Additional Information for Reg.

Line 11: Alternative Tax Net Operating Loss Deduction:

This is the sum of the alternative tax net operating loss (ATNOL) carryovers and carrybacks to the tax year.

3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.

4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).

Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. § 362.

But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations.

If you hold the stock for less than a year before you sell it, any gains will be considered compensation and taxed as such.

If you hold the shares for more than one year, any profit will be taxed at the usually lower capital gains rate.

Under the qualifying relative test, there's no age requirement. However, the child's gross income must be less than $4,050 for the year.

You must also provide more than half of the dependent's total support. The child must also meet all of the other requirements.

Registration of Exchanges, Associations, and Others The Act requires a variety of market participants to register with the Commission,

including exchanges, brokers and dealers, transfer agents, and clearing agencies. Registration for these organizations involves filing disclosure documents that are updated on a regular basis.

Travel. The corporation cannot deduct travel expenses of any individual accompanying a corporate officer or employee, including a spouse or dependent of the officer or employee, unless:

☐ That individual is an employee of the corporation, and ☐ His or her travel is for a bona fide business purpose and would otherwise be deductible by that individual.

☐ Distributions in redemption of stock (section 302). ☐ Distributions in complete liquidation of the corporation (sections 331 through 346). ☐ Distributions in corporate organizations (section 351). Also see Property Exchanged for Stock , earlier.

☐ Distributions in corporate reorganizations (sections 354 through 368). ☐ Certain distributions to 20% corporate shareholders (section 301(e)).

"Disposable Income" in Chapter 11 Cases. Unlike Chapter 13, Chapter 11 does not require individual debtors to turn over their "disposable income" to a trustee.

The total value of the debtor's plan payments, however, must equal at least the amount of his or her "disposable income" over a five-year period.

For this example, assume Mark does not have any debt basis. Using the ordering rule, stock basis is first increased by items of income - so our initial stock basis of $15,000 is increased by the $4,000 net section 1231 gain. Our stock basis before distributions is $19,000.

Then we reduce stock basis by distributions of $12,000. Since the shareholder has adequate stock basis before distributions, the distribution will reduce stock basis to $7,000 and the $12,000 distribution is non-taxable.

Rental Activities Generally, except as noted below, if the gross income from an activity consists of amounts paid principally for the use of real or personal tangible property held by the partnership, the activity is a rental activity.

There are several exceptions to this general rule. Under these exceptions, an activity involving the use of real or personal tangible property isn't a rental activity if any of the following apply.

For property and service liabilities, for example, economic performance occurs as the property or service is provided.

There are special economic performance rules for certain items, including recurring expenses.

Constructive stock distributions. You must treat certain transactions that increase a shareholder's proportionate interest in the earnings and profits or assets of a corporation as if they were distributions of stock or stock rights.

These constructive distributions are treated as property if they have the same result as a distribution described in (2), (3), (4), or (5) of the above discussion. Constructive distributions are described later.

Let's start with how they're similar. Neither a nondeductible IRA nor a Roth IRA gets you a tax deduction for your contribution. So in both cases you are investing after-tax dollars. And the contribution limits are the same as well.

These contribution limits also apply to traditional deductible IRAs. And, by the way, the limits are the max you can contribute to all types of IRAs combined in a single year, which, unfortunately, means you can't contribute the max to a Roth IRA, a deductible IRA and a nondeductible IRA.

Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Thus, on your 2016 return, you can deduct fees paid in 2016 for preparing your 2015 return.

These fees include the cost of tax preparation software programs and tax publications. They also include any fee you paid for electronic filing of your return.

Buying company stock at a discount. Many large companies offer Employee Stock Purchase Plans (ESPP) that let you buy your employer's stock at a discount.

These plans are offered as an employment incentive, giving you an opportunity to share in the growth potential of your company's stock (and by implication, work hard to keep the stock price moving ahead).

(ii) The person had implemented reasonable policies and procedures, taking into consideration the nature of the person's business, to ensure that individuals making investment decisions would not violate the laws prohibiting trading on the basis of material nonpublic information.

These policies and procedures may include those that restrict any purchase, sale, and causing any purchase or sale of any security as to which the person has material nonpublic information, or those that prevent such individuals from becoming aware of such information.

If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person.

These rules also deny the deduction of losses on the sale or exchange of property between related persons.

What Is UNICAP All About? You may have heard the terms UNICAP or 263A, but what does it mean? IRC Section 263A details the uniform capitalization rules that require certain costs normally expensed be capitalized as part of inventory for tax purposes.

These rules apply to: (1) real or tangible personal property produced by the taxpayer, and (2) real or personal property acquired by the taxpayer for resale.

Some employers offer Section 125 plans. These are also called cafeteria plans or flexible spending accounts (FSAs).

They allow employees to reduce their salaries for one or more nontaxable benefits. You can use common flexible spending accounts to pay childcare or medical expenses.

This ratio is then multiplied by total ending inventory resulting in the UNICAP adjustment.

This adjustment is then added to the ending inventory resulting in the ending tax inventory reported on your tax return.

Chapter 11, which is more expensive than Chapter 7, is typically intended for medium- to large-sized businesses, but smaller businesses and sole proprietors may also want to consider this type of bankruptcy. Unlike Chapter 7, Chapter 11 does not liquidate assets, only restructures debts.

This allows a debtor to protect an important asset, such as a business, from liquidation. In the case of sole proprietorships and similarly small businesses, Chapter 11 bankruptcy affects both business and personal assets.

5) Qualified Costs And Expenses In general, any legitimate medical expenses will qualify, including the costs of diagnosing, treating, easing, or preventing disease.

This also includes the cost of health and dental insurance premiums and possibly long-term care insurance premiums. Also on the list are eye exams, eye glasses, contact lenses, and eye surgery. The list of qualified expenses is quite extensive.

The bargain element is calculated as the difference between the exercise price and the market price on the day you exercised the options and purchased the stock ($45 - $20 = $25 x 100 shares = $2,500).

This amount should be included in the total wages shown in Box 1 of the 2016 Form W-2 from your employer because this is a disqualifying sale (meaning that your gain does not qualify for capital gains treatment for which the rates are lower than for ordinary income in 2016).

The commitment period in Chapter 13 cases can be shortened if all unsecured creditors are paid in full. Under no circumstances, however, can a Chapter 13 plan be extended longer than five years.

This can make it difficult or impossible to confirm a Chapter 13 plan in cases where the debtor owes significant secured debt that must be paid to retain assets needed to continue in business.

Line 18: Post-1986 Depreciation: On this line, you enter the depreciation difference for regular and AMT purposes. For AMT purposes, you generally must depreciate (deduct) business assets over a longer period of time than you can for regular tax purposes.

This creates a difference between regular tax depreciation and AMT depreciation. This is an entry that does self-correct. By the time the asset is completely written off, you have received the same deduction for both regular and AMT purposes.

Any general business credit not allowed may be carried back 2 years and carried forward 20 years. Credit for paying the AMT. You might get a tax credit for Alternative Minimum Tax paid in a prior year.

This credit, calculated on Form 8801: Credit for Prior Year Minimum Tax calculates how much of the AMT was related to deferral items, which generate credit for future years, as opposed to exclusion items which are not deductible for AMT, and consequently are lost.

The question of whether there is substantial authority for a taxpayer's position requires an objective analysis of the law and its application to the relevant facts.

This exception applies where there are authorities supporting the taxpayer's per-return treatment of an item and those authorities are substantial in relation to authorities, if any, supporting a contrary position.

In addition, the partnership may not deduct membership dues in any club organized for business, pleasure, recreation, or other social purpose.

This includes country clubs, golf and athletic clubs, airline and hotel clubs, and clubs operated to provide meals under conditions favorable to business discussion.

Situation 1: Disqualifying Disposition Resulting in Short-Term Capital Gain. In this situation, you sell your ESPP shares less than one year after purchasing them. Example:

This is a disqualifying disposition (sale) because you sold the stock less than two years after the offering (grant) date and less than a year after the exercise date.

Gain from property distributions. A corporation will recognize a gain on the distribution of property to a shareholder if the FMV of the property is more than its adjusted basis.

This is generally the same treatment the corporation would receive if the property were sold. However, for this purpose, the FMV of the property is the greater of the following amounts.

In calculating the AMT you cannot take the deductions for personal exemptions. Because the amount on line 38 or 41 of the 1040 is used as the starting point for computing the AMT, the personal exemptions (which are claimed on line 42 of the 1040) are used for AMT purposes.

This is one of the reasons why married couples with children are often affected by the AMT. If you are a married couple with three children, you lose $20,250 ($4,050 x 5) in personal exemptions under the alternative minimum tax in 2016.

3. You want to move money into a Roth IRA: For high earners who are ineligible to contribute to a Roth IRA, a little nondeductible IRA fancy footwork can get you into a Roth via the back door by circumventing the income limits.

This is what's known as the backdoor Roth strategy,and it involves converting the nondeductible IRA into a Roth IRA, ideally as quickly as possible, so that you don't have to pay taxes on any gains that occur before the conversion.

Line 14: Incentive Stock Options:

This line is another common problem for people affected by the AMT. If you exercise an Incentive Stock Option (ISO) but do not sell the stock in the year of exercise, the transaction is not taxable that year for regular tax purposes.

The exercise price is the amount that you can buy the stock for according to your option agreement. And here's the kicker: Your company must report the compensation element as an addition to your wages on your Form W-2 in the year you exercise the options.

This means the IRS knows all about your windfall, and treats it as, compensation income, just like your salary. You will owe income tax and Social Security and Medicare taxes on the compensation element.

☐ The corporation's average annual gross receipts have not exceeded $5 million for any prior 3-tax-year period. For more details, see Regulations sections 1.448-2(a) (2) and 1.448-1T(f)(2).

This provision does not apply to any amount if interest is required to be paid on the amount or if there is any penalty for failure to timely pay the amount.

Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable.

This rule applies both to individuals and to groups who transfer property to a corporation. It also applies whether the corporation is being formed or is already operating. It does not apply in the following situations.

Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange.

This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated.The basis of any other property you receive is its fair market value on the date of the trade.

Contributions to the Partnership Generally, no gain (loss) is recognized to the partnership or any of the partners when property is contributed to the partnership in exchange for an interest in the partnership.

This rule doesn't apply to any gain realized on a transfer of property to a partnership that would be treated as an investment company (within the meaning of section 351(e)) if the partnership were incorporated.

(Section 179 at a Glance for 2017) 2017 Spending Cap on equipment purchases = $2,000,000 This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis.

This spending cap makes Section 179 a true "small business tax incentive" (because larger businesses that spend more than $2.5 million on equipment won't get the deduction.)

Taxpayer conduct: According to the Code, the term "negligence" includes any "failure to make a reasonable attempt to comply" with the Code.

This standard applies to both taxpayer conduct and taxpayer return positions. The two are interrelated, however, and are difficult to separate in practice.

A corporation is subject to the at-risk rules and the PAL rules not because it is a PHC, but because it meets the PHC stock ownership test.

Thus, a corporation that meets the PHC stock ownership test but does not meet the PHC income test is still subject to the at-risk and PAL rules.

Notwithstanding the intent of the parties, the defense further requires that the exchange was, in fact, contemporaneous.

Thus, courts also examined the timing of the purported contemporaneous exchange for new value relative to the type of transaction or circumstances.

Practice point. Trusts will reach the top marginal tax rate faster than individuals because of the depressed progressive tax schedule (in 2010, the top marginal tax rate for trusts starts at $11,200).

Thus, if possible, it is beneficial to allocate as much depreciation as possible to the trust. This can be done by specifying the allocation in the trust instrument.

The mid-month convention states that, no matter when you purchase a fixed asset in a month, you assume that it was purchased in the middle of the month for depreciation purposes.

Thus, if you bought a fixed asset on January 5th, the convention states that you bought it on January 15th; or, if you bought it on January 28, you should still assume that you bought it on January 15th. By doing so, you can more easily calculate a standard half-month of depreciation for that first month of ownership.

The passive activity rules provide that losses and credits from passive activities can generally be applied only against income and tax from passive activities.

Thus, passive losses and credits cannot be applied against income from salaries, wages, professional fees, or a business in which the partner materially participates; against "portfolio income" (defined later); or against the tax related to any of these types of income.

DNI is calculated based on accounting income less any tax-exempt income net of allocable expenses. Section 661(b) stipulates that the deduction amount consists of each class of item included in DNI (as a proportion of DNI) unless the trust instrument or state law explicitly prescribes a different allocation.

Thus, the actual distribution must also be reduced by the proportionate share of net tax-exempt income. The accounting method and period of the estate or trust determine when the deduction may be claimed; the beneficiary's tax year is not relevant.

The statute requires that any understatement be reduced by any portion of the understatement for which substantial authority existed. There either was or was not substantial authority for the taxpayer's position.

Thus, the existence of substantial authority can be determined and demonstrated after the fact (upon audit, for example) regardless of the taxpayer's conduct and regardless of whether the taxpayer was even aware of such authority at the time the return was prepared.

For similar reasons, there is no "stacking" of Sec. 6662 penalties. That is, even if a portion of an underpayment is attributable to more than one trigger, only one trigger will apply to that portion.

Thus, the maximum accuracy-related penalty that can apply to any portion of an underpayment is 20% (or 40% if the Sec. 6662(h) gross valuation misstatement rules apply). Similarly, any portion of an underpayment that is attributable to civil fraud (Sec. 6663) is not subject to the Sec. 6662 penalty.

Rules Generally Applicable to Valuation Misstatements Valuation penalty not conduct based: The valuation triggers are not conduct based, focusing instead fairly mechanically on the taxpayer's reported value for property.

Thus, the reasonableness of a taxpayer's conduct in determining the reported value is not directly a consideration in applying these triggers.

The regulations identify several common activities that are not tax shelter activities, such as holding tax-exempt bonds, taking cost recovery, deferring income in tax-sheltered retirement vehicles, and electing foreign sales corporation status.

Thus, the regulations acknowledge that certain statutory provisions are inherently taxpayer favorable, and taxpayers may avail themselves of the benefits thereof without being characterized as being improperly "tax motivated."

When a business asset is exchanged (traded-in) for a like-kind item, generally any gain or loss that would have resulted from the sale of the asset increases or decreases the adjusted basis of the replacement property.

Thus, where a sale would result in a gain, the gain can be avoided by exchanging the item, such as trading in one business vehicle for another. On the other hand, if a sale would result in a loss, it is probably to the taxpayer's advantage to actually sell the business asset so a loss can be taken.

In other jurisdictions, the individual debtor has the option of choosing between a federal package of exemptions or the exemptions available under state law.

Thus, whether certain property is exempt and may be kept by the debtor is often a question of state law. The debtor should consult an attorney to determine the exemptions available in the state where the debtor lives.

The Child Tax Credit can reduce your tax bill by as much as $1,000 per child, if you meet all seven requirements: 1. age, 2. relationship, 3. support, 4. dependent status, 5. citizenship, 6. length of residency and 7. family income. You and/or your child must pass all seven to claim this tax credit.

To claim the Child Tax Credit, you must determine if your child is eligible. There are seven qualifying tests to consider: age, relationship, support, dependent status, citizenship, length of residency and family income. You and/or your child must pass all seven to claim this tax credit

(3). Treat each distribution as a distribution of these adjusted accumulated earnings and profits. (4). If adjusted accumulated earnings and profits are reduced to zero, the remaining distributions are applied against and reduce the adjusted basis of the stock in the hands of the shareholders.

To the extent that the balance is more than the adjusted basis of the stock, it is treated as a gain from the sale or exchange of property. Example.

The term "tax shelter" for this purpose means a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement, if a significant purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of federal income tax.

Under the regulations, however, tax shelter is defined (arguably more leniently) as a partnership, entity plan, or arrangement the principal purpose of which is to avoid or evade federal income tax.

Persons providing appraisals used in connection with tax matters (e.g., charitable contributions; estate and gift assets; fair market value for sales gain, etc.).

Unlicensed individuals who represent taxpayers before the examination, customer service and the Taxpayer Advocate Service in connection with returns they prepared and signed.

12. Tax consequences of disproportionate distributions can be very complex and are only discussed in this chapter in limited detail.

a. If a disproportionate distribution of hot assets is made, the distribution is recast as: (1) Distribution of the partner's proportionate share of hot assets, and

Disproportionate Distributions 11. A disproportionate distribution is a distribution in which the distributee partner's share of the partnership's unrealized receivables or substantially appreciated inventory (hot assets) either increases or decreases as a result of the distribution.

a. Inventory is substantially appreciated if the value of all inventory items exceeds 120% of the partnership's basis in them.

Rationale for imputed interest The tax code calls for imputed interest because some people and organizations have tried to dodge taxes by portraying large gifts,

additional compensation, dividends and other taxable payments as loans.

(2). Relationship Test. The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency. An adopted child is always treated as your own child. ("An adopted child" includes a child lawfully placed with you for legal adoption, even if that

adoption is not final by the end of the tax year.) you can also claim your brother or sister, stepbrother, stepsister. And you can claim descendents of any of these qualifying people — such as your nieces, nephews and grandchildren — if they meet all the other tests.

Censure is a public reprimand. (b) Authority to disqualify. The Secretary of the Treasury, or delegate,

after due notice and opportunity for hearing, may disqualify any appraiser for a violation of these rules as applicable to appraisers.

When the income is finally distributed to the shareholder (e.g., as a dividend), it will be taxed at the shareholder level. Even if it is distributed to the shareholder in the form of a deductible expense (e.g., compensation)

after the PHC tax has been paid, it will be subject to double-taxation, i.e., the corporation paid the PHC tax on the income, and the shareholder pays tax on it when it is received.

Similar reasoning should help distinguish positions that really are too good to be true from those that are consistent with statutory regimes

albeit arguably applying such provisions in a manner or extent perhaps not anticipated by Congress or Treasury.

Current year earnings and profits. If a corporation's earnings and profits for the year (figured as of the close of the year without reduction for any distributions made during the year) are more than the total amount of distributions made during the year,

all distributions made during the year are treated as distributions of current year earnings and profits. If the total amount of distributions is more than the earnings and profits for the year, see Accumulated earnings and profits below.

Chapter 13 Proceedings: Pros and Cons. The plan approval process tends to proceed much more quickly in Chapter 13 than in Chapter 11. Chapter 13 plans usually have a "commitment period," or duration, of three to five years. During the commitment period, the debtor must turn over

all of his or her "disposable income" to the Chapter 13 trustee for distribution to creditors. A debtor's "disposable income" is the difference between his or her monthly earnings and the amount "reasonable necessary" for his or her maintenance and support.

Precontribution gain is the net gain, if any, that would have been recognized under section 704(c)(1)(B) if the partnership had distributed to another partner

all the property that had been contributed to the partnership by the distributee partner within 7 years of the distribution and that was held by the partnership just before the distribution.

★ Debt used to purchase rental property or debt used in a rental activity. Interest allocable to a rental real estate activity is reported on Form 8825 and is used in arriving at net income (loss) from rental real estate activities on line 2 of Schedule K and in box 2 of Schedule K-1. Interest

allocable to a rental activity other than a rental real estate activity is included on line 3b of Schedule K and is used in arriving at net income (loss) from a rental activity (other than a rental real estate activity). This net amount is reported on line 3c of Schedule K and in box 3 of Schedule K-1.

Regulation D Offerings Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Regulation D (or Reg D) contains three rules providing exemptions from the registration requirements,

allowing some companies to offer and sell their securities without having to register the securities with the SEC. For more information about these exemptions, read our publications on Rules 504, 505, and 506 of Regulation D.

FS-2008-18, February 2008 WASHINGTON — Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and

allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

there are some investment limitations of which you should be aware. In such circumstances, individual investors are limited in how much they can invest to no more than 10% of the greater of the person's,

alone or together with a spouse, annual income or net worth (excluding the value of the person's primary residence and any loans secured by the residence (up to the value of the residence)).

(iv)Irrevocable elections. The elections under this paragraph (f) are irrevocable and are effective only for the taxable year for which they are made. In applying the preceding sentence to elections under this paragraph (f),

an election to terminate the taxable year under section 1377(a)(2) or § 1.1368-1(g)(2) is disregarded. (g)Special rule -

Example for question 3a. Corporation A owns, directly, an interest of 50% in the profit, loss, or capital of Partnership B. Corporation A also owns, directly, an interest of 15% in the profit, loss, or capital of Partnership C. Partnership B owns, directly,

an interest of 70% in the profit, loss, or capital of Partnership C. Therefore, Corporation A owns, directly or indirectly, an interest of 50% in the profit, loss, or capital of Partnership C (15% directly and 35% indirectly through Partnership B).

(h) Government officers and employees, and others. An individual, who is an officer or employee of the executive, legislative, or judicial branch of the United States Government;

an officer or employee of the District of Columbia; a Member of Congress; or a Resident Commissioner may not practice before the Internal Revenue Service if such practice violates 18 U.S.C. §§ 203 or 205.

Valuation Triggers Three types of valuation misstatements can also trigger Sec. 6662. These include any "substantial valuation misstatement," any "substantial overstatement of pension liabilities,"

and "substantial estate or gift tax valuation understatements." Because these triggers are somewhat less common than the others, they are addressed here collectively and more summarily.

Deductible trust expenses include all expenses allocable to taxable trust income. The personal exemption amount has never been updated for inflation and is therefore very low—$600 for estates, $300 for trusts that distribute all income,

and $100 for trusts that distribute part or none of the income (IRC § 642(b)).Under section 265, part of the trustee fee must be allocated to tax-exempt income as a proportion of gross accounting income.

(e) The suit authorized under subsection (a) may be to recover such damages as shall represent the difference between the amount paid for the security (not exceeding the price at which the security was offered to the public)

and (1) the value thereof as of the time such suit was brought, or (2) the price at which such security shall have been disposed of in the market before suit, or

Section 481(a) adjustment. The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. The section 481(a) adjustment period is generally 1 year for a net negative adjustment

and 4 years for a net positive adjustment. However, in some cases, a corporation can elect to modify the section 481(a) adjustment period. The corporation may have to complete the appropriate lines of Form 3115 to make an election.

They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing;

and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.

Gains to the extent they are attributable to depreciation are generally treated as ordinary income (but still not taxable for self-employment tax purposes),

and any additional gain is treated as capital gain. If the asset was held for over a year, the long-term capital gains rates will apply.

U.S. Real Property Interest If a domestic corporation acquires a U.S. real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. The amount paid includes cash, the fair market value of other property,

and any assumed liability.If a domestic corporation distributes a U.S. real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. A corporation that fails to withhold may be liable for the tax and any penalties and interest that apply.

Line 19. Charitable Contributions Enter contributions or gis actually paid within the tax year to or for the use of charitable and governmental organizations described in section 170(c)

and any unused contributions carried over from prior years. Special rules and limits apply to contributions to organizations conducting lobbying activities. See section 170(f)(9).

Except for new taxpayers, the statement must be filed by the due date (not including extensions) of the return for the tax year immediately preceding the election year

and attached to that return or, if applicable, to a request for an extension of time to file that return.

§ 10.62 Contents of complaint. (a) Charges. A complaint must name the respondent, provide a clear and concise description of the facts and law that constitute the basis for the proceeding,

and be signed by an authorized representative of the Internal Revenue Service under §10.69(a)(1). A complaint is sufficient if it fairly informs the respondent of the charges brought so that the respondent is able to prepare a defense.

Suggestion 1: Employee business expenses (Form 2106) are incurred by employees, not self-employed individuals. These are work-related expenses not reimbursed in full by your employer. They become miscellaneous deductions on Schedule A, Itemized Deductions,

and can only be deducted to the extent that all miscellaneous deductions exceed 2% of your adjusted gross income. Only the excess amount can be deducted. If you are in this situation, ask your employer to start reimbursing you for your business expenses.

(2) The practitioner must— (i) Base the written advice on reasonable factual and legal assumptions (including assumptions as to future events); (ii) Reasonably consider all relevant facts

and circumstances that the practitioner knows or reasonably should know; (iii) Use reasonable efforts to identify and ascertain the facts relevant to written advice on each Federal tax matter;

Securities Exchange Act of 1934 With this Act, Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of the securities industry. This includes the power to register, regulate, and oversee brokerage firms, transfer agents,

and clearing agencies as well as the nation's securities self regulatory organizations (SROs). The various securities exchanges, such as the New York Stock Exchange, the NASDAQ Stock Market, and the Chicago Board of Options are SROs. The Financial Industry Regulatory Authority (FINRA) is also an SRO.

Dispositions of Contributed Property Generally, if the partnership disposes of property contributed to the partnership by a partner, income, gain, loss,

and deductions from that property must be allocated among the partners to take into account the difference between the property's basis and its fair market value (FMV) at the time of the contribution.

Contributions of $250 or more. A corporation can deduct a contribution of $250 or more only if it gets a written acknowledgment from the donee organization that shows the amount of cash contributed, describes any property contributed (but not its value),

and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution.

Gifts of $250 or more. Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. The acknowledgement should show the amount of cash contributed, a description of the property contributed (but not its value),

and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution.

Part I provides an overview of the various bases upon which a Sec. 6662 penalty can be imposed. Part II, in the May issue, will discuss in detail the Sec. 6664 reasonable cause

and good-faith defense to the Sec. 6662 penalty. Both parts discuss key considerations for practitioners tasked with helping clients contest an asserted application of the Sec. 6662 penalty.

or otherwise meets the requisite standards prescribed by the Internal Revenue Service, possesses a current or otherwise valid preparer tax identification number or other prescribed identifying number,

and has not engaged in any conduct that would justify the suspension or disbarment of any practitioner under the provisions of this part.

As the Supreme Court has recognized, "the [tax] law is complicated, accounting treatment of various items raises problems of great complexity,

and innocent errors are numerous. . . . It is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care."

The regular and exclusive business use must be for the convenience of your employer

and not just appropriate and helpful in your job.

Item K. Partner's Share of Liabilities Enter each partner's share of nonrecourse liabilities, partnership-level qualified nonrecourse financing,

and other recourse liabilities at the end of the year.

Alternatives to Chapter 7 Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships,

and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code.

(iii)Corporation with subchapter C and subchapter S earnings and profits. If an S corporation that makes the election provided in this paragraph (f)(2) has both subchapter C earnings and profits (as defined in section 1362(d)(3)(B))

and subchapter S earnings and profits in a taxable year of the corporation in which the distribution is made, the distribution is treated as made first from subchapter C earnings and profits, and second from subchapter S earnings and profits.

If the report is made to an officer or employee of the Internal Revenue Service, the officer or employee will make a written report of the suspected violation

and submit the report to the office(s) of the Internal Revenue Service responsible for administering or enforcing this part.

On examination of a "bargain" transfer, the IRS may conclude that the transfer was not a bona fide business transfer,

and that the transferor Taxpayer intended to make a gift to the transferee or, where the transferee is an entity, to the owners thereof (who are related to the transferor).

Fed. R. Bankr. P. 1006. For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. Id.The debtor may also pay the $75 administrative fee

and the $15 trustee surcharge in installments. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 707(a).

Any portion of a distribution remaining after the previously taxed income, earnings and profits,

and the AAA are exhausted is treated in the manner provided in section 1368(b).

Cash contributions. A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution,

and the amount of the contribution. Keep the record of the contribution with the other corporate records. Do not attach the records to the corporation's return.

If the debtor's income is less than 150% of the poverty level (as defined in the Bankruptcy Code),

and the debtor is unable to pay the chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. 28 U.S.C. § 1930(f).

If a partnership distributes unrealized receivables or substantially appreciated inventory items in exchange for all or part of a partner's interest in other partnership property (including money), treat the transaction as a sale or exchange between the partner

and the partnership. Treat the partnership gain (loss) as ordinary business income (loss). The income (loss) is specially allocated only to partners other than the distributee partner.

Net Operating Losses A corporation generally figures and deducts a net operating loss (NOL) the same way an individual, estate, or trust does. The same 2-year carryback and up to 20-year carryforward periods apply,

and the same sequence applies when the corporation carries two or more NOLs to the same year. For more information on these general rules, see Pub. 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.

(c) Copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients,

and the written consents must be provided to any officer or employee of the Internal Revenue Service on request.

P2' s transfer qualifies for tax-free treatment under Sec. 351 because P2 has acquired 80% of the total combined voting power of all classes of stock entitled to vote,

and there are no other classes of shares. P2' s ownership of the Class B shares dilutes or diminishes P1' s voting power.

distributions by the S corporation during the taxable year are treated as made first, from previously taxed income under paragraph (d)(2) of this section; second, from earnings and profits under section 1368(c)(2);

and third, from the AAA under section 1368(c)(1). Any portion of a distribution remaining after the previously taxed income, earnings and profits, and the AAA are exhausted is treated in the manner provided in section 1368(b).

Now if you sell the shares before they meet the criteria for favorable capital gains treatment, the sales are considered "disqualifying dispositions,"

and you may end up paying taxes on part of the proceeds of the sale at your ordinary income tax rate, which in 2016 could be as high as 39.6 percent.

If you elected to depreciate the item instead of taking the Sec. 179 expense election, your depreciation deduction would be $200,

and your adjusted basis after the first year would be $800 ($1,000 - $200). If you then sold the equipment for $900, you would have a $100 ($900 - $800) taxable gain.

Corporations & Shareholders Sec. 351 allows a tax-free incorporation transfer if certain requirements are met, including that the property must be transferred to a corporation by one or more persons in exchange for stock in the corporation,

and, immediately after the exchange, the transferor(s) is (are) in control (as defined in Sec. 368(c)) of the corporation.

Risk #1: Loss of Capital Gain Treatment The Internal Revenue Code provides that in a sale of property between "related persons,"

any gain recognized to the transferor shall be treated as ordinary income (taxable, in the case of an individual, at a maximum rate of 39.6%) if such property is depreciable in the hands of the transferee.

If you can wait at least a year and a day after you purchase the stocks, and at least two years after you were granted the option to sell the stocks (as described in item 5 above),

any profit on the sale is treated as a long-term capital gain, so it is taxed at a lower rate than your regular income. (Your profit is the difference between the bargain price you pay for the stock, and the market price that you sell it for.)

☐ Class: 5-year property ☐ Depreciation Period: 5 years. ☐ Description: Automobiles, taxis, buses, trucks, computers and peripheral equipment, office equipment,

any property used in research and experimentation, breeding cattle and dairy cattle, appliances & etc. used in residential rental real estate activity, certain green energy property.

Taxable income and tax liability. The tax calculation for estates and trusts with regard to long-term capital gains rates is the same as for individuals. Thus, just as for individuals, long-term capital gains and qualified dividends

are currently taxed at 15% and, for trusts and estates in the 15% tax bracket (the lowest), zero. For trusts and estates, however, that bracket is available only if ordinary income is not more than $2,300.

The grounds for denying an individual debtor a discharge in a chapter 7 case

are narrow and are construed against the moving party.

Continuing education presentations provided to an audience solely for the purpose of enhancing practitioners' professional knowledge on Federal tax matters

are not considered written advice on a Federal tax matter for purposes of this section. The preceding sentence does not apply to presentations marketing or promoting transactions.

Notwithstanding the preceding sentence, certified public accountants who are not currently under suspension or disbarment from practice before the Internal Revenue Service

are not required to file a written declaration with the IRS before rendering written advice covered under §10.37, but their rendering of this advice is practice before the Internal Revenue Service.

Notwithstanding the preceding sentence, attorneys who are not currently under suspension or disbarment from practice before the Internal Revenue Service

are not required to file a written declaration with the IRS before rendering written advice covered under §10.37, but their rendering of this advice is practice before the Internal Revenue Service.

In light of these definitions, it appears that careless and reckless disregard,

as defined in the regulations, largely overlap and are virtually the same as negligence.

However, a corporation with a fiscal tax year ending June 30 must file by the 15th day of the 3rd month after the end of its tax year. A corporation with a short tax year ending anytime in June will be treated

as if the short period ended June 30 and must file by the 15th day of the 3rd month after the end of its tax year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day.

To determine if the corporation is subject to this tax, first treat an accumulation of $250,000 or less generally as within the reasonable needs of most businesses. Treat an accumulation of $150,000 or less

as within the reasonable needs of a business whose principal function is performing services in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts.

(1) The individual through willfulness, recklessness, or gross incompetence does not take reasonable steps to ensure that the firm has adequate procedures to comply with this part, as applicable, and one or more individuals who are members of,

associated with, or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm, of failing to comply with this part, as applicable;

Control of a corporation. To be in control of a corporation, you or your group of transferors must own, immediately after the exchange,

at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock.

Consolidated Return Corporations filing a consolidated return must check Item A, box 1a, and attach Form 851, Ailiations Schedule, and other supporting statements to the return. Also, for the first year a subsidiary corporation is being included in a consolidated return,

attach Form 1122, Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return, to the parent's consolidated return. Attach a separate Form 1122 for each new subsidiary being included in the consolidated return.

a. Partners recognize gains when they receive cash distributions or are relieved of partnership debts (deemed cash distribution) that exceed their outside basis.

b. Gain or loss recognized by the distributee partner is usually capital in nature.

Among the schedules that an individual debtor will file is a schedule of "exempt" property. The Bankruptcy Code allows an individual debtor (4) to protect some property from the claims of creditors

because it is exempt under federal bankruptcy law or under the laws of the debtor's home state. 11 U.S.C. § 522(b). Many states have taken advantage of a provision in the Bankruptcy Code that permits each state to adopt its own exemption law in place of the federal exemptions.

Line 1: Adjusted Gross Income After Itemized Deductions: If you itemize, this line is the amount shown on line 41 of your 1040, which is your Adjusted Gross Income (AGI) minus your itemized deductions (some of which are added back in on the following lines). If you take the standard deduction instead, this line is solely your AGI from line 38 of your 1040,

because you can't take any part of the standard deduction when calculating the AMT. So if you took the standard deduction on your regular return, it is effectively added back into your income here. If you itemized your deductions then the next few lines add back some of those itemized deductions.

☐ With a traditional IRA, you're allowed to deduct from your income taxes all or part of the money you put into the account for that tax year. That alone gives you two tax breaks right off the bat: (1) The dollars you contribute to the traditional IRA are put into the account

before any taxes are taken out; (2) Because of that, the money is no longer considered part of that year's taxable income, and you pay less in income taxes. You may even find yourself bumped down to a lower overall tax bracket, which may be the only time you'll actually feel like bragging about that.

Unless otherwise prescribed by regulation or notice, this right does not permit such individual to represent the taxpayer, regardless of the circumstances requiring representation,

before appeals officers, revenue officers, Counsel or similar officers or employees of the Internal Revenue Service or the Treasury Department.

Subpart D — Rules Applicable to Disciplinary Proceedings § 10.60 Institution of proceeding. (a) Whenever it is determined that a practitioner (or employer, firm or other entity, if applicable) violated any provision of the laws governing practice

before the Internal Revenue Service or the regulations in this part, the practitioner may be reprimanded or, in accordance with §10.62, subject to a proceeding for sanctions described in §10.50.

3. In general, distributed property carries over the partnership's basis to the distributee partner and the partner's outside basis is reduced by a like amount. a. If the partnership's basis in the distributed property exceeds the distributee partner's outside basis

before the distribution, some or all of the property will have a basis determined by the partner's outside basis (substituted basis). Assets are deemed to be distributed in the following order.

Membership dues. The corporation can deduct amounts paid or incurred for membership dues in civic or public service organizations, professional organizations (such as bar and medical associations),

business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards. However, no deduction is allowed if a principal purpose of the organization is to entertain or provide entertainment facilities for members or their guests.

Membership dues. The partnership may deduct amounts paid or incurred for membership dues in civic or public service organizations, professional organizations (such as bar and medical associations),

business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards. However, no deduction is allowed if a principal purpose of the organization is to entertain, or provide entertainment facilities for, members or their guests.

Line 13: Section 1202 Exclusion: You can exclude from your income some portion of the gain on the sale of qualified small business stock held more than five years. The gain on the sale of this stock is 50 percent excludable for regular tax purposes,

but 7 percent of the excluded gain is added back for AMT purposes. Suggestion: In the year that you sell qualified small business stock, try to eliminate or reduce as many other AMT adjustments as possible to get the maximum gain exclusion on the sale of the stock.

Who Should File for Chapter 11 or Chapter 7? In most cases, individuals will want to file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy, in particular, is meant for individuals who are seeking a "fresh start,"

but corporations may also file for Chapter 7 (and commonly do). This form of bankruptcy focuses on discharging as many debts as possible and liquidating assets to pay off a variety of remaining debts that cannot be discharged.

In December 2005, the SEC voted to adopt amendments that create a new category of "large accelerated filers" that includes companies with a public float of $700 million or more. The amendments also redefine "accelerated filers" as companies that have at least $75 million,

but less than $700 million, in public float. As described in Release No. 33-8644 (Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports), the current 10-K and 10-Q deadlines for accelerated filers are as follows:

Is there a vehicle sales tax deduction? Can I deduct sales tax on a vehicle purchase? Answer There is a vehicle sales tax deduction but you will have to choose between taking this deduction or claiming your state income tax. You can deduct sales tax on a vehicle purchase,

but only the state and local sales tax. However, you can only claim this deduction if you do so instead of claiming a deduction for state income tax. You'll only want to do this if you paid more in state and local sales tax than you paid in state income tax.

Line 12. Bad Debts Enter the total debts that became worthless in whole or in part during the year,

but only to the extent such debts relate to a trade or business activity. Report deductible nonbusiness bad debts as a short-term capital loss on Form 8949.

The practitioner must make reasonable inquiry of his or her client regarding the identity of any person who may have possession or control of the requested records or information,

but the practitioner is not required to make inquiry of any other person or independently verify any information provided by the practitioner's client regarding the identity of such persons.

Companies relying on a Reg D (17 CFR § 230.501 et seq.) exemption do not have to register their offering of securities with the SEC,

but they must file what's known as a "Form D" electronically with the SEC after they first sell their securities.

Exempt Property In Chapter 7 bankruptcy, individuals will often be allowed to have some assets exempted from the liquidation process. What can be exempted from liquidation varies by state,

but usually exempt property includes assets such as retirement plans, like 401(k)s, a family car, and some savings. A few states, like Texas, are quite lenient when it comes to property exemptions. Others, however, only allow filers to keep a very small amount of cash by the time the process is over.

(d) Effect on proceedings under subpart D. The destruction of any report will not bar any proceeding under subpart D of this part,

but will preclude the use of a copy of the report in a proceeding under subpart D of this part.

(b) Certified public accountants. Any certified public accountant who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service

by filing with the Internal Revenue Service a written declaration that the certified public accountant is currently qualified as a certified public accountant and is authorized to represent the party or parties.

(b) General rules — (1) No former Government employee may, subsequent to Government employment, represent anyone in any matter administered

by the Internal Revenue Service if the representation would violate 18 U.S.C. 207 or any other laws of the United States.

b) Next, the decline in value for parcel A is eliminated, reducing its basis from $40,000 to $30,000. The basis of parcel B is not adjusted because it is an appreciated asset.

c) Last, bases in the two properties now total the $50,000 basis Bob must allocate to the parcels. Parcel A is allocated a $30,000 basis and parcel B is allocated a $20,000 basis. Bases are now closer to the values of the properties.

2. At least 95% of the corporation's stock, by value, is directly or indirectly owned by: a. Employees performing the services, b. Retired employees who had performed the services listed above,

c. Any estate of an employee or retiree described above, or d. Any person who acquired the stock of the corporation as a result of the death of an employee or retiree (but only for the 2-year period beginning on the date of the employee's or retiree's death).

b. The definition of inventory for this purpose is broad enough to include all the accrual basis accounts receivable and any cash basis unrealized receivables.

c. For sales of a partnership interest, inventory is not required to be "substantially" appreciated—any appreciation will result in ordinary income to the selling partner.

b. Cash distributions include decreases in a partner's share of partnership liabilities.

c. Marketable securities distributions are also generally treated as a cash distribution. The amount treated as a cash distribution is somewhat tricky to calculate.

Practice tip: Attentive readers have likely noticed that the valuation penalties have fairly loose tolerances. That is, the penalties do not apply unless the underpayments attributable to the valuation misstatements exceed

certain de minimis thresholds and unless the misstatements are fairly substantial (e.g., reported value is 50% more than the actual value with respect to the substantial valuation misstatement for a non-Sec. 482 transaction).

(3) An individual who practices before the Internal Revenue Service pursuant to paragraph (d) (1) of this section is subject to the provisions of this part in the same manner as attorneys,

certified public accountants, enrolled agents, enrolled retirement plan agents, and registered tax return preparers.

All other corporations generally must complete and attach Form 8283 to their returns for contributions of property (other than money) if the total

claimed deduction for all property contributed was more than $5,000. Special rules apply to the contribution of certain property. See the Instructions for Form 8283.

§ 10.36 Procedures to ensure compliance. (a) Any individual subject to the provisions of this part who has (or individuals who have or share) principal authority and responsibility for overseeing a firm's practice governed by this part, including the provision of advice concerning Federal tax matters and preparation of tax returns,

claims for refund, or other documents for submission to the Internal Revenue Service, must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with subparts A, B, and C of this part, as applicable.

Companies relying on the Rule 504 exemption do not have to register their offering of securities with the SEC, but they must file what is known as a "Form D" electronically with the SEC after they first sell their securities. Form D is a brief notice that includes the names and addresses of the

company's promoters, executive officers and directors, and some details about the offering, but contains little other information about the company.

The final word on when to use a nondeductible IRA As mentioned earlier,

compared to a Roth IRA or traditional IRA, a nondeductible IRA is the savings option of last resort.

The total amount of the contribution claimed for the qualified conservation property cannot exceed 100% of the excess of the corporation's taxable income (as

computed above substituting "100%" for "10%" ) over all other allowable charitable contributions. Any excess qualified conservation contributions can be carried over to the next 15 years, subject to the 100% limitation. See sections 170(b)(2)(B) and (C).

(3) Whenever a person receives or obtains material nonpublic information from his or her spouse, parent, child, or sibling; provided, however, that the person receiving or obtaining the information may demonstrate that no duty of trust or

confidence existed with respect to the information, by establishing that he or she neither knew nor reasonably should have known that the person who was the source of the information expected that the person would keep the information confidential,

Suggestion: If you have an entry on this line,

consider electing a slower depreciation method for your business assets, which could eliminate the AMT adjustment.

Significance There is usually a difference between what a corporation reports on its financial statements as its yearly profit and the corporation's actual taxable profit. These differences arise because of the way in which the IRS accounts for the

corporation's operations and the way in which the corporation accounts for its operations. The IRS, therefore, requires that corporations use Schedule M-1 to enlighten it about reconciliations for accounting and taxable profits. Schedule M-1 is a reconciliation form.

Of course, this is a two-edged sword. For example, if taxpayers are relatively unsophisticated and inexperienced, they are generally held to a lower standard. But such lack of sophistication

could also support a conclusion that the taxpayer's failure to consult a tax adviser was itself negligent. On the other hand, relatively sophisticated and experienced taxpayers are routinely held to a higher standard by courts.

Even if you can't deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.

You can choose to use the standard mileage rate to figure your car expenses. The 2016 rate for business use of a vehicle is 54 cents per mile. See Pub. 463 for more information on travel and car expenses.

Legal Fees

You can deduct legal fees related to doing or keeping your job.

Many Taxpayers are unaware of the tax consequences that can potentially apply to the sale of business property. It's not as simple as just selling an asset.

You can think of selling business property as having many different layers. Each of these different layers can potentially be taxed at different tax rates and be treated differently on a Taxpayer's tax return.

Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit).

You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover.

6) Travel Costs

You may be able to claim the cost of travel for medical care. This includes public transportation, ambulance, tolls, parking fees, etc. If you used your personal automobile, you may be able to deduct 24 cents per mile for 2013.

For the convenience of your employer. This means that your use of the computer is for a substantial business reason of your employer.

You must consider all facts in making this determination. Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer.

How Preemptive Rights Affect You A few examples may help best to understand how preemptive rights can affect your own stock holdings The Terra Firma Coffee Company has 100 shares of stock outstanding.

You own 10 of these shares or 10% of the entire company. To raise capital to expand, the Board of Directors decides to sell another 100 shares in the company for $50 each.

Example. You are an engineer with an engineering firm. You occasionally take work home at night rather than work late at the office.

You own and use a computer that is similar to the one you use at the office to complete your work at home. Since your use of the computer isn't for the convenience of your employer and isn't required as a condition of your employment, you can't claim a depreciation deduction for it.

How to figure each required installment. Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. You will generally use one of the following two methods to figure each required installment.

You should use the method that yields the smallest installment payments. Note. In these discussions, "return" generally refers to the corporation's original return. However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return.

How did we come up with these amounts? The gross sales proceeds from selling the shares is the market price at the date of the sale ($50) times the number of shares sold (100), or $5,000.

You then subtract any commissions paid at the sale ($10 in this example), to arrive at the sales price amount of $4,990 reported on Schedule D. Your broker will show this amount on Form 1099-B that you'll receive at the beginning of the year following the year you sold the stock.

In our example, the amount that should have been reported on your 2016 Form 6251 was the bargain element ($45 - $20 = $25) times the number of shares (100), which equals $2,500. So what do you do this year?

You will have to report another adjustment on your 2016 Form 6251. We explain how you calculate your AMT adjustment in the section called Reporting an Incentive Stock Option Adjustment for the Alternative Minimum Tax below.

(b). The sales price is the per-share market price on the date of sale ($45) times the number of shares sold (100), which equals $4,500. Then, you subtract any commissions paid for the sale ($10, in this example) to arrive at $4,490 as your final sales price.

You'll probably receive a 2016 Form 1099-B from the broker that handled your option purchase and sale. That form should show $4,490 as your proceeds from the sale.

(6). Residence Test. Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military services or detention in a juvenile facility, are counted as time the child lived with you.

[There are also some exceptions to the residency test for children of divorced or separated parents. For details, see the instructions for Form 1040, lines 51 and 6c, or Form 1040A, lines 33 and 6c.]

The low tax rates for long-term capital gains and qualified dividends are scheduled to sunset by the end of 2010. If no new law is enacted, capital gains will be taxed at 20% and dividends at the applicable marginal tax rate

[the top two brackets of which are also scheduled to increase back to their pre-Economic Growth and Tax Relief Reconciliation Act levels of 36% and 39.6%, respectively).

Adjusting AMT for Circulation Expenses The alternative minimum tax (AMT) adjustment for circulation expenses does not apply to any corporations other than PHCs. For purposes of the AMT,

a PHC must capitalize circulation expenses that are fully deductible for regular tax purposes (Sec. 56(b)(2)(C)). The amount capitalized is amortized ratably over three years.

A registered tax return preparer's authorization to practice under this part also does not include the authority to provide tax advice to

a client or another person except as necessary to prepare a tax return, claim for refund, or other document intended to be submitted to the Internal Revenue Service.

(b) Voluntary sanction — (1) In general. In lieu of a proceeding being instituted or continued under §10.60(a),

a practitioner or appraiser (or employer, firm or other entity, if applicable) may offer a consent to be sanctioned under §10.50.

(2) Matter before the Internal Revenue Service includes tax planning and advice, preparing or filing or assisting in preparing or filing returns or claims for refund or credit, and all matters connected with

a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service.

Subchapter S earnings and profits are earnings and profits accumulated in a taxable year beginning before January 1, 1983 (or in the case of a qualified casualty insurance electing small business corporation or

a qualified oil corporation, earnings and profits accumulated in any taxable year), for which an election under subchapter S of chapter 1 of the Internal Revenue Code was in effect.

★ Speculative. Investments in startups and early-stage ventures are speculative and the businesses may fail. Unlike an investment in a mature business where there is a track record of revenue and income,

a startup often relies on the development of a new business, product or service that may or may not find a market. The SEC does not pass upon the merits or give its approval to any securities offered.

The self-charged interest rules don't apply to a partner's interest in a partnership if the partnership makes an election under Regulations section 1.469-7(g) to avoid the application of these rules. To make the election, the partnership must attach to its original or amended partnership return,

a statement that includes the name, address, and EIN of the partnership and a declaration that the election is being made under Regulations section 1.469-7(g). The election will apply to the tax year in which it was made and all subsequent tax years. Once made, the election may only be revoked with the consent of the IRS.

A full discussion of Sec. 6662A is beyond the scope of this article, but practitioners should be aware that if a taxpayer's understatement is attributable to a reportable transaction,

a whole different set of rules applies, with respect to both the application of the penalty in the first instance and the potential reasonable cause/goodfaith exception under Sec. 6664.

5. Partnership distributes two parcels of land, each valued at $20,000. Basis in parcel A is $10,000 and in parcel B is $20,000. The land parcels are capital assets to both Jill and the partnership. Jill assigns $50,000 substituted basis of to the two parcels. Jill's $50,000 basis is allocated between the two parcels as follows.

a) First, the parcels are assigned carryover bases of $10,000 for parcel A and $20,000 for parcel B ($30,000 total).

8.1 DISTRIBUTIONS FROM A PARTNERSHIP 1. Distributions from partnerships to partners are made in cash and/or partnership property. All distributions fall into two categories: Liquidating or Nonliquidating.

a. Categorization as a liquidating or nonliquidating distribution depends solely on whether the partner remains a partner after the distribution. b. Liquidating distributions occur when either of the following happens.

10. Property distributions where precontribution gains exist may result in a taxable gain to the contributing partner in two situations.

a. Contributed property is distributed to a different partner within 7 years of its contribution. (1) The amount of gain recognized by the contributing partner is the remaining net precontribution gain.

Things to remember when granted stock options.

When you are granted nonqualified stock options, get a copy of the option agreement from your employer and read it carefully.

But what about taxes? When the company buys the shares for you, you do not owe any taxes. You are exercising your rights under the ESPP. You have bought some stock. So far so good.

When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income.

Mortgages are very rarely exempt from the bankruptcy process. This means that someone filing for Chapter 7 must continue to make payments on his mortgage. If he cannot make these payments,

he may also eventually end up going through a judicial or non-judicial foreclosure process on top of his bankruptcy. Similarly, the bankruptcy process does not allow an individual to stop making alimony or child support payments or to stop paying taxes.

Therefore, although the corporation allocated Mark a ($20,000) ordinary loss,

he should reflect on his 2015 Schedule E only ($4,800) due to the stock and debt basis limitations.

The courts must charge a $245 case filing fee, a $75 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court's permission,

however, individual debtors may pay in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition.

The SEC adopted new Rules 10b5-1 and 10b5-2 to resolve two insider trading issues where the courts have disagreed. Rule 10b5-1 provides that a person trades on the basis of material nonpublic information

if a trader is "aware" of the material nonpublic information when making the purchase or sale. The rule also sets forth several affirmative defenses or exceptions to liability.

(i) State officers and employees. No officer or employee of any State, or subdivision of any State, whose duties require him or her to pass upon, investigate, or deal with tax matters for such State or subdivision, may practice before the Internal Revenue Service,

if such employment may disclose facts or information applicable to Federal tax matters. (j) Effective/applicability date. Paragraphs (a), (b), and (g) of this section are applicable beginning June 12, 2014. Paragraphs (c) through (f), (h), and (i) of this section are applicable beginning August 2, 2011.

(f)(1) Except as provided in paragraph (2), all or any one or more of the persons specified in subsection (a) shall be jointly and severally liable, and every person who becomes liable to make any payment under this section may recover contribution as in cases of contract from any person who,

if sued separately, would have been liable to make the same payment, unless the person who has become liable was, and the other was not, guilty of fraudulent misrepresentation.

Here's what the IRS says the reasonable needs of a business are: ☐ Specific, definite, and feasible plans for use of the earnings accumulation in the business. ☐ The amount necessary to redeem the corporation's stock included in a deceased shareholder's gross estate,

if the amount does not exceed the reasonably anticipated total estate and inheritance taxes and funeral and administration expenses incurred by the shareholder's estate.

§ 10.24 Assistance from or to disbarred or suspended persons and former Internal Revenue Service employees. A practitioner may not, knowingly and directly or indirectly: (a) Accept assistance from or assist any person who is under disbarment or suspension from practice before the Internal Revenue Service

if the assistance relates to a matter or matters constituting practice before the Internal Revenue Service. (b) Accept assistance from any former government employee where the provisions of § 10.25 or any Federal law would be violated.

Each card or certificate will be valid for the period stated on the card or certificate. An enrolled agent, enrolled retirement plan agent, or registered tax return preparer may not practice before the Internal Revenue Service

if the card or certificate is not current or otherwise Page 10 — § 10.5 Treasury valid. The card or certificate is in addition to any notification that may be provided to each individual who obtains a preparer tax identification number.

GIFT TAXES What are gift taxes? They are taxes owed by the person giving the gift (the donor)

if the gift is in excess of the annual gift tax exemption allowance (currently $14,000 per year in 2013.)

c. Examples. Jill, a partner in a partnership, has a basis in her interest of $50,000. What gain or loss does Jill recognized and what is her basis in the property received

if the partnership makes the following independent proportionate liquidating distributions? The partnership also liquidates. Compare the results of these examples with the previous examples for Bob.

Subpart C — Sanctions for Violation of the Regulations § 10.50 Sanctions. (a) Authority to censure, suspend, or disbar. The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbar any practitioner from practice before the Internal Revenue Service

if the practitioner is shown to be incompetent or disreputable (within the meaning of §10.51), fails to comply with any regulation in this part (under the prohibited conduct standards of §10.52), or with intent to defraud, willfully and knowingly misleads or threatens a client or prospective client.

Even where the Taxpayer's transaction is part of a deferred exchange with an unrelated purchaser,

if the qualified intermediary acquires the replacement property from a person that is related to the Taxpayer, the transaction will result in an immediately taxable event.

4. You're 59 1/2 or older and want easy access to cash and tax-deferred investment growth: Even without the deductibility of your contribution, a nondeductible IRA still gives you a tax break on your investments as they grow in the account --

if you're over the age of 59-1/2 when you no longer have to pay an early withdrawal penalty. So you've got easy access to savings if you need it, and if you don't, the money that stays put continues to grow on a tax-deferred basis.

(b) Whenever a penalty has been assessed against an appraiser under the Internal Revenue Code and an appropriate officer or employee in an office established to enforce this part determines that the appraiser acted willfully, recklessly, or through gross incompetence with respect to the proscribed conduct, the appraiser may be reprimanded or,

in accordance with §10.62, subject to a proceeding for disqualification. A proceeding for disqualification of an appraiser is instituted by the filing of a complaint, the contents of which are more fully described in §10.62.

Lobbying expenses. Generally, lobbying expenses are not deductible. These expenses include: ☐ Amounts paid or incurred in connection with influencing federal or state legislation (but not local legislation), or ☐ Amounts paid or incurred in connection with any communication with certain federal executive branch officials

in an attempt to influence the official actions or positions of the officials. ☐ Dues and other similar amounts paid to certain tax-exempt organizations may not be deductible. See section 162(e)(3). If certain in-house lobbying expenditures do not exceed $2,000, they are deductible.

(a) General. The "manipulative and deceptive devices" prohibited by Section 10(b) of the Act (15 U.S.C. 78j) and §240.10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer,

in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.

Reinstatement will not be granted unless the Internal Revenue Service is satisfied that the petitioner is not likely to engage thereafter

in conduct contrary to the regulations in this part, and that granting such reinstatement would not be contrary to the public interest.

if the court believes the suit or the defense to have been without merit, in an amount sufficient to reimburse him for the reasonable expenses incurred by him,

in connection with such suit, such costs to be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard.

