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Sample Chapters from Past Workbooks

Content sample provided below to evaluate the workbook’s quality.

Ch 12 on Business Entities (2015)

PRELIMINARY TOPICS FOR 2016 NATIONAL INCOME TAX WORKBOOK 

New and Expiring Legislation 

o Path Act and CCA

o Any other new legislation

Rulings and Cases 

o Tax research: increased coverage of what is substantial authority and the differences among TAM, CCA, letter rulings, notices, etc. Cross reference to Penalties chapter and Ethics chapter discussion of lack of substantial authority

 Tax Court website citation for tax research

 Full disclosure: maybe an Ethics issue

o Include both the CCH and RIA citations

o IRS user fees chart (cut and paste from IRS notice)

Rates and Tables 

o Use same format

o Include deduction limits for leased autos

o Include the 2014 Tax Rates chapter chart on making and revoking elections

Business Issues 

o Casualty Losses

o Tax credits

 Federal taxation of state tax credits (Mains case, tax benefit rule change)

 Conservation easement tax credit: VA, CO, in VA credit can be sold and qualifies for like kind exchange

o Independent contractor vs. employee

 How they are characterized (use Uber as an example)

 Impact on business (e.g. ACA determination of ALE)

 1099-Misc

 Reference to penalty

 Get the W-9 up front

 Withholding issue if not

 File a 1099 with all zeros then intention disregard penalty applies

o K-1s for S corps and partnerships

 Basis issues

 Sale of passive activity frees up loss

 Example from a PTR or S corp with every line filled, and where does it get reported

o Rentals

 Repair regulations as applied to rentals (small business example)

 AirBnB and VRBO

o 14 day rental rule?

o Greater than 30 day rule (violated by occupant staying longer)

o Note re state lodging tax, hospitality tax

o Repair regulations

 Updates and new guidance

 New thresholds for de minimis safe harbor

 Examples in Agriculture and Rentals

 Self-employment tax on later sale

Agriculture and Natural Resources 

o Hoop barn depreciation

 Define a hoop barn, and use a picture on the PP slides

 What is the life: 20 year, versus 10 year versus 7 year (fungible commodity storage)

 Does warranty of fabric (20 years) frame (50 years) affect life determination

 Repair regulation application

o New legislation

 Donations of food (PATH act)

 Bonus for trees and vines

 UNICAP elect out

 Can taxpayer use BONUS

 $2,500 application for heifers

 Reporting of recapture

 Reporting of LTCG

o Valuation of growing crops

 How, who, tax consequence, or other valuation needs

 Valuation for Sec. 754 election

 Valuation for conversion from C to S corp

 Valuation for estate

 Valuation for 336(e) election (treatment of stock transfer as asset sale)

 Methods of accounting issues that support the documentation of transaction

o Payments to 4-H or FFA member

 Entity responsibility

 Recipient responsibility

 Example: sale of $10,000 grand champion, $1,000 animal, $9,000 premium

 Need 1099 for $9,000

 Who issues the 1099: entity who collect the money, 3rd party payer?

 Who paid and deducted expenses (parents)

o Multiple entity issues

 Buying equipment in operating LLC to claim section 179 deduction and later transfer to equipment LLC

 Non-corporate lessor planning

 Practice note re state sales tax issues for “non-farmer” purchase of farm equipment by LLC leasing

 Liability

 Estate planning transition issues

o CRPs

 NIIT relative CRP for pre 65 versus post 65 age

 2008 Farm Bill outcome

 Morehouse case for subsequent sale

 Active farming to rental subsequent sale (last year’s book)

 Wetlands Credit

 Practitioner note re 1099 MISC for CRP payments and services

Proper reporting to eliminate the SE tax, ticking the box on the Sch. SE.

o AG and natural resource issues Q&As

 Wind farm/solar long term lease treated as sale (1099 for value of future lease payments), capital or ordinary

 Pipeline easements damages to property

 Conservation easements, donation and any limitations or phaseouts (is a donation following a sale an itemized deduction subject to phaseout)

Individual Issues 

o Charitable contributions

 New law on food donations

 Contributions of RMDs to charity

 Substantiation/acknowledgment by charity (note re must be timely)

o Proposed regulations on innocent/injured spouse relief

 Form 8857 is changed and new rules

 Innocent spouse needs to sign, or can POA sign

 Separate the two: innocent spouse, injured spouse (marries a tax problem)

o Fantasy football

 Gambling, hobby, or business ( NY says it’s gambling)

 How to report income

 Allowed expenses and limitations

 Limitations on losses

o Schedule H

 Home care for children, seniors

 Paid by LTCI – who is doing the hiring?

 Fringe benefits, use of car

 Can use flex account funds to pay for childcare (nanny)

o Airplane and auto expenses

 How they are computed

 How they are reported on the W-2

o Taxation of clergy, Mennonite, and Amish

o Cloud/Crowd funding; tax treatment of contributor and recipient

IRS Issues 

o New Form 2848

 Included new group of preparers

 What do we do with the current 2848s on file?

 Single name versus two names on the 2848 (joint filers)

 How long old 2848 remain on the IRS system

 Separate 2848 for FBAR issues

o Identity theft

 Practitioner note as to how state may handle

 Paper filing v. e-filing, is one safer?

