GREGORY A. CARNES serves as Raburn Eminent Scholar of Accounting at the University of North Alabama, and served as Dean of the Sanders College of Business and Technology for 11 years. Dr. Carnes is well known nationally as an academic leader, having served on the boards of numerous academic organizations. Dr. Carnes has authored tax material for CPA Review courses for more than 20 years and has delivered tax training for national accounting firms and approximately 20 accounting state societies. He has published approximately 30 articles in leading academic and professional journals.

SUZANNE YOUNGBERG joined the faculty at Northern Illinois University as a full-time member in 2000 and is currently teaching in the accounting graduate and undergraduate programs. Prior to joining NIU, she worked for five years in the tax department of a medium-sized public accounting firm and then maintained her own tax practice for 30 years specializing in individual and small business compliance and strategic tax planning. Suzanne received her Bachelor of Science in Accountancy from NIU and her Master of Science in Taxation from DePaul University.

DEDICATIONS III
BRIEF CONTENTS V
LEARNING THE BIG PICTURE OF TAX TO BE A VALUED TAX PROFESSIONAL VI
WHAT ARE OUR STORIES? VII
WHAT MAKES OUR APPROACH TO LEARNING TAX DISTINCTIVE? IX
ASSESSMENT XIII CONNECTING TO THE PROFESSION XV
AN INTERACTIVE, MULTIMEDIA LEARNING EXPERIENCE XVII
PREPARING FOR THE CPA EXAM XVIII
FOR INSTRUCTORS XIX ACKNOWLEDGMENTS XX
TABLE OF CONTENTS XXI

Part I Introduction to Business Entities

1 Basics of Business Entity Taxation 1-1
1.1 Basics of Business Entity Taxation 1-6
1.2 Tax Compliance for Business Entities 1-10
1.3 Review of Fundamentals of Property Transactions 1-19
1.4 Review of Section 1231 Assets 1-37
1.5 Review of Qualified Business Income Deduction 1-58

2 Taxation of Business Entities: Strategies and Planning 2-1
2.1 The Basics of Tax Planning 2-3
2.2 Tax Avoidance vs. Tax Evasion 2-12
2.3 Tax Rules vs. GAAP 2-17
2.4 Tax Professional Responsibilities 2-19
2.5 Professional Taxation as a Career 2-24

Part II Taxation of Corporations

3 Fundamentals of Corporate Taxation 3-1
3.1 Taxation of Corporate Formations 3-5
3.2 Taxation of Costs Incident to Formation 3-17
3.3 Corporate Taxable Income 3-22
3.4 Other Corporate Tax Issues 3-37
3.5 Penalty Taxes 3-55
3.6 Business Tax Credits 3-64

4 Corporate Taxation: Distributions, Redemptions, and Liquidations 4-1
4.1 Distributions Taxed as Dividends 4-4
4.2 Earnings & Profits 4-12
4.3 Property Distributions 4-20
4.4 Stock Redemptions 4-26
4.5 Corporate Liquidations 4-42

5 Corporate Taxation: Related Corporations and Reorganizations 5-1
5.1 Controlled Groups 5-4
5.2 Affiliated Groups and Consolidated Returns 5-14
5.3 Corporate Reorganizations 5-30
5.4 Preservation of Tax Attributes 5-44

Part II (Chapters 3-5): Comprehensive Tax Return Problems 5-58

Part III Taxation of Flow-Through Entities 6 Partnership Taxation: Formation, Basis, and Income 6-1

6 Partnership Taxation: Formation, Basis, and Income 6-1
6.1 Definitions Related to Partnerships 6-4
6.2 Taxation of Partnership Formations 6-8
6.3 Impact of Partnership Debt on Partner's Basis in Partnership Interest 6-14
6.4 Taxation of Partnership Income and Guaranteed Payments 6-19
6.5 Use of Partnership Losses 6-32
6.6 Permitted Tax Years for Partnerships 6-39
6.7 Related-Party Rules 6-45 Disallowance of Related-Party Losses 6-46