Suggestion 2: If you have employee business expenses that your employer refuses to reimburse, and you know that these expenses are causing you to pay the AMT, consider negotiating with your employer.You may be better off by having the employer pay some of these expenses

in exchange for a lower salary. Your employer will save on payroll taxes, workers' compensation insurance, and in some cases liability insurance premiums, and you will reduce your taxable income and possibly avoid the AMT altogether.

Transfers to a corporation controlled by the transferor. Every significant transferor (as defined in Regulations section 1.351-3(d)) that receives stock of a corporation

in exchange for property in a nonrecognition event must include the statement required by Regulations section 1.351-3(a) on or with the transferor's tax return for the tax year of the exchange.

§ 10.37 Requirements for written advice. (a) Requirements. (1) A practitioner may give written advice (including by means of electronic communication) concerning one or more Federal tax matters subject to the requirements

in paragraph (a)(2) of this section. Government submissions on matters of general policy are not considered written advice on a Federal tax matter for purposes of this section.

(b) Enrollment as a retirement plan agent upon examination. The Commissioner, or delegate, will grant enrollment as an enrolled retirement plan agent to an applicant eighteen years of age or older who demonstrates special competence

in qualified retirement plan matters by written examination administered by, or administered under the oversight of, the Internal Revenue Service, who possesses a current or otherwise valid preparer tax identification number or other prescribed identifying number,

If you depreciated nonresidential real property which was placed in service before 1987 and you depreciated the property placed

in service using just straight-line depreciation, there would be no Section 1250 depreciation recapture.

Lenders can petition a bankruptcy court to make an exception to this rule for whatever debt dispute they have with a debtor, meaning that,

in some cases, debtors may have to juggle bankruptcy filing and several types of debt repayment at the same time.

Risk #2: Loss of Installment Reporting Moreover, if Taxpayer's sale is to a related Purchaser, the Taxpayer may not be entitled to report under the installment method the gain realized on the sale that is attributable to depreciable property (the buildings);

in that case, all payments to be received under the note will be treated as received, and included in Taxpayer's income, for the year of the sale, unless the Taxpayer can establish that the sale did not have tax avoidance as one of its principal purposes.

However there is a Section 1231 recapture rule that if you sell business property at a gain and you have deducted ordinary losses due to the sale of Section 1231 property

in that past five years then the Section 1231 gain that you recognize will be taxed as ordinary income, using the Taxpayer's ordinary income rate, and not the preferential 15% maximum capital gain rate.

Appropriate basis adjustments are to be made to the adjusted basis of the distributee partner's interest

in the partnership and the partnership's basis in the contributed property to reflect the gain recognized by the partner.

★ The partnership provides property for use in a nonrental activity of a partnership or joint venture in its capacity as an owner of an interest in such partnership or joint venture. Whether the partnership provides property used in an activity of another partnership or of a joint venture

in the partnership's capacity as an owner of an interest in the partnership or joint venture is determined on the basis of all the facts and circumstances. In addition, a guaranteed payment described in section 707(c) is never income from a rental activity.

Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible

in the related person's gross income. Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible.

Fifth, it is important to note that despite the statutory nomenclature, Sec. 6662 actually imposes an "addition to tax." This characterization has important administrative and procedural significance. Perhaps most notably, additions to tax are assessed

in the same manner as the underlying taxes, and the IRS's assertion thereof is presumed correct. In addition, because the Sec. 6662 penalty is an addition to tax, underpayment interest accrues on the penalty in the same manner as on the tax itself.

§ 10.30 Solicitation. (a) Advertising and solicitation restrictions. (1) A practitioner may not, with respect to any Internal Revenue Service matter, in any way use or participate

in the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim.

Insider Trading The securities laws broadly prohibit fraudulent activities of any kind in connection with the offer, purchase, or sale of securities. These provisions are the basis for many types of disciplinary actions,

including actions against fraudulent insider trading. Insider trading is illegal when a person trades a security while in possession of material nonpublic information in violation of a duty to withhold the information or refrain from trading.

(1) A revenue provision as defined in section 6110(i)(1)(B) of the Internal Revenue Code; (2) Any provision of law impacting a person's obligations under the internal revenue laws and regulations,

including but not limited to the person's liability to pay tax or obligation to file returns; or (3) Any other law or regulation administered by the Internal Revenue Service.

OPR has exclusive responsibility for practitioner conduct and discipline,

including instituting disciplinary proceedings and pursuing sanctions. It functions independently of the Title 26 enforcement components of the IRS.

The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect,

inconsistent with an important fact or another factual assumption, or incomplete.

(C) The purchase or sale that occurred was pursuant to the contract, instruction, or plan. A purchase or sale is not "pursuant to a contract, instruction, or plan" if, among other things, the person who entered into the contract,

instruction, or plan altered or deviated from the contract, instruction, or plan to purchase or sell securities (whether by changing the amount, price, or timing of the purchase or sale), or entered into or altered a corresponding or hedging transaction or position with respect to those securities.

(7) For the purposes of paragraphs (d)(5) and (6) of this section, an aggregate of 10 or more years of employment in positions involving the application and

interpretation of the provisions of the Internal Revenue Code, at least three of which occurred within the five years preceding the date of application, is the equivalent of five years continuous employment.

Nonetheless, the authors' experience, and the experience of many tax professionals, is that some IRS agents have broadly (and improperly)

interpreted this direction to require automatic assertion of not only the substantial understatement but also the negligence and disregard (Sec. 6662(b)(1)) penalties with respect to all underpayments.

(4). The distribution gives preferred stock to some common stock shareholders and gives common stock to other common stock shareholders. (5). The distribution is on preferred stock. (An increase in the conversion ratio of convertible preferred stock made solely to take

into account a stock dividend, stock split,or similar event that would otherwise result in reducing the conversion right is not a distribution on preferred stock.) The term "stock" includes rights to acquire stock and the term "shareholder" includes a holder of rights or convertible securities.

§ 10.31 Negotiation of taxpayer checks. (a) A practitioner may not endorse or otherwise negotiate any check (including directing or accepting payment by any means, electronic or otherwise,

into an account owned or controlled by the practitioner or any firm or other entity with whom the practitioner is associated) issued to a client by the government in respect of a Federal tax liability.

The Director is the final decision-maker on all disciplinary recommendations. The LAB interprets and applies the standards of practice for tax professionals in a fair and equitable manner and applies the principles of due process to the analysis,

investigation and disciplinary process involving allegations of practitioner misconduct. O&M manages all of OPR's administrative, communications, budgetary and personnel functions.

Portfolio Income Generally, portfolio income includes all gross income, other than income derived in the ordinary course of a trade or business, that is attributable to interest; dividends; royalties; income from a real estate investment trust, a regulated investment company, a real estate mortgage

investment conduit, a common trust fund, a controlled foreign corporation, a qualified electing fund, or a cooperative; income from the disposition of property that produces income of a type defined as portfolio income; and income from the disposition of property held for investment.

(2) In the case of an opinion the practitioner knows or has reason to know will be used or referred to by a person other than the practitioner (or a person who is a member of, associated with, or employed by the practitioner's firm) in promoting, marketing, or recommending to one or more taxpayers a partnership or other entity,

investment plan or arrangement a significant purpose of which is the avoidance or evasion of any tax imposed by the Internal Revenue Code, the Commissioner, or delegate, will apply a reasonable practitioner standard, considering all

Practice tip: In all cases, however, it is important to remember (and to remind IRS agents) that the taxpayer's negligence is objectively measured. This requires a determination of what is reasonable under the circumstances and necessarily

involves a comparison of the taxpayer's conduct with that of other similarly situated taxpayers. In this regard, both courts and the regulations recognize that the taxpayer's experience, knowledge, and education are relevant in determining the reasonableness of his or her conduct.

Property transferred will not be considered to be of relatively small value if its fair market value

is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor.

A contingent fee also includes any fee arrangement in which the practitioner will reimburse the client for all or a portion of the client's fee in the event that a position taken on a tax return or other filing

is challenged by the Internal Revenue Service or is not sustained, whether pursuant to an indemnity agreement, a guarantee, rescission rights, or any other arrangement with a similar effect.

Qualifying Disposition: You sold the stock at least two years after the offering (grant date) and at least one year after the exercise (purchase date). If so, a portion of the profit (the "bargain element")

is considered compensation income (taxed at regular rates) on your Form 1040. Any additional profit is considered long-term capital gain (which is be taxed at lower rates than compensation income) and should be reported on Schedule D, Capital Gains and Losses.

3. You exercise the option to purchase the shares and then sell them within a year or less after the day you purchased them. Again, the compensation element of $2,000 (calculated as in the previous examples)

is considered taxable income and should be included in Box 1 of your 2016 Form W-2. If not, you must add it to Form 1040, Line 7 when you fill out your 2016 tax return. Because you sold the stock, you must report the sale on your 2016 Schedule D.

Heightened penalty for gross valua tion misstatements: The normal penalty rate of 20%

is doubled to 40% for any gross valuation misstatement.

Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date,

it generally must reduce its basis in the stock by the nontaxed part of the dividend. The nontaxed part is any dividends-received deduction allowable for the dividends.

ctice point. Because the tax rates of estates and trusts are likely higher than the tax rates of the individual beneficiaries,

it is advisable (if possible) to retain the tax-exempt income and distribute taxable income only.

In an environment where IRS agents are being encouraged, if not required, to apply the Sec. 6662 penalty for all asserted underpayments of tax,

it is especially important for tax practitioners to fully understand the rules if they are to successfully assist and defend their clients on audit.

Indefinite work assignment. If your assignment or job away from home in a single location is realistically expected to last for more than 1 year,

it is indefinite, whether or not it actually lasts for more than 1 year.

(iii)Corporate statement regarding elections. A corporation makes an election for a taxable year under § 1.1368-1(f) by attaching a statement to a timely filed (including extensions) original or amended return required to be filed under section 6037 for that taxable year. In the statement, the corporation must identify the election

it is making under § 1.1368-1(f) and must state that each shareholder consents to the election. In the case of elections for taxable years beginning before January 1, 2003, an officer of the corporation must sign under penalties of perjury the statement on behalf of the corporation.

Accumulated Earnings Tax A corporation can accumulate its earnings for a possible expansion or other bona fide business reasons. However, if a corporation allows earnings to accumulate beyond the reasonable needs of the business,

it may be subject to an accumulated earnings tax of 20%. If the accumulated earnings tax applies, interest applies to the tax from the date the corporate return was originally due, without extensions.

Refiguring required installments. If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated,

it may have to refigure its required installments to see if an underpayment penalty may apply. An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments.

If the partnership distributes any property (other than built-in gain property) to a partner that has contributed built-in gain property to the partnership within the last 7 years,

it will need this information for the attached statement required in the instructions for line 19b of Schedule K for distributions subject to section 737 (code B).

Contributions of property other than cash. If a corporation (other than a closely held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine

its fair market value must be attached to the corporation's return. In addition, the corporation should keep a record of:

(b) Interference with a proper and lawful request for records or information. A practitioner may not interfere, or attempt to interfere, with any proper and lawful effort by the Internal Revenue Service,

its officers or employees, to obtain any record or information unless the practitioner believes in good faith and on reasonable grounds that the record or information is privileged.

Benefiting From PHC Status A PHC is not subject to the AET (Sec. 532(b)(1)). Avoiding PHC Status PHCs do not include the corporations listed in Sec. 542(c). When a corporation changes its status from a PHC to a corporation exempt from the PHC tax, or vice versa, it is subject to the PHC tax only during the part of

its tax year when it was not exempt from the tax. Thus, when a calendar-year corporation is a PHC for the first nine months of the year but qualifies as a bank during the last three months, it is subject to the PHC tax only for the period Jan. 1—Sept. 30 (Rev. Rul. 63-103).

The letter of representation must include the following: i. An affirmation that the representative is authorized to represent people before the IRS; ii. An affirmation that the representative has the appropriate state or federal license, such as an attorney, CPA, or EA; iii. A statement that the representative has been authorized by you to represent you; and

iv. A statement of where to send correspondence, i.e. solely to the representative, or to you and the representative. (Note that in some instances OPR will send certain correspondence directly to you with a copy to your representative regardless of any other instruction.)

(1) The practitioner knows or reasonably should know that the opinion of the other person should not be relied on; (2) The practitioner knows or reasonably should

know that the other person is not competent or lacks the necessary qualifications to provide the advice; or (3) The practitioner knows or reasonably should know that the other person has a conflict of interest in violation of the rules described in this part.

The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange

like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home,

local transportation, entertainment, and gifts, you may be able to deduct these expenses. Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses.

Passive Activity Limitations In general, section 469 limits the amount of losses, deductions, and credits that partners can claim from "passive activities." The passive activity limitations do not apply to the partnership. Instead, they apply to each partner's share of any income or

loss and credit attributable to a passive activity. Because the treatment of each partner's share of partnership income or loss and credit depends on the nature of the activity that generated it, the partnership must report income or loss and credits separately for each activity.

(ii)Effect of the election. A corporation making an election under paragraph (g)(2)(i) of this section must treat the taxable year as separate taxable years for purposes of allocating items of income and loss;

making adjustments to the AAA, earnings and profits, and basis; and determining the tax effect of distributions under section 1368 (b) and (c).

Depending on the type, or "chapter," of bankruptcy, debts are treated differently. In Chapter 11 bankruptcy, debts are restructured in a way that debt repayment becomes more achievable. In Chapter 7 bankruptcy, which is the most common form of bankruptcy,

many debts are forgiven, and a variety of personal assets are sold — liquidated — to repay as many remaining debts as possible. In general, Chapter 11 bankruptcy is utilized by corporations and other business owners, while Chapter 7 bankruptcy is favored by individuals.

These dividends, if not qualified, otherwise would be taxed at a 39.6% rate (for 2016, gain recognized by single filers with taxable income above $415,050,

married couples filing jointly with taxable income above $466,950, heads of household with taxable income above $441,000, and married taxpayers filing separate returns with taxable income above $233,475).

(b) Definition of "on the basis of." Subject to the affirmative defenses in paragraph (c) of this section, a purchase or sale of a security of an issuer is "on the basis of"

material nonpublic information about that security or issuer if the person making the purchase or sale was aware of the material nonpublic information when the person made the purchase or sale.

★ Limited partnerships unable to obtain required financial statements without unreasonable effort or expense

may furnish audited financial statements prepared under the federal income tax laws.

(c) Authority to impose monetary penalty — (1) In general. (i) The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding,

may impose a monetary penalty on any practitioner who engages in conduct subject to sanction under paragraph (a) of this section.

Enrolled agents, enrolled retirement plan agents, or registered tax return preparers, in describing their professional designation,

may not utilize the term "certified" or imply an employer/employee relationship with the Internal Revenue Service.

(d) Enrolled actuaries. (1) Any individual who is enrolled as an actuary by the Joint Board for the Enrollment of Actuaries pursuant to 29 U.S.C. 1242 who is not currently under suspension or disbarment from practice before the Internal Revenue Service

may practice before the Internal Revenue Service by filing with the Internal Revenue Service a written declaration stating that he or she is currently qualified as an enrolled actuary and is authorized to represent the party or parties on whose behalf he or she acts.

The gain attributable to the land (which is not depreciable)

may still be reported on the installment method, subject to one exception.

In this example, the amount that is considered compensation is limited to $1,000, your actual gain when you sell the shares, even though your bargain element ($2,500) is higher. The $1,000 may be included in the total wages shown in Box 1 of your 2016 Form W-2 from your employer because this is

meaning that it does not qualify for treatment as a capital gain (at the lower capital gains rates). If the $1,000 amount is not included in Box 1 of your 2016 Form W-2, you must still add it to the amount you're reporting as compensation income on line 7 of your 2016 Form 1040.a disqualifying sale,

(2) Nonseparately computed income or loss defined For purposes of this subchapter, the term "nonseparately computed income or loss"

means gross income minus the deductions allowed to the corporation under this chapter, determined by excluding all items described in paragraph (1)(A).

(4) No former Government employee may, within one year after Government employment is ended, communicate with or appear before, with the intent to influence, any employee of the Treasury Department in connection with the publication, withdrawal, amendment,

modification, or interpretation of a rule the development of which the former Government employee participated in, or for which, within a period of one year prior to the termination of Government employment, the former government employee had official responsibility.

Debt Forgiveness vs. Debt Reorganization Debt forgiveness is the common term for what is legally known as a bankruptcy discharge, a core component of a Chapter 7 filing that is also used to a lesser degree in Chapter 11 filings. Unless a creditor disputes a particular discharge request,

most discharges are automatically approved. A bankruptcy court then mails a copy of discharge orders to all applicable creditors. Under a discharge order, the creditor(s) must "forgive" the debts listed by no longer seeking repayment. In the eyes of the law, discharged debt is no longer owed.

Proxy Solicitations The Securities Exchange Act also governs the disclosure in materials used to solicit shareholders' votes in annual or special meetings held for the election of directors and the approval of other corporate action. This information, contained in proxy materials,

must be filed with the Commission in advance of any solicitation to ensure compliance with the disclosure rules. Solicitations, whether by management or shareholder groups, must disclose all important facts concerning the issues on which holders are asked to vote.

For 2016, corporations that (a) are required to file Schedule M-3 (Form 1120) and have less than $50 million total assets at the end of the tax year, or (b) are not required to file Schedule M-3 (Form 1120) and voluntarily file Schedule M-3 (Form 1120),

must either (i) complete Schedule M-3 (Form 1120) entirely or (ii) complete Schedule M- 3 (Form 1120) through Part I, and complete Form 1120, Schedule M-1, instead of completing Parts II and III of Schedule M-3 (Form 1120).

If the corporation chooses to complete Schedule M-1 instead of completing Parts II and III of Schedule M-3, line 1 of Schedule M-1

must equal line 11 of Part I of Schedule M-3. See the Instructions for Schedule M-3 (Form 1120) for more information.

Percentage of completion method. Long-term contracts (except for certain real property construction contracts)

must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code.

Change of tax year. Generally, a corporation, including a personal service corporation,

must get the consent of the IRS before changing its tax year by filing Form 1128, Application To Adopt, Change, or Retain a Tax Year. However, exceptions may apply.

Although the maximum tax rate on qualified dividends is 20% (Secs. 531 and 541), it could be worse because the accumulated earnings tax (AET) and PHC tax rates do not reflect the 3.8%

net investment income tax imposed on higher-income individuals. This can result in a maximum 23.8% tax rate on qualified dividends. On the other hand, dividends paid to shareholders may be taxed at a lower 15% or 0% rate.

Example 4: P , a member of a consolidated group, owns all the stock of S1 and S2 . Both S1 and S2 are members of the same consolidated group of which P is a member. The S1 stock is voting stock. S2 transfers one of its assets, asset A , which has a fair market value (FMV)

of $1,000 and an adjusted basis of $40, in exchange for $1,000 of S1 stock. After the transfer, S2 owns 10% of the S1 outstanding stock (i.e., before the transfer, the S1 stock had an FMV of $9,000, and $10,000 after the transfer).

This paragraph (b)(4) does not, however, preclude any former employee from appearing on one's own behalf or from representing a taxpayer before the Internal Revenue Service in connection with a particular matter involving specific parties involving the application or interpretation

of a rule with respect to that particular matter, provided that the representation is otherwise consistent with the other provisions of this section and the former employee does not utilize or disclose any confidential information acquired by the former employee in the development of the rule.

§240.10b5-1 Trading "on the basis of" material nonpublic information in insider trading cases. Preliminary Note to §240.10b5-1: This provision defines when a purchase or sale constitutes trading "on the basis of" material nonpublic information in insider trading cases brought under Section 10(b)

of the Act and Rule 10b-5 thereunder. The law of insider trading is otherwise defined by judicial opinions construing Rule 10b-5, and Rule 10b5-1 does not modify the scope of insider trading law in any other respect.

The price for the sale or use of any property or services claimed on a return in connection with any transaction between persons described in Sec. 482 (commonly referred to as related parties) is 200% or more (or 50% or less)

of the amount determined under Sec. 482 to be the correct amount of the price; or The net Sec. 482 transfer price adjustment for the tax year exceeds the lesser of $5 million or 10% of the taxpayer's gross receipts.

Generally, the corporation must furnish Forms 1099-DIV to shareholders by January 31 of the year following the close of the calendar year during which it made the distributions. However, the corporation may furnish the Form 1099-DIV to shareholders after November 30 of the year

of the distributions if it has made its final distributions for the year. The corporation may furnish the Form 1099-DIV to shareholders anytime after April 30 of the year of the distributions if it gives the Form 1099-DIV with the final distributions for the calendar year.

(f) Registered tax return preparers. (1) Any individual who is designated as a registered tax return preparer pursuant to §10.4(c)

of this part who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service.

(c) Firm representation — (1) No member of a firm of which a former Government employee is a member may represent or knowingly assist a person who was or is a specific party in any particular matter with respect to which the restrictions of paragraph (b)(2)

of this section apply to the former Government employee, in that particular matter, unless the firm isolates the former Government employee in such a way to ensure that the former Government employee cannot assist in the representation.

Costs Chapter 11 bankruptcies are often very expensive because they involve businesses, which complicate matters. Filing for Chapter 11 alone often costs over $1,000. Attorneys' fees are especially expensive as the Chapter 11 process requires more legal input and takes much longer —

often up to a year or longer. Moreover, Chapter 11 attorneys are less common than other bankruptcy attorneys, meaning those who take on Chapter 11 filings often charge more by the hour than would attorneys who handle Chapter 7 or Chapter 13 filings.

Do not include amounts paid during the tax year for insurance that constitutes medical care for a partner, a partner's spouse, a partner's dependents, or a partner's children under age 27 who aren't dependents. Instead, include these amounts on line 10 as guaranteed payments

on Schedule K, line 4, and Schedule K-1, box 4, of each partner on whose behalf the amounts were paid. Also report these amounts on Schedule K, line 13d, and Schedule K-1, box 13, using code M, of each partner on whose behalf the amounts were paid.

Substantial Estate or Gift Tax Valuation Understatement The substantial estate or gift tax valuation understatement penalty applies if the value of any property claimed

on any return imposed by subtitle B is 65% or less of the amount determined to be the correct amount of the valuation.

In addition, special rules in section 706(d)(2) apply to certain items of partnerships that report their income

on the cash basis and special rules in section 706(d)(3) apply to tiered partnerships.

(1) The former employee applies for enrollment on an Internal Revenue Service form and supplies the information requested

on the form and such other information regarding the experience and training of the applicant as may be relevant.

For example, given the Code's well-recognized (and equally well-bemoaned) complexity and the complexity of federal tax law in general,

one might argue that a taxpayer (other than perhaps a tax professional) that attempts to prepare anything other than a very routine return is negligent per se.

If a partner's interest changed during the year (such as the entrance of a new partner, the exit of a partner, an increase to a partner's interest through an additional capital contribution,

or a decrease in a partner's interest through a distribution), see section 706(d) and Regulations section 1.706-4 before determining each partner's distributive share of any item of income, gain, loss, deduction, and other items.

a) Enrollment as an enrolled agent upon examination. The Commissioner, or delegate, will grant enrollment as an enrolled agent to an applicant eighteen years of age or older who demonstrates special competence in tax matters by written examination administered by,

or administered under the oversight of, the Internal Revenue Service, who possesses a current or otherwise valid preparer tax identification number or other prescribed identifying number,

(4) For purposes of this section, respondent means the practitioner, employer, firm or other entity, or appraiser named in the complaint

or any other person having the authority to accept mail on behalf of the practitioner, employer, firm or other entity or appraiser.

Unless this notification is sent, the address for purposes of any correspondence from the appropriate Internal Revenue Service office responsible for administering this part shall be the address reflected on the practitioner's most recent application for enrollment or registration,

or application for renewal of enrollment or registration. A practitioner's change of address notification under this part will not constitute a change of the practitioner's last known address for purposes of section 6212 of the Internal Revenue Code and regulations there under.

False opinions described in this paragraph (a)(l3) include those which reflect or result from a knowing misstatement of fact or law, from an assertion of a position known to be unwarranted under existing law, from counseling

or assisting in conduct known to be illegal or fraudulent, from concealing matters required by law to be revealed, or from consciously disregarding information indicating that material facts expressed in the opinion or offering material are false or misleading.

OPR also may, after notice and an opportunity for a conference, propose a monetary penalty on any practitioner who engages in conduct subject to sanction. The monetary penalty may be proposed against the individual or a firm,

or both, and can be in addition to any Censure, Suspension or Disbarment. The penalty may be up to the gross income derived or to be derived from the conduct giving rise to the penalty.

(b) Enrollment or registration card or certificate. The Internal Revenue Service will issue an enrollment or registration card

or certificate to each individual whose application to practice before the Internal Revenue Service is approved.

Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Usually records that support items of income, deductions,

or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property.

(c) Enrolled agents. Any individual enrolled as an agent pursuant to this part who is not currently under suspension

or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service.

The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments,

or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

b. Conduct If the OPR correspondence only discusses different types of alleged misconduct, such as failure to exercise due diligence, loss of state license,

or false/misleading advertising, then the correct representation documentation is a letter of representation from the person you wish to represent you.

You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E),

or farm income and expenses (Schedule F) on the appropriate schedule. You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR).

§ 10.21 Knowledge of client's omission. A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States

or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of the fact of such noncompliance, error, or omission.

☐ If there is no good business reason for the corporation to assume your liabilities,

or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities.

In addition, examining IRS agents will often have little, if any, practical real-world business experience. This means that such agents have no practical frame of reference for judging the reasonableness of taxpayer conduct (an essential determination, either directly

or indirectly, for all the Sec. 6662 penalties), especially in a business environment. Similarly, such agents often assume that taxpayers have unlimited resources and time, and unfairly judge the reasonableness of the taxpayer's conduct on that basis.

(5) Solicitation of employment as prohibited under §10.30, the use of false or misleading representations with intent to deceive a client or prospective client in order to procure employment,

or intimating that the practitioner is able improperly to obtain special consideration or action from the Internal Revenue Service or any officer or employee thereof.

Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment,

or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.

§ 10.38 Establishment of advisory committees. (a) Advisory committees. To promote and maintain the public's confidence in tax advisors, the Internal Revenue Service is authorized to establish one

or more advisory committees composed of at least six individuals authorized to practice before the Internal Revenue Service.

Careless Disregard and Reckless Disregard Disregard of rules or regulations is careless if the taxpayer does not exercise reasonable diligence to determine the correctness of a return position that is contrary to the rule or regulation. Disregard is reckless if the taxpayer makes little

or no effort to determine whether a rule or regulation exists, under circumstances that demonstrate a substantial deviation from the standard of conduct that a reasonable person would observe.

Cash contributions. For contributions of cash, check, or other monetary gifts (regardless of the amount), the corporation must maintain a bank record, or a receipt, letter,

or other written communication from the donee organization indicating the name of the organization, the date of the contribution, and the amount of the contribution.

Late payment of tax. A corporation that does not pay the tax when due generally may be penalized ½ of 1% of the unpaid tax for each month

or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax.

(1) Whenever a person agrees to maintain information in confidence; (2) Whenever the person communicating the material nonpublic information and the person to whom it is communicated have a history, pattern,

or practice of sharing confidences, such that the recipient of the information knows or reasonably should know that the person communicating the material nonpublic information expects that the recipient will maintain its confidentiality; or

(d) Relying on information furnished by clients. A practitioner advising a client to take a position on a tax return, document, affidavit or other paper submitted to the Internal Revenue Service,

or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client.

(c) Change of address. An enrolled agent, enrolled retirement plan agent,

or registered tax return preparer must send notification of any change of address to the address specified by the Internal Revenue Service within 60 days of the change of address.

§ 10.6 Term and renewal of status as an enrolled agent, enrolled retirement plan agent, or registered tax return preparer. (a) Term. Each individual authorized to practice before the Internal Revenue Service as an enrolled agent, enrolled retirement plan agent,

or registered tax return preparer will be accorded active enrollment or registration status subject to renewal of enrollment or registration as provided in this part.

Issuance of temporary recognition does not constitute either a designation or a finding of eligibility as an enrolled agent, enrolled retirement plan agent,

or registered tax return preparer, and the temporary recognition may be withdrawn at any time.

Intentional Disregard Disregard is intentional if the taxpayer knows of the rule or regulation that is disregarded.39 Only intentional disregard comports with what most taxpayers would consider disregard in the ordinary sense: a taxpayer is aware of the rule

or regulation and understands its application to his or her return, but nevertheless fails to follow the rule. This type of taxpayer conduct, characterized as it is by an intentional and willful disregard of a known obligation, should be relatively rare.

Disregard: Effect of Disclosure The regulations provide that the IRS may not impose a Sec. 6662 disregard penalty on any portion of an underpayment attributable to a position contrary to a rule

or regulation if the position is adequately disclosed. This rule logically seems to apply only to intentional disregard.

A partnership is the relationship between two or more persons who join to carry on a trade or business, with each person contributing money, property, labor,

or skill and each expecting to share in the profits and losses of the business whether or not a formal partnership agreement is made.

(2) Practice as a registered tax return preparer is limited to preparing and signing tax returns and claims for refund, and other documents for submission to the Internal Revenue Service. A registered tax return preparer may prepare all

or substantially all of a tax return or claim for refund of tax. The Internal Revenue Service will prescribe by forms, instructions, or other appropriate guidance the tax returns and claims for refund that a registered tax return preparer may prepare and sign.

If a partnership gives other property (including money) for all or part of that partner's interest in the partnership's unrealized receivables

or substantially appreciated inventory items, treat the transaction as a sale or exchange of the property.

Temporary recognition will be granted only in unusual circumstances and it will not be granted, in any circumstance, if the application is not regular on its face, if the information stated in the application,if true, is not sufficient to warrant granting the application to practice,

or the Commissioner, or delegate, has information indicating that the statements in the application are untrue or that the applicant would not otherwise qualify to become an enrolled agent, enrolled retirement plan agent, or registered tax return preparer.

A corporation generally can elect to waive the entire carryback period for the NOL and instead carry the NOL forward to future tax years. Certain corporations can make the election for the loss year by checking the box on Form 1120, Schedule K, line 11,

or the comparable line of the corporation's income tax return. Consolidated tax return filers must also attach a statement or the election will be invalid. Once made, the election is irrevocable. See the instructions for the corporation's income tax return.

An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court,

or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e).

(4) Giving false or misleading information, or participating in any way in the giving of false or misleading information to the Department of the Treasury or any officer or employee thereof,

or to any tribunal authorized to pass upon Federal tax matters, in connection with any matter pending or likely to be pending before them, knowing the information to be false or misleading.

According to the regulations, when a taxpayer procrastinates until April 15 to prepare a return, hurriedly gathers his or her tax records and prepares the return, and files a return containing numerous errors, the taxpayer is not considered to have reasonable cause for the underpayment

or to have acted in good faith in attempting to file an accurate return. Again, the lack of reasonable cause and good faith should be generally equivalent to negligence for purposes of Sec. 6662.

☐ Negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws, to exercise ordinary and reasonable care in the preparation of a tax return,

or to keep adequate books and records or to substantiate items properly. However, a return position that has a reasonable basis will not be held to be attributable to negligence.

Nonetheless, if taxpayers can demonstrate that they made a reasonable attempt to comply with the Code (either by their own actions

or vicariously through reasonable reliance on a tax professional), they should not be viewed as negligent and should not need to resort to Sec. 6664.

What sanctions are authorized by Circular 230 and to whom do they apply? OPR has oversight of practitioner conduct and exclusive responsibility with respect to practitioner discipline, including disciplinary proceedings and sanctions. OPR may, after notice and an opportunity for a conference, negotiate an appropriate level of discipline with a practitioner;

or, initiate an administrative proceeding to Censure (a public reprimand), Suspend (one to fifty-nine months), or Disbar (five years) the practitioner. OPR may also, after notice and an opportunity for a conference, disqualify an appraiser from further submissions in connection with tax matters.

Distribution deduction. To prevent double taxation on their income, estates and trusts are allowed to deduct the lesser of distributable net income (DNI) or the sum of the trust income required to be distributed and

other amounts "properly paid or credited or required to be distributed" to the beneficiaries (IRC § 661(a)). This includes distributions that can be made out of either income or trust principal to the extent they are made from trust income.

Accumulated earnings and profits. If a corporation's current year earnings and profits (figured as of the close of the year without reduction for any distributions made during the year) are less than the total distributions made during the year,

part or all of each distribution is treated as a distribution of accumulated earnings and profits. Accumulated earnings and profits are earnings and profits the corporation accumulated before the current year.

This information is also needed for purposes of allocating partnership items to partners because income, gain, loss, and deductions related to property contributed to the

partnership by a partner must be shared among the partners so as to take account of the variation between the basis of the property to the partnership and its fair market value at the time of contribution.

In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to "catch up"

past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707(b).

(1). Any shareholder has the choice to receive cash or other property instead of stock or stock rights. (2). The distribution gives cash or other property to some shareholders and an increase in the

percentage interest in the corporation's assets or earnings and profits to other shareholders. (3). The distribution is in convertible preferred stock and has the same result as in (2).

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property. ☐ Your basis for figuring a gain is the same as the donor's adjusted basis,

plus or minus any required adjustments to basis while you held the property. ☐ Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.

If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property. ☐Your basis for figuring a gain is the same as the donor's adjusted basis,

plus or minus any required adjustments to basis while you held the property. ☐ Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property.

(e) Temporary recognition. On receipt of a properly executed application, the Commissioner, or delegate, may grant the applicant temporary recognition to

practice pending a determination as to whether status as an enrolled agent, enrolled retirement plan agent, or registered tax return preparer should be granted.

In addition, income taxation of estates and trusts does not generate much public interest—unlike the estate and gift tax, which has been subject to much debate within the professional community as well as in government and among the general public.As a consequence,

practitioners and their clients may not be aware of several tax issues related to estates and trusts. However, as this article demonstrates, careful planning that takes these issues into account is no less important than for other types of returns and can reap significant tax benefits.

Nonetheless, the regulatory presumption (strong indication) exists, and the taxpayer must address it if the IRS raises it on audit. In determining whether a transaction is too good to be true,

practitioners should remind agents that the determination of whether a position is too good to be true for this purpose is expressly situational: "under the circumstances." Thus, practitioners should consider the context of the item or treatment.

If a partnership is engaged in an activity subject to the limitations of section 465(c)(1) (such as films or videotapes, leasing section 1245 property, farming, or oil and gas property), give each partner his or her share of the total

pre-1976 losses from that activity for which there existed a corresponding amount of nonrecourse liability at the end of each year in which the losses occurred. See Form 6198, At-Risk Limitations, and related instructions for more information.

(4) Practice before the Internal Revenue Service comprehends all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer's rights,

privileges, or liabilities under laws or regulations administered by the Internal Revenue Service.

Heightened Scrutiny of "Too Good to Be True" Positions According to the regulations, negligence is strongly indicated where "[a] taxpayer fails to make a reasonable attempt to ascertain the correctness of a deduction,

credit or exclusion on a return which would seem to a reasonable and prudent person to be 'too good to be true' under the circumstances."28 While this "strong indication" may have some intuitive appeal, it is difficult to justify.

c. Nonliquidating distributions are any other distributions and of the following two types.

d. These distributions may be either proportionate or disproportionate. The taxation of disproportionate distributions can be extremely challenging.

The Chapter 7 Discharge. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions,

debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases.

Conclusion As the foregoing discussion illustrates, the Sec. 6662 penalty rules are numerous and complicated. A central issue, directly or indirectly, in the proper application of the Sec. 6662 penalty is the extent to which taxpayers acted reasonably in preparing their returns or

determining return positions. Unfortunately, in many circumstances IRS agents often lack the real-world business experience necessary to fairly and objectively judge the reasonableness of taxpayer behavior.

These results change significantly if Purchaser is related to Taxpayer. The definition for "related person" varies slightly depending on the context of the particular transaction, but it generally includes a person and any entity in which such person owns,

directly or indirectly, a greater than 50% equity interest. It also generally includes business entities that are under common control. When Taxpayer sells to a related person, there are several risks of which he should be aware.

Example. Corporation A owns, directly, a 50% interest in the profit, loss, or capital of Partnership B. Corporation A also owns, directly, a 15% interest in the profit, loss, or capital of Partnership C and owns,

directly, 15% of the voting stock of Corporation D. Partnership B owns, directly, a 70% interest in the profit, loss, or capital of Partnership C and owns, directly, 70% of the voting stock of Corporation D.

Corporation A reports in its answer to question 5a that it owns, directly or indirectly, 50% of the voting stock of Corporation D. Corporation A reports in its answer to question 5b that it owns,

directly, an interest of 50% in the profit, loss, or capital of Partnership B and owns, directly or indirectly, 50% of the profit, loss, or capital of Partnership C.

If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. 11 U.S.C. § 524(c). The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of

disclosures described in 11 U.S.C. § 524(k). Among other things, the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor's personal liability for that debt will not be discharged in the bankruptcy.

Recognition of Precontribution Gain on Certain Partnership Distributions A partner who contributes appreciated property to the partnership must include in income any precontribution gain to the extent the FMV of other property (other than money)

distributed to the partner by the partnership exceeds the adjusted basis of his or her partnership interest just before the distribution.

If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution

during the 12-month period beginning on the day it received the contribution by the amount of the contribution.

(5) An applicant for enrollment as an enrolled agent who is requesting such enrollment based on former employment with the Internal Revenue Service must have had a minimum of five years continuous employment with the Internal Revenue Service

during which the applicant must have been regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and the regulations relating to income, estate, gift,employment, or excise taxes.

Similarly, while each partner's allocable share of the partnership's ordinary business income (loss) is reported in box 1 of Schedule K-1,

each partner's allocable share of the income and deductions from each trade or business activity must be reported on attached statements to each Schedule K-1. See Passive Activity Reporting Requirements, later, for more information.

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney,

employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.

But if you hold onto the stock, you would be taxed for AMT purposes in the year you exercised the option on the phantom profit of $30 a share—the difference between your option exercise price and market price on the day you bought the shares--

even if the actual market price of your shares fell after that date. It may be advisable to consult with a tax professional prior to making any transactions that involve ISO shares.

Understatement: Tax Shelters For tax shelters (defined below), the foregoing rules do not apply. That is, the amount of a taxpayer's understatement related to a tax shelter item is not reduced as described above,

even if there was substantial authority for the taxpayer's treatment of the item or there was a reasonable basis and the taxpayer disclosed the position.

Line 4: Home Equity Interest: Home mortgage interest claimed as an itemized deduction is only deductible for the AMT if the loan was used to buy, build or improve your home. For regular tax purposes, interest on home equity mortgages up to $100,000 is deductible,

even if you used the proceeds for personal purposes, such as buying a car or paying off credit card debt. So unless the home equity loan proceeds were used to improve your home, the interest is added back for AMT purposes.

The Supreme Court in Boyle recognized that "[c]ourts have frequently held that 'reasonable cause' is established when a taxpayer shows that he reasonably relied on the advice of an accountant or attorney . . .

even when such advice turned out to have been mistaken."21 Boyle itself dealt with the question of whether a taxpayer demonstrated reasonable cause for his failure to timely file a return, technically a defense to the penalty in question in that case.

Line 19. Employee Benefit Programs Enter the partnership's contributions to employee benefit programs not claimed elsewhere on the return (for

example, insurance, health, and welfare programs) that aren't part of a pension, profit-sharing, etc., plan included on line 18.

The reduction for the long-term capital gain applies to: ☐ Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; ☐ Contributions of any property to or for the use of certain private foundations

except for stock for which market quotations are readily available; and ☐ Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property.

(d) Effective/applicability date. This section is applicable beginning August 2, 2011,

except that paragraph (a)(1) is applicable beginning June 12, 2014.

Taxpayers engaging in deferred exchanges generally use

exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .

Do not include any section 179 expense deduction on this line. This amount isn't deducted by the partnership. Instead, it is passed through to the partners in box 12 of Schedule K-1. Generally, the basis of a partnership's section 179 property must be reduced to reflect the amount of section 179

expense elected by the partnership. This reduction must be made in the basis of partnership property even if the limitations of section 179(b) and Regulations section 1.179-2 prevent a partner from deducting all or a portion of the amount of the section 179 expense allocated by the partnership.

(c) Except as provided in §10.82, a proceeding will not be instituted under this section unless the proposed respondent previously has been advised in writing of the law,

facts and conduct warranting such action and has been accorded an opportunity to dispute facts, assert additional facts, and make arguments (including an explanation or description of mitigating circumstances).

(c) Except as provided in §10.82, a proceeding will not be instituted under this section unless the proposed respondent previously has been advised in writing of the law,

facts and conduct warranting such action and has been accorded an opportunity to dispute facts, assert additional facts, and make arguments (including an explanation or description of mitigating circumstances).

Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury;

failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management.

(f) Protest of application denial. The applicantwill be informed in writing as to the reason(s) for any denial of an application. The applicant may, within 30 days after receipt of the notice of denial of the application,

file a written protest of the denial as prescribed by the Internal Revenue Service in forms, guidance, or other appropriate guidance. A protest under this section is not governed by subpart D of this part.

(What's the difference between Section 179 and Bonus Depreciation?) When applying these provisions, Section 179 is generally taken first,

followed by Bonus Depreciation - unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.

(2). 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company,

for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations).

Enter the deductible contributions not claimed elsewhere on the return made by the partnership

for its common-law employees under a qualified pension, profit-sharing, annuity, or SEP or SIMPLE IRA plan, and under any other deferred compensation plan.

☐ A taxpayer may be able to avoid a penalty due to a substantial underpayment of tax if the taxpayer can show substantial authority

for the position causing the understatement or has a reasonable basis for the tax treatment of an item and adequately discloses the facts regarding the item's treatment.

The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return

for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Because this sale and the exercise of the options didn't occur in the same year, you must make an adjustment for AMT. When you originally purchased the stock, you should have reported an income adjustment for AMT purposes in that year. Find out if this was the case by looking at Form 6251 (Alternative Minimum Tax)

for the year that you purchased the shares. In our example, the amount that should have been reported on your 2016 Form 6251 was the bargain element ($45 - $20 = $25) times the number of shares (100), which equals $2,500.

Loss or Deduction Flow-Through Items If a shareholder is allocated an item of S corporation loss or deduction, the shareholder must first have adequate stock and/or debt basis to claim that loss and/or deduction item. In addition, it is important to remember that, even when the shareholder

has adequate stock and/or debt basis to claim the S corporation loss or deduction item, the shareholder must also consider the at-risk and passive activity loss limitations and therefore may not be able to claim the loss and/or deduction item.

(d) Enrollment of former Internal Revenue Service employees. The Commissioner, or delegate, may grant enrollment as an enrolled agent or enrolled retirement plan agent to an applicant who, by virtue of past service and technical experience in the Internal Revenue Service,

has qualified for such enrollment and who has not engaged in any conduct that would justify the suspension or disbarment of any practitioner under the provisions of this part, under the following circumstances:

Subpart B — Duties and Restrictions Relating to Practice Before the Internal Revenue Service § 10.20 Information to be furnished. (a) To the Internal Revenue Service. (1) A practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service,

promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.

(c) Designation as a registered tax return preparer. The Commissioner, or delegate, may designate an individual eighteen years of age or older as a registered tax return preparer

provided an applicant demonstrates competence in Federal tax return preparation matters by written examination administered by, or administered under the oversight of, the Internal Revenue Service,

(ii) If the certified mail is not claimed or accepted by the respondent, or is returned undelivered, service may be made on the respondent, by mailing the complaint to the respondent by first class mail. Service by this method will be considered complete upon mailing,

provided the complaint is addressed to the respondent at the respondent's last known address as determined under section 6212 of the Internal Revenue Code and the regulations thereunder.

This fact sheet, the 21st in the Tax Gap series, exchanges.

provides additional guidance to taxpayers regarding the rules and regulations governing deferred like-kind

ractice tip: In this regard, while a too good to be true item is not expressly equivalent to a tax shelter item, the regulations defining a tax shelter are instructive in identifying a too good to be true item. For example, the regulations acknowledge that the principal

purpose of a transaction is not to avoid or evade federal income tax (read "not too good to be true") if such position has as its purpose claiming exclusions from income, accelerated deductions, or other tax benefits in a manner consistent with the statute and congressional purpose.

☐ Class: 3-year property ☐ Depreciation Period: 3 years. ☐ Description: Tractor units for over-the-road use,

race horses over 2 years old when placed in service, any other horse over 12 years old when placed in service, qualified rent-to-own property.

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example,

real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.

Negligence: Effect of Disclosure The regulations state that taxpayers may not avoid the penalty for negligence by disclosing their positions.35 This is logical, given that negligence is generally defined under the regulations as a failure to act

reasonably with respect to determining a return position or preparing a return. It would be illogical to forgive taxpayers' negligence merely because they have disclosed it. If taxpayers are aware of their negligence, they should correct the negligent error, not disclose it.

When you sell a business asset you can potentially have different types of gains and losses, even within the same transaction. The gains and losses can be: short term capital gains, short term capital losses, long term capital gains, long term capital losses, section 1245 depreciation

recapture, section 1250 depreciation recapture, unrecaptured 1250 gain, and 28% gain (relating to the sale of certain collectibles). Each of these categories of gains and losses are treated differently and taxed at different rates.

Certain items in Lines 2-28 of the Form 6251 are simply not deductible for AMT purposes, such as taxes, home equity mortgage interest and miscellaneous deductions. Lines 2-5, 8-10, 13 and 14 are exclusion items. If you paid AMT based on entries on these lines, you will not

receive a tax credit for AMT. Other items create timing differences, such as depreciation differences between the two tax systems, and the phantom income from exercising incentive stock options. These items can generate a credit on Form 8801 and reduce your taxes in future years.

Both a "failure to exercise reasonable diligence" and making "little or no effort" seem literally synonymous with the negligence standard discussed above. Thus, in practice it would be difficult to distinguish between negligence and careless or

reckless disregard because the same facts would generally support either characterization. To this extent, the negligence rules discussed above are generally relevant to the question of whether the taxpayer carelessly or recklessly disregarded a rule or regulation.

Generally, passive activities include (a) activities that involve the conduct of a trade or business if the partner doesn't materially participate in the activity, and (b) all rental activities (defined later)

regardless of the partner's participation. For exceptions, see Activities That Are Not Passive Activities, later. The level of each partner's participation in an activity must be determined by the partner.

§ 10.0 Scope of part. (a) This part contains rules governing the recognition of attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents,

registered tax return preparers, and other persons representing taxpayers before the Internal Revenue Service.

Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the IRS;

rendering oral and written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings and meetings.

Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the Internal Revenue Service;

rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings.

For instance, if the net income exclusive of specially allocated items is divided evenly among three partners but some special items are allocated 50% to one, 30% to another, and 20% to the third partner,

report the specially allocated items on the appropriate line of the applicable partner's Schedule K-1 and the total on the appropriate line of Schedule K, instead of on the numbered lines on page 1 of Form 1065, Form 1125-A, or Schedule D.

Aggregate taxable income and tax liability were $112 billion and $23 billion, respectively (IRS Statistics of Income, Fiduciary Returns-Sources of Income, Deductions, and Tax Liability). Compared with more than 142 million individual income tax returns (forms 1040, 1040A or 1040-EZ)

reporting more than $8 trillion in gross income (IRS Statistics of Income, Individual Income Tax Returns, Preliminary Data, 2008), these are small numbers.

(2) No former Government employee who personally and substantially participated in a particular matter involving specific parties may, subsequent to Government employment,

represent or knowingly assist, in that particular matter, any person who is or was a specific party to that particular matter.

You may be able to deduct the following items as unreimbursed employee expenses. ★ Business bad debt of an employee. ★ Business liability insurance premiums. ★ Damages paid to a former employer for breach of an employment contract. ★ Depreciation on a computer your employer

requires you to use in your work. ★ Dues to a chamber of commerce if membership helps you do your job. ★ Dues to professional societies. ★ Educator expenses. ★ Home office or part of your home used regularly and exclusively in your work.

Authorities that may be consulted in determining whether substantial authority exists include, among others, the Code and other statutory provisions; proposed, temporary, and final regulations construing such statutes;

revenue rulings and procedures; tax treaties and corresponding regulations, and Treasury and other official explanations of such treaties; court cases; and congressional intent as reflected in committee reports.

It is similarly important that you review the information in the offering circular to learn about what you are investing in. The offering circular will contain important information such as information about the offering and the securities offered,

risks of the investment, use of proceeds, any selling shareholders, the company's business, management, performance, plans and financial statements. Financial statements disclosed in a Tier 2 offering have to be audited by an independent accountant.

Property of relatively small value. The term property does not include property of a relatively small value when it is compared to the value of stock and

securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors.

Similarly, the fact that a taxpayer carefully considers an ambiguous rule or regulation, but in good faith applies it in a manner with which the government disagrees,

should be sufficient to fend off a charge that the taxpayer disregarded the rule. Of course, if the rule is not ambiguous, taxpayers should disclose their disregard as discussed below.

Individuals cannot file for bankruptcy when they have had a previous filing dismissed in the last 180 days,

so it is very important to have all of the necessary evidence when filing.

★ A company registers and sells the offering in a state that requires registration and disclosure delivery and also sells in a state without those requirements,

so long as the company delivers the disclosure documents required by the state where the company registered the offering to all purchasers (including those in the state that has no such requirements); or

This determination is generally based on authorities existing at the time the return is filed. Importantly, the reasonable basis standard is objective,

so the taxpayer's belief that a reasonable basis exists is irrelevant to determining whether a reasonable basis actually exists.27 But this also means that a position's reasonable basis can be articulated after the fact.

Document Form 709 for 2014 Document Form 709 Instructions for 2014 If the donor paid gift tax on the gift (where the value exceeded the annual gift limit and the lifetime gift exemption was not utilized),

some or all of the gift tax paid will also increase your basis. The amount of the gift tax adjustment depends on rules in effect at the date of the gift.

(4). The distribution gives preferred stock to some common stock shareholders and gives common stock to other common stock shareholders. (5). The distribution is on preferred stock. (An increase in the conversion ratio of convertible preferred stock made solely to take into account a stock dividend,

stock split, or similar event that would otherwise result in reducing the conversion right is not a distribution on preferred stock.) The term "stock" includes rights to acquire stock and the term "shareholder" includes a holder of rights or convertible securities.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description,

street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.

Subpart A of this part sets forth rules relating to the authority to practice before the Internal Revenue Service; subpart B of this part prescribes the duties and restrictions relating to such practice; subpart C of this part prescribes the sanctions for violating the regulations;

subpart D of this part contains the rules applicable to disciplinary proceedings; and subpart E of this part contains general provisions relating to the availability of official records. (b) Effective/applicability date. This section is applicable beginning August 2, 2011.

Sec. 6662 imposes an accuracy-related penalty equal to 20% of any underpayment of federal tax resulting from certain specified taxpayer behaviors (e.g., negligence, disregard of rules or regulations,

substantial understatement of income tax, and certain over-and undervaluations).1 This two-part article addresses the Sec. 6662 accuracy-related penalty and the defenses available to taxpayers.

Interest. Interest is charged on taxes paid late even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements,

substantial understatements of tax, and reportable transaction understatements from the due date (including extensions) to the date of payment. The interest charge is figured at a rate determined under section 6621.

Qualified persons include any person actively and regularly engaged in the business of lending money,

such as a bank or savings and loan association.

A practitioner may become competent for the matter for which the practitioner has been engaged through various methods,

such as consulting with experts in the relevant area or studying the relevant law.

(b) Reliance on others. Except as modified by §§10.34 and 10.37, a practitioner will be presumed to have exercised due diligence for purposes of this section if the practitioner relies on the work product of another person and the practitioner used reasonable care in engaging,

supervising, training, and evaluating the person, taking proper account of the nature of the relationship between the practitioner and the person.

(ii) Service of the complaint may be made in person on, or by leaving the complaint at the office or place of business of, the respondent. Service by this method will be considered complete and proof of service will be a written statement,

sworn or affirmed by the person who served the complaint, identifying the manner of service, including the recipient, relationship of recipient to respondent, place, date and time of service.

This was probably not Congress's intent, but in any event many taxpayers do rely on

tax professionals to advise on, and more often to prepare, their returns.

That's true even if the gains in your account are long-term capital gains that would be taxed no higher than 15 percent if you earned those gains in a regular taxable account. Of course, only your gains are taxed, not your original principal, since even the government realizes that

taxing that money twice wouldn't be fair. With a Roth, on the other hand, you pay no tax on any part of your withdrawals, including gains. Which means you're earning a totally tax-free return. That gives a Roth a big -- no, make that a HUGE -- advantage over a nondeductible IRA.

(3) Did not permit the person to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, in addition,

that any other person who, pursuant to the contract, instruction, or plan, did exercise such influence must not have been aware of the material nonpublic information when doing so; and

The practitioner, however, must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under state law

that are necessary for the client to comply with his or her Federal tax obligations. (b) For purposes of this section — Records of the client include all documents or written or electronic

(3) The individual knows or should know that one or more individuals who are members of, associated with, or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm,

that does not comply with this part, as applicable, and the individual, through willfulness, recklessness, or gross incompetence fails to take prompt action to correct the noncompliance.

Rule 505 allows companies to decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws. But companies must give non-accredited investors disclosure documents

that generally are equivalent to those used in registered offerings. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well. The company must also be available to answer questions by prospective purchasers.

In September 2002, the SEC approved a final rule that changed the deadlines for Form 10-K and Form 10-Q for "accelerated filers" -- meaning issuers that have a public float of at least $75 million,

that have been subject to the Exchange Act's reporting requirements for at least 12 calendar months, that previously have filed at least one annual report, and that are not eligible to file their quarterly and annual reports on Forms 10-Q and 10-K using scaled disclosure requirements.

The transferee corporation must include the statement required by Regulations section 1.351-3(b) on or with its return for the tax year of the exchange, unless all the required information is included in any statement(s) provided by a significant transferor

that is attached to the same return for the same section 351 exchange. If the transferor or transferee corporation is a controlled foreign corporation, each U.S. shareholder (within the meaning of section 951(b)) must include the required statement on or with its return.

★ The company may sell its securities to an unlimited number of "accredited investors" and up to 35 other purchasers. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticated—

that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;

(4)Election to forego previously taxed income. An S corporation may elect to forego distributions of previously taxed income. If such an election is made, paragraph (d)(2) of this section (relating to corporations with previously taxed income) does not apply to any distribution made during the taxable year. Thus, distributions by a corporation

that makes the election to forego previously taxed income for a taxable year under this paragraph (f)(4) and does not make the election to distribute earnings and profits first under paragraph (f)(2) of this section are treated in the manner provided in section 1368(c) (relating to distributions by corporations with earnings and profits).

The term also includes any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner, or his or her employee or agent,

that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current Federal tax obligations.

and who has not engaged in any conduct

that would justify the suspension or disbarment of any practitioner under the provisions of this part.

☐ The sale price is $8,490. This is the price at the date of sale ($85) times the number of shares sold (100), or $8,500. We then subtract any commissions paid on the sale (in this example $10), resulting in $8,490. This amount should be reported as the gross amount on the 2016 Form 1099-B

that you'll receive from the broker that handled the sale. ☐ The cost basis is $2,000. This is the actual price paid per share times the number of shares ($20 x 100 = $2,000). ☐ The long-term gain is the difference of $6,490 ($8,490 - $2,000 = $6,490).

DNI and deductible amount. In the case of the JSA Trust, DNI is computed as shown in Exhibit 2. Note that the $119 of the trustee fee allocated to tax-exempt income is not deductible at the trust or beneficiary level;

the $881 deductible part of the trustee fee is allocated between the trust and the beneficiaries as explained below.

