The CCH Principles of Business Taxation course approaches the study of taxation from the perspective of the student who will become a business person faced with business decisions that are inevitably affected by tax considerations. This perspective leads to a very different coverage in this textbook -- coverage that is useful for accounting, finance and general business majors. The new edition focuses on the central concepts that build our tax framework and avoids small exceptions and details to ensure that the student can confidently master the critical underpinnings of federal taxation. It abandons minutia that not only affects a very small number of taxpayers, but also tends to change often. In this way, there are no wasted motions and students gain a stronger, more solid understanding of federal tax principles.
Many items that pertain specifically to businesses (for example, inventory valuation issues) usually not discussed in a traditional undergraduate tax textbook are covered in this book. Although so many of the exclusions, deductions, and credits apply equally to individual and corporate taxpayers, this book focuses on the business perspective. An advantage to this approach is that most of the students who take only one course in taxation will learn how businesses are taxed and, in turn, will have a better appreciation for how taxes affect business decisions. Another advantage to this approach is that the topics dovetail into other business, finance and accounting course work.
While the focus is on concepts and how taxes affect business decisions, individual income taxation is not abandoned. After all, many core tax concepts apply to individuals as well as businesses, and thePrinciples of Business Taxation course is not shy in pointing out such application. The book also includes a special chapter on individuals (sole proprietorships) and one on pass-through entities that tie together the underlying threads concerned with these taxpayers throughout the text.
PART I: OVERVIEW OF TAXES AND THE FEDERAL INCOME TAX SYSTEM
- Part I of the textbook introduces students to the concept of taxes to gain a better appreciation for why taxes exist and how taxes allow governments to provide goods and services. The discussion involves equity considerations, and introduces the "ability to pay" and "wherewithal to pay" concepts, among others. After providing students with a survey of the various taxes that governments impose, the federal income tax is discussed in detail, since it is the focus of this book. An overview of the individual and corporate taxable income formulas is provided, as well as an introduction to the concept of flow-through entities as another alterative to operating a business. This discussion sets the groundwork for the rest of the book. The second half of this Part discusses sources of U.S. federal income tax laws -- the Internal Revenue Code, Treasury regulations and case law. In addition to introducing students to the various types of tax authority, the "hierarchy" of these sources are discussed along with an introduction to tax planning and tax research.
PART II: FEDERAL TAXATION OF BUSINESS INCOME AND DEDUCTIONS
- Part II illustrates how businesses calculate taxable income starting with a discussion of accounting periods and methods, a more detailed overview of taxable income and how taxes are owed or refunded. The focus then shifts to a discussion of which items of income are taxed and which expenditures can be deducted against taxable income.
PART III: TRANSACTIONS INVOLVING BUSINESS PROPERTY
- Part III provides a substantive discussion of the tax consequences of owning property, such as depreciation, gain/loss on disposal, and the rules pertaining to property transactions. A comparison of the financial accounting depreciation methods and tax laws is emphasized in the chapter.
PART IV: CALCULATING TAX LIABILITY AND TAXES OWED
- Part IV discusses calculation of tax liability and taxes owed (refunded) in detail, with the focus on businesses that pay taxes -- sole proprietorships and corporations.
PART V: SPECIFIC BUSINESS ENTITY ISSUES
- Part V discusses the tax laws unique to each of the three types of business: corporations, sole proprietorships, and flow-through entities. This Part starts with the discussion of corporate distributions and the reconciliation of net income and taxable income. Then the book provides an understanding of how businesses operated as sole proprietorships fit into the owner's individual tax return, as individuals are often shareholders in corporations or the owners of flow-through entities. The expanded taxable income formula for individuals is discussed keeping the discussion of the personal deduction (from AGI) kept to a minimum. The progressive rate structure that applies to individuals, and the reduced tax rates that apply to qualified dividends and net capital gains are emphasized in the chapter. The role of flow-through entities as an option for operating a business rounds out the coverage for this Part.
