Lecture Notes For McGraw-Hill's Taxation of Individuals and Business Entities 2021 Edition, 12th Edition

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.1-1Chapter 1An Introduction to TaxINSTRUCTOR’S MANUALLearning Objectives1-1.Demonstrate how taxes influence basic business, investment, personal, and political decisions.1-2.Discuss what constitutes a tax and the general objectives oftaxation.1-3.Describe the different tax rate structures and calculate a tax.1-4.Identify the various federal, state,and local taxes.1-5.Apply appropriate criteria to evaluate alternate taxsystems.Teaching SuggestionsThis chapter provides an overview of why taxes are important, what a taxis, how to calculate a tax,various tax rates and tax rate structures, different types of federal, state, and local taxes, and how toevaluate atax system.One intent of the chapter is to get students thinking about the pervasive influenceof taxes and thus why it is important for a business or accounting student to understand taxes.Discussinghow taxesaffectdecisions that they will face (buying a house, investing for retirement, etc.) is aneffective way topiquestudents’ interest.This chapter also provides an opportunity to motivate students by discussing the political importance oftaxes and the debateoveralternative tax systems.Throughout most of the chapter, you can tie the materialdiscussed back to the debateoveralternative tax systems.This is easily done in the section on evaluatingalternative tax systems and alternative tax ratestructuresbutmay also be done for other parts of the text.For example, when discussing how to calculate a tax, you can point out that once the tax base iscomputed, it is very easy to calculate virtually any tax.The difficulty is in determining the tax base. Theimplication of this understanding is that the tax rate structure (e.g., progressive versusproportional) haslittle effect on tax complexity.In teaching this chapter, the time that you spend in class will vary based on how much discussion that youwant to incorporate regarding evaluating tax systems and implicit taxes.Most of the concepts in thischapter are relatively straightforward, and thus, the chapter provides students with an introduction to taxwithout overwhelming them on the first day or so of class.This is particularly important if your studentshave some trepidation regarding their first tax course.Implicit tax is typically a difficult concept for students to understand.The text provides a good overviewof implicit tax.If you plan to cover implicit tax in some detail, you might alert students that this is adifficult concept and that they should be careful to get familiar with this discussion in the text prior toclass.

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.1-2Assignment MatrixLearning ObjectivesText FeaturesProblemTimeDifficultyLO1LO2LO3LO4LO5ResearchPlanningFormsDQ1-15 min.EasyXDQ1-25 min.EasyXDQ1-35 min.EasyXDQ1-45 min.EasyXDQ1-55 min.MediumXDQ1-65 min.MediumXDQ1-75 min.MediumXDQ1-810 min.MediumXDQ1-95 min.MediumXDQ1-1010 min.MediumXDQ1-1115 min.MediumXDQ1-125 min.MediumXDQ1-1315 min.MediumXDQ1-1410 min.MediumXDQ1-155 min.EasyXDQ1-1615 min.MediumXDQ1-175 min.EasyXDQ1-185 min.EasyXDQ1-1910 min.MediumXDQ1-2010 min.MediumXDQ1-2110 min.EasyXDQ1-2210 min.EasyXDQ1-2315 min.MediumXDQ1-2415 min.MediumXDQ1-2515 min.MediumXDQ1-2615 min.MediumXDQ1-2715 min.MediumXDQ1-2815 min.MediumXDQ1-2915 min.MediumXXDQ1-3020 min.MediumXXDQ1-3115 min.MediumXXDQ1-3215 min.MediumXDQ1-3315 min.MediumXP1-3420 min.MediumXP1-3520 min.MediumXP1-3620 min.MediumXP1-3720 min.MediumXP1-3820 min.MediumXP1-3920 min.MediumXP1-4020 min.MediumX