A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. A required tax year is a tax year required under

the IRC and the Income Tax Regulations. You have not adopted a tax year if you merely did any of the following. ☐ Filed an application for an extension of time to file an income tax return. ☐ Filed an application for an employer identification number. ☐ Paid estimated taxes for that tax year.

(2) delivery by a private delivery service designated pursuant to section 7502(f) of the Internal Revenue Code to the last known address (as determined under section 6212 of

the Internal Revenue Code and the regulations thereunder) of the respondent or the respondent's authorized representative, or

§ 1.1368-1 Distributions by S corporations. (a)In general. This section provides rules for distributions made by an S corporation with respect to its stock which, but for section 1368(a) and this section, would be subject to section 301(c) and other rules of

the Internal Revenue Code that characterize a distribution as a dividend. (b)Date distribution made. For purposes of section 1368, a distribution is taken into account on the date the corporation makes the distribution, regardless of when the distribution is treated as received by the shareholder.

§ 10.81 Petition for reinstatement. (a) In general. A practitioner disbarred or suspended under §10.60, or suspended under §10.82, or a disqualified appraiser may petition for reinstatement before

the Internal Revenue Service after the expiration of 5 years following such disbarment, suspension, or disqualification (or immediately following the expiration of the suspension or disqualification period, if shorter than 5 years).

(2) The appropriate office of the Internal Revenue Service provides a detailed report of the nature and rating of the applicant's work while employed by

the Internal Revenue Service and a recommendation whether such employment qualifies the applicant technically or otherwise for the desired authorization.

In the absence of a person or persons identified by the firm as having the principal authority and responsibility described in this paragraph,

the Internal Revenue Service may identify one or more individuals subject to the provisions of this part responsible for compliance with the requirements of this section.

(2) Matter before the Internal Revenue Service includes tax planning and advice, preparing or filing or assisting in preparing or filing returns or claims for refund or credit, and all matters connected with a presentation to

the Internal Revenue Service or any of its officers or employees relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service.

Subpart D — Rules Applicable to Disciplinary Proceedings § 10.60 Institution of proceeding. (a) Whenever it is determined that a practitioner (or employer, firm or other entity, if applicable) violated any provision of the laws governing practice before

the Internal Revenue Service or the regulations in this part, the practitioner may be reprimanded or, in accordance with §10.62, subject to a proceeding for sanctions described in §10.50.

(c) Destruction of report. No report made under paragraph (a) or (b) of this section shall be maintained unless retention of the report is permissible under the applicable records control schedule as approved by

the National Archives and Records Administration and designated in the Internal Revenue Manual. Reports must be destroyed as soon as permissible under the applicable records control schedule.

Because insider trading undermines investor confidence in the fairness and integrity of the securities markets,

the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.

(ii) If the practitioner described in paragraph (c)(1)(i) of this section was acting on behalf of an employer or any firm or other entity in connection with the conduct giving rise to the penalty,

the Secretary of the Treasury, or delegate, may impose a monetary penalty on the employer, firm, or entity if it knew, or reasonably should have known of such conduct.

(e) Treatment of family group If an individual who is a member of the family (within the meaning of section 704(e)(3)) [1] of one or more shareholders of an S corporation renders services for the corporation or furnishes capital to the corporation without receiving reasonable compensation therefor,

the Secretary shall make such adjustments in the items taken into account by such individual and such shareholders as may be necessary in order to reflect the value of such services or capital.

Note. For a partner that is a closely held C corporation (defined in section 465(a)(1)(B)),

the above conditions are treated as met if more than 50% of the corporation's gross receipts are from real property trades or businesses in which the corporation materially participated.

The sales price ($4,990) is the market price at the date of sale ($50) times the number of shares sold (100), or $5,000, less any commissions you paid when you sold it ($10). The Form 1099-B from the broker handling your sale should report $4,990 as the proceeds from your sale.The cost basis is

the actual price you paid per share times the number of shares ($25 × 100 = $2,500), plus the compensation element of $2,000 for a total of $4,500. So the gain is $490, the difference between your basis and the sales price, and will be taxed as a short-term capital gain at your ordinary income tax rate.

(b) Other persons. Any person other than an officer or employee of the Internal Revenue Service having information of a violation of any provision of this part may make an oral or written report of

the alleged violation to the office(s) of the Internal Revenue Service responsible for administering or enforcing this part or any officer or employee of the Internal Revenue Service.

As the foregoing discussion indicates, the determination of a substantial understatement involves a seemingly mechanical analysis—a comparison of the amount of the taxpayer's understatement for the tax year to the relevant statutory thresholds. However, at least with respect to nontaxshelter items,

the amount of an understatement is reduced if the authority supporting the taxpayer's treatment of any portion of the understatement is substantial or if the taxpayer has a reasonable basis for that portion and it was disclosed as required in the regulations.

(b) Whenever a penalty has been assessed against an appraiser under the Internal Revenue Code and an appropriate officer or employee in an office established to enforce this part determines that the appraiser acted willfully, recklessly, or through gross incompetence with respect to the proscribed conduct,

the appraiser may be reprimanded or, in accordance with §10.62, subject to a proceeding for disqualification. A proceeding for disqualification of an appraiser is instituted by the filing of a complaint, the contents of which are more fully described in §10.62.

In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object,

the bankruptcy court will issue a discharge order relatively early in the case - generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004(c)

Employee-owners. A person is an employee-owner of a personal service corporation if both of the following apply. (1). He or she is an employee of the corporation or performs personal services for, or on behalf of,

the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. (2). He or she owns any stock in the corporation at any time during the testing period.

Section 481(a) adjustment. If the corporation's taxable income for the current tax year is figured under a method of accounting different from the method used in the preceding tax year,

the corporation may have to make an adjustment under section 481(a) to prevent amounts of income or expense from being duplicated or omitted.

Example. You are the only shareholder of a corporation that uses the calendar year as its tax year. In January, you use the worksheet in the Form 5452 instructions to figure your corporation's current year earnings and profits for the previous year. At the beginning of the year,

the corporation's accumulated earnings and profits balance was $20,000. During the year, the corporation made four $4,000 distributions to you ($4,000 × 4 = $16,000). At the end of the year (before subtracting distributions made during the year), the corporation had $10,000 of current year earnings and profits.

Recordkeepings Keep the corporation's records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Usually, records that support an item of income, deduction, or credit on the return must be kept for 3 years from

the date the return is due or filed, whichever is later. Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. The corporation should keep copies of all filed returns.

(D) At-risk limitations To the extent that any increase in adjusted basis described in subparagraph (B) would have increased the shareholder's amount at risk under section 465 if such increase had occurred on

the day preceding the commencement of the post-termination transition period, rules similar to the rules described in subparagraphs (A) through (C) shall apply to any losses disallowed by reason of section 465(a).

It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests. The Bankruptcy Code requires the trustee to ask the debtor questions at the meeting of creditors to ensure that

the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt.

Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by

the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders. 11 U.S.C. § 523(a).

The main difference between Chapter 7 and Chapter 11 bankruptcy is that under a Chapter 7 bankruptcy filing,

the debtor's assets are sold off to pay the lenders (creditors) whereas in Chapter 11, the debtor negotiates with creditors to alter the terms of the loan without having to liquidate (sell off) assets.

Substantial Overstatement of Pension Liabilities A substantial overstatement of pension liabilities occurs if the actuarial determination of the liabilities taken into account for purposes of computing

the deduction under paragraph (1) or (2) of Sec. 404(a) is 200% or more of the amount determined to be the correct amount of such liabilities.

There's also something in the rules about having to follow proportionate allocation guidelines and some other stuff,

the details of which are explained by the IRS in Publication 590 -- a breezy beach read, for sure.

(iv)Coordination with election under section 1377(a)(2). If the event resulting in a qualifying disposition also results in a termination of a shareholder's entire interest as described in § 1.1377-1(b)(4),

the election under this paragraph (g)(2) cannot be made. Rather, the election under section 1377(a)(2) and § 1.1377-1(b) may be made. See § 1.1377-1(b) (concerning the election under section 1377(a)(2)).

If Taxpayer, above, were to sell the property to a Purchaser "related" to Taxpayer, the portion of the gain attributable to the depreciable buildings may be taxed as ordinary income. If the sale was between related partnerships,

the entire gain may be taxed as ordinary income, because neither real property (land) used in a trade or business nor depreciable property (buildings) used in a trade or business is a "capital asset."

Qualified conservation contributions. If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated,

the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. For more information, see section 170(h) of the Internal Revenue Code.

Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. To make the election, the partnership must file a statement describing the election,

the first tax year the election is to be effective, and, in the case of an election for traders in securities or commodities, the trade or business for which the election is made.

Contributions of property other than cash. If a corporation (other than a closely held or personal service corporation) contributes property other than cash and claims over a $500 deduction for the property, it must attach a statement to the return describing

the kind of property contributed and the method used to determine its fair market value (FMV). Closely held corporations and personal service corporations must complete Form 8283, Noncash Charitable Contributions, and attach it to their returns.

Loans "without significant tax effect" are also exempt. The IRS provides several examples in Publication 550, which describes sources of taxable income. Such loans include, among others: ☐ Government-subsidized loans, like student loans. ☐ Loans provided by a lender to the general public that are consistent with

the lender's normal business practices (such as no-interest financing on an auto loan or a zero-interest period on a credit card). ☐ Loans to help an employee relocate. ☐ Loans from a non-U.S. citizen that wouldn't otherwise be subject to U.S. tax law.

Between 21 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator (5) schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing,

the meeting may be held no more than 60 days after the order for relief. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions.

The rule permits persons to trade in certain specified circumstances where it is clear that the information they are aware of is not a factor in the decision to trade, such as pursuant to a pre-existing plan, contract, or instruction that was made in good faith.Rule 10b5-2 clarifies how

the misappropriation theory applies to certain non-business relationships.This rule provides that a person receiving confidential information under circumstances specified in the rule would owe a duty of trust or confidence and thus could be liable under the misappropriation theory.

(c) Demand for answer. The respondent must be notified in the complaint or in a separate paper attached to the complaint of the time for answering the complaint, which may not be less than 30 days from the date of service of the complaint, the name and address of the Administrative Law Judge with whom the answer must be filed,

the name and address of the person representing the Internal Revenue Service to whom a copy of the answer must be served, and that a decision by default may be rendered against the respondent in the event an answer is not filed as required.

(8) Misappropriation of, or failure properly or promptly to remit, funds received from a client for the purpose of payment of taxes or other obligations due the United States. (9) Directly or indirectly attempting to influence, or offering or agreeing to attempt to influence,

the official action of any officer or employee of the Internal Revenue Service by the use of threats, false accusations, duress or coercion, by the offer of any special inducement or promise of an advantage or by the bestowing of any gift, favor or thing of value.

When the replacement property is ultimately sold (not as part of another exchange),

the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

If, as a result of a transfer of property to a partnership, there is a direct or indirect transfer of money or other property to the transferring partner,

the partner may have to recognize gain on the exchange.

If the partnership agreement doesn't provide for the partner's share of income, gain, loss, deduction, or credit, or if the allocation under the agreement doesn't have substantial economic effect,

the partner's share is determined according to the partner's interest in the partnership.

Limited Liability Partnerships 37. LLPs and LLLPs offer greater protection to the partnership than a general or limited partnership. a. In a general partnership, the partners are jointly and severally liable for all partnership debts. In some states,

the partners in LLPs or LLLPs are jointly and severally liable for contractual liabilities. They are not, however, personally liable for the malpractice and torts of their partners (a partner is always personally liable for her/his own malpractice or other torts.)

Reporting of rental activities. In reporting the partnership's income or losses and credits from rental activities,

the partnership must separately report rental real estate activities and rental activities other than rental real estate activities.

(C) Is a willful attempt by the practitioner to understate the liability for tax or a reckless or intentional disregard of rules or regulations by

the practitioner as described in section 6694(b)(2) of the Code (including the related regulations and other published guidance).

(3) When a proper and lawful request is made by a duly authorized officer or employee of the Internal Revenue Service, concerning an inquiry into an alleged violation of the regulations in this part, a practitioner must provide any information

the practitioner has concerning the alleged violation and testify regarding this information in any proceeding instituted under this part, unless the practitioner believes in good faith and on reasonable grounds that the information is privileged.

Nevertheless, if applicable state law allows or permits the retention of a client's records by a practitioner in the case of a dispute over fees for services rendered,

the practitioner need only return those records that must be attached to the taxpayer's return.

Your employer is required to withhold payroll taxes on the compensation element, but occasionally that doesn't happen correctly. In one case we know of, an employee's payroll department did not withhold federal or state income taxes. He exercised his options by paying $7,000 and sold the stock on

the same day for $70,000 then used all the proceeds (plus additional cash) on the deal, to buy an $80,000 car, leaving very little cash on hand. Come tax return time the following year, he was extremely distressed to learn that he owed taxes on the compensation element of $63,000. Don't let this happen to you.

Qualified persons generally do not include related parties (unless the nonrecourse financing is commercially reasonable and on substantially the same terms as loans involving unrelated persons),

the seller of the property, or a person who receives a fee for the partnership's investment in the real property. See section 465(b)(6) for more information on qualified nonrecourse financing.

The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like

the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer. These situations have resulted in taxpayers not meeting

the strict timelines set for a deferred or reverse exchange, thereby disqualifying the transaction from Section 1031 deferral of gain. The gain may be taxable in the current year while any losses the taxpayer suffered would be considered under separate code sections.

(d)S corporation with earnings and profits - (1)General treatment of distribution. Except as provided in paragraph (d)(2) of this section, a distribution made with respect to its stock by an S corporation that has accumulated earnings and profits as of the end of

the taxable year of the S corporation in which the distribution is made is treated in the manner provided in section 1368(c). See section 316 and § 1.316-2 for provisions relating to the allocation of earnings and profits among distributions.

Undue restrictions should not be placed on the power embedded in the voting rights. At least one court has held that restrictions on a board's power to manage

the taxpayer's business reduced shareholders' voting power below the 80% requirement ( Alumax , 165 F.3d 822 (11th Cir. 1999)).

Trust fund recovery penalty. If federal income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury,

the trust fund recovery penalty may apply. The penalty is the full amount of the unpaid trust fund tax.

If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if

the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2.

(d) Pending representation. The provisions of this regulation will govern practice by former Government employees,

their partners and associates with respect to representation in particular matters involving specific parties where actual representation commenced before the effective date of this regulation.

If I want to invest, what do I need to know? Regulation A allows companies to raise money under two different tiers. If you are interested in investing in a company relying on Regulation A to sell its securities,

then it is very important for you to know which tier the offering is being conducted under. Companies are required to indicate the tier their offerings are being conducted under on the cover of their primary disclosure document—the offering circular.

A Silver Lining: Even if the exemption amount is exceeded, regardless by how much, if the earnings are being accumulated for what the IRS considers to be the reasonable needs of the business,

then the accumulated earnings tax won't be imposed. The question is, what does the IRS consider reasonable needs of the business?

If a taxpayer (the original seller) sells property to a related person and, before the taxpayer receives all the installment payments with respect to such sale, the related purchaser disposes of the property,

then the amount realized at the time of the second sale will generally be treated as received at that time by the taxpayer, provided the second sale is not more than two years after the first sale.

a. Tax Compliance If the OPR correspondence only discusses your personal tax compliance issues, for example, not filing a return, or not paying the taxes applicable to a return,

then the correct representation documentation is a Form 2848. A separate Form 2848 is required for each person/entity referenced in the correspondence from OPR.

companies have four business days to file a Form 8-K for the events specified in the items in Sections 1-6 and 9 above. However, if the issuer is furnishing a Form 8-K solely to satisfy its obligations under Regulation FD,

then the due date might be earlier. (Issuers with questions concerning compliance with Regulation FD should consult with counsel or the SECs Division of Corporation Finance.)

The amount reported is the bargain element, which is the difference between what you paid for the stock and its fair market value on the day you bought it. But if your bargain element is more than your actual gain from the sale of the stock,

then you report as compensation the amount of the actual gain. The reported compensation is taxed as ordinary income. (Categories 2, 3 and 4 noted above are disqualifying dispositions.)

Some employers use Incentive Stock Options (ISOs) as a way to attract and retain employees. While ISOs can offer a valuable opportunity to participate in your company's growth and profits,

there are tax implications you should be aware of. We'll help you understand ISOs and fill you in on important timetables that affect your tax liability, so you can optimize the value of your ISOs.

The order in which stock basis is increased or decreased is important. Because both the taxability of a distribution and the deductibility of a loss are dependent on stock basis,

there is an ordering rule in computing stock basis. Stock basis is adjusted annually, as of the last day of the S corporation year, in the following order:

The term "partnership" includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization,

through or by which any business, financial operation, or venture is carried on, that is not, within the meaning of the regulations under section 7701, a corporation, trust, estate, or sole proprietorship.

The cost basis is the actual price you paid per share (the discount price)

times the number of shares ($21.25 x 100 = $2,125), plus the amount reported as income on line 7 of your form 1040 (the $375 bargain element we calculated above), for a final cost basis of $2,500.

Example 3: S1 has two classes of voting stock (Classes A and B ). P1 owns all the Class A shares. P2 transfers property (with unrealized gain)

to S1 for all the Class B shares. The S1 charter provides that the Class A shareholders can elect two of the 10 directors of the company, while the Class B shareholders can elect the remaining eight directors (i.e., the Class B shares are "supervoting" shares).

According to sections 167(d), 611(b)(3) and 642(e), depreciation and depletion deductions must be allocated between the trust and its beneficiaries based on the proportion of net accounting income minus distributions to net accounting income. If the trustee is required by the trust instrument or state law

to allocate depreciation to the trust, the entire deduction (to the extent there is trust income) belongs to the trust. Note that in the case of an estate, the depreciation deduction is apportioned between the estate and beneficiaries regardless of the terms of the will.

Form 8-K In addition to filing annual reports on Form 10-K and quarterly reports on Form 10-Q, public companies must report certain material corporate events on a more current basis. Form 8-K is the "current report" companies must file with the SEC

to announce major events that shareholders should know about. The instructions for Form 8-K describe the types of events that trigger a public company's obligation to file a current report, including any of the following :

Limitations on Deductions Section 263A uniform capitalization rules. The uniform capitalization rules of section 263A generally require partnerships

to capitalize or include in inventory costs, certain costs incurred in connection with the following.

Form 2220. Use Form 2220, Underpayment of Estimated Tax by Corporations,

to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty.

Courts have rendered some surprising decisions when applying the contemporaneous exchange for new value defense. It is important that you collect all relevant facts to your transaction with the customer and review them with counsel

to determine if the defense can be credibly maintained. However, even if you believe that there may be a gap in proving all of the elements of the defense, it should still be asserted because it allows you leverage in dealing with the trustee for purposes of a negotiated settlement.

Chapter 13 Bankruptcy The process is a bit different when you file for a chapter 13 bankruptcy rather than a chapter 7. With a chapter 13, your assets are not sold and instead, you are put on a court-approved payment plan

to effectively pay back your debts over time. However, in most cases, a creditor with a PMSI is only entitled to receive the present value of the goods financed, and must allow a repayment period of 60 months.

Distributions by a corporation that makes both the election to distribute earnings and profits first under paragraph (f)(2) of this section and the election

to forego previously taxed income under this paragraph (f)(4), are treated in the manner provided in paragraph (f)(2)(i) of this section.

Using the numbers from the hypothetical JSA Trust and assuming that the trust distributes $10,000 and $5,000, respectively,

to hypothetical beneficiaries Philip and Benedict (total distributions = $15,000), taxable income before the distribution deduction is calculated as shown in Exhibit 1.

Background A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets

to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors.

PMSI Overview A purchase money security interest is an agreement between a seller and person or business buying property on credit. Specifically, the company allows you to take goods on a payment plan with the seller retaining the right

to reclaim the items you purchased in the event that you fail to make payments. In other words, the items you receive are essentially used as collateral. An example might be buying a sofa on a store charge card or ordering a crane for your construction company through a building supplier.

This fact sheet, the 21st in the Tax Gap series, provides additional guidance

to taxpayers regarding the rules and regulations governing deferred like-kind exchanges.

(b) Procedures to ensure best practices for tax advisors. Tax advisors with responsibility for overseeing a firm's practice of providing advice concerning Federal tax issues or of preparing or assisting in the preparation of submissions

to the Internal Revenue Service should take reasonable steps to ensure that the firm's procedures for all members, associates, and employees are consistent with the best practices set forth in paragraph (a) of this section.

Since the corporation had no current year earnings and profits, all of the distributions are treated as distributions of accumulated earnings and profits. Treat the distributions as follows. (1). Prorate the negative current year earnings and profits balance

to the date of each distribution made during the year. The negative $10,000 can be spread evenly by prorating a negative $2,500 to each distribution. (2). The following table shows how to figure the available accumulated earnings and profits balance on the date of each distribution.

Services rendered. The term property does not include services rendered or to be rendered

to the issuing corporation. The value of stock received for services is income to the recipient.

(e) Enrolled retirement plan agents — Treasury Department Circular No. 230 (1) Any individual enrolled as a retirement plan agent pursuant

to this part who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service.

Now, imagine that five years later The Terra Firma Coffee Company announces a major expansion and plans to issue 1,000 shares of new common stock. You do not purchase any new shares as part of your preemptive right. When the new shares are issued, because you did not add any new shares

to your current position, you will only own 1.67% of the company (20 shares of stock divided by 1,200 shares outstanding). Before the issuance of new stock, your voting rights accounted for 1/10 of the company and held substantial weight. After the new shares were issued, your vote is much smaller in comparison to what it was before.

The sale or exchange of property that is also rented during the tax year (in which the gain or loss is recognized) is

treated as incidental to the activity of dealing in property if, at the time of the sale or exchange, the property was held primarily for sale to customers in the ordinary course of the partnership's trade or business.

Who qualifies for the Section 1031 exchange? Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies,

trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

Situation 2: Disqualifying Disposition Resulting in Long-Term Capital Gain. In this situation, you sell your ESPP shares more than one year after purchasing them, but less than two years after the offering date. This is a disqualifying disposition because you sold the stock less than

two years after the offering (grant) date. As in the previous example, your employer should include the bargain element in your wages on your 2016 Form W-2. The bargain element is the same as in the first example ($375). You must report this amount as compensation income on line 7 of your 2016 Form 1040.

In addition, enrolled retirement plan agents are generally permitted to represent taxpayers with respect to IRS forms

under the 5300 and 5500 series which are filed by retirement plans and plan sponsors, but not with respect to actuarial forms or schedules.

The practitioner must advise the client of the consequences as provided

under the Code and regulations of such noncompliance, error, or omission.

On the other hand, the $450 tax preparation fee in this example is fully deductible,

under the rationale that tax preparation fees arise only if there is taxable income and the tax-exempt income does not generate this particular expense.

(ii) The adjustments to the AAA required by section 1368(e)(1)(A) (but without regard to the adjustments for distributions

under § 1.1368-2(a)(3)(iii)) for the S corporation's taxable year.

§ 10.51 Incompetence and disreputable conduct. (a) Incompetence and disreputable conduct. Incompetence and disreputable conduct for which a practitioner may be sanctioned

under §10.50 includes, but is not limited to —(1) Conviction of any criminal offense under the Federal tax laws.

In no event shall any underwriter [unless such underwriter shall have knowingly received from the issuer for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interests in the

underwriting] be liable in any suit or as a consequence of suits authorized under subsection (a) for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public.

The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to: set aside preferential transfers made to creditors within 90 days before the petition;

undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition; and pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law.

(1) If any appraiser is disqualified pursuant to this subpart C, the appraiser is barred from presenting evidence or testimony in any administrative proceeding before the Department of Treasury or the Internal Revenue Service,

unless and until authorized to do so by the Internal Revenue Service pursuant to §10.81, regardless of whether the evidence or testimony would pertain to an appraisal made prior to or after the effective date of disqualification.

Cash method partnerships cannot take a bad debt deduction

unless the amount was previously included in income.

The fact that a corporation has an unreasonable accumulation of earnings is sufficient to establish liability for the accumulated earnings tax

unless the corporation can show the earnings were not accumulated to allow its individual shareholders to avoid income tax.

In any suit under this or any other section of this title the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees, and if judgment shall be rendered against a party litigant,

upon the motion of the other party litigant, such costs may be assessed in favor of such party litigant (whether or not such undertaking has been required)

It is important that you review the information disclosed in the offering circular before making your investment decision. The offering circular will contain important information such as information about the offering and the securities offered, risks of the investment,

use of proceeds, any selling shareholders, the company's business, management, performance, plans and financial statements. The financial statements disclosed in a Tier 1 offering do not have to be audited by an independent accountant.

A minimum amount of debt is not required for someone to file either Chapter 11 or Chapter 7 bankruptcy. However, to file for Chapter 7 bankruptcy, individuals need to pass a "means test,"

usually by having a large amount of unmanageable debt and/or a low income that hinders debt repayment. Those who have a lot of disposable income are less likely to have their Chapter 7 filing approved.

In determining if the corporation has accumulated earnings and profits beyond its reasonable needs,

value the listed and readily marketable securities owned by the corporation and purchased with its earnings and profits at net liquidation value, not at cost.

If the partnership distributes contributed property with a built-in gain or loss to any partner other than the partner that contributed the property and the date of the distribution is within 7 years of the date the property

was contributed to the partnership, it will need this information for the attached statement required by the instructions for line 20c of Schedule K for the precontribution gain (loss) (code W).

The anti-dilutive preemptive right has also been called the subscription right or subscription privilege. For the sake of simplicity,

what this means is that the right allows you to maintain the same percentage of ownership of the company's common stock by purchasing new shares before the general public.

(16) Willfully failing to file on magnetic or other electronic media a tax return prepared by the practitioner when the practitioner is required to do so by the Federal tax laws unless the failure is due to reasonable cause and not due to willful neglect. (17) Willfully preparing all or substantially all of, or signing, a tax return or claim for refund

when the practitioner does not possess a current or otherwise valid preparer tax identification number or other prescribed identifying number. (18) Willfully representing a taxpayer before an officer or employee of the Internal Revenue Service unless the practitioner is authorized to do so pursuant to this part.

The respondent, nevertheless, may not deny a material allegation in the complaint that the respondent knows to be true, or state that the respondent is without sufficient information to form a belief,

when the respondent possesses the required information. The respondent also must state affirmatively any special matters of defense on which he or she relies.

Employers who maintain a pension, profit-sharing, or other funded deferred compensation plan (other than a SEP or SIMPLE IRA),

whether or not the plan is qualified under the Internal Revenue Code and whether or not a deduction is claimed for the current year, generally must file the applicable form listed below.

Nonetheless, the Court's reasonable cause determination in that case was essentially the same as the determination required by the Sec. 6662 "reasonable attempt to comply" negligence standard:

whether the taxpayer "exercised ordinary business care and prudence" and was nevertheless unable to file the return when due.

When a referral is received, OPR independently determines, based on all available facts and circumstances, if a violation has occurred,

whether the violation is one which calls into question a practitioner's fitness to continue to practice, and if so, what an appropriate sanction for the conduct is.

While S corporations are not subject to the PHC tax, S corporations are subject to a corporate-level tax on excess passive income,

which is based on the same type of income as the PHC tax, if the S corporation has C corporation earnings and profits from before conversion (Sec. 1375(a)).

☐After you've maxed out all your other retirement savings options, go with a nondeductible IRA.And don't pout about it: Remember, you still get one tax benefit - tax-deferred compounding on your investments in the account,

which means you don't pay any taxes on the growth and dividends until you start withdrawing money in retirement. At that time, you'll pay the IRS taxes on the earnings only at your current income-tax rate because you already ponied up taxes on your contributions.

Corporations subject to the passive activity limitations must complete Form 8810 to compute their allowable passive activity loss and credit. Before completing Form 8810, see Temporary Regulations section 1.163-8T,

which provides rules for allocating interest expense among activities. If a passive activity is also subject to the earnings stripping rules of section 163(j), the at-risk rules of section 465, or the tax-exempt use loss rules of section 470, those rules apply before the passive loss

A property's built-in gain is the amount by which the fair market value of the property exceeds its adjusted tax basis at the time the property is contributed to the partnership. A property's built-in loss is the amount by

which the fair market value of the property is less than its adjusted tax basis at the time the property is contributed to the partnership. Partnerships are required to keep track of this information (see Regulations section 1.704-3).

The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold,

whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

The majority shareholder can take advantage of the opportunity to substantially increase his or her ownership position

while simultaneously decreasing the minority shareholders' ownership positions.

☐ If you sell the GM for $2.50 per share, you have neither a gain nor a loss! Your cost basis for gains is $3.00 per share (which would produce a $0.50 loss),

while your cost basis for losses is $2.00 per share (which would produce a $0.50 gain.) Since both of these conditions are incompatible, no gain or loss is applicable to the sale.

(c) Standard of review. (1) In evaluating whether a practitioner giving written advice concerning one or more Federal tax matters complied with the requirements of this section, the Commissioner, or delegate,

will apply a reasonable practitioner standard, considering all facts and circumstances, including, but not limited to, the scope of the engagement and the type and specificity of the advice sought by the client.

Current IRS examination procedures effectively direct examining agents to assert the Sec. 6662 penalty whenever a taxpayer understates its tax liability. For example, the Internal Revenue Manual (IRM) states that "[t]he substantial understatement penalty

will be automatically asserted on Wage & Investment (W&I) and SB/SE campus cases when mathematically applicable under the correspondence examination batch program."

Form 7004 does not extend the time for paying the tax due on the return. Interest, and possibly penalties,

will be charged on any part of the final tax due not shown as a balance due on Form 7004. The interest is figured from the original due date of the return to the date of payment.

These loose tolerances were intentional: "[T]he committee believes that raising both the threshold and the minimum percentage

will eliminate from the penalty's scope a number of instances of good-faith valuation disputes that may be subject to penalty under present law."

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved

with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.

Finally, Sec. 6664 provides an affirmative defense to the proposed application of any of the Sec. 6662 triggers. Specifically, "[n]o penalty shall be imposed under section 6662 . . .

with respect to any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion."

(3) This paragraph (c) applies even if the practitioner is not subject to a penalty under the Internal Revenue Code

with respect to the position or with respect to the document, affidavit or other paper submitted.

Provided, That if the defendant proves that any portion or all of such damages represents other than the depreciation in value of such security resulting from such part of the registration statement,

with respect to which his liability is asserted, not being true or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading, such portion of or all such damages shall not be recoverable.

(6) An applicant for enrollment as an enrolled retirement plan agent who is requesting such enrollment based on former employment with the Internal Revenue Service must have had a minimum of five years continuous employment

with the Internal Revenue Service during which the applicant must have been regularly engaged in applying and interpreting the provisions of the Internal Revenue Code and the regulations relating to qualified retirement plan matters.

(4) Application for enrollment as an enrolled agent or enrolled retirement plan agent based on an applicant's former employment

with the Internal Revenue Service must be made within three years from the date of separation from such employment.

Enrollment as an enrolled retirement plan agent based on an applicant's former employment

with the Internal Revenue Service will be limited to permit the presentation of matters only with respect to qualified retirement plan matters.

An ESBT, defined at IRC § 1361(e)(1) with tax rules at section 641(c), holds the stock of an S corporation, with the shareholders as beneficiaries. A QSST, described in section 1361(d), likewise can hold the stock of an S corporation,

with the beneficiary treated as its owner and the trust treated as a grantor trust. For more information on these trusts, see "Creative Ways of Achieving Grantor Trust Status,"

A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an exchange accommodation titleholder,

with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.

In order to be taxed only on the lesser of the two calculations, ($2,500 vs. $1,000 in our example), the sale cannot be any of the following: (1). A wash sale: if you repurchase shares in the same company (such as through an employee stock purchase plan)

within 30 days before or after the sale of the shares obtained from the exercise of the option, some or all of the sale will be considered a wash sale. You will not be allowed to report the lesser calculation as income for shares sold in a wash sale. You must report the full $2,500 as income.

10.64 Answer; default. (a) Filing. The respondent's answer must be filed with the Administrative Law Judge, and served on the Internal Revenue Service,

within the time specified in the complaint unless, on request or application of the respondent, the time is extended by the Administrative Law Judge.

(3) A former Government employee who within a period of one year prior to the termination of Government employment had official responsibility for a particular matter involving specific parties may not,

within two years after Government employment is ended, represent in that particular matter any person who is or was a specific party to that particular matter.

A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization

without any significant intervening use or material improvement. The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000 ($20,000 for donated art work).

In a state that has not adopted the consolidated return regulations, Regs. Sec. 1.1502-34 would not apply, and S2 would recognize gain. To prevent this result, S2 can ask P to be an "accommodating transferor." Pursuant to Rev. Proc. 77-37, P must make a meaningful transfer and contribute property

worth at least 10% of the S1 stock it already owns to accommodate S2 and allow S2 to obtain Sec. 351 treatment. This means that P must transfer property worth at least $900 ( P owns $9,000 worth of S1 stock) to S1 when S2 transfers asset A to S1 so that S2 can obtain Sec. 351 treatment.

§ 1.1368-1 Distributions by S corporations. (a)In general. This section provides rules for distributions made by an S corporation with respect to its stock which, but for section 1368(a) and this section,

would be subject to section 301(c) and other rules of the Internal Revenue Code that characterize a distribution as a dividend.

However, if at any time an accelerated depreciation method was used, the gain on the sale will be taxed as ordinary income to the extent that the amount of accelerated depreciation taken exceeded depreciation that

would have been allowed if you used the straight line depreciation method. This Section 1250 depreciation recapture is taxed at ordinary income rates.

Rules for carryover and carryback. When carrying a capital loss from one year to another, the following rules apply. ☐ When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. In other words, you can carry capital losses only to

years that would otherwise have a total net capital gain. ☐ If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. ☐ You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back.

When do I have to pay taxes on my options? First things first: You don't have to pay any tax when you're granted those options. If you are given an option agreement that allows you to purchase 1,000 shares of company stock,

you have been granted the option to purchase stock. This grant by itself isn't taxable. It's only when you actually exercise those options and when you later sell the stock that you purchased that you have taxable transactions.

Home Office If you use a part of your home regularly and exclusively for business purposes,

you may be able to deduct a part of the operating expenses and depreciation of your home.

If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation,

you must continue to use the calendar year unless you get IRS approval to change it or meet one of the exceptions listed in the instructions to Form 1128, Application To Adopt, Change, or Retain a Tax Year (PDF).

Because this sale did not occur in the same year as the year you exercised the options, you have to make an adjustment for AMT. When you originally purchased the stock,

you should have reported an income adjustment for AMT purposes in that year. Find out if this was the case by looking at Form 6251 (Alternative Minimum Tax) for the year that you purchased the shares.

If this amount is not included in Box 1 of Form W-2,

you still must add it to the amount of compensation income that you report on your 2016 Form 1040, line 7.

WASHINGTON — Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows

you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

Sometimes you may simply scrap an item because it has no further use in your business and has no resale value. When this happens,

you treat the disposition as a sale for no money, which will produce a loss equal to the balance of the adjusted basis at that time.

A single election statement may be filed for all elections made under § 1.1368-1(g)(2)(i) for the taxable year. An election made under § 1.1368-1(g)(2)(i) is irrevocable. In the case of elections for taxable years beginning before January 1, 2003, the statement through which a corporation makes an election under

§ 1.1368-1(g)(2)(i) must be signed by an officer of the corporation under penalties of perjury. In the case of elections for taxable years beginning after December 31, 2002, the statement described in the preceding sentence shall be verified by signing the return.

(ii) The adjustments to the AAA required by section 1368(e)(1)(A) (but without regard to the adjustments for distributions under

§ 1.1368-2(a)(3)(iii)) for the S corporation's taxable year. Any net negative adjustment (as defined in section 1368(e)(1)(C)(ii)) for the taxable year shall not be taken into account.

• List the amount of the sales proceeds as the cost basis in order to report a gain of zero.

• Attach a statement explaining the circumstances that resulted in non-recognition of gain or loss. • You can use our Gift Calculator report to support your statement.

Taxpayers engaging in deferred exchanges generally use exchange facilitators

under exchange agreements pursuant to rules provided in the Income Tax Regulations.

You can also deduct medical expenses you pay for any other person who:

☐ Qualifies as your dependent ☐ Would qualify as your dependent except that person: ★ Files a joint return ★ Has a gross income that's more than $4,050

Your compensation element is the difference between the exercise price ($25) and the market price ($45) on the day you exercised the option and purchased the stock, times the number of shares you purchased.

$45 − $25 = $20 x 100 shares = $2,000. $20 × 100 shares = $2,000.

(7). Family Income Test. The child tax credit is reduced if your modified adjusted gross income (MAGI) is above certain amounts, which are determined by your tax-filing status.In 2016, the phase out threshold is $55,000 for married couples filing separately;

$75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly. For each $1,000 of income above the threshold, your available child tax credit is reduced by $50.

Penalty thresholds: The substantial valuation misstatement triggers are not applicable unless the misvaluations exceed certain thresholds. For example, no substantial valuation misstatement trigger applies unless the valuation misstatement under chapter 1 exceeds $5,000

($10,000 in the case of a corporation other than an S corporation or a personal holding company). Similarly, no penalty is imposed unless the portion of the underpayment attributable to a substantial estate or gift tax valuation understatement exceeds $5,000.

(e)Certain adjustments taken into account -

(1)Taxable years beginning before January 1, 1997. For any taxable year of the corporation beginning before January 1, 1997, paragraphs (c) and (d) of this section are applied only after taking into account -

Closely held corporations. A corporation is closely held if all of the following apply. (1). It is not a personal service corporation.

(2). At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. "Individual" includes certain trusts and private foundations.

Termination of the Partnership A partnership terminates when: (1). All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership; or

(2). At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner.

Acquisition Indebtedness Overview (1). Income from investment property is subject to liability for tax under IRC 511 where there is "acquisition indebtedness" regarding such property.

(2)."Acquisition indebtedness" means the outstanding amount of:

(2) The contributing partner's basis in the partnership increases by the amount of the gain recognized.

(3) The partnership increases its basis in the recontribution gain property by the amount of the gain recognized by the distributee partner.

(2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business;

(3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by— (A) a taxpayer whose personal efforts created such property,

No deduction allowed for certain dividends. Corporations cannot take a deduction for dividends received from the following entities. (1). A real estate investment trust (REIT). (2). A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year.

(3). A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Ex-dividend means the holder has no rights to the dividend.

(2). An individual is considered to own the stock owned, directly or indirectly, by or for his or her family. Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants.

(3). If a person holds an option to buy stock, he or she is considered to be the owner of that stock.

(d) Special rules for losses and deductions (1) Cannot exceed shareholder's basis in stock and debtThe aggregate amount of losses and deductions taken into account by a shareholder under subsection (a) for any taxable year shall not exceed the sum of—

(A) the adjusted basis of the shareholder's stock in the S corporation (determined with regard to paragraphs (1) and (2)(A) of section 1367(a) for the taxable year), and

Traditional IRA vs. nondeductible IRA. ☐ In contrast, as you may have already gathered by the "nondeductible" part of the so-called nondeductible IRA, the IRS does not allow you to deduct your contribution from your income taxes. So there are no immediate income tax breaks for you.

(Cue sad trombone music.) Yes, you'll avoid capital-gains and dividend taxes as your money grows, but you may feel some lingering bitterness about all the extra money that could have been compounding all these years had you not been denied the income-tax deduction way back when. (Or maybe that's just me.)

On Partnership C's Form 1065, it must answer "Yes" to question 3a of Schedule B. See Example 1 in the instructions for Schedule B-1

(Form 1065) for guidance on providing the rest of the information required of entities answering "Yes" to this question.

(a). More than half of the personal services the partner performed in trades or businesses were performed in real property trades or businesses in which he or she materially participated.

(b). The partner performed more than 750 hours of services in real property trades or businesses in which he or she materially participated.

(b) Character passed thru The character of any item included in a shareholder's pro rata share under paragraph (1) of subsection (a) shall be determined as if such item were realized directly from the source from which realized by the corporation, or incurred in the same manner as incurred by the corporation.

(c) Gross income of a shareholder In any case where it is necessary to determine the gross income of a shareholder for purposes of this title, such gross income shall include the shareholder's pro rata share of the gross income of the corporation.

(e) Sanctions to be imposed. The sanctions imposed by this section shall take into account all relevant facts and circumstances.

(f) Effective/applicability date. This section is applicable to conduct occurring on or after August 2, 2011, except that paragraphs (a), (b)(2), and (e) apply to conduct occurring on or after September 26, 2007, and paragraph (c) applies to prohibited conduct that occurs after October 22, 2004.

Change in accounting method. Generally, the partnership must get IRS consent to change its method of accounting used to report income

(for income as a whole or for any material item). To do so, the partnership generally must file Form 3115, Application for Change in Accounting Method.

(c) Advising clients on potential penalties — (1) A practitioner must inform a client of any penalties that are reasonably likely to apply to the client with respect to —

(i) A position taken on a tax return if — (A) The practitioner advised the client with respect to the position; or (B) The practitioner prepared or signed the tax return; and

(2) Amount of penalty. The amount of the penalty shall not exceed the gross income derived (or to be derived) from the conduct giving rise to the penalty. (3) Coordination with other sanctions. Subject to paragraph (c)(2) of this section —

(i) Any monetary penalty imposed on a practitioner under this paragraph (c) may be in addition to or in lieu of any suspension, disbarment or censure and may be in addition to a penalty imposed on an employer, firm or other entity under paragraph (c)(1)(ii) of this section.

For 2016, corporations that (a) are required to file Schedule M-3 (Form 1120) and have less than $50 million total assets at the end of the tax year, or (b) are not required to file Schedule M-3 (Form 1120) and voluntarily file Schedule M-3 (Form 1120), must either

(i) complete Schedule M-3 (Form 1120) entirely or (ii) complete Schedule M-3 (Form 1120) through Part I, and complete Form 1120, Schedule M-1 instead of completing Parts II and III of Schedule M-3 (Form 1120).

(i) The adjustments to the basis of the shares of a shareholder's stock described in section 1367 (without regard to section 1367(a)(2)(A) (relating to decreases attributable to distributions not includible in income)) for the S corporation's taxable year; and

(ii) The adjustments to the AAA required by section 1368(e)(1)(A) (but without regard to the adjustments for distributions under § 1.1368-2(a)(3)(iii)) for the S corporation's taxable year.

Ownership. For these rules, ownership is based on the amount of voting power and value of the paying corporation's stock

(other than certain preferred stock) that the receiving corporation owns.

The Internal Revenue Service requires corporations to complete a U.S. corporation income tax return, more commonly known as Form 1120. The return has different variants such as 990-T for exempt organizations,

1120-F for foreign corporations and 1065 for limited liability companies. All businesses, large or small, that fall into the 1065 category as limited liability partnerships must also submit Schedule M-1 along with annual returns.

(4). Dependent Test. You must claim the child as a dependent on your tax return. Bear in mind that in order for you to claim a child as a dependent, he or she must: 1) be your child (or adoptive or foster child), sibling, niece, nephew or grandchild;

2) be under age 19, or under age 24 and a fulltime student for at least five months of the year; or be permanently disabled, regardless of age; 3) have lived with you for more than half the year; and 4) have provided no more than half his or her own support for the year.

1. Any listed transaction, which is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other published guidance as a listed transaction.

2. Any transaction offered under conditions of confidentiality for which the corporation (or a related party) paid an advisor a fee of at least $250,000.

General Partnership

A general partnership is composed only of general partners.

Form 1065 is an information return used to report the income, gains, losses, deductions, credits, and other information from the operation of a partnership.

A partnership doesn't pay tax on its income but passes through any profits or losses to its partners. Partners must include partnership items on their tax or information returns.

Exemption Amounts C corporations may accumulate earnings up to $250,000 without incurring an accumulated earnings tax.

A personal service corporation (PSC) may accumulate earnings up to $150,000 without having to pay this tax.

If the debtor's "current monthly income" (1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive.

Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,850, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $7,700.

In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets.

Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

One notable distinction about investing in a Tier 1 offering is that companies relying on Tier 1 do not have ongoing reporting requirements other than a final report on the status of the offering.

Accordingly, you will not have the regular flow of company information that you are familiar with when investing in companies listed on the NYSE or NASDAQ, for example.

If interpreted to apply only to positions that a layperson with no special knowledge of tax law would view as too good to be true, the regulations seem to add little to the reasonable attempt to comply standard.

And if interpreted more broadly, so as to implicitly require the taxpayer to review his or her adviser's advice (or to obtain a second opinion), the regulations seem inconsistent with Supreme Court authority.

Traditional IRA vs. nondeductible IRA. ☐ The money you put into each type of IRA grows tax free, meaning you don't pay any taxes on the gains your investments make while they are in the account.

And only after you start withdrawing the money in retirement -- or after age 59 1/2 to avoid early withdrawal penalties -- do you pay taxes on your gains at your ordinary income-tax rate at the time you withdraw the money.

Unsecured debt, such as credit card debt, is more likely to be forgiven than secured debt, such as a home or auto loan.

And student loan debt is never discharged in bankruptcy.

This, is also a qualifying disposition (sale) because over two years have passed between the offering date and the sale date, and over one year has passed between the date of purchase and the date of sale.

And this time, the price per share increased from the offering date to the purchase date.

Form 1099-DIV. File Form 1099-DIV, Dividends and Distributions, with the IRS for each shareholder to whom the corporation has paid dividends and other distributions on stock of $10 or more during a calendar year. A corporation must generally send Forms 1099-DIV to the IRS with Form 1096,

Annual Summary and Transmittal of U.S. Information Returns, by February 28 (March 31 if filing electronically) of the year following the year of the distribution.

There are a few exceptions to this rule. If a taxpayer is allowed to use the cash method of accounting, they are not required to apply these capitalization rules.

Another allows resellers whose average annual gross receipts for the three previous tax years do not exceed $10 million to be exempt from this rule.

Example 5:

Assume the facts of Example 4 occur in a separate-filing state.

For example, if a person taxed at 25% today wants to invest $4,000 in a Roth IRA, she would pay $1,000 in taxes, leaving her with only $3,000 available to invest.

Assuming her investment doubles by the time she wants to begin withdrawing, her account would be worth $6,000, regardless of what her future tax rate is.

Corporations reporting taxable income on the accrual method can elect to treat as paid during the tax year any contributions paid by the due date for filing the corporation's tax return (not including extensions), if the contributions were authorized by the board of directors during the tax year.

Attach a declaration to the return stating that the resolution authorizing the contributions was adopted by the board of directors during the tax year. The declaration must include the date the resolution was adopted. See section 170(a)(2)(B).

There may be more than one piece of property in each category. Base the reduction of the basis of each property on the following ratio.

Basis of each piece of property Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution.

What's the IRS penalty if I miss the April filing deadline? The IRS applies late penalties and interest on a case-by-case basis and will send a separate bill if penalties apply.

Because the IRS has the last word on penalties, we can't calculate the exact amount if your return is late. But the info below will give you an idea of what to expect in a worst-case scenario (courtesy of IRS Tax Topic 653).

Example 2. Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Its taxable income is $85,000 before the deduction for dividends received. After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000.

Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%).

Publication 542 - Main Content Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996.

Business formed before 1997. A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation.

How do I stay informed about my investment? Companies conducting offerings under either Tier 1 or Tier 2 of Regulation A must file disclosure information with the SEC using EDGAR.

Companies relying on Tier 2 have ongoing reporting requirements and these reports can also be found on EDGAR. Following are descriptions of the forms related to a Regulation A offering:

Observation: Example 3 shows that when there are two or more classes of voting stock, the control requirement of Sec. 351 can serve as either an opportunity or a hindrance in obtaining tax-free treatment.

Corporate instruments can be drafted or amended with consideration of the control requirement. That said, taxpayers should be careful in designing exotic voting rights.

Corporation A owns, indirectly, through Partnership B, a 35% interest (50% of 70%) in the profit, loss, or capital of Partnership C and owns, indirectly, 35% of the voting stock of Corporation D.

Corporation A owns, directly or indirectly, a 50% interest in the profit, loss, or capital of Partnership C (15% directly and 35% indirectly), and owns, directly or indirectly, 50% of the voting stock of Corporation D (15% directly and 35% indirectly).

Below-market loans. If a corporation gives a shareholder a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate, the interest not charged may be treated as a distribution to the shareholder.

Corporation cancels shareholder's debt. If a corporation cancels a shareholder's debt without repayment by the shareholder, the amount canceled is treated as a distribution to the shareholder.

The passive activity rules apply to personal service corporations and closely held corporations other than S corporations.

Corporations subject to the passive activity limitations must complete Form 8810, Corporate Passive Activity Loss and Credit Limitations. For more information on the passive activity limits, see the Instructions for Form 8810 and Pub. 925.

The gain or loss taken into account is treated as ordinary gain or loss.

Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method.

Basis of stock or other property received. The basis of the stock you receive is generally the adjusted basis of the property you transfer. Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange.

Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange.

Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria.

Do not attach an explanation when the corporation's return is filed. See the instructions for your income tax return.

The acknowledgment must be obtained by the due date (including extensions) of the corporation's return, or, if earlier, the date the return is filed.

Do not attach the acknowledgment to the tax return, but keep it with the corporation's records.

Interest

Enter taxable interest on U.S. obligations and on loans, notes, mortgages, bonds, bank deposits, corporate bonds, tax refunds, etc. Do not offset interest expense against interest income.

Extension of Time To File

File Form 7004 to request an extension of time to file. File Form 7004 by the regular due date of the partnership return. Form 7004 can be electronically filed. See the Instructions for Form 7004.

Because the amount to be distributed ($15,000) is less than DNI, it is used to determine taxable income.

First, however, it must be reduced by the proportionate net tax-exempt income of $2,209 (see Exhibit 3).

In addition to compliance with the standards of practice provided elsewhere in this part, best practices include the following: (1) Communicating clearly with the client regarding the terms of the engagement.

For example, the advisor should determine the client's expected purpose for and use of the advice and should have a clear understanding with the client regarding the form and scope of the advice or assistance to be rendered.

Loss on exchange. If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss.

For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Pub. 544.

A domestic LLC with at least two members that does not file

Form 8832 is classified as a partnership for federal income tax purposes.

Any outstanding debts that cannot be paid are then wiped away and the debtor gets a fresh start.

Here, a creditor with a PMSI can be assured that he will at least get the financed goods back, which may be more than he would have received without the PMSI.

An example would be if you used a guitar financed under a PMSI as collateral for a cash loan.

Here, the holder of the PMSI would need to be paid in full before any other creditors could try to repossess the guitar.

If you file as a qualifying widow(er), you can't claim an exemption for your deceased spouse.

However, you can use the married filing jointly tax table or tax rate schedule. The qualifying widow(er) standard deduction is the same as married filing jointly.

☐ It elects under section 444 to have a tax year other than a calendar year. To make the election, use Form 8716, Election To Have a Tax Year Other Than a Required Tax Year.

If a corporation makes the section 444 election, its deduction for certain amounts paid to employee-owners may be limited.

Stock received in disproportion to property transferred. If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred.

If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations.

Qualified personal service corporation. A qualified personal service corporation is taxed at a flat rate of 35% on taxable income.

If the corporation is a qualified personal service corporation, check the box on line 2 even if the corporation has no tax liability.

If the at-risk rules apply, adjust the amount on this line for any section 465(d) losses. These losses are limited to the amount for which the corporation is at risk for each separate activity at the close of the tax year.

If the corporation is involved in one or more activities, any of which incurs a loss for the year, report the losses for each activity separately. Attach Form 6198, At-Risk Limitations, showing the amount at risk and gross income and deductions for the activities with the losses.

Dividends from domestic corporations. A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend.

If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received.

A significant distributee (as defined in Regulations section 1.355-5(c)) that receives stock or securities of a controlled corporation must include the statement required by Regulations section 1.355-5(b) on or with its return for the year of receipt.

If the distributing or distributee corporation is a controlled foreign corporation, each U.S. shareholder (within the meaning of section 951(b)) must include the statement on or with its return.

The following instructions and the instructions for Schedules K and K-1, later, explain the applicable passive activity limitation rules and specify the type of information the partnership must provide to its partners for each activity.

If the partnership had more than one activity, it must report information for each activity on an attached statement to Schedules K and K-1.

Qualified expenses include: ☐ Expenses for care provided outside the home. This applies if the qualifying person regularly spends at least eight hours each day in your home.

If the qualifying person receives the care in a dependent-care center, the center must comply with all relevant state and local laws. A dependent-care center is one that cares for more than six people for a fee.

The corporation must issue a Form 1099-DIV to you by January 31 to report the $4,000 distributed to you during the previous year as dividends. The corporation must use Form 1096 to report this information to the IRS by February 28 (March 31 if filing electronically).

If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. The corporation does not deduct these dividends on its income tax return.

The corporation must issue a Form 1099-DIV to you by the end of January to report $12,000 of the $16,000 distributed to you during the previous year as dividends. The corporation must use Form 1096 to report this information to the IRS by February 28 (March 31 if filing electronically).

If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. The corporation does not deduct these dividends on its income tax return. However, the corporation must attach Form 5452 to this return to report the nondividend distribution.

★ Illiquidity. Even though there is no resale restriction, you may need to hold your investment for an indefinite period of time.

If the securities are not to be listed on an exchange where you can quickly and easily trade the securities, you will have to locate an interested buyer when you do seek to resell your investment.

Suggestion 1: If you exercise ISOs as in the previous example at $33 and the stock falls before the end of the current year, you can sell the stock and avoid the AMT.

If the stock fell to $25 during the year of the exercise, you would be subject to regular tax on only $22 per share ($25-$3) and not be subject to the AMT adjustment at all.

Your holding period is determined by the donor's acquisition date unless the stock declined in value since purchase.

If the stock has declined in value since purchase, your basis will be the fair market value on the date of the gift and the holding period will start on the date of the gift.

Reporting an Incentive Stock Option adjustment for the Alternative Minimum Tax

If you buy and hold, you will report the bargain element as income for Alternative Minimum Tax purposes. Report this amount on Form 6251: Alternative Minimum Tax for the year you exercise the ISOs.

Check-Writing Fees on Personal Account

If you have a personal checking account, you can't deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest.

Repayment of Income Aid Payment An "income aid payment" is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work.

If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment.

If you stop using an item for business purposes and convert it to personal use, your personal basis becomes the adjusted basis at the time of conversion with no additional deduction for the business.

If you subsequently dispose of the item, any amount received in excess of the adjusted basis would be taxable but any loss would not be deductible.

Employer pays the employment agency.

If your employer pays the fees directly to the employment agency and you aren't responsible for them, you don't include them in your gross income.

Am I limited in whether and how much I can invest? There are no limitations on whether you can invest, or how much you can invest, if you are investing in an offering relying on Tier 1 of Regulation A.

If, however, you are offered an opportunity to invest: ★ in a Tier 2 offering; ★ you are not an accredited investor; and ★ the securities are not going to be listed on a national securities exchange upon qualification;

Employer pays you back.

If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. See Recoveries in Pub. 525.

Why High Deductible Health Insurance? To get the benefits of an HSA, the law requires that the savings account be combined with a qualified high deductible health insurance plan which can cost less than other health insurance plans.

In 2016, the minimum annual deductible of a qualified HSA plan for an individual is $1,300 and $2,600 for a family. A health savings account (HSA) is a tax-favored savings account created for the purpose of paying medical expenses.

Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records.

