• Why do we have an income tax, what is the legal basis, how does congress use tax law?
• What is the audit process utilized by the IRS as part of the administration of tax law?
• What ethical guidelines will apply to you in your tax practice?
• What are the economic, social, equity, and political considerations that justify various aspects of the tax law?
• Describe the role played by the IRS and the courts in the evolution of the federal tax system
• What is the purpose of each of these three sources of tax law: statutory, administrative, and judicial ?
Deductions and Exemptions
• Define all parts of the federal income tax formula
• Arrive at the correct number of personal exemptions
• Apply dependency exemption rules
• Calculate the tax liability
• Determine the correct filing requirement and status for a taxpayer
• Understand basic property transaction rules
Gross Income – Concepts and Inclusions
• Distinguish between the economic, accounting, and tax concepts of gross income
• Determine if a taxpayer should pay the tax on a particular item of income
• Determine if certain items are considered income by applying the Internal Revenue Code rule
Exclusions from Gross Income
After completing this section, you should be able to do the following:
• Identify when to exclude an item from gross income
• Identify when receipts can be excluded under the tax-benefit rule
• Describe when income must be reported from the discharge of indebtedness
Deductions and Losses in General
• Determine the benefit derived from deductions for and from adjusted gross income
• Determine the special rules that apply to the following items: public policy limitations, political activities, excessive executive compensation, investigation of business opportunities, hobby losses, vacation-home rentals, payment of others’ expenses, personal expenditures, capital expenditures, related-party transactions, and expenses related to tax-exempt income
• Determine how to apply a bad debt deduction
• Determine the tax effects of worthless securities, including §1244 stock
• Correctly apply the tax rules for deductible and nondeductible losses of individuals
• Determine the proper application of a casualty loss deduction
• Calculate the domestic production activities deduction
• Determine the effect of the carry back and carryover provisions
• Identify the time periods for the different tax depreciation methods
• Determine the cost recovery under MACRS
• Identify listed property and special rules for them
• Calculate the amortization amount for an intangible asset
• List the business and personal expenditures that are deductible either as miscellaneous itemized deductions or as other itemized deductions
• Calculate the moving expense deduction
• Calculate the contribution to a retirement account
• Identify limitations on itemized deductions
Certain Itemized Deductions
• Identify deductible and nondeductible, personal expenses
• Identify medical expenses and calculate the medical expense deduction
• Identify the deductibility of state and local income taxes and sales taxes
• Identify limitation on certain itemized deductions applicable to high-income taxpayers
• Explain why at-risk and passive loss limitations were put into tax law
• Identify the taxpayers subject to passive loss rules that limit deductions for losses
• Discuss the rules for identifying a passive activity
• Apply the rules for material participation
• Describe how passive loss rules apply to rental activities
• Explain why congress creates tax credits that reduce federal tax collections
• Identify the difference between refundable and nonrefundable credits and how they are applied
• Identify business-related tax credits
• Identify tax credits that apply to individual taxpayers
• What are the rules pertaining to partnership taxation?
• What tax impacts are there when forming a partnership with cash and property contributions?
• What accounting periods and accounting methods can partnerships use?
• Does a partnership have a taxable income?
• How is a partner’s income tax return affected by specific partnership items?
• Determine a partner’s basis in the partnership interest and explain how liabilities affect the basis computation.
• Are there limits on deductions for partnership losses?
• How are transactions between a partner and the partnership reported?
• What are the impacts to individual partners when liquidating a partnership?
• How is a selling partner’s gain or loss on the sale or exchange of a partnership interest reported?
• Do partnership provisions also apply to limited liability companies (LLCs) and limited liability partnerships (LLPs)?
Trusts, Estates, etc.
• What are trusts, estates, beneficiaries, and other parties?
• How are the accounting and taxable income of a trust or estate and the related taxable income of the beneficiaries determined?
• Illustrate the uses and implications of distributable net income.
• What are the objectives of financial accounting?
• What are generally accepted accounting principles?
