2006 Small Business Tax Workshop Book

Table of Contents / Page No.

ENTITY SELECTION  1-66
How is Income Taxed?  2
Types of Entities  2-66
1) Sole Proprietorship  2-7
Non-Tax Considerations  2
Tax Considerations  3-7
Hiring the Children  4
Hiring the Spouse  5
Self Charged Rent  5
Advantages & Disadvantages  7
2) Partnership  7-14
Non-Tax Considerations  7-8
Tax Considerations  8-14
Section 754 Election  9-12
Advantages & Disadvantages  13
Partner’s Basis Worksheet  14
3) Corporation  15-56
Non-Tax Considerations  15-16
General Law  15
Corporate Formalities  15-16
Tax Considerations  16-56
S Corporation  16-20
S Corp. Shareholder Basis Worksheet  18
Employer/Employee Relationships  19
Advantages & Disadvantages of an S Corp  20
C Corporation  20-56
Qualified Personal Service Corp  21-22
Double Taxation  22-23
Payroll vs Dividend with Examples  23-27
Distributions to Shareholders  28-30
2006 Tax Rates  28
Tax Rate Examples  29-30
When are Corporate Taxes Due?  31
Social Security vs. S.E. Taxes  31
Accumulated Earnings Tax  33
Accumulated Earnings Tax Worksheet  34
Switch from C to S  35-36
Personal Service Corporation  37
Other Tax Determents of a C Corporation  38-39
Advantages & Disadvantages  39
Built-In Gains Tax  40-56
Built-In Gains Tax Worksheets  42-44
Built-In Gains Tax Example  45-55
4) Limited Liability Company  56-66
Non-Tax Considerations  56
One Member LLC  56-58
Tax Considerations  58-66
Husband and Wife (Community Property States)  59
Self-Employment Tax and the LLC  60-61
Advantages & Disadvantages of LLC  62
Required Records for LLC  62-63
LLC vs. LLP  64
Switching from Corporation to LLC  65
Switching from Partnership to LLC  65-66
DEPRECIATION RECAPTURE AND UNRECAPTURE  67-82
§1231 - Trade or Business Assets  67
§1245 - Gain from Disposition of Certain Depreciable Property  68
§1250 - Gain from Disposition of Certain Depreciable Realty  68-69
Recapture of depreciation under Code Sec. 1245  69
Depreciation Concerns  69-71
Depreciation Example  72-76
What about depreciation overlooked?  77-82
Comprehensive Example  78-82
BUSINESS VALUATIONS  83-108
Importance of Business Valuations  83-86
Allocating Purchase Price  87-88
Valuation Methods  90-105
Example Illustration  101-103
Concluding Points on Business Valuations  103-105
Sample Business Valuation  107-108
BUY-SELL AGREEMENTS  108-119
Funding Options  109-110
Types of Buy-Sell Agreements  110
Corporations - §303 and §302 Stock Redemption Plans  112
Other Aspects of Buy-Sell Agreements  114-119
CORPORATION LIQUIDATIONS  121-137
Reasons for liquidation  121
Drawbacks to liquidating a C Corporation  121-122
Covenant Not to Compete Cases  124-126
Liquidating a C Corporation (Examples)  126-128
Liquidating an S Corporation  128-129
Observations of Liquidation Examples  130-131
Comprehensive Liquidation Example  131-137
Section 1244 Stock  153-155
Section 338 Election with Example  155-157
Qualified Small Business Stock  158
§1202 - Exclusion of Gain  159
§1045 - Rollover of Gain  159
DOMESTIC PRODUCTION ACTIVITIES DEDUCTION  161-170
Activities eligible for U.S. production activities deduction  161
Food and Beverage Industry  161
What constitutes manufacture “in significant part"  162
Substantial in nature test  162
Safe harbor test  162
Packaging design and development activities  163
Domestic production gross receipts defined  164
Cost of goods sold and other expenses allocated  164-165
Taxable income/AGI limitation  166
50%-of-W-2-wages limitation  166-167
Domestic Employees  168
Deduction of pass-thru entities  168
Deduction of “expanded affiliated groups”  168
Domestic production activities deduction example  168-169
Form 8903  169
Businesses that qualify and don’t qualify for the deduction  170
ENERGY EFFICIENT NEW HOME CONSTRUCTION CREDIT   171-174
Qualifications  171-172
Certification guidance  172
Software programs  173
Example  173 -174
Form 8908  174
S CORPORATION DISTRIBUTIONS  175-195
Sample employment wages  176
Payroll vs. Dividends with Examples  177-181
Constructive Dividends  181
Reducing the dividend dilemma  182-186
Interest/Loan Repayment  188-191
SECTION 351 TAX-FREE INCORPORATION  196-205
Sole Proprietorship to C Corporation  197-198
What if we make a mistake?  198-199
Section 351 Transfer Statement  200-201
Partnership to C Corporation?  203-206
Personal Holding Company (PHC) Status  207-210