Tax Core Introduction: Individuals 2024
Edition: 4
Copyright: 2024
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“Learning federal tax law is simple!” No, quite to the contrary, Albert Einstein stated “The hardest thing in the world to understand is the income tax." So, if learning federal taxation is difficult, then teaching taxation is definitely a challenge in today’s world of complex tax laws and various student distractions.
Tax Core Introduction: Individuals 2024 is a key to successful student learning, much like a textbook in introductory accounting. Introductory students have a limited frame of reference, so the textbook must be readable and understandable. Students are more likely to spend time studying textbook content that flows well and limits numerous complex terms and language. This textbook is a primary resource for students in their first tax course. They are not ready to study the Internal Revenue Code, Treasury Regulations, or IRS Publications.
Tax Core Introduction: Individuals 2024 is designed to enhance student study and learning by focusing on fundamental tax concepts, avoiding unnecessary details, and minimizing, where possible, the numerous exceptions that contribute to learning difficulty. The AICPA-NASBA CPA Exam Evolution initiative was one of several important drivers in developing the material covered in this book. As noted in the CPA Exam Evolution, the core competencies are accounting, auditing, taxation, and technology. After completing a semester using this textbook, students should have the Tax Core Foundation as described by the CPA Exam Evolution project and have a strong tax background to move forward into a Tax Compliance and Planning Discipline.
By stressing tax concepts throughout the book, students should understand more, remember more, and be able to adapt easier to future tax law changes. The material covered is consistent with the AICPA Tax Staff Essentials course (except for pass through entity basis and distributions) for new accounting staff. The chapters of Tax Core Introduction: Individuals 2024 are organized as follows: learning objectives, contents, overall tax concept for the chapter, tax concept for the topic within the chapter, topical discussion with numerous examples, and end of chapter questions, exercises, and problems. Some chapters may have appendices. Citations are provided in footnotes, which makes reading a passage easier and less technical.
Why should you adopt or use this book? First, tax law is complex and often learning materials mirror the internal revenue code or other tax law sources and thus cover too much detail. Second, the problem this creates is that students, especially introductory students, typically do not take the time to read and study textbooks sufficiently to master the material. They may try to memorize laws and rules without understanding the concept. Tax Core Introduction: Individuals 2024 strives to cover relevant topics in a manner that students will read and study more, resulting in better comprehension and retention of fundamental tax concepts.
Preface
Tax Systems and Foundation
Chapter 1 Tax History and Foundation
Early us taxation
Sixteenth amendment
Tax law codification
Theoretical foundation
Shifting the tax burden (cost)
Implicit tax cost
Questions
Exercises
Chapter 2 Alternative Tax Systems
Forms of taxation
Income tax
Transfer taxes
Property tax
Sales, use, and excise taxes
Payroll taxes
Self-employment tax
Franchise tax
Questions
Exercises
Problems
Chapter 3 Factors that Influence Tax Law
Taxes and government spending
Political motives
Social behavior
Tax equity
Judicial doctrines
IRS administration and collection
Questions
Exercises
Problems
Working with Tax Law
Chapter 4 Tax Administration
Statutory authority
Today’s IRS
IRS examination
Courts
Tax return filing requirements
Tax formula
Filing status
Gross income
Deduction for adjusted gross income
Deduction from adjusted gross income
Personal and dependent exemptions
Tax computation
Penalties
Estimated Advance Tax Payments
Questions
Exercises
Problems
Chapter 5 Tax Research and Practice
Tax research process
Evaluation of evidence
Relevant tax considerations
Discern tax authority
Power of authority
Probably outcome and recommendation
Communicate results
Tax practice
Circular 230
AICPA Standards of Tax Practice
Ethical issues
Compliance
Questions
Exercises
Problems
Gross Income Determination
Chapter 6 Accounting Methods and Periods
Overall accounting method
Accounting method for specific items
Inventories
Fixed asset cost
Bad debts
Prepaid income
Long-term contracts
Depreciation and depletion
Installment sales
Change of accounting method
Accounting periods
Tax year of an S corporation shareholder or partnership partner
Tax year of a C corporation, S corporation, or partnership
Changing a tax year
Questions
Exercises
Problems
Chapter 7 Gross Income Inclusions
Gross income defined
Realization versus recognition
Forms of income
Constructive receipt
Assignment of income
Specific items included in gross income
Compensation for services
Business income
Property transactions
Investment income
Retirement income
Alimony
Cancellation of debt
Prizes and awards
Damage awards
Gambling winnings
Barter Income
Questions
Exercises
Problems
Chapter 8 Gross Income Exclusions
Gifts, bequests, and inheritances
Gain on sale of personal residence
Life insurance proceeds
Accelerated death benefits