In all cases, the method used must clearly show taxable income. Generally, permissible methods include: ☐ Cash, ☐ Accrual, or ☐ Any other method authorized by the Internal Revenue Code.

If taxpayers carelessly or recklessly disregard a rule or regulation, they presumably are not aware of the rule or regulation and consequently could not disclose their disregard of it.

In any event, disclosure is adequate for this purpose if made on a properly completed and filed Form 8275, Disclosure Statement, or 8275-R, Regulation Disclosure Statement, as appropriate.

Chapter 11 vs. Chapter 7 Effects on Credit Both Chapter 11 and Chapter 7 bankruptcies remain on credit reports for 10 years after the filing date.

In contrast, Chapter 13 bankruptcy lasts on a credit report for only seven years.

RS Tax Rules for Imputed Interest Updated for Tax Year 2017 OVERVIEW Lend someone money at zero interest, and you don't make any profit from the deal. Therefore, you might assume that the loan doesn't have any tax implications for you.

In many cases, though, you'd be wrong. The tax code expects you to charge a certain amount of interest for a loan — and even if you don't, you can be taxed as if you did. The IRS refers to this as "imputed interest."

☐ The S corporation makes a non-dividend distribution to the shareholder.

In order for the shareholder to determine whether or not the distribution is non-taxable they need to demonstrate they have adequate stock basis.

Some trustees provide written information on these topics at or before the meeting to ensure that the debtor is aware of this information.

In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. 11 U.S.C. § 341(c).

Similar considerations apply where the sale is between commonly controlled or related business entities, and the purchase price reflects a premium or discount.

In that case, the IRS will inquire as to the reasons why one entity paid too much, or too little, for the property sold.

(B) Transfers of stock between spouses or incident to divorce

In the case of any transfer described in section 1041(a) of stock of an S corporation, any loss or deduction described in subparagraph (A) with respect such stock shall be treated as incurred by the corporation in the succeeding taxable year with respect to the transferee.

Moreover, whether the agents have such experience or not, they often assume for penalty purposes that a taxpayer is per se negligent (or worse) if the taxpayer happens to disagree with the government about the interpretation or application of federal tax law.

In these circumstances, it is especially important for practitioners to thoroughly understand both the circumstances under which the IRS may properly apply a Sec. 6662 penalty and the potential defenses thereto.

Was income being shifted to an owner in a lower tax bracket? Did one of the entities have tax characteristics (such as losses) that the "other than arm's length" sale sought to utilize?

In these situations, the IRS may reallocate the gain or income between the related parties so as to prevent the avoidance of tax.

The stock sale is considered a short-term transaction because you owned the stock less than a year.

In this example, the date acquired is 6/30/2016, the date sold is 12/15/2016, the sales price is $4,990, and the cost basis is $4,500. The short term capital gain is the difference of $490 ($4,900-$4,500). How did we get these figures?

What are Incentive Stock Options? A stock option grants you the right to purchase a certain number of shares of stock at an established price. There are two types of stock options—

Incentive Stock Options (ISOs) and Nonqualified Stock Options (NSOs) — and they are treated very differently for tax purposes. In most cases, Incentive Stock Options provide more favorable tax treatment than Nonqualified Stock Options.

This is a different process from debt reorganization, which is used in a Chapter 11 filing. Under debt reorganization, debts are not discharged or forgiven.

Instead, loan terms are altered in a way that a debtor will hopefully be able to repay his debt more successfully. For example, debt APR or interest rates may be lowered, or the length of time a debtor has to repay a loan may be extended.

b. LLPs and LLLPs require formal organizational documents and must register with the state.

LLPs can be formed in all states and there are currently 20 states that recognize LLLPs.

Rental income, dividends and interest are considered trust income and will be included in accounting income (generally, all income as determined under the terms of the governing instrument and state law—IRC § 643(b)).

Long-term capital gains, on the other hand, are part of the trust principal and are not included in accounting income. Thus, gross accounting income is $42,000 ($25,000 + $12,000 + $5,000).

Suggestion: If you are subject to the AMT, invest in tax-exempt bonds issued before 2009 that are not private activity bonds.

Many mutual fund companies have two listings of state bond funds, one that contains private activity bonds, and one that doesn't. Read the literature carefully.

Line 23: Mining Costs:

Mining exploration and development costs may also generate an AMT adjustment unless you make an IRC section 59(e) election to write-off the costs over 10 years. Making the election eliminates an entry on this line.

While trusts exist in many forms, this article principally concerns the most commonly encountered type of nongrantor trust.

Other trusts that may be of interest to practitioners include those often used in conjunction with a small business, principally electing small business trusts (ESBTs) and qualified subchapter S trusts (QSSTs).

Chapter 13 Eligibility Chapter 13 is available only to individuals with regular income. If you operate your business as a sole proprietorship, you can take advantage of Chapter 13 by filing a petition on your own behalf.

Otherwise, Chapter 13 is not an option you can choose. Small businesses operated through corporations, partnerships, or other entities are not eligible to seek Chapter 13 relief.

Qualified Defined-Contribution Plans. Keogh plans can be set up as qualified defined-contribution plans, in which the contributions are made on a regular basis up to a limit.

Profit-sharing plans are one of the two types of Keogh plans that allow a business to contribute up to 25% of compensation or $53,000 in 2016. A business does not have to generate profits to set aside money for this type of plan.

A real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.

Services the partner performed as an employee aren't treated as performed in a real property trade or business unless he or she owned more than 5% of the stock (or more than 5% of the capital or profits interest) in the employer.

Debra completes Form 2106-EZ, Part I. She enters the transportation expenses of $500 on line 2. The home office expenses of $1,100 are entered on line 4. The entertainment expenses of $500 are subject to the 50% limit and are entered on line 5.

She then completes the rest of the form. The total expenses of $1,850, shown on line 6, are entered on Schedule A, line 21.

Traditional IRA vs. nondeductible IRA. ☐ On the other hand, there is an age cutoff: Neither allow contributions to the account after you reach the age of 70 1/2, which is also the age at which Uncle Sam requires people to start making withdrawals from both types of IRAs.

So far, traditional and nondeductible IRAs seem like boring identical twins, right? But increase the microscope's magnification, and one major difference is revealed. And it's a doozie.

Carryover. Charitable contributions over the 10% limitation cannot be deducted for the tax year but can be carried over to the next 5 tax years.

Special rules apply if the corporation has an NOL carryover to the tax year. In figuring the charitable contributions deduction for the current tax year, the 10% limit is applied using the taxable income after taking into account any deduction for the NOL.

Partnership items are allocated to a partner only for the part of the year in which that person is a member of the partnership. Generally, for each change in a partner's interest, the partnership will either allocate its items using a pro-ration method or a closing-of-the-books method.

Special rules apply to certain partnerships, certain variations, and certain items. See Regulations section 1.706-4 for additional rules and procedures for making elections.

Costs of Going Into Business When you go into business, treat all eligible costs you incur to get your business started as capital expenses. However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Any costs not deducted can be amortized.

Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Organizational costs are the direct costs of creating the corporation.

Change in accounting method. A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item).

The corporation must file Form 3115, Application for Change in Accounting Method. For more information, see Form 3115 and Pub. 538.

Limits of Section 179 Section 179 does come with limits - there are caps to the total amount written off ($500,000 for 2017), and limits to the total amount of the equipment purchased ($2,000,000 in 2017).

The deduction begins to phase out dollar-for-dollar after $2,000,000 is spent by a given business, so this makes it a true small and medium-sized business deduction.

Tax problems and administrative difficulties can arise if a corporation is classified as a personal holding company (PHC). Avoiding PHC status is important because:

The income will be taxed at the regular corporate rate when it is earned by the corporation.

What's the difference between Section 179 and Bonus Depreciation? Bonus depreciation is offered some years, and some years it isn't. Right now in 2017, it's being offered at 50%.

The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is "new to you"), while Bonus Depreciation covers new equipment only.

With respect to the new value given, you must prove a specific measure of new value was provided to the debtor.

The new value provided generally must actually enhance the worth of the debtor's estate. For example, a creditor's forbearance from levying on a judgment does not constitute new value.

Because the cost basis of a gift sold at a loss is the lower of cost or fair market value, you cannot gift a stock that is "under water" to your kids in order for them to take the loss for income tax savings on their return.

The same cost basis principles apply to gifts of bonds, notes, and mutual fund shares.

All relevant authorities must be considered, and the regulations recognize that there may be substantial authority for more than one position.

The substantial authority standard is less stringent than the more-likely-than-not standard but is more stringent than the reasonable basis standard.

Line 17: Disposition of Property Difference:

The tax basis in assets that you sold may be different for regular and AMT purposes depending on the depreciation method you chose (see Line 19), or on your incentive stock options (see Line 15).

Let's assume that you receive options on stock that is actively traded on an established market such as the NASDAQ, but that the options themselves aren't traded.

The tax catch is that when you exercise the options to purchase stock (but not before), you have taxable income equal to the difference between the stock price set by the option and the market price of the stock. In tax lingo, that's called the compensation element.

(d) Compliance and suitability checks. (1) As a condition to consideration of an application, the Internal Revenue Service may conduct a Federal tax compliance check and suitability check.

The tax compliance check will be limited to an inquiry regarding whether an applicant has filed all required individual or business tax returns and whether the applicant has failed to pay, or make proper arrangements with the Internal Revenue Service for payment of, any Federal tax debts.

As I'm sure you can see it is not as simple as just selling a business asset. Every sale of business assets can have many possible tax treatments, producing various tax results.

The tax treatment of the sale of business assets can be quite complex and if you are unsure of the possible tax consequences you should contact your Dermody, Burke, and Brown tax advisor to explain how the sale should be treated.

The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors.

The trustee accomplishes this by selling the debtor's property if it is free and clear of liens (as long as the property is not exempt) or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.

And when you sell the stock in a later year, you must report another adjustment on your Form 6251 for the year of sale. But what is the adjustment you should report?

The year-of-sale Form 6251 adjustment is added to the stock's cost basis for Alternative Minimum Tax purposes (but not for regular tax purposes).

In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111.

There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

If you're an executive, some of the options you receive from your employer may be Nonqualified Stock Options.

These are options that don't qualify for the more-favorable tax treatment given to Incentive Stock Options. In this article, you'll learn the tax implications of exercising nonqualified stock options.

The at-risk rules of section 465 generally apply to any activity carried on by the partnership as a trade or business or for the production of income.

These rules generally limit the amount of loss and other deductions a partner can claim from any partnership activity to the amount for which that partner is considered at risk.

Any remaining portion of the distribution is treated in the manner provided in section 1368(b).

This election is effective for all distributions made during the year for which the election is made.

Club Dues Generally, you can't deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose.

This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs.

In addition, corporations cannot deduct membership dues in any club organized for business, pleasure, recreation, or other social purpose.

This includes country clubs, golf and athletic clubs, airline and hotel clubs, and clubs operated to provide meals under conditions favorable to business discussion.

Line 19: Passive Activities:

This line contains the differences between AMT and regular tax deductions for passive activities. This line usually relates to a difference in depreciation methods for rentals, partnerships or S Corporations.

Line 26: Intangible Drilling Costs:

This line relates to the difference in timing of the deductions for intangible drilling costs. You can make an election under IRC section 59(e) to write off intangible drilling costs over 60 months for regular tax purposes, and eliminate an entry on this line.

Similarly, some income is taxable in the current period but is not included in your corporation's financial statement for the current period.

This may be previously deferred income not charged by the tax authorities or income that is, by convention and IRS rules, tax chargeable in accelerated mode. Examples of these include certain collected interests.

☐ The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million.

This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely.

Example 2. You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000.

This represents only 75% of each class of stock of the corporation. The other 25% was already issued to someone else. You and Bill recognize a taxable gain of $200,000 on the transaction.

So, in example 5, rather than using a cost basis of $2,000 for AMT, a cost basis of $4,500 ($2,000 plus $2,500 of the AMT adjustment from the year of exercise) should be used.

This results in a $3,990 gain for AMT purposes from the sale, which differs from the regular tax gain of $6,490 by exactly $2,500.

Overview Sec. 6662(a) imposes an addition to tax of 20% of the portion of the "underpayment to which [Sec. 6662] applies," which is any underpayment attributable to certain conditions or taxpayer conduct identified in Sec. 6662 itself.

Thus, for the Sec. 6662 penalty to apply, a taxpayer must have an underpayment of tax, and the underpayment must be attributable to one of the specific conditions or behaviors (referred to herein as "triggers") identified in Sec. 6662, including:

(1). Age Test

To qualify, a child must have been under age 17 (i.e., 16 years old or younger) at the end of the tax year for which you claim the credit.

(3). Support Test

To qualify, the child cannot have provided more than half of his or her own financial support during the tax year.

Exception for computer used in a home office. The more-than-50%-use test doesn't apply to a computer used only in a part of your home that meets the requirements described later under Home Office.

You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you don't use it more than 50% in your work. You also may be able to take a section 179 deduction for the year you place the computer in service.

Résumé.

You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation.

Employment and outplacement agency fees.

You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation.

Travel expenses. Travel expenses are those incurred while traveling away from home for your employer.

You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Generally, you can't deduct travel expenses paid or incurred in connection with an indefinite work assignment.

Tools Used in Your Work. Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase.

You can depreciate the cost of tools that have a useful life substantially beyond the tax year. For more information about depreciation, see Pub. 946.

3) You Must Itemize

You must itemize your deductions (i.e.; Schedule A) in order to qualify. You cannot use the standard deduction and claim medical and dental expenses.

Work Clothes and Uniforms. You can deduct the cost and upkeep of work clothes if the following two requirements are met.

You must wear them as a condition of your employment. The clothes aren't suitable for everyday wear.

Why are Incentive Stock Options more favorable tax-wise? When you exercise Incentive Stock Options, you buy the stock at a pre-established price, which could be well below actual market value. The advantage of an ISO is you do not have to report income when you receive a stock option grant or when you exercise that option.

You report the taxable income only when you sell the stock. And, depending on how long you own the stock, that income could be taxed at capital gain rates ranging from 0 percent to 23.8 percent (for sales in 2016) — typically a lot lower than your regular income tax rate.

If the income is not distributed and the corporation is subject to the PHC tax,

a 20% tax will be imposed on the undistributed personal holding company income (Sec. 541).

This treatment applies to a change in your stock's conversion ratio or redemption price, a difference between your stock's redemption price and issue price,

a redemption that is not treated as a sale or exchange of your stock, and any other transaction having a similar effect on a shareholder's interest in the corporation.

Since the corporation's current year earnings and profits ($10,000) were more than the amount of the distributions it made during the year ($4,000),

all of the distributions are treated as distributions of current year earnings and profits.

A 15% tax rate applies to qualified dividends that otherwise would be taxed at a 25%, 28%, 33%, or 35% rate;

and a 0% tax rate applies to qualified dividends that otherwise would be taxed at a 10% or 15% rate.

Limited Partnership A limited partnership is formed under a state limited partnership law

and composed of at least one general partner and one or more limited partners.

(10) Disbarment or suspension from practice as an attorney, certified public accountant, public accountant, or actuary by any duly constituted authority of any State, territory, or possession of the United States, including a Commonwealth, or the District of Columbia,

any Federal court of record or any Federal agency, body or board. (11) Knowingly aiding and abetting another person to practice before the Internal Revenue Service during a period of suspension, disbarment or ineligibility of such other person.

Any lawful solicitation made by or on behalf of a practitioner eligible to practice before the Internal Revenue Service must, nevertheless,

clearly identify the solicitation as such and, if applicable, identify the source of the information used in choosing the recipient.

Subchapter S earnings and profits are earnings and profits accumulated in a taxable year beginning before January 1, 1983 (or in the case of a qualified casualty insurance electing small business corporation or a qualified oil corporation,

earnings and profits accumulated in any taxable year), for which an election under subchapter S of chapter 1 of the Internal Revenue Code was in effect.

§ 10.29 Conflicting interests. (a) Except as provided by paragraph (b) of this section, a practitioner shall not represent a client before the Internal Revenue Service

if the representation involves a conflict of interest. A conflict of interest exists if —

Acquisition of an interest in a pass-through entity that licenses intangible property. Generally, net royalty income from intangible property is nonpassive income

if the taxpayer acquired an interest in the pass-through entity after the pass-through entity created the intangible property or performed substantial services or incurred substantial costs in developing or marketing the intangible property.

As the name suggests, creditors may attend this meeting, but they rarely do;

instead, they tend to have their attorneys work with the debtor's attorney(s) — another reason it is wise to hire an attorney for the bankruptcy process.

More than anything, it prevents creditors from using abusive,

last-minute tactics to try to make back as much of their money as possible. These protections remain in place throughout the bankruptcy process.

Contemporaneus Exchange for New Value. Previously we addressed the burden of proof placed upon a bankruptcy trustee in order to avoid a preference payment or transfer

made by one of your customers 90 days before filing bankruptcy. See 11 U.S.C. Section 547(b).

Percentage of completion method. Long-term contracts (except for certain real property construction contracts)

must generally be accounted for using the percentage of completion method described in section 460. See section 460 and the underlying regulations for rules on long-term contracts.

(c)S corporation with no earnings and profits. A distribution made by an S corporation that has no accumulated earnings and profits as

of the end of the taxable year of the S corporation in which the distribution is made is treated in the manner provided in section 1368(b).

(2) Government employee is an officer or employee of the United States or any agency of the United States, including a special Government employee as defined in 18 U.S.C. 202(a),

or of the District of Columbia, or of any State, or a member of Congress or of any State legislature.

Nonrecourse Loans Nonrecourse loans are those liabilities of the partnership for which no partner

or related person bears the economic risk of loss.

(Who Qualifies for Section 179?) Most tangible goods including "off-the-shelf" software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction. For basic guidelines on what property is covered under the Section 179 tax code,

please refer to this list of qualifying equipment. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2017 and December 31, 2017.

The sales price reported on Schedule D is $4,990 ($5,000 gross proceeds - $10 commission). The cost basis is the actual price paid per share times the number of shares ($12.75 x 100 = $1,275),

plus the amount that you're reporting as compensation income on line 7 of your Form 1040 ($225). Therefore, your total cost basis is $1,500, and the long-term capital gain reported on Schedule D is $3,490 ($4,990 - $1,500).

Such presentations include, but are not limited to, preparing and filing documents, corresponding and communicating with the Internal Revenue Service,

rendering written advice with respect to any entity, transaction, plan or arrangement, and representing a client at conferences, hearings, and meetings.

tax rate schedule.

tax rate schedule.

The term "property" as used here appears to be consistent with its everyday (tax) meaning. Perhaps the most common example of this occurs

when a taxpayer misstates the value of property contributed to a charitable organization for purposes of the charitable contribution deduction under Sec. 170.

★ Interest which is allocable to unborrowed policy cash values of life insurance, endowment, or annuity contracts issued after June 8, 1997,

when the partnership is a policyholder or beneficiary. See section 264(f). Attach a statement showing the computation of the deduction.

Rule 504 of Regulation D provides an exemption from the registration requirements of the federal securities laws for some companies

when they offer and sell up to $1,000,000 of their securities in any 12-month period.

Travel. The partnership cannot deduct travel expenses of any individual accompanying a partner or partnership employee, including a spouse or dependent of the partner or employee, unless:

★ That individual is an employee of the partnership, and ★ His or her travel is for a bona fide business purpose and would otherwise be deductible by that individual. Meals and entertainment.

Under Rule 506(c), a company can broadly solicit and generally advertise the offering, but still be deemed to be undertaking a private offering within Section 4(a)(2) if:

★ The investors in the offering are all accredited investors; and

★ The cost basis is $4,500.This is the actual price paid per share times the number of shares ($20 x 100 = $2,000), plus any amounts reported as compensation income on your 2016 tax return ($2,500).

★ The sales price is $4,500 ($45 x 100 shares). This should match the gross amount shown on your 2016 Form 1099-B you receive from your broker after the end of the year.

You must figure your taxable income on the basis of a tax year. A "tax year" is an annual accounting period for keeping records and reporting income and expenses. An annual accounting period does not include a short tax year. The tax years you can use are:

☐ Calendar year - 12 consecutive months beginning January 1 and ending December 31. ☐ Fiscal year - 12 consecutive months ending on the last day of any month except December.

Contributions to organizations conducting lobbying activities. Contributions made to an organization that conducts lobbying activities are not deductible if: ☐ The lobbying activities relate to matters of direct financial interest to the donor's trade or business, and

☐ The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor.

An example of an acceptable description for registered tax return preparers is

"designated as a registered tax return preparer by the Internal Revenue Service."

(B) The contract, instruction, or plan described in paragraph (c)(1)(i)(A) of this Section: (1) Specified the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold;

(2) Included a written formula or algorithm, or computer program, for determining the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold; or

(1) The representation of one client will be directly adverse to another client; or

(2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner.

Exposing the Corporation to At-Risk and Passive Activity Loss Rules Shareholders are in control of a corporation for purposes of the at-risk and the passive activity loss (PAL) rules if, at any time in the last half of the tax year, a group of no more than five individuals owns

(directly or indirectly) more than 50% in value of the corporation's stock (Secs. 469(j)(1) and 465(a)(1)(B), referring to Sec. 542(a)(2)). This is the same ownership requirement that applies for determining whether a corporation is a PHC.

The money in a Keogh plan can be invested in stocks, bonds, mutual funds and other types of investments.

A Keogh plan must be established before the end of the year in which you wish to receive the deduction, but you can make Keogh contributions for the prior year when you file your tax return by mid-April or, if you file an extension, by mid-October.

What is the 'Keogh Plan' A Keogh plan is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or defined-contribution plan, although most plans are defined as contributions.

Contributions are generally tax deductible up to a certain percentage of annual income with applicable absolute limits in U.S. dollar terms, which can be changed from year to year by the U.S. Internal Revenue Service (IRS).

Qualified Defined-Benefit Plans Qualified defined-benefit plans state the annual benefits to be received at retirement, and these benefits are typically based on salary and years of employment.

Contributions towards defined-benefit Keogh plans are based on stated benefits and other factors, such as age and expected returns on plan assets. The IRS stated that in 2016, the maximum annual benefit is set at $210,000 or 100% of the employee's compensation, whichever is lower.

For loss and deduction items, which exceed a shareholder's stock basis, the shareholder is allowed to deduct the excess up to the shareholder's basis in loans personally made to the S corporation.

Debt basis is computed similarly to stock basis but there are some differences.

If a shareholder receives a non-dividend distribution from an S corporation, the distribution is tax-free to the extent it does not exceed the shareholder's stock basis.

Debt basis is not considered when determining the taxability of a distribution.

(2) Practice as an enrolled retirement plan agent is limited to representation with respect to issues involving the following programs:

Employee Plans Determination Letter program; Employee Plans Compliance Resolution System; and Employee Plans Master and Prototype and Volume Submitter program.

(2). Is the income, loss or deduction item distributed to the beneficiaries, or does the entity retain it?

Fiduciary accounting has been characterized as somewhat similar to governmental accounting because it deals with a fund (the trust principal) and income derived from the fund.

Following are the deadlines for companies to file

Forms 10-K and 10-Q:

7) No Double Benefits

If you participate in a Health Savings Account or Flexible Spending Arrangement and you used either to pay for medical expenses, you cannot claim a tax deduction as these funds are usually withdrawn on a tax-free basis.

Advance payments.

In general, advance payments are reported in the year of receipt.

Method 1. Each required installment is 25% of the income tax the corporation will show on its return for the current year.

Method 2. Each required installment is 25% of the income tax shown on the corporation's return for the previous year.

Line 2: Medical Expenses: If you itemize deductions, medical deductions have to exceed an additional 2.5 percent of your AGI with the AMT.

Suggestion: If your employer has a pre-tax medical deduction plan, sign up for it. You can reduce your salary to pay your medical expenses on a pre-tax basis, which will help you reduce both the AMT and your regular tax.

So Congress instituted the AMT with the aim of making the tax system fairer. But because the AMT was never indexed to inflation—as the regular income tax is—each year, more and more middle-income taxpayers are snared by a tax originally targeted at the rich.

The AMT exemption amounts are now indexed to rise with inflation.

(5). Citizenship Test.

The child must be a U.S. citizen, a U.S. national or a U.S. resident alien. [For tax purposes, the term "U.S. national" refers to individuals who were born in American Samoa or in the Commonwealth of the Northern Mariana Islands.]

Now you calculate the Tentative Minimum Tax (Line 34). You compare this figure to the tax you calculated under the regular tax system on Form 1040.

The difference, if positive, is the Alternative Minimum Tax. You add the positive difference, if any, to the your regular tax.

As explained by Seattle accountant and tax specialist Scott Usher, the government expects loans to be "structured in a business-like manner," including interest rates that reflect market conditions.

The idea is that if you're not charging and collecting a certain level of interest, the government isn't going to take your word for it that this is a loan.

With ISOs, your taxes depend on the dates of the transactions (that is, when you exercise the options to buy the stock and when you sell the stock).

The price break between the grant price you pay and the fair market value on the day you exercise the options to buy the stock is known as the bargain element.

BREAKING DOWN 'Keogh Plan' The IRS refers to Keogh plans as qualified plans, and they come in two types. The first type of plans are defined-benefit plans, which include profit-sharing plans and money purchase plans.

The second type of plans are defined-contribution plans. Also known as an HR(10) plan, Keogh plans can invest in the same set of securities as 401(k)s and IRAs, including stocks, bonds, certificates of deposit (CDs) and annuities.

Line 15: Estates or Trusts:

This line contains differences between AMT and regular tax deductions from estates or trusts. Unfortunately, decisions by the administrators of the estate or trust may be beyond your control.

What is the 2% rule? In taxes, the 2% rule refers to the limitation on certain types of miscellaneous deductions, including unreimbursed job-related expenses (Form 2106), tax preparation fees, investment or advisory fees, and safe deposit box rentals.

Under the 2% rule, you're only allowed to deduct the portion of miscellaneous expenses that exceeds 2% of your adjusted gross income (AGI). You must also itemize to get this deduction.

Investing in a Keogh As with a traditional 401(k), the money contributed to a Keogh can be invested tax-deferred until retirement, beginning at age 59 1/2 but no later than age 70.

Withdrawals made before that time are taxed on a federal and possibly state level, plus you'll pay a 10-percent penalty. But some exceptions exist to these rules, depending on your physical and financial health.

More-than-50%-use test not met. If you don't meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS).

You also can't claim the section 179 deduction. (But if you use your computer in a home office, see the exception below.)

You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions.

You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit.

Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). You can claim the amount of expenses that is more than 2% of your adjusted gross income.

You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37.

Research Expenses of a College Professor. If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties.

You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. However, you can't deduct the cost of travel as a form of education.

Money or other property received. If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain.

You must recognize gain only up to the amount of money plus the fair market value of the other property you receive.

(3) Member of a firm is a sole practitioner or an employee or associate thereof, or a partner, stockholder,

associate, affiliate or employee of a partnership, joint venture, corporation, professional association or other affiliation of two or more practitioners who represent nongovernmental parties.

(2) Sale of these hot assets back to the partnership at value in exchange for a portion of the assets actually received in the distribution.

b. The partner recognizes ordinary income on the deemed sale of hot assets and the partnership takes a cost basis for the deemed hot asset purchases (Example 21).

This is the most favorable tax treatment because long-term capital gains recognized in 2016 are taxed at a maximum 15 percent (or 0 percent if you're in the 10 percent or 15 percent income tax brackets)

compared to ordinary income tax rates which may be as high as 35 percent. After 2016 tax rates may change depending on what Congress does.

Debtors should also be aware that out-of-court agreements with creditors or

debt counseling services may provide an alternative to a bankruptcy filing.

Today, Keogh plans can be divided into two basic kinds:

defined-contribution plans and defined-benefit plans.

Temporary work assignment. If your assignment or job away from home in a single location is realistically expected to last (and does in fact last)

for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it isn't.

EXECUTIVE SUMMARY ☐ Sec. 6662 imposes an accuracy-related penalty equal to 20% of any underpayment of federal tax resulting

from certain specified taxpayer behaviors (e.g., negligence, disregard of rules or regulations, substantial understatement of income tax, and certain valuation misstatements).

In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time,

if such operation will benefit creditors and enhance the liquidation of the estate. 11 U.S.C. § 721.

The first defense applies when there is a contemporaneous exchange for new value provided to your customer, who is now a bankruptcy debtor. See 11 U.S.C. Section 547(c)(1). Under this section of the Bankruptcy Code, a preference cannot be avoided by the trustee

if you can prove that the transfer was intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor and the transfer was in fact a substantially contemporaneous exchange.

Any gain in excess of the amount treated as ordinary income because of Section 1250 recapture, but not exceeding the total depreciation claimed,

is "unrecaptured Section 1250 gain". Unrecaptured Section 1250 gain will be taxed at a maximum rate of 25%.

If the stock you received as a gift is then sold at a gain, your cost basis

is the carryover basis from your donor.

The court may revoke a chapter 7 discharge on the request of the trustee, a creditor, or the U.S. trustee if the discharge was obtained through fraud by the debtor, if the debtor acquired property that is property of the estate and

knowingly and fraudulently failed to report the acquisition of such property or to surrender the property to the trustee, or if the debtor (without a satisfactory explanation) makes a material misstatement or fails to provide documents or other information in connection with an audit of the debtor's case. 11 U.S.C. § 727(d).

"Ultramares Rule": An accountant only owes a duty of care to those persons for whose primary benefit the accountant's statements were intended, namely:

persons in privity with the accountant; and third parties whose relationship with the accountant was "so close as to approach that of privity."

This notification must include the enrolled agent's, enrolled retirement plan agent's, or registered tax return preparer's name,

prior address, new address, tax identification number(s) (including preparer tax identification number), and the date the change of address is effective.

The debtor must attend the meeting and answer questions regarding the debtor's financial affairs and property. 11 U.S.C. § 343. If a husband and wife have filed a joint petition,

they both must attend the creditors' meeting and answer questions. Within 10 days of the creditors' meeting, the U.S. trustee will report to the court whether the case should be presumed to be an abuse under the means test described in 11 U.S.C. § 704(b).

(1)Election to terminate year under § 1.1368-1(g)(2). If an election is made under paragraph (g)(2) of this section to terminate the year when there is a qualifying disposition,

this section applies as if the taxable year consisted of separate taxable years, the first of which ends at the close of the day on which there is a qualifying disposition of stock.

(b) Fee. A reasonable nonrefundable fee may be charged for each application

to become an enrolled agent, enrolled retirement plan agent, or registered tax return preparer. See 26 CFR part 300.

x

x

Educator expenses over limit. If you were an educator in 2016 and you had qualified expenses that you can't take as an adjustment to gross income,

you can deduct the rest as an itemized deduction subject to the 2% limit.

Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain,

you have neither a gain nor loss on the sale or disposition of the property.

Defined-contribution plans can be broken down further into two types:

★ Profit-sharing plan (PSP). ★ Money purchase plan (MPP).

Nonqualified preferred stock. Nonqualified preferred stock is treated as property other than stock. Generally, it is preferred stock with any of the following features.

☐ The holder has the right to require the issuer or a related person to redeem or buy the stock. ☐ The issuer or a related person is required to redeem or buy the stock.

To qualify, you must meet these requirements: ☐ You qualified for married filing jointly with your spouse for the year he or she died. (It doesn't matter if you actually filed as married filing jointly.) ☐ You didn't remarry before the close of the tax year.

☐ You have a child, stepchild, or adopted child you claim as your dependent. This doesn't apply to a foster child. ☐ You paid more than half the cost of maintaining your home. This must be the main home of your dependent child for the entire year, except for temporary absences.

How do you report non-recognition of gain or loss on your income tax return?

• Report the sales proceeds on your tax return so that the IRS will be able to reconcile your return to your broker's Form 1099-B sales proceeds report.

3. Partnership distributes $40,000 cash and accrual basis accounts receivable with a $20,000 basis and value. Jill has $40,000 cash and a $10,000 substituted basis in the receivables. She recognizes no gain or loss.

4. Partnership distributes $8,000 of inventory value with a $5,000 basis. Jill takes a $5,000 carryover basis in the inventory, and reports a $45,000 loss on the liquidation, because she received only cash, inventory, and/or unrealized receivables in the distribution.

(2) Practice as an enrolled actuary is limited to representation with respect to issues involving the following statutory provisions in title 26 of the United States Code: sections 401 (relating to qualification of employee plans),

403(a) (relating to whether an annuity plan meets the requirements of section 404(a) (2)), 404 (relating to deductibility of employer contributions), 405 (relating to qualification of bond purchase plans), 412 (relating to funding requirements for certain employee plans),

Proportionate Liquidating Distributions 4. Proportionate liquidating distributions consist of either a single distribution or a series of distributions that result in the termination of the partner's entire interest in the partnership. The partnership may or may not also liquidate.

5. Normally, a partnership and its partners do not recognize gains or losses when property or cash is distributed in proportionate liquidating distributions.

(c) Definitions. For purposes of this section — (1) Contingent fee is any fee that is based, in whole or in part, on whether or not a position taken on a tax return or other filing avoids challenge by the Internal Revenue Service or is sustained either by the Internal Revenue Service or in litigation.

A contingent fee includes a fee that is based on a percentage of the refund reported on a return, that is based on a percentage of the taxes saved, or that otherwise depends on the specific result attained.

The corporate alternative minimum tax (AMT) targets these corporations and attempts to ensure that they pay at least a minimum amount of tax on their economic income.

A corporation (other than a small corporation exempt from the AMT, as discussed below) owes AMT if its tentative minimum tax is more than its regular tax.

Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless.

A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason.

§ 10.23 Prompt disposition of pending matters.

A practitioner may not unreasonably delay the prompt disposition of any matter before the Internal Revenue Service.

Line 12: Private Activity and Tax-Exempt Bond Interest:Normally, tax-exempt interest from private activity bonds is not tax-exempt for AMT purposes.

A private activity bond is a state or local bond issued to provide funds for private, nongovernmental activities such as building a sports stadium, industrial development, student loan financing, or low-income housing.

(1). Increased for income items and excess depletion; (2). Decreased for distributions; (3). Decreased for non-deductible, non-capital expenses and depletion; and

(4). Decreased for items of loss and deduction. When determining the taxability of a non-dividend distribution, the shareholder looks solely to his/her stock basis (debt basis is not considered).

10.4 Eligibility to become an enrolled agent, enrolled retirement plan agent, or registered tax return preparer. (a) Enrollment as an enrolled agent upon examination.

(b) Enrollment as a retirement plan agent upon examination. (c) Designation as a registered tax return preparer. (d) Enrollment of former Internal Revenue Service employees.

(2) It appears that the respondent has knowingly introduced false testimony during the proceedings against the respondent.

(b) Hearing. The supplemental charges may be heard with other charges in the case, provided the respondent is given due notice of the charges and is afforded a reasonable opportunity to prepare a defense to the supplemental charges.

In the case of such a distribution, that portion remaining after the application of section 1368(c)(1) (relating to distributions from the accumulated adjustments account (AAA) as defined in § 1.1368-2(a)) is treated in the manner provided in section 1368(b)

(relating to S corporations without earnings and profits) to the extent that portion is a distribution of money and does not exceed the shareholder's net share immediately before the distribution of the corporation's previously taxed income.

Entertainment facilities. The corporation cannot deduct an expense paid or incurred for a facility

(such as a yacht or hunting lodge) used for an activity usually considered entertainment, amusement, or recreation.

Example 2: The facts are the same as in Example 1, except that in addition to the Class A stock and Class B stock received, P1 receives 60 shares of Class C stock

(the total again in a value-for-value exchange). The stock ownership after the exchange is shown in Exhibit 3, below.

4. You exercise the option to purchase the shares, then sell them more than a year after the day you purchased them.The compensation element of the $2,000 is the same as in the preceding examples and should have appeared in Box 1 of your W-2 for 2011

(the year you exercised the options to purchase the stock.) Because this transaction occurred in a previous year, you don't have to pay tax on the compensation element again; it's now considered part of your cost basis purchase price for the stock.

The basis to the partnership of property contributed by a partner is the adjusted basis in the hands of the partner at the time it was contributed, plus any gain recognized

(under section 721(b)) by the partner at that time. See section 723 for more information.

(iv) Not rely upon representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) of the taxpayer or any other person if reliance on them would be unreasonable;(v) Relate applicable law and authorities to facts; and

(vi) Not, in evaluating a Federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit.

(2)Previously taxed income. This paragraph (d)(2) applies to distributions by a corporation that has both accumulated earnings and profits and previously taxed income

(within the meaning of section 1375(d)(2), as in effect prior to its amendment by the Subchapter S Revision Act of 1982, and the regulations thereunder) with respect to one or more shareholders.

This administrative approach (the automatic assertion of accuracy-related penalties) is contrary to congressional intent.

4 Nonetheless, given the current tax enforcement environment, it is the situation taxpayers and practitioners are likely to confront for the foreseeable future.

3. Certain transactions for which the corporation (or a related party) has contractual protection against disallowance of the tax benefits.

4. Certain transactions resulting in a loss of at least $10 million in any single year or $20 million in any combination of years. 5. Any transaction identified by the IRS by notice, regulation, or other published guidance as a "transaction of interest.

Line 10. Guaranteed Payments to Partners Deduct payments or credits to a partner for services or for the use of capital if the payments or credits are determined without regard to partnership income and are allocable to a trade or business activity.

Also include on line 10 amounts paid during the tax year for insurance that constitutes medical care for a partner, a partner's spouse, a partner's dependents, or a partner's children under age 27 who aren't dependents.

To use Method 2: (1). The corporation must have filed a return for the previous year, (2). The return must have been for a full 12 months, and (3). The return must have shown a positive tax liability (not zero).

Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only.

Travel, meals, and entertainment. Subject to limitations and restrictions discussed below, a corporation can deduct ordinary and necessary travel, meals, and entertainment expenses paid or incurred in its trade or business.

Also, special rules apply to deductions for gifts, skybox rentals, luxury water travel, convention expenses, and entertainment tickets. See section 274 and Pub. 463 for details.

Many companies prefer to use full-month depreciation in the first month of ownership, irrespective of the actual date of purchase within the month, so that they can slightly accelerate their recognition of depreciation; doing so reduces their taxable income.

Also, the mid-month convention introduces some complexity to the calculation of depreciation, making it more likely that a calculation error will occur.

Bottom line. Your employer is not required to withhold Social Security (FICA) taxes when you exercise the option to purchase the stock.

Also, your employer is not required to withhold income tax when you dispose of the stock. But you still owe some income tax on any gain resulting from the sale of the stock.

2. Partnership distributes $60,000 cash. Bob reduces his basis in the partnership to $0, has $60,000 cash, and recognizes a gain of $10,000 on the excess distribution.

3. Partnership distributes $40,000 cash and accrual basis accounts receivable with a $20,000 basis and value. Bob reduces his basis in partnership to $0, has $40,000 cash, and a $10,000 substituted basis in the receivables. He recognizes no gain or loss.

If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim.

Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor's property should consult an attorney for advice.

Today, Section 179 is one of the few incentives included in any of the recent Stimulus Bills that actually helps small businesses.

Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses - and millions of small businesses are actually taking action and getting real benefits.

Schedules K and K-1. Partners' Distributive Share Items Purpose of Schedules

Although the partnership isn't subject to income tax, the partners are liable for tax on their shares of the partnership income, whether or not distributed, and must include their shares on their tax returns.

The annual report on Form 10-K provides a comprehensive overview of the company's business and financial condition and includes audited financial statements.

Although similarly named, the annual report on Form 10-K is distinct from the "annual report to shareholders," which a company must send to its shareholders when it holds an annual meeting to elect directors.

Tender Offers The Securities Exchange Act requires disclosure of important information by anyone seeking to acquire more than 5 percent of a company's securities by direct purchase or tender offer.

Such an offer often is extended in an effort to gain control of the company. As with the proxy rules, this allows shareholders to make informed decisions on these critical corporate events.

Schedule K. Schedule K is a summary schedule of all the partners' shares of the partnership's income, credits, deductions, etc. All partnerships must complete Schedule K. Rental activity income (loss) and portfolio income aren't reported on page 1 of Form 1065.

These amounts aren't combined with trade or business activity income (loss). Schedule K is used to report the totals of these and other amounts.

In addition, the regulations, while not defining negligence, do provide examples of negligent behavior.

These examples include failing to keep adequate books and records and failing to substantiate items properly.

As with income accelerated and charged immediately by the IRS, there are certain expenses that are accelerated and charged against taxable income in the current period.

These expenses may be those deferred items disallowed in prior periods but allowed in the current period. An accrued expense, such as unpaid rent, that is not deductible in previous periods is one example.

Alternative Minimum Tax (AMT) The tax laws give special treatment to some types of income and allow special deductions and credits for some types of expenses.

These laws enable some corporations with substantial economic income to significantly reduce their regular tax.

What are the time limits to complete a Section 1031 Deferred Like-Kind Exchange? While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable.

These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.

If the preemptive right did not exist, this would dilute your ownership to 5% (10 shares divided by 200 shares outstanding). You exercise your preemptive right to maintain your proportional interest and agree to buy (or "subscribe") to 10 shares of the new stock.

You promptly cut a check for $500 (10 new shares x $50 offering price = $500), and now you own 20 shares out of 200 outstanding; owning the same 10% of the entire company.

4) When Are Medical Expenses Considered Paid?

You must have paid medical expenses during the calendar year. If you paid by check, the date you mailed or delivered the check is usually the qualifying date of payment.

Rental activity incidental to a nonrental activity. An activity isn't a rental activity if the rental of the property

is incidental to a nonrental activity, such as the activity of holding property for investment, a trade or business activity, or the activity of dealing in property.

Purpose of the Tax The purpose of the accumulated earnings tax is to discourage the accumulation of earnings if the reason for such accumulation

is to allow shareholders to avoid paying taxes on such earnings by not paying them dividends. Keep in mind, this is not a self-assessed tax, it can be imposed via IRS review of a corporation.

(3) Enrollment as an enrolled agent based on an applicant's former employment with the Internal Revenue Service may be of unlimited scope or it may be limited

to permit the presentation of matters only of the particular specialty or only before the particular unit or division of the Internal Revenue Service for which the applicant's former employment has qualified the applicant.

Unreasonable rents. If a corporation rents property from a shareholder and the rent is

unreasonably more than the shareholder would charge to a stranger for use of the same property, the excessive part of the rent may be treated as a distribution to the shareholder.

★ Insurance premiums. ★ Legal and professional fees. ★ Supplies used and consumed in the business. ★ Utilities. ★ Certain business startup and organizational costs. See ★ Limitations on Deductions, earlier, for more details.

★ Deduction for certain energy efficient commercial building property placed in service before January 1, 2017.

General partners. General partners' net earnings (loss) from self-employment do not include the following.

★ Dividends on any shares of stock and interest on any bonds, debentures, notes, etc., unless the dividends or interest are received in the course of a trade or business, such as a dealer in stocks or securities or interest on notes or accounts receivable.

Most distributions from an S corporation are non-dividend distributions. Dividend distributions can occur in a company that was previously a C corporation

or acquired C corporation attributes in a non-taxable transaction (i.e., merger, reorganization, QSub election, etc.).

The term does not include any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner or the practitioner's firm, employees

or agents if the practitioner is withholding such document pending the client's performance of its contractual obligation to pay fees with respect to such document.

What does "practice before the IRS" entail? "Practice before the IRS" comprehends all matters connected with a presentation to the IRS,

or any of its officers or employees, relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS.

Similarly, in the case of a sale of property (whether or not depreciable) between a partnership and a person owning more than 50% of the capital or profit interests in the partnership,

or between two commonly controlled partnerships, any gain recognized shall be considered ordinary income if the property is other than a capital asset.

A contingent fee also includes any fee arrangement in which the practitioner will reimburse the client for all or a portion of the client's fee in the event that a position

taken on a tax return or other filing is challenged by the Internal Revenue Service or is not sustained, whether pursuant to an indemnity agreement, a guarantee, rescission rights, or any other arrangement with a similar effect.

Health Savings Account Advantages: tax-deductible: Contributions to the HSA are 100% deductible (up to the legal limit) — just like an IRA. tax-free: Withdrawals to pay qualified medical expenses, including dental and vision, are never taxed.

tax-deferred: Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free. it's yours!: Unlike a flexible spending account (FSA), unused money in your HSA isn't forfeited at the end of the year; it continues to grow tax-deferred.

Line 3: Taxes: In calculating the AMT, you cannot take itemized deductions for state and local income tax, real estate taxes and personal property taxes, even though these are deductible on your regular return.

Suggestion 1: In a year that you have to pay the AMT, don't bother prepaying real estate or fourth-quarter state estimated tax payments in December. You get no benefit from paying these taxes in a year that you are subject to the AMT.

Line 21: Circulation Expenditures: This line relates to the difference between how newspaper or magazine circulation expenditures are deducted under both tax systems.

Suggestion: If you have an entry on this line, consider making an election under Internal Revenue Code (IRC) section 59(e) to amortize these expenses over three years for regular tax purposes. This will eliminate the entry on this line for AMT purposes.

Your W-2, Box 10 will show the amount of child and dependent care benefits your employer provided. You can't use expenses paid or reimbursed with these benefits to claim the childcare credit.

Subtract the Box 10 amount from the amount of the child and dependent care credit you can claim. When your W-2 shows dependent care benefits, you must complete Form 2441 (Form 1040), Part III. This applies even if you're not claiming a childcare credit.

☐ Class: 20-year property. ☐ Depreciation Period: 20 years.

☐ Description: Farm buildings (other than those noted under 10-year property), municipal sewers not categorized as 25-year property, the initial clearing and grading of land for electric utility transmission and distribution plants

☐ Class: 7-year property ☐ Depreciation Period: 7 years.

☐ Description: Office furniture and fixtures, agricultural machinery and equipment, any property not designated as being in another class, natural gas gathering lines

☐ In order to be eligible to contribute to either, you must have received taxable compensation (e.g. self-employment wages, salaries, fees, tips, bonuses, commissions, taxable alimony).

☐ Unlike the Roth IRA, there are no income limits that prevent you from being eligible to contribute the full allowable amount to either account.

Limit on deduction for dividends. The total deduction for dividends received or accrued is generally limited (in the following order) to:

(1). 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then

Foregone interest. For any period, forgone interest is equal to:

(1). The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus (2). Any interest actually payable on the loan for the period.

c. Nonliquidating distributions are any other distributions and of the following two types. (1) Draw. Distributions of a partner's share of current or accumulated partner-ship profits that have been taxed to the partner.

(2) Partial liquidation. Distributions that reduce the partner's interest in the partnership capital but do not liquidate the partner's entire interest.

(3). You exercise the option to purchase the shares, then you sell them within a year or less after the day you purchased them.

(4). You exercise the option to purchase the shares, then you sell them more than a year after the day you purchased them. Each of these four scenarios has its own tax issues as the following four tax examples show.

Most small business owners, when possible, choose Chapter 13 over Chapter 11. Chapter 11 can provide more flexibility, but it usually costs too much money and takes too much time to be a realistic option for small business owners.

(To learn about these types of bankruptcy, see Chapter 13 Bankruptcy for Small Businesses, and Chapter 11 Bankruptcy: An Overview.)

(3) Reliance on representations, statements, findings, or agreements is unreasonable if the practitioner knows or reasonably should know that one or more representations or assumptions on which any representation is based are incorrect, incomplete, or inconsistent.

(b) Reliance on advice of others. A practitioner may only rely on the advice of another person if the advice was reasonable and the reliance is in good faith considering all the facts and circumstances. Reliance is not reasonable when—

(e) Natural persons. Enrollment to practice may be granted only to natural persons.

(f) Effective/applicability date. This section is applicable beginning August 2, 2011.

(2) A practitioner may charge a contingent fee for services rendered in connection with the Service's examination of, or challenge to — (i) An original tax return; or

(ii) An amended return or claim for refund or credit where the amended return or claim for refund or credit was filed within 120 days of the taxpayer receiving a written notice of the examination of, or a written challenge to the original tax return.

(3) A registered tax return preparer may represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the Internal Revenue Service

(including the Taxpayer Advocate Service) during an examination if the registered tax return preparer signed the tax return.or claim for refund for the taxable year or period under examination.

(2) The individual through willfulness, recklessness, or gross incompetence does not take reasonable steps to ensure that firm procedures in effect are properly followed, and one or more individuals who are members of

, associated with, or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm, of failing to comply with this part, as applicable; or

Dividends on deposits. Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks

, cooperative banks, and similar organizations are interest, not dividends. They do not qualify for this deduction.

This aspect of the negligence penalty also seems to implicate the reasonableness of the taxpayer's recordkeeping

, docu-mentation and substantiation of expenses, and care taken to ensure that items are properly reported on returns.33 The Sec. 6664 regulations illustrate this point.

Mid-Quarter Convention: - Must be used if you buy more than 40% of your property during the last quarter of the year.

- Assumes property was placed in service in the middle of the quarter of purchase - Assets you claim the section 179 deduction for don't count towards the 40% total each year.

Half-Year Convention: - Generally used for personal property, like office equipment, computers, etc.

- Treats property as placed in service in the middle of the year of purchase, thus... - Allows you six months of depreciation for all depreciable property you placed in service during the year, regardless of when you purchased it.

Practice tip: As can readily be seen, the Sec. 6662 negligence penalty, with its focus on the reasonableness of taxpayer behavior and positions, overlaps and can easily be confused with the Sec.

6664 reasonable cause/good-faith defense. Negligence on the one hand and reasonable cause and good faith on the other are really two sides of the same coin.

Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest.

A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate.

If any regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day.

A business day is any day that is not a Saturday, Sunday, or legal holiday.

All papers filed in connection with a proceeding under this part must be served on the other party, unless the Administrative Law Judge directs otherwise.

A certificate evidencing such must be attached to the original paper filed with the Administrative Law Judge.

The tentative minimum tax of a small corporation is zero. This means that a small corporation will not owe AMT. Small corporation exemption.

A corporation is treated as a small corporation exempt from the AMT for its current tax year if that year is the corporation's first tax year in existence (regardless of its gross receipts for the year) or:

General Partner

A general partner is a partner who is personally liable for partnership debts.

Gross Rents Enter the gross amount received for the rental of property. Deduct expenses such as repairs, interest, taxes, and depreciation on the proper lines for deductions.

A rental activity held by a closely held corporation or a personal service corporation may be subject to the passive activity loss rules.

But the similarities between nondeductible and Roth IRAs end there.

After that, the differences between the two are huge.

(What's the difference between Section 179 and Bonus Depreciation?) Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,000,000) on new capital equipment.

Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.

Partners who actively participate in a rental real estate activity may be able to deduct part or all of their rental real estate losses

(and the deduction equivalent of rental real estate credits) against income (or tax) from nonpassive activities.

(a) Scope of Rule. This section shall apply to any violation of Section 10(b) of the Act (15 U.S.C. 78j(b)) and §240.10b-5 thereunder that is based on the purchase or sale of securities on the basis of, or the communication of, material nonpublic information misappropriated in breach of a duty of trust or confidence.

(b) Enumerated "duties of trust or confidence." For purposes of this section, a "duty of trust or confidence" exists in the following circumstances, among others:

How do you report Section 1031 Like-Kind Exchanges to the IRS? You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.

Form 8824 asks for: ☐ Descriptions of the properties exchanged ☐ Dates that properties were identified and transferred ☐ Any relationship between the parties to the exchange

What property qualifies for a Like-Kind Exchange? Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.

Period Covered The 2016 Form 1065 is an information return for calendar year 2016 and fiscal years that begin in 2016 and end in 2017.

For a fiscal year or a short tax year, fill in the tax year space at the top of Form 1065 and each Schedule K-1.

Form 10-K The federal securities laws require public companies to disclose information on an ongoing basis.

For example, domestic companies must submit annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K for a number of specified events and must comply with a variety of other disclosure requirements.

Every month, the IRS publishes a list of current Applicable Federal Rates, which reflect market conditions.

For example, in June 2017, the AFR for loans of less than 3 years was 1.18%. If you loan someone money at no interest, or at 0.25%, or at any rate below 0.93%, you have to deal with imputed interest.

When To File Generally, a domestic partnership must file Form 1065 by the 15th day of the 3rd month following the date its tax year ended as shown at the top of Form 1065.

If the due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday.

Educator Expenses. If you were an eligible educator in 2016, you can deduct up to $250 of qualified expenses you paid in 2016 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction.

If you file Form 1040A, you can deduct these expenses on line 16. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses.

Commuting Expenses You can't deduct commuting expenses (the cost of transportation between your home and your main or regular place of work).

If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items.

Line 7: State Tax Refund:

If you have a taxable state tax refund on your regular tax return, you get to remove it from your income for AMT purposes because you do not receive a corresponding deduction for state taxes.

Your Tentative Minimum Tax limits these credits and most other general business credits other than the energy credit, because these credits cannot reduce the tax you pay below the Tentative Minimum Tax.

If you have any of these credits, usually from a business entity or an investment, you should analyze Lines 2-28 of Form 6251 to see what you can do to reduce your Tentative Minimum Tax and allow more credits.

Risk #4: Disallowed Losses Where the sale of property between related parties results in the realization of a loss, the seller's deduction in the year of the sale in respect of the loss will be disallowed.

However, if the related party purchaser subsequently sells the property at a gain, such gain will be recognized only to the extent it exceeds the previously disallowed loss.

Accrual method. If inventories are required, an accrual method of accounting must be used for sales and purchases of merchandise.

However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using an accrual method and may account for inventoriable items as materials and supplies that aren't incidental.

Indirect expenses, such as trustee fees, must be allocated between taxable and tax-free income.

However, the tax law does not specify how indirect expenses must be attributed to different taxable income items, which allows for some flexibility.

Chapter 11 Proceedings: Pros and Cons A big disadvantage to Chapter 11 is that the proceedings can be complex and expensive.

However, there are special provisions which streamline and expedite Chapter 11 cases involving "small business debtors." (For a list of these streamlined procedures, see Chapter 11 Bankruptcy for Small Business Owners.

Companies offering securities under Tier 2 become subject to ongoing reporting requirements. Like public companies that regularly disclose their financial results, companies raising money under Tier 2 will also file regular reports with the SEC.

However, unlike the quarterly reporting that you may be use to, Tier 2 companies are only required to file a semiannual and annual report as well as interim current reports upon the occurrence of certain enumerated events.

Investment use. Your use of a computer in connection with investments (described later under Other Expenses ) doesn't count as use in your work.

However, you can combine your investment use with your work use in figuring your depreciation deduction.

Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. You can also deduct assessments for benefit payments to unemployed union members.

However, you can't deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Also, you can't deduct contributions to a pension fund even if the union requires you to make the contributions.

Schedule K-1. Schedule K-1 shows each partner's separate share. Attach a copy of each Schedule K-1 to the Form 1065 filed with the IRS. Keep a copy with a copy of the partnership return as a part of the partnership's records and furnish a copy to each partner.

If a partnership interest is held by a nominee on behalf of another person, the partnership may be required to furnish Schedule K-1 to the nominee.

Rental of property to a nonpassive activity.

If a taxpayer rents property to a trade or business activity in which the taxpayer materially participates, the taxpayer's net rental activity income from the property is nonpassive income.

Example 1. A corporation loses $25,000 from operations. It receives $100,000 in dividends from a 20%-owned corporation. Its taxable income is $75,000 ($100,000 - $25,000) before the deduction for dividends received.

If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Therefore, the 80% of taxable income limit does not apply. The corporation can deduct the full $80,000.

