Fundamentals of Taxation for Individuals and Business Entities, with eBook Access Code

DEDICATION III
BRIEF CONTENTS V
LEARNING THE BIG PICTURE OF TAX TO BE A VALUED PROFESSIONAL VI
WHAT ARE OUR STORIES? VII
WHAT MAKES OUR APPROACH TO LEARNING TAX DISTINCTIVE? IX
ASSESSMENT XIII
CONNECTING TO THE PROFESSION XVI
AN INTERACTIVE, MULTIMEDIA LEARNING EXPERIENCE XVIII
PREPARING FOR THE CPA EXAM XIX
FOR INSTRUCTORS XX
ACKNOWLEDGMENTS XXI
TABLE OF CONTENTS XXIII

Part I Introduction to Income Taxation

1 The Professional Practice of Taxation 1-1
1.1 The Basics of Tax Planning 1-4
1.2 Individual Income Tax Formula 1-7
1.3 Tax Compliance vs. Tax Planning 1-15
1.4 Tax Avoidance vs. Tax Evasion 1-27
1.5 Tax Rules vs. GAAP 1-31
1.6 Goals of Tax Policymakers 1-33
1.7 Other Taxes Paid by Individuals 1-38
1.8 Professional Taxation as a Career 1-41

2 Fundamentals of the Federal Income Tax System 2-1
2.1 Taxpayer Activities: Trade or Business, Investment, or Personal Use 2-4
2.2 Classification of Assets 2-10
2.3 Basis 2-14
2.4 Foundations of Income 2-17
2.5 Foundations of Deductions 2-21
2.6 Introduction to Property Transactions 2-24

3 Tax Authority, Research, Compliance Rules, and Professional Responsibilities 3-1
3.1 Sources of Tax Authority 3-5
3.2 Locating and Evaluating Authority 3-17
3.3 Compliance Responsibilities 3-20
3.4 Tax Professional Responsibilities 3-31
3.5 Tax Practice and Procedure 3-36

4 Dependents and Filing Status 4-1
4.1 Dependents-Introduction and Qualifying Child 4-3
4.2 Qualifying Relative and Other Dependency Rules 4-11
4.3 Filing Status-Introduction 4-16
4.4 Head of Household and Qualifying Widow(er) 4-21
4.5 Dependent on Another Return and Kiddie Tax 4-28
4.6 Filing Requirements 4-32

Part II Income

5 Framework for Income Recognition 5-1
5.1 All-Inclusive Approach to Income 5-4
5.2 Judicial Doctrines 5-8
5.3 Accounting Methods and Periods-Income 5-14
5.4 Business Income for Individuals 5-24
5.5 Qualified Business Income Deduction 5-30

6 Income from Personal Activities 6-1
6.1 Income from Prizes, Awards, and Scholarships 6-6
6.2 Taxable Prizes and Awards 6-6
6.3 Exclusion for Awards for Recognition of Civic or Other Achievements 6-7
6.4 Income from Injuries and Other Damage Awards 6-26
6.5 Income from Death of a Taxpayer 6-31
6.6 Forgiveness of Debt 6-35
6.7 Other Inclusions and Exclusions 6-40

7 Income from Services 7-1
7.1 Wages and Tip Income 7-6
7.2 Income from Insurance-Related
7.3 Income from Other Fringe Benefits 7-21
7.4 Stock Options 7-30
7.5 Reimbursement of Employee Business Expenses 7-37
7.6 Retirement Plans 7-39
7.7 Distribution Rules 7-50
7.8 Social Security Benefits 7-57
7.9 Foreign Earned Income 7-60
Part II (Chapters 5-7): Comprehensive Tax Return Problem 7-72

Part III Deductions

8 Framework for Deductions 8-1
8.1 Types of Activities 8-4
8.2 Disallowance of Deductions 8-8
8.3 Types of Deductions 8-13
8.4 Accounting Methods for Deductions 8-16
8.5 Capital Expenditure vs. Repair 8-22
8.6 Accounting for Inventories 8-24

