Corporate Tax Planning 2023 - 21 CPE
Course Description & Study Guide
Course description and objectives: This course examines and explains the practi-cal aspects of using a closely held corporation to maximize after-tax return on business operations. Recent developments giving corporations a competitive edge over other entities are explored and detailed. Practitioners are alerted to often missed fringe benefits, retirement planning opportunities, corporate busi-ness deductions, income splitting possibilities, and little-known estate planning techniques.
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Corporate Tax Planning
Course Description & Study Guide
Course description and objectives: This course examines and explains the practi-cal aspects of using a closely held corporation to maximize after-tax return on business operations. Recent developments giving corporations a competitive edge over other entities are explored and detailed. Practitioners are alerted to often missed fringe benefits, retirement planning opportunities, corporate busi-ness deductions, income splitting possibilities, and little-known estate planning techniques. The program covers step-by-step tax procedures to form, operate, and ultimately dispose of a closely held corporation. Distinctions between S and C corporations will be unraveled and guidelines for client direction given.
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 provid-ed.
Course Level: Overview. This program is appropriate for professionals at all or-ganizational levels.
Field of Study: Taxes
Prerequisite: General understanding of federal income taxation.
Advanced Preparation: None
Learning Assignments & Learning Objectives
As a result of studying each assignment, you should be able to meet the objec-tives listed below each assignment.
Chapter 1 Business Forms & Characteristics
At the start of Chapter 1, participants should identify the following topics for study:
* Sole proprietorships
* Estates & trusts
* Unincorporated associations
* Corporation defined
* Subchapter S corporations
* Ordinary “C” corporations
* Personal service corporations
* Corporate tax rate
After reading Chapter 1, participants will be able to:
1. Specify the advantages and disadvantages of sole proprietorships in-cluding self-employed taxes and payment requirements and identify the characterization of sole proprietorship assets upon disposition.
2. Recognize partnerships and their advantages and disadvantages, identify partnership taxation particularly the application of the passive loss (§469) and at-risk rules (§465), and determine correct partnership income or loss reporting stating the role of husband and wife partner-ships and limited partnerships.
3. Identify the reporting requirements of estates, trusts, and unincor-porated associations, determine what constitutes a “corporation” for a subchapter S or regular corporation, specify the characteristics of a personal service corporation, and recognize the repeal of the alterna-tive minimum tax for regular corporations.
After studying the materials in Chapter 1, answer exam questions 1 to 12.
Chapter 2 Corporate Formation & Capitalization
At the start of Chapter 2, participants should identify the following topics for study:
* Start-up & organizational expenses
* Tax recognition of the corporate entity
* Capital gains & losses
* Dividends received deduction
* Charitable contributions
* Accumulated earnings tax trap
* Accounting periods & methods
* Multiple corporations
After reading Chapter 2, participants will be able to:
1. Identify the transfer of money, property, or both by prospective shareholders and the basic requirements associated with §351.
2. Recognize the requirements of §1244 and the small business stock exclusion, determine the differences between start-up and organiza-tional expenses, and identify the elements of corporate tax recognition including the dangers of corporate ownership and capital gains and losses stating dividends received treatment.
3. Specify the requirements for corporate charitable contributions, identify former §341 collapsible corporations, and determine how to avoid §541 status particularly as to personal service contracts.
4. Identify §531 status and determine accounting periods and methods available to corporations.
5. Specify methods for identifying inventory items including common methods of valuing inventory and, identify multiple corporation tax advantages and the tax consequences of corporate liquidations and dis-tributions.
After studying the materials in Chapter 2, answer exam questions 13 to 29.
Chapter 3 Corporate Principals & Employees
At the start of Chapter 3, participants should identify the following topics for study:
* Payroll taxes
* FICA & FUTA
* Employee labor laws
* Employee v. contractor status
* Unreasonable compensation
* Income splitting
* Buy-sell agreements
* Entity & cross-purchase agreements
* Sole shareholder planning
After reading Chapter 3, participants will be able to:
1. Determine payroll taxes and the uses of Form 941, Form W-4, Form W-2, and Form W-3, specify the application of FICA and FUTA taxes and how to report them, and identify major employee labor laws.
2. Recognize common-law rules used to determine employee status for FICA and federal income tax withholding, specify the dangers of un-reasonable compensation stating how to avoid them, and determine how a corporation can be a valuable income-splitting device.
