Essential Legal Concepts with Tax Analysis 2022 - 40 CPE Credit Hours
While accounting and the practice of law are separate professions, the accountant must be conversant with essential legal concepts. Modern accounting practice requires familiarity with corporate legal structure, business entities, partnership operations, contracts, property rights, employment law, divorce, consumer protection, will & trusts, and even bankruptcy law. This course explores these specific areas with an emphasis on business and accounting issues. This informal and clear guide to the basic concepts of business law provides accountants with an excellent review of legal concepts that arise in any tax professional’s practice. The attendees will gain the ability to recognize and discuss general legal concepts with both client and their counsel.
Knowledge is power and nowhere is that truer than in the field of law. To gain such a working knowledge of law, readily understandable explanations are given to essential and related business law subjects. The accountant is guided through the complex maze of literally hundreds of legal principles from acceptance to zoning.
Completion Deadline & Exam: This course, including the examination, must be completed within one year of the date of purchase. In addition, unless otherwise indicated, no correct or incorrect feedback for any exam question will be provided.
Course Level: Overview. This program is appropriate for professionals at all organizational levels.
Field of Study: Taxes
Prerequisite: General understanding of federal income taxation.
Advanced Preparation: None
Learning Assignments & Objectives
As a result of studying each assignment, you should be able to meet the objectives listed below each assignment.
Chapter 1 Asset Protection
At the start of Chapter 1, participants should identify the following topics for study:
* Need for asset protection
* Types of creditors
* Fraudulent transfers
* Preparation for asset protection
* Types of insurance
* Buy-sell agreements
* Individual ownership and corporate ownership
* Asset protection aspects of trusts
* Co-tenancy and partnerships
After reading Chapter 1, participants will be able to:
1. Identify the goals and purposes of asset protection recognizing the objections some people have about shielding assets from creditors by:
a. Citing reasons for asset protection and situations that can unexpectedly put assets and financial security at stake;
b. Specifying sources of lawsuits and the author's concept of exploding and imploding liability; and
c. Determining asset protection using the primary concepts of insurance, asset placement, and statutory protections.
2. Recognize the importance of creditor types associated with asset protection and fraudulent transfers.
3. Specify the fraudulent transfer laws and badges of fraud, define statutes of limitation, criminal penalties, and permissible asset transfers.
4. Identify the degree and necessity of asset protection using net worth and asset values under a balance sheet and the various ways that insurance and buy-sell agreements can offer asset protection.
5. Recognize the asset protection advantages and disadvantages of ownership formats and entities by:
a. Determining the use of individual ownership and corporate ownership in an asset protection plan including the importance of S corporations and their estate tax planning advantages;
b. Identifying testamentary trusts, living trusts, and subcategories of trusts recognizing their asset protection elements;
c. Specifying the various types of co-tenancy, identifying their asset protection dangers, and several types of partnerships citing their variation from limited liability companies; and
d. Recognizing the unique asset protection qualities of retirement plans, custodianship, and estates as asset protection tools.
After studying the materials in Chapter 1, answer the exam questions 1 to 18.
Chapter 2 Alimony & Child Support
At the start of Chapter 2, participants should identify the following topics for study:
* Divorce or separation instrument
* Pre- and post-1984 alimony requirements
* Deducting pre-2019 alimony paid & reporting alimony received
* Recapture of alimony for types A & B agreements
* Alimony substitution trusts & annuities
* Alimony paid by an estate
* Child support
* COBRA coverage
* Qualified medical child support orders
After reading Chapter 2, participants will be able to:
1. Determine “alimony” and “separate maintenance payments” under §§71 and 215.
2. Specify the types of §71 “divorce or separation instruments” and determine how having an invalid decree, an amended instrument, or a premarital agreement impacts such an instrument.
3. Identify the alimony and child support tax provisions that currently apply from those that applied to instruments executed prior to 1985 by:
a. Specifying variables that impact whether a payment is alimony since 1984 and determining whether a cash payment is deemed made to or on behalf of a former spouse in order to characterize it as alimony;
b. Recalling the tax treatment of housing costs for the family residence showing the impact of ownership when the nonoccupying spouse owns the home and when the occupying spouse owns the home;
c. Identifying what rent or resident cost payments can be alimony when a family residence is jointly owned and occupied by a spouse or a taxpayer is required to make rent payments for a spouse;
d. Recognizing the tax treatment of life insurance premium payments, voluntary payments, and payments to a remarried spouse along with the advantages and disadvantages to each spouse;
e. Determining how to recharacterize otherwise deductible pre-2019 alimony payments as nondeductible, and identifying whether spouses are members of different households, and identifying the alimony pitfall of being required to make payments after a former spouse’s death;
f. Specifying the differences between child support and alimony and thereby avoid reporting errors;
g. Citing the pre-1985 alimony requirements and periodic payments; and
h. Determining marital relationship and the similarities and differences in the treatment of child support under current and previous law.