9 Deductions for AGI, Itemized Deductions, and Additional Deductions 9-1
9.1 Deductions for AGI 9-5
9.2 Itemized Deductions: General Rules 9-14
9.3 Medical Expenses 9-17
9.4 Taxes 9-21
9.5 Interest 9-26
9.6 Charitable Contributions 9-31
9.7 Casualty Losses 9-42
9.8 Other Itemized Deductions 9-47

10 Business Expenses 10-1
10.1 Business Expense Requirements 10-4
10.2 Transportation and Travel Expenses 10-8
10.3 Entertainment and Education Expenses 10-14
10.4 Business Interest 10-18
10.5 Bad Debts 10-21
10.6 Net Operating Losses 10-23
10.7 Excess Business Losses 10-29

11 Limitations on Business Losses and Expenses 11-1
11.1 Business Use of a Home 11-4
11.2 Hobby Losses 11-11
11.3 Vacation Homes 11-14
11.4 Basis and At-Risk Limitations 11-23
11.5 Passive Loss Rules 11-25
11.6 Losses from Partnerships and S Corporations 11-34
Part III (Chapters 8-11): Comprehensive Tax Return Problem 11-48

Part IV Taxation of Property Transactions

12 Taxation of Investment Income 12-1
12.1 Interest Income 12-4
12.2 Dividend Income 12-14
12.3 Capital Gains and Losses 12-22
12.4 The 3.8% Net Investment Income Tax 12-37

13 Cost Recovery of Property 13-1
13.1 General MACRS Rules 13-5
13.2 Additional Cost Recovery Rules 13-15
13.3 Amortization 13-27
13.4 Depletion 13-30

14 Taxation of Assets Used in a Trade or Business 14-1
14.1 Distinguishing Section 1231 Assets from Ordinary and Capital Assets 14-4
14.2 Identifying Types of Section 1231 Assets 14-7
14.3 Netting Section 1231 Gains and Losses 14-10
14.4 Section 1245 Depreciation Recapture 14-15
14.5 Section 1250 Depreciation Recapture 14-20

15 Property Transactions: Nonrecognition of Gains and Losses 15-1
15.1 Related-Party Losses 15-4
15.2 Wash Sales 15-9
15.3 Like-Kind Exchanges 15-15
15.4 Involuntary Conversions 15-26
15.5 Loss on Sale of Personal Use Assets 15-32
15.6 Sale of Principal Residence 15-33
Part IV (Chapters 12-15): Comprehensive Tax Return Problem 15-52

Part V Other Individual Topics

16 Personal Tax Credits 16-1
16.1 Introduction to Personal Tax Credits 16-4
16.2 Child Tax Credit 16-7
16.3 Credit for Other Dependents (Family Tax Credit) 16-10
16.4 Child and Dependent Care Credit 16-11
16.5 Earned Income Tax Credit (EITC) 16-18
16.6 Education Credits 16-25
16.7 Other Personal Tax Credits 16-33

17 Alternative Minimum Tax and Other Taxes 17-1
17.1 Alternative Minimum Tax (AMT) 17-4
17.2 Social Security, Medicare, and Self-Employment Taxes 17-17
17.3 Other Taxes 17-24

Part VI CPA Evolution: Core-Tax

18 Business Entity Topics: CPA Exam Core-Taxation and Regulation 18-1
18.1 Corporations: Taxable Income Computation and Special Deductions 18-5
18.2 Other Corporate Tax Issues 18-20
18.3 Business Tax Credits 18-31
18.4 S Corporations 18-42
18.5 Partnerships and Limited Liability Companies 18-63
18.6 Tax-Exempt Organizations 18-73
18.7 State and Local Taxation 18-76
Part VI (Chapter 18): Comprehensive Tax Return Problem 18-109

APPENDIX A Tax Formula Items A-1
APPENDIX B Tax Forms B-1
GLOSSARY G-1
INDEX I-1