3. Identify a buy-sell agreement distinguishing an entity purchase from a cross-purchase agreement and recognize business recapitalizations and their potential uses.
After studying the materials in Chapter 3, answer exam questions 30 to 39.
Chapter 4 Basic Fringe Benefits
At the start of Chapter 4, participants should identify the following topics for study:
* Statutory v. nonstatutory benefits
* No-additional-cost services & qualified employee discounts
* Working condition fringes
* Employee achievement awards
* Dependent care assistance
* Cafeteria plans
* Self-insured medical reimbursement plans
* Employer-provided automobile
* Interest-free & below-market loans
* Fringe benefit plans for S corporations
After reading Chapter 4, participants will be able to:
1. Identify basic fringe benefit planning by determining “income” un-der §61 and specifying the differences between former nonstatutory and current statutory fringe benefits.
2. Determine “no-additional-cost services” and identify what property or services are excludable from income as qualified employee dis-
counts under §132(c), specify exceptions to working condition fringes and de minimis fringes, recognize a §74 “employee achievement award,” and cite the §79 group term life insurance rules.
3. Recognize the requirements and limits of §129 dependent care assis-tance, identify §125 “cafeteria plans” specifying how they function, specify the §119 meals and lodging exclusion, cite the mechanics of §105 self-insured medical reimbursement plans, and determine the re-quirements and limits of §127 programs.
4. Identify employer-provided automobiles valuation methods, deter-mine what constitutes interest-free and below-market loans, specify the requirements and limitations of fringe benefits under §§217, 132, 67 212, 132(h)(5) and 280A, cite S corporation fringe benefits, and specify ERISA compliance requirements.
After studying the materials in Chapter 4, answer the exam questions 40 to 48.
Chapter 5 Business Entertainment
At the start of Chapter 5, participants should identify the following topics for study:
* Pre- & post-2018 tests for entertainment expenses
* Statutory exceptions
* Pre-2018 ticket purchases
* Percentage reduction for meals
* Entertainment facilities
* Substantiation & record keeping
* Employee expense reimbursement & reporting
* Self-employed persons
After reading Chapter 5, participants will be able to:
1. Define the key tax term “entertainment" and identify the pre- and post-2018 required §162 & §274 deductibility tests recognizing the im-portance of the remaining statutory exceptions for entertainment.
2. Determine the former treatment of ticket purchases, recognize the percentage reduction restriction for meals, specify the application of the former 2% deduction limit, and determine an “entertainment facil-ity” stating related deductible costs.
3. Identify substantiation, recordkeeping, reimbursement, and report-ing requirements recognizing variations in methods, and determine
how to itemize non-reimbursed employee expenses and specify the special reporting rules for self-employed persons and employers.
After studying the materials in Chapter 5, answer the exam questions 49 to 58.
Chapter 6 Insurance
At the start of Chapter 6, participants should identify the following topics for study:
* Company paid insurance
* Group term life insurance
* Retired lives reserve
* Split-dollar life insurance
* Medical & dental insurance & disability income insurance
* Interest limitation on policy loans
* Key person life insurance
* VEBAs - §501(c)(9) Trusts
After reading Chapter 6, participants will be able to:
1. Recognize the importance and variety of business insurance by:
a. Identifying the popularity and application of business life insur-ance plans specifying common coverage and premiums;
b. Determining corporate uses for life insurance including estate, travel, and accident uses and specifying the tax treatment, reporting requirements, and discrimination rules for business insurance partic-ularly the §79 requirements for group insurance;
c. Identifying the benefit of not needing a medical examination as a prerequisite to purchasing a plan;
d. Recognizing retired lives reserve and split-dollar life insurance stating their mechanics, taxation regulation, and advantages and dis-advantages;
e. Specifying the mechanics of employer-paid health, medical, and disability income insurance including the impact of medical examina-tion requirements.
2. Identify the impact of the disallowance of the interest deduction on purchasers and the insurance industry recognizing the §264 interest limitation on policy loans, specify the benefit of corporate key person life insurance, cite the requirements of COBRA, and determine what
constitutes a Voluntary Employee Benefit Association under §501(c)(9).
After studying the materials in Chapter 6, answer the exam questions 59 to 67.
