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AICPA’s 2007 Corporate Tax Review & Update: Real World Applications!

Author/Moderator: William Harden, CPA, ChFC, Ph.D
Publisher: AICPA
Availability: In Stock
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Description

Reinforce your understanding of frequently used principles and receive a wealth of tax planning tips and strategies. Learn how to apply the latest changes when preparing federal income tax returns and advise clients on new developments and tax-saving ideas for S Corps and other pass-through entities. Many key tax return issues are covered in this course.

Objectives: 

  • Apply the latest changes when preparing federal business income tax returns
  • Advise corporate clients on developments and tax-saving ideas
Prerequisite: Knowledge of corporate income taxation

Table of Contents

  • Chapter 1 - Summary of Major Corporate Tax Developments
    • Learning Objectives
    • 2007's Key Inflation-Indexed Figures
      • Standard Mileage Rate per Business Mile
      • High Low Per Diem Rates for Business Travel
      • Depreciation Dollar Caps for Business Vehicles ( §280F)
      • §179 First Year Depreciation
      • Qualified Plans
    • Summary of Major Developments
      • Chapter 2 - S Corporation Characteristics and Treatment
      • Chapter 3 - Section 1244 Stock, Formation of a Corporation, Personal Service Corporations, and
      • Limited Liability Companies
      • Chapter 4 - Accounting Methods and Income
      • Chapter 4 - Accounting Methods
      • Chapter 5 - Salaries and Wages
      • Chapter 5 - Expenses vs. Capital Expenditures
      • Chapter 5 - Cost Recovery and Depreciation
      • Chapter 5 - Modified Accelerated Cost Recovery System (MACRS)
      • Chapter 5 - Election to Expense Depreciable Business Assets
      • Chapter 5 - Deduction for Domestic Production Activities
      • Chapter 6 - Retirement Plans
      • Chapter 6 - Other Deductions - Economic Performance
      • Chapter 6 - Employee Benefit Programs
      • Chapter 7 -Tax Credits
      • Chapter 7 - Compliance Matters
  • Chapter 2 - S Corporations
    • Learning Objectives
    • Advantages and Disadvantages of S Corporations
      • Splitting Income Amongst Family Members
    • Eligibility and S Elections
      • 100 Shareholder Limit
      • Qualified Subchapter S Subsidiary (QSub)
    • Corporate-Level Taxes Imposed on S Corporations
      • Overview
      • Excess Passive Investment Income
      • LIFO Recapture Tax
    • S Corporation Pass-Through Treatment
      • Shareholder Deductibility of S Losses
      • Treatment of Distributions
    • Tax Years and Other Compliance Issues
      • Compensation and Fringe Benefits
      • Compliance Matters
  • Chapter 3 - Personal Service Corporations and Limited Liability Companies
    • Learning Objectives
    • Personal Service Corporations
      • Overview
      • Personal Service Corporation Tax Benefits
      • Personal Service Corporation Tax Pitfalls
      • Summary of PSC Tax Restrictions
    • Limited Liability Companies
      • Overview
    • Limitation Period
      • Grapevine Case
      • Bakersfield Energy Case
      • Brandon Ridge
  • Chapter 4 - C Corporations and Items of Income
    • Learning Objectives
    • Form 1120
      • Book-Tax Reconciliation for Large Corporations (Schedule M-3)
    • Inventories
      • Capitalizing Inventory Costs
    • Accounting Methods and Change of Accounting Method
      • Determination of Proper Accounting Method
      • Cash vs. Accrual Issues
      • Accrual to Cash Conversions: Under $1 Million Gross
      • Accrual to Cash Conversions: Under $10 Million Gross
      • General Change in Accounting Method
    • Installment and Deferred Payment Sales
      • Installment Sale Applications
      • Sales to Related Taxpayers
      • Liquidating Distributions of Installment Obligations
      • Electing Out of the Installment Method
      • Property Sold Subject to a Mortgage
      • Unstated Interest
      • Sale of an Installment Obligation
      • Reporting of Installment Sales
    • Involuntary Conversions and Like-Kind Exchanges
      • Involuntary Conversions
      • Like-Kind Exchanges
  • Chapter 5 - C Corporation Items of Deduction
    • Learning Objectives
    • Salaries and Wages
      • Overview
      • Severance Payments
      • Reasonable Compensation
      • Limit on Deduction for Executive Pay Over $1 Million
      • Golden Parachute Payments
      • Interest-Free or Below Market Interest Rate Loans as Compensation
      • Housing Assistance
      • Incentive Stock Options (ISO)
      • Nonqualified Stock Options (NQSO)
      • Nonqualified Deferred Compensation Plans
    • Expenses vs. Capital Expenditures
      • Repairs
      • Intangible Capitalization
      • Treatment of Environmental Expenditures