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.1-3P1-4120 min.MediumXP1-4220 min.HardXXP1-4315 min.MediumXXXP1-4415 min.MediumXXXP1-4515 min.MediumXXXP1-4615 min.MediumXXXP1-4720 min.HardXP1-4820 min.HardXP1-4920 min.HardXXP1-5020 min.HardXXP1-5120 min.HardXP1-5220 min.HardXP1-5320 min.HardXP1-5420 min.HardXP1-5520 min.HardXP1-5620 min.HardXP1-5725 min.HardXXXP1-5825 min.HardXXXP1-5925 min.MediumXXP1-6025 min.MediumXXLecture Notes1)WhoCares About TaxesandWhy?a)Businessesb)Politiciansc)Individuals2)WhatQualifies as a Tax?a)Definition of a taxi)Key components of definition: payment is required, imposed by a government agency, andnot directlytiedtoanybenefit received by the taxpayerfrom the governmentb)Earmarked tax—definitionandwhythis isconsidered a taxc)Quiz students on tax definition using examples inthe PowerPoint slides.3)Howto Calculate a Taxa)Tax = Tax Base×Tax Ratei)Tax Base—what is actually taxed, usually expressed in monetary termsii)Tax Rate—level of taxes imposed on the tax base, usually expressed as a percentageiii)Flat taxesiv)Graduated taxesv)Bracketsb)Different ways to measure tax ratesi)Marginal tax rate(1)Definition—tax rate that applies to the next additional increment of a taxpayer’s taxableincome (or deductions)

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.1-4(2)Formula—DTaxDTaxable Income=(New Total Tax-Old Total Tax)(New Taxable Income-Old Taxable Income)(3)Useful in tax planningii)Average tax rate(1)Definition—a taxpayer’s average level of taxation on each dollar of taxable income(2)Formula—Total TaxTaxable Income(3)Useful in budgeting tax expenses or comparing therelative tax burdens of taxpayersiii)Effective tax rate(1)Definition—taxpayer’s average rate of taxation on each dollar of total income, includingtaxableandnontaxable income(2)Formula—Total TaxTotal Income(3)Provides the best depiction of a taxpayer’s tax burdeniv)Work example inthe PowerPoint slides calculating tax liability, marginal, average, andeffective tax rates.c)Tax rate structuresi)Proportional tax rate structure(1)Definition—also known as a flat tax, imposes a constant tax rate throughout the taxbase(2)As the tax base increases, the taxes paid increase proportionally.(3)The marginal tax rate remains constant and equals the average tax rate across the taxbase.(4)The most common example of a proportional tax is a sales tax.ii)Progressive tax rate structure(1)Definition—imposes an increasing marginal tax rate as the tax base increases.(2)As the tax base increases, both the marginal tax rate and the taxes paid increase.(3)Common examples of progressive tax rate structures include federal and state incometaxes and federal estate and gift taxes.iii)Regressive tax rate structure(1)Definition—imposes a decreasing marginal tax rate as the tax base increases.(2)As the tax base increases, the taxes paid increase, but the marginal tax rate decreases.(3)Regressive tax rate structures are not common.In the United States, the Social Securitytaxand federal and state unemployment taxesemploy a regressive tax rate structure.iv)Discuss how different taxes can be viewed as having different rate structures when youconsider effective tax rates versusmarginal tax rates (e.g., the sales tax).4)Types ofTaxesa)Federal taxesi)Income tax:Imposed on individuals, corporations, estates,and trusts.The largest federal tax.ii)Employment taxes:Employment taxes consist of the OASDI tax(Social Security tax) and theMHI tax (Medicare tax).The tax base for these taxes is wages or salary and employersandemployees split these taxes equally.Self-employed individuals must pay these taxes in theirentirety.iii)Unemployment taxes: Employers are also required to pay federal and state unemploymenttaxes, which fund temporary unemployment benefits for individuals terminated from theirjobs without cause.iv)Excise taxes: A tax based on quantity of goods or services purchased.Common examplesincludetaxes on alcohol, diesel fuel, gasoline, and tobacco products and on services such astelephone use and air transportation.

