The business in-depth class is the central reference point manual for preparing business tax returns. Similar to our 1040 class, this course begins with detailed discussions of business tax changes that have occurred during the year, whether from Congress, the IRS or the courts. We then move to business formation issues including tax-free organization and choice of entity decisions. This class then provides an in-depth look at the tax organization, filing and compliance issues for all 3 of the major forms of business entities.
The discussion of S corporations includes elections, late “S” election, allowed shareholders, basis rules, distributions and accounting issues as well as the use of ESBT’s, QSST’s and the Q-Sub. The “S” discussion provides the forms, elections and statements needed to convert a sole proprietor to an S corporation or to convert an LLC to an S corporation, as well as the guidance needed to convert to a C corporation. The rare 338 step-up election for S corporations is discussed in example form and we also provide the instructions and elections to make a deemed dividend election or to distribute E&P before AAA. We also discuss troublesome operating issues such as officer compensation, debt basis, suspended losses and non-cash distributions.
The discussion of C corporations provides guidance on tax operating characteristics of the C corporation including accounting methods, choice of year-end, capital losses, net operating losses and a summary of consolidated return rules. Our discussion of C corporate reasonable compensation also includes an analysis of constructive dividend problems and concludes with a review of such problem issues as personal holding companies (PHC), personal service companies (PSC) and the accumulated earnings tax (AET).
Our LLC/partnership discussion includes organizational income tax elections and definitions and then moves to a completed example Form 1065. We discuss converting an LLC to an S corporation and provide an example election. We then move to operating issues of an LLC such as guaranteed payments, tax-free formation, partner self-employment tax issues, basis, ownership transfers and the sale of a partnership interest. Several case studies illustrated, with tax forms, the effects of a “walk-away” partner as well as the 754 step-up basis election. An in-depth discussion of equity accounts is provided along with detailed analysis of debt basis.
We also have a case study on late S elections with completed forms and IRS letters, and greatly expanded explanation of our LLC chapter with more coverage and 2 more case studies on LLC terminations including what to do when partners just walk away, and what to do with partners with negative capital accounts.
This course also includes general business operating issues which this year will include a special new discussion of business tax credits.