2) Temporary Exception to the 10% AGI Threshold

If married, and one spouse is at least age 65, the threshold remains at 7.5% of AGI until December 31, 2016. Beginning January 1, 2017 the threshold will be 10% for all taxpayers.

What documents are required for practitioners electing to be represented during a Circular 230 Investigation? If you receive an allegation, or other investigative, letter from OPR, you may decide that you want to use a representative to interface with OPR.

If so, then you must provide some form of documentation authorizing that representation. The type of documentation needed will depend on what allegations are being raised in the correspondence from OPR.

Making an S Election The PHC rules do not apply to S corporations. However, a C corporation that makes the S election is still subject to the PHC rules for the years in which it was a C corporation.

If the S corporation election is to be effective retroactively to the first day of the tax year, it must be made by the 15th day of the third month following the beginning of the year.

Suspended ordinary loss carryover is not netted with the current year ordinary income when applying the stock basis ordering rules. See Treas. Reg. §1.1366-2(a)(3)(i).

If the Stock basis before losses and deductions had only been $17,500 instead of $30,000, the following losses and deductions would have been allowed in 2016.

The remaining $14,000 ($20,000 − $6,000) of accumulated earnings and profits is available for use in the following year. The corporation must issue a Form 1099-DIV to you by January 31 to report the $16,000 distributed to you during the previous year as dividends.

The corporation must use Form 1096 to report this information to the IRS by February 28 (March 31 if filing electronically). If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. The corporation does not deduct these dividends on its income tax return.

These expenses don't qualify for the child and dependent care credit: ★ Transportation costs to and from the childcare facility ★ Overnight camp expenses ★ Expenses for the education of a child in kindergarten or higher ★ Expenses for chauffeur or gardening services

The cost of before- or after-school programs might qualify if the program is for the care of the child. Education costs below kindergarten qualify if you can't separate those costs from the cost of care. This includes nursery school.

For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. It isn't temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less.

If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date.

Given these procedures, there is a de facto administrative presumption that the Sec. 6662 penalty applies to any understatement of tax. 3

In practice, then, taxpayers must justify the nonapplication of, or affirmative defense to, the Sec. 6662 penalty for every item the IRS adjusts on audit.

1. You exercise your option to purchase the shares and hold onto them.

In this situation, you exercise your option to purchase the shares but you do not sell the shares.

Some companies choose to do away with the preemptive right because it can be inconvenient when attempting to raise cash from equity issuance. It is also a means to avoid certain legal conflicts such as minority shareholder oppression.

One example of this is when a company issues new shares of stock at prices lower than what the shares are currently trading, knowing full well that the minority shareholders will not be able to purchase the new shares as part of their preemptive right.

Suggestion 2: Real estate and personal property taxes are not deductible for AMT if they are part of itemized deductions. Taxes deductible on a business schedule (Schedule C), rental schedule (Schedule E), or farm schedule (Schedule F or Form 4835) are allowed for the AMT.

Perhaps you can qualify for a home office, which would allow you to deduct part of your home real estate tax on Schedule C.

Who is subject to Circular 230 jurisdiction? State licensed Attorneys and Certified Public Accountants authorized and in good standing with their state licensing authority who interact with tax administrative at any level and in any capacity.

Persons enrolled to practice before the IRS- Enrolled Agents, Enrolled Retirement Plan Agents, and Enrolled Actuaries.

Qualified expenses.

Qualified child- or dependent-care expenses are those you incur while you work or look for work. The main purpose of the expenses must be well-being and protection.

What is the Office of Professional Responsibility (OPR)? OPR supports the IRS's strategy to enhance enforcement of the tax law by ensuring that tax professionals adhere to tax practice standards and follow the law. OPR is the governing body responsible for interpreting and applying the

Regulations Governing Practice before the Internal Revenue Service (Treasury Department Circular 230).

It is important to note that a taxpayer is not negligent, nor does he or she disregard a rule or regulation, merely because the taxpayer takes a position with which the government disagrees, even if the taxpayer's position is ultimately found to be erroneous.

Such a "mistake of law," if made in good faith, is not negligent as long as the taxpayer's conduct (e.g., engagement of a tax adviser) or return position satisfy the negligence standard (i.e., reasonable attempt or reasonable basis, respectively).

One way around that is to sell the stock in the same year that you bought it, creating a "disqualifying" disposition.

That way you will not be subject to the AMT, but you would be subject to regular tax on the difference between your option exercise price and the sales price.

Once the costs are identified, the taxpayer must determine what adjustment must be added to ending inventory for tax purposes. To minimize the burden of these rules, many taxpayers use the simplified production method.

The first step is to calculate the absorption ratio - which is the additional 263A costs (those costs identified that are not already included in inventory for book purposes) divided by total inventory costs (Section 471 costs).

Gain is realized as follows. FMV of stock received $16,000 Add: Cash received 10,000 Add: Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 = Realized gain $11,000

The liability assumed is not treated as money or other property. The recognized gain is limited to $10,000, the cash received.

(2) Treatment of tax imposed on built-in gains If any tax is imposed under section 1374 for any taxable year on an S corporation, for purposes of subsection (a), the amount so imposed shall be treated as a loss sustained by the S corporation during such taxable year.

The character of such loss shall be determined by allocating the loss proportionately among the recognized built-in gains giving rise to such tax.

affiliated group. An affiliated group is one or more chains of includible corporations (section 1504(a)) connected through stock ownership with a common parent corporation.

The common parent must be an includible corporation and the following requirements must be met.

Employers must report the income from a 2016 exercise of Nonqualified Stock Options in Box 12 of the 2016 Form W-2 using the code "V."

The compensation element is already included in Boxes 1, 3 (if applicable) and 5, but is also reported separately in Box 12 to clearly indicate the amount of compensation arising from an non-qualified stock option exercise.

(3) Each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the practitioner.

The confirmation may be made within a reasonable period of time after the informed consent, but in no event later than 30 days.

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information: A list of all creditors and the amount and nature of their claims;

The source, amount, and frequency of the debtor's income; A list of all of the debtor's property; and A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Example: You exercise Incentive Stock Options (ISOs) to purchase 100 shares of stock at $3 per share and you decide to hold the stock as a long-term investment.

The stock is trading at $33 per share on the day of the exercise. Line 15 on your Form 6251 is $3000 (100 shares x ($33-$3 per share).

(6). Residence Test. The child must have lived with you for more than half of the tax year for which you claim the credit.

There are important exceptions, however: A child who was born (or died) during the tax year is considered to have lived with you for the entire year.

Expenses of issuing a stock dividend. You cannot deduct the expenses of issuing a stock dividend.

These expenses include printing, postage, cost of advice sheets, fees paid to transfer agents, and fees for listing on stock exchanges. The corporation must capitalize these costs.

The corporation should keep copies of all filed returns.

They help in preparing future and amended returns and in the calculation of earnings and profits.

Local transportation expenses. Local transportation expenses are the expenses of getting from one workplace to another when you aren't traveling away from home.

They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. You can choose to use the standard mileage rate to figure your car expenses. The 2016 rate for business use of a vehicle is 54 cents per mile.

Line 24: Research and Experimental Expenditures:

This adjustment is related to a timing difference between deducting Research and Experimental Expenditures for regular and AMT purposes. You can eliminate this line entry if you make the IRC section 59(e) election to deduct the costs over 10 years.

Practice tip: It is important to recognize that the substantial authority exception to the substantial understatement penalty does not depend on the reasonableness of the taxpayer's conduct.

This is essentially a mechanical exception to a mechanical trigger. That is, this trigger is not "fault-based," and the exception similarly applies regardless of the taxpayer's conduct.

(Section 179 at a Glance for 2017) 2017 Deduction Limit = $500,000 This deduction is good on new and used equipment, as well as off-the-shelf software.

To take the deduction for tax year 2017, the equipment must be financed/purchased and put into service between January 1, 2017 and the end of the day on December 31, 2017.

To figure the amount of any remaining NOL carryover to later years, taxable income must be modified (see section 172(b)).

To the extent that contributions are used to reduce taxable income for this purpose and increase an NOL carryover, a contributions carryover is not allowed. See section 170(d)(2)(B).

Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend.

Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock.

Membership of an advisory committee must be balanced among those who practice as attorneys, accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and registered tax return preparers.

Under procedures prescribed by the Internal Revenue Service, an advisory committee may review and make general recommendations regarding the practices, procedures, and policies of the offices described in §10.1.

What is the age limit for claiming dependents on taxes and is there an income requirement for dependents? Answer

Under the qualifying child test, the child must be one of these: ☐ Under age 19 ☐ Under age 24 and a full-time student ☐ Permanently and totally disabled.

For example, assume you receive correspondence from OPR that states you have failed to file your personal returns for tax years 2010, 2011, and 2012, and you have failed to file S Corporation returns for your 2011 and 2012 tax years.

Under this example, OPR would require two separate Forms 2848. The first Form 2848 would be for your 2010, 2011, and 2012 Forms 1040 returns. The second Form 2848 would be for the 2011 and 2012 S Corporation returns.

There are numerous ways of disposing of an asset, such as selling, scrapping, converting to personal use, contributing to a charity, exchanging for another like business item, or even giving it away.

We cannot cover all of the aspects of dispositions here but we can give you an overview.

Legal fees.

You can't deduct legal fees paid to defend charges that arise from participation in a political campaign.

Suggestion 2: When you exercise ISOs, always use tax planning software to forecast the tax consequences.

You may need to sell some of the stock in the year of the exercise to pay the tax due.

The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity,

and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. 11 U.S.C. § 523(c); Fed. R. Bankr. P. 4007(c).

See Dispositions of Contributed Property, earlier, for special rules on the allocation of income, gain, loss,

and deductions on the disposition of property contributed to the partnership by a partner.

Automatic Stays As soon as any bankruptcy petition is filed, and prior to its approval or dismissal, an automatic stay is placed on all lenders. An automatic stay restricts creditors from continuing to try to collect payment from the debtor

and further restricts creditors from filing lawsuits against the debtor or foreclosing on his home. This provides immediate relief for those seeking bankruptcy.

Gains and losses from the sale of business assets are not included on the business schedule in the tax return where net profit or loss from operating the business is figured,

and generally do not affect the taxpayer's self-employment tax. Generally, losses from selling business assets are fully deductible in the year of sale.

A decision by default constitutes a decision under §10.76. (e) Signature. The answer must be signed by the respondent or the respondent's authorized representative under §10.69(a)(2)

and must include a statement directly above the signature acknowledging that the statements made in the answer are true and correct and that knowing and willful false statements may be punishable under 18 U.S.C. §1001.

(2) Service by certified or first class mail. (i) Service of the complaint may be made on the respondent by mailing the complaint by certified mail to the last known address (as determined under section 6212 of the Internal Revenue Code

and the regulations thereunder) of the respondent. Where service is by certified mail, the returned post office receipt duly signed by the respondent will be proof of service.

(ii)Previously taxed income. If a corporation to which paragraph (d)(2) of this section (relating to corporations with previously taxed income)

applies makes the election provided in this paragraph (f)(2) for the taxable year, and does not make the election to forego previously taxed income under paragraph (f)(4) of this section,

If the partnership is engaged in two or more different types of at-risk activities, or a combination of at-risk activities and any other activity,

attach a statement showing the partner's share of nonrecourse liabilities, partnership-level qualified nonrecourse financing, and other recourse liabilities for each activity. See Pub. 925 to determine if the partnership is engaged in more than one at-risk activity.

When it's time to file his 2016 taxes, George must let the IRS know that he made a nondeductible contribution to an IRA by reporting it on Form 8606. 6. You love paperwork! Not that you needed another reason to blow off even researching whether a nondeductible IRA is worthwhile for you,

but this seems like as good a time as any to bring up the added administrative hassle of nondeductible IRAs: ☐ First, when you make contributions to your IRA, you must designate them as nondeductible by filling out Form 8606 and filing it with your tax return.

(a) Form; address. An applicant to become an enrolled agent, enrolled retirement plan agent, or registered tax return preparer must apply as required

by forms or procedures established and published by the Internal Revenue Service, including proper execution of required forms under oath or affirmation.

If the gift was before 1977, the gift tax increases your basis but not to an amount more than the fair market value at the date of the gift. If the gift was after 1976, your basis is increased

by only the gift tax paid on the portion of the gift which represents appreciation over the donor's cost. Also, some states (Connecticut and Minnesota) assess gift taxes at the state level. Consult your professional tax advisor for these special cases.

Thus, if an item has a reasonable basis and the taxpayer properly discloses it, the item is treated as if it were shown properly on the return for the tax year in computing the amount of the tax shown on the return. Whether a reasonable basis exists for any taxpayer position is determined

by reference to the same authorities used for substantial authority determination discussed above.However, the reasonable basis standard requires a lower level of authority than the substantial authority standard.

Facts or other matters contained in testimony, Federal tax returns, financial statements, applications for enrollment, affidavits,

declarations, and any other document or statement, written or oral, are included in the term "information."

For this purpose, the term "amount of the tax required to be shown on the return for the tax year" has the same meaning as "amount of income tax imposed" as defined in Regs. Sec. 1.6664-2(b). That term, in turn, is defined as the amount of tax imposed on the taxpayer under subtitle A (income taxes) for the tax year,

determined without regard to certain items, most commonly the credits for tax withheld (tax withheld on wages and tax withheld at source on nonresident aliens and foreign corporations) and payments of tax or estimated tax by the taxpayer.67

and who has not engaged in any conduct that would justify the suspension or

disbarment of any practitioner under the provisions of this part.

Qualifying persons To claim a credit for qualified expenses, you must provide care for one or more qualifying persons. Qualifying persons include: ★ Dependent who's a qualifying child and under age 13 when you provide the care. Usually, you must be able to claim the child as

a dependent to receive a credit. However, an exception applies for children of divorced or separated parents. In those situations, the child is the qualifying child of the custodial parent for purposes of this credit. This applies even if the noncustodial parent claims the child as a dependent.

In the context of a family business, we are sometimes presented with situations in which the business wishes to sell property to, or acquire property from,

a family member or an affiliated business in which he is involved. The transferors are often surprised by the tax consequences of these transactions.

Proportionate Nonliquidating Distributions 2. Generally, partnerships and partners do not recognize gains or losses on proportionate nonliquidating distributions.

a. However, gain is recognized by the distributee partner if cash received exceeds the partner's outside basis in the partnership immediately before the distribution. Gain is generally capital in nature.

Compare the Tentative Minimum Tax to your regular tax (Tentative Minimum Tax should be the line above your regular tax) to see how close you were to paying the AMT. Look for entries on lines 1-27, which adjust your taxable income for AMT purposes. For instance, you have to put various items back into your income,

adding such items as your standard deduction, personal exemptions, home equity mortgage interest, miscellaneous deductions such as employee business expenses, and the bargain element of any incentive stock options you exercised.

(iii)Time and manner of making election. A corporation makes an election under § 1.1368-1(g)(2)(i) for a taxable year by attaching a statement to a timely filed (including extensions) original or amended return required to be filed under section 6037

for a taxable year (without regard to the election under § 1.1368-1(g)(2)(i)). In the statement, the corporation must state that it is electing for the taxable year under § 1.1368-1(g)(2)(i) to treat the taxable year as if it consisted of separate taxable years.

The amount of the deemed dividend may not exceed the subchapter C earnings and profits of the corporation on the last day of the taxable year, reduced by any actual distributions of subchapter C earnings and profits made during the taxable year. The amount of the deemed dividend is considered,

for all purposes of the Internal Revenue Code, as if it were distributed in money to the shareholders in proportion to their stock ownership, received by the shareholders, and immediately contributed by the shareholders to the corporation, all on the last day of the corporation's taxable year.

(ii) The adjustments to the AAA required by section 1368(e)(1)(A) (but without regard to the adjustments for distributions under § 1.1368-2(a)(3)(iii))

for the S corporation's taxable year. Any net negative adjustment (as defined in section 1368(e)(1)(C)(ii)) for the taxable year shall not be taken into account.

For purposes of this paragraph (a)(13), reckless conduct is a highly unreasonable omission or misrepresentation involving an extreme departure

from the standards of ordinary care that a practitioner should observe under the circumstances.

8. You do not have to file a gift tax return to report

gifts to political organizations and gifts made by paying someone's tuition or medical expenses.

4. Partnership distributes $8,000 of inventory value with a $5,000 basis. Bob reduces his basis in the partnership to $45,000,

has a $5,000 carryover basis in the inventory, and recognizes no loss as this is a nonliquidating distribution.

Personal services. Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering,

health (including veterinary services), law, and the performing arts.

(iii) Service may be made by any other means agreed to by the respondent. Proof of service will be a written statement, sworn or affirmed by the person who served the complaint,

identifying the manner of service, including the recipient, relationship of recipient to respondent, place, date and time of service.

If the partner terminated his or her interest in the partnership during the year, enter the share that existed

immediately before the total disposition. In all other cases, enter it as of the end of the year.

(d)S corporation with earnings and profits - (1)General treatment of distribution. Except as provided in paragraph (d)(2) of this section, a distribution made with respect to its stock by an S corporation that has accumulated earnings and profits as of the end of the taxable year of the S corporation

in which the distribution is made is treated in the manner provided in section 1368(c). See section 316 and § 1.316-2 for provisions relating to the allocation of earnings and profits among distributions.

(B) a taxpayer in whose hands the basis of such publication is determined, for purposes of determining gain from a sale or exchange,

in whole or in part by reference to the basis of such publication in the hands of a taxpayer described in subparagraph (A);

Qualified nonrecourse financing secured by real property used in an activity of holding real property that is subject to the at-risk rules is treated as an amount at risk. "Qualified nonrecourse financing" generally includes financing for which no one

is personally liable for repayment that is borrowed for use in an activity of holding real property and that is loaned or guaranteed by a federal, state, or local government or that is borrowed from a "qualified" person.

Each partner must determine if the partner materially participated in an activity. As a result, while the partnership's ordinary business income (loss)

is reported on page 1 of Form 1065, the specific income and deductions from each separate trade or business activity must be reported on attached statements to Form 1065.

This provision doesn't apply to any amount if interest

is required to be paid on the amount or if there is any penalty for failure to timely pay the amount.

This may lead readers to conclude that there is considerable room for error in valuation matters, but this would be an incorrect and dangerous conclusion, because any valuation misstatement that causes an underpayment of tax

is still subject to penalty under the other triggers (e.g., negligence or substantial understatement), even if it is not subject to penalty as a valuation misstatement.80

One major difference in a Chapter 11 filing comes with the reorganization of businesses, which the trustee takes over during the bankruptcy process. (There are some exceptions to this; see debtor in possession.) If a business is likely to make money in coming years,

the business will often be allowed to continue operations, and income earned from the business will go toward debt repayment. If the business has more debt than it does assets or revenue, however, it is likely the business will be sold to creditor(s) as part of Chapter 11's reorganization process.

Companies relying on the Rule 506 exemption do not have to register their offering of securities with the SEC, but they must file what is known as a "Form D" electronically with the SEC after they first sell their securities. Form D is a brief notice that includes the names and addresses of

the company's promoters,​executive officers and directors, and some details about the offering, but contains little other information about the company.

Advantages and Disadvantages of Keogh Plans. Keogh plans have more administrative burdens and higher upkeep costs than Simplified Employee Pension (SEP) or 401(k) plans, but the contribution limits are higher,

making Keogh plans a popular option for many high-income business owners. Because current tax retirement laws do not set apart incorporated and self-employed plan sponsors, the term "Keogh plan" is rarely used.

(2)Election in case of a qualifying disposition - (i)In general. In the case of a qualifying disposition, a corporation may elect under this paragraph (g)(2)(i) to treat the year as if it consisted of separate taxable years, the first of which ends at the close of the day

on which the qualifying disposition occurs. A qualifying disposition is - (A) A disposition by a shareholder of 20 percent or more of the outstanding stock of the corporation in one or more transactions during any thirty-day period during the corporation's taxable year;

(2). A sale to a related party: If you sell the shares to a related party (a member of your family,

or a partnership or corporation in which you have more than a 50 percent interest), you must report the full $2,500 as income.

If you received a gift after 1976, increase your basis by the part of the gift tax paid on it that is due to the net increase in value of the gift. To figure out the net increase in value or for other information on gifts received before 1977,

see Publication 551, Basis of Assets. Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property.

It appears that the regulations essentially require a taxpayer to judge the merit of the positions recommended by the taxpayer's tax adviser,

something the taxpayer often lacks the ability to do and an activity that, under Boyle, he or she is not required to do.

Otherwise, the location of your principal place of business generally depends on

the relative importance of the activities performed at each location and the time spent at each location.

In the case of elections for taxable years beginning before January 1, 2003, an officer of the corporation must sign under penalties of perjury the statement on behalf of the corporation. In the case of elections for taxable years beginning after December 31, 2002,

the statement described in this paragraph (f)(5)(iii) shall be verified by signing the return. A statement of election to make a deemed dividend under § 1.1368-1(f) must include the amount of the deemed dividend that is distributed to each shareholder.

Moreover, as is the case for all Sec. 6662 penalty triggers,

the substantial understatement trigger is avoidable if the Sec. 6664 reasonable cause/ good-faith defense can be satisfied.

In many such instances, a taxpayer has only the slightest understanding of the technical positions taken on the return. Nonetheless, if the taxpayer has reasonably relied on a tax professional's advice in determining and reporting those positions,

the taxpayer should be viewed as having met the "reasonable attempt to comply" standard and therefore should not properly be characterized as negligent with respect to such positions, even if the substantive position is erroneous.

§240.10b5-2 Duties of trust or confidence in misappropriation insider trading cases. Preliminary Note to §240.10b5-2: This section provides a non-exclusive definition of circumstances in which a person has a duty of trust or confidence for purposes of the "misappropriation"

theory of insider trading under Section 10(b) of the Act and Rule 10b-5. The law of insider trading is otherwise defined by judicial opinions construing Rule 10b-5, and Rule 10b5-2 does not modify the scope of insider trading law in any other respect.

(3) In determining the correctness of oral or written representations made by the practitioner

to clients with reference to any matter administered by the Internal Revenue Service.

Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you,

unless payment of the liability gives rise to a deduction when paid.

if you simply give the item away to an individual, neither the business nor you as an individual taxpayer is allowed a deduction. The general rule is that the recipient's basis will be the asset's adjusted basis at the time of the gift. However, where a sale in the hands of the recipient

would result in a loss, the loss would be based on the lower of the item's adjusted basis or FMV at the time of the gift. If the value of the asset, plus other gifts you give the same individual during the year, exceeds $14,000 (2014 and 2015), a gift tax return generally will be required.

Work-Related Education. You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests.

★ It maintains or improves skills required in your present work. ★ It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer.

★ The production of real property and tangible personal property held in inventory or held for sale in the ordinary course of business.

★ Real property or personal property (tangible and intangible) acquired for resale. ★ The production of real property and tangible personal property by a partnership for use in its trade or business or in an activity engaged in for profit.

★ Income or gain derived in the ordinary course of an activity of trading or dealing in any property if such activity constitutes a trade or business (unless the dealer held the property for investment at any time before such income or gain is recognized).

★ Royalties derived by the taxpayer in the ordinary course of a trade or business of licensing intangible property.

★ Personal disability insurance premiums. ★ Personal legal expenses. ★ Personal, living, or family expenses. ★ Political contributions. ★ Professional accreditation fees. ★ Professional reputation, expenses to improve. ★ Relief fund contributions. ★ Residential telephone line.

★ Stockholders' meeting, expenses of attending. ★ Tax-exempt income, expenses of earning or collecting. ★ The value of wages never received or lost vacation time. ★ Travel expenses for another individual. ★ Voluntary unemployment benefit fund contributions. ★ Wristwatches.

★ The average period of customer use (defined below) for such property is 7 days or less.

★ The average period of customer use for such property is 30 days or less and significant personal services (defined below) are provided by or on behalf of the partnership. ★ Extraordinary personal services (defined below) are provided by or on behalf of the partnership.

Report the sale on your 2016 Schedule D, Part I, as a short-term sale. It's considered short-term because less than one year passed between the date you acquired the stock and the date you sold it. For reporting purposes on Schedule D:

★ The date acquired is 12/31/2015 ★ The date sold is 6/15/2016

Report the sale on your 2016 Schedule D, Part I as a short-term sale. The sale is short-term because not more than one year passed between the date you acquired the actual stock and the date you sold it. For reporting purposes on Schedule D:

★ The date acquired is 6/30/2016 ★ The date sold is also 6/30/2016

Claiming the credit Claim the credit on Schedule R. Figuring the credit is a multi-step process that considers your:

☐ Age ☐ Filing status ☐ Disabled status

☐ Negligence or disregard of rules or regulations; ☐ Any substantial understatement of income tax; ☐ Any substantial valuation misstatement under chapter 1 (i.e., Secs. 1-1400U-3, dealing with normal taxes and surtaxes);

☐ Any substantial overstatement of pension liabilities; and ☐ Any substantial estate or gift tax valuation understatement.

You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: ☐ As your principal place of business for any trade or business,

☐ As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or ☐ In the case of a separate structure not attached to your home, in connection with your trade or business.

☐ Class: 10-year property. ☐ Depreciation Period: 10 years.

☐ Description: Vessels, barges, tugs, single-purpose agricultural or horticultural structures, trees/vines bearing fruits or nuts, qualified small electric meter and smart electric grid systems

Important Things You Should Know: ☐ A non-dividend distribution in excess of stock basis is taxed as a capital gain on the shareholder's personal return. It is a long-term capital gain (LTCG) if the S corporation stock has been held for longer than one year.

☐ Non-deductible expenses reduce a shareholder's stock and/or debt basis before loss and deduction items. If non-deductible expenses exceed stock and/or debt basis, they are not suspended and carried forward.

Under the accrual method, an amount is includible in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date:

☐ Payment is earned through the required performance, ☐ Payment is due to the taxpayer, or ☐ Payment is received by the taxpayer; and

General Overview. To some extent, Chapters 11 and 13 are similar. Both types of bankruptcy allow debtors to continue in business and propose plans to restructure their finances. Subject to legal requirements and limitations, a Chapter 11 or 13 plan can:

☐ allow yo to retain property needed to operate your business. ☐ give you time to sell assets you no longer need or cannot afford to keep ☐ modify payment terms on secured debts (like real property mortgages or equipment loans), and ☐ discharge (or in other words, eliminate) obligations that you cannot pay over the plan term.

For these purposes a "small business debtor" is a person or entity who:

☐ is engaged in business or other commercial activities, and ☐ owes no more than $2,566,050 in total debt (excluding obligations owed to insiders such as family members of the business owner).

The deduction begins to phase out if more than $2,000,000 of equipment is purchased

- in fact, the deduction decreases on a dollar for dollar scale after that, making Section 179 a deduction specifically for small and medium-sized businesses.

More-than-50%-use test met. You meet this test if you use the computer more than 50% in your work. If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS).

...In addition, you may be able to take the section 179 deduction for the year you place the item in service.

Closely held corporations. A corporation is a closely held corporation if:

At any time during the last half of the tax year more than 50% in value of its outstanding stock is directly or indirectly owned by or for not more than five individuals, and The corporation is not a personal service corporation.

DEFINITION of 'Ultra Vires Acts' Any act that lies beyond the authority of a corporation to perform. Ultra Vires acts fall outside the powers that are specifically listed in a corporate charter or state law. They can also be any action that is specifically prohibited by the corporate charter.

BREAKING DOWN 'Ultra Vires Acts' Ultra Vires acts can also be defined as any excessive use of corporate power that has been granted. These acts cannot be legally defended in court. They will, in fact, leave the corporation vulnerable to lawsuits by employees or other parties.

To avoid this situation, encourage your employer to change to an accountable plan. With this plan, you turn in your receipts to your employer and you must refund any expense advance not used.

Because you are not taxed on the advance and you do not take a deduction for the expenses, you avoid being hit by AMT rules.

You end up reporting no gain or loss on the stock sale transaction itself, but the $2,500 overall profit will be taxed at your ordinary tax rate.

Because you exercised the options and sold the stock in the same year, you do not need to make an adjustment for Alternative Minimum Tax purposes.

Even if you're not married filing jointly, you and your spouse might be able to claim the credit if both of these are true: ☐ You paid more than half the cost of maintaining a household for the year.

Both you and the qualifying person must have used the home as your main residence for more than half the tax year. ☐ Your spouse wasn't a member of the household during the last six months of the tax year.

NOTE: Only non-dividend distributions reduces stock basis, dividend distributions do not. The corporation is responsible for telling the shareholder the amount of non-dividend and dividend distributions.

Box 16D of Schedule K-1 reflects non-dividend distributions. Form 1099-DIV is used to report dividend distributions; dividends are not reported on the shareholder's Schedule K-1.

What happens to my tax credits? If the calculation on Form 6251: Alternative Minimum Tax shows that your Tentative Minimum Tax is less than your regular tax, you don't owe any AMT, but you may still be affected by the AMT in other ways.

Business credits. Because of the AMT, you may not be receiving all of your tax credits such as the Low-Income Housing or Work Opportunity Credits.

A joint undertaking merely to share expenses is not a partnership. Mere co-ownership of property that is maintained and leased or rented is not a partnership. However, if the co-owners provide services to the tenants, a partnership exists.

Business owned and operated by spouses. Generally, if you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership and you must file Form 1065.

The Alternative Minimum Tax (AMT) was designed to keep wealthy taxpayers from using loopholes to avoid paying taxes.

But because it was not automatically updated for inflation, more middle-class taxpayers were getting hit with the AMT each year. Congress traditionally passed an annual "patch" to address this until, in January 2013, as part of the "fiscal cliff" deal, they passed a permanent patch to the

★ Companies must decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws.

But companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well;

Vive les differences! The most important distinction is what happens to your money after you make your contribution. With a nondeductible IRA, your money compounds free of taxes as long as it remains in the account.

But once you withdraw your money, your gains are not only taxed, they're taxed at ordinary income rates, which can now run as high as 35 percent.

If you choose to use the mid-month convention, this also means that you should record a half-month of depreciation for the last month of the asset's useful life.

By doing so, the two-half month depreciation calculations equal one full month of depreciation.

Dividends from regulated investment companies. Regulated investment company dividends received are subject to certain limits.

Capital gain dividends received from a regulated investment company do not qualify for the deduction. For more information, see section 854 of the Internal Revenue Code.

Note. You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual.

Cash method corporation. A corporation using the cash method of accounting deducts contributions in the tax year paid.

In Chapter 13, a trustee is always appointed. In most cases, the role of the Chapter 13 trustee is relatively limited. Chapter 13 trustees review the proposed plan and other documents and make recommendations to the bankruptcy court on how to proceed.

Chapter 13 trustees are also responsible for collecting plan payments and distributing the proceeds to creditors. If you fail to make required plan payments, the Chapter 13 trustee (or creditors) can ask the court to dismiss the case or convert it to a Chapter 7 liquidation.

What is Circular 230? Circular 230 is a document containing the statute and regulations detailing a tax professional's duties and obligations while practicing before the IRS; authorizing specific sanctions for violations of the duties and obligations; and, describing the procedures that apply to administrative proceedings for discipline.

Circular 230 is the common name given to the body of regulations promulgated from the enabling statute found at Title 31, United States Code § 330. This statute and the body of regulations are the source of OPR's authority.

Rule 506 of Regulation D is considered a "safe harbor" for the private offering exemption of Section 4(a)(2) of the Securities Act.

Companies relying on the Rule 506 exemption can raise an unlimited amount of money. There are actually two distinct exemptions that fall under Rule 506.

§ 10.35 Competence. (a) A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service.

Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.

(b) Specification of sanction. The complaint must specify the sanction sought against the practitioner or appraiser.

If the sanction sought is a suspension, the duration of the suspension sought must be specified.

If the carryover basis is greater than the fair market value at the time of the gift, it gets a lot more complicated. You will actually not know your basis until you sell the stock because it will have a different basis if it is sold at a gain than if it is sold at a loss.

If the stock you received as a gift is then sold at a loss, your cost basis is the lower of either the carryover basis or the fair market value at the time of the gift. Accountants refer to this as the "lower of cost or market" rule.

To figure out whether you owe any additional tax under the Alternative Minimum Tax system, you need to fill out Form 6251.

If the tax calculated on Form 6251 is higher than that calculated on your regular tax return, you have to pay the difference as AMT in addition to the regularly calculated income tax. It can result in you paying hundreds or even thousands of dollars in additional taxes.

Reduction of Understatement for Substantial Authority The amount of any understatement is reduced by the portion of the understatement that is attributable to the taxpayer's treatment of any item if there is or was substantial authority for the taxpayer's treatment.

If there is substantial authority for the tax treatment of an item, the item is treated as if it were shown properly on the return. Thus, a nontax-shelter item for which there is substantial authority is excluded from the taxpayer's understatement for the year.

Occupational Taxes. You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality.

If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you can't claim them as a deduction for taxes elsewhere on your return.

If you have been granted stock options, make sure you know which type of options you received.

If you are not sure, take a look at your option agreement or ask your employer. The type of options should be clearly identified in the agreement.

Line 10: Net Operating Loss:

If you claimed a net operating loss deduction on Form 1040, you have to add it back to your income.

Check last year's return for any general business credits that are being carried forward. If there are some, they may be due to the Tentative Minimum Tax limit.

If you exercise stock options during the year, see Incentive Stock Options above for guidance on how the timing of the subsequent sale of stock can affect your AMT liability.

INFORMATION FOR DONORS Eight Tips to Determine if Your Gift is Taxable IRS Tax Tip 2012-62 published 3/30/2012

If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.

Tax-Exempt Income Expenses. You can't deduct expenses to produce tax-exempt income. You can't deduct interest on a debt incurred or continued to buy or carry tax-exempt securities.

If you have expenses to produce both taxable and tax-exempt income, but you can't identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct.

Section 1245 property is (1) all depreciable personal property, whether tangible or intangible, and (2) certain depreciable real property (usually, real property that performs specific functions, for example, a storage tank, but not buildings or structural components of building).

If you sell Section 1245 property, you must recapture your gain as ordinary income to the extent of your earlier depreciation deductions on the asset that was sold.

Section 1250 property consists of real property that is not Section 1245 property (as defined above), generally buildings and their structural components. When you sell Section 1250 property you will have to be aware of possible Section 1250 depreciation recapture as well as "unrecaptured Section 1250 gain".

If you sell Section 1250 property that is placed in service after 1986, none of the long-term capital gain attributable to depreciation deductions will be subject to Section 1250 depreciation recapture.

For example, assume you exercised options at $3 a share on a day when the stock was selling for $33, and the stock value later dropped to $25.

If you sell the stock at $25 before the end of the year, you would be taxed at ordinary income tax rates on $22 per share ($25-$3) and not be subject to any AMT concerns.

6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse.

If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.

How does Regulation A affect me? With recent changes, Regulation A may present new opportunities for you to invest in early stage and smaller companies and businesses.

If you take advantage of these opportunities, however, you should also be fully aware that your investment will involve risk.

Capital Expenses. You can't currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property.

If you use such property in your work, you may be able to take a depreciation deduction. See Pub. 946. If the property is a car used in your work, also see Pub. 463.

Example: You paid $800 in job-related tools and uniforms, plus another $200 to prepare last year's taxes, so you have $1,000 in deductions subject to the 2% rule.

If your AGI is $35,000 and you're itemizing, you can deduct $300 because: $35,000 × 0.02 = $700 and $1000 - $700 = $300

Why does the AMT exist?

In 1969, Congress noticed that 155 people with high incomes were legally using so many deductions and other tax breaks that they were paying absolutely nothing in federal income taxes. Their nonexistent tax bills were an embarrassment.

Appointment of a Trustee. Whether a bankruptcy trustee will be appointed in your case differs in Chapter 11 and Chapter 13 bankruptcy.

In Chapter 11, appointment of a trustee is the exception rather than the rule. The bankruptcy court may appoint a Chapter 11 trustee, but only if there is cause, such as gross mismanagement, or fraud.

Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing.

In a situation where only one spouse files, the income and expenses of the non-filing spouse are required so that the court, the trustee and creditors can evaluate the household's financial position.

Generally, the partnership can deduct only 50% of the amount otherwise allowable for meals and entertainment expenses paid or incurred in its trade or business.

In addition (subject to exceptions under section 274(k)(2)): ★ Meals must not be lavish or extravagant;

Comparatively, Chapter 7 bankruptcy is very affordable and some fees, such as the cost to attend credit counseling, may be waived sometimes for those who have no cash to spare. Filing is relatively cheap and tends to stay under $500, though there are additional attorneys' fees.

In most cases, a Chapter 11 bankruptcy will cost many thousands of dollars (often in relation to business size), while a Chapter 7 bankruptcy will cost somewhere between $1,000 and $2,000.

Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property.

In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy.

In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.

Title 31 seeks to insure tax professionals possess the requisite character, reputation, qualifications and competency to provide valuable service to clients in presenting their cases to the IRS.

In short, Circular 230 consists of the "rules of engagement" for tax practice. The underlying issue in all Circular 230 cases is the tax professional's "fitness to practice" before the IRS.

Securities offered under Tier 2, however, may be listed on a national exchange to the extent that the company applies for listing and meets the listing requirements for that particular exchange.

In such circumstances, the company would be required to comply with the more extensive ongoing reporting requirements of public companies including, for example, the requirement to file quarterly reports.

Income tax accounting for trusts and estates has received relatively little attention from tax professionals as well as lawmakers. This is not surprising because of the comparatively few taxpayers affected.

In the 2008 tax year, approximately 3 million Forms 1041, U.S. Income Tax Return for Estates and Trusts, were filed, with an aggregate gross income of $188 billion.

A PMSI agreement can be included in your application for the store card, or presented as a separate agreement. It is important to note the distinction between purchasing on credit with the seller and financing the items in other ways, like with your personal Visa card.

In the latter case, you own full legal title to the property and the credit card company cannot reclaim it even if you default on the debt.

(iii)Corporate statement regarding elections. A corporation makes an election for a taxable year under § 1.1368-1(f) by attaching a statement to a timely filed (including extensions) original or amended return required to be filed under section 6037 for that taxable year.

In the statement, the corporation must identify the election it is making under § 1.1368-1(f) and must state that each shareholder consents to the election.

You must show the sale of the stock on your 2016 Schedule D. It's considered long-term because more than one year passed from the date acquired (January 2, 2012) to the date of sale (January 20, 2016). That is good, because long-term capital gains are taxed at a rate that is lower than your regular tax rate.

In this example, as in the previous one, the sales price you report on Schedule D is $4,990 and the cost basis is $2,500. The long-term gain is the difference of $2,490. ($4,990 - $2,500).

Thus, this standard requires an evaluation of how the taxpayer prepares and assembles the return itself (e.g., the mechanical process of filling out the return).

In this regard, the regulations state that negligence is strongly indicated where a taxpayer "fails to include on an income tax return an amount of income shown on an information return" (e.g., a Form W-2 or 1099).

Home office. You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business.

In this situation, whether the other workplace is temporary or regular and its distance from your home don't matter.

Situation 3: Qualifying Disposition With Stock Price Increase Between Offering Date and Purchase Date

In this situation, you sell your ESPP shares more than one year after purchasing them, and more than two years after the offering date and the market price actually increased from the offering date to the exercise date.

Involuntary Bankruptcy Most involuntary bankruptcies are filed against businesses. But one or more creditors can file a petition against an individual and ask the court to declare the debtor bankrupt.

Involuntary bankruptcy can only be filed under Chapter 7 or Chapter 11. If the debtor does not object to the bankruptcy petition, the bankruptcy will proceed. If the debtor objects, the court will first hold hearings to determine if the creditor's petition was filed in good faith.

DIFFERENT INCOME TYPES AT THE BENEFICIARY LEVEL The character of the trust income at the beneficiary level is determined based on the actual distribution amount and DNI unless the trust instrument or state law specifies otherwise.

Direct expenses must be allocated to the respective incomes (for example, rental expenses must be deducted from rental income).

Line 15. Interest Include only interest incurred in the trade or business activities of the partnership that isn't claimed elsewhere on the return.

Do not include interest expense on the following.

Do not reduce the amount of the allowable deduction for any portion of the credit that was passed through to the partnership from another pass-through entity. See the instructions for the credit form for more information.

Do not include salaries and wages reported elsewhere on the return, such as amounts included in cost of goods sold, elective contributions to a section 401(k) cash or deferred arrangement, or amounts contributed under a salary reduction SEP agreement or a SIMPLE IRA plan.

I received a gift When you receive a gift of stocks, bonds, or mutual funds, your cost basis is the same as the donor's cost basis except when it's not! Clear as mud?

It all depends on whether the donor's cost basis (called "carryover" basis by accountants) was more or less than the fair market value of the stock on the date of the gift.

Beginning in 2016, qualified expenses also include those expenses you incur while participating in professional development courses related to the curriculum in which you provide instruction.

It also includes those expenses related to those students for whom you provide that instruction.

Note that the taxable income that is arrived at on M-1 is the taxable income on line 28 of Form 1120.

It is the taxable income before net operating loss deduction and special deductions.

Advantages and Disadvantages of Keogh Plans. Keogh plans were established through legislation by Congress in 1962 and were spearheaded by Rep.

Eugene Keogh. As with other qualified retirement accounts, funds can be accessed as early as age 59.5, and withdrawals must begin by age 70.5.

☐ Years later, when it's time to start shamelessly spending down your kids' inheritance, you're going to have to account for which withdrawals come from deductible contributions and earnings and which come from the nondeductible money you contributed to your account.

Even if you keep the contributions in separate accounts, the IRS treats all of your traditional IRA assets as a single IRA when you start taking withdrawals.

7. Mixed distributions of assets are deemed to be distributed in the order presented in part 3.a. of this outline. a. Distributed assets take a carryover basis from the partnership and reduce the partner's outside basis dollar for dollar.

Eventually, some assets typically take a substituted basis from the partner's outside basis. This occurs because the partner's outside basis must reach $0 because the partner's interest terminates.

Example 1. Your corporation's tax year ends December 31. Installment payments are due on April 15, June 15, September 15, and December 15.

Example 2. Your corporation's tax year ends June 30. Installment payments are due on October 15, December 15, March 15, and June 15. If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day.

Because this sale did not occur in the same year as the year you exercised the options, you have to make an adjustment for AMT. When you originally purchased the stock, you should have reported an income adjustment for AMT purposes in that year.

Find out if this was the case by looking at Form 6251 (Alternative Minimum Tax) for the year that you purchased the shares. In our example, the amount that should have been reported on your 2016 Form 6251 was the bargain element ($45 - $20 = $25) times the number of shares (100), which equals $2,500.

In some situations, you will end up not having a gain OR a loss when you sell the stock! How can this be? It happens when the sales proceeds are more than the cost basis for a loss (i.e. lower of carryover basis or market) but less than the cost basis for a gain (i.e. carryover basis.)

Let's look at an example: Your generous grandmother gave you 100 shares of General Motors for your birthday. Her cost basis (adjusted for spinoffs, splits, etc.) was $3.00 per share. At the time of the gift, General Motors was selling for $2.00 per share.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name.

Follow the IRS guidelines for the maximum number and value of properties that can be identified.

1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year.

For 2011 and 2012, the annual exclusion is $13,000. 2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.

Line 9: Depletion: You can calculate depletion from mining, oil, gas, timber or other similar activities for regular tax purposes using either the cost or percentage depletion method.

For AMT, only the cost method is allowed. Suggestion: If this line is generating AMT on your tax return, consider electing the cost method of depletion.

Following the ALJ's Decision and Order, either party may appeal the case to the Treasury Appellate Authority who will, after receiving briefs from both parties, render the Final Agency Decision.

For OPR, a decision by the Appellate Authority is a final determination in the case. In addition, if neither party appeals within 30 days, the ALJ's Initial Decision and Order becomes the Final Agency Decision.

Tier 1 Under Tier 1, a company can raise up to $20 million in any 12-month period. In connection with any offering under Regulation A, all investors must be provided with, or given information to access, an offering circular.

For Tier 1 offerings, this offering circular must also be filed with, and is subject to review and qualification by, the staff at the SEC as well as by the securities regulator in the states where the offering is being conducted. There may be additional materials that you receive in addition to the offering circular.

Tier 2 Companies offering securities under Tier 2 can offer up to $50 million in any 12-month period. As with Tier 1, all investors must be provided with, or given information to access, an offering circular.

For Tier 2 offerings, the offering circular is subject to review and qualification by the staff at the SEC, but is not subject to review by state securities regulators.

Transfers of property to shareholders for less than FMV. A sale or exchange of property by a corporation to a shareholder may be treated as a distribution to the shareholder.

For a shareholder who is not a corporation, if the FMV of the property on the date of the sale or exchange exceeds the price paid by the shareholder, the excess is treated as a distribution to the shareholder.

However, if the adjusted basis of the contributed property exceeds its FMV at the time of the contribution, the built-in loss can only be taken into account by the contributing partner.

For all other partners, the basis of the property in the hands of the partnership is treated as equal to its FMV at the time of the contribution (see section 704(c)(1)(C)).

The key to knowing the tax ramifications of dispositions is understanding the tax term "adjusted basis." Any gain or loss from the disposition of a business asset is measured from adjusted basis. Adjusted basis is generally the cost of the item reduced by any business deductions taken for the item.

For example, you purchase computer equipment for $1,000 and it is in a class of business property that must be depreciated over 5 years. You can elect to write-off any portion of the item the first year (within the Sec. 179 expense limitations) and depreciate the balance over five years.

Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. The contribution is deductible if made to, or for the use of, a qualified organization.

For more information on qualified organizations, see Pub. 526, Charitable Contributions. Also see Exempt Organizations Select Check (EO Select Check) at www.irs.gov/charities, the online search tool for finding information on organizations eligible to receive tax-deductible contributions.

Licensed and unlicensed individuals who give written advice with respect to any entity, transaction, plan or arrangement; or other plan or arrangement, which is of a type the IRS determines as having a potential for tax avoidance or evasion.

For this purposes "written advice" contemplates all forms of written material, including the content of an email, given in connection with any law or regulation administered by the IRS.

5. Partnership distributes two parcels of land, each with a value of $30,000. The partnership's basis in parcel A is $40,000 and in parcel B is $20,000. Bob reduces his basis in his partnership interest to $0, assigns a $50,000 substituted basis to the two parcels, and recognizes no gain or loss.

His $50,000 basis is allocated between the two parcels as follows. a) First, parcels are assigned carryover bases of $40,000 for parcel A and $20,000 for parcel B ($60,000 total).

Line 16. Depreciation On line 16a, enter only the depreciation claimed on assets used in a trade or business activity. Enter on line 16b the depreciation included elsewhere on the return (for example, on page 1, line 2) that is attributable to assets used in trade or business activities.

How To Depreciate Property, to figure the amount of depreciation to enter on this line. Complete and attach Form 4562 only if the partnership placed property in service during the tax year or claims depreciation on any car or other listed property.

In past years, if you itemized your deductions, you could deduct qualified medical and dental expenses to the extent they exceeded 7.5% of your adjusted gross income (AGI).

However, beginning January 1, 2013, this threshold was raised to 10%. In this article, we'll discuss what you need to know to claim a federal income tax deduction for medical and dental expenses.

A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation.

However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply.

For example, if a taxpayer contributes to charity a desk which was used only for personal purposes, and never for business, that had cost $150 and has a FMV of $50, the taxpayer can take a $50 charitable deduction.

However, if the desk had been a business asset, and its cost had been fully deducted (depreciated), the taxpayer's charitable deduction would be zero since the adjusted basis would have been zero and was less than the FMV.

5) Qualified Costs And Expenses You may use any medical or dental costs you paid for yourself, your spouse, and your dependents.

However, if you were reimbursed by insurance or another source, your deduction will be reduced by the amount of the reimbursement.

The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment.

However, in some cases, a corporation can elect to modify the section 481(a) adjustment period. The corporation may have to complete the appropriate lines of Form 3115 to make an election.

If inventories are required, an accrual method generally must be used for sales and purchases of merchandise.

However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental.

b. If more than one asset is distributed in the same category, a partner may have to step the bases in assets up or down.

However, unrealized receivables and inventory cannot be stepped up or down. If other assets are stepped up, special rules determine how the basis is allocated (Example 13).

Unused AMT credits In the year that you exercise an Incentive Stock Option, the difference between the market value of the stock on the exercise date and the exercise price counts as income under the AMT rules, which can trigger an AMT liability.

However, you will also generally earn an AMT credit in that year. several years. You can use the credit to lower your tax bill in later years. However, there are limitations on when you can use an AMT credit. In some cases, AMT credits cannot be used for

Qualified Defined-Contribution Plans. Money purchase plans are less flexible compared to profit-sharing plans and require a business to contribute a fixed percentage of its income every year that is specified in plan documents.

If a business alters its fixed percentage, it may face penalties. The contribution limit in 2016 for money purchase plans is set at 25% of a compensation or $53,000, whichever is lower.

Role of the Case Trustee. When a chapter 7 petition is filed, the U.S. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor's nonexempt assets. 11 U.S.C. §§ 701, 704.

If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors.

☐ You have some earned income. If you're married and living together, both you and your spouse must have earned income. However, one spouse might be disabled or a full-time student at least five months of the year.

If that's the case, the IRS assigns one of these earned income amounts to that spouse: ★ $250 per month for one child ★ $500 per month for two or more children.

Suggestion: If the adjustment is from a rental property, consider using slower depreciation methods for regular tax purposes to eliminate an entry on this line.

If the adjustment is from a partnership or S Corporation, the depreciation methods are selected at the entity level and there is probably nothing you can do.

If the asset that is sold is being held in a C-Corporation the gain is taxed at ordinary tax rates despite what kind of property the asset is.

If the asset that is being sold is held in an entity other than a C-Corporation then you can potentially have different layers of gain, depending on the type of asset that is sold.

§ 10.61 Conferences. (a) In general. The Commissioner, or delegate, may confer with a practitioner, employer, firm or other entity, or an appraiser concerning allegations of misconduct irrespective of whether a proceeding has been instituted.

If the conference results in a stipulation in connection with an ongoing proceeding in which the practitioner, employer, firm or other entity, or appraiser is the respondent, the stipulation may be entered in the record by either party to the proceeding.

If the corporation sells or otherwise disposes of an asset or its interest (either total or partial) in an activity to which the at-risk rules apply, determine the net profit or loss from the activity by combining the gain or loss on the sale or disposition with the profit or loss from the activity.

If the corporation has a net loss, it may be limited because of the at-risk rules. Treat any loss from an activity not allowed for the tax year as a deduction allocable to the activity in the next tax year.

Late filing of return. A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.

If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment.

If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs.

If the education qualifies you for a new trade or business, you can't deduct the educational expenses even if you don't intend to enter that trade or business.

Consider the entire picture. It is important to take a look at the whole picture of your capital gains and losses for AMT purposes when you sell stock that you purchased by exercising Incentive Stock Options.

If the market turns on you after you have exercised your options and the current value of your stock is now less than what you paid, you could still be subject to the Alternative Minimum Tax.

(3). Involves research or experimental expenditures deductible under section 174 (or that would be if you chose to deduct rather than capitalize them).

If the partner doesn't materially participate in the activity, a trade or business activity conducted through a partnership is generally a passive activity of the partner.

For purposes of this rule, each interest in rental real estate is a separate activity, unless the partner elects to treat all interests in rental real estate as one activity.

If the partner is married filing jointly, either the partner or his or her spouse must separately meet both of the above conditions, without taking into account services performed by the other spouse.

☐ The actual FMV. ☐ The amount of any liabilities the shareholder assumed in connection with the distribution of the property.

If the property was depreciable or amortizable, the corporation may have to treat all or part of the gain as ordinary income from depreciation recapture.

The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Pub. 544 under Like-Kind Exchanges.

If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. See chapter 3 of Pub. 544. No loss is recognized.

(c) Affirmative defenses. (1)(i) Subject to paragraph (c)(1)(ii) of this section, a person's purchase or sale is not

"on the basis of" material nonpublic information if the person making the purchase or sale demonstrates that:

Here's how to determine which of your kids will qualify you for the credit:

(1). Age Test (2). Relationship Test (3). Support Test (4). Dependent Test (5). Citizenship Test (6). Residence Test (7). Family Income Test

Used with current year earnings and profits. If the corporation has current year earnings and profits, figure the use of accumulated and current earnings and profits as follows.

(1). Divide the current year earnings and profits by the total distributions made during the year. (2). Multiply each distribution by the percentage figured in (1) to get the amount treated as a distribution of current year earnings and profits.

Trade or Business Activities A trade or business activity is an activity (other than a rental activity or an activity treated as incidental to an activity of holding property for investment) that:

(1). Involves the conduct of a trade or business (within the meaning of section 162), (2). Is conducted in anticipation of starting a trade or business, or

FIDUCIARY ACCOUNTING AND INCOME TAXES Income of estates and nongrantor trusts is taxed at either the entity or the beneficiary level, depending on the answer to the following two questions:

(1). Is each income, loss or deduction item part of the trust's or estate's distributable income, or is it part of a change in the principal?

To figure if more than 50% in value of the stock is owned by five or fewer individuals, apply the following rules.

(1). Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust is considered owned proportionately by its shareholders, partners, or beneficiaries.

Qualified personal service corporation. A qualified personal service corporation is taxed at a flat rate of 35% on taxable income. A corporation is a qualified personal service corporation if it meets both of the following tests.

(1). Substantially all the corporation's activities involve the performance of personal services (as defined earlier under Personal services ).

Other methods. If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods.

(1). The annualized income installment method. (2). The adjusted seasonal installment method. Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments.

How you report your stock option transactions depends on the type of transaction. Usually, taxable Nonqualified Stock Option transactions fall into four possible categories:

(1). You exercise your option to purchase the shares and you hold onto the shares. (2). You exercise your option to purchase the shares, and then you sell the shares the same day.

(12) Contemptuous conduct in connection with practice before the Internal Revenue Service, including the use of abusive language, making false accusations or statements, knowing them to be false, or circulating or publishing malicious or libelous matter.

(13) Giving a false opinion, knowingly, recklessly, or through gross incompetence, including an opinion which is intentionally or recklessly misleading, or engaging in a pattern of providing incompetent opinions on questions arising under the Federal tax laws.

(14) Willfully failing to sign a tax return prepared by the practitioner when the practitioner's signature is required by Federal tax laws unless the failure is due to reasonable cause and not due to willful neglect.

(15) Willfully disclosing or otherwise using a tax return or tax return information in a manner not authorized by the Internal Revenue Code, contrary to the order of a court of competent jurisdiction, or contrary to the order of an administrative law judge in a proceeding instituted under §10.60.

(1) The Office of Professional Responsibility, which shall generally have responsibility for matters related to practitioner conduct and shall have exclusive responsibility for discipline, including disciplinary proceedings and sanctions; and

(2) An office with responsibility for matters related to authority to practice before the Internal Revenue Service, including acting on applications for enrollment to practice before the Internal Revenue Service and administering competency testing and continuing education.

§ 10.22 Diligence as to accuracy. (a) In general. A practitioner must exercise due diligence — (1) In preparing or assisting in the preparation of, approving, and filing tax returns, documents, affidavits, and other papers relating to Internal Revenue Service matters;

(2) In determining the correctness of oral or written representations made by the practitioner to the Department of the Treasury; and

(A) Before becoming aware of the information, the person had: (1) Entered into a binding contract to purchase or sell the security,

(2) Instructed another person to purchase or sell the security for the instructing person's account, or (3) Adopted a written plan for trading securities;

(ii) Any document, affidavit or other paper submitted to the Internal Revenue Service.

