Interpreting Tax Research

Tax Representation Guidelines
Please respond to the following:

Compare the American Institute of CPAs’ (AICPA) Statements on Tax Standards (SSTS) and the Treasury Department Circular 230 rules to practice before the Internal Revenue Service (IRS). Suggest which document creates better guidance in the preparation of tax returns and written advice provided to taxpayers.
Imagine that you are a CPA, and there is a conflict in the Circular 230 and the SSTS. Identify the guidelines that you would use, and support your selection

“Interpreting Tax Research” Please respond to the following:

From the e-Activity, evaluate the importance of the principal issue litigated in the case in question, using the tax research steps outlined in Appendix A of your text.
From the e-Activity, give your opinion on the adequacy of the ruling in the case based on the Medicare guidelines, petitioners expensing policy, and the tax laws identified in the case.

Discussion 1

“Transfers to Controlled Corporations” Please respond to the following:

Create a scenario where the transfer of property to a controlled corporation under Section 351 of the Internal Revenue Code (IRC) results in the taxation to the transferor. Evaluate the fairness of the taxation of the transaction to the transferor. Provide a tax-planning strategy to prevent taxation of similar transfers.

From the e-Activity, examine the differences in the treatment of nonmonetary transactions in corporate formations under GAAP versus under Section 351 of the IRC. Suggest the main possible reason for these differences.

Discussion 2

“Related Party Losses” Please respond to the following:

Section 267 of the IRC disallows a deduction on losses realized on the sale of property and a deduction for accrued expenses between a corporation and a controlling shareholder. GAAP does not include this disallowance provision. Create an argument for allowing a loss on a sales transaction between a controlled corporation and shareholder when the transaction includes an independent appraisal and the loss is similar to losses incurred in arm’s length transactions. Provide an example to support your argument.

Suppose clients request that their tax return preparation include the loss on the sales transaction identified between the controlling shareholder and corporation, as described in Part 1 of this discussion. Analyze the potential impact and required disclosures resulting from the inclusion on the financial statements and the tax return of the corporation. Examine the implications of the uncertain tax position in this situation on the requirements of Circular 230 and the Statements on Tax Standards (SSTS).

week 3Section 306 of the IRC was enacted by Congress to prevent tax avoidance by distributing certain stock to a shareholder in a nontaxable stock dividend. Section 306 prevents shareholders from using a preferred stock bailout to convert ordinary income into a capital gain. Analyze the key provisions of Section 306 of the IRC, and outline a tax- planning strategy geared toward redeeming preferred stock with sale or exchange treatment as an alternative to Section 306.

ACC565 Week 3 Discussion 2

Per the text, the personal holding company (PHC) tax penalizes taxpayers that enter into tax-motivated transactions designed to shelter passive income of closely held corporations from higher individual tax rates. Suppose you represent a professional athlete who is the majority owner of a corporation. The corporation has several personal service contracts with advertising agencies and endorsements for your client in addition to passive income. Propose a plan in which you eliminate the potential for the PHC tax on the client’s corporation.

The same client provides significant information on passive income at the end of the year, creating a potential PHC tax liability. Outline a plan for the current year in which you reduce the total tax liability for the client and include a proposal for future years to prevent PHC tax liability

week 4

“Corporate Liquidations” Please respond to the following:

From the e-Activity, evaluate the appropriateness of the techniques used and the common issues pursued by the IRS in corporate liquidations and dissolutions. Create an argument to defend the client if the IRS pursues the assignment of income doctrine or the clear reflection of income doctrine on a cash-basis corporation, as reflected in the Examining Officers Guide (EOG).

Outline a plan of liquidation for a client that liquidates two (2) years after incorporation by transferring loss property under IRC Section 351. The plan of liquidation should be defensible against the IRS in an audit that challenges the plan as having a tax-avoidance purpose. Analyze the consequences in an IRS audit of a subsequent reincorporation after a corporate liquidation and recognition of losses.

Discussion 2

“Taxable Acquisition Transactions and Nontaxable Reorganizations” Please respond to the following:

IRC Section 338 allows a deemed sale election generating immediate taxation to the target corporation and a stepped-up or stepped-down basis to the price paid by the acquiring corporation for the target corporation stock plus liabilities on the deemed sale. Examine at least one (1) benefit of a Section IRC 338 liquidation election for a target corporation. Create a situation which demonstrates a favorable Section IRC 338 liquidation election for a target corporation.

Identify one (1) consequence of a nontaxable reorganization, and offer an alternative to eliminate the negative effect of the identified consequence.

