Organization and Content

Principles of Taxation for Business and Investment Planning consists of six parts with a total of 17 chapters. The following summaries of each part describe the sequencing and content of the chapters.

Part One, Exploring the Tax Environment, consists of two chapters that familiarize students with the global tax environment. Chapter 1 describes the environment in terms of the legal relationship between taxes, taxpayers, and governments. Definitions of key terms are developed, and the major taxes that businesses routinely encounter are identified. Chapter 2 considers the tax environment from a normative perspective by asking the question: "What are the characteristics of a good tax?" Students are introduced to the notions of tax efficiency and tax equity and learn how contrasting political beliefs about efficiency and equity continue to shape the tax environment.

Part Two, Fundamentals of Tax Planning, concentrates on developing a methodology by which to incorporate tax factors into business decisions. Chapter 3 introduces the pivotal role of net present value of cash flows as the basis for evaluating financial alternatives. Students learn how to compute tax costs and tax savings and how to interpret these numbers as cash flows. Chapter 4 covers the basic maxims of income tax planning. The characteristics of the tax law that create planning opportunities are explained, and the generic techniques for taking advantage of those opportunities are analyzed.

Part Three, The Measurement of Taxable Income, focuses on the quantification of taxable income generated by business operations. Chapter 5 covers the computation of taxable income or loss from ongoing commercial activities, with special emphasis on differences between taxable income and net income for financial statement purposes. Chapters 6 and 7 explore the tax implications of acquisitions and dispositions of business property, while Chapter 8 is devoted to nontaxable exchanges.

Part Four, The Taxation of Business Income, teaches students how to calculate the tax liability on a given amount of business income. Chapter 9 describes the function of sole proprietorships, partnerships, and S corporations as conduits of income, while Chapter 10 discusses corporations as taxable entities in their own right. Chapter 11 builds on the preceding two chapters by exploring the tax planning implications of the choice of business entity. Chapter 12 broadens the discussion by considering the special problems of businesses generating income in more than one tax jurisdiction. This chapter introduces the reader to both multistate and international tax planning strategies.

Part Five, The Individual Taxpayer, concentrates on the tax rules and regulations unique to individuals. Chapter 13 presents the individual tax formula and acquaints students with the complexities of computing individual taxable income and tax liability. Chapter 14 covers compensation and retirement planning. Chapter 15 discusses the tax consequences of investment and rental activities and introduces wealth transfer planning. Finally, Chapter 16 analyzes the tax consequences of personal activities, with particular emphasis on home ownership.

Part Six, The Tax Compliance Process, consists of Chapter 17, which presents the important procedural and administrative issues confronting taxpayers. This chapter covers the basic rules for the payment of tax and the filing of returns, as well as the penalties the Internal Revenue Service may impose on taxpayers who violate the rules. Chapter 17 also describes the judicial process through which taxpayers and the IRS resolve their differences.

The Tax Research appendix provides a succinct overview of the tax research process and is designed to prepare students to solve the research problems included at the end of each chapter. The appendix identifies and explains the six steps in the tax research process and contains a cumulative example of the application of each step to a research case.