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.1-5v)Transfer taxes: Theestate tax and gift taxes are based onthe fair market values of wealthtransfers upon death or by gift, respectively.b)State and local taxesi)Income tax:Most states impose an income tax.The calculation varies by state.ii)Sales and use taxes:The tax base for a sales tax is the retail sales of goods and some services.Retailers collect and remit this tax.The tax base for theuse taxis the retail price of goodsowned, possessed,or consumed within a state that werenotpurchased within the state.Thepurpose of a use tax is to discourage taxpayers from buying goods out of state in order toavoid or minimize the sales tax in their home state.iii)Property taxes:Assessed on the fair market value of real property and personal property.These are ad valorem taxes.iv)Excise taxesc)Implicit taxesi)Indirect taxes that result from a tax advantage the government grants to certain transactions.ii)Defined as the reduced before-tax return that a tax-favored asset produces because of its tax-advantaged status.iii)Difficult to quantify but important to understand in evaluating the relative tax burdens oftax-advantaged investments.iv)Walk through examples of implicit taxes in text.5)EvaluatingAlternative Tax Systemsa)Sufficiencyi)Involves assessing the aggregate size of the tax revenues that must be generated and makingsure that the tax system provides these revenues.ii)Static forecasting: Forecasting revenue ignores how taxpayers might alter their activities inresponse to a tax law change and to base projected tax revenues on the existing state oftransactions.iii)Dynamic forecasting: Forecastingthattries to predict possible responses by taxpayers to newtax laws.iv)Incomeeffect: As tax rates go up, people will work harder to maintain same after-tax income.v)Substitutioneffect: As tax rates goup, people will substitute nontaxable activities because themarginal value of taxable ones has decreased.vi)Equity:A tax system is considered fair or equitable if the tax is based on the taxpayer’sability to pay.vii)Horizontal equity:Two taxpayers in similar situations pay the same tax.viii)Vertical equity:Taxpayerswithgreater ability to pay taxpay more tax relative to taxpayerswith a lesser ability to pay tax.Vertical equity can be viewed in terms of tax dollars paid ortax rates.Vertical equity may also be evaluated using effective tax rates instead of simplyconsidering the tax rate structure.ix)Certainty:Taxpayers should be able to determine when to pay the tax, where to pay the tax,and how to determine the tax.b)Conveniencei)A tax system should be designed to be collected without undue hardship to the taxpayer.c)Economyi)A tax system should minimize the compliance and administration costs associated with thetax system.

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.1-6d)Compare the income tax and sales tax using the equity, certainty, convenience, and economycriteria.e)Evaluating tax systems—the trade-offi)Much of the debate regarding alternative tax systems reduces to a choice between simplicityand fairness.ii)Those taxes that generally are simpler and easier to administer are typically viewed aslessfair.Those taxes that may be viewed as more fair are often more complex to administer.Class Activities1. Suggested class activitiesoDesigning a tax system:Tell students that the class has just seceded from the United Statesandneeds to develop a tax system sufficient to generate $XX, XXXfrom the class members.Havethe students break into groups ofthree to fiveto design a tax system.As part of this task, they areto evaluate the advantages and disadvantages of their tax.The group judged by the class to havethe most advantageous tax system receives bonus participation points for the day.oWhat is fair?Put two different taxsystems in front of the class—one a proportional tax rate,onea progressive tax system.Poll the class by show ofhands to determine which tax system eachperson views as being fairer.Either in groups or as a class, have the students discuss why theyview a specific system as being fairer.After the discussion, poll the class by show of hands todetermine if anyone has changed their view of which tax is fairer.Then discuss with the class thatthere is no right answer as to which system is fairer.Instead, the answer depends on a person’sindividual views on fairness.oOne versus the class:Have one student volunteer as the “one” with the other class membersbeing the “group.”Use the key facts boxes in the text to develop multiple-choice questions (A, B,C answers) and then quiz the volunteer and the class on the questions.The volunteer and eachclass member will need to write the letters A, B, and C on separate sheets of paper and then holdup their appropriate response to the question.Once a student (either the “one” or a member of the“group”) misses a question, heor she is eliminated from the competition.Aftersix(or some othernumber) of questions, those students left standing receive bonus participation points for the day.oDiscuss current tax policy topics:Find a few recent articles discussing tax reform, the currentincome distribution, or the millionaire surtax. Post the articles so that students can read beforeclass and ask a few questions to begin the class discussion.2. Research activitiesoShow the class the IRS website and some of the materials included in the website—e.g.,publications, IRS forms, etc.oHave students research the presidential candidates’tax platforms and compare and contrast thelikely changes to the Internal Revenue Code.

