Choice of Entity

Upon successful completion of this course, participants will be able to:

Chapter 1

• Determine the elements associated with sole proprietorships, and specify the tax reporting requirements.
• State the ordinary and necessary business deduction test under §162, identify not-for-profit activities, differentiate income tax rates for sole proprietorships versus other entities, and recall profit reinvestment limitations.
• Recognize the taxes imposed on self-employed persons and state the possible S corporation solution, identify the quarterly reporting of estimated taxes, determine how sole proprietorship assets are characterized on disposition, and identify income splitting and estate planning devices available for such business owners.

Chapter 2

• Determine the tax treatment of family and publicly traded partnerships including the special benefits of family partnerships, and specify the partnership exclusion requirements and the tax treatment of partnership expenses paid by a partner.
• Recognize the relationship of deductions to outside basis, how outside bases can be increased, partnership filing requirements, and failure to file penalties, identify the allocation timing partnership income and deductions, and state the limitations on the choice of a taxable year.
• Identify types of transactions between a partner and the partnership that can influence the treatment of the transaction, and specify the character of property contributions under §721.
• Determine inside and outside basis, including complications caused by the contribution of services, specify their interplay with the at-risk rules, their impact on the disposition of partnership interests, and their effect on partnership distributions.

Chapter 3

• Identify the elements of limited liability companies (LLCs) that distinguish them from other entities, particularly C corporations, and specify the benefits of an LLC and their effect on choosing a form of entity.
• Cite reasons for choosing an LLC over S corporations, limited partnerships, and general partnerships and, in contrast, determine the drawbacks of LLC entity selection.
• Identify several ways to use the LLC form effectively and thereby fit client objectives and expand business-planning opportunities.
• Recognize the varying tax consequences of forming or converting to an LLC including possible tax differences using the California Limited Liability Company Act.

Chapter 4

• Determine a “corporation,” for tax purposes, and identify regular corporations from other entities.
• Identify “personal service corporations” and small business investment companies including their requirements & tax treatment, and recognize the transfer of money, property, or both by prospective shareholders to a corporation under §351.
• Specify the requirements of §1244 stock and the small business stock exclusion, and determine the differences between start-up expenses and organizational expenses.
• Identify corporate pitfalls and dangers citing tax recognition of the entity, tax rates, AMT repeal, capital gains & losses under §1212, and the dividends received deduction under §243.
• Specify necessary corporate action for making allowable corporate charitable contributions and avoiding tax penalties under §541 and §531, and identify the treatment and impact of tax-exempt income, accounting methods, and consolidated returns.

Chapter 5

• Determine what constitutes an S corporation and specify the advantages and disadvantages associated with them.
• Identify variables that impact whether a business can choose or continue S corporation status, ways that an S corporation may be terminated, and the related procedures that must be followed.
• Recognize S corporation tax treatment including special areas involving income and expenses and built-in gain.
• Identify cash basis related party rules, fringe benefit limitations, and the application of the chameleon rule.

Chapter 6

• Recognize basic fringe benefit planning by specifying “income” under §61, determine statutory fringe benefits under tax law, identify the fair market value of a fringe benefit under the general and special valuation rules, and cite the special two-month pour-over accounting rule.
• Specify the rules for §79 group term life insurancespecifying how to implement proper coverage and report excess coverage, recognize the mechanics of §105 self-insured medical reimbursement plans, identify the §119 rules for excluding the value of meals and lodging, and determine what constitutes a “cafeteria plan.”
• Identify the requirements and limits of employee educational assistance programs and dependent care assistance, determine excludable income from qualified employee discounts under §132(c) and de minimis fringes, and specify valuation methods for employer-provided automobiles, and identify the requirements and benefits of adoption assistance programs.
• Recognize the wage and salary treatment of moving expense reimbursements, and identify ERISA compliance requirements of welfare benefit plans.

Chapter 7

• Specify the compensation base for qualified plan contributions, cite the classification of qualified retirement plans including profit sharing and defined contribution plans, and identify the application of PBGC insurance to qualified plans.
• Specify the requirements of the basic forms of qualified pension plans, identify basic qualified plans specifying their effect on retirement and death benefits, recognize the tax impact of employee voluntary contributions, and state the 10-year termination rule.
• Determine the differences between self-employed and qualified plans for other business types, identify the impact of controlled businesses, specify the requirements and limits of IRAs, identify tax-free Roth IRA distributions, and cite the coverage requirements for SEPs.

Chapter 8

• Identify the advantages of nonqualified deferred compensation, recognize incentive nonqualified compensation, and determine “constructive receipt” and “economic benefit.”
• Specify the various methods to fund a nonqualified deferred compensation plan and identify the basic accounting methods associated with nonqualified plans.