Choice of Entity & Tax Issue Entity Formations: Part 2

Author: Jennifer Kowal

CPE Credit:  4 hours for CPAs
4 hours Federal Tax Related for EAs and OTRPs
4 hours Federal Tax Law for CTEC

Part 2 in a two-part self-study series – this 4 CPE hour self-study course will discuss the tax advantages and disadvantages of each entity type. The course will also cover the tax treatment and potential pitfalls involved in forming each type of entity.

This Course Reflects Entity Formation Choices and Decisions after the Tax Cuts and Jobs Act of 2017
Choosing which type of entity to use to form and organize a new business can be challenging. One must consider and weigh costs and benefits today vs. the future, without knowing what the future will bring. Often, business concerns suggest one type of entity while tax concerns suggest another. These decisions are also affected by the Tax Cuts and Jobs Act of 2017 with the new 20% passthrough deduction and the lower rate for C corporations. While much of that remains uncertain, Jennifer Kowal will discuss the impact of the tax bill and how it needs to become part of the decision making process in 2018.

This course is excluded from the following subscription programs:
Value Pass, Self-Study Package, Webinar Package, Self-Study & Webinar Package, and Firm Package.

Publication Date: January 2018

Designed For
Tax practitioners at all levels who advise on the tax issues involved in forming business entities.

Topics Covered

  • Section 351
  • Tax Consequences of §351
  • S Corps Formation
  • Partnership Contributions
  • Effect of Debt on Gain
  • Formation of a Partnership- Contribution of Property
  • Contribution of Property- Effects of Liabilities
  • Contribution of Property- Partner's Basis in Partnership Interest
  • Partnership's Basis in Property
  • Comparison of Choice of Entity Effects on Income Taxes and Other Considerations
  • C Corporation-Double Taxation Example-Ordinary Income
  • Passthrough-Single Taxation Example
  • Other Specialty Forms of Ownership
  • Consider Passthrough of Losses
  • Outside Investors
  • Exit Strategy
  • Tax Distributions
  • Tax Complexity
  • Basis Step Up
  • Other LLC Advantages
  • Tax Cut and Jobs Act Effects on Choice of Entity Considerations
  • Lower Corporate Rate
  • 20% Passthrough Deduction
  • Other Provisions
  • Factors to Consider under TCJA
  • Further Discussion of Entity Choice Under New Law

Learning Objectives

  • Describe the business advantages and disadvantages of using C corporations, S corporations, LLCs, partnerships, and sole proprietorships
  • Identify the tax advantages and disadvantages of each entity type
  • Describe tax consequences to forming various types of entities
  • Differentiate IRC sections and how they apply
  • Describe tax consequences of a Section 351 exchange
  • Identify the formula for determining the aggregate basis in stock
  • Recognize tax consequence of a Section 351 transaction
  • Describe partner's basis in a partnership interest
  • Recognize characteristics of a real estate investment trust
  • Recognize which types of entities do not allow entity debt to count toward shareholder basis
  • Identify types of entities and the effects on income taxes
  • Identify an advantage to the Limited Liability Company structure
  • Identify the C Corporation Tax Rate as a result of the TCJA
  • Recognize statements with respect to net operating loss deduction and the impacts from the TCJA
  • Describe Revenue Rulings
  • Identify when a corporation recognizes no gain or loss when it acquires property
  • Differentiate IRS Sections
  • Describe the characteristics Section 721 (a) provides a partnership with
  • Identify why Section 731 partner does not recognize gain on a distribution unless cash exceeds
  • Recognize a partner's beginning basis in a partnership
  • Identify characteristics of joint ownership of property as opposed to an investment in a REIT
  • Differentiate types of investments are commonly issued by C Corporations with respect to venture capital investments
  • Identify exceptions to the 20% passthrough deduction as a result of the TCJA
  • Identify the new state and local tax deduction limitation as a result of the TCJA
  • Recognize which tax provisions were repealed as a result of the TCJA


Instructional Method

NASBA Field of Study
Taxes (4 hours)

Program Prerequisites
Basic experience with choice of entity and tax issues involved in entity formations.
Completing CPE course Choice of Entity & Tax Issue Entity Formations: Part 1.

Advance Preparation

Registration Options
Regular Fee $83.00

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