Employee death benefits
Municipal bond interest
Scholarships
Education saving bond
529 Educational savings plan
Coverdell savings account
Worker’s compensation
Disability insurance
Long-term care insurance
Payment for personal injury
Foreign earned income
Canceled debts
Employee fringe benefits
Cafeteria plans
Flexible spending accounts
Accident and health insurance
Health reimbursement accounts
Employee achievement awards
Adoption assistance benefit
Dependent care assistance
Educational assistance
Employee discounts
Group term insurance
Health savings accounts
Lodging on employer premises
Meals provided employees
Moving expense reimbursement by employer
No-additional cost services
Transportation or commuting benefits
Working condition benefits
Questions
Exercises
Problems
Deductions and Losses
Chapter 9 Deductions
Deductions for adjusted gross income
Educator expenses
Health savings account
Expenses of reservists, performing artists, and government officials
Moving expenses
Self-employment tax
Self-employed simplified employee pension, simple, and qualified plans
Self-employed health insurance
Penalty on early withdrawal of savings
Alimony paid
IRA deduction
Student loan interest
Tuition and fees
Domestic production activities deduction
Deductions from adjusted gross income
Medical and dental expenses
Taxes
Interest
Charitable contributions
Casualty and theft losses
Questions
Exercises
Problems
Chapter 10 Taxpayer Losses
Capital loss versus ordinary loss
Passive loss
Bad debt losses
Business bad debt
Nonbusiness bad debt
Net operating losses
Gambling losses
Hobby loss
Investor losses
Related party losses
Questions
Exercises
Problems
Business and Investment Expenses
Chapter 11 Deductions Related to Generation of Income
Nonemployment business expenses
Inventory
Uniform capitalization rules
Repayment (claim of right)
Operating lease expense versus capital lease
Carrying charges
Research and development
Circulation costs
Retired asset removal
Barrier removal
Repair and maintenance
Expenses contrary to public policy
Lobby expenses
Business expenses pertaining to employees
Travel and meals
Employee pay
Employee benefits
Retirement
Key person life insurance
Investment interest
Home office expense
Questions
Exercises
Problems
Chapter 12 Depreciation, Section 179 Deduction, Depletion, Amortization
Determination of tax depreciation
Real property
Personal property
Listed property
Bonus depreciation
Section 179 deduction
Amount of deduction
Sport utility vehicles
Business income limit
Depletion
Cost depletion
Percentage depletion
Amortization
Start-up costs and organizational costs
Cost of getting a lease
Costs of section 197 intangibles
Geological and geophysical costs
Pollution control facility costs
Research and experimentation costs
Questions
Exercises
Problems
Property Transactions 223
Chapter 13 Gains and Losses from Property Transactions
Amount realized
Basis determination
Personal tangible property
Real property
Property received by gift
Property received by inheritance
Property converted from personal use to business use or rental property
Bargain purchase
Abandoned property
Section 1231 Gains
Depreciation recapture
Section 1245
Section 1250
Installment sales
Questions
Exercises
Problems
Chapter 14 Like-Kind Exchanges and Involuntary Conversions
Like-kind exchange transactions
Excluded property
Like-kind exchange requirements
Like-kind property
Boot given or received
Basis of property
Liabilities assumed
Holding period
Involuntary conversions
Event or action
Amount realized
Gain realized or recognized
Replacement property
Basis of replacement property
Severance damages
Questions
Exercises
Problems
Tax Computation
Chapter 15 Determination of Tax Liability
Tax liability
Tax liability based on taxable income
Tax credits
Refundable credits and nonrefundable credits
Foreign tax credit
Child tax credit
Credit for child and dependent care expenses
Education credits
Adoption credit
Mortgage interest credit
Minimum tax credit
Residential energy efficient property credit
Retirement savings contribution credit
Credit for tax on undistributed capital gains
Credit for excess social security tax or railroad retirement tax
Alternative minimum tax
Amt tax preferences
Amt adjustments
Amt exemption
Amt tax rate
Amt FTC
Other taxes
Questions
Exercises
Problems
Danny P. Hollingsworth, CPA, is emeritus Joseph Decosimo Professor of Accounting and Department Head of Accounting in the Gary W. Rollins College of Business at the University of Tennessee at Chattanooga. He received a bachelor’s degree with a major in accounting and a master’s degree in business from Mississippi State University, a doctoral degree in business at the University of Memphis, and postdoctoral work in educational management at Harvard University’s graduate school of education. With extensive experience in both academia and industry, Dr. Hollingsworth has a noteworthy research record with publications in both scholarly and professional journals as well as book sections such as the National Income Tax Workbook, which is used nationwide for tax training of CPAs and other professionals. He has been president of the Federation of Schools of Accountancy, Trustee of the Mississippi Tax Institute and has served in a number of committee positions with the American Accounting Association, American Taxation Association, and the Federation of Schools of Accountancy.