“Consolidated Net Operating Losses and Intercompany Transactions” Please respond to the following:

A client is pursuing the acquisition of Corporation A that has a substantial net operating loss. Corporation B is a member of the controlled group and is currently included in the consolidated tax return that also has a net operating loss. Analyze the potential advantages and disadvantages of Corporation B’s acquisition of Corporation A and Corporation A’s subsequent inclusion in Corporation B’s consolidated tax return. Suggest the key tax issues the client should consider in determining the deductibility of the net operating losses.
From the e-Activity, create a tax-planning strategy for a client geared toward complying with the final regulations issued by the IRS under Code Section 267 (f). (Note: Code Section 267 (f) discusses the time taken into account for deferred losses on the sale or exchange of property between members of a controlled group.) Recommend the alternatives that you believe would be best suited for the client to use in order to both take advantage of losses between members and remain in compliance with related regulations. Justify your response.
ACC565 WEEK 5 DISCUSSION 2

“Consolidated Tax Returns” Please respond to the following:

Corporations P, S, and C are members of a parent-subsidiary controlled group filing a consolidated tax return. Corporations A and B are members of a brother-sister controlled group that cannot file a consolidated tax return. Design a strategy geared toward creating an affiliated group which makes Corporations A, B, P, S, and C all eligible to file a consolidated tax return.
Assess the adequacy of the schedule M-3 Part 1 in creating transparency between the consolidated financial statements and the consolidated tax returns of the corporations discussed in the first part of this discussion. Suggest at least two (2) modifications to the M-3 that you can use to identify possible issues the IRS would most likely examine on a consolidated tax return.

WEEK 6 DISCUSSION 1

“Partnership Tax Year” Please respond to the following:

The IRC restricts the choices for a partnership‘s tax year to prevent the deferral of tax. This causes most partnerships to adopt a calendar year for tax reporting. From the e-Activity, create a scenario using a fiscal tax year which allows a partnership to defer taxes that meet the requirements of Sections 706 and 444 of the IRC.
Suggest at least one (1) major reason why Congress allowed the exception to the calendar year for partnership tax year elections.
WEEK 6 DISCUSSION 2

“Limited Liability Partnerships” Please respond to the following:

As discussed in the text, large accounting firms and other professional firms operate as limited liability partnerships (LLPs). Contrast the LLP form of business under state laws to the LLP for tax purposes.
Suggest the major reasons why a new entity would choose a LLP over a traditional partnership for tax purposes.

week 7

“Deductibility of S Corporation Losses and Deductions” Please respond to the following:

Per the text and IRC, losses and deductions of an S corporation pass through to the shareholders of the corporation and are limited to the shareholders’ basis in the S corporation. Suggest a plan for a client to increase the deductible pass through loss and deductions over the initial investment from a new wholly owned S corporation.

Analyze the major advantages and disadvantages of using the plan you created on tax planning in the first part of this discussion for future years.

Week 7 Discussion 2

“S Corporation Distributions and Taxation” Please respond to the following:

From the e-Activity, differentiate between the treatment of S corporation distributions from corporations having no earnings and profits, and corporations having accumulated earnings and profits. Suggest the most significant reason for the difference in the treatment of distributions. Justify your response.

Per the text, Last In, First Out (LIFO) recapture tax and built-in gains tax are applied to S corporations at the corporate level. Create a tax-planning strategy to prevent the S corporation from the payment of these taxes.

week 8
Per the text and IRC, a gift occurs when the transfer of property is complete and the gift is valued at the date of the transfer. Imagine a scenario in which a client creates an irrevocable trust for his two (2) grandchildren to ensure college education expenses are paid. The trust agreement requires the distribution of the income from the trust directly to the college or university the grandchildren attend for tuition while they are in college and directly to the grandchildren until age twenty-five (25) after completing college. The income from the trust is distributed directly to the grandchildren until they reach age twenty-five (25), if they do not attend college. When the grandchildren celebrate their twenty-fifth (25th) birthday, the income stream distribution reverts to the client’s spouse, and the spouse receives the property upon the death of the client. Examine the gift tax consequences of the transaction based on the use of the irrevocable trust, as compared to direct payments to the grandchildren

From the e-Activity and the scenario from Part 1 of this discussion, create a tax strategy which ensures that gift tax is paid on the property prior to the death of the client and that the client may use the full benefit of the gift-splitting election.
Discussion 2
Per the text, gift tax-planning strategies can reduce tax for estate tax-planning purposes. Estate tax planning is very important for wealthy clients. Examine one (1) tax-planning strategy that a CPA could use for lifetime giving that would reduce overall estate and gift taxes for a client.

week 9
“Fairness of the Federal Estate Tax” Please respond to the following:
Per the text, a voluntary compliance system is built on the fairness of the system. The federal estate tax is often referred to as a death tax on wealthy individuals. The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 provided for periodic increases in the exemption amount for decedents who die after December 31, 2001, until the filing threshold reached $3.5 million in 2009. The tax was repealed in 2010 and later reinstated beginning in 2011. From the e-Activity, determine one (1) major factor contributing to the fairness of estate taxes on wealthy individuals prior to EGTRRA and the current structure of the federal estate tax.
Per the text, several arguments exist for the repeal of the estate tax. From the e-Activity, defend the most significant argument advanced in the repeal of the estate tax by its opponents. Justify your

Discussion 2

“Income and Principal in Fiduciary Accounting” Please respond to the following

The Uniform Principal and Income Act of 2000 (Uniform Act) allows the trustee to make adjustments between the principal and income accounts as necessary under certain requirements. Examine the major reasoning for allowing such transfers by the trustee and recommend alternatives to the allowance of the adjustments. Justify your response.

Create a scenario that demonstrates an adverse effect on the remainderman resulting from a transfer between principal and income by the trustee.

week 10
Imagine a situation in which a client under audit by the IRS omitted $100,000 in income. From the e-Activity, examine the major factors relative to the omission by the client that would result in a criminal investigation, rather than a civil fraud proposal by the IRS.