Chapter 7 Retirement Plans
At the start of Chapter 7, participants should identify the following topics for study:
* Qualified deferred compensation
* Basic requirements of a qualified pension plan
* Basic types of corporate plans
* Types of defined contribution plans
* Self-employed plans - Keogh
* Distribution & settlement options of IRAs
* Tax-free rollovers for IRAs
* Roth IRAs
* Simplified employee pension plans (SEPs)
* SIMPLE Plans
After reading Chapter 7, participants will be able to:
1. Identify nonqualified and qualified deferred compensation plans recognizing their benefits and contribution limits and recall the current and deferred advantages and disadvantages of corporate plans includ-ing fiduciary responsibilities and prohibited transactions.
2. Specify the requirements of three basic forms of qualified pension plans.
3. Determine the differences between defined contribution and de-fined benefit retirement plans and specify five types of defined contri-bution plans stating their impact on retirement benefits.
4. Recognize self-employed plans from qualified plans for other busi-ness types and owners.
5. Identify the requirements of IRAs, SEPs, and SIMPLEs, and define tax-free Roth IRA distributions specifying strategies to maximize plan benefits.
After studying the materials in Chapter 7, answer the exam questions 68 to 90.
Chapter 8 Nonqualified Deferred Compensation
At the start of Chapter 8, participants should identify the following topics for study:
* Postponement of income
* Purposes & benefits
* Constructive receipt
* Economic benefit
* Funded company account plan
* Segregated asset plan
* Tax consequences
* Estate planning considerations
After reading Chapter 8, participants will be able to:
1. Recognize the postponement of income with a nonqualified plan by:
a. Identifying nonqualified plan advantages including ways to design the plans and specifying the IRS’s position on such arrangements recognizing the impact of constructive receipt and economic benefit concepts;
b. Specifying deferred compensation patterns set forth in R.R. 60-31 stating the taxability of each; and
c. Determining unfunded and funded plans and the use of company assets or bookkeeping accounts to avoid employee taxation.
2. Identify the setup of a segregated asset plan where the account is not subject to the claims of the employer’s creditors and still avoids em-ployee taxation and specify the tax consequences of establishing a non-qualified plan.
After studying the materials in Chapter 8, answer the exam questions 91 to 99.
Chapter 9 S Corporations
At the start of Chapter 9, participants should identify the following topics for study:
* Advantages & disadvantages
* S corporation status
* Income & expense
* Built-in gain
* Passive income
* Basis of stocks & debts
* Form 1120S
* Fringe benefits
After reading Chapter 9, participants will be able to:
1. Determine what constitutes an S corporation and specify the ad-vantages and list the disadvantages associated with them.
2. Identify variables that impact whether a business can choose S cor-poration status.
3. Cite ways an S corporation may be terminated specifying related procedures to be followed.
4. Recognize the taxation and fringe benefits of S corporations as compared to other entity formats by:
a. Determining the tax treatment of S corporation income and ex-penses, pass-through items, built-in gain, passive income, tax prefer-ence items, LIFO recapture tax, and capital gains tax and their im-pact on the taxation of S corporations; and
b. Identifying the benefits available to other entity formats, deter-mining S corporation owner compensation and distribution options recognizing reasonable compensation requirements, related party rules, S corporation distribution taxation, tax year choices, fringe benefits, and specifying when the Form 1120S must be filed.
After studying the materials in Chapter 9, answer the exam questions 100 to 119.
Chapter 10 Business Dispositions & Reorganizations
At the start of Chapter 10, participants should identify the following top-ics for study:
* Starting a new business
* Buying an existing business
* Reorganization types
* Carryover of corporate tax attributes
After reading Chapter 10, participants will be able to:
1. Recognize various business disposition and reorganization possibili-ties by:
a. Determining how organizational costs, start-up costs, and syndica-tion costs are incurred and specifying what expenditures they include and how they are treated;
b. Identifying advantages of purchasing an existing business over starting a new business, citing ways to find a business that is for sale, and specifying the tax considerations of such an acquisition;
c. Specifying a reorganization under §368(a)(1) recognizing the types of transactions that qualify as non-taxable reorganizations; and
d. Identifying the factors that determine the corporate tax attributes of an acquired corporation that carry over to the acquiring or succes-sor corporation.
After studying the materials in Chapter 10, answer the exam questions 120 to 125.
This course and test have been adapted from materials and information contained in the above text and any supplemental material provided. This course is sold with the understand-ing that the publisher is not engaged in rendering legal, accounting, or other professional ad-vice and assumes no liability whatsoever in connection with its use. Since laws are constantly changing, and are subject to differing interpretations, we urge you to do additional research and consult appropriate experts before relying on the information contained in this course to render professional advice.