      • Other Capitalization Issues
      • Proposed Regulations on Capitalization of Repairs and Tangible Property Expenditures
    • Charitable Contributions
      • Overview
      • Property Contributions
      • Special 2½ Month Rule for Accrual Corporations
      • Donee Acknowledgment and Required Substantiation
    • Casualty and Theft Losses
      • Overview
      • Measuring Casualty Losses
      • Theft Losses
      • Claim for Reimbursement of Loss
      • Disaster Losses
      • New York Liberty Zone Tax Incentives
      • Gulf Opportunity Zone Tax Incentives
    • Cost Recovery and Depreciation
      • Depreciation Systems
      • Leasehold Improvements
      • Income-Forecast Method of Depreciation
      • Capitalization of Minor Cost Assets
      • Tax-Exempt Entity Leasing
      • Demolition Expenses
    • Modified Accelerated Cost Recovery System (MACRS)
      • 15 Yr. Retail Motor Fuel Outlets
      • 15 Yr. Restaurant Building Improvements
      • Petroleum Storage Tanks
      • Percentage Tables Used for MACRS Calculations
      • Correction of Depreciable Class Life
      • 30% and 50% First Year Bonus Depreciation
      • Recovery Periods for Short Tax Years
      • General Asset Accounts
      • Luxury Autos
      • Leased Automobiles
    • Election to Expense Depreciable Business Assets
      • Overview
      • Qualifying Property
      • Making the Election
      • Calculating the Deduction
      • Deduction Limits
      • $25,000 Vehicle Limit
      • Recapture of §179 Expensed Amounts
      • Effect of Expensing on Corporate Earnings and Profits
      • Energy Efficient Commercial Building Expensing
    • Deduction for Domestic Production Activities
      • Overview
      • Eligible Production Income
      • The Wage Limitation
      • Eligibility Issues
      • Puerto Rico Part of U.S. for the PAD
      • Other PAD Changes Now Effective
      • Regulations for §199 - Online Software and Cooperatives
      • Calculating QPAI at Entity Level
      • Use of Statistical Sampling with ~§~199
      • Other Proposed §199 Rules
  • Chapter 6 - Other Items of Deduction
    • Learning Objectives
    • Retirement Plans
      • SIMPLE Retirement Plans
      • Qualified Plans
      • Nondiscrimination and Other Rules for Qualified Plans
      • Additional Requirements for a Qualified Pension, Profit-Sharing, or Stock Bonus Plan
      • "Cash or Deferred" Profit-Sharing Plans - §401(k) (CODAs)
    • Other Deduction Items
      • Timing - Economic Performance
    • Substantiation Requirements for Away-from-Home Travel and Entertainment Expenses
      • Overview
      • Away-from-Home Travel
      • Substantiation Requirements
      • Nonaccountable Plans
    • Employee Benefit Programs
      • Health Savings Accounts (HSAs)
      • Tax Relief and Health Care Act HSA Modifications
      • Health Reimbursement Arrangements (HRAs)
      • Health FSA and HRA Rollovers to HSA
      • "Use-it-or-Lose-it" Rule
      • Changes to Cafeteria Plan Coverage Elections
      • Discrimination Requirements
      • Reporting Requirements
    • Specified Liability Losses
      • Specified Liability Losses with Chance for Recovery
    • Form 1139 Carryback Form
    • Loss Limitation Due to Change in Ownership
      • Change in Ownership Period
  • Chapter 7 - Tax Credits and Compliance Matters
    • Learning Objectives
    • Corporate Tax Credits
      • Organization of Tax Credits
      • Jobs Tax Credits
      • Tax Credit for Increasing Research Activities
      • Low-Income Housing Credit
      • Disabled Access Credit
      • Employer Social Security Credit on Tips
      • Home Contractor Energy Credit
      • Alternative Motor Vehicle Credit
    • Foreign Tax Credit
      • Overview
      • Limitations on Foreign Tax Credit
      • Foreign Taxes Eligible for Credit
      • Period to Elect Deduction or Credit of Foreign Taxes
    • Corporate Distributions at a 15% Dividend Rate
      • Background
      • Distributions of Excess Liquidity
      • Partial Stock Redemptions
      • Eliminating S Corporation AE&P
    • Corporate Taxes and Compliance Matters
      • Income Tax Return Preparer Changed to Tax Return Preparer
      • Payments and Penalties
  • Chapter 8 - Ethics Focus: Taxation
    • Ethics Overview
    • Recent Developments
    • Spotlight on Independence in Tax Services
    • Key Ethical Dilemmas and Judgment Calls
    • Addressing Ethical Dilemmas
    • Available Resources
  • Chapter 9 - Latest Developments

 

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Excerpts

Chapter 1

Learning Objectives

After completing this chapter, you should be

  • Updated with 2007's key inflation-indexed figures.
  • Aware of the subject matter to be covered over the duration of the course. 2007's Key Inflation-Indexed Figures