7 Partnership Taxation: Distributions, Sales, and Advanced Topics 7-1
7.1 Built-In Gains and Losses 7-5
7.2 Distributions from a Partnership 7-13
7.3 Retirement Distributions 7-24
7.4 Sale of a Partnership Interest 7-30
7.5 Advanced Topic (Drilling Down)-Disproportionate Distributions 7-38
7.6 Advanced Topic (Drilling Down)-Optional Adjustment to Basis of Partnership Assets (Section 754 Elections) 7-44
7.7 Advanced Topic (Drilling Down)-Distributions of Built-In Gain Property 7-57

Part III (Chapters 6-7): Comprehensive Tax Return Problem 7-70

8 Taxation of S Corporations 8-1
8.1 Eligibility Rules and Shareholder Requirements 8-4
8.2 Election Requirements and Terminations 8-11
8.3 Taxation of S Corporation Income 8-18
8.4 Shareholder's Basis in S Corporation Stock and Loss Limitations 8-26
8.5 Taxation of S Corporation Distributions 8-33
8.6 S Corporation Taxes 8-45 Built-In Gains Tax 8-45

Part III (Chapter 8): Comprehensive Tax Return Problem 8-68

Part IV Choice of Business Entity

9 Choice of Business Entity 9-1
9.1 Business Structures 9-5
9.2 Characteristics of Tax Entities 9-13
9.3 Comparison of Partnerships/Limited Liability Companies and S Corporations 9-28
9.4 Dispositions of Ownership Interests and Conversions to Other Entity Types 9-35

Part V Special Topics

10 Taxes on the Financial Statements 10-1
10.1 Basics of Accounting for Income Taxes 10-5
10.2 Determining the Income Tax Provision 10-16
10.3 Tax Disclosures in the Financial Statements 10-42
10.4 Disclosures in the Tax Return 10-47
10.5 Special Issues 10-50

Part V (Chapter 10): Comprehensive Companion Income Tax Provision Problem 10-61

11 Income Taxation of Trusts and Estates 11-1
11.1 Overview of Income Taxation of Trusts and Estates 11-5
11.2 Fiduciary Accounting 11-11
11.3 Taxable Income for Trusts and Estates 11-21
11.4 Income Distribution Deduction 11-36
11.5 Taxation of Beneficiaries 11-42

12 Gift and Estate Taxes 12-1
12.1 Unified Transfer Tax 12-4
12.2 Transfers Subject to the Gift Tax 12-8
12.3 Gift Tax Formula 12-18
12.4 Estate Tax-General Rules 12-26
12.5 Inclusions in the Gross Estate 12-33
12.6 Deductions from the Gross Estate 12-40
12.7 Estate Tax Formula 12-45 Estate Tax Formula 12-45

13 Taxation of Multinational Transactions 13-1
13.1 General Rules for International Taxation 13-4
13.2 Sourcing of Income and Expenses 13-11 Sourcing of Income 13-11
13.3 U.S. Taxpayers with Outbound Investment through Corporations 13-21
13.4 Inbound Taxation on Foreign Persons 13-31

14 State and Local Taxation 14-1
14.1 Types of State and Local Taxes (SALT) 14-3
14.2 Jurisdiction to Tax 14-8
14.3 State Income Tax Computation 14-16
14.4 Filing Methods and Other Topics 14-28

15 Tax-Exempt Organizations 15-1
15.1 Types of Tax-Exempt Organizations 15-3
15.2 Filing Requirements 15-7
15.3 Taxation of Tax-Exempt Entities 15-14
15.4 Unrelated Business Income (UBI) 15-23

16 Tax Research and Professional Issues 16-1
16.1 Sources of Tax Authority 16-3
16.2 Locating and Evaluating Authority 16-15
16.3 Tax Preparer Penalties 16-18
16.4 Tax Practice and Procedure 16-20

APPENDIX A Tax Formula Items A-1
APPENDIX B Tax Forms B-1
APPENDIX C Personal Financial Planning (Available Online)
GLOSSARY G-1
SUBJECT INDEX I-1