Advanced Income Tax
BUS - A339 — Spring 2002

W. Vetter	Website: http://users.ipfw.edu/vetterw
350 Neff	Email: wvvetter@hotmail.com
219-481-6856	Course Listserv: a339@listserv.ipfw.edu

COURSE OBJECTIVES:

This course is "advanced" in the sense that the student must have taken a basic tax course before taking this course. This course is "introductory" in the sense that it introduces students to parts of the federal Internal Revenue Code ("IRC") not included (or only briefly mentioned) in a basic tax course. It will be assumed that students have a working knowledge, or at least a rudimentary understanding, of the topics covered in a basic tax course. Having an basic tax course text available may be helpful because this course's text does not discuss things like what qualifies for current business deduction, the definition of § 1231 property, provisions relating to taxing individuals, etc.

As with a basic tax course, this course necessarily discusses the details of various Internal Revenue Code (IRC) provisions. That can present problems because the details of tax law can change daily; significant changes happen somewhat less frequently. However, the basic structure and underlying concepts have not changed significantly for the past half-century. Therefore, this course emphasizes concepts and operating principles. Memorizing the details of a multitude of IRC provisions will not be required. However, this is not simply a theory course; it will be necessary to apply tax rules to real-life situations - both for understanding the concepts and principles and to pass this course. At times, IRC section numbers will be used in the discussion because they are generally known, important provisions that are usually referred to by number (like § 1231 mentioned above).

Taxation is not a stand-alone subject, it requires some understanding of accounting, law, economics, politics, public financing, and other topics. For the most part, this course concentrates on tax law but since it deals with things like "income" and "expenses", accounting is also significant. Accounting students should be careful to distinguish between "tax accounting" and general accounting. For the most part, those two are the same. But, because of differing purposes and needs, there are some significant differences. Students should also keep in mind that a single "real world" event can have significantly differing tax impacts on the participants.

This course, and many others, creates an artificial environment. During the course, tax will be the sole consideration in solving problems. In the "real world" many other factors influence decisions – tax factors are often not as important as other factors, such as customer relations, production logistics, etc.

As with a basic tax course, the various statutory and regulatory provisions are all interrelated. An initially simple question can lead to a multitude of rules, exceptions, qualifications, etc. The goal of this course is to assist students in building a foundation of basic tax principles and concepts. It is not possible (or desirable) to address every exception to every, or any, tax rule. The purpose is to provide tax education, not tax training. Fundamental concepts and more common transactions will be emphasized. This should provide a good starting point for future study of taxation. It should also provide a better understanding of the impact of tax laws on daily activities and provide insight into how tax laws affect business and financial decisions.

By the end of this course, students should:

• Have a good understanding of the IRC's basic provisions relating to formation, operation, and termination of a variety of types of business organization

• Understand relevant tax terminology

• Understand distinctions between tax accounting and general accounting

• Be able to identify tax issues facing business persons and business organizations when considering the creation or transfer of control over business assets

• Be able to efficiently find applicable tax laws and rules (research)

• Make informed judgments based on research to resolve tax issues

• Know the basic techniques and procedures necessary to prepare tax returns of business organizations

COURSE TEXT:

Required: Corporate, Partnership, Estate and Gift Taxation, 2002 Edition, by Pratt and Kulsrud

Optional: The Study Guide published to accompany the required text.

Optional: The Selected Code and Regulations publication by West Publishing Co.

Some persons find a Study Guide helpful – purchasing that is a purely personal decision.

Many students in the introductory tax course expressed frustration because the course text did not include the actual Code provisions. The text required for this course also does not include Code provisions. However, it does provide more references to the IRC, regulations and other authorities. The optional Code and Regulations text includes most, if not all, of the Code provisions that will be discussed during the course. Unfortunately, as with the required text, it was out of date (in some details) before it was printed.

GRADING

Grades for this course will be assigned on a "percent" scale as follows:

A = 90 - 100% B = 80 - 89.99%

C = 70 - 79.99% D = 60 - 69.99%

The components of the final grade will be:

	Exams		65%
	Exam 1	20%
	Exam 2	15%
	Exam 3	20%
	Exam 4	10%
	Research Project		20%
	Problems & Participation		15%

RESEARCH PROJECT

The research project requires examining a given fact situation, identifying and researching the tax-law issues raised by that situation, and preparing a memorandum. The paper to be submitted will be in the form of a memorandum to a supervising tax professional, or to the client's file. It will require a recitation of the relevant facts, identification of the specific tax issue(s) raised, a discussion of the relevant rules and their application to the given facts, and a recommendation. Detailed instructions are given in the Research Project Instructions and Research Project Scenario handouts/web-pages.

HOMEWORK and CLASS PARTICIPATION

For most class sessions, there are a number of assigned problems. The assigned problems will be found at the end of the chapter assigned for that class period. "Points" will be given for each answer submitted, if it appears to be a reasonable attempt to answer the assigned question.

Answers to assigned problems are due on the class day following the assignment/discussion day. The text's authors' answers to those problems will be available at the course website the day following the assignment/discussion day. This arrangement somewhat detracts from the grading objective of assigning problems. However, it allows students to compare their answers to the authors' answers and, to determine why there is a difference, if there is one. For this reason, the "class participation" portion of this grading factor will have greater weight than the "homework" factor.

During each class, there will be some discussion of problems - frequently the assigned homework problems. Class participation will consist, in part, of proposing solutions to discussion problems and other issues. Asking and answering questions is also part of class discussion. Students who have not read the assigned materials before class will find it difficult to meaningfully participate in class discussions. Students should be prepared to be called upon during each class session. When discussing the answer to any particular question, assigned chapter problem or otherwise, students should be aware that the more important consideration is not the resulting numbers, but the "how" and "why" of how those numbers were determined.