A number of tax provisions are changed annually to reflect inflation. Key inflation-indexed figures and statutory changes for tax year 2007 include the following:

Standard Mileage Rate per Business Mile
(Rev. Proc. 2006-49)

2007 2006 2005
48.5 cents 44.5 cents 40.5 cents

High Low Per Diem Rates for Business Travel
(Rev. Proc. 2006-41)

2007 2006 2005
$246 & $148 $226 & $141 $204 & $129

(Memo: Meal portion for 2007: $58 and $45; for 2006: $58 and $45)

Depreciation Dollar Caps for Business Vehicles (§280F)
(Rev. Proc. 2007-30)

  Light Trucks and Vans Autos
Year 2007 2006 2005 2007 2006 2005
1 $3,260 $3,260 $3,260 $3,060 $2,960 $2,960
2 $5,200 $5,200 $5,200 $4,900 $4,800 $4,700
3 $3,050 $3,150 $3,150 $2,850 $2,850 $2,850
4+ $1,875 $1,875 $1,875 $1,775 $1,775 $1,675



§179 First Year Depreciation

(Rev. Proc. 2006-53 and the Small Business and Work Opportunity Tax Act of 2007)

  2007 2006 2005
Maximum deduction $125,000* $108,000 $105,000
Asset addition limit
(phaseout threshold)		 $500,000* $430,000 $420,000

* As adjusted by the Small Business and Work Opportunity Tax Act of 2007.


Qualified Plans
(IRS Notice 2006-98)

  2007 2006 2005
Maximum annual benefit under defined benefit plan $180,000 $175,000 $170,000
Maximum contribution to defined contribution plan $45,000 $44,000 $42,000
Maximum compensation generally taken into account under qualified retirement plan and SEPs $225,000 $220,000 $210,000
Elective deferral limits for 401(k) plans, SEPs, etc. $15,500 $15,000 $14,000
Additional age 50 elective deferral $5,000 $5,000 $4,000
Compensation requiring SEP coverage $500 $450 $450
Maximum compensation deferral under a SIMPLE plan $10,500 $10,000 $10,000
Additional SIMPLE age 50 catch-up deferral $2,500 $2,500 $2,000
       
       


Treatment as highly compensated for various purposes:

A “highly compensated employee” is any employee who

  • Was a 5% owner at any time during the year or the prior year; or
  • For the prior year, received compensation in excess of $100,000 (as indexed for 2007) and, if the employer elects, was in the top-paid group of employees for the prior year
    [§414(q)].

Summary of Major Developments

Chapter 2 - S Corporation Characteristics and Treatment

  • The increase in the application of the Kiddie Tax from children under age 18 to full-time students between the ages of 18 and 24 whose earned income accounts for less than onehalf of their support is reflected in a discussion regarding gifts of S corporation stock to children [§1(g)].
  • Legislation in 2005 retroactively eliminated the requirement for family members to file an election to be treated as a single shareholder. That treatment now occurs automatically by law [§1361(c)(1)].
  • For taxable years beginning after December 31, 2006, restricted bank director stock is no longer treated as outstanding stock of an S corporation for purposes of (a) determining whether the S corporation has more than one class of stock; (b) determining the number of S corporation shareholders; and (c) allocating items of S corporation income, gain, loss and credit among the S corporation shareholders [Act 8232 of the Small Business and Work Opportunity Tax Act of 2007.].
  • For years beginning after December 31, 2006, if a parent S corporation sells the stock of its QSub and the sale terminates the QSub election (which is usually the case), the sale is treated as a sale of an undivided interest in the assets of the QSub (based on the percentage of stock sold) followed by a deemed transfer of the sold QSub's assets and liabilities to a new corporation in a transaction that qualifies under §351 [Act §8234 of the Small Business and Work Opportunity Tax Act of 2007].
  • 2005 legislation requires QSubs to be treated as separate entities for information reporting requirements, except as provided by the IRS in future guidance [§1361(b)(3)(E)].
  • Proposed regulations, when final, will treat a QSub as a recognized (rather than disregarded) entity for federal employment tax purposes. However, prior to the implementation of final regulations, the payroll taxes of the QSub may continue to be reported by the parent entity (Prop. Reg. §301.7701-2, REG-114371-05, 10/18/2005).
  • For years beginning after May 25, 2007, capital gain from the sale of stock or securities is no longer treated as passive investment income for purposes of computing the tax on excessive passive investment income under §1375 and the prohibition against an S corporation having excessive passive investment income for three consecutive years under 1362(d)(3) [§1362(d)(3)(C); Act §8231 of the Small Business and Work Opportunity Tax Act of 2007].

Videocourse Details

NASBA Field of Study: Taxes
Level: Update
Recommended CPE Credit: 9
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