on the Law: What Happens if You Die without aWill? 11-9Probate Estate vs. Gross Estate 11-911.2 Fiduciary Accounting 11-11Structure of a Trust 11-12UPAIA Provisions 11-1311.3 Taxable Income for Trusts and Estates 11-21Key Concepts for Computing Taxable Income 11-23Income 11-23Deductions and Credits Similar toIndividuals 11-26Deduction Rules That Differ from Those forIndividuals 11-28Other Issues for Fiduciary Income Taxation 11-2911.4 Income Distribution Deduction 11-36Distributable Net Income 11-3611.5 Taxation of Beneficiaries 11-42Simple Trusts 11-43Complex Trusts 11-46Summary 11-5012 Gift and Estate Taxes 12-112.1 Unified Transfer Tax 12-4Unified Tax Rate Schedule 12-5Applicable Credit Exclusion 12-612.2 Transfers Subject to the Gift Tax 12-8General Rules 12-8Completed Gifts 12-10Transfers to a Trust 12-10Joint Ownership of Property 12-11Annual Exclusion 12-12Gift-Splitting 12-1512.3 Gift Tax Formula 12-18Deductions Allowed for the Gift Tax 12-18Gift Tax Formula 12-20Filing Requirements for Form 709 12-2412.4 Estate Tax—General Rules 12-26Spotlight on the Tax Law: No Estate Tax in 2010—Is ThisTrue? 12-2612.5 Inclusions in the Gross Estate 12-33Transfers within Three Years of Death 12-3812.6 Deductions from the Gross Estate 12-40Marital Deduction 12-40Debts and Claims against the Estate 12-42Charitable Contributions 12-42Final Expenses 12-42Casualty and Theft Losses 12-4312.7 Estate Tax Formula 12-45Estate Tax Formula 12-45Computing the Net Estate Tax Liability 12-47Other Requirements 12-5113 Taxation of MultinationalTransactions 13-113.1 General Rules for International Taxation 13-4U.S. Tax Residents 13-4Worldwide Taxation vs. Territorial Taxation 13-8Tax Treaties 13-913.2 Sourcing of Income and Expenses 13-11Sourcing of Income 13-11Sourcing of Deductions 13-14Foreign Tax Credit 13-18Transfer Pricing 13-1913.3 U.S. Taxpayers with Outbound Investment throughCorporations 13-21Controlled Foreign Corporations 13-22Subpart F Income Anti-Deferral Regime 13-23The Net CFC Tested Income Regime(formerly Global Intangible Low-Tax IncomeAnti-Deferal Regime) 13-27Spotlight on the Law: Google—Brilliant Tax Minds SaveBillions in Taxes 13-28Passive Foreign Investment Company (PFIC) Anti-Deferral Regime 13-29Base Erosion and Anti-Abuse Tax Regime(BEAT) 13-2913.4 Inbound Taxation on Foreign Persons 13-31FDAP Income 13-32Business Income 13-3414 State and Local Taxation 14-114.1 Types of State and Local Taxes (SALT) 14-3Corporate Income Taxes 14-4Individual Income Taxes 14-5Sales and Use Taxes 14-5Property Taxes 14-5Franchise Taxes 14-6Excise Taxes 14-6Unemployment Tax 14-614.2 Jurisdiction to Tax 14-8Primary Authority for Nexus 14-9Sales Tax Nexus 14-10Income Tax Nexus 14-1214.3 State Income Tax Computation 14-16Computing Taxable Income 14-16Spotlight on the Law: Worldwide CombinedReporting 14-21Apportionment and Allocation 14-2214.4 Filing Methods and Other Topics 14-28Separate Filing 14-29Consolidated Filing 14-29Carnes_FM.indd 25 24-04-2026 11:15:04xxvi TABLE OF CONTENTSCombined Reporting 14-30Other Entities 14-3215 Tax-Exempt Organizations 15-115.1 Types of Tax-Exempt Organizations 15-3Types of §501(c) Organizations 15-3Number of Tax-Exempt Entities Filing Form990 15-4Private Foundations 15-5Spotlight on the Law: College Athletes Working with Tax-Exempt Organizations 15-615.2 Filing Requirements 15-7Request for Tax-Exempt Status 15-7Annual Information Returns 15-815.3 Taxation of Tax-Exempt Entities 15-14Lobbying Tax 15-14Excess Benefits Tax 15-18Private Foundations 15-20Private Universities Investment Income Tax 15-21Excessive Compensation Tax 15-2215.4 Unrelated Business Income (UBI) 15-23Definition of Unrelated Business Income 15-24Computation of Unrelated Business Taxable IncomeTax 15-2716 Tax Research and ProfessionalIssues 16-116.1 Sources of Tax Authority 16-3Legislative Sources of Tax Authority 16-4Administrative Sources of Tax Authority 16-7Judicial Sources of Tax Authority 16-9Spotlight on the Law: Impact of Filing a PetitionLate 16-11Secondary Sources of Tax Authority 16-1416.2 Locating and Evaluating Authority 16-15Weighting of Tax Authority 16-16The Research Process 16-1616.3 Tax Preparer Penalties 16-1816.4 Tax Practice and Procedure 16-20Audit Process 16-20Appeals Process 16-22Other Audit Issues 16-22Signing a Return 16-23APPENDIX A Tax Formula Items A-1APPENDIX B Tax Forms B-1APPENDIX C Personal Financial Planning C-1GLOSSARY G-1INDEX I-1