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-1Chapter2Tax Compliance, the IRS, and Tax AuthoritiesINSTRUCTOR’S MANUALLearning Objectives2-1.Identify the filing requirements for income tax returns and the statute of limitations forassessment.2-2.Outline the IRS audit process, how returns are selected, the different types of audits, andwhat happens after the audit.2-3.Evaluate the relative weights of the various tax law sources.2-4.Describe the legislative process as it pertains to taxation.2-5.Perform the basic steps in tax research.2-6.Describe tax professional responsibilities in providing tax advice.2-7.Identify taxpayer and tax professional penalties.Teaching SuggestionsThis chapter provides a summary of the filing requirements for income tax returns, the IRS audit process,tax law sources and tax research, tax professional responsibilities, and taxpayer and tax practitionerpenalties.The time allotted to this chapter will vary based on your expectations regarding the students’abilities to conduct research in the course. The remaining material in the chapter (filing requirements, IRSaudit process, tax professional responsibilities, and taxpayer and tax practitioner penalties) can be coveredin a class session (or two).Compared to Chapter 1 and later chapters, the material in Chapter 2 could be considered somewhat “dry.”Thus, it is important to bring this material to life in the classroom as much as possible. Some suggestionsfor the class discussion include:•Filing requirements: Provide a basic overview of the filing requirements by entity and statuteof limitations and then use discussion questions 1 through 3 and problems 43 through 49 toquiz students on their understanding.•IRS audit process: Most students are interested in how the IRS selects returns for audit.Discussing high-profile IRS cases (Richard Hatch,Survivor; Willie Nelson; Al Capone) orpersonal experiences with IRS audits is typically well received. After the discussion, quizzingthe students on identifying the selection method and audit type for various fact patterns is aneffective way to make sure that your students can apply the concepts from this discussion.•Tax law sources: The depth to which you cover the various sources will vary with yourexpectations regarding the students’ abilities to conduct research.If students will be expectedto research problems, read primary authorities, etc., showing examples of the specific types ofauthorities that they will research (code sections, regulations, etc.), highlighting theirattributes, contrasting different authorities, and discussing how to locate the authorities andmake sure that they are “current”should prove beneficial. This discussion could then befollowed with a discussion of how to conduct research and an in-class example of a simpleresearch problem. [As an out-of-class exercise, you might assign students to locate specific

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-2primary authorities (e.g., court cases, revenue rulings, etc.) and related discussion in anavailable tax service (CCH, RIA, BNA, etc.) and have the students summarize the issueaddressed in the primary authority and tax service and how they located each authority.]If instead students are simply required to have a basic understanding of tax authorities withlittle or no research expectation, most of the discussion of authorities could focus oncomparing different authorities and their relative weights. This discussion can then bereinforced with classroom questions comparing the weight of different authorities orcontrasting different authorities using the “one versusthe group” activity suggested below.•Tax legislation: This discussion may be aided by displaying Exhibit 2-7. You may alsoremind your class of theSchoolhouse Rocksong“I’mJust A Bill,”which highlights thelegislative process. You can watch this song on YouTube.•Basic tax research steps: This discussion may be enhanced by walking students through theresearch example in the text or through one of the end of chapter research problems.•Tax professional standards/taxpayer and tax practitioner penalties: This discussion may beenhanced by a discussion of the IRS’s crackdown on tax shelters, the dire consequencesassociated with not meeting professional standards, and the recent increased thresholds toavoid tax practitioner penalties.Assignment MatrixLearning ObjectivesText FeatureProblemTimeDifficultyLO1LO2LO3LO4LO5LO6LO7ResearchPlanningFormsDQ2-15 min.EasyXDQ2-210 min.EasyXDQ2-310 min.MediumXDQ2-45 min.EasyXDQ2-510 min.MediumXDQ2-610 min.MediumXDQ2-710 min.MediumXDQ2-815 min.MediumXDQ2-915 min.MediumXDQ2-1010 min.EasyXDQ2-1110 min.MediumXDQ2-125min.EasyXDQ2-1315min.MediumXDQ2-1410min.MediumXDQ2-1510min.MediumXDQ2-1610min.MediumXDQ2-1715 min.MediumXDQ2-1815 min.MediumXDQ2-195min.EasyXDQ2-2020min.MediumXDQ2-2115 min.MediumX

