AICPA’s 2007 Federal Income Tax “Workshop Update” by Sid Kess: Applying the Key Changes

• Chapter 1 - 2007 Inflation-Adjusted Tax Figures
  • Learning Objectives
  • 2007's Key Inflation-Indexed Figures and New Law Changes
    • Standard Mileage Rates per Mile
    • High Low Per Diem Rates for Business Travel
    • Depreciation Dollar Caps for Business Vehicles
    • Qualified Plans
    • Other Indexed Amounts
    • Changes Scheduled by Statute
    • Individual Income Tax Rates for 2007
• Chapter 2 - Recent Tax Law Changes Affecting Individuals
  • Learning Objectives
  • Small Business and Work Opportunity Tax Act of 2007
    • Section 179 Deduction Rules Extended and Made Even Better
    • Taxpayer-Friendly S Corporation Changes
    • Simplified Tax Compliance for Husband-Wife Businesses
    • Work Opportunity Tax Credit (WOTC) Changes
    • Employer Tip Credit Change
    • WOTC and Employer Tip Credit Can Reduce AMT Liabilities
    • Gulf Opportunity Zone Tax Incentive Changes
    • Revenue Raisers
  • Tax Relief and Health Care Act of 2006
    • Itemized State and Local Sales Tax Deduction Reinstated
    • Above-the-Line Higher Education Expense Deduction Reinstated
    • Above-the-Line $250 Educator Expense Deduction Reinstated
    • Election to Treat Tax-Free Combat Pay as Earned Income for EIC Purposes Extended
    • New Contribution Rules for Health Savings Accounts (HSAs)
    • New Refundable Credit for Individuals with Long-Term AMT Credit Carryovers
    • New (but Temporary) Itemized Deduction for Mortgage Insurance Premiums
    • Specialized Home Sale Rules
    • Excise Tax on CRTs
    • R&D Credit Reinstated and Modified
    • Employment Credits Reinstated and Modified
    • 15-Year Depreciation for Qualified Leasehold Property and Restaurant Improvements
    • Reinstated
    • New (but Temporary) Section 199 Deduction for Puerto Rico
    • Extensions and Modifications of Energy-Related Provisions
    • Extensions of Miscellaneous Other Provisions
    • Some TIPRA Changes Made Permanent
  • Pension Protection Act of 2006
    • Taxpayer-Friendly Retirement Plan Rules Made Permanent
    • Updated Retirement Savings Advice for Clients
    • Made Permanent: Taxpayer-Friendly Section 529 Plan Rules
    • Charitable Donations Can Be Made Directly from IRAs Owned by Seniors
    • Non-Spousal Retirement Plan Beneficiaries Can Roll Over Inherited Retirement Account Balances into IRAs
    • Direct Deposits of Tax Refunds into IRAs
    • Liberalized Rules for Rolling Over After-Tax Contributions
    • Inflation Adjustments to Phase-Out Ranges for Deductible Traditional IRA Contributions and Roth IRA Contributions
    • Beginning In 2008: Direct Rollovers from Retirement Plans into Roth IRAs Allowed
    • Favorable Rules for Retirement Account Distributions Received by Military Reservists
    • Penalty-Free Early Distributions for Public Safety Workers
    • Encouragement to Automatically Enroll Employees for 401(k) Contributions
    • Changes Intended to Strengthen Pension Plans and Other Revised Rules for Retirement Arrangements
    • Changes for Charitable Donors and Charitable Organizations
  • Tax Increase Prevention and Reconciliation Act
    • Favorable Tax Rates for Capital Gains and Dividends Extended Through 2010
    • Alternative Minimum Tax Band Aid for 2006 Only
    • For 2006 and 2007: Kiddie Tax Rules Apply Until Age 18
    • No Income Restriction for Roth Conversions in 2010 and Beyond
    • Other Changes Affect Only Targeted Taxpayers
• Chapter 3 - Other Tax Developments Affecting Individuals
  • Learning Objectives
  • IRA Contributions Can Be Based on Tax-Free Combat Pay
  • Debt Discharge Income from Short Sale of Principle Residence
  • Children of Divorced or Separated Parents
  • Contributions to SIMPLE Plans
  • Out-of-Town Travel Expenses
  • Section 199 Domestic Producer Deduction
  • Section 409A Rules for Nonqualified Deferred Compensation Arrangements
  • Controversy Regarding Proper Treatment of Health Insurance Premiums for More-Than-2% S
  • Corporation Shareholder-Employees
    • Rules for Partners Apply to More-Than-2% Shareholder-Employees
    • IRS Says No Section 162(l) Deduction for Health Insurance Obtained in More-Than-2%
    • Shareholder-Employee's Name
    • Should You Pay Attention to the IRS Position?