(2) The practitioner also must inform the client of any opportunity to avoid any such penalties by disclosure, if relevant, and of the requirements for adequate disclosure.

Understatement The term "understatement" is defined as the excess of (1) the amount of the tax required to be shown on the return for the tax year over

(2) the amount of the tax imposed that is shown on the return, reduced by any rebate.

Ownership of stock. To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. (1). Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries.

(2). An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants.

Related persons. For purposes of this rule, the following persons are related to a corporation. (1). Another corporation that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code).

(2). An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. (3). A trust fiduciary, if the trust or the grantor of the trust owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation.

Activities That Are Not Passive Activities. The following are not passive activities. (1). Trade or business activities in which the partner materially participated for the tax year.

(2). Any rental real estate activity in which the partner materially participated if the partner met both of the following conditions for the tax year.

Used without current year earnings and profits. If the corporation has no current year earnings and profits, figure the use of accumulated earnings and profits as follows. (1). If the current year earnings and profits balance is negative, prorate the negative balance to the date of each distribution made during the year.

(2). Figure the available accumulated earnings and profits balance on the date of each distribution by subtracting the prorated amount of current year earnings and profits from the accumulated balance.

So if you don't meet an exception, you must look at what costs to capitalize. Costs include: (1). Direct Costs - direct material costs that become an integral part of the property and direct labor costs. ☐ These normally would already be included in inventory.

(2). Indirect Costs - all costs that are not direct but directly benefit or are incurred by production activities. (3). Service Costs - a type of indirect cost that can be identified specifically with a service department. These are usually general and administrative expenses.

(1). It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997, and

(2). Its average annual gross receipts for the 3-tax-year period (or portion thereof during which the corporation was in existence) ending before its current tax year did not exceed $7.5 million ($5 million for the corporation's first 3-tax-year period).

(1). The annualized income installment method was used to figure any required installment.

(2). The adjusted seasonal installment method was used to figure any required installment. (3). The corporation is a large corporation figuring its first required installment based on the prior year's tax.

If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. (1). The amount of the underpayment.

(2). The period during which the underpayment was due and unpaid. (3). The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin.

In this scenario, P1 meets the Sec. 351 control threshold after the transfer because it owns 80% of the total combined voting power of all classes of stock entitled to vote (Classes A and B )

(280 ÷ 350) and 80% of the total number of shares for all other classes of stock (Class C ) (80 ÷ 100). Because the control requirement is met, the transfer qualifies for tax-free treatment under Sec. 351.

(2) Establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law (including potentially applicable judicial doctrines) to the relevant facts, and arriving at a conclusion supported by the law and the facts.

(3) Advising the client regarding the import of the conclusions reached, including, for example, whether a taxpayer may avoid accuracy-related penalties under the Internal Revenue Code if a taxpayer acts in reliance on the advice. (4) Acting fairly and with integrity in practice before the Internal Revenue Service.

(2) Certified public accountant means any person who is duly qualified to practice as a certified public accountant in any state, territory, or possession of the United States, including a Commonwealth, or the District of Columbia.

(3) Commissioner refers to the Commissioner of Internal Revenue.

(2) Conviction of any criminal offense involving dishonesty or breach of trust.

(3) Conviction of any felony under Federal or State law for which the conduct involved renders the practitioner unfit to practice before the Internal Revenue Service.

How Chapter 7 Works. A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets.

(3) In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases.

(2) The contributing partner's basis in the partnership increases by the amount of the gain recognized.

(3) The distributee partner's basis in property received increases by the amount of the precontribution gain recognized by the contributing partner.

(2). Its employee-owners substantially perform the services in (1) above. This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners.

(3). Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period.

If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. (1). Depreciable property. (2). Amortizable property.

(3). Property subject to cost depletion but not to percentage depletion. (4). All other remaining properties. Reduce the basis of property in each category to zero before going on to the next category.

Limitations on deduction. A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Figure taxable income for this purpose without the following. (1). The deduction for charitable contributions. (2). The dividends-received deduction.

(3). The deduction allowed under section 249 of the Internal Revenue Code for bond premium. (4). The domestic production activities deduction. (5). Any net operating loss carryback to the tax year. (6). Any capital loss carryback to the tax year.

(2). Multiply each $4,000 distribution by the .625 figured in (1) to get the amount ($2,500) of each distribution treated as a distribution of current year earnings and profits.

(3). The remaining $1,500 of each distribution is treated as a distribution from accumulated earnings and profits. The corporation distributed $6,000 ($1,500 × 4) of accumulated earnings and profits.

Figuring the limit. In figuring the limit, determine taxable income without the following items. (1). The net operating loss deduction. (2). The domestic production activities deduction. (3). The deduction for dividends received.

(4). Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends below). (5). Any capital loss carryback to the tax year.

A capital loss is carried to other years in the following order. (1). 3 years prior to the loss year. (2). 2 years prior to the loss year. (3). 1 year prior to the loss year.

(4). Any loss remaining is carried forward for 5 years. When you carry a net capital loss to another tax year, treat it as a short-term loss. It does not retain its original identity as long term or short term.

(3). Start with the first distribution and treat the part of each distribution greater than the allocated current year earnings and profits figured in (2) as a distribution of accumulated earnings and profits.

(4). If accumulated earnings and profits are reduced to zero, the remaining part of each distribution is applied against and reduces the adjusted basis of the stock in the hands of the shareholders. To the extent that the balance is more than the adjusted basis of the stock, it is treated as a gain from the sale or exchange of property.

(4). The rental of a dwelling unit used by a partner for personal purposes during the year for more than the greater of 14 days or 10% of the number of days that the residence was rented at fair rental value.

(5). An activity of trading personal property for the account of owners of interests in the activity. For purposes of this rule, personal property means property that is actively traded, such as stocks, bonds, and other securities. See Temporary Regulations section 1.469-1T(e)(6).

(4). A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days.

(5). Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

(4). When applying (1) or (2) above, stock considered owned by a person under (1) or (3) above is treated as actually owned by that person. Stock considered owned by an individual under (2) is not treated as owned by the individual for again applying (2) to consider another the owner of that stock.

(5). Stock that may be considered owned by an individual under either (2) or (3) above is considered owned by the individual under (3).

(4). An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. (5). A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership.

(6). Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation , earlier), regardless of the amount of stock owned by the employee-owner.

(5) Practitioner means any individual described in paragraphs (a), (b), (c), (d), (e), or (f) of §10.3. (6) A tax return includes an amended tax return and a claim for refund.

(7) Service means the Internal Revenue Service. (8) Tax return preparer means any individual within the meaning of section 7701(a)(36) and 26 CFR 301.7701-15.

(6) Willfully failing to make a Federal tax return in violation of the Federal tax laws, or willfully evading, attempting to evade, or participating in any way in evading or attempting to evade any assessment or payment of any Federal tax.

(7) Willfully assisting, counseling, encouraging a client or prospective client in violating, or suggesting to a client or prospective client to violate, any Federal tax law, or knowingly counseling or suggesting to a client or prospective client an illegal plan to evade Federal taxes or payment thereof.

(7) any hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe); or

(8) supplies of a type regularly used or consumed by the taxpayer in the ordinary course of a trade or business of the taxpayer.

In general, such gain would be long-term capital gain, which, in the case of an individual, would be subject to federal income tax, in part at the 20% capital gain rate and in part at a 25% rate.

(A 3.8% surtax may also apply.) Part of the gain would be recognized in the year of the sale, and the balance would be recognized, under the installment method, as payments are received on the note.

(ii) Advise a client to take a position on a tax return or claim for refund, or prepare a portion of a tax return or claim for refund containing a position, that —

(A) Lacks a reasonable basis; (B) Is an unreasonable position as described in section 6694(a)(2) of the Code (including the related regulations and other published guidance); or

(5) a publication of the United States Government (including the Congressional Record) which is received from the United States Government or any agency thereof, other than by purchase at the price at which it is offered for sale to the public, and which is held by—

(A) a taxpayer who so received such publication, or

(4) Application of limitation on charitable contributionsIn the case of any charitable contribution of property to which the second sentence of section 1367(a)(2) applies, paragraph (1) shall not apply to the extent of the excess (if any) of—

(A) the shareholder's pro rata share of such contribution, over (B) the shareholder's pro rata share of the adjusted basis of such property.

(A) items of income (including tax-exempt income), loss, deduction, or credit the separate treatment of which could affect the liability for tax of any shareholder, and

(B) nonseparately computed income or loss. For purposes of the preceding sentence, the items referred to in subparagraph (A) shall include amounts described in paragraph (4) or (6) of section 702(a).

(6) any commodities derivative financial instrument held by a commodities derivatives dealer, unless— (A) it is established to the satisfaction of the Secretary that such instrument has no connection to the activities of such dealer as a dealer, and

(B) such instrument is clearly identified in such dealer's records as being described in subparagraph (A) before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe);

(B) Cannot exceed shareholder's basis in stock The aggregate amount of losses and deductions taken into account by a shareholder under subparagraph (A) shall not exceed the adjusted basis of the shareholder's stock in the corporation (determined at the close of the last day of the post-termination transition period and without regard to this paragraph).

(C) Adjustment in basis of stock The shareholder's basis in the stock of the corporation shall be reduced by the amount allowed as a deduction by reason of this paragraph.

(B) A redemption treated as an exchange under section 302(a) or section 303(a) of 20 percent or more of the outstanding stock of the corporation from a shareholder in one or more transactions during any thirty-day period during the corporation's taxable year; or

(C) An issuance of an amount of stock equal to or greater than 25 percent of the previously outstanding stock to one or more new shareholders during any thirty-day period during the corporation's taxable year.

(B) Price. "Price" means the market price on a particular date or a limit price, or a particular dollar price.

(C) Date. "Date" means, in the case of a market order, the specific day of the year on which the order is to be executed (or as soon thereafter as is practicable under ordinary principles of best execution). "Date" means, in the case of a limit order, a day of the year on which the limit order is in force.

(A) Lacks a reasonable basis; (B) Is an unreasonable position as described in section 6694(a)(2) of the Internal Revenue Code (Code) (including the related regulations and other published guidance); or

(C) Is a willful attempt by the practitioner to understate the liability for tax or a reckless or intentional disregard of rules or regulations by the practitioner as described in section 6694(b)(2) of the Code (including the related regulations and other published guidance).

(B) in the case of a letter, memorandum, or similar property, a taxpayer for whom such property was prepared or produced, or

(C) a taxpayer in whose hands the basis of such property is determined, for purposes of determining gain from a sale or exchange, in whole or part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (A) or (B);

If the partnership contributes to an individual retirement arrangement

(IRA) for employees, include the contribution in salaries and wages on page 1, line 9, or Form 1125-A, line 3, and not on line 18.

Sec. 368(c) defines control as the ownership of stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation.

(Unlike, e.g., Sec. 1504, this provision does not have a value requirement.) Note: It is assumed for all the following examples that no special Sec. 351 rules-such as the investment company provisions in Sec. 351(e)(1)-apply.

§ 10.32 Practice of law. Nothing in the regulations in this part may be construed as authorizing persons not members of the bar to practice law. § 10.33 Best practices for tax advisors.

(a) Best practices. Tax advisors should provide clients with the highest quality representation concerning Federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service.z

10.5 Application to become an enrolled agent, enrolled retirement plan agent, or registered tax return preparer.

(a) Form; address. (b) Fee.

§ 10.63 Service of complaint; service of other papers; service of evidence in support of complaint; filing of papers.

(a) Service of complaint. (1) In general. The complaint or a copy of the complaint must be served on the respondent by any manner described in paragraphs (a) (2) or (3) of this section.

Exception. If a partner contributes more than 10 properties with either a built-in gain or built-in loss on any date during the tax year, the partnership isn't required to provide the required information separately for each property contributed for that date. Instead, the partnership can report the

(a) number of properties contributed on that date, (b) total amount of built-in gain, and (c) total amount of built-in loss. Do not net the built-in gains and built-in losses; instead, show the total built-in gain and total built-in loss for all properties contributed on that date.

(b) Any such individual who has (or such individuals who have or share) principal authority as described in paragraph

(a) of this section will be subject to discipline for failing to comply with the requirements of this section if—

(f) Special rules (1) Subsection (a) not to apply to credit allowable under section 34 Subsection

(a) shall not apply with respect to any credit allowable under section 34 (relating to certain uses of gasoline and special fuels).

(3) Reduction in pass-thru for tax imposed on excess net passive incomeIf any tax is imposed under section 1375 for any taxable year on an S corporation, for purposes of subsection

(a), each item of passive investment income shall be reduced by an amount which bears the same ratio to the amount of such tax as— (A) the amount of such item, bears to (B) the total passive investment income for the taxable year.

Under the accrual method, an amount is includable in income when: (1). All the events have occurred that fix the right to receive the income, which is the earliest of the date:

(a). The required performance takes place, (b). Payment is due, or (c). Payment is received; and

(iii)Corporation with subchapter C and subchapter S earnings and profits. If an S corporation that makes the election provided in this paragraph (f)(2) has both subchapter C earnings and profits

(as defined in section 1362(d)(3)(B)) and subchapter S earnings and profits in a taxable year of the corporation in which the distribution is made, the distribution is treated as made first from subchapter C earnings and profits, and second from subchapter S earnings and profits.

(2) A pattern of conduct is a factor that will be taken into account in determining whether a practitioner acted willfully, recklessly, or through gross incompetence.

(b) Documents, affidavits and other papers — (1) A practitioner may not advise a client to take a position on a document, affidavit or other paper submitted to the Internal Revenue Service unless the position is not frivolous.

(2) Discretion; acceptance or declination. The Commissioner, or delegate, may accept or decline the offer described in paragraph (b)(1) of this section. When the decision is to decline the offer, the written notice of declination may state that the offer described in paragraph

(b)(1) of this section would be accepted if it contained different terms. The Commissioner, or delegate, has the discretion to accept or reject a revised offer submitted in response to the declination or may counteroffer and act upon any accepted counteroffer.

(b) Officers and employees within any office established under this part may perform acts necessary or appropriate to carry out the responsibilities of their office(s) under this part or as otherwise prescribed by the Commissioner.

(c) Acting. The Commissioner will designate an officer or employee of the Internal Revenue Service to perform the duties of an individual appointed under paragraph (a) of this section in the absence of that officer or employee or during a vacancy in that office.

(2). At least 95% of the corporation's stock, by value, is owned, directly or indirectly, by any of the following. (a). Employees performing the personal services. (b). Retired employees who had performed the personal services.

(c). An estate of the employee or retiree described above. (d). Any person who acquired the stock of the corporation as a result of the death of an employee or retiree (but only for the 2-year period beginning on the date of the employee's or retiree's death).

(b)Date distribution made. For purposes of section 1368, a distribution is taken into account on the date the corporation makes the distribution, regardless of when the distribution is treated as received by the shareholder.

(c)S corporation with no earnings and profits. A distribution made by an S corporation that has no accumulated earnings and profits as of the end of the taxable year of the S corporation in which the distribution is made is treated in the manner provided in section 1368(b).

Net royalty income is the excess of passive activity gross income from licensing or transferring any right in intangible property over passive activity deductions

(current year deductions and prior year unallowed losses) that are reasonably allocable to the intangible property.

(ii) Any monetary penalty imposed on an employer, firm or other entity may be in addition to or in lieu of penalties imposed under paragraph (c) (1)(i) of this section.

(d) Authority to accept a practitioner's consent to sanction. The Internal Revenue Service may accept a practitioner's offer of consent to be sanctioned under §10.50 in lieu of instituting or continuing a proceeding under §10.60(a).

facts and circumstances, with emphasis given to the additional risk caused by the practitioner's lack of knowledge of the taxpayer's particular circumstances, when determining whether a practitioner has failed to comply with this section.

(d) Federal tax matter. A Federal tax matter, as used in this section, is any matter concerning the application or interpretation of---

(4)Election to forego previously taxed income. An S corporation may elect to forego distributions of previously taxed income. If such an election is made, paragraph

(d)(2) of this section (relating to corporations with previously taxed income) does not apply to any distribution made during the taxable year.

(B) the shareholder's adjusted basis of any indebtedness of the S corporation to the shareholder

(determined without regard to any adjustment under paragraph (2) of section 1367(b) for the taxable year).

Income test: At least 60% of the corporation's adjusted ordinary gross income is PHC income (Sec. 542(a)(1)). Stock ownership test: More than 50% of the value of the corporation's outstanding stock is owned

(directly or indirectly) by five or fewer individuals on any day during the last half of the corporation's tax year (Sec. 542(a)(2)). Few closely held corporations have sufficiently diverse ownership to avoid PHC status based on this test.

Generally, you apply the 2% limit after you apply any other deduction limit. For example, you apply the 50% (or 80%) limit on business-related meals and entertainment

(discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit.

Distributions by a corporation that makes both the election to distribute earnings and profits first under paragraph

(f)(2) of this section and the election to forego previously taxed income under this paragraph (f)(4), are treated in the manner provided in paragraph (f)(2)(i) of this section.

Thus, distributions by a corporation that makes the election to forego previously taxed income for a taxable year under this paragraph (f)(4) and does not make the election to distribute earnings and profits first under paragraph

(f)(2) of this section are treated in the manner provided in section 1368(c) (relating to distributions by corporations with earnings and profits).

(ii)For previously taxed income and deemed dividends. If an election is made to forego previously taxed income under paragraph

(f)(4) of this section or to make a deemed dividend under paragraph (f)(3) of this section, consent by each "affected shareholder," as defined in section 1368(e)(3)(B), is required.

(ii)Previously taxed income. If a corporation to which paragraph (d)(2) of this section (relating to corporations with previously taxed income) applies makes the election provided in this paragraph (f)(2) for the taxable year, and does not make the election to forego previously taxed income under paragraph

(f)(4) of this section, distributions by the S corporation during the taxable year are treated as made first, from previously taxed income under paragraph (d)(2) of this section; second, from earnings and profits under section 1368(c)(2); and third, from the AAA under section 1368(c)(1).

(3). An interest in an oil or gas well drilled or operated under a working interest if at any time during the tax year the partner held the working interest directly or through an entity that didn't limit the partner's liability

(for example, an interest as a general partner). This exception applies regardless of whether the partner materially participated for the tax year.

Larger deduction. A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus half of the inventory or property's appreciation

(gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. This deduction may be allowed for certain contributions of:

Who qualifies for the Section 1031 exchange? Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships

(general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

(e)Certain adjustments taken into account - (1)Taxable years beginning before January 1, 1997. For any taxable year of the corporation beginning before January 1, 1997, paragraphs (c) and (d) of this section are applied only after taking into account -

(i) The adjustments to the basis of the shares of a shareholder's stock described in section 1367 (without regard to section 1367(a)(2)(A) (relating to decreases attributable to distributions not includible in income)) for the S corporation's taxable year; and

(2)Taxable years beginning on or after August 18, 1998. For any taxable year of the corporation beginning on or after August 18, 1998, paragraphs (c) and (d) of this section are applied only after taking into account -

(i) The adjustments to the basis of the shares of a shareholder's stock described in section 1367(a)(1) (relating to increases in basis of stock) for the S corporation's taxable year; and

(2) A person other than a natural person also may demonstrate that a purchase or sale of securities is not "on the basis of" material nonpublic information if the person demonstrates that:

(i) The individual making the investment decision on behalf of the person to purchase or sell the securities was not aware of the information; and

(f)Elections relating to source of distributions - (1)In general. An S corporation may modify the application of paragraphs (c) and (d) of this section by electing (pursuant to paragraph (f)(5) of this section) -

(i) To distribute earnings and profits first as described in paragraph (f)(2) of this section; (ii) To make a deemed dividend as described in paragraph (f)(3) of this section; or (iii) To forego previously taxed income as described in paragraph (f)(4) of this section.

(2) A practitioner may not advise a client to submit a document, affidavit or other paper to the Internal Revenue Service — (i) The purpose of which is to delay or impede the administration of the Federal tax laws; (ii) That is frivolous; or

(iii) That contains or omits information in a manner that demonstrates an intentional disregard of a rule or regulation unless the practitioner also advises the client to submit a document that evidences a good faith challenge to the rule or regulation.

(ii) Paragraph (c)(1)(i) of this section is applicable only when the contract, instruction, or plan to purchase or sell securities was given or entered into in good faith and not as part of a plan or scheme to evade the prohibitions of this section.

(iii) This paragraph (c)(1)(iii) defines certain terms as used in paragraph (c) of this Section. (A) Amount. "Amount" means either a specified number of shares or other securities or a specified dollar value of securities.

If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary

(in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date.

Transactions between related taxpayers. Generally, an accrual basis partnership can deduct business expenses and interest owed to a related party

(including any partner) only in the tax year of the partnership that includes the day on which the payment is includible in the income of the related party. See section 267 for details.

(iii)Corporate statement regarding elections. A corporation makes an election for a taxable year under § 1.1368-1(f) by attaching a statement to a timely filed

(including extensions) original or amended return required to be filed under section 6037 for that taxable year. In the statement, the corporation must identify the election it is making under § 1.1368-1(f) and must state that each shareholder consents to the election.

The combined amount of rental real estate losses and the deduction equivalent of rental real estate credits from all sources

(including rental real estate activities not held through the partnership) that may be claimed is limited to $25,000. This $25,000 amount is generally reduced for high-income partners.

The bargain element is the difference between the exercise price and the market price on the day you exercised the options and purchased the stock ($45 - $20 = $25 x 100 shares = $2,500). This amount should already be included in the total wages reported in Box 1 of your 2016 Form W-2 because this is a disqualifying sale

(meaning you are disqualified from taking it as a capital gain and being taxed at the lower capital gains rate because you sold the shares less than a year after exercising the option). If this amount is not included in Box 1 of Form W-2, add it to the amount you're reporting on your 2016 Form 1040, line 7.

(3) the price at which such security shall have been disposed of after suit but before judgment if such damages shall be less than the damages representing the difference between the amount paid for the security

(not exceeding the price at which the security was offered to the public) and the value thereof as of the time such suit was brought:

26 U.S. Code § 1366 - Pass-thru of items to shareholders. (a) Determination of shareholder's tax liability (1) In generalIn determining the tax under this chapter of a shareholder for the shareholder's taxable year in which the taxable year of the S corporation ends

(or for the final taxable year of a shareholder who dies, or of a trust or estate which terminates, before the end of the corporation's taxable year), there shall be taken into account the shareholder's pro rata share of the corporation's—

☐ Late payment penalties apply if you didn't pay taxes owed by April 18, 2017, regardless of whether you filed an extension or not. ★ The late payment penalty is 0.5% (1/2 of 1 percent) of the additional tax owed amount for every month

(or fraction thereof) the owed tax remains unpaid, up to a maximum of 25%. ★ For any month(s) in which both the late-payment and late-filing penalties apply, the 0.5% late-payment penalty is waived.

☐ Late filing penalties apply if you owe taxes and didn't file your return or extension by April 18, 2017, or if you filed an extension but failed to file your return by October 16, 2017. ★ The late filing penalty is 5% of the additional taxes owed amount for every month

(or fraction thereof) your return is late, up to a maximum of 25%. ★ If you file more than 60 days after the due date, the minimum penalty is $205 or 100% of your unpaid tax, whichever is less.

Distributions under section 355. Every corporation that makes a distribution of stock or securities of a controlled corporation, as described in section 355

(or so much of section 356 as it relates to section 355), must include the statement required by Regulations section 1.355-5(a) on or with its return for the year of the distribution.

Non-Sec. 482 transactions: For non- Sec. 482 transactions, the substantial valuation misstatement trigger is effectively a substantial overstatement trigger. That is, a substantial valuation misstatement exists for such transactions if the value

(or the adjusted basis) of any property claimed on a return is 150% or more of the amount ultimately determined to be the correct amount of such value or adjusted basis.

The corporation also must set forth facts in the statement relating to the qualifying disposition (e.g., sale, gift, stock issuance, or redemption), and state that each shareholder who held stock in the corporation during the taxable year

(without regard to the election under § 1.1368-1(g)(2)(i)) consents to this election. For purposes of this election, a shareholder of the corporation for the taxable year is a shareholder as described in section 1362(a)(2).

Limited partners. Generally, a limited partner's share of partnership income (loss) isn't included in net earnings (loss) from self-employment.

Limited partners treat as self-employment earnings only guaranteed payments for services they actually rendered to, or on behalf of, the partnership to the extent that those payments are payment for those services.

How can I escape the AMT? Line 1: Adjusted Gross Income After Itemized Deductions: Line 2: Medical Expenses: Line 3: Taxes: Line 4: Home Equity Interest: Line 5: Miscellaneous Itemized Deductions: Line 6: This line is reserved for future use. Line 7: State Tax Refund:

Line 8: Investment Interest: Line 9: Depletion: Line 10: Net Operating Loss: Line 11: Alternative Tax Net Operating Loss Deduction: Line 12: Private Activity and Tax-Exempt Bond Interest: Line 13: Section 1202 Exclusion: Line 14: Incentive Stock Options:

☐ The approximate date and manner of acquisition of the donated property, and ☐ The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution.Closely held and personal service corporations must complete and attach Form 8283,

Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return.

Example. Debra Smith is employed as a salesperson. She isn't a statutory employee. Her adjusted gross income is $40,000, and she didn't receive any reimbursement for her expenses. She has the following qualifying miscellaneous deductions:

Of Debra's deductions, only gambling losses aren't subject to the 2%-of-adjusted-gross-income limit. She enters the gambling losses on Schedule A, line 28. The other items are subject to the 2% limit and are shown on Schedule A, lines 21, 22, and 23.

Line 5: Miscellaneous Itemized Deductions: Miscellaneous itemized deductions are not deductible for AMT purposes.

Often generated by employee business expenses, these itemized deductions can save you a lot of money on your regular return. If so, when the AMT puts them back into your taxable income, you could face a big problem.

Upon successful completion of these programs, individuals receive a certificate from program providers.

These certificates are part of the evidence required for debtors to file for bankruptcy.

because of the parties' history, pattern, or practice of sharing and maintaining confidences,

and because there was no agreement or understanding to maintain the confidentiality of the information.

Practice point. It may be advisable to recognize income in 2010 before the higher rates go into effect. Also, if the higher rates take effect, the difference between trust tax brackets and individual tax brackets becomes even more important.

"Pushing" the income to the beneficiaries by distributing all or most of DNI makes even more sense, since income at the beneficiary level is more likely to be taxed at a lower rate.

Taxpayer positions: In addition to taxpayer behavior, the statutory "reasonable attempt to comply" standard can also apply to taxpayer return positions. In this regard, the regulations recognize that a return position that has a reasonable basis "is not attributable to negligence.

"The term "reasonable basis" is not defined, but the regulations indicate that it describes a position less robust than one supported by substantial authority but more robust than one that is merely arguable or colorable.

§ 10.52 Violations subject to sanction. (a) A practitioner may be sanctioned under §10.50 if the practitioner —

(1) Willfully violates any of the regulations (other than §10.33) contained in this part; or (2) Recklessly or through gross incompetence (within the meaning of §10.51(a)(13)) violates §§ 10.34, 10.35, 10.36 or 10.37. § 10.53 Receipt of information concerning practitioner.

As discussed below, the negligence determination mandated by Sec. 6662 appears to focus on two related but distinct taxpayer activities:

(1) complying with the Code itself (presumably both substantive and procedural rules) and (2) preparing returns (including documentation and substantiation of items shown thereon).

(3) A practitioner may charge a contingent fee for services rendered in connection with a claim for credit or refund filed solely in connection with the determination of statutory interest or penalties assessed by the Internal Revenue Service.

(4) A practitioner may charge a contingent fee for services rendered in connection with any judicial proceeding arising under the Internal Revenue Code.

In generalFor purposes of this subtitle, the term "capital asset" means property held by the taxpayer (whether or not connected with his trade or business), but does not include

(1) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business;

A corporation's NOL generally differs from individual, estate, and trust NOLs in the following ways. (1). A corporation can take different deductions when figuring an NOL.

(2). A corporation must make different modifications to its taxable income in the carryback or carryforward year when figuring how much of the NOL is used and how much is carried over to the next year. (3). A corporation uses different forms when claiming an NOL deduction.

(1). The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. (2). The issue price of the stock exceeds its liquidation rights or stated redemption price.

(3). The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock.

(3). Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner.(4). To apply (1), (2), or (3), above, stock constructively owned by a person under

(1) is treated as actually owned by that person. But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock.

(b) Service of papers other than complaint. Any paper other than the complaint may be served on the respondent, or his or her authorized representative under §10.69(a)(2) by:

(1) mailing the paper by first class mail to the last known address (as determined under section 6212 of the Internal Revenue Code and the regulations thereunder) of the respondent or the respondent's authorized representative,

(3) An individual who practices before the Internal Revenue Service pursuant to paragraph (e)

(1) of this section is subject to the provisions of this part in the same manner as attorneys, certified public accountants, enrolled agents, enrolled actuaries, and registered tax return preparers.

(4) An individual who practices before the Internal Revenue Service pursuant to paragraph (f)

(1) of this section is subject to the provisions of this part in the same manner as attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, and enrolled actuaries.

(a) In general. A practitioner may not charge an unconscionable fee in connection with any matter before the Internal Revenue Service. (b) Contingent fees —

(1) Except as provided in paragraphs (b)(2), (3), and (4) of this section, a practitioner may not charge a contingent fee for services rendered in connection with any matter before the Internal Revenue Service.

§ 10.65 Supplemental charges. (a) In general. Supplemental charges may be filed against the respondent by amending the complaint with the permission of the Administrative Law Judge if, for example —

(1) It appears that the respondent, in the answer, falsely and in bad faith, denies a material allegation of fact in the complaint or states that the respondent has insufficient knowledge to form a belief, when the respondent possesses such information; or

Lobbying and political activities.

You may not be able to deduct that part of your dues that is for certain lobbying and political activities. See Lobbying Expenses under Nondeductible Expenses, later.

b. A partner contributes property with a precontribution gain, and within 7 years of the contribution, this partner receives a distribution of property other than cash.

(1) The amount of gain recognized is the lesser of the remaining net precontribution gain or the excess value of the distributed property over the partner's basis in the partnership interest.

According to the regulations, if a return position is "reasonably based" on one or more such authority, the return position

will generally satisfy the reasonable basis standard even though it may not satisfy the substantial authority standard.

b. Liquidating distributions occur when either of the following happens.

(1) The partnership itself liquidates and distributes all of the partnership property to its partners. (2) An ongoing partnership redeems the interest of one of its partners.

(b) Notwithstanding the existence of a conflict of interest under paragraph (a) of this section, the practitioner may represent a client if —

(1) The practitioner reasonably believes that the practitioner will be able to provide competent and diligent representation to each affected client; (2) The representation is not prohibited by law; and

Substantial An understatement (after any appropriate reduction as described above) is substantial if it exceeds certain statutory thresholds. For individual taxpayers, an understatement is substantial if it exceeds the greater of

(1) 10% of the tax required to be shown on the return for the tax year or (2) $5,000.65 For corporate taxpayers, an understatement is substantial if it exceeds the lesser of (1) 10% of the tax required to be shown on the return for the tax year (or, if greater, $10,000) or (2) $10 million.66

§ 10.34 Standards with respect to tax returns and documents, affidavits and other papers. (a) Tax returns.

(1) A practitioner may not willfully, recklessly, or through gross incompetence — (i) Sign a tax return or claim for refund that the practitioner knows or reasonably should know contains a position that —

§ 10.25 Practice by former government employees, their partners and their associates. (a) Definitions. For purposes of this section —

(1) Assist means to act in such a way as to advise, furnish information to, or otherwise aid another person, directly, or indirectly.

10.2 Definitions. (a) As used in this part, except where the text provides otherwise —

(1) Attorney means any person who is a member in good standing of the bar of the highest court of any state, territory, or possession of the United States, including a Commonwealth, or the District of Columbia.

(3) Carryover of disallowed losses and deductions to post-termination transition period (A) In general If for the last taxable year of a corporation for which it was an S corporation a loss or deduction was disallowed by reason of paragraph

(1), such loss or deduction shall be treated as incurred by the shareholder on the last day of any post-termination transition period.

See Form 3800 for a list of allowable business credits and other special rules. General business credits are treated as used on a first-in, first-out basis by offsetting the earliest-earned credits first. Therefore, the order in which the credits are used in any tax year is as follows.

(1). Carryforwards to that year, the earliest ones first; (2). The general business credit earned in that year; and (3). The carryback to that year.

Deductions Limitations on Deductions Uniform capitalization rules. The uniform capitalization rules of section 263A require corporations to capitalize, or include in inventory, certain costs. Corporations subject to the section 263A uniform capitalization rules are required to capitalize:

1. Direct costs of assets produced or acquired for resale, and 2. An allocable part of most indirect costs (including taxes) that are properly allocable to property produced or property acquired for resale. The costs required to be capitalized under section 263A are not deductible until the property (to

File supporting statements for each corporation included in the consolidated return. Do not use Form 1120 as a supporting statement. On the supporting statement, use columns to show the following, both before and after adjustments.

1. Items of gross income and deductions. 2. A computation of taxable income. 3. Balance sheets as of the beginning and end of the tax year. 4. A reconciliation of income per books with income per return. 5. A reconciliation of retained earnings.

e. Examples. Partner Bob's basis in his partnership interest is $50,000. What gain or loss is recognized, what is Bob's basis in the property received, and his basis in his partnership interest, if the partnership makes the following independent proportionate nonliquidating distributions?

1. Partnership distributes $40,000 in cash. Bob reduces his basis in the partnership to $10,000, has $40,000 cash, and recognizes no gain or loss.

A corporation is a qualified personal service corporation if it meets both of the following tests.

1. Substantially all of the corporation's activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.

Fed. R. Bankr. P. 1007(b). Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began).

11 U.S.C. § 521. Individual debtors with primarily consumer debts have additional document filing requirements.

The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement.

11 U.S.C. § 524(d) and (m). The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. 11 U.S.C. § 524(f).

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations.

11 U.S.C. § 727(a)(1). Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

1. Partnership distributes $40,000 cash. Jill has $40,000 cash and recognizes a loss of $10,000, because she received only cash in the distribution.

2. Partnership distributes $60,000 cash. Jill has $60,000 cash, and recognizes a gain of $10,000 on the excess distribution.

1. The common parent must own directly stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of at least one of the other includible corporations.

2. Stock that represents at least 80% of the total voting power and at least 80% of the total value of the stock of each of the other corporations (except for the common parent) must be owned directly by one or more of the other includible corporations.

1. First, cash and "deemed" cash (debt relief but not marketable securities).

2. Then, unrealized receivables and inventory. 3. Last, all other assets (including marketable securities).

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition.

A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.

(1) Contingent fee is any fee that is based, in whole or in part, on whether or not a position taken on a tax return or other filing avoids challenge by the Internal Revenue Service or is sustained either by the Internal Revenue Service or in litigation.

A contingent fee includes a fee that is based on a percentage of the refund reported on a return, that is based on a percentage of the taxes saved, or that otherwise depends on the specific result attained.

Quick refund of overpayments. A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax.

A corporation can apply for a quick refund if the overpayment is: ☐ At least 10% of its expected tax liability, and ☐ At least $500. Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax.

Accrual method. Generally, a corporation (other than a qualified personal service corporation) must use an accrual method of accounting if its average annual gross receipts exceed $5 million.

A corporation engaged in farming operations also must use an accrual method.

Corporations with total assets non-consolidated (or consolidated for all corporations included within the tax consolidation group) of $10 million or more on the last day of the tax year must file Schedule M-3 (Form 1120) instead of Schedule M-1.

A corporation filing Form 1120 that is not required to file Schedule M-3 may voluntarily file Schedule M-3 instead of Schedule M-1. See the Instructions for Schedule M-3 (Form 1120) for more information.

Money or Property Distributions Most distributions are in money, but they may also be in stock or other property. For this purpose, "property" generally does not include stock in the corporation or rights to acquire this stock. However, see Distributions of Stock or Stock Rights , later.

A corporation generally does not recognize a gain or loss on the distributions covered by the rules in this section.

Note. To carryback an unused credit, the corporation must file an amended return (Form 1120X, or other amended return) for the prior year, or an application for tentative refund (Form 1139). ☐ Credit for prior year minimum tax (see Form 8827). ☐ Bond credits (see Form 8912).

A corporation is also allowed certain refundable credits such as the credit for federal tax on fuels used for certain nontaxable purposes (Form 4136). See the instructions for the corporation's income tax return for a list of other refundable credits that may be allowed for the current tax year.

An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case.

A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7.

Section 1231 property are assets that are used in your trade or business and are held by the Taxpayer for more than one year. A gain on the sale of Section 1231 business property is treated as long-term capital gain and is taxed at a maximum rate of 15%, at least through December 31, 2012.

A loss on the sale of Section 1231 business property is treated as ordinary loss and can reduce ordinary income on the Taxpayer's return and is not subject to the capital loss limitations ($3,000 limitation for individuals or capital gain limitation for corporations).

When to file. Generally, for tax years beginning after December 31, 2015, a corporation must file its income tax return by the 15th day of the 4th month after the end of its tax year.

A new corporation filing a short-period return must generally file by the 15th day of the 4th month after the short period ends. A corporation that has dissolved must generally file by the 15th day of the 4th month after the date it dissolved.

In the case of elections for taxable years beginning after December 31, 2002, the statement described in this paragraph (f)(5)(iii) shall be verified by signing the return.

A statement of election to make a deemed dividend under § 1.1368-1(f) must include the amount of the deemed dividend that is distributed to each shareholder.

If a C corporation retains earnings (doesn't distribute them to shareholders) above a certain amount, an amount which the IRS concludes to be beyond the reasonable needs of the business, the corporation may be assessed tax penalty called the accumulated earnings tax ( IRC section 531) equal to 20 percent of accumulated taxable income.

Accumulated earnings in a C corporation and personal service corporation, above certain exemption limits, may incur a 20% accumulated earnings tax (15% prior to 2013).

Qualification. For both tiers under Regulation A, a company can only accept payment for the sale of its securities once its offering materials have been qualified by the staff at the SEC.

Additionally, companies that are conducting a Tier 1 offering must generally have their offering materials qualified by state securities regulators in the states in which the company plans to sell its securities.

A practitioner who wishes may file a complaint in U.S. District Court to contest the Final Agency Decision when rendered by the Treasury Appellate Authority. This proceeding is also conducted according to the

Administrative Procedures Act during which the Federal district judge will review findings of facts based only on the administrative record and will set aside agency action only if arbitrary or capricious, contrary to law, or an abuse of discretion. The proceeding is not a trial de novo.

The notice gives the practitioner an opportunity to provide any evidence or documentation s/he believes is relevant to OPR's determination.

After a thorough investigation of the facts and an analysis/consideration of aggravating and mitigating circumstances, OPR determines the lowest level of discipline warranted for the violation(s).

Who Qualifies for Section 179?

All businesses that purchase, finance, and/or lease less than $2,000,000 in new or used business equipment during tax year 2017 should qualify for the Section 179 Deduction.

Limited Liability Company A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts.

An LLC may be classified for federal income tax purposes as a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301.7701-3. See Form 8832, Entity Classification Election, for more details.

Money purchase plan (MPP).

An MPP plan is less flexible and requires you to contribute a fixed percentage of income every year up to 25% of compensation. If you alter the percentage of an MPP, you can be subject to a penalty.

(2) If the applicant does not pass the tax compliance or suitability check, the applicant will not be issued an enrollment or registration card or certificate pursuant to §10.6(b) of this part.

An applicant who is initially denied enrollment or registration for failure to pass a tax compliance check may reapply after the initial denial if the applicant becomes current with respect to the applicant's tax liabilities.

(2) Any appraisal made by a disqualified appraiser after the effective date of disqualification will not have any probative effect in any administrative proceeding before the Department of the Treasury or the Internal Revenue Service.

An appraisal otherwise barred from admission into evidence pursuant to this section may be admitted into evidence solely for the purpose of determining the taxpayer's reliance in good faith on such appraisal.

Eligible educator.

An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year.

Line 16: Electing Large Partnerships:

An entry on this line comes from a partnership in which you are a partner. Other than disposing of the investment, which would have other tax ramifications, there is probably nothing you can do about an entry on this line.

Buying company stock at a discount. Usually, you make contributions to a stock purchase fund for a certain period of time through payroll deductions.

At designated points in the year, your employer then uses the accumulated money in the fund to purchase stock for you.

An expense is ordinary if it is common and accepted in your trade, business, or profession.

An expense is necessary if it is appropriate and helpful to your business. An expense doesn't have to be required to be considered necessary.

Computing Stock Basis In computing stock basis, the shareholder starts with their initial capital contribution to the S corporation or the initial cost of the stock they purchased (the same as a C corporation). That amount is then increased and/or decreased based on the flow-through amounts from the S corporation.

An income item will increase stock basis while a loss, deduction, or distribution will decrease stock basis. A shareholder's stock is increased by (using 2015 Form 1120S Schedule K-1 box items):

Qualified expenses. Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom.

An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense doesn't have to be required to be considered necessary.

Voluntary Bankruptcy Voluntary bankruptcies are most commonly filed by individuals or businesses under Chapter 7 of the Bankruptcy Code.

Filing Chapter 7 bankruptcy is a way to discharge your unsecured debts, the money you owe that is not secured by collateral. Creditors are prohibited from collecting on debts that are discharged in bankruptcy.

Business start-up and organizational costs. Generally, a partnership can elect to deduct a limited amount of start-up or organizational costs paid or incurred.

Any costs not deducted must be amortized as explained below. See sections 195(b) and 709(b).

The AAA and the earnings and profits of the corporation are not decreased by that portion of the distribution.

Any distribution remaining after the application of this paragraph (d)(2) is treated in the manner provided in section 1368(c) (2) and (3).

Reporting Dividends and Other Distributions A corporate distribution to a shareholder is generally treated as a distribution of earnings and profits. Any part of a distribution from either current or accumulated earnings and profits is reported to the shareholder as a dividend.

Any part of a distribution that is not from earnings and profits is applied against and reduces the adjusted basis of the stock in the hands of the shareholder. To the extent the balance is more than the adjusted basis of the stock, the shareholder has a gain (usually a capital gain) from the sale or exchange of property.

Third, the reference to the "portion" of any underpayment in Sec. 6662(a) means that the penalty applies only to that portion of the underpayment that is attributable to a specific trigger.

Any portion of the underpayment that is not attributable to a trigger is not subject to the Sec. 6662 penalty. This is in contrast to prior law under which the penalty applied on the entire underpayment if any portion thereof was attributable to negligence.

Election to deduct business start-up and organizational costs. A corporation can elect to deduct a limited amount of start-up and organizational costs it paid or incurred.

Any remaining costs generally must be amortized over a 180-month period.

Mark-to-market accounting method. Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Under this method, any security held by a dealer as inventory must be included in inventory at its fair market value.

Any security not held as inventory at the close of the tax year is treated as sold at its fair market value on the last business day of the tax year. Any gain or loss must be taken into account in determining gross income.

Mark-to-market accounting method. Dealers in securities must use the mark-to-market accounting method described in section 475. Under this method, any security that is inventory to the dealer must be included in inventory at its fair market value (FMV).

Any security that isn't inventory and that is held at the close of the tax year is treated as sold at its FMV on the last business day of the tax year, and any gain or loss must be taken into account in determining gross income. The gain or loss taken into account is generally treated as ordinary gain or loss.

Second, the purpose of tax penalties is to "encourage voluntary compliance by supporting the standards of behavior expected by the Internal Revenue Code."6 Thus, only behavior that falls below the relevant standards of care should properly be subject to penalty.

As discussed below, the proper focus of the statutory regime is ultimately on the taxpayer's behavior in most cases because if the taxpayer can demonstrate the reasonableness of its conduct or return position, the Sec. 6662 penalty should generally not apply even under a mechanical trigger.

You then must report the sale of the stock on your 2016 Schedule D, Part II because it's a long-term transaction; you owned the stock for almost 18 months.

As in the preceding example, the stock sale gain is $490, calculated in the same manner ($4,990 sale price - $4,500 cost basis). But now the $490 gain is a long-term gain, so you only have to pay tax at the capital-gains rate, which will probably be a lot lower than your regular income-

Disregard The second Sec. 6662 penalty trigger is disregard of rules or regulations. For purposes of the disregard trigger, the term "rules or regulations" includes the Code, temporary or final Treasury regulations, and revenue rulings or notices (other than notices of proposed rulemaking) issued by the IRS.

As is the case with the negligence trigger, the focus here is almost exclusively on the taxpayer's conduct. Again, the statute does not define the term but instead identifies three types of disregard: careless, reckless, and intentional disregard.

Consequently, if the taxpayer's reported value for property exceeds the relevant over-or undervaluation thresholds, the penalty applies and the taxpayer's only recourse is to establish a reasonable cause/good-faith defense under Sec. 6664.

As will be discussed in Part II of this article, that defense is particularly difficult to prove in cases of valuation misstatement, with many technical requirements for the underlying appraisals upon which taxpayers rely.

When Should Bankruptcy Be Considered?

Bankruptcy is an option for those who feel they will be unable to repay their debts. Even so, bankruptcy should be considered only as a last resort, as it has long-term, negative consequences on credit rating.

After the exchange, P1 owns 80% of the total combined voting power of all classes of stock entitled to vote (Classes A and B ) (280 ÷ 350) and 50% of all other classes of stock (Class C ).

Because the threshold requirement for control under Sec. 351 is not met ( P1 owns only 50% of Class C instead of at least 80%), P1' s transfer of property to S1 does not meet the requirements of Sec. 351 and is subject to federal income tax.

This sale is a qualifying sale, because more than two years passed between the grant date and the sale date, and more than one year passed between the exercise date and the sales date.

Because this is a qualifying sale, the 2016 Form W-2 you receive from your employer will not report any compensation amount for this sale.

These bonds are often issued by states, counties or cities and are tax-exempt for regular federal tax, but not for the AMT.

If you invest in mutual funds, the 1099 you get will list how much interest you received from private activity bonds. This amount is entered on Line 12 to show the income as taxable for AMT purposes.

Lines 15-28 are deferral items. An AMT credit may be generated based on the reversal of the timing difference of these items.

For example, AMT depreciation methods may be slower than those for the regular tax, but you will eventually receive the same deduction. To calculate and report your AMT credit you need to fill out Form 8801: Credit for Prior Year Minimum Tax.

Form 10-Q The federal securities laws require publicly traded companies to disclose information on an ongoing basis.

For example, domestic issuers must submit annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K for a number of specified events and must comply with a variety of other disclosure requirements.

You do not report anything on your 2016 Schedule D (Capital Gains and Losses) because you have not yet sold the stock. Your employer will not include any compensation related to your options on your 2016 Form W-2 either.

But you will have to make an adjustment for the Alternative Minimum Tax (AMT) that equals the bargain element, which is $2,000 ($45 - $25 = $20 x 100 shares = $2,000). Report this amount on your 2016 Form 6251: Alternative Minimum Tax, line 14.

Qualifying widow(er)

If you qualify, you can use this filing status for the two tax years after the death of your spouse. However, you can't use it for the year of death.

Work at two places in a day.

If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other.

Rural Mail Carriers' Vehicle Expenses

If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. See chapter 4 of Pub. 463 for more information.

The amount at risk generally equals: ☐ The money and the adjusted basis of property contributed by the taxpayer to the activity, and ☐ The money borrowed for the activity.

Closely held corporation. For the at-risk rules, a corporation is a closely held corporation if, at any time during the last half of the tax year, more than 50% in value of its outstanding stock is owned directly or indirectly by, or for, five or fewer individuals.

Schedule M-1. Reconciliation of Income (Loss) per Books With Income per Return In completing Schedule M-1, the following apply.

Corporations with total receipts (page 1, line 1a plus lines 4 through 10) and total assets at the end of the tax year less than $250,000 are not required to complete Schedules L, M-1, and M-2 if the "Yes" box on Schedule K, question 13, is checked.

When asserting this defense, you must prove that the debtor and you intended the transfer to be a contemporaneous exchange for new value given to the customer.

Courts have held that transactions that appear on their face to be a contemporaneous exchange for new value will not be considered as such if there is evidence that the parties did not intend the exchange to be contemporaneous.

Risk #5: Loss of a Tax-Free Like-Kind Exchange Even an otherwise tax-free exchange may be adversely impacted where the parties to the transaction are related.

For example, if a Taxpayer exchanges property with a related person in a tax-free like-kind exchange, the Taxpayer may nevertheless be forced into recognizing gain if the related person disposes of the property exchanged within two years of the original transaction.

Special rules apply to the following. ★ Allocating interest expense among activities so that the limitations on passive activity losses, investment interest, and personal interest can be properly figured. Generally, interest expense is allocated in the same manner as debt is allocated.

Debt is allocated by tracing disbursements of the debt proceeds to specific expenditures. Temporary Regulations section 1.163-8T gives rules for tracing debt proceeds to expenditures.

During credit counseling, a financial advisor helps a debtor create a budget and look for any possible alternatives to bankruptcy.

Debtor education is more of a general educational course that teaches an individual how to properly manage money and credit; the course is intended to help the debtor learn how to avoid bankruptcy in the future.

b. If more than one asset is distributed in category (2) or (3), and if the partner would be required to step down the basis of assets in the category, special rules apply (Text Examples 9 and 10). c. Unrealized receivables are amounts that ultimately will be recognized as ordinary income in the future.

Depreciation recapture is an unrealized receivable. d. Inventory includes all partnership assets except cash, capital, and § 1231 assets.

An election made under paragraph (g)(2)(i) of this section may be made upon the occurrence of any qualifying disposition.

Dispositions of stock that are taken into account as part of a qualifying disposition are not taken into account in determining whether a subsequent qualifying disposition has been made.

Disqualified preferred stock. Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock.

Disqualified preferred stock is any stock preferred as to dividends if any of the following apply.

Distributions of Stock or Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Stock rights (also known as "stock options") are distributions by a corporation of rights to acquire its stock.

Distributions of stock dividends and stock rights are generally tax-free to shareholders. However, if any of the following apply to their distribution, stock and stock rights are treated as property, as discussed under Money or Property Distributions.

Generally, permissible methods include: ★ Cash, ★ Accrual, or ★ Any other method authorized by the Internal Revenue Code.

Generally, a partnership may not use the cash method of accounting if (a) it has at least one corporate partner, it has average annual gross receipts of more than $5 million and it isn't a farming business; or (b) it is a tax shelter

Example. You are the only shareholder of a corporation that uses the calendar year as its tax year. In January, you use the worksheet in the Form 5452 instructions to figure your corporation's current year earnings and profits for the previous year.

During the year, the corporation made four $1,000 distributions to you. At the end of the year (before subtracting distributions made during the year), the corporation had $10,000 of current year earnings and profits.

You are the only shareholder of a corporation that uses the calendar year as its tax year. In January, you use the worksheet in the Form 5452 instructions to figure your corporation's current year earnings and profits for the previous year. At the beginning of the year, the corporation's accumulated earnings and profits balance was $20,000.

During the year, the corporation made four $4,000 distributions to you on March 31, June 30, September 30, and December 31. At the end of the year (before subtracting distributions made during the year), the corporation had a negative $10,000 current year earnings and profits balance.

In many plans, the price that you pay for the stock is the stock price at the time you started contributing to the fund, or the stock price at the time your employer purchases the shares on your behalf, whichever is lower, with a discount of up to 15 percent.

Either way, you get to buy the stock at a price that's lower than the market price. Your discounted price is known as the offer or grant price.The company keeps the stock in your name until you decide to sell it. At that point you have to begin thinking about taxes.

Meals and entertainment. Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business.

However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion.

(2)Election to distribute earnings and profits first - (i)In general. An S corporation with accumulated earnings and profits may elect under this paragraph (f)(2) for any taxable year to distribute earnings and profits first as provided in section 1368(e)(3).

Except as provided in paragraph (f)(2)(ii) of this section, distributions made by an S corporation making this election are treated as made first from earnings and profits under section 1368(c)(2) and second from the AAA under section 1368(c)(1).

(2) Indefinite carryover of disallowed losses and deductions (A) In general

Except as provided in subparagraph (B), any loss or deduction which is disallowed for any taxable year by reason of paragraph (1) shall be treated as incurred by the corporation in the succeeding taxable year with respect to that shareholder.

Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an "asset" case at the outset, unsecured creditors (7) must file their claims with the court within 90 days after the first date set for the meeting of creditors.

Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502(b)(9). In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution.

How transactions affect your taxes. Incentive Stock Option transactions fall into five possible categories, each of which may get taxed a little differently. With an ISO, you can:

Exercise your option to purchase the shares and hold them. Exercise your option to purchase the shares, then sell them any time within the same year.

CASE STUDY: THE JSA TRUST The hypothetical Jon and Susan Anders Family Trust ("JSA Trust") reports the following income for 2010: rental income of $25,000; qualified dividend income of $12,000; municipal bond interest income of $5,000 (tax-exempt); and long-term capital gains of $60,000.

Expenses are a trustee fee of $1,000; depreciation deductions of $2,000; tax return preparation fees of $450; and rental expenses of $6,250.

(c) Failure to deny or answer allegations in the complaint. Every allegation in the complaint that is not denied in the answer is deemed admitted and will be considered proved; no further evidence in respect of such allegation need be adduced at a hearing. (d) Default.

Failure to file an answer within the time prescribed (or within the time for answer as extended by the Administrative Law Judge), constitutes an admission of the allegations of the complaint and a waiver of hearing, and the Administrative Law Judge may make the decision by default without a hearing or further procedure.

(d) Renewal. (1) In general. Enrolled agents, enrolled retirement plan agents, and registered tax return preparers must renew their status with the Internal Revenue Service to maintain eligibility to practice before the Internal Revenue Service.

Failure to receive notification from the Internal Revenue Service of the renewal requirement will not be justification for the individual's failure to satisfy this requirement.

Carryover of excess contributions. You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. You lose any excess not used within that period.

For example, if a corporation has a carryover of excess contributions paid in 2016 and it does not use all the excess on its return for 2017, it can carry any excess over to 2018, 2019, 2020, and 2021, if applicable. Any excess not used in 2021 is lost.

Tax Break for Contributions However, you may be eligible for a tax credit for having made a contribution. The retirement savings credit is up to $1,000, depending on your filing status, MAGI and Roth IRA contribution.

For example, if you were a head of household with MAGI in 2015 of no more than $27,375, contributing $2,000 or more to a Roth IRA generates a $1,000 tax credit.

Expense Adjustments As with some nontaxable income, there are expenses that the IRS does not allow. These expenses are either exempt from being included at all or are deferred until some specified future occurrence.

For example, partnerships cannot use penalties to reduce taxable income. They also cannot claim accrued payments to employees until they actually make the payments.

How imputed interest works Imputed interest is interest that the tax code assumes you collected but you didn't actually collect.

For example, say you loan a friend $20,000 for one year at 0.1% interest. That friend will pay you $20 in interest ($20,000 x .001 = $20).

However, the difference between the exercise price and the fair market value of the stock on the day of the exercise is an adjustment for AMT purposes and appears on Line 15.

For many people, this adjustment can be a very large number. Essentially, you are going to be taxed on a hypothetical profit (what you might have made if you sold the stock on the day you bought it.)

Estates and nongrantor trusts must file income tax returns just as individuals do, but with some important differences.

For one, their income is taxed at either the entity or beneficiary level depending on whether it is allocated to principal or allocated to distributable income, and whether it is distributed to the beneficiaries.

The partnership's tax year ends on the date of termination. For purposes of (1) above, the date of termination is the date the partnership winds up its affairs.

