2015 EA Exam Review Course Part II: Business Taxation

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1 Table of Contents Business Entities... 1 General Information... 1 Sole Proprietorship... 1 Partnership... 2 Corporation... 3 S Corporation... 4 Limited Liability Company... 5 Employer Identification Number... 6 Employee or Independent Contractor... 7 Family Employees Books and Records Accounting Periods Calendar Year Fiscal Year Short Tax Year Accounting Methods Cash Method Accrual Method Hybrid Method Inventories Change in Accounting Method Capital Expenses Basis of Assets Cost Basis Adjusted Basis Basis Other Than Cost Basis Reference Chart Business Entities Review Questions Business Entities Review Answers Partnerships Definitions Forming a Partnership Family Partnerships Partnership Agreement Contributions of Property Contribution of Services Exclusion from Partnership Rules Tax Year Exceptions Terminating a Partnership Converting to LLC NATP xi

2 Form Penalties Electronic Filing Income or Loss Separately Stated Partnership Choices Partnership Passive Activity Portfolio Income Uniform Capitalization Distributive Share Schedules L, M-1, M-2 and M Partner Provisions Basis of Partner s Interest Limits on Losses Partner s Exclusion and Deductions Partnership Distributions Partner s Gain or Loss Partner s Basis for Distributed Property Partner s Dealings with Partnership Sale or Exchange of Property Guaranteed Payments Disposition of a Partner s Interest Sale, Exchange, or Other Transfer Liquidation of Partner s Interest Partnership Review Questions Partnership Review Answers Corporations Filing Requirements Penalties Estimated Tax Final Return Accounting Methods and Periods Recordkeeping Transfers to a Corporation Exchange of Property for Stock Stock for Services Shareholder Basis Corporation Basis Capital Contributions Nonshareholder Contributions Bond Premiums Income, Deductions, and Special Provisions Cost of Getting Started Related Persons xii 2015 NATP

3 Below-market Loans Charitable Contributions Dividends-received Deduction Losses Capital Losses Net Operating Loss Passive Losses At-risk Limits Taxable Income Corporate Tax Credits Alternative Minimum Tax Accumulated Earnings Tax Corporate Earnings and Profits Schedule M Distributions Money or Property Distribution Distribution of Stock or Stock Rights Constructive Distribution Reporting Dividends and Other Distributions Liquidation Redemption Distributions to Related Parties Controlled Groups Parent-subsidiary Group Brother-sister Group Combined Group Apportionment Personal Service Corporation Reportable Transactions Corporation Review Questions Corporation Review Answers S Corporations Requirements for S Corporation Status Ineligible Corporations Other Shareholder Options Electing S Corporation Status Basics of S Corporations Pass-through Entity Form 1120S General Instructions Penalties Electronic Filing Accounting NATP xiii

4 Passive Activity Limitations Income and Expense Items S Corporation Taxes Accumulated Adjustments Account Shareholder Provisions Allocation of Income, Loss, Expense, and Credit Basis Distributions Termination of S Status Revocation Ceasing to Qualify Passive Investment Income Termination of a Shareholder s Interest S Corporation Review Questions S Corporation Review Answers Business Financial Information Business Income Bartering Income Rental Income Interest Income Dividends Canceled Debt Miscellaneous Income Prepaid Income Items Not Considered Income Cost of Goods Sold Inventories Uniform Capitalization Business Expenses and Deductions Employees Pay Business Bad Debts Car and Truck Expenses Gifts Insurance Interest Legal and Professional Fees Retirement Plan Contributions Rent Expense Taxes Travel, Meals, and Entertainment Business Use of Residence Miscellaneous Expenses Nondeductible Expenses Depreciation, 179 Deduction, Amortization, and Depletion xiv 2015 NATP

5 Domestic Production Activities Deduction Net Operating Loss Determining the NOL When to Use an NOL Alternative Minimum Tax Net Operating Loss Reportable Transactions Business Financial Information Review Questions Business Financial Information Review Answers Sales, Credits, and SE Tax General Information Like-kind Exchange Deferred Exchange Partially Nontaxable Multiple Property Exchange Related Party Other Nontaxable Exchanges Other Transfers Abandonment Foreclosure and Repossession Involuntary Conversion Sale to Related Party Transfer to a Spouse Other Dispositions Reporting Gains and Losses Depreciable Property Form Business Credits General Business Credit Credits for Which a Separate Limit Applies Self-employment Tax Self-employment Income Sales, Credits, and SE Tax Review Questions Sales, Credits, and SE Tax Review Answers Specialized Returns and Taxpayers Form General Trust Information Filing Estimated Tax Distributable Net Income Income Distribution Deduction Abusive Trusts Separately Stated Items Self-employed Retirement Plans Simplified Employee Pension NATP xv

6 Savings Incentive Match Plans for Employees Qualified Plans Penalties Retirement Savings Contributions Credit Retirement Plan Reporting Exempt Organizations Exemption Filing Tax Contributions Special Rules for Farming Farm Income Farm Income Averaging Farm Expenses Employment Tax Responsibilities Specialized Returns Review Questions Specialized Returns Review Answers Appendix Index xvi 2015 NATP