4. Identify the deduction of pre-2019 alimony paid and the reporting of alimony received on the proper forms with required information.
5. Specify the pre-2019 alimony recapture rule for various marital agreements and its impact on the tax treatment of past payments.
6. Recognize the use of alimony trusts to realize tax advantage and security, determine the use of annuity contracts, and specify the proper tax treatment of alimony paid by an estate to a former spouse of a decedent.
7. Recall the tax treatment of child support, identify two circumstances where a payment will be fixed as child support, and specify six events that determine whether a contingency is clearly child-related and how to rebut this presumption of child support.
8. Recall the COBRA and qualified medical child support order rules so as to maximize the use of health care coverage plans by:
a. Identifying whether COBRA rules apply to different plans including notice & deadline requirements and specifying four situations that may result in termination of continuing coverage; and
b. Determining what constitutes “qualified medical child support orders” recognizing differences with other similar orders and identifying the procedures, requirements, and jurisdiction of QMCSOs.
After studying the materials in Chapter 2, answer the exam questions 19 to 41.
Chapter 3 Bankruptcy
At the start of Chapter 3, participants should identify the following topics for study:
* Tax law changes
* Bankruptcy types
* Automatic stay
* Debt discharge
* Individual bankruptcy estate
* Individual debtor
* Corporate bankruptcy
* Homesteading & garnishment
After reading Chapter 3, participants will be able to:
1. Determine how the 2005 Bankruptcy Act changed procedures, qualifications, and tax law, and identify the most common bankruptcy types and their influence on how an individual or business “goes bankrupt.”
2. Specify the rules for automatic stay and levy along with their impact on “freezing” creditor activity, tax assessment, and collection.
3. Identify the differences between preferential and nonpreferential payments together with the priority of creditor claims.
4. Recognize when debt is discharged under various bankruptcy types and identify how to establish an individual bankruptcy estate determining its taxable income and filing requirements.
5. Identify partnership and corporate bankruptcies, specify debts covered under homesteading, and determine permissible garnishment amounts and special garnishment rules.
After studying the materials in Chapter 3, answer the exam questions 42 to 56.
Chapter 4 Divorce Settlements & Divisions
At the start of Chapter 4, participants should identify the following topics for study:
* Premarital agreements
* Application of §1041
* Incident to divorce
* Property basis
* Purchase of residence between spouses
* Purchase of business & investment property between spouses
* Division of corporate business interests
* Division of partnership business interests
* Deferred v. present division of benefits
* Individual retirement arrangements
After reading Chapter 4, participants will be able to:
1. Identify the formats that courts typically follow if a couple does not have a premarital agreement and post-nuptial and premarital agreements including how they relate to divorce settlements and divisions.
2. Cite the position of U.S. v. Davis on interspousal transfers and the changes made by §1041 and, specify the requirements of §1041 and the scope of its application.
3. Identify factors that determine when a property transfer is incident to divorce and how to meet these factors or avoid §1041 altogether when desired and recognize the application of §1041 to transfers in trust under §1041(e) and to third-party transfers on behalf of a spouse or former spouse.
4. Determine deferred tax liability and property basis for the transferor spouse and transferee spouse under §1041 after a property settlement.
5. Recognize the application of §1041 to property transfers where the transferee assumes liabilities encumbering the property, and identify with appropriate records the holding period for an asset transferred between spouses or former spouses incident to divorce.
6. Identify the dangers of purchasing a former spouse's interest in property particularly a marital residence including its tendency to create deferred tax liability, specify the effects of purchasing an interest in personal or real property used in a business or held for investment, recognize potential recapture and identify the use of an exchange to dispose of low-basis property received in a §1041 transfer.
7. Recognize sale, redemption, recapitalization, liquidation, and third-party transfers as methods of dividing a business in a marital settlement citing unique provisions under §302, §368, §736 and §754.
8. Identify an overall tax and economic strategy for the division of pension benefits in a marital settlement by:
a. Specifying popular methods of dividing retirement benefits in a divorce or separation action;
b. Determining what constitutes a “qualified domestic relations order” along with specific information to be included in such an order and the tax consequences of QDRO distributions;
c. Recognizing the pros and cons of deferred, present, and alternate property division arguments;
d. Specifying the treatment of IRAs at divorce considering the IRA deduction limit and rollovers; and
e. Locating military pensions and civil service pensions that may be available to a former spouse.
After studying the materials in Chapter 4, answer the exam questions 57 to 78.
Chapter 5 Employment
At the start of Chapter 5, participants sh