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-3DQ2-2210 min.EasyXDQ2-2310min.EasyXDQ2-2415 min.MediumXDQ2-2515 min.MediumXDQ2-2615 min.MediumXDQ2-2715 min.MediumXDQ2-2815 min.MediumXDQ2-2915 min.MediumXDQ2-3010 min.EasyXDQ2-3115 min.MediumXDQ2-3215 min.MediumXDQ2-3315 min.MediumXDQ2-3415 min.MediumXDQ2-3515 min.MediumXDQ2-3620 min.MediumXDQ2-3715 min.MediumXDQ2-3810 min.MediumXDQ2-3915 min.MediumXDQ2-4015 min.MediumXDQ2-4115 min.MediumXDQ2-4215 min.MediumXP2-4315min.MediumXP2-4415 min.MediumXP2-4515 min.MediumXP2-4615 min.MediumXP2-4715 min.MediumXP2-4815 min.MediumXP2-4915 min.MediumXP2-5010min.MediumXP2-5115 min.MediumXP2-5210min.MediumXP2-5310 min.MediumXP2-5410 min.MediumXP2-5510 min.MediumXP2-5620 min.MediumXXP2-5720 min.MediumXXP2-5815min.MediumXP2-5915min.MediumXP2-6015min.MediumXP2-6115min.MediumXP2-6210 min.MediumXP2-6310 min.MediumXP2-6415 min.MediumXP2-6515 min.MediumXP2-6610 min.MediumXP2-6710 min.MediumX

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-4P2-6860 min.MediumXXP2-6960 min.MediumXXP2-7060 min.MediumXXP2-7160 min.MediumXXP2-7260 min.MediumXXP2-73120min.HardXXP2-74120min.HardXXP2-7560 min.MediumXXP2-7620 min.MediumXP2-7720 min.HardXP2-7820 min.MediumXP2-7920 min.MediumXLecture Notes1)TaxpayerFilingRequirementsa)Filing requirements by entityi)Individuals(show Exhibit 2-1)ii)Corporationsb)Tax return due date and extensionsi)Individuals andC corporationsii)Partnerships and S corporationsc)Statute of limitationsi)The period in which the taxpayer can file an amended tax return or the IRS can assess a taxdeficiency for a specific tax year.ii)Generally ends three years from thelaterof (1) the date the tax return was actually filed or(2) the tax return’s original due date.iii)Asix-year statute of limitations applies to IRS assessments if the taxpayer omits items ofgross income that exceed 25 percent of the gross income reported on the tax return.iv)For fraudulent returns, or if the taxpayer fails to file a tax return, the statute of limitationsremains open indefinitely.2)IRS Audit Selectiona)Methods of selectioni)DIF systemii)Document perfectioniii)Information matchingiv)Other methodsb)Types of auditsi)Correspondenceexaminationsii)Officeexaminationsiii)Fieldexaminationsc)After the audit (show Exhibit 2-2)i)Proposed adjustmentii)30-day letteriii)Appeals conferenceiv)90-day letterv)Petition courts

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-5vi)Trial-level courts and their differences: Tax Court, U.S. District Court, U.S. Court of FederalClaimsvii)Choosing a trial-level court (show Exhibit 2-3)viii)Circuit Court of Appeals (show Exhibit 2-4)ix)Supreme Court3)Tax Law Sourcesa)Primary and secondary sourcesi)Primary tax authorities (show Exhibit 2-5)ii)Secondary authorities (show Exhibit 2-6)b)Legislative sources: Congress and the Constitutioni)U.S. Constitutionii)Internal Revenue Codeiii)Legislative process for tax laws (show Exhibit 2-7)iv)Basic organization of the code (show Exhibit 2-8)v)Tax treatiesc)Judicial sources: The courtsi)The hierarchy of the courts (trial level, appeals, Supreme Court)ii)Stare decisisiii)Golsen ruled)Administrative sources: The U.S. Treasuryi)Regulations: Three different forms (final, temporary, proposed); three different purposes(interpretative, procedural, legislative); highest administrative authority.ii)Revenue Rulings and Revenue Procedures: More detailed than regulations; second inadministrative weight. Definition of each.iii)Letter rulings: Lower authoritative weight; contrast private letter rulings with determinationletters and technical advice memorandums.iv)Acquiescence, nonacquiescence, and actions on decision: Define and explain why important.4)Tax Researcha)Understand factsi)Open and closed factsii)How do you determine facts for a research question?b)Identify issuesi)Ability to identify issues varies with experience.ii)Understand facts, combine facts with understanding of law, identify general issues. (Is thisincome taxable? Is this expense deductible?)iii)Research will allow you to identify more specific issues.iv)Discuss Example 2-4 in class.c)Locate relevant authoritiesi)Annotated tax services: Definition and what they contain.ii)Topical tax services: Definition and what they contain.iii)How to use these services?iv)Keyword search: Area of law and key facts; suggestions if key word searching is not provingbeneficial.v)Topical indexvi)Browsing the servicevii)Discuss Example 2-5.d)Analyze tax authoritiesi)Questions of fact: Hinges upon the facts and circumstances of the taxpayer’s transaction.Inthis type of question, the researcher will focus on understanding how various facts affect theresearch answer and identifying authorities with fact patterns similar to her client’s.