• What ethical rules do accountants have to follow related to financial reporting?
• What are the basic assumptions used in accounting?
• What are qualitative characteristics of accounting information?
• What impact do constraints have on reporting accounting information?
• What is the rule-setting authority of the Financial Accounting Standards Board, the Securities and Exchange Commission with regard to accounting regulations and enforcement, and the International Accounting Standards Board?
Receivables — Valuation Methods
• What methods are used to account for bad debt expense?
• What is the journal entry to record bad debt expense under each method?
• How do you calculate the allowance for bad debt?
• What is the journal entry to record accounts receivables sold with recourse and without recourse?
• Explain how discounts offered to customers have an effect on the value of receivables
• What impact do free on board (FOB) terms have on inventory valuation?
• What is the effect of the dollar-value last-in, first-out (LIFO) on income and asset valuation?
Acquisition and Disposition
• What is the cost of property, plant, and equipment?
• How is construction-project interest costs recorded?
• What is a lump-sum purchase of assets, and how is each asset valued?
Depreciation and Depletion
• What is depreciation? What is accumulated depreciation?
• What are the different methods used for depreciation?
• What is the journal entry to record depreciation under each method?
• What is the best method to use for depreciation based on given circumstances?
• What method is used to calculate depletion?
• What is the difference between a tangible and intangible asset?
• What is goodwill?
• What is the estimated useful life of a trademark, copyright, and patent?
• What method is used to cost allocate an intangible asset?
• How are research and development costs accounted for?
• How do the impairment rules impact asset value?
• How are short-term payables recorded?
• How are dividends payable recorded?
• What are unearned (or deferred) revenues, and how are they recorded?
• What items are included in payroll and the associated payables?
• What is a contingency, and when do the disclosure requirements require recording in the accounting records?
• What is an imputed interest rate, and how is it used?
Long Term Liabilities
• What are the characteristics of different types of corporate bonds?
• Why are bonds issued at a price different from face value?
• How is a bond issue-price determined?
• How are the accounting entries different for straight-line and effective interest amortization?
• How is the accounting different for a bond issuance between interest dates?
• How is the value of long-term notes payable calculated?
• How is off-balance-sheet financing used?
Capital Acquisition from Investors
• How are stock issuances recorded?
• How are stock splits accounted for?
• How does the accounting change if a stock dividend is large vs. small?
• Does the income statement reflect gains from treasury stock reissuance?
• How do common and preferred stock differ?
• Do stock options have any effect on the balance sheet?
• What is done on each of the dates associated with a dividend?
Dilutive Securities and Earnings per Share
• How are stock options recorded?
• How is a conversion from debt to common stock recorded?
• What impacts does a convertible preferred class of stock have on earnings per share?
• Do stock dividends and stock splits impact earnings per share calculations?
• What is the difference between basic earnings per share and diluted earnings per share?
• What are the different types of securities?
• How do the accounting entries change for securities at cost and at equity?
• What effect did the Securities Act of 1933 have on investments?
• What effect did the Securities Exchange Act of 1934 have on investments?
• What are the eight ways to recognize revenue?
• What is channel stuffing, and how does the practice affect revenue recognition?
• What methods can be used to report revenue on long-term construction projects?
• How do the rules change when accounting for discontinued operations?
• What are extraordinary items?
• How does a change in accounting principle affect the income statement?
Accounting and Income Tax Rule Differences
• Using given data, what is deferred tax asset or deferred tax liability?
• Identify temporary and permanent tax differences.
• How are deferred taxes over multiple years affected based on the marginal-rate tax system?
• How do the rules for tax loss carry backs and carry forwards differ?
• What are intra-period tax allocations?
• What are two types of pension plans?
• What is the journal entry to record pension expense under each type?
• What is a defined benefit plan compared to a defined contribution plan?
• What are the four capitalization rules used to classify a lease as a capital lease or an operating lease?
• What is the journal entry to record the minimum lease payment?
• What is the journal entry to record a lease payment when a residual value is present?
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