For purposes of (2) above, the date of termination is the date the partnership interest is sold or exchanged that, of itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both partnership capital and profits.

★ Form 5500 and Form 5500-SF must be filed electronically under the computerized ERISA Filing Acceptance System (EFAST2).

Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan. File this form for a plan that only covers one or more partners (or partners and their spouses).

They help in preparing future and amended returns and in the calculation of earnings and profits. Reportable transaction disclosure statement. Disclose information for each reportable transaction in which the corporation participated.

Form 8886, Reportable Transaction Disclosure Statement, must be filed for each tax year that the federal income tax liability of the corporation is affected by its participation in the transaction. The following are reportable transactions.

Companies relying on the Rule 505 exemption do not have to register their offering of securities with the SEC, but they must file what is known as a "Form D" electronically with the SEC after they first sell their securities.

Form D is a brief notice that includes the names and addresses of the company's promoters, executive officers and directors, and some details about the offering, but contains little other information about the company.

Risk #3: Scrutiny of "Bargain" Transfers In other situations, the Taxpayer may want to transfer property to a related entity for an amount of consideration that is less than the property's fair market value.

From the Taxpayer's perspective, there may be reasonably good business reasons for doing so; however, the IRS will closely scrutinize any such transfer.

Accounting Period A corporation must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses.

Generally, corporations can use a calendar year or a fiscal year. Personal service corporations, however, must use a calendar year unless they meet one of the exceptions, discussed later under Personal Service Corporation.

Accounting Periods A corporation must figure its taxable income on the basis of a tax year. A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses.

Generally, corporations can use either a calendar year or a fiscal year as its tax year. Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. For more information, see Pub. 538.

Note that because dividends are taxed at a lower rate, all expenses that are not allocated to the municipal bond interest are allocated to rental income.

Further note that the income items are in proportion of DNI, while the depreciation deduction is allocated between the trust and the beneficiaries based on net accounting income.

How do you compute the basis in the new property? It is critical that you and your tax representative adjust and track basis correctly to comply with Section 1031 regulations.

Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange.

Due process protections are incorporated throughout the disciplinary process. If OPR fails to reach agreement with the practitioner as to an appropriate sanction, a complaint is drafted and the case is referred to the Office of Chief Counsel,

General Legal Services (GLS). GLS sends a letter to the practitioner offering a final opportunity to resolve the matter without hearing.

What is the extent of OPR's authority? OPR's oversight of the conduct of tax practice extends to all individuals who make a presentation to the IRS relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the IRS.

Generally speaking, this includes any individual who interacts with Federal tax administration, whether in person, orally, in writing or by the preparation and submission of documents.

Limited Liability Partnership A limited liability partnership (LLP) is formed under a state limited liability partnership law.

Generally, a partner in an LLP isn't personally liable for the debts of the LLP or any other partner, nor is a partner liable for the acts or omissions of any other partner, solely by reason of being a partner.

Self-Charged Interest Certain self-charged interest income and deductions may be treated as passive activity gross income and passive activity deductions if the loan proceeds are used in a passive activity.

Generally, self-charged interest income and deductions result from loans between the partnership and its partners. It also includes loans between the partnership and another partnership if each owner in the borrowing entity has the same proportional ownership interest in the lending entity.

Personal service corporations. A corporation is a personal service corporation if it meets all of the following requirements. (1). Its principal activity during the "testing period" is performing personal services (defined later).

Generally, the testing period for any tax year is the prior tax year. If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: (a). The last day of its tax year, or (b). The last day of the calendar year in which its tax year begins.

Passive Activity Limits. The passive activity rules generally limit your losses from passive activities to your passive activity income.

Generally, you are in a passive activity if you have a trade or business activity in which you do not materially participate during the tax year, or you have a rental activity.

Let's use your 29-year-old neighbor George to illustrate how partial deductibility works. George is single -- he's not ready to settle down just yet -- and in 2016, he was covered by a retirement plan at work. His salary is $65,000, and his MAGI comes to $68,000.

George is getting serious about saving for his future and decides to make a $5,500 IRA contribution for 2016. Because he was covered by a retirement plan, and his MAGI is above $67,000, he is only allowed to deduct $1,650 of his $5,500 IRA contribution.

See Temporary Regulations sections 1.6031(b)-1T and 1.6031(c)-1T for more information.

Give each partner a copy of either the Partner's Instructions for Schedule K-1 (Form 1065) or specific instructions for each item reported on the partner's Schedule K-1.

The estate's or trust's taxable income is computed using the following formula:

Gross income Less: Deductible trust expenses Less: Personal exemption amount Equals: Taxable income before distribution deduction Less: Distribution deduction Equals: Taxable income Times: Applicable tax rates Equals: Tax liability

A pattern of conduct is a factor that will be taken into account in determining whether a practitioner acted knowingly, recklessly, or through gross incompetence.

Gross incompetence includes conduct that reflects gross indifference, preparation which is grossly inadequate under the circumstances, and a consistent failure to perform obligations to the client.

☐ Expenses for in-home care. This includes expenses for: ★ Cooking ★ Light housework related to the qualifying individual's care ★ The care itself.

Gross wages paid for qualified services, plus your portion of: ★ Social Security ★ Medicare ★ Federal unemployment taxes ★ Other payroll taxes paid on the wages ★ Meals and lodging for the employee providing the services.

Let's say, for example, you invest $3,000 to a Roth IRA this year and earn 8 percent per year for the next 20 years. At the end of that time, you would have $13,983 in your account, totally free from income taxes.

Had you invested that same three grand in a nondeductible IRA, on the other hand, you would have $13,983 in your account, but you would owe tax on the $10,983 gain. Assuming a 25 percent ordinary income tax rate, you would owe $2,746, leaving you with $11,237, much less than in the Roth.

Line 27: Other Adjustments: This line relates to any other income or deduction items that are affected by AMT differences, such as taxable IRA distributions, self-employed health insurance, IRA deductions and other income-based calculations.

Having thrown so many items back into your income, you now get a small break. Your taxable income for AMT purposes is reduced by the exemption amount shown above at the beginning of this article. This exemption amount phases out as income increases.

If that same person uses a traditional IRA, her $4,000 is tax-deductible, saving her the $1,000 in taxes she'd otherwise owe. Assuming her investment doubles, her account balance at the time she wants to start withdrawing is $8,000.

However, she now has to pay taxes on any amounts withdrawn. If her tax rate is still 25%, the value of her IRA is $6,000 after taxes. But if her tax rate is higher (let's assume 33%), regardless of whether it's through tax hikes or higher earnings, her account would only be worth $5,360 after taxes.

The intent of the parties can be difficult to prove, especially if you have an uncooperative debtor.

However, the conduct of the parties and any writings and communications between them can be used to establish intent.

Income Adjustments Schedule M-1 income adjustments are those sources of income, such as exempt interest, that are not considered taxable. This income also include amounts that are not taxable in the current period.

Hence, adjustments to income on Schedule M-1 also include some deferred incomes, such as life insurance proceeds or any other income that bears timing differences.

In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to a case under chapter 11, 12, or 13 (6) as long as the debtor is eligible to be a debtor under the new chapter.

However, a condition of the debtor's voluntary conversion is that the case has not previously been converted to chapter 7 from another chapter. 11 U.S.C. § 706(a). Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another.

The absence of a bona fide business reason for a corporation's accumulated earnings may be indicated by many different circumstances, such as a lack of regular distributions to its shareholders or withdrawals by the shareholders classified as personal loans.

However, actual moves to expand the business generally qualify as a bona fide use of the accumulations.

The cost of new buildings, machinery, or permanent improvements that increase the value of the property aren't deductible. They are chargeable to capital accounts and may be depreciated or amortized.

However, amounts paid for routine maintenance on property, including buildings, may be deductible. See Regulations section 1.263(a)-3(i).

Practice point. When (or if) the lower tax rate for qualified dividends sunsets, the allocation of expenses to nondividends is no longer necessary.

However, depending on the beneficiary's individual tax situation, it may still be important to allocate the indirect expenses to one particular income item.

Basis. The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange.

However, the increase for the gain recognized may be limited. For more information, see Basis of property transferred above and section 362 of the Internal Revenue Code. The basis of property contributed to capital by a person other than a shareholder is zero.

Basis of property transferred. A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange.

However, the increase for the gain recognized may be limited. For more information, see section 362 of the Internal Revenue Code. Also see section 362(e)(2)(C) and the related regulations for information on elections to reduce basis.

The 2016 Form 1065 may also be used if: (1). The partnership has a tax year of less than 12 months that begins and ends in 2017, and (2). The 2017 Form 1065 is not available by the time the partnership is required to file its return.

However, the partnership must show its 2017 tax year on the 2016 Form 1065 and incorporate any tax law changes that are effective for tax years beginning after 2016.

Do not include any payments and credits that should be capitalized. For example, although payments or credits to a partner for services rendered in syndicating a partnership may be guaranteed payments, they aren't deductible on line 10. They are capital expenditures.

However, they should be separately reported on Schedule K, line 4, and on Schedule K-1, box 4. Do not include distributive shares of partnership profits. Report the guaranteed payments to the appropriate partners on Schedule K-1, box 4.

Amount distributed. The amount of a distribution is generally the amount of any money paid to the shareholder plus the fair market value (FMV) of any property transferred to the shareholder.

However, this amount is reduced (but not below zero) by the following liabilities.

Distributions to Shareholders This section discusses corporate distributions of money, stock, or other property to a shareholder with respect to the shareholder's ownership of stock.

However, this section does not discuss the special rules that apply to the following distributions. See the applicable sections of the Internal Revenue Code.

Change of tax year. Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128, Application To Adopt, Change, or Retain a Tax Year.

However, under certain conditions, a corporation can change its tax year without getting the consent. For more information, see Form 1128 and Pub. 538.

Form D is a brief notice that includes the names and addresses of the company's promoters, executive officers and directors, and some details about the offering, but contains little other information about the company.

If you are thinking about investing in a Regulation D offering, you should access the EDGAR database to determine whether the company has filed Form D.

Damages for Breach of Employment Contract.

If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer.

We ended that discussion by noting that even if the trustee proves all of the elements of a preference, there are defenses to a trustee's preference action. Those defenses are set forth in Section 547(c) of the Bankruptcy Code.

If you can successfully prove one of the defenses in this section, then the Trustee cannot avoid the payment or transfer that was made.

(3)Election to make a deemed dividend. An S corporation may elect under this paragraph (f)(3) to distribute all or part of its subchapter C earnings and profits through a deemed dividend.

If an S corporation makes the election provided in this paragraph (f)(3), the S corporation will be considered to have made the election provided in paragraph (f)(2) of this section (relating to the election to distribute earnings and profits first).

If a shareholder has S corporation loss and deduction items in excess of stock basis and those losses and deductions are claimed based on debt basis, the debt basis of the shareholder will be reduced by the claimed losses and deductions.

If an S corporation repays reduced basis debt to the shareholder, part or all of the repayment is taxable to the shareholder.

(5)Time and manner of making elections - (i)For earnings and profits.

If an election is made under paragraph (f)(2) of this section to distribute earnings and profits first, see section 1368(e)(3) regarding the consent required by shareholders.

BREAKING DOWN 'Keogh Plan' Keogh plans represent retirement plans for self-employed people and unincorporated businesses, such as sole proprietorship and partnerships.

If an individual is an independent contractor, he cannot set up and use a Keogh plan for retirement.

Registration statements and prospectuses become public shortly after filing with the SEC.

If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. Registration statements are subject to examination for compliance with disclosure requirements.

If you have a farm operation and use your car in your work, you might be able to deduct the personal property tax on the car on Schedule F.

If you have vacant land on which you are paying real estate taxes, you could turn it into a farm rental and deduct the taxes on Form 4835.

Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift.

The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt.

If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.

Business Use of Chapter 11 and Chapter 7 Businesses frequently use both types of these bankruptcies. Choosing between these two chapters comes down to what business owners hope to achieve with their business in the long run.

If the business is not profitable or worth keeping, Chapter 7 bankruptcy is a reasonable choice. If the business is profitable, Chapter 11 may be a good option. It is worth noting, however, that few small businesses survive the costs of Chapter 11 bankruptcy.

The donor is the person who gave the stock to you. You are the donee, the person who received the gift.

If the carryover basis is less than the fair market value at the time of the gift, the answer is easy. Your cost basis is always the carryover basis (except see below for adjustments for gift tax paid.)

It is worth noting that any debt discharges are issued at different times in Chapter 11 and Chapter 7 filings. For Chapter 11 bankruptcy, any debt forgiveness is typically granted after all reorganized debts have been paid in full.

In Chapter 7 bankruptcy, however, there are set periods of time when a creditor can petition to make a debt ineligible for discharge; following this period of time — usually about two to four months into the Chapter 7 filing process — all eligible debts are automatically discharged.

Tax Rate and Interest. If a corporation accumulates earnings that exceed the exemption amounts an accumulated earnings tax of 20% (15% prior to 2013) of the excess earnings may be imposed by the IRS.

In addition, interest applies to the tax from the date the corporate return was due, without extensions.

In the authors' experience, given how the IRS administers the Sec. 6662 penalty, this distinction seems to make little practical difference.

In any event, for substantial understatements attributable to tax shelters, only the Sec. 6664 reasonable cause/ good-faith exception avoids the substantial understatement trigger.

(iv)Irrevocable elections. The elections under this paragraph (f) are irrevocable and are effective only for the taxable year for which they are made.

In applying the preceding sentence to elections under this paragraph (f), an election to terminate the taxable year under section 1377(a)(2) or § 1.1368-1(g)(2) is disregarded.

What is Regulation A? Regulation A allows companies to offer and sell securities to the public, but with more limited disclosure requirements than what you would currently expect from publicly reporting companies.

In comparison to registered offerings, smaller companies in earlier stages of development may be able to use this rule to more cost-effectively raise money.

(Essentially, Section 179 works like this:) When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation.

In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).

First Meeting of Creditors and Bankruptcy Court Barring when creditors dispute a discharge, few must attend a hearing in a bankruptcy court for a personal bankruptcy filing.

Instead, there is a "First Meeting of Creditors," which is a meeting that takes place around 30 to 40 days into the filing process.

Commissions Commissions paid on the purchase of securities aren't deductible, either as business or nonbusiness expenses.

Instead, these fees must be added to the taxpayer's cost of the securities. Commissions paid on the sale are deductible as business expenses only by dealers.

IRC §1366(d)(2) holds that any loss suspended because of lack of stock and debt basis shall be treated as incurred

by the corporation in the succeeding taxable year with respect to that shareholder.

Chapter 11 Eligibility On the other hand, almost anyone can file bankruptcy under Chapter 11.

Individuals, corporations, partnerships, joint ventures, and limited liability companies are all eligible to be Chapter 11 debtors. There are no debt or income requirements or limitations for filing bankruptcy under Chapter 11.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.

Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Line 25: Installment Sales:

Installment sales of inventory items are not allowed for AMT purposes for sales entered into between August 16, 1986 and January 1, 1987. (Almost no one uses this line).

Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year.

Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years.

★ Debt required to be allocated to the production of designated property. Designated property includes real property, personal property that has a class life of 20 years or more, and other tangible property requiring more than 2 years (1 year in the case of property with a cost of more than $1 million) to produce or construct.

Interest allocable to designated property produced by a partnership for its own use or for sale must be capitalized. In addition, a partnership must also capitalize to the basis of the designated property any interest on debt allocable to an asset used to produce designated property.

(2) Where the requested records or information are not in the possession of, or subject to the control of, the practitioner or the practitioner's client, the practitioner must promptly notify the requesting

Internal Revenue Service officer or employee and the practitioner must provide any information that the practitioner has regarding the identity of any person who the practitioner believes may have possession or control of the requested records or information.

It is therefore important to know whether an offering has been qualified.

Investors, however, should understand that the SEC's qualification of an offering statement does not mean that the SEC has assessed the accuracy of the offering statement or the merits of the securities offered.

The effect of having a bankruptcy on a credit report can be very negative. It usually prevents individuals from taking out new loans or getting approved for credit cards.

It also makes buying a car or home almost impossible. While this can make sense early on in a bankruptcy, many years down the road, long after debts have been forgiven or repaid, it can continue to haunt the filer.

Commencement of a bankruptcy case creates an "estate." The estate technically becomes the temporary legal owner of all the debtor's property.

It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.

Are there restrictions for deferred and reverse exchanges?

It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

Selling shareholders. For both tiers under Regulation A, companies can include shares in their offerings held by other shareholders. In this case, your investment may be a purchase of shares from an existing shareholder.

It is worthwhile to note that your investment in these resale shares will not be used to fund the company's future development and plans. The offering circular will disclose whether any shares in the offering are being offered by an existing shareholder.

Required as a condition of your employment. This means that you can't properly perform your duties without the computer. Whether you can properly perform your duties without it depends on all the facts and circumstances.

It isn't necessary that your employer explicitly requires you to use your computer. But neither is it enough that your employer merely states that your use of the item is a condition of your employment.

So you must report $225 on line 7 on the Form 1040 as "ESPP Ordinary Income." You must also report the sale of your stock on Schedule D, Part II as a long-term sale.

It's long term because there is over one year between the date acquired (6/30/10) and the date of sale (1/20/2016).

What if for some reason the compensation element is not included in Box 1?

It's still considered part of your wages, so you must add it to Form 1040, Line 7 when you fill out your tax return for the year you exercise the option.

This is referred to as a "cram down," as it could significantly reduce the amount you end up paying under a PMSI, particularly if the goods have decreased in value and your existing debt to the company is high.

Keep in mind that cram downs are not allowed if your goods were financed within one year prior of filing for bankruptcy.

The acknowledgement must be obtained by the due date (including extensions) of the return, or, if earlier, the date the return was filed.

Keep the acknowledgement with other corporate records. Do not attach the acknowledgement to the return.

Line 15: Estates or Trusts: Line 16: Electing Large Partnerships: Line 17: Disposition of Property Difference: Line 18: Post-1986 Depreciation: Line 19: Passive Activities: Line 20: Loss Limitations: Line 21: Circulation Expenditures:

Line 22: Long-Term Contracts: Line 23: Mining Costs: Line 24: Research and Experimental Expenditures: Line 25: Installment Sales: Line 26: Intangible Drilling Costs: Line 27: Other Adjustments:

Line 22: Long-Term Contracts:

Long-term construction contractors are generally required to use the percentage of completion method of accounting for long-term contract revenue, rather than the completed-contract method. This is a timing difference that will reverse in later years.

For 2016 Mark's K-1 reflected the following: Mark's basis in his stock at the beginning of the year is $0.

Losses suspended in a previous year are treated as being incurred in the next tax year and can only be deducted when basis is increased.

Unreasonable salaries. If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed

by the shareholder-employee, the excessive part of the salary may be treated as a distribution to the shareholder-employee.

Accrual method corporation. A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the due date for filing the corporation's tax return (not including extensions).

Make the choice by reporting the contribution on the corporation's return for the tax year. Attach a declaration stating that the board of directors adopted the resolution during the tax year. The declaration must include the date the resolution was adopted.

Next, stock basis is reduced by the $1,000 of non-deductible expenses. Stock basis before loss and deduction items is $6,000.

Mark has ($25,000) of loss and deduction items: ☐ ($20,000) ordinary loss ☐ $5,000 charitable contribution

You can deduct these medical expenses: ☐ Cost of medical care from any of these types of practitioners: Acupuncturists Chiropractors Dentists Eye doctors

Medical doctors Occupational therapists Osteopathic doctors Physical therapists Podiatrists Psychiatrists Psychoanalysts giving medical care Psychologists Other qualified medical practitioners

What is an HSA? A health savings account (HSA) combines high deductible health insurance with a tax-favored savings account. Money in the savings account can help pay the deductible. Once the deductible is met, the insurance starts paying.

Money left in the savings account earns interest and is yours to keep. ★ Health Insurance can cost less ★ Savings help to pay your deductible ★ Tax-deductible deposits ★ Tax-deferred growth ★ Tax-free for medical care

More Types of Debts Are Dischargeable in Chapter 13 Than in Chapter 11. One of the primary reasons debtors file bankruptcy is to discharge obligations that they owe to creditors.

Most debts can be discharged in bankruptcy, but there are exceptions. There are more exceptions to discharge under Chapter 11 than Chapter 13.

In either type of filing, the person seeking liquidation or reorganization swears an oath to truthfully answer a trustee's questions.

Most of the time, this meeting is very short unless the trustee or chief restructuring officer is confused or suspicious about certain information the debtor has provided.

Because this is a disqualifying disposition, your employer should include the bargain element in Box 1 of your 2016 Form W-2 as compensation. The bargain element is calculated this way: Subtract the actual price paid from the market price at the exercise date

Multiply the result by the number of shares: ($25 - $21.25) x 100 = $375. Even if your employer didn't include the bargain amount in Box 1 of Form W-2, you must report this amount as compensation income on line 7 of your Form 1040.

Schedule M-3 (Form 1120) A corporation with total assets (non-consolidated or consolidated for all corporations included within a tax consolidation group) of $10 million or more on the last day of the tax year must file Schedule M-3 (Form 1120),

Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More, instead of Schedule M-1. A corporation filing Form 1120 that is not required to file Schedule M-3 may voluntarily file Schedule M-3 instead of Schedule M-1.

Negligence The first Sec. 6662 penalty trigger is negligence. The term "negligence" is not defined in the Code or the regulations.

Nevertheless, courts have generally applied the common law tort definition of the term, holding that negligence means failing to do what a reasonable and ordinarily prudent person would do under the same or similar circumstances.

As in the previous example, the compensation element is $2,000, and your employer will include $2,000 in income on your 2016 Form W-2. If they don't, you must add it to Form 1040, Line 7 when you fill out your 2016 tax return.

Next, you have to report the actual sale of the stock on your 2016 Schedule D, Capital Gains and Losses, Part I.

Sales that meet these one- and two-year time limits are called "qualifying dispositions," because they qualify for favorable tax treatment.

No compensation is reported to you on your Form W-2, so you do not have to pay taxes on the transaction as ordinary income at your regular tax rate. Category 5 is also a qualifying disposition.

Property-by-property determination: The determination of whether there is a substantial or gross valuation misstatement on a return is made on a propertyby-property basis.

No disclosure exception: Somewhat logically, taxpayers may not avoid the valuation misstatement triggers by disclosing the valuation misstatement.

Example. You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Right after the exchange, you own 85% of the outstanding stock.

No gain is recognized on the exchange of property. However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation.

If the trust were required by its governing instrument to distribute all its income currently, the trust's taxable income would be $59,700 ($60,000 capital gains less exemption amount of $300).

None of the income would be considered ordinary, and the zero rate would be available for the first $2,300 of the capital gains. Tax would be 15% x $57,400 = $8,610.

The interaction of the Sec. 6662 penalty provisions and the Sec. 6664 defense raises some interesting issues, which will be addressed more fully in Part II.

Nonetheless, it will be helpful for readers, as they consider the application of specific Sec. 6662 triggers below, to be aware of the potential availability of Sec. 6664's reasonable cause/good-faith defense.

A key difference between the two chapters relates to divorce obligations. Support obligations for the care or maintenance of a child or spouse cannot be discharged under Chapter 11 or 13.

Nonsupport obligations, on the other hand, can be discharged -- but only in Chapter 13. Payments due on account of a property settlement, for example, may be considered a nonsupport obligation that can be discharged through a Chapter 13 plan.

d) Jill recognizes no gain or loss.

Note that Jill can "step-up" the basis in land (a capital asset), but she cannot "step-up" her basis in unrealized receivables or inventory.

Thus, about $850 of the depreciation deduction is deductible to the beneficiaries (see Exhibit 6), and $1,150 is deductible at the trust level.

Note that, if the trustee fee were deducted from trust income instead of from the trust principal, 43.7%, or $875, of the depreciation expense would be allocated to the beneficiaries and $1,125 to the trust.

Substantial Understatement The third Sec. 6662 penalty trigger is the existence of a substantial understatement of tax. This is the first mechanical trigger. This penalty applies, logically, only if the taxpayer's return contains an understatement and that understatement is substantial.

Notwithstanding this trigger's seemingly mechanical nature, there are two independent ways a taxpayer can avoid the penalty: (1) substantial authority and (2) reasonable basis and disclosure.

That kind of difference can really add up when you're making many contributions over a period of many years.

Now, in this little example, I've assumed that in both cases you qualified for each type of account and kept your money in both accounts long enough to gain the full tax advantages of both accounts and avoid possible penalties.

(Essentially, Section 179 works like this:)

Now, while it's true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.

Accredited investor. An individual will be considered an accredited investor if he or she: earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year,

OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person's primary residence and any loans secured by the residence (up to the value of the residence)).

Practice tip: As any reader with even a passing familiarity with the Code and regulations can attest, federal tax law can be extraordinarily complex. Indeed, items whose treatment is clear-cut and unambiguous are probably the exception rather than the norm.

Obviously, the proper treatment of routine items and transactions is often easily determined. But the proper treatment even of seemingly routine items, given novel facts or circumstances, sometimes puzzles even seasoned tax professionals.

If the trust instrument of the JSA Trust or state law indicates that taxable income must be distributed before tax-exempt income, the distribution would consist of $15,000 in taxable income, and the entire $4,881 net tax-exempt income would be allocated to the trust. The distribution deduction would be $15,000.

On the other hand, if tax-exempt income is distributed first, the distribution would consist of $4,881 net tax-exempt income and $10,119 taxable income. The trust's income would be $73,169 ($88,169 - $15,000) in the former example or $78,050 ($88,169 - $10,119) in the latter case.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange. Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

When you sell the stock two years or less from the offering date, known as the "grant date," the transaction is a disqualifying disposition.

Or if you sell the shares one year or less from the "exercise date," which is when you purchase the stock, that is also considered a disqualifying disposition. In both cases, the compensation should be reported on your Form W-2.

The regulations support this position: "[A]n honest misunderstanding of fact or law that is reasonable in light of all the facts and circumstances,

including the experience, knowledge and education of the taxpayer" demonstrates reasonable cause and good faith.

Example 1: S1 has three classes of stock. Classes A and B are voting common stock, and Class C is nonvoting common stock. The shares are owned by P1 and P2 as shown in Exhibit 1, below. P1 and P2 are unrelated parties.

P1 transfers property (with unrealized gain) to S1 in exchange for 50 shares of Class A stock and 120 shares of Class B stock in a value-for-value exchange. P2 does not transfer any property. The stock ownership of S1 after the exchange is shown in Exhibit 2, also below.

Paragraph (a) of this section is applicable for returns or claims for refund filed, or advice provided, beginning August 2, 2011.

Paragraphs (b) through (d) of this section are applicable to tax returns, documents, affidavits, and other papers filed on or after September 26, 2007.

(g) Others. Any individual qualifying under paragraph §10.5(e) or §10.7

is eligible to practice before the Internal Revenue Service to the extent provided in those sections.

How Income Is Shared Among Partners Allocate shares of income, gain, loss, deduction, or credit among the partners according to the partnership agreement for sharing income or loss generally.

Partners may agree to allocate specific items in a ratio different from the ratio for sharing income or loss.

You usually can't deduct premiums you pay for certain types of policies. This is true of policies with benefits that aren't tied to the actual cost of the medical care you received. These policies: Pay you a certain amount (Ex: policy that pays you $200 a day while hospitalized) Pay you for lost earnings

Pay a flat amount for the loss of a limb or eyesight Contributions you make to a health savings account (HSA) aren't medical expenses. They're an adjustment to income. So, you can deduct all of your qualifying HSA contributions, even if you don't itemize deductions.

Priority PMSIs provide good protection to the creditor because they "perfect" automatically without having to file or record any documents as with other types of debts.

Perfection involves putting everyone on notice that the creditor has an interest or "lien" on the property you financed, which means the creditor has priority over any subsequent secured creditors that may come forward.

(Section 179 at a Glance for 2017) Bonus Depreciation: 50% for 2017 Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached.

Please Note> Bonus Depreciation is available for new equipment only; used equipment qualifies for Section 179 Deduction, but does not qualify for Bonus Depreciation.

Preparation of Returns In addition to the statutory reasonable attempt standard, the regulations state that negligence includes any failure "to exercise ordinary and reasonable care in the preparation of a tax return."

Presumably, this language is intended to apply to the taxpayer's actual preparation of the return itself, rather than the taxpayer's conduct in determining return positions. Otherwise, it would be redundant with the general reasonable attempt to comply standard discussed above.

★ The company has taken reasonable steps to verify that its investors are accredited investors, which could include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like.

Purchasers of securities offered pursuant to Rule 506 receive "restricted" securities, meaning that the securities cannot be sold for at least a year without registering them.

The purpose of the PHC tax is to prevent corporations from accumulating their earnings instead of distributing those earnings as taxable dividends.

Qualified corporate dividends are taxed to noncorporate shareholders at a maximum rate of 20%.

To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction).

Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property.

How does the disciplinary process work? OPR's authority and case determinations are independent of the enforcement functions performed by the general IRS population.

Referrals to OPR alleging violations of Circular 230 are received from a variety of sources both internal and external. Only rarely does OPR initiate its own projects to identify specific issues for investigation.

The two different tiers mean two different types of investments for you.

Regardless of the tier, however, any offering under Regulation A is subject to both federal and relevant state jurisdiction for any fraudulent and other unlawful conduct.

(c).Subtracting your sales price ($4,490) from your cost basis ($4,500), you get a loss of $10.

Remember, you actually came out well ahead (even after taxes) since you sold stock for $4,490 (after paying the $10 commission) that you purchased for only $2,500.

Line 18. Retirement Plans, etc. Do not deduct payments for partners to retirement or deferred compensation plans including IRAs, qualified plans, and simplified employee pension (SEP) and SIMPLE IRA plans on this line.

These amounts are reported on Schedule K-1, box 13, using code R, and are deducted by the partners on their own returns.

Report rental real estate activity income (loss) on Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, and line 2 of Schedule K and box 2 of Schedule K-1, rather than on page 1 of Form 1065.

Report credits related to rental real estate activities on lines 15c and 15d of Schedule K (box 15, codes E and F, of Schedule K-1) and low-income housing credits on lines 15a and 15b of Schedule K (box 15, codes A-D of Schedule K-1).

Fourth, in this context practitioners should be aware of Sec. 6662A, which generally imposes a similar accuracy-related penalty on understatements attributable to "reportable transactions."

Reportable transactions are generally those taxpayers are required to disclose under the Sec. 6011 regulations finalized in 2003.

Liquidation vs. Debt Repayment A trustee takes over a debtor's assets in a Chapter 7 filing. These assets are liquidated — sold by the trustee in exchange for cash — which is then distributed among creditors.

Restructured debt, as found in Chapter 11 bankruptcy, must be repaid according to the new terms agreed upon during the filing process — usually over a period of three to five years.

(3) Service by other than certified or first class mail. (i) Service of the complaint may be made on the respondent by delivery by a private delivery service designated pursuant to section 7502(f) of the Internal Revenue Code to the last known address (as determined under section 6212 of the Internal

Revenue Code and the regulations there under) of the respondent. Service by this method will be considered complete, provided the complaint is addressed to the respondent at the respondent's last known address as determined under section 6212 of the Internal Revenue Code and the regulations thereunder.

What is a Roth IRA? A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement.

Roth IRA rules dictate that as long as you've owned your account for 5 years* and you're age 59½ or older, you can withdraw your money when you want to and you won't owe any federal taxes.

Business expansion, constructing a new facility, and investing in newer and more productive equipment are reasonable business needs.

S corporations don't have a problem with accumulated earnings because earnings are taxed to S corporation shareholders even if they're not distributed to them.

The exchanges and the Financial Industry Regulatory Authority (FINRA) are identified as self-regulatory organizations (SRO). SROs must create rules that allow for disciplining members for improper conduct and for establishing measures to ensure market integrity and investor protection.

SRO proposed rules are subject to SEC review and published to solicit public comment. While many SRO proposed rules are effective upon filing, some are subject to SEC approval before they can go into effect.

Example: Let's say you didn't file your return by the April 18 deadline and you owe the IRS an additional $1,000.

Scenario 1: You file an extension on or before April 18 and pay your $1,000 bill on April 28 (10 days late). Your penalty would be $5 (the 0.5% late-payment penalty applied to $1,000), plus another dollar or so for the interest.

Scenario 2: You didn't file an extension, and you file your return on April 28 (10 days late) along with your $1,000 payment. Your penalty would be $50 (the 5% late-filing penalty applied to $1,000), plus another dollar or so for the interest.

Scenario 3: You file your return 5 years late, along with your $1,000 payment. Your penalty would be around $482 (the maximum late-filing penalty of 25% applied to $1,000, plus 4.18% interest compounded daily assuming the interest rate doesn't change).

Observations: Initially, this transfer appears to fail as a Sec. 351 transaction because the control requirement is not met. S2 owns only 10% of the S1 outstanding stock and may have to recognize gain on the exchange. However, pursuant to a special aggregate stock ownership rule under Regs.

Sec. 1.1502-34, stock owned by all members of a consolidated group is included for purposes of determining application of Sec. 351(a). Therefore, S2 is deemed to own the S1 stock owned by P . As a result, Sec. 351 applies to prevent gain recognition on the exchange.

A net Sec. 482 transfer price adjustment is generally the net increase in taxable income for the tax year resulting from adjustments under

Sec. 482 in the price for the sale or use of any property or services.

Substantial Valuation Misstatement Effectively, there are two distinct substantial valuation misstatement standards: one for Sec. 482 transactions and one for non-Sec. 482 transactions.

Sec. 482 transactions: For Sec. 482 transactions (generally related-party transactions), the substantial valuation misstatement trigger operates as both an overstatement and an understatement trigger. This trigger applies if:

."2 The direction to IRS examiners is to apply the substantial understatement

Sec. 6662(b)(2)) penalty in all cases in which there is a prima facie case (i.e., a mathematical trigger) for application thereof.

Special provisions apply to certain activities. First, the passive activity limitations must be applied separately for a net loss from passive activities held through a publicly traded partnership.

Second, special rules require that net income from certain activities that would otherwise be treated as passive income must be recharacterized as nonpassive income for purposes of the passive activity limitations.

If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited

See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction.

Debra's expenses for tax return preparation are entered on Schedule A, line 22. Her expenses for investment counseling are entered on line 23. She then totals the amounts on lines 21, 22, and 23 and enters this total of $2,350 on line 24.

She enters $40,000, her adjusted gross income, on line 25. She multiplies this amount by 2% (.02) and enters the result of $800 on line 26. She subtracts the amount on line 26 from the amount on line 24 and enters $1,550, her allowable deduction, on line 27.

Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job.

Similar organizations include: ★ Boards of trade, ★ Business leagues, ★ Civic or public service organizations, ★ Real estate boards, and ★ Trade associations.

Examples of acceptable descriptions for enrolled agents are "enrolled to represent taxpayers before the Internal Revenue Service," "enrolled to practice before the Internal Revenue Service," and "admitted to practice before the Internal Revenue Service."

Similarly, examples of acceptable descriptions for enrolled retirement plan agents are "enrolled to represent taxpayers before the Internal Revenue Service as a retirement plan agent" and "enrolled to practice before the Internal Revenue Service as a retirement plan agent."

That is, if the taxpayer's return position or treatment of an item is generally consistent with the applicable statutory or regulatory regime, the position would seem not to be too good to be true under the circumstances.

Similarly, if the taxpayer reasonably relied on a tax adviser, positions recommended by that adviser should not normally be too good to be true because the taxpayer is not independently expert in tax matters and would not be expected to be in a position to make that determination.

Calculating ordinary income. Using the numbers from the JSA Trust (Exhibit 3), total taxable trust income is $75,378. Of this amount, $60,000 is long-term capital gain. The remainder is partially qualified dividend income and partially rental income.

Since $15,000 of the $33,150 DNI is distributed to the beneficiaries, the proportion of the remainder retained by the trust to DNI determines the portion of qualified dividend income eligible for the preferential tax rates as shown in Exhibit 4.

☐ The shareholder disposes of their stock. As with any asset, including C corporation stock, when the asset is sold or disposed of, basis needs to be established in order to reflect the proper gain or loss on the disposition.

Since shareholder stock basis in an S Corporation changes every year, it must be computed every year.

(2) A practitioner may not make, directly or indirectly, an uninvited written or oral solicitationof employment in matters related to the Internal Revenue Service if the solicitation violates Federal or

State law or other applicable rule, e.g., attorneys are precluded from making a solicitation that is prohibited by conduct rules applicable to all attorneys in their State(s) of licensure.

Your employer includes the compensation element amount ($2,000) in Box 1 (wages) of your 2016 Form W-2. Why is it reported on your W-2? Because it's considered "compensation" to you, just like your salary.

So even though you haven't yet seen any actual profit from selling the shares, you're still taxed on the compensation element just as if you had received a $2000 cash bonus.

Why? Because you recovered $100 of your cost as the depreciation you had previously taken as a deduction. On the other hand, if you had sold it for $500, you would have a $300 deductible loss.

So, as you can see, you must take into account how much of the cost of the asset you have already written off to determine any subsequent gain or loss.

If you deduct sales tax, you can either: ☐ Save sales receipts and deduct actual sales taxes paid. ☐ Use the IRS sales tax tables to figure your deduction. These tables calculate the estimated sales tax you paid based on your income. They don't include large purchases.

So, to the amount in the table, you can add the sales tax you paid on any of these: ★ Cars ★ Motorcycles ★ Boats ★ Airplanes ★ Motor homes

Partner's Dealings With Partnership If a partner engages in a transaction with his or her partnership, other than in his or her capacity as a partner, the partner is treated as not being a member of the partnership for that transaction.

Special rules apply to sales or exchanges of property between partnerships and certain persons, as explained in Pub. 541, Partnerships.

How can I plan ahead for the AMT? There are some things you can do to plan ahead for the Alternative Minimum Tax: Use tax-planning software such as TurboTax during the year to minimize your overall tax liability.

Study Form 6251 each time you prepare your tax return to see how close you are to paying the AMT. Evaluate how close your Tentative Minimum Tax (line 34) was to your regular tax (line 35). For information on Form 6251, see the Instructions.

Assume that Taxpayer owns land and buildings that he leases to various businesses.

Taxpayer has depreciated the buildings over several years, and the value of the properties has appreciated.

Fortunately, a taxpayer-friendly change in 2008 allows individuals with unused AMT credits that are over three years old (so-called long-term unused AMT credits) to cash them in. For the 2016 tax year, long-term unused AMT credits are those that were earned in pre-2007 years.

Taxpayers with long-term unused credits from pre-2007 years can generally collect at least half their credit amounts by filing their 2016 returns, and the remainder can be collected by filing their 2016 returns.To figure the amount of unused AMT credits that can be collected under this rule, fill out Form 8801 (Credit for Prior Year Minimum Tax).

What are the 2016 AMT Exemption Amounts?

Thanks to changes made by Congress, each year the AMT exemption amount automatically adjusts with inflation. The AMT exemption is like a standard deduction for calculating the alternative minimum tax.

How much of the stock sale price is compensation and how much is capital gain?

That depends on whether your stock sale is a qualifying disposition or a disqualifying disposition.

5. You want to take advantage of the full IRA contribution limit for the year, regardless of how it affects your taxes right now: Maybe you fall somewhere in the phase-out range of deductibility for a traditional IRA.

That doesn't mean you can't max out your contribution. (The full allowable limit for 2016 is $5,500 if you're below the age of 50 and $6,500 if you're 50 or older.) It just means that only part of your contribution will be deductible.

Below-market loans Holding money in hand Imputed interest comes into play when someone makes a "below-market" loan.

That's a loan with an interest rate below a certain minimum level set by the government, known as the Applicable Federal Rate, or AFR.

(Essentially, Section 179 works like this:) In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting over the next few years.

That's the whole purpose behind Section 179 - to motivate the American economy (and your business) to move in a positive direction. For most small businesses, the entire cost can be written-off on the 2017 tax return (up to $500,000).

If a hearing is conducted, and after post-hearing briefs are submitted, the ALJ issues an Initial Decision and Order as to the alleged misconduct and the appropriateness of OPR's proposed sanction.

The ALJ may accept OPR's recommendations as to the fact of violation and as to the proposed sanction; may accept the fact of violation but increase or reduce the recommended sanction; or, may reject OPR's recommendations both as to facts and sanctions, and thus dismiss the case.

What is the Alternative Minimum Tax?

The AMT is a parallel tax system that operates in the shadow of the regular tax, expanding the amount of income that is taxed by adding items that are tax-free and disallowing many deductions under the regular tax system.

The Act also identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and persons associated with them.

The Act also empowers the SEC to require periodic reporting of information by companies with publicly traded securities.

Applying the Two Tests for PHC Status The determination of PHC status is based on two objective tests. The intent or motive of the corporation or shareholders is irrelevant.

The penalty tax applies when the objective tests are met even if no accompanying tax-related motives exist. If a corporation meets both tests, it is a PHC (unless it is an excluded corporation as previously described).

Subpart A — Rules Governing Authority to Practice § 10.1 Offices. (a) Establishment of office(s). The Commissioner shall establish the Office of Professional Responsibility and any other office(s) within the Internal Revenue Service necessary to administer and enforce this part.

The Commissioner shall appoint the Director of the Office of Professional Responsibility and any other Internal Revenue official(s) to manage and direct any office(s) established to administer or enforce this part. Offices established under this part include, but are not limited to:

How is OPR organized? OPR completed a significant organizational and operational reorganization effective February 13, 2012. OPR now includes three major segments: Office of the Director, Legal Analysis Branch (LAB), and Operations and Management Branch (O&M).

The Director, who reports jointly to the Commissioner and the Deputy Commissioner, Services and Enforcement, has primary supervisory responsibility for OPR, including oversight and control of all policy decisions and implementation.

Extension of time to file. File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation's income tax return.

The IRS will grant the extension if the corporation completes the form properly, files it, and pays any tax due by the original due date for the return.

Any gain up to the amount of the previously taken depreciation will be taxed at ordinary income rates. The amount of gain that exceeds the depreciation previously taken is then treated as Section 1231 gain (subject to the Section 1231 rules mentioned above).

The Section 1245 recapture rules do not apply if the asset is sold at a loss. If a section 1245 asset is sold at a loss, the loss is treated as a Section 1231 loss and is deducted as an ordinary loss which can reduce ordinary income.

here are several points to address. 1) There will be no capital gain as she didn't sell it for a gain. She will have to recapture the depreciation she took. 2) She will not have to actually pay any tax although she will have to fill out a Form 709. There is a yearly exemption amount of $14,000.

The U.S. has a unified gift and estate tax system. Gifts you make during your lifetime are treated similarly to gifts made from your estate after your death. Everyone has a lifetime exemption from gift and estate tax -- $5.43 million for 2015.

The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $205.

The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause.

However, for partners who acquired their partnership interests before 1987, the at-risk rules do not apply to losses from an activity of holding real property the partnership placed in service before 1987.

The activity of holding mineral property doesn't qualify for this exception. Identify on an attached statement to Schedule K-1 the amount of any losses that aren't subject to the at-risk rules.

b) Next, the appreciation in parcel A is added to the basis of the parcel. This increases its basis from $10,000 to $20,000. The basis of parcel B is not adjusted above $20,000 because it is not an appreciated asset. c) Bases in the properties now total $40,000, but Jill must allocate $50,000 to them.

The additional $10,000 basis is allocated according to the relative values of the property. The properties have equal values ($20,000). Therefore, the $10,000 is allocated equally ($5,000 to each parcel). Jill's basis in each parcel, then, is $25,000.

The amount of the deemed dividend may not exceed the subchapter C earnings and profits of the corporation on the last day of the taxable year, reduced by any actual distributions of subchapter C earnings and profits made during the taxable year.

The amount of the deemed dividend is considered, for all purposes of the Internal Revenue Code, as if it were distributed in money to the shareholders in proportion to their stock ownership, received by the shareholders, and immediately contributed by the shareholders to the corporation, all on the last day of the corporation's taxable year.

At-Risk Limits

The at-risk rules limit your losses from most activities to your amount at risk in the activity. The at-risk limits apply to certain closely held corporations (other than S corporations).

An advantage of Chapter 11, if you can meet all of the statutory requirements, is that there is no set limit on a plan's duration. Chapter 11 plans typically provide for debtors to make payments to creditors over a period of three to five years.

The bankruptcy court can confirm a Chapter 11 plan with a longer term, however, if you need more time to make required payments. Small business debtors with real property mortgages or equipment loans, for example, often need extended payment terms.

Disqualifying Disposition: You sold the stock within two years after the offering date or one year or less from the exercise (purchase date). In this case, your employer will report the bargain element as compensation on your Form W-2, so you will have to pay taxes on that amount as ordinary income.

The bargain element is the difference between the exercise price and the market price on the exercise date. Any additional profit is considered capital gain (short-term or long-term depending on how long you held the shares) and should be reported on Schedule D.

Enter on Form 1120 the totals for each item of income, gain, loss, expense, or deduction, net of eliminating entries for intercompany transactions between corporations within the consolidated group. Attach consolidated balance sheets and a reconciliation of consolidated retained earnings.

The corporation does not have to provide the information requested in (3), (4), and (5), above, if its total receipts (line 1a plus lines 4 through 10 on page 1 of the return) and its total assets at the end of the tax year (Schedule L, line 15(d)) are less than $250,000. See Schedule K, question 13.

Tangible personal property produced by a partnership includes a film, sound recording, videotape, book, or similar property.

The costs required to be capitalized under section 263A aren't deductible until the property to which the costs relate is sold, used, or otherwise disposed of by the partnership.

Extraordinary dividend. An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock.

The percentages are: (1). 5% for stock preferred as to dividends, or (2). 10% for other stock.

The address on the application will be the address under which a successful applicant

is enrolled or registered and is the address to which all correspondence concerning enrollment or registration will be sent.

Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. This section discusses the general rules that apply.

The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return.

Contributions of used vehicles. A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes.

The deduction is limited, and other special rules apply. For more information, see Pub. 526.

Which depreciation method to use.

The depreciation method you use depends on whether you meet the more-than-50%-use test.

But if the AFR for that type of loan is 0.64%, then you should have collected $86 ($20,000 x .0064 = $128).

The difference — $128 - $20 = $108 — is imputed interest, and you must report it as taxable income and pay taxes on it.

In certain circumstances, a disclosure made generally prior to IRS contact but after the filing of the original return (a "qualified amended return") can also satisfy the disclosure requirement.

The disclosure exception does not apply to negligence, however, and also does not apply in the case of a position that does not have a reasonable basis or where the taxpayer fails to keep adequate books and records or to properly substantiate items.

The Form 10-Q includes unaudited financial statements and provides a continuing view of the company's financial position during the year.

The report must be filed for each of the first three fiscal quarters of the company's fiscal year.

A taxpayer has the burden of establishing the reasonable basis for any return position.

The existence of a reasonable basis for any position is determined by reference to the authorities identified in the regulations, including, among others, the Code, legislative history, treasury regulations, court decisions, and IRS rulings and announcements.

"Nonrecourse liabilities" are those liabilities of the partnership for which no partner (or related person) bears the economic risk of loss.

The extent to which a partner bears the economic risk of loss is determined under the rules of Regulations section 1.752-2. Do not include partnership-level qualified nonrecourse financing (defined below) on the line for nonrecourse liabilities.

There are three shareholder loss limitations: (1). Stock and Debt Basis Limitations (2). At Risk Limitations (3). Passive Activity Loss Limitations Each limitation must be met, and in the order presented, before a shareholder is allowed to claim a flow-through loss.

The fact that a shareholder receives a K-1 reflecting a loss does not mean that the shareholder is automatically entitled to claim the loss.

Gift expenses. You can generally deduct up to $25 of business gifts you give to any one individual during the year.

The following items don't count toward the $25 limit. ★ Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. ★ Signs, racks, and promotional materials to be displayed on the business premises of the recipient.

For property contributed to the partnership, the contributing partner must recognize gain or loss on a distribution of the property to another partner within 7 years of being contributed.

The gain or loss is equal to the amount that the contributing partner should have recognized if the property had been sold for its FMV when distributed, because of the difference between the property's basis and its FMV at the time of contribution.

Tax Break for Contributions Contributions to Roth IRAs are not tax deductible. They are made with your after-tax earnings.

The incentive for contributing to a Roth IRA is to create tax-free income for the future - not to obtain a current tax deduction.

Before discussing the specific Sec. 6662 triggers, several general points should be made. First, it is helpful to divide the triggers into conduct-based and mechanical triggers. The conduct-based triggers (negligence and disregard) apply as a function of the taxpayer's conduct.

The mechanical triggers are, at least as an initial matter, mathematical in nature and are imposed either because an under-or overstatement exceeds a certain threshold or because the taxpayer has significantly over-or undervalued an item on the taxpayer's return.

Late filing of return. A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.

The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $205. The penalty will not be imposed if the corporation can show that the failure to file on time was due to reasonable cause.

Following a preliminary investigation, OPR renders an independent determination as to the likelihood that a violation of Circular 230 has occurred. If a violation is identified, OPR communicates with the practitioner. This is done using a "Pre-Allegation Notice."

The notice consists of correspondence providing the practitioner with information regarding the conduct alleged, and the fact that OPR has initiated a disciplinary investigation.

Unrealized Receivables and Inventory Items Generally, if a partner sells or exchanges a partnership interest where unrealized receivables or inventory items are involved, the transferor partner must notify the partnership, in writing, within 30 days of the exchange.

The partnership must then file Form 8308, Report of a Sale or Exchange of Certain Partnership Interests.

10.28 Return of client's records. (a) In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations.

The practitioner may retain copies of the records returned to a client. The existence of a dispute over fees generally does not relieve the practitioner of his or her responsibility under this section.

§ 10.28 Return of client's records. (a) In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations.

The practitioner may retain copies of the records returned to a client. The existence of a dispute over fees generally does not relieve the practitioner of his or her responsibility under this section.

Nevertheless, if applicable state law allows or permits the retention of a client's records by a practitioner in the case of a dispute over fees for services rendered, the practitioner need only return those records that must be attached to the taxpayer's return.

The practitioner, however, must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under state law that are necessary for the client to comply with his or her Federal tax obligations.

In the process of your investment research, you may have heard of something called the preemptive right of common stockholders on your favorite investment news television program or written in an annual report or 10-K. Just what is it and how does it affect your ownership position?

The preemptive right is a right belonging to existing shareholders of a corporation to avoid involuntary dilution of their ownership stake by giving them the chance to buy a proportional interest of any future issuance of common stock.

If settlement is not reached, GLS files the complaint to commence a proceeding before an Administrative Law Judge (ALJ). The ALJ proceeding is a civil hearing during which the government and respondent present their evidence.

The proceeding is conducted according to the provisions of the Administrative Procedures Act (5 USC § 500 et seq.). The case may be settled by concurrence of both parties at any time prior to the hearing.

(a) Officer or employee of the Internal Revenue Service. If an officer or employee of the Internal Revenue Service has reason to believe a practitioner has violated any provision of this part, the officer or employee will promptly make a written report of the suspected violation.

The report will explain the facts and reasons upon which the officer's or employee's belief rests and must be submitted to the office(s) of the Internal Revenue Service responsible for administering or enforcing this part.

(b) Contents. The answer must be written and contain a statement of facts that constitute the respondent's grounds of defense. General denials are not permitted.

The respondent must specifically admit or deny each allegation set forth in the complaint, except that the respondent may state that the respondent is without sufficient information to admit or deny a specific allegation.

Any remaining gain in excess of both the Section 1250 depreciation recapture and unrecaptured Section 1250 gains will be treated as Section 1231 gain (long term capital gain), which will be taxed at a maximum rate of 15%, through December 31, 2012.

The sale of Section 1250 property at a loss produces a Section 1231 loss and is deducted as ordinary loss which can reduce ordinary income. The Section 1250 recapture provisions only apply to gains, not losses.

You must also show the sale of the stock on your 2016 Schedule D, Part I for short-term sales because there was less than one year lapsed between the date you acquired the stock (June 30, 2015) and the date you sold it (January 20, 2016).

The sales price you report on Schedule D is $4,990 and the cost basis is $2,500. Your short-term capital gain is the $2,490 difference ($4,990 - $2,500).

c. Both Tax Compliance and Conduct Cases If the OPR correspondence refers to both tax compliance and conduct, as referenced above, then you must submit both Forms 2848 and a letter of representation.

The same rules apply for each Form 2848, where you must submit one for each entity that the correspondence discusses. The same rules also apply for the requirements in a letter of representation, listed above.

Why would I have to pay the AMT?

The simplest way to see why you are paying the AMT, or how close you came to paying it, is to look at your Form 6251 from last year.

(2) When isolation of a former Government employee is required under paragraph (c)(1) of this section, a statement affirming the fact of such isolation must be executed under oath by the former Government employee and by another member of the firm acting on behalf of the firm.

The statement must clearly identify the firm, the former Government employee, and the particular matter(s) requiring isolation. The statement must be retained by the firm and, upon request, provided to the office(s) of the Internal Revenue Service administering or enforcing this part.

The partner as well as the partnership must meet the qualified nonrecourse rules.

Therefore, the partnership must enter on an attached statement any other information the partner needs to determine if the qualified nonrecourse rules are also met at the partner level.

Example. You transfer property to a corporation for stock. Immediately after the transfer, you control the corporation. You also receive $10,000 in the exchange. Your adjusted basis in the transferred property is $20,000.

The stock you receive has a fair market value (FMV) of $16,000. The corporation also assumes a $5,000 mortgage on the property for which you are personally liable.

Thus, ordinary income is $8,808, as shown in Exhibit 5.Because $8,808 exceeds $2,300, the zero tax rate is not available. The tax on the capital gains and dividends is $9,986 (15% x ($60,000 + $6,570)).

The tax on ordinary income is $2,106 ([33% x ($8,808 - $8,200)] + $1,905.50) for a total tax of $12,092 (see tax tables at bottom of page).

(b) For purposes of this section — Records of the client include all documents or written or electronic materials provided to the practitioner, or obtained by the practitioner in the course of the practitioner's representation of the client, that preexisted the retention of the practitioner by the client.

The term also includes materials that were prepared by the client or a third party (not including an employee or agent of the practitioner) at any time and provided to the practitioner with respect to the subject matter of the representation.

Personal Service Corporation If the corporation is a personal service corporation, check Item A, box 3. A personal service corporation is a corporation whose principal activity for the testing period is the performance of personal services.

The testing period for a tax year is generally the prior tax year unless the corporation has just been formed. Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, and the performing arts.

When determining what character of gain you will have when you sell a business asset it is first important to determine what kind of asset you are selling and also what type of entity the asset is being held in.

The three categories of assets that are most commonly sold are (1) Section 1231 property, (2) Section 1245 property, and (3) Section 1250 property.

Profit-sharing plan (PSP).

The title of the PSP is a little bit misleading. The business doesn't actually have to show a book profit. The term is used because the contribution is discretionary from year to year: you can choose to contribute up to 25% of compensation or $51,000 for 2013 and $52,000 for 2014.

1) AGI Threshold Increase

The total of your qualified medical and dental expenses must exceed 10% of your AGI to claim a deduction. There's one exception which we'll discuss in the next section.

This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business.

The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so.

Shareholder Loss Limitations An S corporation is a corporation with an "S" election in effect. The impact of the election is that the S corporation's items of income, loss, deductions and credits flow to the shareholder and are taxed on the shareholder's personal return.

The two main reasons for electing S corporation status are: (1). Avoid double taxation on distributions. (2). Allow corporate losses to flow through to its owners.

