Fundamentals of Federal Income Taxation Outline - DOC

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					                          ACCOUNTING 6936
                             Spring, 2006

                           James A. Fellows, Ph.D, CPA
                               Professor of Accounting
                                 College of Business
                      University of South Florida St.Petersburg
                                Phone: 727-553-4587

PREREQUISITES: TAX 4001 [Concepts of Federal Taxation]
               TAX 5015 [Taxation of Business Entities]
               [or their equivalent from another university]

There is absolutely no exception to the rule for the course prerequisites. This course
assumes that you have the necessary background in general tax accounting principles,
especially knowledge of the basic fundamentals of business taxation.


Publisher: Commerce Clearing House
ISBN: 0-8080-1386-6
Author: Michael Schlesinger

The book is available at USF St. Petersburg Bookstore as well as the Bayboro Bookstore
on the USFSP campus. The book is also available, for a sharply higher price, at the
website for CCH: Purchase through the website is an option if
you have time constraints getting to the bookstore.

SECTIONS, Martin B. Dickinson, Editor, Commerce Clearing House, Inc.

The book is also available at the USFSP bookstore, as well as the CCH website. [If you
have access to the current Code and Regulations from another source, this also is
acceptable]. USF students have access to LEXIS and the CCH Tax Research libraries
through the “My USF” portal [Go to USF Libraries in “My USF”]. You can access the
entire Code and Regulations there for free. The Code and Regulations are also available
for free at the website:

In addition to the text, Code and regulations, there will be numerous handouts, consisting
of journal articles, revenue rulings, and court cases. These will be assigned throughout
the semester.

COURSE DESCRIPTION: This course will undertake a discussion of advanced topics
on the subject of S Corporations and the current issues that affect these entities and their
shareholders. Topics include the formation and liquidation of S corporations, tax issues
from their operation, the limit on loss deduction by shareholders and the tax
consequences of distributions to shareholders.

course we will also emphasize the social responsibility of these business entities to
comply with the various tax laws and operate legitimate and productive enterprises. This
is not a course in “how to game the system” with socially irresponsible tax shelters that
have no economic purpose other than the reduction of tax liabilities. Students wishing to
understand “how to game the system” will not find any instructions along this line from
this course. In other words, just because something is legal does make it ethical.
Therefore we will assume that the business entities in this course are formed for the
purpose of generating profits and income to their owners from legitimate and
economically productive enterprises, those which not only benefit their owners but also
benefit their surrounding communities by fostering economic growth and employment.

                                        COURSE OUTLINE

In the following outline I refer to the main text by Michael Schlesinger as MS. We
will cover several topical areas for each exam, as noted below. The exact days we
cover them is hard to predict, because it is based on “how things go” in class. Also,
please note that we do not have class on the following dates:

Monday, January 16: MLK Holiday

Monday, March 13: Spring Break

Exam 1:           February 13

Topical Coverage:

(1)      Overview of Form 1120S and K-1; Formation of the S corporation: Section 351
         rules; Overview of S Corporation taxation: Tax Considerations in Electing S

         MS: Chapter 1
         [Readings 1 and 2 at USF Blackboard: Corporate Formations].
         Code Sections 351(a)(b); 357(a)-(c); Code Sections 358, 362
         Study Revenue Ruling 68-55

(2)      Trusts as Shareholders; The Subchapter S Election
         MS: Chapters 2, 3, 4; Omit Chapter Sec. 306 on Electing Small Business Trusts.

         Code sections 1361(a)-(b)(1)(2), 1362(a)-(d); Reg. Secs. 1.1362-1, but omit

(3):     Tax Years and Accounting Methods
         MS: Chapters 5: Omit Chapter Section 502.04 on the Code Sec. 444 election.