    • Advice for Affected Clients
  • Update on Gambling Losses
    • Tax Treatment of Gambling Winnings
    • Tax Treatment of Gambling Losses
    • Professional Gambler Status May Not Help
    • Identifying and Documenting Gambling Losses
  • Update on Securities Traders Gains and Losses
    • Advantages of Mark-to-Market Election
    • When to Make the Election
    • Tax Reporting Issues for Traders
    • Traders Should Segregate Their Longer-Term Investments
  • Update on Tax Credits for Energy-Efficient Vehicles
    • Credits for Hybrid Vehicles
    • Credits for Alternative Fuel Vehicles
    • Credits for Fuel Cell Vehicles
    • Credits for Advanced Lean Burn Technology Vehicles
    • Bad News for AMT Victims
• Chapter 4 - Kiddie Tax Update
  • Learning Objectives
  • Child's Age Is the Key Factor
  • Kiddie Tax Rules for 2007
    • Kiddie Tax Avoidance Strategy for 2007
  • Stricter Kiddie Tax Rules for 2008 and Beyond
  • Kiddie Tax Avoidance Strategies for 2008 and Beyond
    • Finesse the Age Rules
    • Invest Carefully and Avoid Triggering Substantial Unearned Income in Kiddie Tax Years
    • Exploit Unearned Income Threshold (Currently $1,700)
• Chapter 5 - Update on Health Savings Accounts (HSAs)
  • Learning Objectives
  • How HSAs Work in a Nutshell
    • Basics on Contributions by Individuals
    • Basics on Contributions by Employers
  • Determining Eligibility for HSA Contributions
    • Must Have HDHP Coverage
    • Cannot Have Non-HDHP Health Coverage
  • HSA Contributions for Married Individuals
  • HSA Contribution Eligibility Can Be Determined at Yearend (but Watch Out for Nasty Recapture Rule)
    • Nasty Recapture Rule
  • New HSA Rollover Deal for FSA and HRA Balances (but Watch Out for Nasty Recapture Rule)
    • Rollover Basics
    • Tricky Qualification Rules
    • Nasty Recapture Rule
  • New IRA-to-HSA Rollover Deal (but Watch Out for Nasty Recapture Rule)
    • Rollover Limitations and Mechanics
    • Nasty Recapture Rule
  • Pay Attention to HSA Timing Considerations
  • Summary Client Advice on HSAs and HDHPs
• Chapter 6 - Cool Tax-Saving IRA Maneuvers
  • Learning Objectives
  • IRA Rollover Privilege for Non-Spousal Retirement Account Beneficiaries
    • General Rollover Mechanics
    • Required Minimum Withdrawal Rules Apply to Receiving IRA
    • Special Considerations When Plan Participant Dies before RBD
    • Special Rollover Mechanics When Plan Participant Dies before RBD
  • Charitable Contributions from IRAs
    • Qualified Charitable Distribution (QCD) Definition
    • Sunset Date and Annual Limitation Rules
    • Senior IRA Beneficiaries Can Do QCDs Too
    • QCDs Offer Income and Estate Tax Advantages
    • Who Can Benefit?
    • Do QCDs from Roth IRAs Make Sense?
    • "Bad Old Rules" Will Return in 2008 Unless Congress Acts
• Chapter 7 - Cool Tax-Saving Ideas for Husband-Wife Businesses
  • Learning Objectives
  • Sole Proprietors Can Hire Their Spouses and Save Taxes
    • Set Up Section 105 Medical Reimbursement Plan
    • Mind the Details When Compensating the Employee-Spouse
  • Advantages of Combining Section 105 Plan with Health Savings Account (HSA)
    • Section 105 Plan Can Pay First-Dollar Reimbursements for Certain Health Expenditures without Jeopardizing Employee-Spouse's HSA Contribution Privilege
    • Putting the Tax-Saving Pieces Together
    • Do Not Forget to Account for Client's Age
    • Special SE-Tax-Saving Opportunity for Husband-Wife Businesses in Community Property States
    • The Potential Problem
    • The Possible Solution
    • SE Tax Planning Strategies
    • Implications for Unincorporated Husband-Wife Businesses in Non-Community Property States
  • Parents Who Own Businesses Can Hire Their Kids and Save Taxes
• Chapter 8 - 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 9 - 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 10 - 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 11 - 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 12 - 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 13 - 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 14 - 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 15 - Latest Developments

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