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Principles of Taxation for Business and Investment Planning, 5/e
Sally M Jones, University of Virginia
The Taxation of Business Income
The Choice of Business Entity

Chapter 11 Objectives

After studying this chapter, you should be able to:

1. Explain the advantage of operating a business with start-up losses as a passthrough entity.

2. Calculate the difference in after-tax cash flow attributable to operating a business as a passthrough entity rather than as a corporation.

3. Describe how families can use partnerships or S corporations to shift business income from individuals in a high tax bracket to individuals in a low tax bracket.

4. Identify the characteristics of partnerships and S corporations that owners should consider in choosing between the two types of passthrough entity.

5. Define the term constructive dividend.

6. List the three factors that can create tax savings when individuals use closely held corporations as tax shelters.

7. Identify the reasons why Congress enacted the accumulated earnings tax and the personal holding company tax.

8. Explain how the tax rates apply to income earned by members of a controlled corporate group.





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