         Code section 1378; Reg. Sec. 1.1378-1
         Read Revenue Procedure 2002-28. This is easily found at

(4)      Income and Loss Allocations
         MS: Chapter 6

         Code sections 1363(a)-(c); 1366(a)-(c):
         Reg. Sec. 1.1363-1; Reg. Sec. 1.1366-1



Exam 2:           March 27

Topical Coverage

(1)      Expenses of the S corporation and shareholders
         MS: Chapter 7: Omit Chapter sections 719-721; Omit Chapter section 723

         Code sections 1363(c)(1); Reg. Sec. 1.179-1(f),(h)

         Article: S Corporations and Salary Payments to Shareholders: A Major Issue for
         the IRS, by James A. Fellows and John F. Jewell, The CPA Journal,
         forthcoming. [This is available on USF Blackboard as Reading # 3].

(2)      Corporate Level Taxes
         MS: Chapter 8

         Code sections 1363(d); 1374, 1375, 1366(f): Reg. Sec. 1.1374, 1.1375

(3)      Shareholder Basis and Losses
         MS: Chapter 9

         Code sections 1366, 1367, 1371(e): Reg. Sec. 1.1366, 1.1367

         Article: Tax Basis and Shareholder Guarantees of S Corporation Debt: The
         Economic Outlay Doctrine Revisited, by James Fellows and Michael Yuhas;
         TAXES, November 2000.

         Article: Corporations, Shareholders, and the Self-Rental Rule for Passive Losses,
         by James A. Fellows and John F. Jewell, TAXES, August 2005

Exam 3:           May 1

Topical Coverage

(1)               Distributions to Shareholders
                  MS: Chapter 10

                  Code section 1368; Reg. Sec. 1.1368

(2):              Selected Topics in Income and Estate Tax Planning
                  MS: Chapter 11

                  In Chapter 11 OMIT the following Chapter sections:

                  Sections 1109-1111, 1120, 1125

                  Article: Section 1244 Losses and the S Corporation, by James A. Fellows,
                  Journal of Passthrough Entities, May-June 2005.

                  Article: The Single-Member LLC or the Single-Shareholder S
                  Corporation? A Life-Cycle Analysis of the Tax Consequences of the
                  Chosen Path, by James Fellows and Michael Yuhas, Journal of
                  Passthrough Entities, May-June 2000

(3):              Reorganization of the S corporation: Liquidation of the S corporation
                  MS: Chapters 12 -13

                  In Chapter 13 the only assignment is Chapter section 1307 on the topic of
                  One-Member Limited Liability Companies and their comparison to S corps

                  a) Article: S Corporation Redemptions, by James Fellows and Michael
                  Yuhas, Journal of Taxation of Corporate Transactions, March/April

                  b) Article: The Formation and Liquidation of the S Corporation, by
                  James Fellows, Journal of Taxation of Corporate Transactions,
                  September/October 2003.

                  Code sections 1362(d)-(f); Reg. Secs. 1.1362-2,-3,-4,-5.

(4)               Subchapter S Subsidiaries
                  MS: Chapter 14

                  Code section 1361(b)(3); Reg. Secs. 1.1361-2, 3, 4, 5

                                   GRADING POLICY

The final grade for the course will be based on a maximum total of 150 points, distributed
as follows:

Exam One:                      45 points
Exam Two:                      45 points
Exam Three:                    45 points
Term Project                   15 points

All exams are open-book, open-note, open-everything. None of the exams are
comprehensive. The term project will be explained at the beginning of the year. Final
course grades are based on a total of 150 points and are allocated as follows:

A+             =       144-150
A              =       136-143
A-             =       134-135
B+             =       131-133
B              =       120-130
B-             =       116-119
C+             =       113-115
C              =       100-112
D              =       Below 100 [A grade of D is a failing grade for a graduate course]

NOTE: The term project for the semester is due on April 24. The project can be
found at the USF Blackboard System for the course. Look under “Assignments.”

The instructor reserves the right to make small additions to your final point total based on
your class participation. Class participation includes more than just showing up to class. I
will not, however subtract points from your totals for lack of class participation. If you
earn a grade strictly on the exams and term project, I will not lower that grade.

I also reserve the right to make small additions to your final point total based on your
class participation. Class participation includes more than just showing up to class. I will
not, however subtract points from your totals for lack of class participation. If you earn a
grade strictly on the exams and term project, I will not lower that grade.


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