PART IV: Entity Tax Planning (Area 3)

In this section

• Chapter 13: Entity Choice & Formation Strategies
  • C Corp vs. S Corp vs. Partnership vs. LLC: Tax Impact & Liability
    Explore crucial distinctions among C Corporations, S Corporations, Partnerships, and LLCs in terms of double taxation, pass-through taxation, liability, ownership constraints, and self-employment taxes. Gain insights to make informed entity selection decisions aligned with strategic tax planning objectives.
  • §351 & §721 Nonrecognition Transactions & Built-In Losses
    Discover how IRC §§351 and 721 enable tax-deferred entity formation, including decision trees for intangible and IP property transfers, built-in gains, and built-in losses.
  • Leveraging Special Allocations & Ownership Classes for Optimal Outcomes
    Discover advanced strategies for shifting income, optimizing deductions, and structuring effective ownership classes. This comprehensive guide explores IRC provisions, partnership allocations, multi-tiered share classes, and real-world case studies tailored for CPA candidates seeking mastery in tax compliance and planning.
  • Planning Around Qualified Small Business Stock (QSBS) Exclusions
    Comprehensive guidance on maximizing tax benefits from Qualified Small Business Stock (QSBS), exploring holding periods, percentage exclusions, and entity conversions for optimal planning.
• Chapter 14: Ongoing Planning for C Corporations
  • Timing of Income & Deductions; Using Fiscal vs. Calendar Years
    Explore key tax considerations in choosing and managing accounting periods, including method changes, deferral of advanced payments, and IRS forms relevant for changing accounting methods.
  • Deferral vs. Dividend Planning & Shareholder Compensation Balances
    Explore strategic methods for balancing wages, bonuses, and dividends in C corporations—examining deferral techniques, potential IRS scrutiny, and best practices for shareholder compensation.
  • Multi-State & Nexus Considerations; Apportionment & Allocation
    Explore how states determine nexus and utilize various apportionment formulas—such as three-factor and single-sales factor—to calculate a C corporation’s multi-state tax liabilities. Learn to optimize planning strategies and minimize potential risks through real-world examples and clear illustrations.
  • Cross-Border Structuring, Branch vs. Subsidiary, Treaty Positions
    Explore key considerations in cross-border structuring for CPA candidates, contrasting immediate branch-level inclusion with deferred subsidiary profits, and examining permanent establishment definitions.
• Chapter 15: Advanced S Corporation Planning
  • Avoiding Inadvertent Terminations, Updating Shareholder Agreements
    Learn how to safeguard your S Corporation status by preventing inadvertent terminations and updating shareholder agreements with robust clauses, ensuring compliance with IRS regulations.
  • Built-In Gain Timing & Monitoring AAA vs. E&P for Distributions
    Explore built-in gain recognition periods, the Accumulated Adjustments Account, and Earnings & Profits interplay. Understand multi-year AAA tracking, distribution ordering rules, and strategic planning to minimize tax pitfalls for Advanced S Corporation Planning.
  • Owner Compensation, Reasonable Salary & Employment Tax Minimization
    Explore how S corporation owners can set and justify reasonable wages, minimize employment taxes, and mitigate risks of IRS reclassification, with comparative salary and distribution examples across various states.
  • Conversions to/from C Corp & Planning for Mergers or Acquisitions
    Explore essential tax considerations, short-year returns, and strategic insights for switching between C and S corporations, with guidance on mergers, acquisitions, and best practices for CPA exam readiness.
• Chapter 16: Partnership & LLC Tax Planning
  • Special Allocations to Shift Income/Loss Gains to Advantageous Partners
    Learn how and why partnerships strategically allocate income and losses to specific partners, the substantial economic effect rules, safe harbor conditions, and common pitfalls in special allocations.
  • §754 Elections & Step-Ups in Basis on Transfers & Distributions
    Discover how Section 754 elections allow partnerships to adjust inside basis when ownership transfers or certain distributions occur. Explore triggers like a partner’s death or sale and learn to track step-ups for newly admitted partners.
  • Debt Reallocation & Impact on At-Risk & Passive Losses
    Explore how partnership debt arrangements influence at-risk calculations and passive loss deductions under U.S. tax law, focusing on recourse vs. nonrecourse allocations and real-world planning strategies.
  • Roll-Up Strategies, Partnership Mergers & Divisions
    Learn how multiple smaller partnerships can be combined into a single entity or split apart efficiently while addressing disguised sale rules, liability reallocations, and other key tax considerations.