Practice tip: Most closely held corporations will find it easier to fail the income test than the stock ownership test. (Both tests must be met for a corporation to be classified as a PHC.)

Therefore, when determining if a corporation is a PHC, it generally saves time to perform the income test first. Only if the corporation meets the income test will the stock ownership test need to be performed.

Because you sold the stock right after you bought it, the sale counts as short-term (that is, you owned the stock for a year or less—less than a day in this case). In this example, the date acquired is 6/30/2016 and the date sold is also 6/30/2016.

Then you have to determine if you have a gain or loss. In this example, the cost basis of your shares is $4,500, and the sales price is $4,490. The $10 (from the commission),is your short-term capital loss. How did we determine these amounts?

For a small business in financial distress, bankruptcy may be the only viable option.

There are two restructuring options under bankruptcy law for debtors who want to try to stay in business: Chapter 11 and Chapter 13. For a "straight" or "liquidation" bankruptcy, see Chapter 7 Bankruptcy for Small Business Owners.

Other Ways to Discharge Debt Often creditors sell their unsecured debts to collection agencies, who then adopt aggressive tactics to collect on the debt, or as much of it as they can.

There are ways to use the Fair Credit Reporting Act to get these unsecured debts voided, especially because collection agencies often lack the necessary documentation for legally enforcing debt obligations. This forum post has some good information on how to do that.

Calculations Schedule M-1 presents the reconciling calculation, and it allows the IRS to identify credits a corporation is claiming such as exempt income and deductible expenses. The schedule begins with net income or loss as per your books.

Thereafter, each line describes the book and tax differences until it goes to line 10 to arrive at the taxable income. The schedule adds line 7, the income reported on the books and line 8, the deduction not charged against the books for the tax year and then subtracts that amount from the total of lines 1 through 5.

Example. During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. In earning this income, you had total expenses of $500 during the year. You can't identify the amount of each expense item that is for each income item.

Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. You can deduct, subject to the 2% limit, expenses of $400 (80% of $500).

Corporate Reporting Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports.

These reports are available to the public through the SEC's EDGAR database.

Even if a company makes a private sale where there are no specific disclosure delivery requirements, a company should take care to provide sufficient information to investors to avoid violating the antifraud provisions of the securities laws.

This means that any information a company provides to investors must be free from false or misleading statements. Similarly, a company should not exclude any information if the omission makes what is provided to investors false or misleading.

The corporation carries the $6,000 short-term loss back 3 years. In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. It subtracts the $6,000 short-term loss first from the net short-term gain.

This results in a net capital gain for year 1 of $7,000. This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. S corporation status. A corporation may not carry a capital loss from, or to, a year for which it is an S corporation.

There's no limitation on the child's income under the qualifying child test. However, the child can't provide more than half of his or her own support.

To be a qualifying child, the child must not file a joint return unless he or she is only filing to claim a refund of withheld taxes. Also, there would be no tax liability for either the child or their spouse if filing separate returns.

You might be able to get back some of the money you spent on childcare expenses by claiming this nonrefundable credit. You can also qualify if you cared for disabled dependents or spouses. Requirements

To claim the child and dependent care credit, all of these must be true: ☐ You and your spouse usually file as married filing jointly. (See Filing exceptions below.) ☐ You provide the care so you (and your spouse, if married) can work or look for work.

★ Debt proceeds allocated to distributions made to partners during the tax year. Instead, report such interest on line 13d of Schedule K and in box 13 of Schedule K-1 using code W.

To determine the amount to allocate to distributions to partners, see Notice 89-35, 1989-1 C.B. 675.

Effect of net operating loss. If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply.

To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit.

Change in accounting method. Generally, the corporation must get IRS consent to change either an overall method of accounting or the accounting treatment of any material item.

To do so, the corporation generally must file Form 3115, Application for Change in Accounting Method.

If the FMV is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. If you received a gift after 1976, increase your basis by the part of the gift tax paid on it that is due to the net increase in value of the gift.

To figure out the net increase in value or for other information on gifts received before 1977, see Publication 551, Basis of Assets. Also, for figuring gain or loss, you must increase or decrease your basis by any required adjustments to basis while you held the property.

Suggestion: If you are subject to the AMT, there is no advantage to using your home equity line of credit to buy a car, because the interest will not be deductible.

You may be able to get a lower interest rate from a regular car loan. If the car is used in your business, you may be able to write off some of your auto loan interest as a business expense on Schedule C.

A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: ☐ A loan in exchange for a note that requires payment of interest at the applicable federal rate, and ☐ An additional payment in an amount equal to the forgone interest.

Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction.

Since the corporation's current year earnings and profits ($10,000) were less than the distributions it made during the year ($16,000), part of each distribution is treated as a distribution of accumulated earnings and profits.

Treat the distributions as follows. (1). Divide the current year earnings and profits ($10,000) by the total amount of distributions made during the year ($16,000). The result is .625.

This meeting is not overseen by a bankruptcy judge, but by a bankruptcy trustee, a person who is in charge of managing an individual's bankruptcy.

Trustees are usually appointed by the U.S. Department of Justice. In some Chapter 11 filings, a chief restructuring officer is used in place of a trustee.

Section 726 of the Bankruptcy Code governs the distribution of the property of the estate.

Under § 726, there are six classes of claims; and each class must be paid in full before the next lower class is paid anything. The debtor is only paid if all other classes of claims have been paid in full.

Beneficiary allocations. The beneficiaries of the JSA Trust receive $5,000 and $10,000, respectively.

Unless specified differently in the trust instrument or by state law, the two amounts are composed as shown in Exhibit 6.

(2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed. 11 U.S.C. § 707(b)(1).

S Corporation Shareholders are Required to Compute Both Stock and Debt Basis The amount of a shareholder's stock and debt basis in the S corporation is very important.

Unlike a C corporation, each year a shareholder's stock and/or debt basis of an S corporation increases or decreases based upon the S corporation's operations. The S corporation will issue a shareholder a Schedule K-1.

Chapter 13 is also subject to debt limitations, which change periodically. Currently, eligibility for Chapter 13 is limited to individuals who owe no more than $394,725 in unsecured debt and $1,184,200 in secured debt (as of April 2016).

Unsecured debts are obligations that are not backed by collateral, such as medical bills and credit card claims. Examples of secured debts are home mortgages and car loans. Individuals cannot file for relief under Chapter 13 if they owe more than the specified debt limits.

For there to be "acquisition indebtedness," there must be a debt. In general, debt is an obligation to pay a specific sum in the future.

Usually, periodic payments are required so long as the debt exists; otherwise, debt is found only where there is a lien against particular property. However, loans against the cash value of an insurance policy create a debt even though there is no subsequent periodic payments or liens.

Eligibility for Chapter 11 or Chapter 13 Bankruptcy.

Virtually anyone can file for Chapter 11 bankruptcy, whereas many small businesses are ineligible to file for Chapter 13.

Business Bad Debt Example.

You make a bona fide loan to the corporation you work for. It fails to pay you back. You had to make the loan in order to keep your job. You have a business bad debt as an employee.

How can I escape the AMT? One of the best things that can be said about the AMT is that Congress was successful in making it difficult to get around this tax. To avoid the AMT, you need to understand how the AMT differs from the regular tax system.

We'll walk through Form 6251, line by line, looking at how the AMT handles different deductions and expenses. Wherever we see a tax-planning opportunity, we will suggest how to lessen the impact of the AMT.

"Insider trading" is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies.

When corporate insiders trade in their own securities, they must report their trades to the SEC. For more information about this type of insider trading and the reports insiders must file, please read "Forms 3, 4, 5" in our Fast Answers databank.

Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. This section will explain how to avoid this penalty.

When to pay estimated tax. Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.

But if your AGI is $50,000 or higher, you can't deduct these expenses because: $50,000 × 0.02 = $1,000 and $1,000 - $1,000 = $0 So the higher your AGI is, the higher your expenses need to be in order for you to be able to deduct a portion of them.

When you enter expenses subject to the 2% rule, we'll automatically check to see if you qualify to take the deduction. If your expenses qualify, the deduction will show up on line 27 of Schedule A.

Your basis in this stock is now $300 ($3 x 100) for regular tax purposes, but $3300 ($33 x 100) for AMT purposes.

When you later sell the stock, you will have an entry on Line 18, Disposition of Property Difference, to account for the difference in your tax basis for regular and AMT purposes.

A bankruptcy may be the only way to get out from under your debt, but it can have severe consequences on your credit score.

When you think of bankruptcy, you most likely think of voluntary bankruptcy, which is initiated by an individual or business. But a bankruptcy may also be initiated by a creditor. This is known as an involuntary bankruptcy.

(d) Service of evidence in support of complaint. Within 10 days of serving the complaint, copies of the evidence in support of the complaint must be served on the respondent in any manner described in paragraphs (a)(2) and (3) of this section. (e) Filing of papers.

Whenever the filing of a paper is required or permitted in connection with a proceeding under this part, the original paper, plus one additional copy, must be filed with the Administrative Law Judge at the address specified in the complaint or at an address otherwise specified by the Administrative Law Judge.

Purpose of Registration A primary means of accomplishing these goals is the disclosure of important financial information through the registration of securities. This information enables investors, not the government, to make informed judgments about whether to purchase a company's securities.

While the SEC requires that the information provided be accurate, it does not guarantee it. Investors who purchase securities and suffer losses have important recovery rights if they can prove that there was incomplete or inaccurate disclosure of important information.

A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds.

Willfully means voluntarily, consciously, and intentionally. A responsible person acts willfully if the person knows the required actions are not taking place or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes.

There is a catch with Incentive Stock Options, however: you do have to report that bargain element as taxable compensation for Alternative Minimum Tax (AMT) purposes in the year you exercise the options (unless you sell the stock in the same year). We'll explain more about the AMT later.

With Nonqualified Stock Options, you must report the price break as taxable compensation in the year you exercise your options, and it's taxed at your regular income tax rate, which in 2016 can range from 10 percent to 35 percent.

And because their exemption amounts, tax brackets and related thresholds haven't been indexed for inflation or modified for tax relief to the extent those for individuals have, they can be subject to higher tax rates at much lower levels of income.

With the new Medicare tax on investment income on the highest tax brackets, estates and trusts pay still more taxes on incomes over $11,200, as opposed to $200,000 or $250,000 for individuals.

A defined benefit plan is a bit more complicated. It's easiest to think of it like a self-funded pension plan.

You can contributed up to $205,000 for 2013 ($210,000 for 2014) - or up to 100% of your compensation - which makes it an attractive vehicle for those in higher income brackets. The actual funding formula is set up based on a calculation from IRS - and it can get pretty complicated.

Business Liability Insurance.

You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job.

Licenses and Regulatory Fees

You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession.

Example 1. You and Bill Jones buy property for $100,000. You both organize a corporation when the property has a fair market value of $300,000.

You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. No gain is recognized by you, Bill, or the corporation.

In this and other ways, the Patient Protection and Affordable Care and the Health Care and Education Reconciliation acts of 2010 (PL 111-148 and PL 111-152, respectively)

affect trusts' and estates' income taxes and have introduced discrepancies that tax practitioners can review with their clients who administer trusts and estates. This article reviews some strategies for more tax-efficient allocation of income and principal by trusts and estates.

(b) Effective/applicability date. This section is applicable on August 2, 2011. § 10.3 Who may practice. (a) Attorneys. Any attorney who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice

before the Internal Revenue Service by filing with the Internal Revenue Service a written declaration that the attorney is currently qualified as an attorney and is authorized to represent the party or parties.

☐ The IRS can impose the accuracy-related penalty for careless, reckless, or intentional disregard of the rules or regulations,

but a taxpayer may be able to avoid the penalty for taking a position on a return that is contrary to a rule or regulation if the taxpayer properly discloses the position.

Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or

collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.

How to File With the advent of the electronic filing processes, individuals are able to file for bankruptcy without the help of a bankruptcy attorney. Form B200 contains checklists for each type of bankruptcy. However, Chapter 11 and Chapter 7 bankruptcies are very complex

for individuals who are unfamiliar with the U.S. Bankruptcy Code, and failing to submit the right information or paperwork may result in a court's rejection of a filing. Worse, inaccurate information in a bankruptcy filing may be considered criminally fraudulent.

(4) accounts or notes receivable acquired in the ordinary course of trade or business

for services rendered or from the sale of property described in paragraph (1);

The suitability check will be limited to an inquiry regarding whether an applicant has engaged in any conduct that would justify suspension or disbarment of any practitioner under the provisions of this part on the date the application is submitted,

including whether the applicant has engaged in disreputable conduct as defined in §10.51. The application will be denied only if the results of the compliance or suitability check are sufficient to establish that the practitioner engaged in conduct subject to sanctions under §§10.51 and 10.52.

Example. A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. The short-term gain offsets some of the long-term loss,

leaving a net capital loss of $6,000. The corporation treats this $6,000 as a short-term loss when carried back or forward.

☐ Class: 15-year property. ☐ Depreciation Period: 15 years. ☐ Description: Certain land improvements (such as shrubbery, fences, roads, sidewalks and bridges),

retail motor fuels outlets, municipal wastewater treatment plants, clearing and grading land improvements for gas utility property, electric transmission property, natural gas distribution lines

Favorite and frequently encountered deductions for taxpayers are non-cash contributions to charity. Although there are some special rules,

taxpayers can generally deduct the lesser of cost or fair market value (FMV) for personal items contributed to a charitable organization. For business assets, adjusted basis is substituted for cost.

★ The company sells exclusively according to state law exemptions

that permit general solicitation and advertising, so long as the company sells only to "accredited investors."

Any person submitting a power of attorney in connection with limited representation or special authorization

to represent before the IRS with respect to a specific matter before the Agency.

Special rules on the allocation of income, gain, loss, and deductions generally apply if a partner contributes property to the partnership and the FMV of that property at the time of contribution differs from the contributing partner's adjusted tax basis. Under these rules, the partnership must

use a reasonable method of making allocations of income, gain, loss, and deductions from the property so that the contributing partner receives the tax burdens and benefits of any built-in gain or loss (that is, precontribution appreciation or diminution of value of the contributed property).

Entertainment facilities. The partnership cannot deduct an expense paid or incurred for a facility (such as a yacht or hunting lodge)

used for an activity usually considered entertainment, amusement, or recreation.

The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however,

you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

Employer-provided benefits Some employers provide childcare benefits like: ★ On-site care for their employees' children ★ Direct payment for third-party care ★ Accounts earmarked for childcare expenses.

★ Employees can put money from their salaries into these accounts. If the value of the benefits is more than $5,000, your employer will report everything over $5,000 as taxable income. If the value is less than $5,000, it's not taxable income.

★ The sales price is $3,000. This is the price at the date of sale ($30) times the number of shares sold (100). This amount should be reported as the gross amount on the 2016 Form 1099-B that you'll receive from the broker that handled the sale.

★ The cost basis is $3,000. This is the actual price paid per share times the number of shares ($20 x 100 = $2,000) plus the compensation amount reported on your 2016 Form 1040 ($1,000). ★ The resulting gain is zero.

Rental of property is incidental to an activity of holding property for investment if both of the following apply. ★ The main purpose for holding the property is to realize a gain from the appreciation of the property.

★ The gross rental income from such property for the tax year is less than 2% of the smaller of the property's unadjusted basis or its fair market value.

Estimated tax penalty. A corporation that does not make estimated tax payments when due may be subject to an underpayment penalty for the period of underpayment. Generally, a corporation is subject to the penalty if its tax liability is $500 or more and it did not timely pay at least the smaller of:

☐ Its tax liability for the current year, or ☐ Its prior year's tax. Use Form 2220, Underpayment of Estimated Tax by Corporations, to see if the corporation owes a penalty and to figure the amount of the penalty. If Form 2220 is completed, enter the penalty on line 33.

Meals and entertainment. Generally, the corporation can deduct only 50% of the amount otherwise allowable for meals and entertainment expenses paid or incurred in its trade or business. In addition (subject to exceptions under section 274(k)(2)):

☐ Meals must not be lavish or extravagant; ☐ A bona fide business discussion must occur during, immediately before, or immediately aer the meal; and ☐ An employee of the corporation must be present at the meal.

Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders.

Paid-in capital. Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. These contributions are not taxable to the corporation.

Accounting Methods Figure taxable income using the method of accounting regularly used in keeping the corporation's books and records. In all cases, the method used must clearly show taxable income.

Permissible methods include cash, accrual, or any other method authorized by the Internal Revenue Code.

Credits A corporation's tax liability is reduced by allowable credits. The following list includes some of the credits available to corporations. ☐ Foreign tax credit (see Form 1118). ☐ Any qualified electric vehicle passive activity credit from prior years allowed for the current year from Form 8834.

See Form 8810, Corporate Passive Activity Loss and Credit Limitations (for personal service corporations and closely held corporations) to see if a credit is allowed for the current year. ☐ General business credit.

Line 11. Repairs and Maintenance Enter the costs of incidental repairs and maintenance that do not add to the value of the property or appreciably prolong its life, but only to the extent that such costs relate to a trade or business activity and aren't claimed elsewhere on the return.

See Regulations section 1.162-4. The partnership may elect to capitalize certain repair and maintenance costs consistent with its books and records. See Regulations section 1.263(a)-3(n) for information on how to make the election.

★ A bona fide business discussion must occur during, immediately before, or immediately after the meal; and ★ A partner or employee of the partnership must be present at the meal.

See section 274(n)(3) for a special rule that applies to expenses for meals consumed by individuals subject to the hours of service limits of the Department of Transportation.

See section 704(c) for details and other rules on dispositions of contributed property.

See section 724 for the character of any gain or loss recognized on the disposition of unrealized receivables, inventory items, or capital loss property contributed to the partnership by a partner.

★ Debt used to buy property held for investment. Interest that is clearly and directly allocable to interest, dividend, royalty, or annuity income not derived in the ordinary course of a trade or business is reported on line 13b of Schedule K and in box 13 of Schedule K-1 using code H.

See the instructions for line 13b of Schedule K; box 13, code H of Schedule K-1; and Form 4952, Investment Interest Expense Deduction, for more information on investment property.

Exercise your option to purchase the shares and sell them after less than 12 months, but during the following calendar year. Sell shares at least one year and a day after you purchased them, but less than two years since your original grant date.

Sell shares at least one year and a day after you purchased them, and at least two years since the original grant date. Each transaction has different tax implications. The first and last are the most favorable. The time at which you sell determines how the proceeds are taxed.

Instead of a strict pro rata allocation, a trust instrument may stipulate a certain order in which income items are distributed to the beneficiaries.

Similarly, state law may indicate in what order income should be distributed.

Small business investment companies.

Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations.

Limited Partner A limited partner is a partner in a partnership formed under a state limited partnership law, whose personal liability for partnership debts is limited to the amount of money or other property that the partner contributed or is required to contribute to the partnership.

Some members of other entities, such as domestic or foreign business trusts or limited liability companies that are classified as partnerships, may be treated as limited partners for certain purposes.

Claiming the NOL Deduction Generally, a corporation must carry an NOL back 2 years prior to the year the NOL is generated. If the NOL is not used in the prior years, the remaining NOL can be carried forward for up to 20 years after the tax year in which the NOL was generated.

Special rules apply to certain losses including a specified liability loss, a farming loss, certain disaster losses, an eligible loss, or an excess interest loss. See the Instructions for Form 1139.

☐ Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants.

Special rules apply to qualified contributions of "apparently wholesome food" (see section 170(e)(3)(C) of the Internal Revenue Code).

Chapter 7 Eligibility. To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b).

Subject to the means test described above for individual debtors, relief is available under chapter 7 irrespective of the amount of the debtor's debts or whether the debtor is solvent or insolvent.

Stock basis is computed as follows: Although the K-1 will only show the current year income items, the shareholder will be allowed to take the losses previously suspended due to the stock basis limitations.

Suspended losses should not be combined with current income amounts, but listed on a separate line on the Form 1040, Sch. E, Supplemental Income and Loss, or the appropriate schedule when possible.

The categorization of trustee fee and depreciation expenses depends on specifications in the trust instrument and state law. If the trust instrument is silent, state law prevails. If both are charged to the principal, net accounting income in our example is $35,300 ($42,000 + $450 + $6,250).

Tax-exempt income is included in accounting income for purposes of allocating the trustee fee and depreciation deductions in determining taxable income but is excluded from taxable income.

What is the Section 179 Deduction? Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year.

That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.

Credit Counseling and Debtor Education Prior to filing either type of bankruptcy, individuals must attend at least 60 minutes of credit counseling and at least two hours of a debtor education course.

The U.S. Trustee Program provides a list of government-approved credit counselors and debtor education courses.

☐ Interest (compounded daily) starts accumulating on unpaid taxes one day after the due date of the return, until the bill is fully paid off.

The current interest rate is 4.18% (3% on top of the federal short-term rate of 1.18%) and is subject to change.

This defense only protects preference transfers to the extent that the creditor can prove that the value given to the creditor equals the value the debtor received. For example, you ship $100,000.00 in merchandise to a customer on 30-day terms.

The customer pays you $100,000.00 within the 30 days and then files bankruptcy within 90 days of the payment. Under the Code, the payment is considered a contemporaneous exchange for new value and cannot be avoided as a preference.

Travel and transportation expenses. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job.

The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement.

The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependants. 11 U.S.C. § 524(k).

Since 12% of the gross accounting income is tax-exempt (the $5,000 municipal bond interest divided by the $42,000 gross accounting income), only 88% of the $1,000 trustee fee is deductible.

The allocation of the depreciation deduction between the beneficiaries and the trust depends on net accounting income. In this case, $15,000 of $35,300 (about 42.5%) of the income is distributed.

Underpayment penalty. If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. The penalty is figured separately for each installment due date.

The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. This is true even if the corporation is due a refund when its return is filed.

(a). The cost basis is your original cost [the value of the stock, consisting of what you paid, plus the compensation element that you have to report as compensation income on your 2016 Form 1040].

The cost basis is therefore, is the actual price paid per share times the number of shares ($25 x 100 = $2,500) plus the $2,000 of compensation reported on your 2016 Form W-2. Therefore, the total cost basis of your stock is $4,500 ($2,500 + $2,000).

A partner may have to capitalize interest that the partner incurs during the tax year for the partnership's production expenditures. Similarly, interest incurred by a partnership may have to be capitalized by a partner for the partner's own production expenditures.

The information required by the partner to properly capitalize interest for this purpose must be provided by the partnership on an attached statement for box 20 of Schedule K-1, using code R. See section 263A(f) and Regulations sections 1.263A-8 through 1.263A-15.

Line 8: Investment Interest:

The investment interest deduction may be different for AMT purposes because it depends on whether you have taxable private activity bond interest (see line 12). If you do, you may have an additional deduction for investment interest.

Compensation element. The compensation element is basically the amount of discount you get when you buy the stock at the option exercise price instead of at the current market price. You calculate the compensation element by subtracting the exercise price from the market value.

The market value of the stock is the stock price on the day you exercise your options to buy the stock. You can use the average of the high and low prices that the stock trades for on that day.

Again, your employer might not report anything on your 2016 Form W-2 as compensation. But you will still need to report some ordinary income on line 7 of your 2016 Form 1040, as "compensation." You report the lesser of:

The gross sales price of $5,000 minus the $1,275 actual discounted price paid for the shares ($12.75 x 100) minus the $10 sales commission= $3,715, or The per-share company discount times the number of shares. ($2.25 x 100 shares = $225).

Non-Qualified Stock Options. One way to reward employees. One strategy companies use to reward employees is to give them options to purchase a certain amount of the company's stock for a fixed price after a defined period of time.

The hope is that by the time the employee's options vest—that is, at the time the employee can actually exercise the options to buy stock at the set price—that the market price of the stock will have risen, so the employee gets the stock for less than the current market price.

Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case.

The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible.

Late payment of tax. A corporation that does not pay the tax when due may be penalized half of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax.

The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause.

The donor has the option to utilize part of his/her lifetime gift/estate tax exemption instead of paying the gift tax currently, but then less will be available later to shelter the estate from estate taxes.

The rate of tax is the same as the estate tax. The tax is reported on Form 709 (see pdf files to the right for form and instructions.)

The proper federal tax treatment of an item requires interpreting the applicable statutory, regulatory, and judicial authority and applying that authority to often myriad facts.

The regulations explicitly recognize that there may be substantial authority for more than one position for the same item. In this environment, it would be patently unreasonable to take the position that merely being "wrong" about an item makes a taxpayer negligent.

Understatement: Effect of Disclosure The amount of any understatement is also reduced by the portion of the understatement for which:

The relevant facts affecting the item's tax treatment are adequately disclosed (either on the return itself or in a statement attached thereto); and There is a reasonable basis for the tax treatment of that item by the taxpayer.

Many taxpayers fail to understand the tax ramifications of disposing of personal property such as equipment, furniture and autos used in business and end up with unpleasant surprises at tax time.

The tax consequences depend upon how the property was used, how long it was owned and the method of disposition.

It is important to understand that the K-1 reflects the S corporation's items of income, loss and deduction that are allocated to the shareholder for the year. The K-1 shows the amount of non-dividend distribution the shareholder receives; it does not state the taxable amount of a distribution.

The taxable amount of a distribution is contingent on the shareholder's stock basis. It is not the corporation's responsibility to track a shareholder's stock and debt basis but rather it is the shareholder's responsibility.

(2)."Acquisition indebtedness" means the outstanding amount of:

★ the principal indebtedness incurred after the acquisition or improvement if such indebtedness would not have been incurred but for such acquisition or improvement and such indebtedness was reasonably foreseeable when the property was acquired or improved.

6. Loss is recognized if the following occurs. • The distributee partner receives only cash, unrealized receivables, and inventory from the partnership, and

• The inside bases of the distributed assets is less than the partner's outside basis in the partnership immediately before the distribution.

5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts: • Gifts that are do not exceed the annual exclusion for the calendar year,

• Tuition or medical expenses you pay directly to a medical or educational institution for someone, • Gifts to your spouse, • Gifts to a political organization for its use, and • Gifts to charities.

At-risk rules. Generally, special at-risk rules under section 465 apply to closely held corporations (see Passive activity limitations, earlier) engaged in any activity as a trade or business or for the production of income. These corporations may have to adjust the amount on line 28. (See below.) The at-risk rules do not apply to:

★ Holding real property placed in service by the taxpayer before 1987; ★ Equipment leasing under sections 465(c)(4), (5), and (6); or ★ Any qualifying business of a qualified corporation under section 465(c)(7). However, the at-risk rules do apply to the holding of mineral property.

Here are some specifics about the financial statement requirements applicable to this type of offering: ★ Financial statements need to be certified by an independent public accountant;

★ If a company other than a limited partnership cannot obtain audited financial statements without unreasonable effort or expense, only the company's balance sheet (to be dated within 120 days of the start of the offering) must be audited; and

★ Interest on accounts receivable arising from the performance of services or the sale of property in the ordinary course of a trade or business of performing such services or selling such property, but only if credit is customarily offered to customers of the business.

★ Income from investments made in the ordinary course of a trade or business of furnishing insurance or annuity contracts or reinsuring risks underwritten by insurance companies.

Solely for purposes of the preceding paragraph, gross income derived in the ordinary course of a trade or business includes (and portfolio income, therefore, does not include) the following types of income.

★ Interest income on loans and investments made in the ordinary course of a trade or business of lending money.

You can't deduct expenses you have for education, even though one or both of the preceding tests are met, if the education:

★ Is needed to meet the minimum educational requirements to qualify you in your trade or business, or ★ Is part of a program of study that will lead to qualifying you in a new trade or business.

★ Home security system. ★ Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Pub. 535. ★ Investment-related seminars. ★ Life insurance premiums paid by the insured. ★ Lobbying expenses.

★ Losses from the sale of your home, furniture, personal car, etc. ★ Lost or misplaced cash or property. ★ Lunches with co-workers. ★ Meals while working late. ★ Medical expenses as business expenses other than medical examinations required by your employer.

Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc.),

★ Meals and lodging while away from home, ★ Taxi fares, ★ Baggage charges, and ★ Cleaning and laundry expenses. ★ Travel expenses are discussed more fully in chapter 1 of Pub. 463.

★ Job search expenses in your present occupation. ★ Laboratory breakage fees. ★ Legal fees related to your job. ★ Licenses and regulatory fees. ★ Malpractice insurance premiums.

★ Medical examinations required by an employer. ★ Occupational taxes. ★ Passport for a business trip. ★ Repayment of an income aid payment received under an employer's plan.

★ Amounts included in the gross income of a patron of a cooperative by reason of any payment or allocation to the patron based on patronage as a result of a trade or business of the patron.

★ Other income identified by the IRS as income derived by the taxpayer in the ordinary course of a trade or business. See Temporary Regulations section 1.469-2T(c)(3) for more information on portfolio income. Report portfolio income and related deductions on Schedule K rather than on page 1 of Form 1065.

☐ You and the person(s) being cared for live in the same home for more than half of the year. ☐ The person providing the care can't be: ★ Your spouse

★ Parent of your qualifying child under age 13 ★ Person you can claim as a dependent ☐ If your child provides the care, he or she: ★ Must be age 19 or older by the end of 2017 ★ Can't be your dependent.

★ Interest paid by a partnership to a partner for the use of capital, which should be entered on line 10 as guaranteed payments.

★ Prepaid interest, which generally can only be deducted over the term of the debt. See section 461(g) and Regulations sections 1.163-7, 1.446-2, and 1.1273-2(g) for details.

★ Rentals from real estate, except rentals of real estate held for sale to customers in the course of a trade or business as a real estate dealer or payments for rooms or space when significant services are provided.

★ Royalty income, except royalty income received in the course of a trade or business. See the Instructions for Schedule SE (Form 1040), Self-Employment Tax, for more information.

Following are some general risks to keep in mind:

★ Speculative. ★ Illiquidity.

Unlike the previous example, the compensation is calculated as the lesser of the bargain element or the actual gain from the sale of the stock, because the market price on the day of the sale is less than that on the day you exercised your option.

★ The bargain element, that is, the difference between the exercise price and the market price on the day you exercised the options and purchased the stock ($45 - $20 = $25 x 100 shares = $2,500) ★ The actual gain on the sale of the stock ($30 - $20 = $10 x 100 shares = $1,000).

Under Rule 506(b), a company can be assured it is within the Section 4(a)(2) exemption by satisfying the following standards:

★ The company cannot use general solicitation or advertising to market the securities;

Rule 504 does allow companies to solicit or advertise their securities to the public and to sell securities that are not restricted, if one of the following circumstances is met:

★ The company registers the offering exclusively in one or more states that require a publicly filed registration statement and delivery of a substantive disclosure document to investors;

★ The rental of such property is treated as incidental to a nonrental activity of the partnership under Temporary Regulations section 1.469-1T(e)(3)(vi) and Regulations section 1.469-1(e)(3)(vi)(D).

★ The partnership customarily makes the property available during defined business hours for nonexclusive use by various customers.

Rental of property is incidental to a trade or business activity if all of the following apply. ★ The partnership owns an interest in the trade or business at all times during the year.

★ The rental property was mainly used in the trade or business activity during the tax year or during at least 2 of the 5 preceding tax years. ★ The gross rental income from the property for the tax year is less than 2% of the smaller of the property's unadjusted basis or its fair market value.

To allow each partner to correctly apply the passive activity limitations, the partnership must report income or loss and credits separately by activity for each of the following.

★ Trade or business activities. ★ Rental real estate activities. ★ Rental activities other than real estate. ★ Portfolio income.

★ Research expenses of a college professor. ★ Rural mail carriers' vehicle expenses. ★ Subscriptions to professional journals and trade magazines related to your work. ★ Tools and supplies used in your work.

★ Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. ★ Union dues and expenses. ★ Work clothes and uniforms if required and not suitable for everyday use. ★ Work-related education.

Line 9. Salaries and Wages Enter the salaries and wages paid or incurred for the tax year, reduced by the amount of the following credit(s), if applicable.

★ Work Opportunity Credit (Form 5884). ★ Empowerment Zone Employment Credit (Form 8844). ★ Indian Employment Credit (Form 8845). ★ Mine Rescue Team Training Credit (Form 8923). ★ Credit for Employer Differential Wage Payments (Form 8932).

Temporary work location. You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. ★ The work location is outside the metropolitan area where you live and normally work.

★ You have at least one regular work location (other than your home) for the same trade or business. (If this applies, the distance between your home and the temporary work location doesn't matter.)

Credit for Elderly or Disabled You might qualify for this credit if either of these applies: ☐ You're age 65 or older. ☐ You're under age 65 and both of these apply:

★ You retired on permanent and total disability. ★ You received taxable disability benefits. However, your income must also fall below the limits set for your filing status to claim this credit.

Not all offerings of securities must be registered with the Commission. Some exemptions from the registration requirement include: ★ private offerings to a limited number of persons or institutions; ★ offerings of limited size;

★ intrastate offerings; and ★ securities of municipal, state, and federal governments. By exempting many small offerings from the registration process, the SEC seeks to foster capital formation by lowering the cost of offering securities to the public.

Local lodging. If your employer provides or requires you to obtain lodging while you aren't traveling away from home, you can deduct the cost of the lodging if it is: ★ on a temporary basis,

★ necessary for you to participate in or be available for a business meeting or employer function, and ★ the costs are ordinary and necessary, but not lavish or extravagant.

(2)."Acquisition indebtedness" means the outstanding amount of: ★ the principal indebtedness incurred in acquiring or improving the property,

★ the principal indebtedness incurred before the acquisition or improvement of the property if such indebtedness would not have been incurred but for such acquisition or improvement, and

Since loss and deduction items exceed stock basis, we would look to see if the shareholder had valid debt basis. Since there is no debt basis in our example, the loss and deduction items are pro-rated to determine the amount currently allowable:

☐ 20,000/25,000 * 6,000 = ($4,800) ordinary loss ☐ 5,000/25,000 * 6,000 = $1,200 charitable contribution

Business formed after 1996. The following businesses formed after 1996 are taxed as corporations. ☐ A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic.

☐ A business formed under a state law that refers to it as a joint-stock company or joint-stock association. ☐ An insurance company. ☐ Certain banks. ☐ A business wholly owned by a state or local government.

Suspension of 10% limitation for farmers and ranchers and certain Native Corporations. Certain corporations can deduct contributions of qualified conservation property without regard to the general 10% limit. This applies to:

☐ A qualified farmer or rancher (as defined in section 170(b)(1)(E)(v)) that does not have publicly traded stock; and ☐ A Native Corporation (as defined in section 170(b)(2)(C)(iii)) that contributes property which was land conveyed under the Alaska Native Claims Settlement Act.

☐ If the current year has different types of loss and deduction items, which exceed stock and/or debt basis, the allowable loss and deduction items must be allocated pro rata based on the amount of the particular loss and deduction items.

☐ A shareholder is not allowed to claim loss and deduction items in excess of stock and/or debt basis.

☐ Value of the like-kind and other property received ☐ Gain or loss on sale of other (non-like-kind) property given up ☐ Cash received or paid; liabilities relieved or assumed

☐ Adjusted basis of like-kind property given up; realized gain ☐ If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

(2). The amount can be determined with reasonable accuracy. Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when:

☐ All events that determine the liability have occurred, ☐ The amount of the liability can be figured with reasonable accuracy, and ☐ Economic performance takes place with respect to the expense.

The amount can be determined with reasonable accuracy. Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year in which:

☐ All events that determine the liability have occurred, ☐ The amount of the liability can be figured with reasonable accuracy, and ☐ Economic performance takes place with respect to the expense.

Do not deduct the following. ☐ Fines or penalties paid to a government for violating any law.

☐ Any amount that is allocable to a class of exempt income. See section 265(b) for exceptions. ☐ Lobbying expenses.

☐ Any liability of the corporation the shareholder assumes in connection with the distribution.

☐ Any liability to which the property is subject immediately before, and immediately after, the distribution. The FMV of any property distributed to a shareholder becomes the shareholder's basis in that property.

What kinds of loans have imputed interest The rules for below-market loans apply to several kinds of loans: ☐ Loans from a corporation to one or more of its shareholders.

☐ Any loan made specifically to reduce someone's tax responsibility. ☐ Certain loans made to continuing care facilities under a contract.

Business formed after 1996. The following businesses formed after 1996 are taxed as corporations. ☐ A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships).

☐ Certain foreign businesses. ☐ Any other business that elects to be taxed as a corporation.

Key exceptions to the rules The tax code provides a couple notable exceptions to the imputed interest rules: ☐ Gift loans of less than $10,000 are exempt, as long as the money isn't used to buy income-producing assets.

☐ Compensation-related and corporation-shareholder loans under $10,000 are also exempt if the lender can demonstrate that tax avoidance wasn't the purpose of the loan.

☐ A corporation engaged in farming must use an accrual method. For exceptions, see section 447. ☐ Special rules apply to long-term contracts. See section 460.

☐ Dealers in securities must use the mark-to-market accounting method. Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. See section 475.

☐ Class: Nonresidential real property. ☐ Depreciation Period: 39 years.

☐ Description: An office building, store, or warehouse that is not residential property or has a class life of less than 27.5 years

☐ Class: Residential rental property. ☐ Depreciation Period: 27.5 years.

☐ Description: Any building or structure where 80% or more of its gross rental income is from dwelling units.

☐ Class: 25-year property. ☐ Depreciation Period: 25 years.

☐ Description: Property that is an integral part of the water distribution facilities, municipal sewers

Reduction for contributions of certain property. For a charitable contribution of property, the corporation must reduce the contribution by the sum of: ☐ The ordinary income and short-term capital gain that would have resulted if the property were sold at its fair market value, and

☐ For certain contributions, the long-term capital gain that would have resulted if the property were sold at its fair market value.

What kinds of loans have imputed interest The rules for below-market loans apply to several kinds of loans:

☐ Gift loans — loans between friends and family members other than spouses. ☐ Compensation-related loans — loans from an employer to an employee or independent contractor.

☐ Fund a traditional IRA to get the up-front tax reduction based on your contributions.But if you find that you don't qualify for a fully deductible IRA...

☐ Go back to your 401(k) -- if the investment options are decent -- and fully fund it beyond the match. (The 2016 401(k) contribution limits are $18,000 up to age 50; $24,000 if you are age 50 and over.) And lastly...

Liabilities. If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. There are two exceptions to this treatment.

☐ If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized.

☐ If you sell the GM for $4.00 per share, your cost basis is the carryover basis of $3.00 per share, for a gain of $1.00 per share.

☐ If you sell the GM for $1.00 per share, your cost basis is the lower of cost or market, meaning a basis of $2.00 per share, for a loss of $1.00 per share.

Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of:

☐ Inventory or stock in trade ☐ Stocks, bonds, or notes ☐ Other securities or debt ☐ Partnership interests ☐ Certificates of trust

Personal service corporation. A personal service corporation must use a calendar year as its tax year unless: ☐ It elects to use a 52-53-week tax year that ends with reference to the calendar year or tax year elected under section 444 of the Internal Revenue Code;

☐ It can establish a business purpose for a different tax year and obtains approval of the IRS; or ☐ It elects under section 444 to have a tax year other than a calendar year. Use Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, to make the election.

The services must be substantially performed by employee-owners. A personal service corporation must use a calendar tax year unless:

☐ It elects to use a 52-53-week tax year that ends with reference to the calendar year or tax year elected under section 444; ☐ It can establish a business purpose for a dierent tax year and obtains the approval of the IRS (see the Instructions for Form 1128 and Pub. 538); or

☐ Transportation costs to and from medical care. If you drive your own car, the deduction is 23 cents per mile in 2017. ☐ Prescription medicines ☐ Amounts you paid for qualified long-term care services ☐ Limited amounts you paid for any qualified long-term care insurance contracts

☐ Medical insurance premium — You can't deduct pre-tax salary contributions you make to an employer-sponsored health insurance plan. ☐ Amounts you pay if not covered by Social Security for: ★ Medicare B supplemental insurance ★ Medicare D insurance ★ Medicare A premiums

☐ No penalty if you're getting a tax refund. ★ However, you must file your 2016 taxes by April 18, 2020 (or October 16 of 2020, if you filed an extension). After that, any unclaimed tax refunds get turned over to the U.S. Treasury.

☐ No penalty if you file by October 16, 2017, provided you filed an extension and paid your tax bill by April 18, 2017.

Qualified expenses don't include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts. ☐ Excludable U.S. series EE and I savings bond interest from Form 8815.

☐ Nontaxable qualified state tuition program earnings. ☐ Nontaxable earnings from Coverdell education savings accounts. ☐ Any reimbursements you received for those expenses that weren't reported to you on your ☐ Form W-2, box 1.

Unreimbursed Employee Expenses. Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. You can deduct only unreimbursed employee expenses that are:

☐ Paid or incurred during your tax year, ☐ For carrying on your trade or business of being an employee, and ☐ Ordinary and necessary.

☐ If a shareholder contends he or she has contributed or loaned substantial funds to the S corporation, consideration should be given to whether the shareholder had the financial means to make the contribution or loan.

☐ Part or all of the repayment of a reduced basis debt is taxable to the shareholder. ☐ If a shareholder sells their stock, suspended losses due to basis limitations are lost. Any gain on the sale of the stock does not increase the shareholder's stock basis.

☐ In determining current year allowable losses, current year loss and deduction items are combined with the suspended loss and deduction items carried over from the prior year, though the current year and suspended items should be separately stated on the Form 1040

☐ Schedule E or other appropriate schedule on the return. ☐ A shareholder is only allowed debt basis to the extent he or she has personally lent money to the S corporation. A loan guarantee is not sufficient to allow the shareholder debt basis.

☐ Loss and deduction items not allowable in the current year are suspended due to basis limitations and are carried over to the subsequent year.

☐ Suspended losses and deductions due to basis limitations retain their character in subsequent years. ☐ Any suspended loss or deduction items in excess of stock and/or debt basis are carried forward indefinitely.

Deductions subject to the 2% limit are discussed in the following three categories. ☐ Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7).

☐ Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). ☐ Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9).

S Corporation Stock and Debt Basis Importance of Stock Basis It is important that a shareholder know his/her stock basis when:

☐ The S corporation allocates a loss and/or deduction item to the shareholder. In order for the shareholder to claim a loss, they need to demonstrate they have adequate stock and/or debt basis.

If your employer has a non-accountable business expense plan (explained below), encourage him or her to adopt an accountable plan. ☐ In a non-accountable plan, your employer gives you an expense advance check and you are not required to keep records of your purchases.

☐ The advance is included in your income, and you take your expenses as miscellaneous itemized deductions. ☐ In the AMT system, you are taxed on the expense advance, but can't take a deduction for the expenses.

Reasonable needs of the business include the following. ☐ Specific, definite, and feasible plans for use of the earnings accumulation in the business.

☐ The amount necessary to redeem the corporation's stock included in a deceased shareholder's gross estate, if the amount does not exceed the reasonably anticipated total estate and inheritance taxes and funeral and administration expenses incurred by the shareholder's estate.

Traditional IRA vs. nondeductible IRA. In many ways -- five, actually -- a nondeductible IRA is identical to a traditional IRA:

☐ The contribution limits for both are the same: The maximum allowable contribution for 2016 is $5,500, and if you're over the age of 50, the contribution ceiling is $6,500.

☐ The sales price is $8,490. This is the price at the date of sale ($85) times the number of shares sold (100), or $8,500. We then subtract the commissions paid on the sale (in this example $10), resulting in $8,490. This amount should be reported as the gross amount on the 2016 Form 1099-B that you'll receive from the broker that handled the sale.

☐ The cost basis is $4,500. This is the actual price paid per share times the number of shares ($20 x 100 = $2,000) plus the compensation income reported on your 2016 Form 1040 ($2,500). ☐ The resulting gain is $3,990 ($8,490 - $4,500 = $3,990).

Report the sale on your 2016 Schedule D, Part II as a long-term sale. It is long-term because more than one year passed between the date you acquired the stock and the date you sold it. For reporting purposes on Schedule D:

☐ The date acquired is 02/01/2015 ☐ The date sold is 06/15/2016

You also must report the sale of the stock on your 2016 Schedule D, Part II as a long-term sale. It is long term because more than one year passed between the date you acquired the stock and the date you sold it. For reporting purposes on Schedule D:

☐ The date acquired is 02/01/2015 ☐ The date sold is 6/15/2016

☐ The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised.

☐ The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices.

Limitation on deduction. The total amount claimed cannot be more than 10% of taxable income (line 30) computed without regard to the following. ☐ Any deduction for contributions. ☐ The special deductions on line 29b. ☐ The limitation under section 249 on the deduction for bond premium.

☐ The domestic production activities deduction under section 199. ☐ Any net operating loss (NOL) carryback to the tax year under section 172. ☐ Any capital loss carryback to the tax year under section 1212(a)(1).

Question What is the basis of property received as a gift? Answer ☐ To figure out the basis of property you receive as a gift, you must know three amounts: ☐ The adjusted cost basis to the donor just before the donor made the gift to you.

☐ The fair market value (FMV) at the time the donor made the gift. ☐ The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

Question: What is the basis of property received as a gift? Answer: To figure out the basis of property you receive as a gift, you must know three amounts: ☐ The adjusted cost basis to the donor just before the donor made the gift to you.

☐ The fair market value (FMV) at the time the donor made the gift. ☐ The amount of any gift tax paid on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

Whose medical expenses can you include on your return? You can deduct medical expenses for anyone who qualifies as your spouse or dependent when either:

☐ The service was provided ☐ The bill was paid If you're divorced, you can deduct any qualifying bills you pay for your children as a medical expense. This applies even if your former spouse claims your children as dependents.

Nonaccrual experience method for service providers. Accrual method corporations are not required to accrue certain amounts to be received from the performance of services that, on the basis of their experience, will not be collected, if:

☐ The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, or

Nonaccrual experience method. Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if:

☐ The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or

Nonaccrual-experience method. Accrual method partnerships aren't required to accrue certain amounts to be received from the performance of services that, on the basis of their experience, will not be collected if:

☐ The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or ☐ The partnership's average annual gross receipts for the 3 prior tax years doesn't exceed $5 million.

☐ The corporation is an investment company. ☐ You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors.

☐ The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt.

Passive activity limitations. Limitations on passive activity losses and credits under section 469 apply to personal service corporations (defined earlier) and closely held corporations (defined later). Generally, the two kinds of passive activities are:

☐ Trade or business activities in which the corporation did not materially participate for the tax year; and ☐ Rental activities, regardless of its participation. For exceptions, see Form 8810, Corporate Passive Activity Loss and Credit Limitations.

Generally, the following rules apply. For more information, see Pub. 538, Accounting Periods and Methods. ☐ A corporation (other than a qualified personal service corporation) must use an accrual method of accounting if its average annual gross receipts exceed $5 million.

☐ Unless it is a qualifying taxpayer or a qualifying small business taxpayer, a corporation must use an accrual method for sales and purchases of inventory items.

Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you don't get a new job. You can't deduct these expenses if:

☐ You are looking for a job in a new occupation, ☐ There was a substantial break between the ending of your last job and your looking for a new one, or ☐ You are looking for a job for the first time.

Generally, anyone can adopt the calendar year. However, if any of the following apply, you must adopt the calendar year.

☐ You keep no books or records; ☐ You have no annual accounting period; ☐ Your present tax year does not qualify as a fiscal year; or ☐ You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations.

Principal place of business. If you have more than one place of business, the business part of your home is your principal place of business if:

☐ You use it regularly and exclusively for administrative or management activities of your trade or business, and ☐ You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.

If you're married filing separately, you can only claim this credit if you lived apart from your spouse for the entire year. If you're married filing separately and pass the age and disability test, you can't claim the credit if either of these applies:

☐ Your AGI is $12,500 or more. ☐ You received $3,750 or more in nontaxable benefits.

If you're married filing jointly and only one of you passes the age or disability test, you can't claim the credit if either of these applies:

☐ Your AGI is $20,000 or more. ☐ You received $5,000 or more in nontaxable benefits.

If you're married filing jointly and both of you pass the age or disability test, you can't claim the credit if either of these applies:

☐ Your AGI is $25,000 or more. ☐ You received $7,500 or more in nontaxable benefits.

Your filing status If you're filing as single, head of household, or qualifying widow(er), you can't claim the credit if one of these applies:

☐ Your adjusted gross income (AGI) is $17,500 or more. ☐ You received $5,000 or more of nontaxable Social Security or other nontaxable pension or disability benefits.

The Registration Process. In general, securities sold in the U.S. must be registered. The registration forms companies file provide essential facts while minimizing the burden and expense of complying with the law. In general, registration forms call for:

☐ a description of the company's properties and business; ☐ a description of the security to be offered for sale; ☐ information about the management of the company; and ☐ financial statements certified by independent accountants.

The loss and deduction items in excess of stock and debt basis: ☐ retain their character ☐ are treated as loss and deduction items incurred in the subsequent tax year and will be allowed if stock or debt basis is increased or restored

☐ carryover indefinitely or until all the shareholder's stock is disposed of Once a shareholder disposes of all of their stock, any suspended loss and deduction items are lost and cannot be deducted.

Securities Act of 1933 Often referred to as the "truth in securities" law, the Securities Act of 1933 has two basic objectives:

☐ require that investors receive financial and other significant information concerning securities being offered for public sale; and ☐ prohibit deceit, misrepresentations, and other fraud in the sale of securities.

★ Spouse or dependent of any age who's both of these:

♦ Physically or mentally incapable of self-care ♦ Has the same main home as you do when you provide the care.

Calculating the credit The credit is 20%-35% of qualified expenses. The percentage depends on your adjusted gross income (AGI). The maximum amount of qualified expenses you're allowed to calculate the credit is:

★ $3,000 for one qualifying person ★ $6,000 for two or more qualifying persons Complete Form 2441: Child and Dependent Care Expenses and attach it to your Form 1040 to claim the credit.

Line 20. Other Deductions Enter the total allowable trade or business deductions that aren't deductible elsewhere on page 1 of Form 1065. Attach a statement listing by type and amount each deduction included on this line. Examples of other deductions include the following.

★ Amortization. See the Instructions for Form 4562 for more information. Complete and attach Form 4562 if the partnership is claiming amortization of costs that began during the tax year.

A corporation is taxed as a personal holding company under section 542 if: ★ At least 60% of its adjusted ordinary gross income for the tax year is personal holding company income, and

★ At any time during the last half of the tax year more than 50% in value of its outstanding stock is directly or indirectly owned by five or fewer individuals.

Rule 505 of Regulation D provides an exemption from the registration requirements of the federal securities laws for companies when they offer and sell securities. To qualify for this exemption, a company:

★ Can only offer and sell up to $5 million of its securities in any 12-month period; ★ May sell to an unlimited number of "accredited investors" and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions;

★ Must inform purchasers that they receive "restricted" securities, meaning that the securities cannot be sold for six months or longer without registering them; and

★ Cannot use general solicitation or advertising to sell the securities.

There are 4 types of bankruptcy filings in the Federal Bankruptcy Code (Title 11 of the United States Code):

★ Chapter 7 - Liquidation ★ Chapter 11 - Reorganization (or Rehabilitation bankruptcy) ★ Chapter 12 - Adjustment of Debts of a Family Farmer with Regular Annual Income ★ Chapter 13 - Adjustment of Debts of an Individual with Regular Income

List of Nondeductible Expenses ★ Adoption expenses. ★ Broker's commissions. ★ Burial or funeral expenses, including the cost of a cemetery lot. ★ Campaign expenses. ★ Capital expenses. ★ Check-writing fees.

★ Club dues. ★ Commuting expenses. ★ Fees and licenses, such as car licenses, marriage licenses, and dog tags. ★ Fines and penalties, such as parking tickets. ★ Health spa expenses. ★ Hobby losses—but see Hobby Expenses, earlier. ★ Home repairs, insurance, and rent.

You can't deduct dues paid to an organization if one of its main purposes is to:

★ Conduct entertainment activities for members or their guests, or ★ Provide members or their guests with access to entertainment facilities. Dues paid to airline, hotel, and luncheon clubs aren't deductible.

What are some expenses not considered deductible medical expenses? Nondeductible expenses include: ☐ Cosmetic surgery not related to any of these:

★ Congenital abnormality ★ Accident ★ Disease ☐ Medicare tax on wages and tips paid as part of the self-employment tax or household employment taxes ☐ Nursing care for a healthy baby ☐ Usually, drugs not approved by the FDA ☐ Funeral, burial, or cremation costs

What can I deduct? For any medical condition, it includes the cost of: ☐ Diagnosis ☐ Cure ☐ Mitigation ☐ Treatment ☐ Prevention ☐ Items needed for the above purposes, including:

★ Equipment ★ Supplies ★ Diagnostic devices If you want to deduct medical expenses, they must alleviate or prevent a physical or mental defect or illness. You can't deduct expenses that simply benefit general health, like vitamins or a vacation.

Do not deduct the following on line 20. ★ Items that must be reported separately on Schedules K and K-1. ★ Fines or penalties paid to a government for violating any law. Report these expenses on Schedule K, line 18c.

★ Expenses allocable to tax-exempt income. Report these expenses on Schedule K, line 18c. ★ Net operating losses. Only individuals and corporations may claim a net operating loss deduction.

★ Amounts paid or incurred to participate or intervene in any political campaign on behalf of a candidate for public office, or to influence the general public regarding legislative matters, elections, or referendums. Report these expenses on Schedule K, line 18c.

★ Expenses paid or incurred to influence federal or state legislation, or to influence the actions or positions of certain federal executive branch officials. However, certain in-house lobbying expenditures that do not exceed $2,000 are deductible.

★ The company must be available to answer questions by prospective purchasers; and

★ Financial statement requirements are the same as for Rule 505.

A company can use this exemption so long as it is not a blank check company and does not have to file reports under the Securities Exchange Act of 1934. Also, the exemption generally does not allow companies to solicit or advertise their securities to the public

, and purchasers receive "restricted" securities, meaning that they may not sell the securities without registration or an applicable exemption.

You can also deduct legal expenses that are: ★ Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,

★ For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or ★ To collect taxable alimony.

Depreciation on Computers. You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is:

★ For the convenience of your employer, and ★ Required as a condition of your employment.

★ Form 5500, Annual Return/Report of Employee Benefit Plan.

★ Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan (generally filed instead of Form 5500 if there are under 100 participants at the beginning of the plan year).

Examples of insider trading cases that have been brought by the SEC are cases against: ★ Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

★ Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

Chapter 7 Bankruptcy Having a PMSI becomes important should you file for bankruptcy. In a chapter 7 bankruptcy, a trustee is appointed to collect your assets and liquidate, or sell, them to pay back creditors in a specific order of priority.

Debtors are typically allowed certain exemptions, such as keeping a certain amount of equity in their homes, so this limits the money available to pay creditors.

What are the different structures of a Section 1031 Exchange? To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another.

Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.

Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted.

Depending on individual circumstances, if a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to "reaffirm" the debt.

Line 20: Loss Limitations: You may have AMT or regular tax differences due to passive investments in partnerships or S Corporations.

Depending on your percentage of ownership, you may discuss with the management of these investments any items that are generating AMT on your tax return to see if the AMT impact can be lessened in future years.

Accounting Methods An accounting method is a set of rules used to determine when and how income and expenditures are reported.

Figure ordinary business income using the method of accounting regularly used in keeping the partnership's books and records. In all cases, the method used must clearly reflect income.

☐ Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction.

The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science.

★ Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

★ Government employees who learned of such information because of their employment by the government; and ★ Other persons who misappropriated, and took advantage of, confidential information from their employers.

7. You must file a gift tax return on Form 709, if any of the following apply:

• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year. • You and your spouse are splitting a gift.

• You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.

• You gave your spouse an interest in property that will terminate due to a future event.