Title Details

Preface xx

About the Authors xxv

PART I Introduction to Taxation and Its Environment

1 An Introduction to Taxation 2

Setting the Stage—An Introductory Case 3

1.1 An Introduction to Taxes 3

1.2 Types of Tax Rate Systems 12

1.3 Characteristics of a Good Tax 15

1.4 The Taxing Units and the Basic Income Tax Model 18

1.5 Choice of Business Entity 29

Revisiting the Introductory Case 38

Summary 38

Key Terms 39

Test Yourself 39

Problem Assignments 40

Answers to Test Yourself 44

2 The Tax Practice Environment 45

Setting the Stage—An Introductory Case 46

2.1 Tax Compliance 46

2.2 Professional Responsibilities and Ethics 54

2.3 Tax Planning 59

2.4 Tax Research 69

Revisiting the Introductory Case 89

Summary 89

Table of Contents ix

Key Terms 90

Test Yourself 90

Problem Assignments 90

Answers to Test Yourself 97

Appendix: Authorities for Sample Research Problem 97

PART II Income Expenses and Individual Taxes

3 Determining Gross Income 108

Setting the Stage—An Introductory Case 109

3.1 What Is Income? 109

3.2 When Is Income Recognized? 112

3.3 Who Recognizes the Income? 118

3.4 Sources of Income 119

3.5 Exclusions 134

3.6 Expanded Topics—Jurisdictional Issues 139

Revisiting the Introductory Case 142

Summary 142

Key Terms 143

Test Yourself 143

Problem Assignments 144

Answers to Test Yourself 152

4 Employee Compensation 153

Setting the Stage—An Introductory Case 154

4.1 Employee Compensation 154

4.2 Employee Fringe Benefits 161

4.3 Employee Stock and Stock Options 174

4.4 Deferred Compensation and Retirement Planning 179

4.5 Self-Employed Individuals 187

4.6 Expanded Topics—Foreign Assignments 191

Revisiting the Introductory Case 195

Summary 195

Key Terms 196

Test Yourself 197

Problem Assignments 198

Answers to Test Yourself 205

5 Deductions for Individuals and Tax Determination 206

Setting the Stage—An Introductory Case 207

5.1 The Individual Tax Model 207

5.2 Deductions for Adjusted Gross Income 209

5.3 Standard Deduction 212

5.4 Itemized Deductions 217

5.5 Qualified Business Income Deduction 228

5.6 Dependents 230

5.7 Tax Credits 233

5.8 Computing the Tax 239

5.9 Payment of Tax and Filing the Return 247

Revisiting the Introductory Case 250

Summary 253

Key Terms 253

Test Yourself 253

Problem Assignments 254

Answers to Test Yourself 264

PART III Business and Property Concepts

6 Business Expenses 266

Setting the Stage—An Introductory Case 267

6.1 Criteria for Deductibility 267

6.2 Timing of Deductions 271

6.3 Costs of Starting a Business 275

6.4 Operating Expenses 277

6.5 Limited Expense Deductions 285

6.6 Expanded Topics—Book/Tax Differences 292

Revisiting the Introductory Case 301

Summary 303

Key Terms 304

Test Yourself 304

Problem Assignments 305

Answers to Test Yourself 314

7 Property Acquisitions and Cost Recovery Deductions 316

Setting the Stage—An Introductory Case 317

7.1 Capital Expenditures 317

7.2 MACRS 322

7.3 Special Expensing Provisions 329

7.4 Provisions Limiting Depreciation 334

7.5 Depletion 338

7.6 Amortization 339

Revisiting the Introductory Case 341

Summary 342

Key Terms 342

Test Yourself 343

Problem Assignments 344

Answers to Test Yourself 351

PART IV Property Dispositions

8 Property Dispositions 354

Setting the Stage—An Introductory Case 355

8.1 Determining Gain or Loss on Dispositions 356

8.2 Disposition of Capital Assets 363

8.3 Disposition of Section 1231 Property 371

8.4 Mixed-Use Property 378

8.5 Special Rules for Small Business Stock 379

8.6 Sale of Principal Residence—Section 121 382

8.7 Navigating Individual Capital Gains Tax Rates 385

Revisiting the Introductory Case 388

Summary 389

Key Terms 390

Test Yourself 390

Problem Assignments 391

Answers to Test Yourself 400

9 Tax-Deferred Exchanges 401

Setting the Stage—An Introductory Case 402

9.1 Basics of Tax-Deferred Exchanges 402

9.2 Like-Kind Exchanges—Section 1031 404

9.3 Involuntary Conversions 409

9.4 Other Tax-Deferred Exchanges or Dispositions 418

9.5 Asset Transfers to Businesses 422

9.6 An Introduction to Corporate Reorganizations 431

Revisiting the Introductory Case 432

Summary 432

Key Terms 433

Test Yourself 433

Problem Assignments 434

Answers to Test Yourself 443

Appendix: Corporate Reorganizations 444

PART V Business Taxation

10 Taxation of Corporations 452

Setting the Stage—An Introductory Case 453

10.1 Introduction to Corporations 453

10.2 Taxation of C Corporations 457

10.3 Corporate Dividend Distributions 468

10.4 Corporate Redemptions and Liquidations 475

10.5 Issues for Closely Held Corporations 480

10.6 Consolidated Returns 484

Revisiting the Introductory Case 486

Summary 487

Key Terms 487

Table of Contents xvii

Test Yourself 488

Problem Assignments 488

Answers to Test Yourself 496

Appendix: Exempt Organizations 496

11 Sole Proprietorships and Flow-Through Entities 501

Setting the Stage—An Introductory Case 502

11.1 Introduction to Flow-Through Business Entities 502

11.2 The Sole Proprietorship 503

11.3 Partnerships 509

11.4 S Corporation Characteristics 528

11.5 Expanded Topics—The Passive Deduction Limitations 540

Revisiting the Introductory Case 544

Summary 545

Key Terms 545

Test Yourself 546

Problem Assignments 547

Answers to Test Yourself 558

PART VI Wealth Taxation

12 Estates Gifts and Trusts 560

Setting the Stage—An Introductory Case 561

12.1 Overview of Wealth Transfer Taxation 561

12.2 The Federal Gift Tax 566

12.3 Tax Consequences for Donees 574

12.4 The Taxable Estate 577

12.5 Transfer Tax Planning 582

12.6 Fiduciary Income Tax Issues 585

12.7 Expanded Topics—The Tax Calculations 588

Revisiting the Introductory Case 592

Summary 592

Key Terms 593

Test Yourself 593

Problem Assignments 594

Answers to Test Yourself 601

Appendix Selected Tax Tables for 2018 and 2017 603

Corporate Tax Rates for 2018 and 2017 603

Individual Income Tax Rate Schedules for 2018 and 2017 603

Social Security and Medicare Taxes for 2018 and 2017 605

Standard Deductions for 2018 and 2017 606

Tax Rates for Estates Gifts and Trusts for 2018 and 2017 606

Depreciation Tables 607

Present Value and Future Value Tables 609

Index 613