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-6ii)Questions of law: Hinges upon the interpretation of the law, such as interpreting a particularphrase in a code section. If a researcher is faced with this type of question, she will spendmuch of her time researching the various interpretations of the code section and take note ofwhich authorities interpret the code differently and why.iii)Conflicting authorities: The tax researcher should evaluate the hierarchical level, jurisdiction,and age of the authorities, placing more weight on higher and newer authorities that havejurisdiction over the taxpayer.iv)Checking the status of authorities: Citators and methods to check the status of authorities.e)Communicate the resultsi)The basic parts of a memo: Facts, issues, authorities, conclusion, and analysis.ii)Facts: Discuss facts that provide necessary background of the transaction and those facts thatmay influence the research answer.iii)Issues: State the specific issues that the memo addresses. Issues should be written asspecifically as possible and be limited to one or two sentences per issue.iv)Authorities: The researcher cites the relevant tax authorities that apply to the issue, such asthe IRC, court cases, and revenue rulings. Cite enough to provide a clear understanding of theissue and interpretation of the law.v)Conclusion: One conclusion per issue. Each conclusion should answer the question as brieflyas possible, and preferably indicate why the answer is what it is.vi)Analysis: The goal of the analysis is for the researcher to provide the reader a clearunderstanding of the area of law and specific authorities that apply. Typically an analysis willbe organized to discuss the general area(s) of law first (the Code section) and then thespecific authorities (court cases, revenue rulings) that apply to the research question. Afteryou discuss the relevant authorities, apply the authorities to your client’s transaction andexplain how the authorities result in your conclusion.vii)The basic parts of a client letter: Salutation and social graces, research question andlimitations, facts, analysis, and closing.5)Tax Professional Responsibilitiesa)Tax professionals are subject to various statutes, rules, and codes of conduct.i)AICPA Code of Professional Conductii)AICPA Statement on Standards for Tax Servicesiii)IRS’s Circular 230iv)State board of accountancy statutesb)Failure to comply with statutes can result in being admonished, suspended, or barred frompracticing.6)Taxpayer and Tax Practitioner Penaltiesa)Civil penaltiesi)Generally monetary penaltiesii)Imposed when tax practitioners or taxpayers violate tax statutes without reasonable cause.b)Criminal penaltiesi)Much less common than civil penalties.ii)Penalties are much higher and can include prison sentences.c)Taxpayerunderpayment penalty: No underpayment penalty if there issubstantial authoritythatsupports the tax return position or if there is a reasonable basis for the position and it is disclosedon the taxpayer’s tax return.d)Atax practitionerwill not be subject to penalty if there issubstantial authoritythat supports thetax return position or if there is a reasonable basis for the position and it is disclosed on thetaxpayer’s tax return.Class Activities

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.2-71. Suggested class activitiesoLet’s choose a court:Split the class into groups. Explain to the class that you will be asking aseries of questions to the class regarding the choice of trial-level courts after an audit. After youask the question, a group may buzz in to answer the question when a group member raises his orher hand. If the person gets the question correct, the group will receive one point. If the personmisses the question, the group loses one point. The group with the most points after the series ofquestions will receive bonus participation points for the day. Use the individual court differencesand differences in their respective appellate courts to generate questions. See problem 57 forexamples of questions to pose.oOne versus the class:Have one student volunteer as the “one,” with the other class membersbeing the “group.”Use the key facts boxes in the text to develop basic multiple-choice questions(A, B, C answers) and then quiz the volunteer and the class on the questions. The volunteer andeach class member will need to write the letters A, B, and C on separate sheets of paper and thenhold up their appropriate response to the question.Once a student (either the “one” or a memberof the “group”) misses a question, her or she is eliminated from the competition.After six (orsome other number) of questions, those students left standing receive bonus participation pointsfor the day.2. Research activitiesoTake one or more of the research problems at the end of the chapter and pose the followingquestions after reading the problem: (1) What are the key facts in the problem? (2) What is thegeneral issue to be addressed? (3) What key words would you use to research this question? Thenwalk the students through how you would conduct the research using an available on-line service.3. EthicsdiscussionFrom page 2-5:Discussion points:•What are the timing requirements for filing a tax return and paying taxesowed?•Does Bill’s action likely violate any IRS regulation?•If Bill’s action does not violate IRS rules, is it ethical?•Are ethics and IRS rules the same?