 New IP PIN rules

 Two new IRS notices

 New driver’s license number required

 Form 14039

o FBAR chart with revised deadlines (maybe in new legislation)

o Transcripts

 How to request

 Difference between account transcript and return transcripts

o Levels of Representation before IRS and//or Tax Court by various credentials

 Confidentiality and ethics rules (apply to attorneys differently than others)

 The listed credentials, where they can practice, and what they can do

 Expirations (e.g. when does third party designation on return expire)

o IRS appeals

 Fast track and access to that process

 How to approach a protest to IRS

o Correspondence audit – how to get it transferred to the local office

Penalties and Defenses 

o FBAR penalties

o Information reporting penalties

o Rev Proc (or Rul.) 84-35 (10 partners or fewer exception to the penalty)

o ACA penalties

o Failure to deposit

o Individual

o Business

o Social Security interlinkage

o Substantial authority

o Penalty defenses and relief

Ethics 

o Case studies

 Put the “recommended” answer at the back of chapter

 More than last time (Chris Bird has many)

 Include Circular 230 rules in the examples

 Substantial authority

 Advising re choice of entity – practice of law

o Conflict of interest

 Example of disclosure and waiver

o Engagement letter

 What should be in it

 Identify the client

 Sample (or key points)

o Taxpayer rights (reference to discussion in New Legislation)

o Protecting sensitive electronic data

 Duty to keep up to date

 Paperless, wireless, cloud issues

 Security plan, new IRS rule 3 years ago

 What to do with a data breach/disclosure

 Document on desk, inadvertent disclosure

 Duty of employees: mail opener

 Mail/email sent to the wrong recipient

Retirement 

o Self-directed IRA

 IRA prohibited Transactions

 Investing in real estate in IRA, owner operation rule and attribution rule

o Retirement Distributions, including RMDs

o What plan is best for which business (size, type) SEP, 401-K, SIMPLE

o Changes in SS as of May 1

 Taxability of SS benefits

 When to start – impact on other taxes and taxability of SS benefits

o Retirement planning strategies, real life management tied to tax in a financial context

 Contributions to IRA reduce AGI lowering AGI for Medicare premium amounts

 Examples

o “Back door” Roth transactions, legality

o Buying and Selling Entities

 338(h)(10), and 336(e)

 Selling by retiring shareholders and partners

 Valuing business for sale

o Inherited IRAs

Commented [PEH1]: Keep in and make different from last year, or maybe just practitioner’s note or Q&A with references to prior discussion

Commented [PEH2]: We had an 11 page issue on inherited IRAs in the 2014 Retirement Chapter. It could wait to another year to be repeated if we need the room. Maybe Q&A re IRA inherited by minor and kiddie tax, with reference to 2014 discussion.

Business Entities 

o S-corp Issues

 Built in gains new law and an example

 Making the election late, Form 2553

 Conversions to S

 Convert C to an S corp

 Convert single member LLC to S corp

 Convert sole proprietorship to S corp

 How to close out an S corp on death of a shareholder

 Fringe benefits in S corps

 Health insurance

o Partnership Issues

 New hot asset regulations

 Section 754 basis adjustments

o Nonprofits

 New rules for submission of 1023

Death of a Taxpayer 

o Estate/Trust Issues

 ABC trust and the death of first spouse

 Failure to establish and fund B trust

 Applicability of trust planning with increased exemption amount and portability

 Dealing with older estate plan that cannot be changed (decanting)

 Practitioner note re sale of inherited property where there was no Will/probate

o Income tax issues

 POA

 Unused carry forwards (NOL, charitable contributions)

 Income to the estate, or the beneficiaries

 1041 required, what if not there?

o Basis issues

 Life estate

Related Parties Issues 

o Installment sales

o Sale of property at a loss

o IRC Sec 179

o Gain on sale or exchange of depreciable property

o Educational Assistance Programs

o Sec 139 disaster relief payments

o Include a table, and cross references to related party topics in past books

ACA 

o Updates and new guidance

o Does the ACA apply

 Determination of an ALE: Section 414 controlled groups

 Other attribution rules, family relationships and ownership

o Issues for smaller employers and self-employed

o Marriages during the year and the PTC

o Child turns 26 within the year and no longer on parent’s policy

o Q&A scenarios

o Reference to penalties

Financial Distress 

o Examples in areas affected by oil industry decline, and agriculture

o 1099 A and 1099 C

 Flow through implications of entities

 Cancellation of debt versus discharge of debt

 Clark TC memo, lenders not taking action within 36 months since last payment.

 1099C validity

o Bad debt, foreclosure, CODI

 Recourse or nonrecourse debt

 Deed in lieu of foreclosure

 Sec. 108 exclusions from income

Taxation of Foreign Income 

o Streamlined compliance issues (people coming forward)

o Filing requirements of Canadian pensioners

o Non-resident filers

o H2-A (nonresident dependency for Canadian or Mexicans on a US return)

o ITIN requirements

Domestic Production Activities Deduction 

o Mechanics

o Flow through discussion of the DPAD taken at individual level

o Check IRS calculations, they may be in error

o Industry specific discussion/examples

 Construction

 Ag

 Coop

 Manufacturing

OTHER: Use template to highlight “New Law”

Power Point slides

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