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.3-1Chapter3Tax Planning Strategies and Related LimitationsINSTRUCTOR’S MANUALLearning Objectives3-1.Identify the objectives of basic tax planning strategies.3-2.Apply the timing strategy.3-3.Apply the concept of present value to tax planning.3-4.Apply the income-shifting strategy.3-5.Apply the conversion strategy.3-6.Describe basic judicial doctrines that limit tax planning strategies.3-7.Contrast tax avoidance and tax evasionTeaching SuggestionsThis chapter provides an overview of the basic tax planning strategies that represent the building blocksof tax planning. It is placed early in the text to emphasize the importance of tax planning and to allow thestudents to form an early foundation of the basic planning techniques. In later chapters as you discussspecific technical content (e.g., investments, compensation, property transactions), students should beable to identify and apply the basic tax planning strategies that apply to each transaction.This chapter can be covered in one to one and a half class sessions. Most of the concepts in the chapterare relatively straightforward and thus should not present students with tremendous difficulty. If studentshave not been exposed to the concept of present value, this discussion may require more time. If studentsare familiar with present value, a short review should suffice. This chapter should be of interest tostudents given the importance of tax planning and the related wealth impact that these strategies can have.Thus, students should have a natural interest in thechapter’smaterial. Nonetheless, discussing real-lifeexamples of these strategies should pique students’interests even more so (see, for example,the “Taxesin the Real World” boxes in the text).The chapter lends itself to covering in-class examples of each strategy. Included in the text are severalbasic examples of the strategies, with additional problems in the end of chapter material that may proveuseful. Post-TCJA, taxpayers may rethink the income-shifting strategy for their business income toaccommodate the lower corporate tax rate (21 percent). We may see more business incorporations takeadvantage of this lower tax rate.In addition to discussing the basic tax planning strategies, the chapter introduces several judicial doctrinesthat limit tax planning (and apply in numerous tax settings). These doctrines represent key components ofthe tax law and will also be discussed later in the text when applicable. When discussing these doctrines,it may be useful to provide specific examples of their application (e.g., Example 3-6 in the text).Finally, this chapter provides a brief discussion of tax avoidance and tax evasion. This discussionprovides an opportunity to discuss the importance of ethics in the accounting profession and the negativeconsequences associated with tax evasion. This discussion also provides an opportunity for students toremember the discussion of tax practitioner professional standards and civil and criminal penalties in

Lecture Notes For McGraw-Hill's Taxation of Individuals and Business Entities 2021 Edition, 12th Edition - Page 16 preview image

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Instructor’s Manual–McGraw-Hill’sTaxation,by Spilker et al.3-2Chapter 2.Assignment MatrixLearning ObjectivesText FeatureProblemTimeDifficultyLO3-1LO3-2LO3-3LO3-4LO3-5LO3-6LO3-7ResearchPlanningTax FormsDQ3-110min.EasyXDQ3-210 min.EasyXDQ3-320min.MediumXDQ3-415 min.MediumXDQ3-515min.MediumXDQ3-615min.MediumXDQ3-715min.MediumXDQ3-815 min.MediumXXDQ3-920min.MediumXXDQ3-1015min.MediumXDQ3-1115min.MediumXDQ3-125min.EasyXDQ3-1315min.MediumXDQ3-1410min.MediumXDQ3-1515min.MediumXDQ3-1615min.MediumXDQ3-1710min.MediumXDQ3-1815min.MediumXDQ3-1910min.MediumXDQ3-2015min.MediumXDQ3-2115min.MediumXXXDQ3-2210 min.EasyXDQ3-2310 min.MediumXDQ3-2415 min.EasyXDQ3-2525 min.MediumXXDQ3-2610 min.MediumXDQ3-2720 min.MediumXDQ3-2815 min.MediumXDQ3-2910 min.MediumXDQ3-3010 min.MediumXDQ3-3115 min.MediumXDQ3-3210 min.EasyXDQ3-3310min.EasyXDQ3-3415 min.MediumXP3-3515 min.MediumXX

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